**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 1934****For
                the fiscal year ended December 31, 2007****Or**o
            
            **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**
            
            **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.





Yes o 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 No o





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
                  acclerated filero
              Accelerated
                  fileroNon-accelerated
                  filero
              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 o No þ





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 24, 2008, was $1,105,597.





As
      of March 28, 2008, the registrant had 23,625,143 shares of Common Stock
      outstanding.





DOCUMENTS
      INCORPORATED BY REFERENCE :
      None.












**ALLEGRO
      BIODIESEL CORPORATION**





**Annual
      Report on Form 10-K**


**For
      the year ended December 31, 200**  **7**


Page
                  No.**PART
                  I.**Item 1.
                  Description of Business
              
              1Item 1A.
                  Risk Factors
              
              5Item 1B.
                  Unresolved Staff Comments
              
              5Item 2.
                  Properties
              
              6Item 3.
                  Legal Proceedings
              
              6Item 4.
                  Submission of Matters to a Vote of Security Holders
              
              7**PART
                  II.**Item 5.
                  Market for Registrant’s Common Equity, Related Stockholder Matters and
                  Issuer Purchases of Equity Securities
              
              7Item 6.
                  Selected Financial Data
              
              8Item 7.
                  Management’s Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              8Item 7A.
                  Quantitative and Qualitative Disclosures About Market
                  Risk
              
              16Item 8.
                  Financial Statements and Supplementary Data
              
              16Item 9.
                  Changes In and Disagreements With Accountants on Accounting and
                  Financial
                  Disclosure
              
              16Item 9A.
                  Controls and Procedures
              
              16Item 9B.
                  Other Information
              
              17**PART
                  III.**Item 10.
                  Directors, Executive Officers and Corporate Governance
              
              17Item 11.
                  Executive Compensation
              
              19Item 12.
                  Security Ownership of Certain Beneficial Owners and Management
                  and Related
                  Stockholder Matters
              
              23Item 13.
                  Certain Relationships and Related Transactions, and Director
                  Independence
              
              25Item 14.
                  Principal Accounting Fees and Services
              
              26Item 15.
                  Exhibits, Financial Statement Schedules
              
              28Signatures
              
              30







**PART
      I**




**Item
      1. Description of Business**





We
      are in
      the business of production and distribution of biodiesel fuel. We began
      biodiesel fuel production and sales in April 2006, making us the first
      operational producer of biodiesel in Louisiana. Our biodiesel fuel production
      facility is located on a 320-acre site in Pollock, Louisiana (the “Pollock
      Facility”). The Pollock Facility uses renewable agricultural-based feedstock
      (primarily soybean oil) to produce biodiesel. Our current production capacity
      is
      estimated to be 12 million gallons of biodiesel per year.





Our
      primary source of revenue is the sale of biodiesel fuel, both in blended and
      unblended forms with petroleum-based diesel fuel. We produce biodiesel that
      meets or exceeds the ASTM D6751 specification and sell it primarily to
      wholesalers who purchase pure biodiesel (known as B100) or blended biodiesel
      such as B20 (which is blend of 20 percent biodiesel and 80 percent diesel).
      Our
      sales are dependent on the volume and price of the biodiesel fuel we sell.
      The
      selling prices we realize for our biodiesel are closely linked to the prices
      of
      petroleum-based diesel fuel and the supply and demand for biodiesel, as well
      as
      the tax incentives offered by federal and state governments for the production
      and blending of alternative fuels.





Furthermore,
      the amount of revenue that we may recognize from the sale of a gallon of
      biodiesel may depend on whether it is sold as a blended product with petroleum
      diesel (whereby we collect a $1.00 per gallon federal excise tax credit in
      addition to the sale price of the fuel), as an unblended B100 product (whereby
      a
      buyer who is a registered blender with the IRS pays a premium of approximately
      $1.00 per gallon over the market price of diesel fuel, and may collect the
      tax
      credit), or under a tolling arrangement (whereby a customer provides feedstock,
      such as soybean oil, which we then convert into biodiesel fuel for a fee or
      a
      toll).





Our
      gross
      margin is driven by the cost of feedstock (primarily soybean oil) and other
      chemical inputs used in our production of biodiesel fuel. We purchase feedstock
      and other inputs both on the spot market and pursuant to fixed, short-term
      supply agreements. Our profit margins and financial condition are significantly
      affected by our cost and supply of soybean oil feedstock and other inputs in
      the
      commodity markets.





**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”), a current shareholder of the Company, for a nominal amount of cash. In
      connection with the closing of this transaction, our Board 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 2007 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.





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.




-
          1
          -


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 are making certain claims against such escrowed funds and shares. See “Item
      3. Legal Proceedings – Indemnification Claims.” 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 (the “First South credit agreement”).





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 the Series 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).





**Developments
      in Our Business During Fiscal 2007**





*Trends
      in Our Business*





During
      the first half of 2007, the biodiesel industry experienced a significant
      increase in the cost of soybean oil, with the price increasing 70% from $0.25
      per pound in September 2006 to $0.62 as of March 14, 2008. Although we have
      been
      able to develop efficiency improvements in our production processes, feedstock
      is still the primary production cost. This increase has had a significant,
      negative effect on profit margins and cash flows and caused an impairment of
      goodwill associated with our production facility of $19.9 million. See Note
      8 to
      the Notes to Consolidated Financial Statements.





Given
      these economic conditions, in October 2007 we adopted a company-wide cost
      reduction plan intended to reduce our operating costs. Under this plan, we
      reduced our biodiesel production volume, administrative costs and our
      non-executive headcount from 19 to seven employees. Furthermore, we amended
      our
      compensation arrangements with our management team effective October 15, 2007,
      including a deferral of 50% of the monthly cash compensation payable to our
      senior executives, OPA and our non-executive directors ,
      plus a
      100% deferral of any bonuses, until a time in the future to be determined by
      the
      Board of Directors.





These
      measures significantly lowered our monthly cash operating expenses from an
      average of about $400,000 to approximately $150,000 per month while preserving
      our ability to manufacture biodiesel fuel. In addition to our cost reduction
      plan, we are actively pursuing strategic alternatives, including evaluating
      other biodiesel feedstock sources, new uses for our assets and infrastructure,
      as well as other strategic opportunities in the renewable energy sector.
      Currently, our production team is evaluating jatropha oil as a potential lower
      cost feedstock. We are also exploring potential business combinations with
      third
      parties, the sale of Allegro, the sale of some or all of the assets of the
      biodiesel plant, and raising additional capital. We cannot provide any
      assurances as to whether we will be successful in our pursuance of any of these
      strategic alternatives.




-
          2
          -


As
      of
      December 31, 2007, Allegro had negative working capital of $6,727,825. 
Included as a reduction to working capital is $2,844,342 of accrued dividends
      which we may pay, at our option, in shares of Series A convertible preferred
      stock or in cash. As of December 31, 2007, Vanguard failed to comply with a
      covenant under its credit agreement with First South Farm Credit, ACA, relating
      to the maintenance of minimum level of working capital of $500,000. On March
      27,
      2008, Vanguard received a waiver of its non-compliance with this covenant from
      First South through September 1, 2008 and an acknowledgement that Vanguard
      was no longer in default of the credit agreement as of December 31, 2007. See
      “Item 7. Liquidity and Capital Resources” for further discussion.





Management
      believes its existing sources of liquidity should be sufficient to fund its
      operations, working capital and other financing requirements into the second
      quarter of 2008. By that time, the Company will need additional debt and/or
      equity financing to fund its business, which it is now actively seeking.
      Management cannot assure that such financing will be available to the Company
      on
      favorable terms, or at all. Unless additional financing is obtained, we may
      not
      be able to continue as a going concern. As a consequence, 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.





*Talen’s
      Marine & Fuel, Inc.*





On
      June
      22, 2007, we entered into a definitive agreement to acquire all of the
      outstanding stock of Talen's Marine & Fuel, Inc. ("Talen's"). The
      closing of the acquisition was contingent on our ability to secure not less
      than
      $30 million in financing for the acquisition on terms and conditions
      satisfactory to us. Due
      to
      the unforeseen deterioration of conditions in the financial markets, securing
      financing, in the timeline originally set forth in the definitive agreement,
      was
      not practicable.  As such, all parties agreed to terminate the Purchase
      Agreement effective October 18, 2007.





*Community
      Power Corporation*





In
      November 2007, we acquired a minority interest in Community Power Corporation,
      a
      developer of biomass power generation technology and products (“CPC”), for $1
      million. The purchase price for the acquisition was a loan from Monarch Pointe
      Fund, Ltd., a fund managed by one of our shareholders, M.A.G. Capital, LLC.
      The
      loan accrues interest at 7% per annum and is due on March 31, 2008. We also
      loaned CPC $500,000 in connection with the discussions for such acquisition.
      On
      February 25, 2008, we re-negotiated the terms of our loan with CPC. In exchange
      for early note repayment of $225,000 by CPC, we forgave $25,000 of the loan
      and
      waived the interest that had accrued on the $250,000 portion of repaid
      principal. The maturity date of the remaining $250,000 owed to us has been
      extended from March 1, 2008, to the earlier of either December 31, 2008, or
      the
      date CPC receives at least $2.5 million in equity or debt financing.





*Port
      of Alexandria*





On
      February 13, 2008, we entered into a binding letter agreement with several
      individual investors for the funding of Port Asset Acquisition, LLC (“PAA”), an
      entity previously formed by us for the purpose of acquiring assets at the Port
      of Alexandria (the "Port Assets") and developing a liquid terminal operation.
      The transactions contemplated by the Agreement include:





1.  the
      purchase of 14.71 acres of real property, which includes tank storage, a fuel
      terminal and an office building;


2.
            the
                purchase of an additional seven adjacent acres of real property from
                the
                City of Alexandria and the lease of river front property for a term
                of up
                to 40 years from the Alexandria Port Authority;
                and


3.
            the
                grant of a 90-day call option to us to purchase the equity interests
                of
                the investors for their original $1,000,000 cash investment, plus
                an
                additional payment of $500,000. If we do not exercise such call option,
                the investors have the option to purchase our equity interest in
                PAA for a
                purchase price ranging from $125,000 to $175,000 depending on the
                time of
                exercise. On March 25, 2008, the investors exercised their option
                which
                resulted in proceeds to us of $125,000. We retain the right, though,
                to
                exercise our option and supercede the exercise of the investors’
                option, as long as we do so on or before May 13,
                2008.





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. In the event we exercise the call option described above,
      we will be required to pay them an aggregate of $250,000 in cash and $200,000
      of
      our stock to settle such bonus claims.





**The
      Product**





Biodiesel
      is an alternative fuel (i.e., not derived from petroleum) that has important
      environmental and economic advantages over petroleum-based diesel
      (“petrodiesel”). It is derived from renewable agricultural-based resources,
      including vegetable oils, recycled grease and animal fats, and has significant
      environmental benefits. According to the Methanol Institute and International
      Fuel Quality Center, biodiesel is non-toxic and bio-degradable with no emissions
      of sulfur and significantly lower emissions of particulate matter, carbon
      monoxide, and hydrocarbons than petrodiesel when burned. According to U.S.
      Department of Energy studies, the use of 100% biodiesel (B100) results in a
      78.5% reduction in carbon dioxide emissions when compared to petrodiesel.
      Biodiesel is a registered fuel with the Environmental Protection Agency (“EPA”)
      and is recognized by the Department of Transportation.


-
          3
          -




Biodiesel
      can be blended with petrodiesel, or it can be used entirely on its own (known
      as
      B100 fuel, or 100% biodiesel) in diesel engines without major modifications.
      The
      diesel engine was originally developed in 1892 by Rudolph Diesel specifically
      to
      be run on vegetable oils (his prototypes used peanut oil), and to be more
      efficient than gasoline engines. In the United States, the most common blends
      are between 2% to 20% biodiesel (B2 to B20). According to the National Biodiesel
      Board, most major engine companies have stated formally that the use of blends
      up to B20 will not void their parts and workmanship warranties.





**Biodiesel
      Tax Credit**





Biodiesel’s
      potential to reduce dependence on foreign petroleum imports in the United States
      and to support domestic agriculture has prompted the introduction of favorable
      legislation to encourage its use and production, and to spur investment in
      the
      industry. In October 2004, Congress passed a biodiesel tax incentive as part
      of
      the American Jobs Creation Act. The incentive allows diesel “blenders,” as
      registered with the Internal Revenue Service (the “IRS”), to claim an excise tax
      credit of $1.00 per gallon for biodiesel made from virgin vegetable oil or
      animal fats, and $0.50 per gallon for biodiesel made from non-virgin oil. This
      tax credit allows producers of biodiesel to compete effectively with
      petrodiesel. Originally scheduled to expire at the end of 2006, the tax credit
      was extended by the Energy Policy Act of 2005 (“EPAct”) to the end of
      2008.





**Biodiesel
      Pricing**





The
      price
      of biodiesel is closely linked with the price of petrodiesel, which has
      increased dramatically in recent years with the rapid rise in oil prices. As
      of
      March 15, 2008, the national average wholesale price of diesel (before
      tax) was approximately $2.65 per gallon. Because biodiesel is currently
      eligible for the $1 per gallon federal excise tax credit, it is generally sold
      at a wholesale price approximately $1 higher than the wholesale price of
      petrodiesel. Alternatively, a producer of biodiesel who is also registered
      as a
      blender may blend the product with petrodiesel, sell the blended diesel (at
      the
      wholesale price) and then claim the tax credit directly. We are a blender
      registered with the IRS.





**Production
      Economics**





The
      primary biodiesel production cost is feedstock (primarily soybean oil) and
      other
      chemical input costs. Since April 2006, our feedstock and chemical input costs
      have ranged from approximately $2.60 - 2.75 to the current cost of approximately
      $5.50 per gallon of biodiesel produced. The nationwide average wholesale price
      of biodiesel is approximately $3.65 per gallon. The margin between the sales
      price and feedstock costs may be used to cover fixed production costs and
      operating expenses (including Selling, General and Administrative Expenses).





The
      amount of revenue that we may recognize in our financial statements from the
      sale of a gallon of biodiesel may depend on how it is sold. The three typical
      modes of sale are outlined below:





·
            Sale
                of biodiesel and its tax credit. The Company sells the biodiesel
                and does
                not claim the excise tax credit; the blender does so. The blender
                might
                therefore pay a premium of approximately $1.00 over the wholesale
                price
                without such excise tax credit. The Company recognizes the full receipt
                as
                revenue in such a transaction.





·
            Sale
                of biodiesel without its tax credit. The Company sells biodiesel
                blended
                with petrodiesel (e.g., B99) and claims the excise tax credit; the
                buyer
                does not. The Company recognizes as revenue only the wholesale price
                it
                receives.





·
            Sale
                under a tolling agreement (whereby the customer provides soybean
                oil to
                the Company to process into biodiesel, and pays a fixed price per
                gallon
                for such processing). The Company recognizes revenue in the amount
                of the
                processing fee earned. Such processing fee per gallon would be
                significantly lower than the wholesale price: typically, the processing
                fee is comparable to the difference between the price of biodiesel
                and the
                cost of feedstock oil. Similarly, the cost of the feedstock oil would
                not
                be recorded as an expense.





**Market
      Size**





Biodiesel
      is a substitute or additive fuel to petrodiesel. As a result, its market is
      closely tied to that of petrodiesel. Energy Information Administration
      statistics show that total annual diesel consumption in the United States is
      approximately 62 billion gallons in 2006. According to the National Biodiesel
      Board, biodiesel constituted 225 million gallons (or approximately 3.6%) of
      this
      amount. Usage has increased significantly over the past several years (only
      2
      million gallons of biodiesel were produced in the United States in 2000), and
      biodiesel industry experts expect demand and production to continue to grow
      rapidly. The National Biodiesel Board has estimated that 500 million gallons
      of
      biodiesel were produced in 2007.




Projections
      for biodiesel’s growth in the US may have been inspired in part by the success
      of the industry in Europe, where biodiesel has been used since the early 1990’s
      and has already entered mainstream usage. The Methanol Institute estimates
      that
      nearly 6.1 million metric tons of biodiesel were produced in the European Union
      in 2007, representing approximately 5% of total diesel
      usage.


-
          4
          -




**Usage
      Mandates**





Certain
      states—including Louisiana, Minnesota, Washington and Illinois—have enacted
      biodiesel usage mandates. For instance, Minnesota’s B2 mandate requires that all
      diesel sold in the state have a 2% biodiesel blend. According to the Methanol
      Institute and the International Fuel Quality Center, at least 31 states provide
      either user or producer incentives for biodiesel (typically in the form of
      tax
      incentives), and the number of states considering further affirmative
      legislation for biodiesel continues to increase.





The
      federal government is also introducing regulatory provisions to directly
      increase the usage of biodiesel. In 2005, the government passed the United
      States Renewable Fuel Standard, mandating that governmental groups (federal,
      state and local governments and agencies) use 7.5 billion gallons of alternative
      fuels by 2012. The EPAct amended and expanded the scope of the Energy
      Conservation Reauthorization Act of 1998 to include biodiesel as a way to meet
      the alternative fuel use requirements.




Furthermore,
      the EPA recently announced significant reductions in the required emissions
      certification levels of all on-road diesel engines. Beginning in 2006, sulfur
      levels in diesel fuel for on-road use were required to be reduced to a
      maximum of 15 parts per million (ppm), down from then current maximum of 500
      ppm. A similar reduction for the off-road market was required in 2007, and
      for
      the marine and rail markets in 2008. However, reducing sulfur in diesel to
      15
      ppm substantially reduces its lubricity, enhancing the need for a lubricity
      additive. Biodiesel is well-positioned to be this additive. Biodiesel has a
      much
      higher lubricity than petrodiesel and contains no sulfur. According to the
      National Biodiesel Board, a 2% blend of biodiesel can restore the lubricity
      of
“Ultra Low Sulfur” diesel fuel. Nonetheless, there is no guarantee that
      biodiesel will become a widely-used lubricity additive. Currently, most of
      the
      Ultra Low Sulfur diesel fuel sold in the United States does not contain
      biodiesel.





**Biodiesel
      in Louisiana**





The
      state
      of Louisiana has enacted an alternative renewable fuel usage mandate that will
      become effective six months following the month in which annualized production
      of biodiesel in Louisiana equals or exceeds 10 million gallons (i.e.,
      834,000 gallons produced in a month), though the state may waive or extend
      the
      six-month grace period should it find that the quality or supply of biodiesel
      is
      lacking. The mandate requires that 2% of the total diesel fuel sold by blenders
      and distributors in the state be an alternative renewable fuel (such as
      biodiesel), produced from domestically-grown feedstock. Fulfilling the 2%
      mandate will require approximately 15 million gallons of biodiesel or
      alternative diesel fuel annually, based on the state’s aggregate use of
      approximately 760 million gallons of diesel in 2005.





