**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-Q**


______


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


**OF
      1934**





For
      the
      quarterly period ended_________________________March 31, 2008


OR





**o
      TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





For
      the
      transition period from_____________to_____________




Commission
      file number 001-32636





**S** **ULPH** **C** **O, INC.** ****


(Exact
      name of registrant as specified in its charter)





**Nevada**
              (State
                or other jurisdiction of incorporation or
              organization)
            
            **88-0224817**
              (I.R.S.
                Employer Identification No.)





**4333
                W. Sam Houston Pkwy N., Suite 190**
              **Houston,
                TX**
              (Address
                of principal executive offices)
            
            **77043**
              (Zip
                Code)




**(713)
      896-9100**


Registrant's
      telephone number, including area code





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes þ No o





Indicate
      by check mark whether the registrant is a large accelerated filer an accelerated
      filer, or a non-accelerated filer. See definition of “accredited filer and large
      accelerated filer” in Rule 12b-2 of the Exchange Act:





Large
      Accelerated Filer o Accelerated
      Filer þ Non-accelerated filer o Smaller
      Reporting Company o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act): Yes o No þ


Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      equity, as of the latest practicable date:


Class
              
              Outstanding
                  at April 30, 2008Common
                  Stock, par value $.001
              
              80,849,666
                  shares









**PART
      I.**


**Item
      1. Financial Statements.**





SULPHCO,
      INC.


(A
      Company in the Development Stage)


CONDENSED
      BALANCE SHEETS


March
      31,
      2008 and December 31, 2007


(unaudited)


**March 31,**
                **2008**
              
              **December 31,**
                **2007****ASSETS****Current
                  Assets:**Cash
                  and cash equivalents
              
              $
              3,885,188
              
              $
              7,430,138Prepaid
                  expenses and other
              
              
              809,531
              
              
              442,934Total
                  current assets
              
              
              4,694,719
              
              
              7,873,072**Property
                  and Equipment**(net
                  of****accumulated
                  depreciation of $959,651
                and
                  $917,107, respectively)****
              
              
              277,870
              
              
              309,323**Other
                  Assets**Intangible
                  assets (net of accumulated amortization of $106,069 and $89,496,
                  respectively)
              
              
              936,642
              
              
              881,848Deposits
              
              
              37,798
              
              
              37,798Total
                  other assets
              
              
              974,440
              
              
              919,646Total
                  assets
              
              $
              5,947,029
              
              $
              9,102,041**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY (DEFICIT)****Current
                  Liabilities**Accounts
                  payable and accrued expenses
              
              $
              2,163,013
              
              $
              1,515,278Refundable
                  deposit
              
              
              550,000
              
              
              550,000Late
                  registration penalty (including accrued interest)
              
              
              1,188,918
              
              
              1,094,671Total
                  current liabilities
              
              
              3,901,931
              
              
              3,159,949Convertible
                  notes payable, net of discount
              
              
              3,184,170
              
              
              2,967,802Other
              
              
              154,271
              
              
              180,058Total
                  long-term liabilities
              
              
              3,338,441
              
              
              3,147,860Total
                  liabilities
              
              
              7,240,372
              
              
              6,307,809**Commitments
                  and Contingencies (see Note 6 )****Stockholders'
                  Equity (Deficit)**Preferred
                  stock: 10,000,000 shares authorized ($0.001 par value) none
                  issued
              
              
              -
              
              
              -Common
                  stock: 110,000,000 shares authorized ($0.001 par value)80,849,666
                  and 80,848,416 shares issued and outstanding, respectively
              
              
              80,850
              
              
              80,848Additional
                  paid-in capital
              
              
              125,487,159
              
              
              122,700,951Deficit
                  accumulated during the development stage
              
              
              (126,861,352
              )
              
              (119,987,567
              )Total
                  stockholders' equity (deficit)
              
              
              (1,293,343
              )
              
              2,794,232Total
                  liabilities and stockholders' equity (deficit)
              
              $
              5,947,029
              
              $
              9,102,041




The
      Accompanying Notes are an Integral Part of the Financial
      Statements.




2




SULPHCO,
      INC.


(A
      Company in the Development Stage)


CONDENSED
      STATEMENTS OF OPERATIONS


For
      the
      Three-Month Periods ended March 31, 2008 and 2007


and
      the
      Period from Inception to March 31, 2008


(unaudited)


**Three-Months Ended**
                **March
                  31,**
              
              **Inception to****2008**
              
              **2007**
              
              **March 31, 2008****Revenue**Sales
              
              $
              -
              
              $
              -
              
              $
              42,967**Expenses:**Selling,
                  general, and administrative expenses
              
              
              (5,629,368
              )
              
              (1,953,670
              )
              
              (57,532,461
              )Research
                  and development expenses:Fujairah
                  test facility
              
              
              (38,016
              )
              
              (156,757
              )
              
              (23,205,654
              )Other
              
              
              (936,757
              )
              
              (816,764
              )
              
              (14,091,087
              )Loss
                  on investment in joint venture
              
              
              -
              
              
              -
              
              
              (136,095
              )Loss
                  on disposal of asset
              
              
              -
              
              
              -
              
              
              (221,711
              )Loss
                  on impairment of asset
              
              
              -
              
              
              -
              
              
              (233,900
              )Total
                  operating expenses
              
              
              (6,604,141
              )
              
              (2,927,191
              )
              
              (95,420,908
              )Loss
                  from operations
              
              
              (6,604,141
              )
              
              (2,927,191
              )
              
              (95,377,941
              )**Other
                  income (expense):**Interest
                  income
              
              
              40,971
              
              
              52,759
              
              
              1,059,535Interest
                  expense
              
              
              (310,615
              )
              
              (113,281
              )
              
              (7,007,130
              )Late
                  registration fees
              
              
              -
              
              
              -
              
              
              (760,240
              )Other
              
              
              -
              
              
              (1,027
              )
              
              (6,628
              )**Net
                  loss**
              
              
              (6,873,785
              )
              
              (2,988,740
              )
              
              (102,092,404
              )Deemed
                  Dividend (Note 3)
              
              
              -
              
              
              (11,523,885
              )
              
              (24,768,948
              )**Net
                    loss attributable to common stockholders**
              
              $
              (6,873,785
              )
              $
              (14,512,625
              )
              $
              (126,861,352
              )Loss
                  per share - basic and diluted
              
              $
              (0.09
              )
              $
              (0.20
              )Weighted
                  average shares - basic and diluted
              
              
              80,848,759
              
              
              73,938,266




The
      Accompanying Notes are an Integral Part of the Financial
      Statements.