**Insurance
      Policies**





We
      maintain insurance policies covering our property and business, pollution
      liability, workers compensation, directors and officers' liability and general
      liability. However, as biodiesel is a new and unique product, it is unclear
      whether standard insurance policies cover claims arising from the production,
      use or transport of biodiesel. Furthermore, there can be no assurance that
      the
      policy coverage limits are adequate or sufficient in the event of an accident,
      negligence or an act of God.





**Employees**





We
      currently employ nine persons on a full-time basis. Of these persons, two are
      executives, four are engaged in operations and production, two are engaged
      in
      operations management, and one is engaged in environmental/chemical lab
      matters.





On
      the
      closing date of the Acquisition, we entered into a management services agreement
      with Ocean Park Advisors, LLC, pursuant to which certain of OPA's professionals
      (including but not limited to Bruce Comer, our Chief Executive Officer) and
      consultants perform general and administrative functions for us. See “Item 13.
      Certain Relationships and Related Transactions, and Director
      Independence.”





On
      March
      14, 2006, we entered into a services agreement with PV Asset Management, LLC,
      a
      company controlled by Paul Galleberg, one of our directors. Pursuant to that
      agreement, which was effective as of February 5, 2007, Mr. Galleberg provided
      management and consulting services for us. This agreement expired on October
      15,
      2007 and PV Asset Management, LLC is no longer engaged as a consultant by us.
      Mr. Galleberg remains a director of the Company. See “Item 13. Certain
      Relationships and Related Transactions, and Director Independence.”





**Item
      1A. Risk Factors**





Not
      applicable.





**Item
      1B. Unresolved Staff Comments**





Not
      applicable.




-
          5
          -


**Item
      2. Properties**





Our
      principal executive office is located at 6033 West Century Blvd., Suite 1090,
      Los Angeles, California 90045. Our other principal properties are as
      follows:





**Location
                of Property**
            
            **Use of Facility**
            
            **Approximate****Size**Pollock,
                Louisiana (1)
            
            
            Production of biodiesel fuel
            
            
            320
                acresAlexandria,
                Louisiana (2)
            
            
            Office
            
            
            1,637
                sq. ft.Los
                Angeles, California (3)
            
            
            Office
            
            
            2,082
                sq. ft.







(1)
      This
      property is owned by us.




(2)
      This
      property is leased by us pursuant to a 36 month lease which began on February
      1,
      2007, at the rental rate of $1.25 per square foot per month.





(3) This
      property is leased by us pursuant to a 18 month lease which began on February
      1,
      2007, at the rental rate of $1.50 per square foot per month from February 1,
      2007 to January 31, 2008 and at the rate of $1.55 from February 1, 2008 to
      July 31, 2008.





**Item
      3. Legal Proceedings**





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





Vanguard
      Synfuels, LLC and Allegro were sued by a former employee of Vanguard who claims
      he was terminated by Vanguard in breach of his employment agreement. He is
      seeking an unspecified amount of damages plus court costs and interest.
      Recently, the Court denied the former employee’s motion for summary judgment.
      Discovery is in the early stages. We believe the suit to be without merit and
      intend to vigorously defend ourselves.




*Indemnification
      Claims*





On
      November 13, 2007, we notified the former members of Vanguard (the “Former
      Vanguard Members”) of our demand for indemnification under the Contribution
      Agreement we entered into with them on September 20, 2007 (the “Contribution
      Agreement”), and of our claim upon the escrow deposit under the Escrow Agreement
      we entered into with them on the same date (the “Escrow Account”). In our
      letter, we alleged that the Former Vanguard Members made certain
      misrepresentations with respect to the closing balance sheet of Vanguard, dated
      September 15, 2006, namely overstating inventory assets and understanding
      current liabilities. The total amount of this claim is approximately $1.23
      million, not all of which is payable in cash. Under the terms of the relevant
      agreements, we have demanded that the escrow agent release to us $905,993 in
      cash and 619,003 shares of our common stock from the Escrow
      Account.





On
      February 22, 2008, we notified the Former Vanguard Members of an additional
      demand for indemnification under the Contribution Agreement, and of our further
      claim upon the Escrow Account. In our second letter we alleged that the Former
      Vanguard Members made certain misrepresentations with respect to certain IRS
      tax
      penalties. The total amount of this additional claim is $47,448. Under the
      terms
      of the relevant agreements, we have demanded that the escrow agent release
      to us
      $38,173 of cash and 23,965 shares of our common stock from the Escrow
      Account.





On
      March
      18, 2008, we notified the Former Vanguard Members of a third demand for
      indemnification under the Contribution Agreement, and of our further claim
      upon
      the Escrow Account. In our third letter we alleged that the Former Vanguard
      Members made certain misrepresentations with respect to the Vanguard biodiesel
      plant and certain liabilities relating to the disposal of glycerin produced
      at
      such plant. The total amount of this claim is $972,525. Under the terms of
      the
      relevant agreements, we have demanded that the escrow agent release to us
      $782,436 of cash and 491,139 shares of our common stock from the Escrow Account.





The
      Former Vanguard Members have disputed the first two demands we have made for
      indemnification. We have not yet received a response to our third demand. Two
      of
      the Former Vanguard Members, Darrell Dubroc and Tim Collins, are currently
      officers and directors of Allegro. We can make no assurances as to the final
      amount, if any, of funds that will be released to us from the Escrow
      Account.




-
          6
          -


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





On
      December 4, 2007, we held our annual meeting of shareholders. At the meeting,
      the shareholders elected the following directors for terms expiring at the
      next
      annual meeting of shareholders:





**Nominee**
            
            **Votes Cast For**
            
            **Votes Withheld**
            
            **Abstentions**
            
            **Broker Non-Votes**W.
                Bruce Comer III
            
            
            50,639,778
            
            
            38,407
            
            
            0
            
            
            10,053,538Heng
                Chuk
            
            
            50,640,024
            
            
            38,161
            
            
            0
            
            
            10,053,538Paul
                Galleberg
            
            
            50,638,133
            
            
            40,052
            
            
            0
            
            
            10,053,538Jeffrey
                Lawton
            
            
            50,640,162
            
            
            38,023
            
            
            0
            
            
            10,053,538Tim
                Collins
            
            
            50,640,408
            
            
            37,777
            
            
            0
            
            
            10,053,538Darrell
                Dubroc
            
            
            50,638,563
            
            
            38,622
            
            
            0
            
            
            10,053,538





The
      shareholders also ratified the appointment of McKennon, Wilson & Morgan, LLP
      as our independent auditors for the fiscal year ending December 31, 2007. Of
      the
      votes cast on this matter, 50,634,167 votes were cast for; 21,072 votes were
      cast against; 22,946 votes abstained; and there were 10,053,538 broker
      non-votes.





No
      other
      matters were voted on at the meeting.





**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**
            
            **Low****2006**First
                Quarter
            
            $
            18.00
            
            $
            5.00Second
                Quarter
            
            $
            14.00
            
            $
            7.00Third
                Quarter
            
            $
            10.00
            
            $
            3.00Fourth
                Quarter
            
            $
            5.25
            
            $
            2.25**2007**First
                Quarter
            
            $
            6.20
            
            $
            3.00Second
                Quarter
            
            $
            8.50
            
            $
            1.01Third
                Quarter
            
            $
            2.10
            
            $
            0.55Fourth
                Quarter
            
            $
            0.85
            
            $
            0.21





There
      were approximately 340 common
      shareholders of
      record as of March 24, 2008. 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, 2007 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 remaining****be issued upon exercise**
                
                **exercise price of**
                
                **available for future issuance****of outstanding options,**
                
                **outstanding options,**
                
                **under equity compensation****Plan Category**
                
                **warrants and rights**
                
                **warrants and rights**
                
                **plans (excluding securities**Equity
                    compensation plans approved by security holders
                
                
                696,960
                
                $
                0.76
                
                
                1,035,091Equity
                    compensation plans not approved by security holders
                
                
                -
                
                
                N/A
                
                
                N/ATotal
                
                
                696,960
                
                $
                0.76
                
                
                1,035,091




-
          7
          -


**Issuer
      Purchases of Equity Securities**





During
      the three months ended December 31, 2007, we did not make any purchases of
      our
      common stock.





**Recent
      Sales of Unregistered Securities**





During
      the three months ended December 31, 2007, 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, 2007 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 in
      the business of production and distribution of biodiesel fuel. We began
      biodiesel fuel production and sales in April 2006, making us the first
      operational producer of biodiesel in Louisiana. Our biodiesel fuel production
      facility is located on a 320-acre site in Pollock, Louisiana. The Pollock
      Facility uses renewable agricultural-based feedstock (primarily soybean oil)
      to
      produce biodiesel. Our current production capacity is estimated to be 12 million
      gallons of biodiesel per year.





Our
      primary source of revenue is the sale of biodiesel fuel, both in blended and
      unblended forms with petroleum-based diesel fuel. We produce biodiesel that
      meets or exceeds the ASTM D6751 specification and sell it primarily to
      wholesalers who purchase pure biodiesel (known as B100) or blended biodiesel
      such as B20 (which is blend of 20 percent biodiesel and 80 percent diesel).
      Our
      sales are dependent on the volume and price of the biodiesel fuel we sell.
      The
      selling prices we realize for our biodiesel are closely linked to the prices
      of
      petroleum-based diesel fuel and the supply and demand for biodiesel, as well
      as
      the tax incentives offered by federal and state governments for the production
      and blending of alternative fuels.





**Trends
      and Factors Affecting Our Business**





Our
      sales
      are dependent on the volume and price of the biodiesel fuel we sell. The selling
      prices we realize for our biodiesel are closely linked to market prices of
      petroleum-based diesel fuel, the supply and demand for biodiesel, as well as
      the
      tax incentives offered by federal and state governments for the production
      and
      blending of alternative fuels. The wholesale price of petroleum diesel
      historically has been highly volatile in both the short and long-term. For
      example, during 2007, wholesale petroleum-based diesel prices in the Gulf Coast
      have ranged from a low of approximately $1.40 to a high of approximately $2.55.
      During the year ended December 31, 2007, the average price per gallon in the
      Gulf Coast region of the United States was approximately $2.45.




-
          8
          -


Our
      gross
      margin is driven by the cost of feedstock (primarily soybean oil) and other
      chemical inputs used in our production of biodiesel fuel. Soybean oil is the
      primary input used and is our single largest expense. We purchase feedstock
      and
      other inputs both on the spot market and pursuant to fixed, short-term supply
      agreements. The price for refined soybean oil has been steadily increasing
      since
      the beginning of 2007, and increased to approximately $5.00 per gallon as of
      March 14, 2007, as compared to approximately $1.90 per gallon in the third
      quarter of 2006. This increase in soybean oil prices also has had a significant,
      negative effect on our profit margins and cash flows. In addition, we have
      experienced price fluctuations in other inputs such as sodium methylate and
      methanol.





Due
      to
      the rising costs of our feedstock inputs (out of proportion to the increase
      in
      fuel prices), we have had to significantly reduce our biodiesel production
      volume, which in turn has contributed to a reduction in our revenue and cash
      flows. We are currently not producing biodiesel due to the cost of soybean
      oil.
      If current commodity price levels (e.g., for soybean oil and diesel fuel)
      persist, we will produce only very limited quantities of biodiesel product
      during 2008. As discussed above, as a result of the rising cost of our feedstock
      inputs, we recorded an impairment of our goodwill associated with the Pollock
      Facility of approximately $19.9 million during the third quarter of
      2007.





Given
      these economic conditions, in October 2007 we adopted a company-wide cost
      reduction plan intended to reduce our operating costs. Under this plan, we
      significantly reduced our biodiesel production volume, administrative costs
      and
      our headcount from 19 to seven employees. Furthermore, we amended our
      compensation arrangements with our management team effective October 15, 2007,
      including a deferral of 50% of the monthly cash compensation payable to our
      senior executives, OPA and our non-executive directors, plus a 100% deferral
      of
      any bonuses, until a time in the future to be determined by our Board of
      Directors.





These
      measures have significantly lowered our monthly cash operating expenses from
      an
      average of about $400,000 to approximately $150,000 per month while preserving
      our ability to manufacture biodiesel fuel. In addition to our cost reduction
      plan, we are actively pursuing strategic alternatives, including evaluating
      other biodiesel feedstock sources, new uses for our assets and infrastructure,
      as well as other strategic opportunities in the renewable energy sector.
      Currently, our production team is evaluating jatropha oil as a potential lower
      cost feedstock. We are also exploring potential business combinations with
      third
      parties, the sale of Allegro, the sale of some or all of the assets of the
      biodiesel plant, and raising additional capital. We cannot provide any
      assurances as to whether we will be successful in our pursuance of any of these
      strategic alternatives.





On
      June
      22, 2007, we entered into a definitive agreement to acquire all of the
      outstanding stock of Talen's Marine & Fuel, Inc. (“Talen’s”). The closing of
      the acquisition was contingent on our ability to secure not less than $30
      million in financing for the acquisition on terms and conditions satisfactory
      to
      us. Due to the unforeseen deterioration of conditions in the financial markets,
      securing financing, in the timeline originally set forth in the definitive
      agreement, was not practicable.  As such, all parties agreed to terminate
      the Purchase Agreement effective October 18, 2007.





**Strategy**





Throughout
      fiscal 2007 we pursued measures to decrease the cost of feedstock and improve
      our operating efficiency. During the second quarter of 2007, we installed a
      methanol distillation system in order to reduce our methanol usage needs in
      the
      production of biodiesel. In April 2007, we introduced crude soybean oil
      feedstock into our biodiesel production process, which previously used more
      expensive refined soybean oil as the primary feedstock. In June 2007, we began
      exploring the use of pretreated animal tallow as an additional low-cost
      feedstock. On February 12, 2008 we began exploring making biodiesel from
      jatropha oil. We are pursuing other lower-cost modes of transport (such as
      freight by river barge, instead of rail or truck) for inbound supplies as well
      as outbound finished product.





In
      addition to our cost reduction initiatives, we are also actively pursuing
      strategic alternatives, including evaluating other biodiesel feedstock sources,
      new uses for our assets and infrastructure, as well as other strategic
      opportunities in the renewable energy sector. And as appropriate (i.e. with
      a
      re-alignment of commodity prices), in the future we have the ability to increase
      our production capacity from 12 million to 20 million gallons, but any such
      increase would be subject to our obtaining additional financing.





**Biodiesel
      Tax Credit**





Biodiesel's
      potential to reduce dependence on foreign petroleum imports in the United States
      and to support domestic agriculture has prompted the introduction of favorable
      legislation to encourage its use and production, and to spur investment in
      the
      industry. In October 2004, Congress passed a biodiesel tax incentive as part
      of
      the American Jobs Creation Act. The incentive allows diesel “blenders,” as
      registered with the Internal Revenue Service (the “IRS”), to claim an excise tax
      credit of $1.00 per gallon for biodiesel made from virgin vegetable oil or
      animal fats, and $0.50 per gallon for biodiesel made from non-virgin oil. This
      tax credit allows producers of biodiesel to compete effectively with
      petrodiesel. Originally scheduled to expire at the end of 2006, the tax credit
      was extended by the Energy Policy Act of 2005 (“EPAct”) to the end of
      2008.


**Biodiesel
      Pricing**





The
      price
      of biodiesel is closely linked with the price of petrodiesel, which has
      increased dramatically in recent years with the rapid rise in oil prices. As
      of
      the date of this report, the national average wholesale price of diesel (before
      tax) is approximately $2.65 per gallon. Because biodiesel is currently eligible
      for the $1 per gallon federal excise tax credit, it is generally sold at a
      wholesale price approximately $1 higher than the wholesale price of petrodiesel.
      Alternatively, a producer of biodiesel who is also registered as a blender
      may
      blend the product with petrodiesel, sell the blended diesel (at the wholesale
      price) and then claim the tax credit directly. We are a blender registered
      with
      the IRS.




-
          9
          -




**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, including those related to sales allowances, the allowance for doubtful
      accounts, inventories and related reserves, long-lived assets, income taxes,
      litigation and stock-based compensation. We base our estimates on our historical
      experience, knowledge of current conditions and our beliefs of what could occur
      in the future considering available information. Actual results may differ
      from
      these estimates, and material effects on our operating results and financial
      position may result. We believe the following critical accounting policies
      involve our more significant judgments and estimates used in the preparation
      of
      our consolidated financial statements.





*Revenue
      Recognition*





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





·
            persuasive
                evidence that an arrangement
                exists;





·
            the
                products and services have been
                delivered;




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




·
            collection
                of amounts due is reasonably
                assured.





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





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




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





*Accounts
      Receivable*





We
      perform ongoing credit evaluations of our customers and adjust credit limits
      based upon payment history and the customer's current credit worthiness, as
      determined by our review of their current credit information. We continuously
      monitor collections and payments from our customers and maintain an allowance
      for doubtful accounts based upon our historical experience and any specific
      customer collection issues that we have identified. While our credit losses
      have
      historically been within our expectations and the allowance established, we
      may
      not continue to experience the same credit loss rates as we have in the past.
      Our accounts receivable are concentrated in a relatively few number of
      customers. Therefore, a significant change in the liquidity or financial
      position of any one customer could make it more difficult for us to collect
      our
      accounts receivable and require us to increase our allowance for doubtful
      accounts, which could have a material adverse impact on our consolidated
      financial position, results of operations and cash flows.




-
          10
          -




*Inventories*





We
      seek
      to purchase and maintain raw materials at sufficient levels to meet lead times
      based on forecasted demand. If forecasted demand exceeds actual demand, we
      may
      need to provide an allowance for excess or obsolete quantities on hand. We
      also
      review our inventories for changes in the market prices of biodiesel fuel and
      provide reserves as deemed necessary. If actual market conditions are less
      favorable than those projected by management, additional inventory reserves
      may
      be required. We state our inventories at the lower of cost, using the first-in,
      first-out method on an average costs basis, or market.





We
      adopted SFAS No. 151, “Inventory Costs, an amendment of Accounting Research
      Bulletin (ARB) No. 43, Chapter 4” beginning January 1, 2006, with no
      material effect on our financial condition or results of operations. Abnormal
      amounts of idle facility expense, freight, handling costs, and wasted materials
      (spoilage) are recognized as current-period charges. Fixed production
      overhead is allocated to the costs of conversion into inventories based on
      the
      normal capacity of the production facilities. We utilize an expected normal
      level of production units, based on our plant capacity. To the extent we do
      not
      achieve a normal expected production levels, we charge such under-absorption
      of
      fixed overhead to operations.





*Long-lived
      Assets*





We
      continually monitor and review long-lived assets, including fixed assets,
      goodwill and intangible 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. The estimate of cash flows is based upon, among other things,
      certain assumptions about expected future operating performance, growth rates
      and other factors. Our estimates of cash flows may differ from actual cash
      flows
      due to, among other things status of federal and state fuel tax credit programs,
      market spot rates for raw material used in our production process, market spot
      rates for biodiesel, all which can cause materially changes our operating
      performance. 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.





*Goodwill
      and Acquired Intangible Assets*





We
      account for goodwill and acquired intangible assets in accordance with SFAS
      142
      (FAS 142) “Goodwill and Other Intangible Assets”, whereby goodwill is not
      amortized, and is tested for impairment at the reporting unit level annually
      or
      when there are any indications of impairment. A reporting unit is an operating
      segment for which discrete financial information is available and is regularly
      reviewed by management. The Company has one reporting unit, its Pollock,
      Louisiana, biodiesel production facility, to which goodwill is
      assigned.





FAS
      142
      requires a two-step approach to test goodwill for impairment for each reporting
      unit. The first step tests for impairment by applying fair value-based tests
      (described below) to a reporting unit. The second step, if deemed necessary,
      measures the impairment by applying fair value-based tests to specific assets
      and liabilities within the reporting unit. Application of the goodwill
      impairment tests require judgment, including identification of reporting units,
      assignment of assets and liabilities to each reporting unit, assignment of
      goodwill to each reporting unit, and determination of the fair value of each
      reporting unit. The determination of fair value for a reporting unit could
      be
      materially affected by changes in these estimates and assumptions. Due to the
      change in market conditions that negatively affected our profit margins and
      cash
      flows as discussed in Note 1 above, Allegro conducted goodwill impairment
      testing for its production facility as of September 30, 2007. As part of the
      first step, management considered three methodologies to determine the
      fair-value of this reporting unit.





1.
            Discounted
                cash flow methodology, which requires significant judgment to estimate
                the
                future cash flows and to determine the appropriate discount rates,
                growth
                rates, trends for commodity prices and other
                assumptions.





2.
            Orderly
                sale of assets process, which values the unit based on publicly-traded
                comparables using certain multiples of
                EBITDA.





3.
            Market
                capitalization approach. Management does not believe this method
                provides
                an accurate representation of the fair value due to the significant
                number
                of shares of Series A convertible preferred stock that are not included
                in
                this measurement and the lack of trading volume in its
                stock.





We
      believe the asset sale valuation and discounted cash flow methods provide the
      most accurate representations of the fair value of its biodiesel production
      facility. In determining the future cash flows of the facility, management
      considered among other things, the current and projected prices for soybean
      oil
      (the primary cost input) and for diesel and biodiesel fuel. Since the
      acquisition of Vanguard in September 2006, the price of soybean oil has steadily
      increased from $1.90 to over $5.00 per gallon of biodiesel produced. As a
      result, the expected cash flows to be generated by the biodiesel production
      facility were adversely impacted, resulting in the impairment of goodwill.
      As a
      result of its analysis, an impairment to goodwill of $19,978,894 was recorded
      during the third quarter of 2007.





-
          11
          -




*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.





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





*Equity
      Instruments Issued with Registration Rights Agreement*





We
      account for these penalties as contingent liabilities, applying the accounting
      guidance of SFAS No. 5, “Accounting for Contingencies”. This accounting is
      consistent with views established by the Emerging Issues Task Force (EITF)
      in
      its consensus set forth in EITF 05-04 (view C) and FASB Staff Positions FSP
      EITF
      00-19-2 “Accounting for Registration Payment Arrangements”, which was issued
      December 21, 2006. Accordingly, we recognize the damages when it becomes
      probable that they will be incurred and amounts are reasonably estimable. From
      April 13, 2007 to June 13, 2007, the Company incurred penalties under the
      registration rights agreement it entered into on September 20, 2006, for the
      late registration of shares underlying the Class A convertible preferred shares
      it issued in September 2006. The registration statement was declared effective
      on June 13, 2007. As of December 31, 2007, the Company accrued $381,415 for
      penalties associated with the late registration of such shares. .





**Recent
      Accounting Pronouncements**





In
      July
      2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
      Income Taxes — an interpretation of FASB Statement No. 109 ("FIN48"). 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 will be effective for the Company beginning
      October 1, 2007. 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.




-
          12
          -


In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, Fair Value Measurements ("SFAS 157"). SFAS No. 157 provides a common
      definition of fair value and establishes a framework to make the measurement
      of
      fair value in generally accepted accounting principles more consistent and
      comparable. SFAS 157 also requires expanded disclosures to provide information
      about the extent to which fair value is used to measure assets and liabilities,
      the methods and assumptions used to measure fair value, and the effect of fair
      value measures on earnings. SFAS 157 is effective for fiscal years beginning
      after November 15, 2007, although early adoption is permitted. The Company
      is
      currently assessing the potential effect, if any, of SFAS 157 on its
      consolidated financial statements.





In
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities — Including an amendment of FASB
      Statement No. 115" ("SFAS 159"). SFAS 159 permits an entity to elect fair value
      as the initial and subsequent measurement attribute for many financial assets
      and liabilities. Entities electing the fair value option would be required
      to
      recognize changes in fair value in earnings. Entities electing the fair value
      option are required to distinguish, on the face of the statement of financial
      position, the fair value of assets and liabilities for which the fair value
      option has been elected and similar assets and liabilities measured using
      another measurement attribute. SFAS 159 is effective for fiscal years beginning
      after November 15, 2007. The adjustment to reflect the difference between the
      fair value and the carrying amount would be accounted for as a cumulative-effect
      adjustment to retained earnings as of the date of initial adoption. The Company
      is currently evaluating the impact, if any, of SFAS 159 on its consolidated
      financial statements.





In
      December 2007, the FASB issued SFAS No. 141(R), Business Combinations ("SFAS
      141(R)"), which replaces FAS 141. SFAS 141(R) establishes principles and
      requirements for how an acquirer in a business combination recognizes and
      measures in its financial statements the identifiable assets acquired, the
      liabilities assumed, and any controlling interest; recognizes and measures
      the
      goodwill acquired in the business combination or a gain from a bargain purchase;
      and determines what information to disclose to enable users of the financial
      statements to evaluate the nature and financial effects of the business
      combination. FAS 141(R) is to be applied prospectively to business combinations.





**Results
      of Operation**





Immediately
      prior to the acquisition of Vanguard Synfuels, LLC on September 20, 2006 (the
      “Acquisition”), we were considered a “shell company” as defined by the
      Securities and Exchange Commission with our business activities primarily
      focused on raising additional financing and the pursuit of a strategic
      transaction. Consequently, we had no operations until after the completion
      of
      the Acquisition. As a result, we believe that a comparison of our financial
      results for the year period ended December 31, 2007, to the year ended December
      31, 2006, is not meaningful.





**Results
      of Operations for the Years Ended December 31, 2007 and 2006**





*Sales*





During
      fiscal 2007, we generated $7,402,700 in revenue from sales of biodiesel,
      including excise tax credits of $1,940,947 generated by the sale of blended biodiesel fuel.





From
      the
      date of the Acquisition (September 20, 2006) through December 31, 2006, we
      generated $1,802,926 in revenue through sales of biodiesel, including excise
      tax
      credits of $618,155 generated by the sale of blended biodiesel fuel.





*Gross
      Profit (Loss)*





Our
      gross
      loss represents revenues less the cost of goods sold. Our cost of goods sold
      consists of raw materials including the cost of vegetable oils, chemicals,
      labor
      and overhead incurred with the production of biodiesel.





Our
      gross
      loss during fiscal 2007 was $373,606 primarily as a result of increasing
      feedstock costs as discussed above under the caption “Trends and Factors
      Affecting Our Business.”





Our
      gross
      loss for the period from September 20, 2006 to December 31, 2006 primarily
      resulted from our sub-scale production level during the period. We were
      operating at approximately 22% of planned production capacity during this
      period, resulting in lower efficiencies, higher usage and cost of chemical
      inputs, and high fixed operating costs in relation to our output.





*Selling,
      General and Administrative Expenses*





Our
      selling, general and administrative (“SG&A”) expenses include personnel
      costs, product marketing, the costs of corporate functions (including our
      Services Agreement with OPA), accounting, transaction costs, legal expenses,
      public company costs, information systems costs and non-cash stock-based
      compensation.




-
          13
          -


SG&A
      expenses during fiscal 2007 were $7,890,749, including $2,733,467 of non-cash
      stock based compensation expense, $359,025 of depreciation expense, and $990,960
      of abandoned acquisition costs incurred in connection with the termination
      of
      the proposed acquisition of Talen’s. We also incurred $961,774 in management
      fees and milestone payments to OPA pursuant to our Services Agreement with
      OPA.





SG&A
      expenses during 2006 were $25,404,059, including $1,358,755 incurred by Vanguard
      from the date of the Acquisition to December 31, 2006. Included in these costs
      were non-cash, nonrecurring expenses incurred in connection with the
      Acquisition, granting of stock options and issuance of warrants. The stock
      options and warrants were valued using the Black-Scholes option pricing model.
      The charges include the following items:





·
            $14,807,934,
                representing the fair value of warrants granted to OPA for the waiving
                of
                anti-dilution provisions held in connection with our Series I convertible
                preferred stock; and


·
            $6,044,040
                for the fair value of vested stock options granted to OPA in connection
                with its Services Agreement with
                us.





*Amortization
      of Intangible Assets*





Amortization
      expense relating to our intangible assets during fiscal 2007 was $905,400,
      compared to $226,350 during fiscal 2006. The change resulted from a full year
      of
      amortization in fiscal 2007 compared to approximately three months in fiscal
      2006.





*Impairment
      of Goodwill*





During
      2007, we performed a goodwill impairment test relating to the Pollock Facility
      which resulted in an impairment to goodwill associated with the facility of
      $19,978,894. This impairment was attributable to the increase in feedstock
      costs. During 2006, we recorded an impairment of goodwill of $51,012,250 on
“day
      one” of the Acquisition. See Note 2 to the consolidated financial
      statements.





*Interest
      Expense*





Interest
      expense during fiscal 2007 primarily related to principal amounts outstanding
      under our credit agreement with First South Farm Credit, ACA. During the first
      nine months of 2006, we had $750,000 of outstanding principal balances under
      convertible promissory notes which were cancelled in September 2006 and
      converted into common stock in connection with the Acquisition.





During
      fiscal 2007, we incurred interest expense of $348,265, compared to $879,029
      in
      fiscal 2006. Interest expense during fiscal 2006, included $737,443 of non-cash
      accretion for the $750,000 convertible notes which were cancelled and converted
      into common stock on the date of the Acquisition. The remaining interest expense
      was attributable to Vanguard's line of credit and notes payable from the date
      of
      the Acquisition to December 31, 2006.





*Interest
      Income*





Interest
      income during fiscal 2007 was $67,186 compared to $68,096 during the same period
      in fiscal 2006.





*Registration
      Rights Penalties*





During
      fiscal 2007, we incurred registration rights penalties under our Series A
      convertible preferred stock registration rights agreement of $381,250, as
      compared to $0 for 2006. See Note 14 to the consolidated financial
      statements.





*Other
      Income*





Other
      income during fiscal 2007 totaled $222,753, and included $197,753 of penalties
      received for untimely removal of equipment sold to a third-party prior to the
      Acquisition.





Other
      income during fiscal 2006 totaled $142,781, and consisted primarily of proceeds
      received from the sale of our equity interests in TGC Research Limited, a
      subsidiary that held intellectual property assets related to our previously
      discontinued business operations, to Glumetrics, Inc. in July 2006.





*Income
      Tax Benefit*





The
      benefit from income taxes for the year ended December 31, 2007 resulted from
      operating losses incurred. Such losses were recognized to the extent of our
      deferred income tax liabilities. The amount of our deferred tax assets in excess
      of our liabilities has been recorded as deferred tax assets, which have been
      provided a valuation allowance of approximately $20,101,400. As a result of
      our
      recent operating losses and our expectation of future operating results, we
      determined that it is more likely than not that the U.S. federal and state
      income tax benefits (principally net operating losses we can carry forward
      to
      future years) which arose during the year ended December 31, 2007 will not
      be
      realized. We do not expect to recognize any income tax benefits relating to
      future operating losses until we believe that such tax benefits are more likely
      than not to be realized.




-
          14
          -


**Liquidity
      and Capital Resources**





The
      accompanying consolidated financial statements have been prepared on a
      going-concern basis, which contemplates the realization of assets and
      satisfaction of liabilities and other commitments in the normal course of
      business.





Our
      principal sources of liquidity consist of cash and cash equivalents, cash
      generated from product sales, the issuance of debt and equity securities, and
      amounts available for borrowing under our credit agreement with First South
      Farm
      Credit, ACA (“First South”). In addition to funding operations, our principal
      short-term and long-term liquidity needs have been, and are expected to be,
      the
      debt service requirements of our line of credit and notes payable, capital
      expenditures and general corporate purposes. In addition, commensurate with
      our
      level of production of biodiesel, we require working capital for purchases
      of
      soybean oil and other inputs necessary for biodiesel production. At December
      31,
      2007, our cash and cash equivalents totaled $874,693, and we had negative
      working capital of $6,727,825 Included as a reduction to our working capital
      is
      $2,844,342 of accrued dividends which we may pay, at our option, in shares
      of
      Series A convertible preferred stock or in cash. The payment of such dividends
      may result in substantial dilution to our existing common shareholders. We
      also
      have a note receivable from Community Power Corporation (“CPC”) for $500,000 as
      of December 31, 2007, of which $225,000 was repaid on February 27, 2008, and
      $25,000 was forgiven in exchange for such early repayment. The remaining balance
      of $250,000 is due on or before December 31, 2008.





At
      December 31, 2007, we had $3,017,379 in bank debt outstanding under our credit
      agreement with First South. The credit agreement provides for borrowings of
      up
      to $3,500,000, which includes a line of credit and a term loan. The amount
      outstanding under the note payable and line of credit is $1,350,000 and
      $1,667,379, respectively. The credit agreement is secured by substantially
      all
      of the assets of Vanguard. As of December 31, 2007, Vanguard failed to comply
      with a covenant under the credit agreement, relating to the maintenance of
      minimum level of working capital of $500,000. On March 27, 2008, Vanguard
      received a waiver of its non-compliance with this covenant from First South
      through September 1, 2008, and an acknowledgement that Vanguard was no longer
      in
      default of the credit agreement as of December 31, 2007. In the future if
      Vanguard is unable to meet the covenants under the credit agreement, First
      South
      may elect to exercise its rights under the agreement and foreclose on the assets
      of Vanguard. On January 1, 2008, we made the contractual principal payment
      of
      $150,000 on the term loan.





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 is due on March 31, 2008, and is convertible into our common
      stock
      at any time at either party’s election at a conversion price of $0.65 per share.
      On March 27, 2008, we notified Monarch Pointe that we will be converting the
      principal of the note, together with accrued interest, into 1,577,113 shares
      of
      our common stock.





On
      June
      28, 2007, we borrowed $640,000 from The Bel Fixed Income Portfolio (“Bel”) which
      we loaned to Talen's in connection with the proposed acquisition discussed
      above
      under “Trends and Factors Affecting Our Business.” On September 11, 2007,
      Talen’s repaid the amounts owed to us. In turn, we repaid the amounts owed to
      Bel.





We
      believe that our existing sources of liquidity will be sufficient to fund our
      operations, anticipated capital expenditures, working capital and other
      financing requirements into the second quarter of 2008. We are currently seeking
      additional financing to fund our business. Due to the increases in the price
      of
      soybean oil, our primary input in the production of our biodiesel, we cannot
      assure you that such financing will be available to us on favorable terms,
      or at
      all. If we cannot obtain such financing, we will be forced to further curtail
      our operations, and we may become unable to satisfy our obligations to our
      creditors. In such an event we will need to enter into discussions with our
      creditors to settle, or otherwise seek relief from, our obligations. Management
      is also in the process of evaluating strategic opportunities which include
      the
      possible sale of Allegro to a third party or a sale of the biodiesel facility’s
      assets.





**Cash
      Flows**





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


2007
              
              2006
              
              ChangeProvided
                  by (used in)Operating
                  activities
              
              $
              (4,052,489
              )
              $
              (3,519,389
              )
              $
              (533,100
              )Investing
                  activities
              
              
              (1,601,109
              )
              
              (19,063,159
              )
              
              17,462,050Financing
                  activities
              
              
              950,000
              
              
              27,780,012
              
              
              (26,830,012
              )$
              (4,703,598
              )
              $
              5,197,464
              
              $
              (9,901,062
              )


*Operating
      Activities*





Operating
      cash flows during fiscal 2007 reflect our net loss of $29,588,390, offset by
      positive changes in working capital of $1,372,552 and non-cash expenses
      (depreciation, amortization of intangible assets, impairment of goodwill and
      stock-based compensation) of $24,083,349. The change in working capital
      requirements is primarily related to decreases in accounts receivables and
      inventory levels due to decreased sales and, increases in our accounts payable
      and increases in accrued expenses.




-
          15
          -


Operating
      cash flows during fiscal 2006 reflect our net loss of $75,249,814 and increased
      working capital requirements, substantially offset by non-cash charges
      (depreciation, amortization, stock-based compensation, impairment of goodwill,
      accretion of convertible notes, and nonrecurring indirect transaction related
      charges) of $75,305,235.





*Investing
      Activities*





Cash
      used
      in investing activities during fiscal 2007 was $1,601,109. During fiscal 2007,
      we purchased $626,109 of equipment purchases to upgrade our plant and increase
      operational efficiencies in order to lower our production costs. We also
      invested $1,000,000 for a minority interest in Community Power
      Corporation.





During
      fiscal 2006, we paid $18,538,953 in cash to acquire Vanguard and purchased
      $524,206 of capital expenditures to upgrade and expand the production capacity
      of our plant.





*Financing
      Activities*





During
      fiscal 2007 cash provided by financing activities was $950,000. During fiscal
      2007, we received proceeds of $1,640,000 from the issuances of promissory notes
      and $600,000 from the exercise of warrants to purchase our common stock. We
      also
      loaned $1,140,000 to two parties of which we received aggregate principal
      payments of $640,000 and made $640,000 in principal repayments. We also made
      a
      scheduled principal payment of $150,000 under our term loan with First South.





During
      fiscal 2006, we received net proceeds of $28,240,000 from the issuance of
      $28,500,000 of Series A convertible preferred stock and $300,000 from the
      issuance of a convertible note. We repaid of $759,988 of notes payable assumed
      in connection with the Acquisition and converted the $300,000 convertible note
      into common stock.





**Disclosure
      of Contractual Obligations**





The
      following table summarizes our commitments to settle contractual obligations
      in
      cash as of December 31,:


Year
                  ending December 31,2008
              
              2009
              
              2010
              
              TotalDebt
                  obligations
              
              $
              4,017,378
              
              $
              -
              
              $
              -
              
              $
              4,017,378Operating
                  leases
              
              
              47,041
              
              
              24,555
              
              
              2,046
              
              
              73,642$
              4,066,427
              
              $
              26,564
              
              $
              4,056
              
              $
              4,091,020




**Off
      Balance Sheet Arrangements**





We
      have
      no off balance sheet arrangements.