3




SULPHCO,
      INC.


(A
      Company in the Development Stage)


CONDENSED
      STATEMENTS OF CASH FLOWS


For
      the
      Three-Month Periods Ended March 31, 2008 and 2007


and
      for
      the Period from Inception to March 31, 2008


(unaudited)




**Three-Months Ended****March
                31,**
            
            **Inception to****2008**
            
            **2007**
            
            **March 31, 2008****Cash
                Flows From Operating Activities**Net
                loss
            
            $
            (6,873,785
            )
            $
            (2,988,740
            )
            $
            (102,092,404
            )Adjustments
                to reconcile net loss to cash used in
                operating activities:Depreciation
                and amortization
            
            
            59,117
            
            
            42,514
            
            
            1,246,561Accretion
                of note payable discount
            
            
            216,368
            
            
            -
            
            
            5,240,676Allowance
                for loan receivable
            
            
            -
            
            
            -
            
            
            313,451Stock-based
                compensation
            
            
            2,786,210
            
            
            66,670
            
            
            17,270,313Stock
                issued for interest expense
            
            
            -
            
            
            -
            
            
            296,000Contribution
                from stockholder
            
            
            -
            
            
            -
            
            
            555,000Loss
                from joint venture
            
            
            -
            
            
            -
            
            
            136,096(Gain)
                loss on disposal and impairment of assets
            
            
            -
            
            
            -
            
            
            448,703Changes
                in:Receivables
            
            
            -
            
            
            955
            
            
            (118,657
            )Prepaid
                expenses and other
            
            
            (366,597
            )
            
            (26,680
            )
            
            (725,871
            )Accounts
                payable and accrued expenses
            
            
            621,948
            
            
            (1,129,814
            )
            
            2,239,474Refundable
                deposit
            
            
            -
            
            
            (25,835
            )
            
            550,000Accrued
                fees and interest
            
            
            94,247
            
            
            -
            
            
            776,099Net
                cash used in operating activities
            
            
            (3,462,492
            )
            
            (4,060,930
            )
            
            (73,864,559
            )**Cash
                Flows From Investing Activities**Purchase
                of property and equipment
            
            
            (11,091
            )
            
            (2,988
            )
            
            (1,267,165
            )Investments
                in joint ventures and subsidiaries
            
            
            -
            
            
            -
            
            
            (361,261
            )Payment
                of deposits
            
            
            -
            
            
            -
            
            
            (36,822
            )Investments
                in intangible assets
            
            
            (71,367
            )
            
            (56,495
            )
            
            (1,058,553
            )Net
                cash used in investing activities
            
            
            (82,458
            )
            
            (59,483
            )
            
            (2,723,801
            )**Cash
                Flows from Financing Activities**Proceeds
                from issuance of stock, net of offering costs
            
            
            -
            
            
            7,787,674
            
            
            69,683,188Proceeds
                from issuance of related party notes payable
            
            
            -
            
            
            -
            
            
            11,000,000Proceeds
                from stock subscriptions
            
            
            -
            
            
            -
            
            
            4,240,887Proceeds
                from issuance of line of credit
            
            
            -
            
            
            -
            
            
            750,000Return
                on capital
            
            
            -
            
            
            -
            
            
            (118,427
            )Principal
                payments on related party notes payable
            
            
            -
            
            
            -
            
            
            (3,250,000
            )Decrease
                in related party receivable
            
            
            -
            
            
            -
            
            
            1,359,185Payments
                on contract payable
            
            
            -
            
            
            -
            
            
            (250,000
            )Principal
                payments on line of credit
            
            
            -
            
            
            -
            
            
            (750,000
            )Principal
                payments on advance from related party
            
            
            -
            
            
            -
            
            
            (2,191,285
            )Net
                cash provided by financing activities
            
            
            -
            
            
            7,787,674
            
            
            80,473,548Net
                change in cash and cash equivalents
            
            
            (3,544,950
            )
            
            3,667,261
            
            
            3,885,188Cash
                and cash equivalents at beginning of period
            
            
            7,430,138
            
            
            6,004,992
            
            
            -Cash
                and cash equivalents at end of period
            
            $
            3,885,188
            
            $
            9,672,253
            
            $
            3,885,188





The
      Accompanying Notes are an Integral Part of the Financial
      Statements.





4





SULPHCO,
      INC.


(A
      Company in the Development Stage)


CONDENSED
      STATEMENTS OF CASH FLOWS - Continued


For
      the
      Three-Month Periods Ended March 31, 2008 and 2007


and
      for
      the Period from Inception to March 31, 2008


(unaudited)





**Supplemental
                information and non-cash transactions**Cash
                paid for interest
            
            $
            -
            
            $
            -
            
            $
            967,760Cash
                paid for income taxes
            
            $
            -
            
            $
            -
            
            $
            -The
                Company had the following non-cash investing and financing activities:Extinguishment
                of related party note payable
            
            $
            -
            
            $
            -
            
            $
            5,000,000Extinguishment
                of convertible notes payable
            
            
            -
            
            
            -
            
            
            4,680,044Issuance
                of stock for convertible notes payable
            
            
            -
            
            
            -
            
            
            319,956Non-cash
                deemed dividend
            
            
            -
            
            
            11,523,885
            
            
            24,768,948





The
      Accompanying Notes are an Integral Part of the Financial
      Statements.