**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-20.





**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, 2007. 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.




-
          16
          -


**Management's
      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, 2007, 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, 2007.





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 2007 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





**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**
            
            **Position**Bruce
                Comer
            
            42
            
            Chief
                Executive Officer, DirectorDarrell
                Dubroc
            
            47
            
            President
                & Chief Operating Officer, DirectorTim
                Collins
            
            43
            
            Executive
                Vice President of Business Development, DirectorPaul A. Galleberg
            
            47
            
            Director,
                Compensation Committee ChairmanJeffrey Lawton
            
            31
            
            Director,
                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.




-
          17
          -


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 is the founder and Managing Director of Ocean Park Advisors,
      LLC, a private equity firm founded in 2004 that invests in middle-market
      companies and provides advisory services to select investors and corporate
      clients. He has over 17 years experience in business development, finance and
      operations both in the United States and throughout Asia. Prior to founding
      Ocean Park Advisors, he was a Principal at Platinum Equity. From 2000 through
      2002, Mr. Comer was the Chief Financial Officer of Pacific Crossing, a
      subsea cable venture that owned and operated a trans-Pacific fiber optic cable
      system linking Japan and the United States, and was Vice President of Corporate
      Finance at Asia Global Crossing. The Pacific Crossing venture consisted of
      the
      following entities: PC Landing Corp., a Delaware corporation, Pacific Crossing,
      Ltd., a Bermuda company, Pacific Crossing UK, Ltd., a United Kingdom company,
      PCL Japan, Ltd., a Japan company, and SCS Bermuda, Ltd., a Bermuda company.
      Mr. Comer serves on the Board of Trustees of Princeton-in-Asia. He is also
      a member of the Pacific Council on International Policy and served on its task
      force on United States-Indian Relations. 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.





**Darrell
      Dubroc**





Mr. Dubroc
      has served as the President, Chief Operating Officer and a director of the
      Company since September 2006, and has served as the President and Chief
      Executive Officer of Vanguard since its inception in 2003. Prior to 2003,
      Mr. Dubroc had an 18 year tenure at Cleco Corporation, a publicly-listed
      electric utility company (NYSE: CNL) based in the Gulf Coast region, where
      he
      most recently served as an officer and as a Senior Vice President.
      Mr. Dubroc is a member of the Louisiana Association of Business and
      Industry, the Louisiana Engineering Society, the Central Louisiana Chamber
      of
      Commerce, and is a voting Board Member of the National Biodiesel Board.
      Mr. Dubroc is a graduate of the Advanced Business Management program at
      Harvard Business School, and received an advanced degree in Engineering
      Management from Louisiana State University. He graduated with a B.S. in
      Mechanical Engineering from the University of Louisiana in
      Lafayette.




**Tim
      Collins**





Mr. Collins
      has served as the Executive Vice President of Business Development and a
      director of the Company since September 2006, and has served as the Chief
      Financial Officer, Secretary and Treasurer of Vanguard since its inception
      in
      2003. He has over 15 years experience in finance, strategic planning, and
      business development. Prior to 2003, Mr. Collins had a 5 year tenure at
      Cleco Corporation, where he served as Director of Finance and Strategic
      Planning. Prior to Cleco, Mr. Collins was involved in a number of
      investment and consulting projects where he advised on operations, finance,
      accounting, and fundraising. Mr. Collins is a graduate of Louisiana Tech
      University, where he received a B.S. in Accounting.





**Paul
      A. Galleberg**





Mr. Galleberg
      has served as a director of the Company since March 2006. He has over 20 years
      experience in business development, law, corporate finance and general
      management. Since June 2006, Mr. Galleberg has been President of PV Asset
      Management LLC, a private investment and advisory company. From 2000 to June
      2006, Mr. Galleberg had been Senior Vice President, General Counsel and
      Secretary of Infonet Services Corporation, one of the world's largest managed
      data network services providers, which was purchased by BT Group plc in February
      2005. Prior to joining Infonet, Mr. Galleberg was a corporate partner with
      Latham & Watkins, an international law firm, having been associated
      with the firm since 1986. Mr. Galleberg received a J.D., *cum
      laude* ,
      from
      Harvard Law School and an A.B., with highest distinction, from the University
      of
      Michigan.





**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.




-
          18
          -


**Director
      Independence**





As
      of the
      date of this prospectus, 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 members are Mr. Galleberg,
      who
      is the Chairman, and 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 2007.





The
      Board
      of Directors re-established its Audit Committee on November 20, 2006 and
      appointed Mr. Galleberg and Mr. Lawton as members of the Audit Committee
      (previously, the full Board acted in lieu of a separate Audit Committee). The
      chairman of the Audit Committee is Jeffrey 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 four times in the year ended December 31, 2007.




The
      Board
      of Directors established a Nominating Committee on November 20, 2006 and
      appointed Mr. Comer, Mr. Dubroc and Mr. Galleberg as members of the Nominating
      Committee. The Nominating Committee did not meet during fiscal
      2007.





**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, 2007, 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
      has been filed as an exhibit to this report.





**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 2007 fiscal
      year
      was in excess of $100,000, for services rendered in all capacities for the
      fiscal years ended December 31, 2007 and 2006, respectively. No other executive
      officers who would have otherwise been includable in such table on the basis
      of
      salary and bonus earned for the 2007 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.”





-
          19
          -




**SUMMARY
      COMPENSATION TABLE**


**Name and Principal Position**
                
                **Year**
                
                **Salary ($)**
                
                **Bonus ($)**
                
                **Stock****Awards ($)**
                
                **Option****Awards ($)**
                
                **Non-Equity**
                  **Incentive Plan****Compensation****($)**
                
                **Nonqualfied**
                  **Deferred**
                  **Compensation**
                  **Earnings ($)**
                
                **All Other**
                  **Compensatio****nTotal ($)**
                
                **Total**Bruce
                    Comer,
                
                
                2007
                
                
                -
                (1)
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                $
                -Chief
                    Executive Officer
                
                
                2006
                
                $
                18,333
                (1)
                
                -
                
                
                -
                
                $
                1,001,119
                (3)
                
                -
                
                
                -
                
                
                -
                
                $
                1,019,452Heng
                    Chuk,
                
                
                2007
                
                
                -
                (2)
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                $
                -Chief
                    Financial Officer
                
                
                2006
                
                $
                18,334
                (2)
                $
                6,000
                
                
                -
                
                $
                480,534
                (4)
                
                -
                
                
                -
                
                
                -
                
                $
                504,868Darrell
                    Dubroc,
                
                
                2007
                
                $
                222,356
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                $
                27,644
                
                
                -
                
                $
                250,000President
                    and Chief Operating
                
                
                2006
                
                $
                75,452
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                $
                540,598
                (5)
                $
                616,050Tim
                    Collins,
                
                
                2007
                
                $
                155,649
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                $
                19,351
                
                
                
                
                $
                175,000Executive
                            Vice President of Business
                            Development
                
                
                2006
                
                $
                51,769
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                $
                174,378
                (6)
                $
                226,147







(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. OPA professionals and advisors perform general
                and
                administrative services for us. Mr. Comer serves as our Chief Executive
                Officer pursuant to that agreement. He receives no separate compensation
                for his services. See “Employment and Management Agreements” and “Item 13.
                Certain Relationships and Related Transactions, and Director
                Independence.”





(2)
            Does
                not include payments made to OPA pursuant to the agreement described
                in
                Note 1 above. Mr. Chuk was a principal of OPA during fiscal 2007,
                and
                served as our Chief Financial Officer until his resignation in February
                2008. Pursuant to the OPA agreement, he received no separate compensation
                for his services. See “Employment and Management Agreements” and “Item 13.
                Certain Relationships and Related Transactions, and Director
                Independence.”





(3)
            Represents
                the dollar amount recognized for financial reporting purposes of
                all stock
                options awarded to Mr. Comer in fiscal 2006, computed in accordance
                with
                Financial Accounting Standards 123R. See Note 15 to the Consolidated
                Financial Statements for a discussion of the assumptions we used
                in making
                such calculation. Does not include a stock option to purchase 2,069,109
                shares of common stock granted to OPA on September, 20, 2006.
                Mr. Comer is a principal of OPA and disclaims beneficial ownership of
                the shares underlying such option except to the extent of his pecuniary
                interest therein.





(4)
            Represents
                the dollar amount recognized for financial reporting purposes of
                all stock
                options awarded to Mr. Chuk in fiscal 2006, computed in accordance
                with
                Financial Accounting Standards 123R. See Note 15 to the Consolidated
                Financial Statements for a discussion of the assumptions we used
                in making
                such calculation. Does not include the stock option granted to OPA
                on
                September, 20, 2006 and described in Note 3 above. Mr. Chuk was a
                principal of OPA during fiscal 2007 and disclaims beneficial ownership
                of
                the shares underlying such option except to the extent of his pecuniary
                interest therein.





(5)
            Represents
                a bonus of $540,598 paid to Mr. Dubroc upon the completion of the
                Vanguard
                Acquisition.





(6)
            Represents
                a bonus of $174,378 paid to Mr. Collins upon the completion of the
                Vanguard Acquisition.





**Employment,
      Management and Change of Control Agreements**





On
      September 20, 2006, we entered into an employment agreement with
      Mr. Dubroc as our President and Chief Operating Officer. The employment
      agreement provides for an initial term of three years, which is automatically
      renewed for successive one-year terms thereafter on the same terms and
      conditions unless either party provides the other party with notice that it
      has
      elected not to renew the employment agreement. Mr. Dubroc is entitled to receive
      an annual salary of $250,000, a bonus of $540,598 that was paid upon the closing
      of the Acquisition, future incentive compensation of up to $1,081,196 based
      on
      our achieving certain milestones, and an annual performance bonus to be
      determined by our Board of Directors. On October
      22, 2007, Mr. Dubroc agreed to allow us to defer payment of fifty percent of
      his
      monthly cash compensation and one hundred percent of any bonuses earned (as
      provided for in his employment agreement with us dated September 20, 2006),
      effective as of October 15, 2007. These amounts will be deferred until a date
      to
      be determined by the Board of Directors. In connection with the proposed
      acquisition of the Port Assets described under “Item 1. Business-Developments in
      Our Business During Fiscal 2007,” Mr. Dubroc agreed to release certain of his
      bonus rights under his employment agreement in exchange for our permission
      to
      participate as an investor in such transaction.




-
          20
          -


On
      September 20, 2006, we entered into an employment agreement with
      Mr. Collins as our Executive Vice President of Business Development. The
      employment agreement provides for an initial term of three years, which is
      automatically renewed for successive one-year terms thereafter on the same
      terms
      and conditions unless either party provides the other party with notice that
      it
      has elected not to renew the employment agreement. Mr. Collins is entitled
      to receive an annual salary of $175,000, a bonus of $174,378 that was paid
      upon
      the closing of the Acquisition, future incentive compensation of up to $348,756
      based on our achieving certain milestones, and an annual performance bonus
      to be
      determined by our Board of Directors On October
      22, 2007, Mr. Collins agreed to allow us to defer payment of fifty percent
      of
      his monthly cash compensation and one hundred percent of any bonuses earned
      (as
      provided for in his employment agreement with us dated September 20, 2006),
      effective as of October 15, 2007. These amounts will be deferred until a date
      to
      be determined by the Board of Directors. In connection with the proposed
      acquisition of the Port Assets described under “Item 1. Business – Developments
      in Our Business During Fiscal 2007,” Mr. Collins agreed to release certain of
      his bonus rights under his employment agreement in exchange for our permission
      to participate as an investor in such transaction.





On
      September 20, 2006, we entered into a management services agreement with
      OPA, pursuant to which certain of OPA's professionals (including but not limited
      to Mr. Comer) and consultants provided general and administrative services
      to
      us. Such professionals are involved in our strategic planning, management of
      operations, finance and accounting functions, as well as business development.
      We and OPA have agreed that Mr. Comer shall continue to serve as our Chief
      Executive Officer, and that OPA will have the right to appoint two directors
      to
      our Board. On October 15, 2007, we amended our 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 agreement
      was
      also amended as follows: the term of the agreement was extended to October
      31,
      2007; after October 31, 2007, the agreement continues 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. See “Item 13.
      Certain Relationships and Related Transactions, and Director
      Independence.”





**Equity
      Awards**





The
      following table provides certain information concerning equity awards held
      by
      the named executive officers as of December 31, 2007:





**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR END**


**Option
                  Awards**
              
              **Stock
                  Awards****Number
                  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**
              
              **Unexercisable**Bruce
                  Comer
              
              
              -
              
              
              -
              (1)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Heng
                  Chuk
              
              
              -
              
              
              -
              (2)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Darrell
                  Dubroc
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Tim
                  Collins
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -







(1)
            Does
                not include a stock option to purchase 2,069,109 shares of common
                stock
                granted to OPA on September 20, 2006. Mr. Comer is a principal of
                OPA and
                disclaims beneficial ownership of the shares underlying such option
                except
                to the extent of his pecuniary interest therein. Such option has
                an
                exercise price of $0.7587 and expires on December 31, 2008. The option
                is
                fully vested and became exercisable on January 1,
                2008.





(2)
            Does
                not include the stock option granted to OPA on September 20, 2006
                as
                described in Note 1 above. Mr. Chuk is a former principal of OPA
                who
                resigned as an officer and director of Allegro in February 2008.
                He
                disclaims beneficial ownership of the shares underlying the option
                except
                to the extent of his pecuniary interest
                therein.





**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 ($)**Paul
                  A. Galleberg
              
              $
              7,434
              (1)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              7,434Jeffrey
                  Lawton
              
              $
              20,000
              (2)
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              20,000




-
          21
          -




(1)
            Includes
                deferred fees earned of $1,667 for the year ended December 31, 2007.See
                “Item 1. Business — Developments in Our Business During Fiscal 2007 –
                Trends in Our Business.”





(2)
            Includes
                deferred fees earned of $2,000 for the year ended December 31, 2007.See
                “Item 1. . Business — Developments in Our Business During Fiscal 2007 –
                Trends in Our Business.”





Our
      non-executive directors receive annual retainers of $16,000 and no additional
      fees for each meeting they attend. For the period from March 2007 through
      October 15, 2007, Mr. Galleberg did not receive any fees for his service as
      a
      director since we were party to a services agreement with a company controlled
      by him, as described below. Effective as of October 15, 2007, 50% of the
      compensation payable to our non-executive directors was deferred until a time
      in
      the future to be determined by our Board of Directors.





On
      August
      11, 2006, we granted Bruce Comer, our Chief Executive Officer, and Heng Chuk,
      our former Chief Financial Officer and Secretary options to purchase 180,622
      and
      86,698 shares of common stock, respectively, with an exercise price of $0.46
      per
      share, or 110% of the fair value of the common stock on the date of grant,
      and
      vesting fully on December 1, 2006. Our two outside directors, Paul
      Galleberg and Jeffrey Lawton, were each awarded an option to purchase 36,124
      shares of common stock, at an exercise price of $0.42 per share and vesting
      fully on September 13, 2006 and November 4, 2006, respectively (being
      six months after the appointment of each director). All stock options issued
      to
      the above individuals were originally set to expire on March 15, 2007; on March
      14, 2007, we extended the expiration terms to December 31, 2007. The options
      expired as of that date.





On
      March
      14, 2007, we entered into a services agreement with PV Asset Management, LLC,
      a
      company controlled by Paul Galleberg, a member of the Board of Directors.
      Pursuant to the terms of that agreement, which was effective as of February
      5,
      2007, Mr. Galleberg performed management and consulting services for us. The
      original term of the agreement extended through August 3, 2007, and was then
      further extended to October 15, 2007. The agreement expired on such date. See
      “Item 13. Certain Relationships and Related Transactions, and Director
      Independence.”





**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, 2007, an aggregate of 696,960 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.




-
          22
          -


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
      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.





**Item
      12. Security Ownership of Certain Benefical 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 23,625,143 shares of our common stock outstanding as of March
      28,
      2008.




**Name
                of Beneficial Owner**
            
            **Number of Shares**
              **Beneficially Owned (1)**
            
            **Percent**
              **of Class**(2)
            
            M.A.G.
                Capital, LLC
            
            24,356,395
            
            52.8%
            %(3)
            
            Mercator
                Momentum Fund
            
            2,422,063
            
            9.3%
            %(4)
            
            Mercator
                Momentum Fund III
            
            4,657,724
            
            16.5%
            %(5)
            
            Monarch
                Pointe Fund Ltd.
            
            15,862,708
            
            42.1%
            %(6)
            
            Ocean
                Park Advisors, LLC
            
            5,144,497
            
            21.8%
            %(7)
            
            Asset
                Managers International Limited
            
            9,565,818
            
            29.5%
            %(8)
            
            St.
                Cloud Capital Partners
            
            3,088,869
            
            11.6%
            %(9)
            
            Erasmus
                Louisiana Growth Fund
            
            2,841,860
            
            10.7%
            %(10)
            
            Pentagon
                Dollar Satellite Fund
            
            2,916,714
            
            11.0%
            %(11)
            
            Dave
                Callaham
            
            2,493,859
            
            9.5%
            %(12)
            
            Bruce
                Comer
            
            6,654,947
            
            26.5%
            %(13)
            
            Darrell
                Dubroc
            
            6,978,630
            
            29.5%
            %(14)
            
            Tim
                Collins
            
            4,131,370
            
            17.5%
            %(15)
            
            Paul
                A. Galleberg
            
            623,478
            
            2.6
            %(16)
            
            Jeffrey
                Lawton
            
            384,604
            
            1.5
            %(17)
            
            All
                directors and executive officers as a group
            
            18,736,905
            
            71.8%
            %







(1)
            The
                percentage calculations are based on 23,625,143 shares of common
                stock
                that were outstanding as of March 28, 2008 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 28, 2008 (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.




-
          23
          -




(2)
            Consists
                of 1,413,900 shares of common stock that may be acquired upon the
                conversion of outstanding Series B Convertible Preferred Stock, as
                well as
                the securities held by Mercator Momentum Fund, LP, Mercator Momentum
                Fund
                III, LP, Monarch Pointe Fund, Ltd., or Mercator Focus Fund, LP. David
                Firestone, as managing member of M.A.G. Capital, LLC, has voting
                and
                investment control over the shares owned by M.A.G. Capital, LLC and
                the
                foregoing Funds described in this table. See Notes 3, 4, and 5. The
                documentation governing the terms of the Series B Convertible Preferred
                Stock contains provisions prohibiting any conversion of the Series
                B
                Convertible Preferred Stock that would result in M.A.G. Capital,
                LLC;
                Mercator Momentum Fund, LP; Mercator Momentum Fund III or 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 23,051 shares of common stock, 1,691,694 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. The documentation governing the terms of the Series B
                Convertible Preferred Stock contains provisions prohibiting any conversion
                of the Series B Convertible Preferred Stock that would result in
                M.A.G.
                Capital, LLC; Mercator Momentum Fund, LP; Mercator Momentum Fund
                III or
                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.





(4)
            Consists
                of 25,150 shares of common stock, 3,266,720 shares of common stock
                that
                may be acquired upon the conversion of outstanding Series A Convertible
                Preferred Stock and 1,365,854 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 B
                Convertible Preferred Stock contains provisions prohibiting any conversion
                of the Series B Convertible Preferred Stock that would result in
                M.A.G.
                Capital, LLC; Mercator Momentum Fund, LP; Mercator Momentum Fund
                III or
                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.





(5)
            Consists
                of 1,771,284 shares of common stock, 10,587,673 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 B
                Convertible Preferred Stock contains provisions prohibiting any conversion
                of the Series B Convertible Preferred Stock that would result in
                M.A.G.
                Capital, LLC; Mercator Momentum Fund, LP; Mercator Momentum Fund
                III or
                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.





(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 815,675 shares of common stock and 8,750,143 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.





(8)
            Consists
                of 3,088,869 shares of common stock that may be acquired upon the
                conversion of outstanding Series A Convertible Preferred Stock. Marshall
                Geller, as managing partner of St. Cloud Capital Partners, has voting
                and
                investment control over the shares owned by
                it.





(9)
            Consists
                of 2,841,860 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.





(10)
            Consists
                of 2,916,714 shares of common stock that may be acquired upon the
                conversion of outstanding Series A Convertible Preferred Stock. Lewis
                Chester, as managing member of Pentagon Dollar Satellite Fund, Ltd.,
                has
                voting and investment control over the shares owned by
                it.





(11)
            Consists
                of 2,493,859 shares of common stock that may be acquired upon the
                conversion of outstanding Series A Convertible Preferred
                Stock.





(12)
            Includes
                shares underlying options to purchase 1,510,450 shares. Additionally,
                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.





(13)
            Consists
                of 6,978,630 shares of common
                stock.




-
          24
          -




(14)
            Consists
                of 4,131,370 shares of common
                stock.





(15)
            Consists
                of options to purchase 623,478 common
                shares.





(16)
            Consists
                of options to purchase 348,480 common
                shares.





(17)
            Includes
                shares beneficially owned by Darrell Dubroc, Tim Collins, Bruce Comer,
                Paul Galleberg and Jeff Lawton, and including with respect to Mr.
                Comer,
                shares beneficially owned by Ocean Park Advisors. Mr. Comer disclaims
                beneficial ownership of the shares beneficially owned by Ocean Park
                Advisors except to the extent of his respective pecuniary interest
                therein.




**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 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 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 our 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 agreement was also
      amended as follows: the term of the agreement was extended to October 31, 2007;
      after October 31, 2007, the agreement continues 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
      September 20, 2006, we entered into an agreement with OPA, pursuant to
      which OPA agreed to convert its Series I Convertible Preferred Stock into common
      stock and to waive the anti-dilution rights associated with the Series I
      Convertible Preferred Stock. In consideration of converting such Series I
      Convertible Preferred Stock and waiving such anti-dilution rights, we issued
      warrants to OPA to purchase approximately 4.8 million shares of common
      stock at $0.76 per share. The OPA warrants would vest upon the later of
      (i) the date the Reincorporation becomes effective, or (ii) the date
      that the price of the Company's stock closes at higher than $0.76 per share
      for
      50% of such warrants, and higher than $1.14 per share for the other 50% of
      such
      warrants. The two vesting conditions were satisfied and the OPA warrants were
      fully vested. On January 25, 2007, OPA elected to exercise the warrants in
      full
      pursuant to the terms thereof, in exchange for the issuance of an aggregate
      of
      3,765,097 shares of our common stock.





On
      September 20, 2006, Asset Managers International Limited and Monarch Pointe
      Fund, Ltd. each received 815,675 shares of common stock upon the conversion
      of
      their Convertible Secured Promissory Notes dated December 6, 2005 in
      accordance with the terms of such promissory notes. In connection with the
      Acquisition, we issued to certain funds managed by M.A.G. Capital, LLC (“MAG”)
      80,733 shares of common stock upon the cashless exercise of warrants to acquire
      417,119 of our common shares held by such funds, based on the closing price
      of
      our common stock on September 19, 2006.





On
      September 20, 2006, in consideration for the assignment to us of certain
      rights to acquire Vanguard, we issued to MAG warrants (the “MAG Warrants”) to
      purchase 6,500,000 shares of common stock (approximately 10% of the common
      shares on a fully-diluted basis) upon closing of the Acquisition. Half of the
      MAG Warrants had an exercise price of $1.1381 per share, and the other half
      had
      an exercise price of $1.3278 per share. MAG also received a cash fee of $435,000
      to cover certain due diligence and legal expenses it incurred in connection
      with
      the Acquisition. On November 13, 2007, we amended the exercise price of 923,077
      of these warrants from $1,3278 to $0.65 per share. These amended warrants were
      exercised by MAG, resulting in gross proceeds of $600,000 to us.




-
          25
          -


We
      and
      certain of our stockholders entered into voting agreements, each dated as of
      September 20, 2006. The stockholders who entered into the voting agreements
      collectively beneficially owned securities with the voting power equivalent
      to
      that of 52 million common shares (or approximately 99% of the voting power
      of our capital stock) at that time, and agreed to vote their shares in favor
      of
      approving the Reincorporation and approving our 2006 Incentive Compensation
      Plan
      and the Amendment to the Company's 2006 Incentive Compensation Plan at our
      special meeting of shareholders held on November 28, 2006. Such proposals
      were approved by stockholders at the special meeting of shareholders on that
      date.





In
      connection with the sale of our Series J Convertible Preferred Stock, we entered
      into a Registration Rights Agreement, dated as of September 20, 2006, with
      certain related parties (including Monarch Pointe Fund, Ltd., Mercator Momentum
      Fund, L.P., Mercator Momentum Fund III, L.P., M.A.G. Capital, LLC and Ocean
      Park
      Advisors, LLC). In addition, we previously granted registration rights to the
      holders of our Series H and Series I Convertible Preferred Stock.





On
      August
      11, 2006, we granted Bruce Comer, our Chief Executive Officer, and Heng Chuk,
      our former Chief Financial Officer and Secretary options to purchase 180,622
      and
      86,698 shares of common stock, respectively, with an exercise price of $0.46
      per
      share, or 110% of the fair value of the common stock on the date of grant,
      and
      vesting fully on December 1, 2006. Our two independent directors, Paul
      Galleberg and Jeffrey Lawton, were each awarded an option to purchase 36,124
      shares of common stock, at an exercise price of $0.42 per share and vesting
      fully on September 13, 2006 and November 4, 2006, respectively (being
      six months after the appointment of each director). All stock options issued
      to
      the above individuals were originally set to expire on March 15, 2007; on
      March 14, 2007, we extended the expiration terms to December 31, 2007. The
      options were not exercisable until approval by our stockholders. On
      November 28, 2006, the stockholders approved the stock options at a special
      meeting of stockholders. These options were not exercised and expired on
      December 31, 2007.





On
      March
      14, 2007, we entered into a services agreement with PV Asset Management, LLC
      (“PVAM”), a company controlled by Paul Galleberg, a member of the Board of
      Directors. Pursuant to the terms of that agreement, which was effective as
      of
      February 5, 2007, Mr. Galleberg 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.





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. See “Item 1. Business – Developments in Our Business During Fiscal
      2007.” 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. In the event we exercise the call option described above,
      we will be required to pay them an aggregate of $250,000 in cash and $200,000
      of
      our stock to settle such bonus claims.





*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.





Paul
      Galleberg, who is a member of our Board and our Audit, Compensation and
      Nominating Committees, is not independent under relevant Nasdaq
      definitions.





**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, 2007 and 2006. 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.




-
          26
          -


**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**
            
            **2007 Fees**
            
            **2006
                Fees**Audit
                Fees
            
            $
            82,625
            
            $
            94,000Audit-Related
                Fees (a)
            
            
            0
            
            
            80,000Tax
                Fees(b)
            
            
            11,800
            
            
            7,000All
                Other Fees (c)
            
            
            24,287
            
            
            0Total
            
            $
            118,172
            
            $
            181,000




(a)
            Includes
                audit and related fees incurred in connection with the audits of
                the
                financial statements of Vanguard Synfuels LLC for the years ended
                December
                31, 2005 and 2004 and the reviews of the six months ended June 30,
                2006
                and 2005.





(b)
            Fees
                for all tax-related services rendered to the
                Company.





(c)
            Fees
                for acquisition due diligence and filing of the Company’s Form SB-2
                registration statement in fiscal
                2006.





**Audit
      Committee Pre-Approval Policy**





There
      are
      currently two members of the Audit Committee, Paul A. Galleberg and 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,


·
            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.




-
          27
          -


**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, 2007 and 2006
            
            F-2Consolidated
                Statements of Operations for the Years Ended December 31, 2007 and
                2006
            
            F-3Consolidated
                Statements of Shareholders' Equity (Deficit) for the Years Ended
                December
                31, 2007 and 2006
            
            F-4Consolidated
                Statements of Cash Flows for the Years Ended December 31, 2007 and
                2006
            
            F-5Notes
                to Consolidated Financial Statements
            
            F-6





**(a)
      2. Financial Statement Schedules**





None.





**(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**
              
              **Description**2.1
              
              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
                  (6)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)4.3
              
              Registration
                  Rights Agreement for the Series J Convertible Preferred Stock,
                  dated
                  September 20, 2006, among Diametrics Medical, Inc. and M.A.G. Capital,
                  LLC, Monarch Pointe Fund, Ltd., Mercator Momentum Fund, L.P., Mercator
                  Momentum Fund III, L.P., Ocean Park Advisors, LLC and certain Accredited
                  Investors (1)4.4
              
              Voting
                  Agreement, dated September 20, 2006, by and between Diametrics
                  Medical,
                  Inc. and certain of its stockholders (1)10.1
              
              Employment
                  Agreement, effective September 20, 2006, by and between Diametrics
                  Medical, Inc. and Darrell Dubroc (1) *10.2
              
              Confidential
                  Information and Invention Assignment Agreement, dated September
                  20, 2006,
                  by and between Diametrics Medical, Inc. and Darrell Dubroc
                  (1)10.3
              
              Employment
                  Agreement, effective September 20, 2006, by and between Diametrics
                  Medical, Inc. and Tim Collins (1) *10.4
              
              Confidential
                  Information and Invention Assignment Agreement, dated September 20,
                  2006, by and between Diametrics Medical, Inc. and Tim Collins
                  (1)10.5
              
              Member
                  Cross Receipt and Release, dated September 20, 2006, by and between
                  Diametrics Medical, Inc. and the members of Vanguard Synfuels,
                  L.L.C.
                  (1)10.6
              
              Services
                  Agreement, effective September 20, 2006, by and between Diametrics
                  Medical, Inc. and Ocean Park Advisors, LLC (1) *10.6.1
              
              First
                  Amendment to Services Agreement by and between Allegro Biodiesel
                  Corporation (formerly known as Diametrics Medical, Inc.) and Ocean
                  Park
                  Advisors, LLC (10)10.7
              
              Series
                  J Convertible Preferred Stock Subscription Agreement, dated September
                  20,
                  2006, among Diametrics Medical, Inc. and M.A.G. Capital, LLC, Monarch
                  Pointe Fund, Ltd., Mercator Momentum Fund, L.P., Mercator Momentum
                  Fund
                  III, L.P. and certain Accredited Investors (1)10.8
              
              Form
                  of Indemnification Agreement (3)10.9
              
              Diametrics
                  Medical, Inc. 2006 Incentive Compensation Plan (3) *10.10
              
              First
                  Amendment to the Diametrics Medical, Inc. 2006 Incentive Compensation
                  Plan
                  (1) *10.11
              
              Form
                  of Stock Option Agreement under 2006 Incentive Compensation Plan
                  (3)
                  *10.11.1
              
              Form
                  of Amendment to Stock Option Agreement under 2006 Incentive Compensation
                  Plan (5) *10.12
              
              Escrow
                  Agreement, dated September 20, 2006, by and among Diametrics Medical,
                  Inc., the members of Vanguard Synfuels, L.L.C. and JPMorgan Chase
                  Bank,
                  N.A. (1)
  -
            28
            -
  10.13
              
              Closing
                  Statement, dated September 20, 2006, by and between Diametrics
                  Medical,
                  Inc. and the members of Vanguard Synfuels, L.L.C. (1)10.14
              
              Exercise
                  Agreement, dated September 20, 2006, by and between Diametrics
                  Medical,
                  Inc. and Asset Managers International Limited (1)10.15
              
              Exercise
                  Agreement, dated September 20, 2006, by and between Diametrics
                  Medical,
                  Inc. and Ocean Park Advisors (1)10.16
              
              Warrant
                  1 to Ocean Park Advisors, LLC to Purchase Common Stock, issued
                  September
                  20, 2006 (1)10.17
              
              Warrant
                  2 to Ocean Park Advisors, LLC to Purchase Common Stock, issued
                  September
                  20, 2006 (1)10.18
              
              Stock
                  Option Agreement, dated September 20, 2006, by and between Diametrics
                  Medical, Inc. and Ocean Park Advisors, LLC (1) *10.19
              
              Stock
                  Option Agreement, dated September 20, 2006, by and between Diametrics
                  Medical, Inc. and Paul Galleberg (1) *10.20
              
              Stock
                  Option Agreement, dated September 20, 2006, by and between Diametrics
                  Medical, Inc. and Jeff Lawton (1) *10.21
              
              Exercise
                  Agreement, dated September 20, 2006, by and between Diametrics
                  Medical,
                  Inc. and M.A.G. Funds (1)10.22
              
              Subscription
                  Agreement, dated September 20, 2006, by and between Diametrics
                  Medical,
                  Inc. and M.A.G. Capital, LLC, regarding warrants to purchase Series
                  J
                  Preferred Stock (1)10.23
              
              Warrant
                  1 to M.A.G. Capital, LLC to Purchase Common Stock, issued September
                  20,
                  2006 (1)10.24
              
              Warrant
                  2 to M.A.G. Capital, LLC to Purchase Common Stock, issued September
                  20,
                  2006 (1)10.25
              
              Letter
                  Agreement, dated September 19, 2006, by and among Diametrics Medical,
                  Inc., Vanguard Synfuels, L.L.C. and First South Farm Credit, ACA
                  (1)10.26
              
              Agreement
                  and Plan of Merger between Diametrics Medical, Inc. and Biodiesel
                  Development Corporation (4)10.27
              
              Loan
                  Agreement with First South Farm Credit ACA (7)10.27.1
              
              First
                  Amendment to Loan Agreement with First South Farm Credit ACA
                  (7)10.27.2
              
              Waiver
                  of Non Compliance with Covenants (7)10.27.3
              
              Amended
                  and Restated Loan Agreement dated June 28, 2007, by and between
                  Vanguard
                  Synfuels, LLC and First South Farm Credit ACA (9)10.27.4
              
              Continuing
                  Guaranty executed by Allegro Biodiesel Corporation in favor of
                  First South
                  Farm Credit ACA (9)10.27.5
              
              Waiver
                  of Non Compliance with Covenantsü10.28
              
              Services
                  Agreement dated as of February 5, 2007, between Allegro Biodiesel
                  Corporation and PV Asset Management LLC (5)10.28.1
              
              First
                  Amendment to Services Agreement dated as of August 1, 2007, by
                  and between
                  Allegro Biodiesel Corporation and PV Asset Management
                  (8)10.29
              
              Secured
                  Promissory Note dated November 14, 2007, between Allegro Biodiesel
                  Corporation and Community Power Corporation (11)10.30
              
              Stock
                  Purchase Agreement dated November 23, 2007, between Community Power
                  Corporation and Allegro Biodiesel Corporation (12)10.31
              
              Convertible
                  Promissory Note dated November 21, 2007, between Monarch Pointe
                  Fund Ltd.
                  and Allegro Biodiesel Corporation (12)10.32
              
              Letter
                  of Intent dated February 13, 2008, between Allegro Biodiesel Corporation
                  and the Investor Group re the Port of Alexandria (13)10.33
              
              Amended
                  and Restated Note dated February 28, 2008 between Allegro Biodiesel
                  Corporation and Community Power Corporation (14)14.
              
              Code
                  of Business Conductü21.1
              
              List
                  of subsidiariesü31.1
              
              Certification
                  of Chief Executive Officer and Principal Financial Officer Pursuant
                  to
                  Section 302 of the Sarbanes-Oxley Act of 2002ü32.1
              
              Certification
                  Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002ü




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 October 18,
                  2006.(5)
              Incorporated
                  by reference to the Company’s Form 8-K dated March 14,
                  2007(6)
              Incorporated
                  by reference to the Company’s Form 8-K dated August 22,
                  2007(7)
              Incorporated
                  by reference to the Company’s Form 10-K for the fiscal year ended December
                  31, 2006(8)
              Incorporated
                  by reference to the Company’s Form 8-K dated August 1,
                  2007(9)
              Incorporated
                  by reference to the Company’s Form 8-K dated June 28,
                  2007(10)
              Incorporated
                  by reference to the Company’s Form 8-K dated October 22,
                  2007(11)
              Incorporated
                  by reference to the Company’s Form 8-K dated November 14,
                  2007(12)
              Incorporated
                  by reference to the Company’s Form 8-K dated November 23,
                  2007(13)
              Incorporated
                  by reference to the Company’s Form 8-K dated February 13,
                  2008(14)
              Incorporated
                  by reference to the Company’s Form 8-K dated February 25,
                  2008




-
          29
          -




**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 PrincipalFinancial and Accounting
                Officer)Date:
                March 31, 2008





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
                  31, 2008**W.
                  Bruce Comer III**
              
              (Principal
                  Executive Officer and Principal Financial and Accounting
                  Officer)/S/    DARRELL
                  DUBROC
              
              Director
              
              March
                  31, 2008**Darrell
                  Dubroc**/S/    TIM
                  COLLINS
              
              Director
              
              March
                  31, 2008**Tim
                  Collins**/S/    PAUL
                  A. GALLEBERG
              
              Director
              
              March
                  31, 2008**Paul
                  A. Galleberg**/S/    JEFFREY
                  LAWTON
              
              Director
              
              March
                  31, 2008**Jeffrey
                  Lawton**




-
          30
          -


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Shareholders and Board of Directors


Allegro
      Biodiesel Corporation





We
      have
      audited the accompanying consolidated balance sheet of Allegro Biodiesel
      Corporation and its subsidiaries (collectively “Allegro”) as of December 31,
      2007 and 2006, and the related statements of operations, shareholders' equity
      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, 2007 and 2006.
      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, 2007 and 2006, 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
      28,
      2008




F-1


**ALLEGRO
      BIODIESEL CORPORATION**


**CONSOLIDATED
      BALANCE SHEET**


**December 31, 2007**
                
                **December 31, 2006****Assets**Current
                    assets:Cash
                    and cash equivalents
                
                $
                874,693
                
                $
                5,578,291Accounts
                    receivable, net
                
                
                71,312
                
                
                514,731Inventory
                
                
                130,621
                
                
                657,245Note
                    receivable
                
                
                500,000
                
                
                -Other
                    current assets
                
                
                152,658
                
                
                200,411Total
                    current assets
                
                
                1,729,284
                
                
                6,950,678Property
                    and equipment, net
                
                
                4,905,280
                
                
                4,737,033Intangible
                    assets, net
                
                
                3,395,250
                
                
                4,300,650Goodwill
                
                
                -
                
                
                19,978,894Investments
                
                
                1,000,000
                
                
                -Other
                
                
                25,896
                
                
                26,296Deferred
                    income taxes
                
                
                -
                
                
                362,160Total
                    assets
                
                $
                11,055,710
                
                $
                36,355,711**Liabilities
                    and Shareholders’ Equity**Current
                    liabilities:Notes
                    payable, net
                
                $
                3,967,545
                
                $
                150,000Accounts
                    payable
                
                
                793,102
                
                
                690,944Accrued
                    expenses
                
                
                3,584,688
                
                
                1,248,053Due
                    to Ocean Park Advisors, LLC.
                