5





**SULPHCO,
      INC.**


**(A
      Company in the Development Stage)**


NOTES
      TO THE INTERIM FINANCIAL STATEMENTS


March
      31,
      2008


(unaudited)





**1.**
            **Basis
                of Presentation**




The
      accompanying unaudited condensed financial statements of SulphCo, Inc. (the
      “Company” or “SulphCo”) were prepared in accordance with generally accepted
      accounting principles for interim financial statements in the United States
      of
      America (“GAAP”), pursuant to the Securities and Exchange Commission rules and
      regulations. Accordingly, they do not include all of the information and
      footnotes required by GAAP for complete annual financial statements.





In
      the
      opinion of management, the unaudited interim financial statements reflect all
      normal and recurring adjustments necessary for a fair presentation of the
      results of operations, financial position and cash flows for the interim
      periods. The results of operations for any interim period are not necessarily
      indicative of the results for a full year. The accompanying condensed financial
      statements are unaudited and should be read in conjunction with the most recent
      annual report on Form 10-K.





**Use
      of Estimates**




The preparation
      of financial statements in conformity with GAAP requires management to make
      estimates and assumptions that affect the reported amounts of certain assets
      and
      liabilities, disclosures of contingent assets and liabilities at the date of
      the
      financial statements, and the related reported amounts of revenues and expenses
      during the reporting period. The significant estimates made by management in
      the
      accompanying financial statements include allowances for doubtful accounts,
      determination of income taxes, contingent liabilities, useful lives used in
      depreciation and amortization and the assumptions utilized to compute
      stock-based compensation. Actual results could differ from those
      estimates.





**Going
      Concern**





The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and the settlement of liabilities
      and commitments in the normal course of business.  As of March 31, 2008,
      the Company had cash and cash equivalents on hand of approximately $3.9 million
      and working capital of approximately $0.8 million. For the three-month period
      ended March 31, 2008, the Company recognized a net loss of approximately $6.9
      million. As a result of these continuing net losses, the Company has an
      accumulated deficit of approximately $126.9 million that includes the effect
      of
      non-cash deemed dividends totaling approximately $24.8 million.  When taken
      together, these factors raise substantial doubt about our ability to continue
      as
      a going concern.  The ability of the Company to continue as a going concern
      is dependent on the Company’s ability to raise additional funds and implement
      its business plan.





**2.**
            **Convertible
                Notes Payable**





At
      December 31, 2007 and March 31, 2008, the Company had outstanding convertible
      notes payable of approximately $4.7 million (the “Convertible Notes Payable”).
      The Convertible Notes Payable are presented net of the unamortized discount
      related to a beneficial conversion feature present in the terms of the note.
      The
      discount is being accreted into the statement of operations as
      incremental interest
      expense using the effective interest method through July 31, 2009, after which
      time the note holders have the ability to accelerate the maturity of the
      Convertible Notes Payable.





6




As
      of
      March 31, 2008, the net balance of the Convertible Notes Payable
      is:


**March 31, 2008**Assumed
                  proceeds from modified Convertible Notes Payable
              
              $
              4,680,044Less:Discount
                  related to beneficial conversion feature
              
              
              (1,736,550
              )Net
                  Convertible Notes Payable balance at November 2007
              
              
              2,943,494Add:Discount
                  accretion through March 31, 2008
              
              
              240,676Net
                  Convertible Notes Payable balance at March 31, 2008
              
              $
              3,184,170




The
      Convertible Notes Payable represents an unsecured obligation of the
      Company.





Interest
      on the Convertible Notes Payable is adjusted quarterly based on a London
      Inter-Bank Offering Rate (“LIBOR”) plus 0.5% per annum, with interest only
      payments due on December 31 st of each
      year during the remaining term of the Convertible Notes Payable that extends
      through December 31, 2011 when the note matures (unless maturity is otherwise
      accelerated by the note holders to any date after July 31, 2009). As a result
      of
      the November 2007 Modifications, the effective interest rate of the Convertible
      Notes Payable was determined to be approximately 33%. For the three months
      ended
      March 31, 2008 and 2007, the Company recognized total interest expense of
      approximately $0.3 million and $0.1 million, respectively. For the three month
      period ended March 31, 2008, total interest expense recognized by the Company
      included approximately $0.2 million of incremental interest expense associated
      with discount accretion.





**3.**
            **Deemed
                Dividend**





On
      March
      12, 2007, the Company executed Amendment No. 1 to Securities Purchase Agreements
      and Warrants (the “Agreement”) with the warrant holders (the “Warrant Holders”)
      that provided inducements to encourage the Warrant Holders to exercise their
      respective warrants. As consideration for Warrant Holders exercising their
      shares, the Company agreed that it would:





·
            reduce
                the exercise price on warrants to acquire 4,000,000 shares of the
                Company’s common stock held by the 2006 Warrant Holders from $6.805 per
                share to $2.68 per share; and





·
            issue
                the Warrant Holders additional warrants, with an exercise price of
                $2.68
                per share, on a one to one basis for each existing warrant that was
                exercised including granting up to 1,952,068 warrants to 2004 Warrant
                Holders and up to 4,000,000 warrants to the 2006 Warrant
                Holders.





As
      a
      result of the inducements included in the Agreement described above, during
      the
      quarter ended March 31, 2007, 1,952,068 warrants held by the 2004 Warrant
      Holders and 2,000,000 warrants held by the 2006 Warrant Holders were exercised
      resulting in the grant of 3,952,068 additional warrants. As a result of the
      inducements, the Company recorded a non-cash deemed dividend of approximately
      $11.5 million. The amount of the deemed dividend was estimated to be equal
      to
      the sum of the fair value of the inducements as the sum of (1) the incremental
      fair value conveyed to the 2006 Warrant Holders via the reduction of the
      exercise price of the 2006 Warrants determined as provided in paragraph 51
      of
      SFAS 123R utilizing the Black-Scholes Valuation Model and (2) the fair value
      of
      the 3,952,068 additional warrants estimated using the Black-Scholes Valuation
      Model.