                
                111,774
                
                
                -Deferred
                    income taxes
                
                
                -
                
                
                362,160Total
                    current liabilities
                
                
                8,457,109
                
                
                2,451,157Notes
                    payable
                
                
                -
                
                
                3,017,379Total
                    liabilities
                
                
                8,457,109
                
                
                5,468,536**Shareholders’
                    equity:**Convertible
                    preferred stock, $0.01 par value:50,000,000
                    shares authorized - 26,712,969 and 28,527,224 sharesissued
                    and outstanding shares at December 31, 2007 and 2006, respectively
                
                
                294,082
                
                
                312,224Common
                    stock, $0.01 par value:150,000,000
                    shares authorized - 23,161,906 and 14,619,458 sharesissued
                    and outstanding shares at December 31, 2007 and 2006, respectively
                
                
                223,311
                
                
                146,195Additional
                    paid−in capital
                
                
                315,864,997
                
                
                311,836,455Accumulated
                    deficit
                
                
                (313,783,789
                )
                
                (281,407,699
                )Total
                    shareholders’ equity
                
                
                2,598,601
                
                
                30,887,175Total
                    liabilities & shareholders' equity
                
                $
                11,055,710
                
                $
                36,355,711




See
      accompanying notes to these consolidated financial statements.





F-2




**ALLEGRO
      BIODIESEL CORPORATION**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**For the Years Ended December 31,****2007**
              
              **2006**Sales
              
              $
              7,402,700
              
              $
              1,802,926Cost
                  of sales, net of excise tax credits for the years endedDecember
                  31, 2007 and 2006 of $678,868 and $57,184, respectively
              
              
              7,776,306
              
              
              2,000,089Gross
                  loss
              
              
              (373,606
              )
              
              (197,163
              )Operating
                  expenses:Selling,
                  general and administrative
              
              
              7,890,749
              
              
              25,404,059Amortization
                  of intangible assets
              
              
              905,400
              
              
              226,350Impairment
                  of goodwill
              
              
              19,978,894
              
              
              51,012,250Total
                  operating expenses
              
              
              28,775,043
              
              
              76,642,659Operating
                  loss
              
              
              (29,148,649
              )
              
              (76,839,822
              )Interest
                  expense
              
              
              (348,265
              )
              
              (879,029
              )Interest
                  income
              
              
              67,186
              
              
              68,096Registration
                  rights
              
              
              (381,415
              )
              
              -Other,
                  net
              
              
              222,753
              
              
              142,871Loss
                  before income taxes
              
              
              (29,588,390
              )
              
              (77,507,884
              )Income
                  tax benefit
              
              
              -
              
              
              2,258,070Net
                  loss
              
              
              (29,588,390
              )
              
              (75,249,814
              )Dividends
                  on preferred stock
              
              
              (2,787,700
              )
              
              (28,500,000
              )Loss
                  available to common shareholders
              
              $
              (32,376,090
              )
              $
              (103,749,814
              )Net
                  loss per share, basic and diluted
              
              $
              (1.58
              )
              $
              (46.84
              )Weighted
                  average number of common shares under in per share calculations
              
              
              20,546,898
              
              
              2,214,966




See
      accompanying notes to these consolidated financial statements.




F-3




**ALLEGRO
      BIODIESEL CORPORATION**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)**


**ConvertiblePreferred Shares**
              
              **Convertible**
                    **Preferred Stock**
              
              **Common Shares**
              
              **Common Stock**
              
              **Additional
                      Paid-in          Capital**
              
              **Accumulated Deficit**
              
              **Total Stockholders'Equity****(Deficit)**Balance,
                  December 31, 2005
              
              
              41,683
              
              $
              417
              
              
              351,218
              
              $
              351,218
              
              $
              176,331,331
              
              $
              (177,024,552
              )
              
              (341,586
              )Benefical
                  conversion value related to convertible senior notes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              300,000
              
              
              -
              
              
              300,000Conversion
                  of convertible preferred stock into common stock
              
              
              (18,106
              )
              
              (18,095
              )
              
              12,492,359
              
              
              1,490,850
              
              
              (1,472,443
              )
              
              -
              
              
              312Stock
                  split
              
              
              (653
              )
              
              40,602
              
              
              63,798
              
              
              66,407
              
              
              (107,009
              )
              
              -
              
              
              -Stock
                  compensation expense
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,599,936
              
              
              -
              
              
              2,599,936Sale
                  of Series A preferred stock, net of offering costs of
                  $260,000
              
              
              2,850
              
              
              2,850
              
              
              -
              
              
              -
              
              
              28,237,150
              
              
              -
              
              
              28,240,000Benefical
                  conversion value on Series J preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              28,500,000
              
              
              (28,500,000
              )
              
              -Value
                  assigned to stock options and warrants issued to Ocean Park Advisors
                  LLC
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              20,851,974
              
              
              -
              
              
              20,851,974Value
                  assigned to the issuance of common stock warrants to MAG Capital
                  LLC
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              19,872,178
              
              
              -
              
              
              19,872,178Conversion
                  of convertible debt into common stock
              
              
              -
              
              
              -
              
              
              1,631,350
              
              
              1,631,350
              
              
              (750,000
              )
              
              (74,842
              )
              
              806,508Issuance
                  of common stock through exercise of warrants
              
              
              -
              
              
              -
              
              
              80,733
              
              
              80,733
              
              
              (80,733
              )
              
              -
              
              
              -Conversion
                  of Series J preferred stock Series A preferred stock
              
              
              28,497,150
              
              
              282,150
              
              
              -
              
              
              -
              
              
              (282,150
              )
              
              -
              
              
              -Issuance
                        of Series K preferred stock in connection with the acquisition
                        of Vanguard
                        Synfuels LLC.
              
              
              4,300
              
              
              4,300
              
              
              -
              
              
              -
              
              
              34,436,700
              
              
              -
              
              
              34,441,000Amendment
                  to the par value of common stock in connection with the
                  Reincorporation
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,474,363
              )
              
              3,399,521
              
              
              74,842
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (75,249,814
              )
              
              (75,249,814
              )Accrual
                  of dividends on Series A convertible preferred stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (633,333
              )
              
              (633,333
              )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 convertbile 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
              )
              $
              2,598,601




See
      accompanying notes to these consolidated financial statements.




F-4


**ALLEGRO
      BIODIESEL CORPORATION**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**For the Years Ended December 31,****2007**
              
              **2006**Cash
                  flows from operating activities:Net
                  loss
              
              $
              (29,588,390
              )
              $
              (75,249,814
              )Adjustments
                  to reconcile net loss to net cash from operating
                  activities:Depreciation
                  and amortization
              
              
              1,338,262
              
              
              311,923Stock-based
                  compensation
              
              
              2,733,467
              
              
              23,177,750Deferred
                  income taxes
              
              
              -
              
              
              (2,258,070
              )Accretion
                  of convertible notes payable and amortization of debt
                  discount
              
              
              32,726
              
              
              737,443Impairment
                  of goodwill
              
              
              19,978,894
              
              
              51,078,119Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              443,419
              
              
              (369,273
              )Inventory
              
              
              526,624
              
              
              (414,017
              )Prepaid
                  expenses and other assets
              
              
              117,167
              
              
              (105,578
              )Accounts
                  payable
              
              
              214,332
              
              
              (643,689
              )Accrued
                  expenses
              
              
              151,010
              
              
              215,817Net
                  cash used in operating activities
              
              
              (4,052,489
              )
              
              (3,519,389
              )Cash
                  flows from investing activities:Capital
                  expenditures
              
              
              (626,109
              )
              
              (524,206
              )Proceeds
                  from sale of equipment
              
              
              25,000
              
              
              -Investment
                  in Community Power Corporation
              
              
              (1,000,000
              )
              
              -Acquisition
                  of Vanguard Synfuels LLC, netof cash acquired
              
              
              -
              
              
              (18,538,953
              )Net
                  cash used in investing activities
              
              
              (1,601,109
              )
              
              (19,063,159
              )Cash
                  flows from financing activities:Net
                  proceeds from issuance of convertible preferred stock
              
              
              -
              
              
              28,240,000Proceeds
                  from issuance of notes payable
              
              
              1,640,000
              
              
              300,000Issuance
                  of promissory notes
              
              
              (1,140,000
              )
              
              --Exercise
                  of common stock warrants
              
              
              600,000
              
              
              -Payments
                  on line of credit and notes payable
              
              
              (150,000
              )
              
              (759,988
              )Net
                  cash provided by financing activities
              
              
              950,000
              
              
              27,780,012Net
                  increase (decrease) in cash and cash equivalents
              
              
              (4,703,598
              )
              
              5,197,464Cash
                  and cash equivalents at beginning of year
              
              
              5,578,291
              
              
              380,827Cash
                  and cash equivalents at end of year
              
              $
              874,693
              
              $
              5,578,291Supplemental
                  disclosure of cash flow information:Cash
                  paid during the period for interest
              
              $
              376,112
              
              $
              -Cash
                  paid during the period for income taxes
              
              $
              2,056
              
              $
              13,548Supplemental
                  disclosure of non-cash investing and financing activities:Issuance
                  of convertible preferred stock in connection with the acquisition
                  of
                  Vanguard Synfuels LLC
              
              $
              -
              
              $
              34,441,000Conversion
                  of convertible debt into common stock
              
              $
              -
              
              $
              750,000
  See
        accompanying notes to these consolidated financial
        statements.





F-5





**ALLEGRO
      BIODIESEL CORPORATION**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**1.**  **Organization
      and Business**





*Organization*


On
      September 20, 2006, Allegro Biodiesel Corporation (formerly known as Diametrics
      Medical, Inc., and herein referred to as the “Company”, “Allegro”, “we”, “us” or
“Diametrics”) acquired Vanguard Synfuels, LLC (“Vanguard”), a producer of
      biodiesel fuel that owns and operates a production facility located in Pollock,
      Louisiana (the “Acquisition”). From January 2005 to September 19, 2006,
      Diametrics was considered a “shell company” as defined by the Securities and
      Exchange Commission, wherein its business activities were primarily focused
      on
      raising additional financing and the pursuit of a strategic transaction. Prior
      to January 2005, the Company was involved with the development, production
      and
      distribution of medical devices since its inception. All such operations were
      discontinued during 2005.





Allegro
      is a producer and distributor of biodiesel fuel. The Company owns an operating
      production facility in Pollock, Louisiana, which has been temporarily shuttered
      due to increasing costs of soybean oil, the primary input in the production
      its
      biodiesel. The Company began production in April 2006, becoming the first
      operational producer of biodiesel in the state of Louisiana. Management is
      evaluating its opportunities, which includes the possible sale the assets of
      biodiesel facility.





*Business*


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





*Reincorporation*


On
      November 28, 2006, the Company reincorporated in the State of Delaware (the
      “Reincorporation”) and, in connection with the Reincorporation, changed its
      corporate name from Diametrics Medical, Inc. to Allegro Biodiesel Corporation.
      The Reincorporation also resulted in an increase in the number of the Company's
      authorized shares of common stock to 150,000,000 shares and the authorized
      shares of preferred stock to 50,000,000 shares. Each outstanding share of common
      stock of the Company was automatically converted into shares of the common
      stock
      of the Delaware company, on a one-for-one-basis. Each outstanding share of
      Series H and Series J convertible preferred stock was automatically converted
      into shares of Series B and Series A Convertible Preferred Stock of the Delaware
      Company, on a one-for-one and one-for ten thousand basis, respectively.
      Outstanding stock options and warrants to purchase the Company's common stock
      were converted into options and warrants to purchase the same number of shares
      of the Delaware Company's common stock.





*Management's
      Plan of Operations*


During
      2007, the biodiesel industry experienced a significant increase in the cost
      of
      soybean oil, with the price increasing from $0.25 per pound in September 2006
      to
      the current price of approximately $0.62. Although we have been able to develop
      efficiency improvements in our production processes, feedstock is still the
      primary production cost. This increase has had a significant, negative effect
      on
      profit margins and cash flows and caused an impairment of goodwill associated
      with our production facility of $19.9 million. Given these economic conditions,
      in October 2007 we adopted a company-wide cost reduction plan intended to reduce
      our operating costs. Under this plan, we significantly reduced our biodiesel
      production volume, administrative costs and our headcount from 19 to 7
      employees. Furthermore, we amended our compensation arrangements with our
      management team effective October 15, 2007, including a deferral of 50% of
      the
      monthly cash compensation payable to our senior executives, our management
      advisor, Ocean Park Advisors, LLC, and our non-executive directors, plus a
      100%
      deferral of any bonuses, until a time in the future to be determined by our
      Board of Directors.





These
      measures have significantly lowered our monthly cash operating expenses from
      an
      average of about $400,000 to approximately $150,000 per month while preserving
      our ability to manufacture biodiesel fuel. In addition to our cost reduction
      plan, we are actively pursuing strategic alternatives, including evaluating
      other biodiesel feedstock sources, new uses for our assets and infrastructure,
      as well as other strategic opportunities in the renewable energy sector.
      Currently, our production team is evaluating jatropha oil as a potential lower
      cost feedstock. The Company is also exploring business combinations, the sale
      of
      the Comapny, some or all of the assets of the biodiesel plant, and raising
      additional capital. Management cannot provide any assurances as to whether
      the
      Company will be successful in its pursuant of these strategic
      alternatives.




F-6


As
      of
      December 31, 2007, Allegro had negative working capital of $6,727,825. Included
      as a reduction to working capital is $2,844,342 of accrued dividends which
      the
      Company may pay, at its option, convert into shares of its Series A convertible
      preferred stock or in cash. As of December 31, 2007, the Company was in default
      of its working capital covenant under its credit agreement and on March 27,
      2007, a waiver from First South Farm Credit ACA was obtained through September
      1, 2008. See Note 7. Management believes its existing sources of liquidity
      should be sufficient to fund its operations, working capital and other financing
      requirements into the second quarter of 2008. By that time, the Company will
      need additional debt and/or equity financing to fund its business, which it
      is
      now actively seeking. Management cannot assure you that such financing will
      be
      available to the Company on favorable terms, or at all. Unless additional
      financing is obtained, the Company may not be able to continue as a going
      concern. The consolidated financial statements have been prepared on a going
      concern basis which contemplates the realization of assets and the settlement
      of
      liabilities in the normal course of business.





On
      November 23, 2007, the Company invested $1,000,000 to acquire a minority stake
      in privately-held Community Power Corporation (“CPC”) based in Littleton,
      Colorado, a leading developer of small modular bioenergy technology and
      products. These systems gasify a wide range of biomass residues to generate
      power and heat, and produce synthetic fuels that substitute for fossil fuels
      such as natural gas, propane and diesel.





**2.**  **Acquisition
      of Vanguard Synfuels, LLC**





On
      September 20, 2006, the Company acquired 100% of the membership interests
      of Vanguard for an aggregate purchase price of $73,412,250. The acquisition
      has
      been accounted for using the purchase method of accounting in accordance with
      Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business
      Combinations” (“SFAS 141”), whereby the estimated purchase price has been
      allocated to tangible and intangible net assets acquired based upon their fair
      values at the date of acquisition.





The
      purchase price consisted of cash paid to selling shareholders for their 80%
      membership interest in Vanguard totaling $17,699,378. Additionally, the Company
      issued 4,300 shares of Series K convertible preferred stock for the remaining
      20% membership interests with a deemed fair value of $34,441,000 for financial
      reporting purposes based on the quoted market price of $3.10 per share on the
      date of Acquisition. During the fourth quarter of 2006, the Series K convertible
      preferred stock was convertible into 11,110,000 shares of common
      stock.





The
      Company also incurred direct acquisition costs totaling $21,271,872. Included
      in
      these costs are the fair value of warrants to purchase up to 6,500,000 shares
      of
      common stock granted to M.A.G. Capital, LLC (“MAG”), the largest single
      beneficial owner of the Company's equity securities at the time of the
      transaction. These warrants were granted in exchange for MAG's assignment of
      the
      rights they held to acquire Vanguard. The Company also paid MAG a cash
      due-diligence fee of $435,000, incurred legal and other direct costs of $249,721
      and paid $714,976 in transaction bonuses to certain officers of Vanguard.
      Management applied the guidance set forth under SFAS 141, paragraph 24 to
      determine its accounting for direct acquisition costs. The Company accounted
      for
      the issuance of the warrants in accordance with SFAS No. 123R “Share-Based
      Payment” and utilized the quoted market price of $3.10 per share as of September
      20, 2006 to value the securities which resulted in a fair value of
      $19,872,178.




The
      components of the aggregate purchase price are as follows:




Consideration
                paid:Net
                cash paid to selling shareholders
            
            $
            17,699,378Value
                assigned to the of Series K convertible preferred stock
            
            
            34,441,000Direct
                acquisition costs
            
            
            21,271,872Total
            
            $
            73,412,250





The
      purchase price of Vanguard has been allocated to assets acquired and liabilities
      assumed based on their estimated fair values determined by management as
      follows:




Cash
            
            $
            125,373Accounts
                receivable, net
            
            
            145,458Inventory
            
            
            243,228Plant
                and equipment
            
            
            3,589,000Land
            
            
            709,400Other
                assets
            
            
            28,200Customer
                relationships
            
            
            4,527,000Goodwill
            
            
            71,207,293Accounts
                payable
            
            
            (677,782
            )Accrued
                liabilities
            
            
            (299,481
            )Line
                of credit
            
            
            (1,667,379
            )Notes
                payable to bank
            
            
            (1,500,000
            )Notes
                payable to related parties
            
            
            (759,990
            )Deferred
                income tax liabilities
            
            
            (2,258,070
            )Total
            
            $
            73,412,250




F-7


The
      purchase price represented a premium over Vanguard's appraised assets, resulting
      in the recognition of $71,207,293 of goodwill. Management determined that the
      cash purchase price of $17,699,378, excluding direct acquisition costs, implied
      the fair value of Vanguard's business was approximately $22,400,000; however,
      the purchase price was increased through the issuance of Series K convertible
      preferred stock in the amount of $34,441,000. Management believed this
      additional consideration was appropriate to retain key management of Vanguard.
      The implied cash purchase price was determined based on the projected future
      cash flows of the business, based on the favorable market conditions at the
      time
      (primarily high oil prices and lower soybean prices) and extant government
      support for the industry in the form of a $1.00 per gallon of biodiesel tax
      credit.  Management also assessed comparable publicly-traded companies in
      biodiesel and other alternative energy sectors which commanded significant
      valuation premiums in the capital markets.  Additionally, management found
      there were few established biodiesel assets in the United States and
      construction times for new production facilities are typically in excess of
      one
      year.  Management believed Vanguard's established operations and
      early-mover advantage merited the cash purchase consideration paid in the
      transaction.