7


**4.**
            **Loss
                Per Share**





The
      computations of basic and diluted loss per common share are based upon the
      weighted average number of common shares outstanding and potentially dilutive
      securities. Potentially dilutive securities include options and warrants to
      acquire the Company’s common stock and convertible debt. As of March 31, 2008,
      there were approximately 9.8 million shares issuable in connection with these
      potentially dilutive securities. These potentially dilutive securities were
      disregarded in the computations of diluted net loss per share for three month
      periods ended March 31, 2008 and 2007, because inclusion of such potentially
      dilutive securities would have been anti-dilutive.





**5.**
            **Stock
                Plans and Stock-Based
                Compensation**





In
      accordance with the provisions of SFAS 123R, the Company records stock-based
      compensation expense for all share-based payment arrangements, including stock
      options, warrants and restricted stock grants. Total stock-based compensation
      for the three month periods ended March 31, 2008 and 2007 was approximately
      $2.8 million (including $0.3 million for stock options granted in 2007),
      and $0.1 million, respectively.





**Stock
      Option Grants – Directors, Officers and Employees**





During
      the three month periods ended March 31, 2008 and 2007, the Company granted
      977,534 and 350,000 stock options, respectively, to its directors, officers
      and
      employees. The stock-based compensation expense for these stock options for
      the
      three month periods ended March 31, 2008 and 2007 was approximately $2.5 million
      and $0.1 million. The fair value of these stock options was estimated using
      the
      Black-Scholes options pricing model with the following assumptions:





**Three
                Months Ended March 31, 2008 and 2007**
            
            **2008**
            
            **2007**Valuation
                Assumptions:Expected
                Term (years)
            
            
            1.5 - 6.5
            
            
            5.5 - 6.5Expected
                Volatility
            
            
            93.5% - 150.8%
            
            
            114% - 150%Expected
                Dividend Rate
            
            
            -
            
            
            -Risk
                Free Interest Rate
            
            
            1.6% - 3.16%
            
            
            4.60% - 4.80%Weighted
                Average Grant Date Fair Value
            
            
            $2.18
                          - $3.69
            
            
            $2.46
                              - $3.37





**6.**
            **Commitments
                and Contingencies**





**Concentrations
      of Credit Risk**





Financial
      instruments, which potentially subject the Company to concentrations of credit
      risk, consist mainly of cash equivalents. The Company maintains these financial
      instruments in one U.S. financial institution, which exceed federally insured
      limits by approximately $3.8 million at March 31, 2008. The Company has not
      experienced any losses in such accounts, nor does management believe it is
      exposed to any significant credit risk .





8




**Litigation
      Contingencies**





There
      are
      various claims and lawsuits pending against the Company arising in the normal
      course of the Company’s business. Although the amount of liability, if any, at
      March 31, 2008 cannot be ascertained, management is of the opinion that these
      claims and lawsuits will not materially affect the Company’s financial position.
      We have and will continue to devote significant resources to our defense, as
      necessary.





The
      following paragraphs set forth the status of litigation as of March 31,
      2008.





Clean
      Fuels Litigation


In *Clean
      Fuels Technology v. Rudolf W. Gunnerman, Peter Gunnerman, RWG, Inc. and SulphCo,
      Inc.* ,
      Case
      No. CV05-01346 (Second Judicial District, County of Washoe) the Company, Rudolf
      W. Gunnerman, Peter Gunnerman, and RWG, Inc., were named as defendants in a
      legal action commenced in Reno, Nevada.  The Plaintiff, Clean Fuels
      Technology later assigned its claims in the lawsuit to EcoEnergy Solutions,
      Inc., which entity was substituted as Plaintiff.  In general, Plaintiff
      EcoEnergy Solutions, Inc. alleged claims relate to ownership of the “sulfur
      removal technology” originally developed by Professor Teh Fu Yen and Dr.
      Gunnerman with financial assistance provided by Dr. Gunnerman, and subsequently
      assigned to the Company.  On September 14, 2007, after a jury trial and
      extensive post-trial proceedings, the trial court entered final judgment against
      Plaintiff EcoEnergy Solutions, Inc. on all of its claims.  Per the final
      judgment, all of Plaintiff’s claims were resolved against Plaintiff and were
      dismissed with prejudice.  In addition, the trial court found that the
      Company was the prevailing party in the lawsuit and entered judgment in favor
      of
      the Company and against Plaintiff of approximately $124,000, with post-judgment
      interest. The
      Plaintiff appealed the judgment on October 5, 2007.  On December 19, 2007,
      and as required by Nevada statute, the Company participated in a mandatory
      settlement conference at which time a settlement was not reached. A briefing
      schedule has been issued, but there has been no date set for oral arguments. As
      of
      March 31, 2008, no asset or liability has been accrued relative to this
      action.





Talisman
      Litigation


In *Talisman
      Capital Talon Fund, Ltd. v. Rudolf W.Gunnerman and SulphCo, Inc* .,
      Case
      No. 05-CV-N-0354-BES-RAM, the Company and Rudolf W. Gunnerman were named as
      Defendants in a legal action commenced in federal court in Reno, Nevada. The
      Plaintiff alleged claims relating to the Company's ownership and rights to
      develop its "sulfur removal technology." The Company regards these claims as
      without merit. Discovery in this case formally concluded on May 24, 2006. On
      September 28, 2007, the court granted, in part, the Defendants' motion for
      summary judgment and dismissed the Plaintiff's claims for bad faith breach
      of
      contract and unjust enrichment that had been asserted against Rudolf Gunnerman.
      The court denied the Plaintiff's motion for partial summary judgment. Trial
      has
      been set for August 4, 2008. As
      of
      March 31, 2008, no liability has been accrued relative to this
      action.





9


Neuhaus
      Litigation


On
      October 20, 2006, Mark Neuhaus filed a lawsuit against the Company and Rudolf
      W.
      Gunnerman, *Mark
      Neuhaus v. SulphCo, Inc., Rudolph W. Gunnerman* ,
      in the
      Second Judicial District Court, in and for the County of Washoe, Case No.
      CV06-02502, Dept. No. 1. The lawsuit is based on a purported Non-Qualified
      Stock
      Option Agreement and related Consulting Agreement between Mark Neuhaus and
      the
      Company dated March of 2002. Mark Neuhaus claims that according to the terms
      of
      the Non-Qualified Stock Option Agreement, he was granted an option to purchase
      three million (3,000,000) shares of the Company’s common stock at the exercise
      price per share of $0.01. On or about February of 2006, Mark Neuhaus attempted
      to exercise the option allegedly provided to him under the Non-Qualified Stock
      Option Agreement. At that time, the Company rejected Mr. Neuhaus’s attempt to
      exercise the option. Thereafter, Mr. Neuhaus filed this lawsuit seeking to
      enforce the Non-Qualified Stock Option Agreement. In his suit, Mr. Neuhaus
      includes claims for specific performance, breach of contract, contractual breach
      of the covenant of good faith and fair dealing, and tortious breach of the
      covenant of good faith and fair dealing. He requested that the Court compel
      the
      Company to issue the shares or alternatively to award him damages equal to
      the
      fair market value of the three million (3,000,000) shares of stock when he
      purported to exercise the options, minus the exercise price. On December 7,
      2006, the Company moved to dismiss the lawsuit. On January 4, 2007, the Court
      issued an Order denying the motion on the ground that there were factual issues
      to be resolved which prevented dismissal at that time. The Company filed an
      Answer to the Complaint, as well as a counterclaim against Mr. Neuhaus and
      a
      cross claim against Rudolf W. Gunnerman on March 29, 2007. That cross-claim
      against Dr. Gunnerman was subsequently voluntarily discontinued, without
      prejudice.





Mr.
      Neuhaus filed a motion to dismiss the counterclaim on April 11, 2007, which
      the
      Company opposed. On July 20, 2007, the Court issued an Order granting Mr.
      Neuhaus’ Motion to Dismiss. The Court found that Nevada was not the proper venue
      for the counterclaim and that the Nevada courts did not have jurisdiction over
      the counterclaim. The Company has filed an action in the New York State Supreme
      Court seeking to obtain the same relief as was sought in the counterclaim that
      was dismissed.





On
      December 21, 2007, the Company filed a Motion for Summary Judgment with the
      Court seeking dismissal of Neuhaus's claims. The Company argued that the
      Non-Qualified Stock Option Agreement was not valid in that there was no evidence
      of a board resolution approving the terms of the options, as is required by
      Nevada law. Neuhaus opposed the Motion. On February 4, 2008, the Court denied
      the Motion for Summary Judgment, finding that there remain material issues
      of
      disputed facts relating to the creation of the Non-Qualified Stock Option
      Agreement and the Consulting Agreement. The Company is proceeding with
      discovery.





On
      March
      25, 2008, Neuhaus moved for partial summary judgment of liability against the
      Company. On April 21, 2008, the Company filed its response (a) opposing summary
      judgment for Neuhaus and (b) cross-moving for summary judgment in favor of
      the
      Company dismissing all of Neuhaus’s claims, on the ground that discovery had now
      confirmed that there was no Board resolution adopted authorizing the purported
      option grant. Neuhaus has not yet filed his response to the Company’s
      cross-motion, and the motions have not yet been submitted to the Court for
      decision.





Trial
      in
      this action has been rescheduled for July 14, 2008. As
      of
      March 31, 2008, no liability has been accrued relative to this action. The
      Company regards the claim as without merit.




Hendrickson
      Derivative Litigation


On
      January 26, 2007, Thomas Hendrickson filed a shareholder derivative claim
      against certain current and former officers and directors or the Company in
      the
      Second Judicial District Court of the State of Nevada, in and for the County
      of
      Washoe. The case is known as *Thomas
      Hendrickson, Derivatively on Behalf of SulphCo, Inc. v. Rudolf W. Gunnerman,
      Peter W. Gunnerman, Loren J. Kalmen, Richard L. Masica, Robert Henri Charles
      Van
      Maasdijk, Hannes Farnleitner, Michael T. Heffner, Edward E. Urquhart, Lawrence
      G. Schafran, Alan L. Austin, Jr., Raad Alkadiri and Christoph
      Henkel* ,
      Case
      No. CV07-00137, Dept. No. B6. The complaint alleges, among other things, that
      the defendants breached their fiduciary duty to the Company by failing to act
      in
      good faith and diligence in the administration of the affairs of the Company
      and
      in the use and preservation of its property and assets, including the Company’s
      credibility and reputation. The Company and the Board had intended to file
      a
      Motion for Dismissal with the Court, based upon the Plaintiff’s failure to make
      a demand upon the Board. On
      July
      10, 2007, the Company received notice that a stipulation (the “Stipulation”) of
      voluntary dismissal without prejudice had been entered, with an effective date
      of July 3, 2007, regarding this action. The Stipulation provides that in
      connection with the dismissal of this action each of the parties will bear
      their
      own costs and attorney fees and thereby waive their rights, if any, to seek
      costs and attorney fees from the opposing party.  Further, neither the
      plaintiff nor his counsel has received any consideration for the dismissal
      of
      this action, and no future consideration has been promised.





10


In
      September of 2007, the Company’s Board of Directors received a demand letter
      (the “Hendrickson Demand Letter”) from Mr. Hendrickson’s attorney reasserting
      the allegations contained in the original derivative claim and requesting that
      the Board of Directors conduct an investigation of these matters in response
      thereto. In response to the Hendrickson Demand Letter, the Company’s Board of
      Directors formed a committee comprised of three independent directors to
      evaluate the Hendrickson Demand Letter and to determine what, if any, action
      should be taken. The committee has retained independent counsel to advise it. As
      of
      March 31, 2008, no liability has been accrued relative to this action.