The
      Company immediately evaluated the carrying amount of goodwill for impairment
      by
      comparing the fair value of Vanguard of $22,400,000 (using the discounted cash
      flow method) to the carrying amount of goodwill. Secondly, in accordance with
      SFAS No. 142 “Goodwill and Other Intangible Assets”, management determined the
      fair value of Vanguard's net assets, including tangible assets of $2,200,000
      and
      total net assets to be $22,400,000 and allocated such fair value of the net
      assets of Vanguard resulting in an implied goodwill of $20,195,043. Accordingly,
      management immediately recorded an impairment of goodwill in the amount of
      $51,012,250.





The
      fixed
      assets are being depreciated from the date of acquisition with estimated useful
      lives ranging from three to twenty years. The customer relationships are
      considered an intangible asset and are being amortized over the estimated useful
      live of five years from the date of the Acquisition. The goodwill is not subject
      to amortization and the amount assigned to goodwill is not deductible for tax
      purposes.





In
      accordance with SFAS 141, the operating results of Vanguard have been included
      in the Company's consolidated operating results since the acquisition date,
      September 20, 2006. The pro forma results of operations data which assumes
      that
      the acquisition of Vanguard had occurred at the beginning of the respective
      reporting periods are not being presented herein, as such results would not
      be
      meaningful: in the reporting periods prior to September 20, 2006, the Company
      was defined as a “shell company” with no operations and limited assets, and
      Vanguard was still a development-stage company with limited operations (as
      biodiesel production and sale began in April 2006). Also see Note 8 for
      impairment analysis discussion affecting 2007.





**3.**  **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
      inter-company 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.





*Stock
      Split*


On
      June
      15, 2006, the Board of Directors of the Company approved a one (1) for one
      hundred (100) reverse stock split of the Company's common stock. The record
      date
      of the stock split was June 30, 2006. All share and per share information have
      been adjusted to give effect to the stock split for all periods presented,
      including all references throughout the financial statements and accompanying
      notes.





*Accounting
      for Federal Excise Tax Credits*


The
      Company’s biodiesel fuel in unblended form (B100) is eligible for a federal
      excise tax credit of $1.00 per gallon upon blending by a blender of fuel as
      certified with the IRS. Thus the amount of revenue that the Company may
      recognize in its financial statements from a gallon of biodiesel may depend
      on
      how it is sold. The two primary modes of sale are outlined below:





·
            Sale
                of biodiesel and its tax credit. The Company sells the unblended
                biodiesel
                (i.e., B100) to a certified blender and does not claim the excise
                tax
                credit; the blender does so. The certified blender pays a premium
                for
                unblended biodiesel fuel of approximately $1.00 over the wholesale
                price
                of fuel without such excise tax credit. The certified blender then
                may
                apply for the tax credit, and the Company is not party to such application
                and amounts billed to the customer are not affected. In these instances,
                the Company records revenue equal to the full amount billed (which
                is
                approximately equal to the market price of diesel fuel plus $1.00).
                During
                the years ended December 31, 2007 and 2006, excise tax credits associated
                with biodiesel sold to certified blenders totaled $1,940,947 and
                $618,155,
                respectively.






F-8




·
            Sale
                of biodiesel without its tax credit. The Company sells biodiesel
                blended
                with petrodiesel (e.g., B99) and recognizes as revenue only the wholesale
                market price it receives. The Company (and not the buyer), however,
                is
                entitled to apply for the excise tax credit and has historically
                received
                such credits. The Company classifies these credit amounts as a reduction
                of cost of sales in the accompanying consolidated statement of operations.
                For the years ended December 31, 2007 and 2006, excise tax credits
                received in connection with sales of blended biodiesel fuel to
                non-certified blenders totaled $678,868 and $57,184, respectively.
                The tax
                credits included in accounts receivable as December 31, 2007 and
                2006 were
                $21,795 and $43,288, respectively.





*Revenue
      Recognition*


The
      Company generates its revenues from the sale of biodiesel fuel and recognizes
      revenue when the following fundamental criteria are met:





·
            persuasive
                evidence that an arrangement
                exists;


·
            the
                products and services have been
                delivered;


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


·
            collection
                of amounts due is reasonably
                assured.





Delivery
      occurs when goods are shipped and title and risk of loss transfer to the
      customer, in accordance with the terms specified in the arrangement with the
      customer. Revenue recognition is deferred in all instances where the earnings
      process is incomplete based on the criteria listed above. As of December 31,
      2007, the Company did not have any revenues that were required to be deferred.
      Management provides for sales returns and allowances in the same period as
      the
      related revenues are recognized. Management bases their estimates on historical
      experience or the specific identification of an event necessitating a
      reserve.





When
      the
      Company sells unblended biodiesel fuel (i.e., to certified blenders as
      registered with the IRS), it records revenues that result from federal incentive
      programs for the production of biodiesel. When the Company sells blended
      biodiesel fuel to non-certified blenders, it is eligible for tax credits under
      certain federal incentive programs. When all requirements of the applicable
      incentive program have been met, generally occurring at the time of sale, the
      Company records a reduction to cost of sales for the credit it is to
      receive.





*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.





*Accounts
      Receivable*


The
      Company performs ongoing credit evaluations and continually monitors its
      collection of amounts due from its customers. The Company adjusts credit limits
      and payment terms granted to its customers based upon payment history and the
      customer's current creditworthiness. The Company does not require collateral
      from its customers to secure amounts due from them. Historically, the Company
      has not experienced collection issues. As such, as of December 31, 2007, the
      Company did not deem an allowance for uncollectible accounts was required based
      on the review of its accounts receivable and collection of these balances
      subsequent to each of these periods. In the future, the Company may be required
      to record an allowance for doubtful accounts if events or circumstance exist
      which may result in amounts not being realized.





*Concentrations*


Financial
      instruments that potentially subject the Company to concentration of credit
      risk
      consist principally of cash and cash equivalents and trade accounts receivable.





Accounts
      receivable from four customers represented 92% of total accounts receivables
      at
      December 31, 2007. Revenues from three customers represented 66% of revenues
      for
      the year ended December 31, 2007. Accounts receivable and revenues from one
      customer represented 88% and 75% of total accounts receivables and revenues
      as
      of December 31, 2006, respectively.





*Inventories*


Inventories
      are stated at the lower of cost, determined on a first in, first out (“FIFO”)
      basis average cost basis, or market. The Company adopted SFAS No. 151,
“Inventory Costs, an amendment of Accounting Research Bulletin No. 43,
      Chapter 4” beginning January 1, 2006, with no material effect on its
      financial condition or results of operations. Abnormal amounts of idle facility
      expense, freight, handling costs, and wasted materials (spoilage) are recognized
      as current-period charges. Fixed production overhead is allocated to the costs
      of conversion into inventories based on the normal capacity of the production
      facilities.




F-9


*Property,
      Plant and Equipment*


Property,
      plant and equipment are stated at cost, less accumulated depreciation.
      Depreciation is computed using the straight-line method over the estimated
      useful lives of the related assets ranging from three to twenty years.
      Significant renewals and betterments are capitalized while maintenance and
      repairs are charged to expense as incurred. Leasehold improvements are amortized
      on the straight-line basis over the lesser of their estimated useful lives
      or
      the term of the related lease.





*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”.





*Long-Lived
      Assets*


The
      Company reviews its fixed assets and certain identifiable intangibles for
      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.





*Goodwill
      and Other Intangible Assets*


SFAS
      No.
      141 requires that all business combinations be accounted for under the purchase
      method. The statement further requires separate recognition of intangible assets
      that meet certain criteria. SFAS
      142
      ("FAS 142") “Goodwill and Other Intangible Assets” ,
      requires that an acquired intangible asset meeting certain criteria shall be
      initially recognized, and measured based on its fair value.





In
      accordance with FAS 142, goodwill is not amortized, and is tested for impairment
      at the reporting unit level annually or when there are any indications of
      impairment. A reporting unit is an operating segment for which discrete
      financial information is available and is regularly reviewed by management.
      The
      Company has one reporting unit, its Pollock, Louisiana, biodiesel production
      facility, to which goodwill is assigned.





FAS
      142
      requires a two-step approach to test goodwill for impairment for each reporting
      unit. The first step tests for impairment by applying fair value-based tests
      to
      a reporting unit. The second step, if deemed necessary, measures the impairment
      by applying fair value-based tests to specific assets and liabilities within
      the
      reporting unit. Application of the goodwill impairment tests require judgment,
      including identification of reporting units, assignment of assets and
      liabilities to each reporting unit, assignment of goodwill to each reporting
      unit, and determination of the fair value of each reporting unit. The
      determination of fair value for a reporting unit could be materially affected
      by
      changes in these estimates and assumptions.





*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.





*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 earnings per share that could occur upon conversion
      or exercise of securities, options or other such items to common shares using
      the treasury stock method, based upon the weighted average fair value of our
      common shares during the period. For each period presented, basic and diluted
      loss per share amounts are identical as the effect of potential common shares
      is
      antidilutive.




F-10


The
      following is a summary of outstanding securities which have been excluded from
      the calculation of diluted net loss per share because the effect would have
      been
      antidilutive for the years ended December 31,:


2007
              
              2006Common
                  stock options
              
              
              2,766,069
              
              
              3,127,312Common
                  stock warrants
              
              
              5,805,748
              
              
              11,642,867Convertible
                  preferred stock - Series A
              
              
              26,698,830
              
              
              37,561,583Convertible
                  preferred stock - Series B
              
              
              1,413,900
              
              
              2,722,40036,684,547
              
              
              55,054,162




*Stock-Based
      Compensation*


Effective
      January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based
      Payment” (“SFAS 123R”). SFAS 123R requires that the Company account for all
      stock-based compensation using a fair-value method and recognize the fair value
      of each award as an expense over the service period.





*Accounting
      for Stock Options Issued to Consultants*


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





*Use
      of Estimates*


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 and the reported amounts of
      revenues and expenses during the reporting period. Our significant estimates
      relate to the assessment of impairment of goodwill, and long-lived assets other
      than goodwill, as well as the fair value options and warrants to purchase common
      stock.





*Fair
      Value of Financial Instruments*


Financial
      instruments are recorded on the consolidated balance sheets. The carrying amount
      for cash and cash equivalents, accounts receivable, accounts payable, accrued
      expenses approximates fair value due to the immediate or short-term maturity
      of
      these financial instruments. The fair value of long-term debt approximates
      the
      carrying amounts based upon our expected borrowing rate for debt with similar
      remaining maturities and comparable risk.





*Equity
      Instruments Issued with Registration Rights Agreement*


The
      Company accounts for registration rights agreement penalties as contingent
      liabilities, applying the accounting guidance of FASB No. 5. This accounting
      is
      consistent with views established by the Emerging Issues Task Force in its
      consensus set forth in EITF 05-04 (view C) and FASB Staff Positions FSP EITF
      00-19-2 “Accounting for Registration Payment Arrangements”, which was issued
      December 21, 2006. Accordingly, the Company recognizes the damages when it
      becomes probable that they will be incurred and amounts are reasonably
      estimable. Beginning on April 13, 2007, the Company began incurring penalties
      under the registration rights agreement entered into in conjunction with its
      Series A convertible preferred stock. In the event the date the registration
      statement is declared effective is different than management’s estimate,
      additional penalties may be incurred and recorded in subsequent reporting
      periods.





*Risks
      and Uncertainties*


The
      Company receives a federal excise tax credit of $1.00 per gallon of biodiesel
      sold in blended form (with petroleum diesel), and can sell biodiesel in
      unblended form (“B100”) at a premium over petroleum diesel of approximately
      $1.00 per gallon. The federal excise tax credit is scheduled to expire on
      December 31, 2008. There are no assurances the tax credit will be extended
      beyond December 31, 2008. The loss of the tax credit would have a significant,
      material adverse effect on the Company's operations.





The
      Company's results of operations are significantly affected by the cost and
      supply of soybean oil, other alternative feedstocks, and chemical inputs used
      in
      the production of biodiesel fuel. The price of soybean oil or other inputs
      are
      influenced by weather conditions and other factors affecting crop yields, farmer
      planting decisions, the output and proximity of soybean crush facilities, and
      general economic, market and regulatory factors. These factors include
      government policies and subsidies with respect to agriculture and international
      trade, and global and local demand and supply. The significance and
      relative effect of these factors on the price of soy oil is difficult to
      predict. Any event that tends to negatively affect the supply of soy oil,
      such as adverse weather or crop disease, could increase soy oil prices and
      potentially harm our business.  In addition, Vanguard may also have
      difficulty, from time to time, in physically sourcing soy oil or other inputs
      on
      economical terms due to supply shortages.  Such a shortage could require
      Vanguard to suspend operations until soy oil or other inputs are available
      at
      economical terms, which would have a material adverse effect on the results
      of
      operations and financial position.




F-11


The
      Company is also subject to federal, state and local environmental laws and
      regulations and does not anticipate expenditures to comply with such laws and
      regulations would have a material impact on its financial position, results
      of
      operations, or liquidity. Management believes that its operations comply, in
      all
      material respects, with applicable federal, state, and local environmental
      laws
      and regulations.





*Recent
      Accounting Pronouncements*


In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements” ("SFAS 157"). SFAS No. 157 provides a common
      definition of fair value and establishes a framework to make the measurement
      of
      fair value in generally accepted accounting principles more consistent and
      comparable. SFAS 157 also requires expanded disclosures to provide information
      about the extent to which fair value is used to measure assets and liabilities,
      the methods and assumptions used to measure fair value, and the effect of fair
      value measures on earnings. SFAS 157 is effective for fiscal years beginning
      after November 15, 2007, although early adoption is permitted. The Company
      is
      currently assessing the potential effect, if any, of SFAS 157 on its
      consolidated financial statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities — Including an amendment of FASB
      Statement No. 115 ("SFAS 159")”. SFAS 159 permits an entity to elect fair value
      as the initial and subsequent measurement attribute for many financial assets
      and liabilities. Entities electing the fair value option would be required
      to
      recognize changes in fair value in earnings. Entities electing the fair value
      option are required to distinguish, on the face of the statement of financial
      position, the fair value of assets and liabilities for which the fair value
      option has been elected and similar assets and liabilities measured using
      another measurement attribute. SFAS 159 is effective for fiscal years beginning
      after November 15, 2007. The adjustment to reflect the difference between the
      fair value and the carrying amount would be accounted for as a cumulative-effect
      adjustment to retained earnings as of the date of initial adoption. The Company
      is currently evaluating the impact, if any, of SFAS 159 on its consolidated
      financial statements.





In
      December 2007, the FASB issued SFAS No. 141(R), Business Combinations ("SFAS
      141(R)"), which replaces FAS 141. SFAS 141(R) establishes principles and
      requirements for how an acquirer in a business combination recognizes and
      measures in its financial statements the identifiable assets acquired, the
      liabilities assumed, and any controlling interest; recognizes and measures
      the
      goodwill acquired in the business combination or a gain from a bargain purchase;
      and determines what information to disclose to enable users of the financial
      statements to evaluate the nature and financial effects of the business
      combination. FAS 141(R) is to be applied prospectively to business
      combinations.





**4.**  **Inventories**





Inventories
      consist of the following at December 31,:


2007
              
              2006Raw
                  materials
              
              $
              81,315
              
              $
              452,381Finished
                  goods
              
              
              49,306
              
              
              204,864$
              130,621
              
              $
              657,245




**5.**  **Note
      Receivable**





On
      November 14, 2007, the Company loaned $500,000 to CPC. The note accrues interest
      at 7% per annum, is due on June 1, 2008, and is secured by all the assets of
      CPC, subordinate only to any first priority security interests and liens on
      CPC's assets outstanding as of the date of the note. The Company also owns
      a
      minority investment in CPC.





On
      February 25, 2008, the note was amended whereby a partial repayment of principal
      by CPC to Allegro in the amount of $225,000 and the forbearance of $25,000
      of
      principal by Allegro was made. The Company also waived the interest that had
      accrued on the repaid principal of $250,000. The maturity date of the remaining
      amount outstanding under the note of $250,000 has been extended to the earlier
      of either December 31, 2008, or the date by which CPC receives at least
      $2,500,000 in equity or debt financing.




F-12


**6.**  **Property,
      Plant and Equipment**





Property,
      plant and equipment consist of the following at December 31,:


EstimatedUseful
                  Life
              
              2007
              
              2006Land
              
              
              -
              
              $
              1,054,400
              
              $
              1,054,400Buildings
              
              
              17
              
              
              380,000
              
              
              380,000Machinery
                  and equipment
              
              
              1
                  to 12
              
              
              3,915,479
              
              
              3,142,681Construction
                  in progress
              
              
              -
              
              
              -
              
              
              245,5255,349,879
              
              
              4,822,606Less
                  - accumulated depreciation
              
              
              
              
              
              (444,599
              )
              
              (85,573
              )$
              4,905,280
              
              $
              4,737,033




Depreciation
      expense was $359,025 and $85,573 for the years ended December 31, 2007 and
      2006,
      respectively.





**7.**  **Intangible
      Assets, net**





Intangible
      assets subject to amortization include customer relationships incurred in
      connection with the acquisition of Vanguard. Amortization expense was $905,400
      and $226,350 for the years ended December 31, 2007 and 2006,
      respectively.





Estimated
      intangible asset amortization expense for the remaining carrying amount of
      intangible assets for the years ending December 31, 2007 is as
      follows:




2008
            
            $
            905,4002009
            
            
            905,4002010
            
            
            905,4002011
            
            
            905,4002012
            
            
            679,050$
            3,395,250




**8.**  **Goodwill**





Due
      to
      the change in market conditions that negatively affected our profit margins
      and
      cash flows, Allegro conducted a goodwill impairment testing for its production
      facility as of September 30, 2007. As part of the first step, management
      considered three methodologies to determine the fair-value of this reporting
      unit.