Nevada
      Heat Treating Litigation


On
      November 29, 2007, Nevada Heat Treating, Inc. (“NHT”) filed at lawsuit against
      the Company, *Nevada
      Heat Treating, Inc., d/b/a California Brazing* ,
      in the
      Second Judicial District Court of the State of Nevada, in and for the County
      of
      Washoe, Case No. CV07-02729. In its complaint, NHT alleges trade secret
      misappropriation and breach of contract relative to certain information alleged
      to have been disclosed to the Company beginning in late 2006 and continuing
      through early 2007 pursuant to a consulting engagement with NHT. Among other
      things, NHT is asserting that certain information, alleged to have been
      disclosed to the Company during the term of the consulting engagement, is the
      subject of a nondisclosure/confidentiality agreement executed at the inception
      of the consulting engagement. NHT is contending that this certain information
      represents a trade secret that should no longer be available for use by the
      Company following the termination of the consulting engagement with NHT in
      the
      spring of 2007. In connection with filing this action, NHT also filed a motion
      for preliminary injunction against the Company seeking to enjoin it from using
      certain information until the matter can be resolved through the courts.
      Hearings on the preliminary injunction motion took place on March 24 and 25,
      2008, and May 8, 2008. On May 8, 2008, the court ruled from the bench, at the
      conclusion of the hearing on the motion for preliminary injunction. The court
      denied the plaintiff's motion on the grounds that the plaintiff had failed
      to
      demonstrate a probability of success on the merits of its claims. Trial has
      been
      set for April 27, 2009. As of March 31, 2008, no liability has been accrued
      relative to this action.





Securities
      and Exchange Commission Subpoena


On
      February 25, 2008, the Company received a subpoena from the Denver office of
      the
      Securities and Exchange Commission (the “SEC”). The subpoena formalizes
      virtually identical requests the Company received in May, June and August 2007
      and subsequently responded to which requested the voluntary production of
      documents and information, including financial, corporate, and accounting
      information related to the following subject matters: Fujairah Oil Technology
      LLC, the Company’s restatements for the first three quarterly periods of 2006
      and the non-cash deemed dividend for the quarter ended March 31, 2007, and
      information and documents related to certain members of former management,
      all
      of whom have not been employed by the Company for over a year. We have been
      advised by the SEC that, despite the subpoena and formal order of investigation
      authorizing its issuance, neither the SEC nor its staff has determined whether
      the Company or any person has committed any violation of law. The Company
      intends to continue to cooperate with the SEC in connection with its requests
      for documents and information.





**7.**
            **Related
                Party Transactions**





During
      the three-month periods ended March 31, 2008 and 2007, the Company made payments
      totaling approximately $0.3 million and $0.2 million, respectively, to Märkisches Werk
      Halver, GmbH (“MWH”) in connection with ongoing probe development activities.
      Edward E. Urquhart, a member of the Company’s Board of Directors since August
      2006, has been the Chief Executive Officer of MWH since July 2003.





11




The
      Company has a consulting contract with Vincent van Maasdijk, the son of Robert
      van Maasdijk who is the Chairman of the Company’s Board of Directors, to serve
      as a project manager. As a project manager, Mr. van Maasdijk’s responsibilities
      will include overseeing the installation and testing of commercial Sonocracking
      units at various locations assigned by the Company. Under the terms of the
      contract, Mr. van Maasdijk will receive a monthly payment of approximately
      $7,000 plus reimbursement of all reasonable out-of-pocket expenses, in
      accordance with the Company’s applicable policies and procedures. For the three
      month periods ended March 31, 2008 and 2007, the total expense recognized by
      the
      Company under this arrangement was approximately $20,000 and $10,000,
      respectively.





Historically,
      the Company had maintained a consulting contract with RWG, Inc., a company
      wholly-owned by Dr. Rudolf Gunnerman, the Company’s former Chairman and CEO.
      This contract was terminated in January 2007 contemporaneous with Dr.
      Gunnerman’s dismissal from the Company. During the three month periods ended
      March 31, 2008 and March 31, 2007 the total expense recognized by the Company
      under this arrangement was none and $40,000, respectively.





**8.**
            **Recent
                Accounting
                Pronouncements**





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157 (SFAS 157), “Fair Value Measurements,” which defines fair value, establishes
      guidelines for measuring fair value and expands disclosures regarding fair
      value
      measurements. SFAS 157 does not require any new fair value measurements but
      rather eliminates inconsistencies in guidance found in various prior accounting
      pronouncements. SFAS 157 is effective for fiscal years beginning after November
      15, 2007. In February 2008, the FASB issued FASB Staff Position (FSP) 157-2,
      “Effective Date of FASB Statement No. 157,” which defers the effective date of
      Statement 157 for nonfinancial assets and nonfinancial liabilities, except
      for
      items that are recognized or disclosed at fair value in an entity’s financial
      statements on a recurring basis (at least annually), to fiscal years beginning
      after November 15, 2008, and interim periods within those fiscal years. Earlier
      adoption is permitted, provided a company has not yet issued financial
      statements, including for interim periods, for that fiscal year. As of January
      1, 2008, the Company does not have any recurring fair value measurements and
      has
      opted for the deferral. Accordingly, the Company has not implemented and is
      currently evaluating the impact of SFAS 157, but does not expect the adoption
      of
      SFAS 157 to have a material impact on its results from operations or financial
      position.




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      159 (SFAS 159), “The Fair Value Option for Financial Assets and Financial
      Liabilities — Including an amendment of FASB Statement No. 115.” SFAS 159
      permits entities to measure eligible assets and liabilities at fair value.
      Unrealized gains and losses on items for which the fair value option has been
      elected are reported in earnings. SFAS 159 is effective for fiscal years
      beginning after November 15, 2007. As of March 31, 2008, the Company did not
      elect the fair value option on any financial instruments or certain other items
      as permitted by SFAS 159.