·
            Discounted
                cash flow methodology, which requires significant judgment to estimate
                the
                future cash flows and to determine the appropriate discount rates,
                growth
                rates, trends for commodity prices and other
                assumptions;


·
            Orderly
                sale of assets process, which values the unit based on publicly-traded
                comparables using certain multiples of EBITDA; and


·
            Market
                capitalization approach. Management does not believe this method
                provides
                an accurate representation of the fair value due to the significant
                number
                of shares of Series A convertible preferred stock that are not included
                in
                this measurement and the lack of trading volume in its
                stock





The
      Company believes the asset sale valuation and discounted cash flow methods
      provide the most accurate representations of the fair value of its biodiesel
      production facility. In determining the future cash flows of the facility,
      management considered among other things, the current and projected prices
      for
      soybean oil (the primary cost input) and for diesel and biodiesel fuel. As
      a
      result, the expected cash flows to be generated by the biodiesel production
      facility have been adversely affected, resulting in the impairment of goodwill.
      As a result of its analysis, an impairment to goodwill of $19,978,894 was
      recorded during the year ended December 31, 2007.




F-13


**9.**  **Accrued
      Liabilities**





Accrued
      liabilities consist of the following at December 31,:


2007
              
              2006Dividends
              
              $
              2,844,342
              
              $
              633,333Registration
                  rights penalties
              
              
              381,250
              
              
              -Professional
                  fees
              
              
              89,330
              
              
              235,295Compensation
                  and related benefits
              
              
              105,659
              
              
              129,372Interest
              
              
              68,150
              
              
              74,793Lease
                  termination costs
              
              
              88,310
              
              
              97,382Other
              
              
              7,647
              
              
              77,878$
              3,584,688
              
              $
              1,248,053


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





*First
      South Farm Credit, ACA*


The
      Company is party to a credit agreement with First South Farm Credit, ACA (“First
      South”) that provides for borrowings of up to $3,500,000 which includes a line
      of credit and a term loan. On April 2, 2007, the Company received from First
      South a letter of approval by its loan committee of certain amendments to the
      credit agreement. The amendments include a two year renewal of the line of
      credit so that the outstanding principal balance is now due on July 1, 2009
      and
      requires the Company to achieve and maintain certain financial and non-financial
      covenants based on Vanguard's working capital and net assets position including
      achieving a minimum working capital of $500,000, maintenance of an excess of
      total assets over total liabilities of not less than $1,500,000 and the
      maintenance of a cash flow coverage ratio of at least 1.25 to 1.00 by December
      31, 2008. As
      of
      December 31, 2007, Allegro had negative working capital of $6,727,825. 
Included as a reduction to working capital is $2,844,342 of accrued dividends
      which we may pay, at our option, in shares of Series A convertible preferred
      stock or in cash. As of December 31, 2007, Vanguard failed to comply with a
      covenant under its credit agreement with First South Farm Credit, ACA, relating
      to the maintenance of minimum level of working capital of $500,000. On March
      27,
      2008, Vanguard received a waiver of its non-compliance with this covenant from
      First South through September 1, 2008 and an acknowledgement that the Company
      was no longer in default of the credit agreement as of December 31, 2007. All
      amounts outstanding under the credit agreement have been classified as a current
      liability in the accompanying consolidated financial statements.





The
      line
      of credit provides for borrowings of up to $2,000,000, bearing interest at
      the
      lender's referenced prime rate plus 1.0%, or 8.5% and 9.5% per annum at December
      31, 2007 and 2006, respectively. Interest is payable monthly. The agreement
      also
      permits the Company to issue letters of credit which are secured by the line
      and
      reduces the amount of borrowings available under the agreement. The due date
      of
      the outstanding principal balance is amended to July 1, 2009. The amount
      outstanding under the line of credit at December 31, 2007 and 2006 was
      $1,667,378. As of December 31, 2007, the amount available was $0.





The
      term
      loan provides for borrowings of up to $1,500,000 which is secured by
      substantially all of the assets of the Company. The loan bears interest at
      the
      lender's referenced prime rate plus 1.25%, or 8.75% and 9.75% per annum at
      December 31, 2007 and 2006, respectively. Interest is payable quarterly.
      Commencing January 1, 2007, the Company was required to make 10 annual principal
      payments of $150,000 each. The amount outstanding under the term loan at
      December 31, 2007 and December 31, 2006 was $1,350,000 and $1,500,000,
      respectively. In January 2008, the Company made the contractual principal
      payment on the loan of $150,000.





*Monarche
      Pointe Fund, Ltd.*


On
      November 21, 2007, the Company issued a convertible promissory note to Monarch
      Pointe Fund, Ltd. (“Monarch Pointe”), a fund managed by M.A.G. Capital, LLC
      (“MAG”) for gross proceeds of $1,000,000. The note is unsecured, accrues
      interest at 7% per annum, is due on March 31, 2008, and is convertible into
      our
      common stock at any time at either party’s election at a conversion price of
      $0.65 per share.





In
      accordance with EITF 98-05 “Accounting for Convertible Securities with
      Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”,
      the Company calculated the relative fair value of the beneficial conversion
      feature to be $71,429 which has been recorded as a discount to the note and
      is
      being amortized into interest expense over the term of the note. As of December
      31, 2007, the carrying value of the note is $950,166.





**11.**  **Convertible
      Promissory Notes**





*Convertible
      Promissory Notes*


On
      December 6, 2005, the Company entered into an agreement to issue up to $750,000
      principal amount of convertible promissory notes. The Company received $450,000
      in proceeds on December 6, 2005 and $300,000 on January 18, 2006. The Company
      accounted for the embedded conversion feature in accordance with EITF 98-5
      “Accounting for Convertible Securities with Beneficial Conversion Features or
      Contingently Adjustable Conversion Ratios” and EITF 00-27 “Application of Issue
      No. 98-5 to Certain Convertible Instruments” since the embedded conversion
      feature was considered conventional as defined in EITF 00-19 “Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in, a
      Company's Own Stock” and EITF 05-02 “The Meaning of "Conventional Convertible
      Debt Instrument”. This resulted in the calculation of the intrinsic value of the
      embedded beneficial conversion feature in the amount of $450,000 for the
      December 6, 2005 advance and $300,000 for the January 18, 2006 advance, which
      have been treated as discounts to the underlying debt and were amortized into
      interest expense over the term of the notes.




F-14


These
      notes together with accrued interest were originally due on November 30, 2008.
      On September 20, 2006, the notes and accrued interest were cancelled and
      converted into 1,631,350 shares of common stock. The Company recorded a charge
      to the statement of operations for the difference between the face value and
      the
      carrying value of the notes.





**12.**  **Income
      Taxes**





Reconciliations
      of the U.S. federal statutory rate to the actual tax rate follows for the years
      ended December 31, 2007 and 2006 are as follows:


2007
              
              2006Pretax
                  lossFederal
                  tax at statutory rate
              
              
              34.0
              %
              
              34.0
              %Permanent
                  differences:State
                  income taxes, net of federal benefit
              
              
              1.6
              %
              
              5.8
              %Impairment
                  of goodwill
              
              
              -26.9
              %
              
              -25.8
              %Other
              
              
              -1.8
              %
              
              -Change
                  in valuation allowance
              
              
              -6.9
              %
              
              -11.0
              %Total
                  provision
              
              
              0.0
              %
              
              3.0
              %




The
      major
      components of the deferred taxes are as follows at December 31, 2007 and 2006
      are as follows:


Asset
                  (Liability)2007
              
              2006Current:Reserves
                  and accruals
              
              $
              (24,450
              )
              $
              -Intangible
                  assets
              
              
              (360,349
              )
              
              (362,160
              )Noncurrent:Depreciation
              
              
              (307,118
              )
              
              -Intangible
                  assets
              
              
              (1,859,881
              )
              
              459,128Net
                  operating losses
              
              
              7,178,162
              
              
              463,311Stock
                  compensation
              
              
              5,717,320
              
              
              10,046,798Acquisition
                  of Vanguard Synfuels, LLC
              
              
              -
              
              
              (2,258,070
              )Other
              
              
              
              
              
              (50,000
              )Valuation
                  allowance
              
              
              (10,343,683
              )
              
              (8,299,007
              )Net
                  deferred tax asset
              
              $
              -
              
              $
              -




At
      December 31, 2007, the Company had available $20,101,400 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.





**13.**  **Commitments
      and Contingencies**





The
      Company leases its office space and certain office equipment under
      non-cancelable operating leases. Total rent expense under these operating leases
      was $55,522 and $46,603, respectively, for the years ended December 31, 2007
      and
      2006, respectively.





Future
      minimum lease payments under non-cancelable operating leases at December 31,
      2007 are as follows:


2008
              
              $
              47,0412009
              
              
              24,5552010
              
              
              2,046Thereafter
              
              
              -$
              73,642




F-15




**14.**  **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. As of
      December 31, 2007, 26,698,830 and 14,139 shares of Series A and Series B
      Preferred were outstanding, respectively. As of December 31, 2006, 28,500,000
      and 27,224 shares of Series A and Series B Preferred were outstanding,
      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.





*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.




F-16


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,
      2007, 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.





**15.**  **Common
      Stock and Common Stock 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.





*Common
      Stock Warrants*


On
      September 20, 2006, in connection with the Acquisition, the Company issued
      warrants to MAG, to purchase up to 6,500,000 shares of common stock as
      consideration for the assignment by MAG to the Company of certain rights to
      acquire Vanguard. One-half of the warrants have an exercise price of $1.14
      per
      share, and the other half have an exercise price of $1.33 per share. The
      warrants are exercisable upon the effectiveness of the Reincorporation and
      the
      related increase in the authorized common stock of the Company. The value of
      the
      warrants was determined using the Black-Scholes model with the following
      assumptions:





Estimated
                fair value of underlying common stock
            
            $
            3.10Expected
                life (in years)
            
            
            5.0Risk-free
                interest rate
            
            
            4.68
            %Expected
                volatility
            
            
            204.5
            %Dividend
                yield
            
            
            0
            %




The
      value
      ascribed to the MAG warrants was $19,872,178. The fair value of the warrants
      were deemed to be a direct acquisition cost in connection with the Acquisition
      and included as part of the purchase price.





On
      September 20, 2006, in connection with the Acquisition, the Company issued
      warrants to Ocean Park Advisors, LLC (“OPA”), a firm controlled by Bruce Comer
      (the Company's Chief Executive Officer), to purchase up to 2,758,812 shares
      of
      common stock as consideration for OPA's waiver of certain anti-dilution
      provisions of its Series I convertible preferred stock, and OPA's subsequent
      conversion of 13,794 shares of Series I convertible preferred stock into
      1,379,400 shares of common stock. The OPA warrants have an exercise price of
      $0.76 per share and became exercisable upon the effectiveness of the
      Reincorporation and the related increase in the authorized common stock of
      the
      Company. The value of the warrants was determined using the Black-Scholes model
      with the following assumptions:




Estimated
                fair value of underlying common stock
            
            $
            3.10Expected
                life (in years)
            
            
            5.0Risk-free
                interest rate
            
            
            4.77
            %Expected
                volatility
            
            
            204.5
            %Dividend
                yield
            
            
            0
            %





The
      value
      ascribed to the OPA warrants was $14,807,934 and has been recorded in “Selling,
      General and Administrative” in the accompanying consolidated statement of
      operations during the year ended December 31, 2006. On January 25, 2007, OPA
      elected to exercise the warrants based on the “cashless” exercise provision
      pursuant to the agreement, in exchange for the issuance of an aggregate of
      2,151,484 shares of the Company's common stock.




F-17




*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.





On
      August
      11, 2006, the Company granted stock options to Bruce Comer, its Chief Executive
      Officer, and Heng Chuk, its former Chief Financial Officer options to purchase
      180,622 and 86,698 shares of common stock, respectively, with an exercise price
      of $0.46 per share, or 110% of the fair value of the common stock on the date
      of
      grant, and vesting fully on December 1, 2006. Two members of the Company's
      board
      of directors were each awarded an option to purchase 36,124 shares of common
      stock, at an exercise price of $0.42 per share and vesting fully on
      September 13, 2006 and November 4, 2006, respectively (being six months
      after the appointment of each director) as discussed above. The Company also
      issued an option to purchase 21,675 shares of common stock to an advisor, at
      an
      exercise price of $0.42 per share and vesting fully on December 1, 2006. All
      stock options issued to the above individuals expire on March 15, 2007. The
      Company has fully expensed the stock-based compensation totaling $1,994,091
      for
      the above issuances during 2006.





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





On
      September 20, 2006, in connection with the Acquisition, the Board of Directors
      granted OPA options to purchase 2,069,109 shares of common stock in connection
      with a Management Services Agreement dated September 20, 2006. The options
      had
      an exercise price of $0.7587 per share and an expected life of five years.
      On
      January 25, 2007, OPA elected to exercise these warrants via a cashless exercise
      which provided for the issuance of 1,613,613 shares of the Company’s common
      stock.





The
      value
      ascribed to the OPA stock options was $6,044,040. The options were considered
      fully vested and the Company charged the value ascribed to the statement of
      operations on the date of acquisition.





The
      value
      of the stock was determined using the Black-Scholes model with the following
      assumptions:




Estimated
                fair value of underlying common stock
            
            $
            6.00Expected
                life (in years)
            
            
            0.1
                to 0.25Risk-free
                interest rate
            
            
            5.02
            %Expected
                volatility
            
            
            204.5
            %Dividend
                yield
            
            
            0
            %





On
      March
      14, 2007, the Company entered into a services agreement with PV Asset
      Management, LLC, a company controlled by Paul Galleberg, a member of the Board
      of Directors. Pursuant to the terms of that agreement, which was effective
      as of
      February 5, 2007, Mr. Galleberg performed management and consulting services
      for
      the Company. The term of the agreement extended through August 3, 2007. Mr.
      Galleberg received stock option grants on each of April 5, 2007, June 5, 2007,
      and August 5, 2007 of 91,666 shares of common stock for services rendered.
      The
      options became be fully vested on the date of grant, have a term of five years,
      and an exercise price equal to the fair market value of our common stock on
      the
      grant date. The Company accounted for these stock options in accordance with
      EITF 96-18. The estimated value of the stock options was determined using the
      Black-Scholes model with market based assumption at each respective reporting
      period. For the
      year ended December 31, 2007, the Company recorded stock compensation expense
      for these options totaled $1,231,105.




F-18


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


**Weighted Average Exercise****Shares Available for Grant**
              
              **Price**Balance,
                  beginning of year
              
              
              **-**Shares
                  reserved upon plan adoption
              
              
              6,592,755Granted
              
              
              (3,127,312
              )
              $
              0.72Exercised
              
              
              -
              
              $
              -Cancelled
              
              
              -
              
              $
              -Balance
                  at December 31, 2006
              
              
              3,465,443Granted
              
              
              309,998
              
              $
              3.11Exercised
              
              
              (2,069,109
              )
              $
              0.76Cancelled
              
              
              (671,241
              )
              $
              1.68Balance
                  at December 31, 2007
              
              
              1,035,091




**Options Outstanding****Exercise Price**
              
              **Number**
                **Outstanding**
              
              **Average remaining**
                **life (years)**
              
              **Weighted average**
                **exercise price**
              
              **Number of shares**
              
              **Weighted average**
                **exercise price**
              
              **Aggregate intrinsic**
                **value**$                  0.76
              
              
              696,960
              
              
              1.22
              
              $
              0.76
              
              
              696,960
              
              $
              0.76
              
              $
              -
  The
        fair
        value of stock options awarded during the year ended December 31, 2007 and
        2006
        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, 2007 and
      2006
      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:


**2007**
              
              **2006**Fair
                  value
              
              $
              3.11
              
              $
              3.25Exercise
                  price
              
              $
              3.11
              
              $
              0.72Risk
                  free rate
              
              
              4.75
              %
              
              4.79
              %Term
              
              
              5.0
              
              
              2.0Expected
                  volatility
              
              
              227.7
              %
              
              203.3
              %Dividend
                  yield
              
              
              0
              %
              
              0
              %
  **16.**  **Segment
        Information**





SFAS
      No.
      131, “ *Disclosures
      About Segments of an Enterprise and Related Information”* ,
      requires the determination of reportable business segments (i.e., the management
      approach). This approach requires that business segment information used by
      the
      chief operating decision maker to assess performance and manage company
      resources be the source for segment information disclosure. The Company operates
      in one business segment: the production of biodiesel fuel.





Revenues
      are derived from customers located within the United States.





Long-lived
      assets consist of property, plant and equipment and intangible assets located
      within the United States.





**17.**  **Subsequent
      Events**





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





On
      February 13, 2008, the Company entered into a binding letter agreement with
      a
      group of investors (“Investor Group”) for the funding of Port Asset Acquisition,
      LLC ("PAA"), an entity previously formed by Allegro for the purpose of acquiring
      assets at the Port of Alexandria (the "Port Assets") and developing a liquid
      terminal operation. The transactions contemplated by the agreement include:
      (i)
      the purchase of 14.71 acres of real property, which includes tank storage,
      a
      fuel terminal and an office building; (ii) the purchase of an additional 7
      adjacent acres of real property from the City of Alexandria; and (iii) the
      lease
      of riverfront property for a term of up to 40 years from the Alexandria Port
      Authority.




F-19




In
      exchange for an investment of $1,000,000 into PAA, the Investor Group received
      a
      92.5% of the ownership interest of PAA and the Company retained a 7.5% ownership
      interest. PAA also plans to obtain $825,000 in seller financing for the purchase
      of the 14.71 acres of real property described in the foregoing paragraph, which
      loan is expected to be secured by all the equity in PAA and all of PAA's assets.




The
      Agreement grants the Company a 90-day call option to purchase the equity
      interests of the Investor Group, subject to certain conditions. If the Company
      does not exercise this option during its exercise period, the Investor Group
      has
      the option to purchase the Company’s equity interest in PAA during the same
      90-day period. Should the Company exercise its call option, it will repay the
      Investor Group's original $1,000,000 cash investment, plus an additional payment
      of $500,000 to be allocated among all PAA members pro rata to their equity
      interests at the time the option is exercised. The Company will also be required
      to repay any seller financing to PAA outstanding at such time. Furthermore,
      if
      the Company exercises the call option, it will be required to pay certain
      employees an aggregate of $250,000 in cash and $200,000 in stock. The Investor
      Group's call option to purchase the Company’s equity interest in PAA provides
      for a purchase price ranging from $125,000 to $175,000, depending upon the
      time
      of exercise within the 90-day option period. The Investor Group's call option
      automatically expires if the Company exercises its call option first. On March
      25, 2008, the Investor Group exercised its call option resulting in the receipt
      of $125,000 in proceeds by the Company.




On
      March
      27, 2008, the Company notified Monarch Pointe its outstanding note payable
      due
      on March 31, 2008 together with accrued will be converted into 1,577,513 share
      of common stock, pursuant the agreement.




F-20