In
      December 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      141 (revised 2007) (SFAS 141R), “Business Combinations,” which replaces SFAS
      141. SFAS 141R establishes principles and requirements for how an acquirer
      recognizes and measures in its financial statements the identifiable assets
      acquired, the liabilities assumed, any non-controlling interest in the acquiree
      and the goodwill acquired. The Statement also establishes disclosure
      requirements that will enable users to evaluate the nature and financial effects
      of the business combination. SFAS 141R is effective for fiscal years beginning
      after December 15, 2008. The adoption of SFAS 141R is not expected to have
      a
      material impact on the Company’s results from operations or financial position.




12




In
      December 2007, the FASB issued Statement of Financial Accounting Standards
      No.
      160 (SFAS 160), “Non-controlling Interests in Consolidated Financial Statements
— an amendment of ARB No. 51.” SFAS 160 requires that accounting and reporting
      for minority interests be re-characterized as non-controlling interests and
      classified as a component of equity. SFAS 160 also establishes reporting
      requirements that provide sufficient disclosures that clearly identify and
      distinguish between the interests of the parent and the interests of the
      non-controlling owners. SFAS 160 applies to all entities that prepare
      consolidated financial statements, except not-for-profit organizations, but
      will
      affect only those entities that have an outstanding non-controlling interest
      in
      one or more subsidiaries or that deconsolidate a subsidiary. This statement
      is
      effective for fiscal years beginning after December 15, 2008. The adoption
      of
      SFAS 160 is not expected to have a material impact on our results from
      operations or financial position.




In
      March
      2008, the FASB issued Statement of Financial Accounting Standards No. 161 (SFAS
      160), “Disclosures about Derivative Instruments and Hedging Activities — an
      amendment of FASB Statement No. 133.” SFAS 161 changes the disclosure
      requirements for derivative instruments and hedging activities. This statement
      is effective for financial statements issued for fiscal years and interim
      periods beginning after November 15, 2008. Early adoption is encouraged. SFAS
      161 applies to all entities but will only affect those entities that use
      derivative instruments. As of March 31, 2008, the Company does not have any
      derivative instruments and does not expect SFAS 161 to have a material impact
      on
      our results from operations or financial position.





**9.**
            **Subsequent
                Events**





**Equity
      Line of Credit**


The
      Company entered into an equity line of credit with Azimuth Opportunity Ltd.
      (“Azimuth”) pursuant to a Common Stock Purchase Agreement dated April 30, 2008.
      Subject to the conditions set forth in that agreement, Azimuth is committed
      to
      purchase up to $60,000,000 of the Company’s common stock pursuant to draw down
      notices that the Company may give to Azimuth from time to time at the Company’s
      discretion until November 1, 2009. The price of shares sold is determined by
      reference to the volume weighted average price of the Company’s common stock
      during a ten trading day pricing period at the time of each draw down notice,
      less a small discount.




13


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





**Results
      of Operations**





As
      a
      development stage company, we have not generated any material revenues since
      we
      commenced our current line of business in 1999. When we emerge from the
      development stage, our reporting will change to reflect costs of sales against
      revenues.





**Business
      Development Activities Update**





The
      following is an update on the more significant activities the Company has been
      pursuing.




With
      respect to the Company’s ongoing commercial efforts, we continue to see a high
      level of interest in the SonocrackingTM process as potential customers see the
      value that can be driven by the technology. We are pursuing what we believe
      are
      opportunities presenting the highest likelihood of success for the technology
      (i.e., crudes with high sulphur content) and are working with several potential
      customers to achieve that goal.




Southeast
      Asia




On
      February 11, 2008, we announced an agreement with Pt. Isis Megah (“Isis”), an
      Indonesian oil and gas services company, granting Isis an exclusive
      distributorship in the sales territories of India, Malaysia, Singapore and
      Indonesia (the “Sales Territories”). We concurrently announced a customer order
      procured through Isis, conditioned upon the execution of an operating agreement,
      for SonocrackingTM units having at least 30,000 barrels per day (“Bpd”) of
      processing capacity to be shipped at our expense from Fujairah to a designated
      port within the Sales Territories. Subsequently, the Company shipped 90,000
      Bpd
      of processing capacity from our facility in Fujairah, UAE, that
      arrived in Singapore during the week of April 14, 2008. The
      SonocrackingTM units will remain in storage there pending finalization of a
      refinery placement agreement with the customer.





During
      the week of March 31, 2008, SulphCo personnel conducted joint site inspections
      with the customer at two of its Southeast Asian refineries to evaluate their
      suitability for the proposed SonocrackingTM unit installations. Following these
      inspections the parties reached a preliminary understanding, now being reduced
      to writing, as to the placement of the Company’s first 30,000 Bpd commercial
      scale SonocrackingTM unit within a customer’s refinery (the “Placement
      Agreement”). Upon
      execution of the Placement Agreement among Isis, the customer, and SulphCo,
      the
      30,000 Bpd SonocrackingTM unit will be shipped by barge from Singapore to
      the customer’s refinery
      site. An operating agreement cannot be signed before finalization of
      the Placement Agreement, since the character of the crude oil or
      fractionates to be processed is dependent upon both the selection
      of and location within the refinery where the SonocrackingTM
unit is to be installed. Nonetheless, it is the intention of the Company to
      expeditiously proceed with the installation of the SonocrackingTM
unit at the customer's refinery once the Placement Agreement has been
      signed, irrespective of the status of the operating agreement
      because: 1) the customer is prohibited from operating the SonocrackingTM
unit unless an operating agreement has first been executed and 2)
      should the parties be unable to agree upon the terms of an operating
      agreement, Isis bears the risk of having to uninstall the SonocrackingTM
      unit at
      its
      expense and return it to SulphCo.





Fujairah




The
      Company is currently scheduling additional rounds of testing at the Fujairah
      Facility during the second quarter of 2008. These tests will be conducted for
      the benefit of potential customers to allow them to observe the SonocrackingTM
technology and process performance first hand.


14




European
      Testing Activities





The
      Company expects to meet with its European testing partner during the second
      quarter of 2008 to discuss, among other things, the following items: 1) the
      results of all testing performed to date in the European testing partner’s
      facilities, 2) the commercial significance of those results, 3) potential
      commercial opportunities between SulphCo and the European testing partner,
      4)
      additional commercial opportunities that may arise as a result of improvements
      made to the probe and reactor chamber technology subsequent to earlier rounds
      of
      testing in Europe, and 5) the attendance of European testing partner personnel
      at future testing trials in Fujairah.




South
      Korea





The
      SulphCo KorAsia project has experienced delays due to unanticipated equipment
      problems that occurred during the testing conducted in the first quarter of
      2008. During the course of the limited trials, issues arose with a certain
      switching component of an electrical driver for the ultrasound probes. Those
      issues were ultimately attributed to factors related to the original electrical
      equipment supplied with the 2,000 Bpd SonocrackingTM unit in 2005. SulphCo is in
      the process of supplying a new power generator as well as the latest electrical
      driver design, similar to the drivers utilized in trials in Europe and Fujairah.
      We expect to resume testing utilizing Khafji crude oil, (sulphur content ~2.9%)
      in the latter half of the second quarter of 2008 or in the third quarter of
      2008. Once a full set of trials have been performed and the data analyzed,
      we
      will determine, in conjunction with SulphCo KorAsia, the appropriate technical
      and commercial paths forward.





Houston,
      Texas





We
      are in
      advanced discussions with several potential North American clients. In
      anticipation of the need for processing capacity in North America, we have
      shipped a 15,000 Bpd SonocrackingTM unit from Germany to Houston. The
      SonocrackingTM unit is expected to arrive in Houston during the mid to latter
      part of May 2008.




Research
      and development activities in the SulphCo Houston facility have been centered
      around two principal areas: 1) the building and commissioning of a mobile unit
      capable of processing up to 5,000 Bpd of crude oil and 2) the building and
      performance validation of a pilot scale unit (with flow rates of 1 - 15 gallons
      per minute), which will provide potential customers with laboratory scale data replicating
      the performance of a commercial scale SonocrackingTM unit.





Construction
      and commissioning of the 5,000 Bpd mobile unit has now been completed and we
      anticipate testing the unit in the field at potential customer sites during
      the
      second quarter of 2008 and beyond. The goal of this testing will be to
      demonstrate the effectiveness of the SonocrackingTM process on the customer’s own
      crude at commercial flow rates. If such tests are successful, we would
      anticipate moving forward to commercial operating agreements with such
      customers.





We
      continue to make progress in the development of the pilot scale unit and are
      currently in the process of incorporating new probe and reactor technology.
      We
      have been conducting test runs throughout the first quarter of 2008 and expect
      to expand this test program throughout the second quarter of 2008 and beyond.
      Potential customers have supplied a variety of crudes in various quantities
      for
      laboratory testing. We expect to conduct extensive laboratory tests on the
      potential customers’ crudes during the second quarter of 2008 and beyond. If
      such tests are successful on a laboratory scale, we would anticipate moving
      forward to field testing and/or commercial operating agreements with such
      potential customers.


15


***Three-months
      ended March 31, 2008 compared to the three-months ended March 31,
      2007***





**Research
      and Development Expenses**




For
      the
      three month period ended March 31, 2008, we incurred expenses of approximately
      $1.0 million, related to research and development of our Sonocracking
      technology. This compares to expenses of approximately $1.0 million for the
      comparable period in 2007. During the three month period ended March 31 2008,
      we
      incurred approximately $38,000 in expenses related to the test facility in
      Fujairah, UAE. This compares to expenses of approximately $157,000 for the
      comparable period in 2007.




For
      the
      three month period ended March 31, 2008, we paid approximately $122,000 to
      our
      engineers and other research and development employees as wages and related
      benefits for design and testing of our Sonocracker units. This compares to
      expenses of approximately $68,000 for the comparable period in 2007. For the
      three month period ended March 31, 2008, approximately $296,000 in expenses
      were
      incurred for the procurement of control panels, probes, centrifuges, and
      generators related to the ongoing research and development of our units. This
      compares to expenses of approximately $398,000 for the comparable period in
      2007.




**Selling,
      General and Administrative Expenses**




For
      the
      three month period ended March 31, 2008, we incurred approximately $5.6 million
      in selling, general and administrative expenses. This compares to expenses
      of
      approximately $2.0 million for the comparable period in 2007.





Stock-based
      compensation was approximately $2.8 million for the three month period ended
      March 31, 2008. This compares to stock-based compensation of approximately
      $0.1
      million for the comparable period in 2007.





Legal
      fees were approximately $0.9 million for the three month period ended March
      31,
      2008. This compares to expenses of approximately $0.6 million for the comparable
      period in 2007, an increase of $0.3 million. This increase was primarily due
      to
      increased litigation fees for the ongoing legal proceedings. We expect to
      continue to incur significant litigation fees throughout the remainder of
      2008.





Consulting
      fees, payroll and related expenses were approximately $1.0 million for the
      three
      months ended March 31, 2008. This compares to expenses of approximately $0.8
      million for the comparable period in 2007.





Travel
      and travel related expenses were approximately $0.2 million for the three month
      period ended March 31, 2008. This compares to expenses of approximately $0.2
      million for the comparable period in 2007.





In
      2007,
      the Company entered into agreements to lease office/warehouse facilities in
      Houston, Texas, the new location of its corporate headquarters, and office
      facilities in Reno, Nevada. Office lease expense was approximately $56,000
      for
      the three month period ended March 31, 2008. This compares to office lease
      expense of approximately $43,000 for the comparable period in 2007.





The
      remainder of the amounts incurred relate to normal recurring operating expenses
      such as utilities, marketing, and investor relations.





**Interest
      Expense**




Interest
      expense was approximately $0.3 million for the three month period ended
      March 31, 2008, reflecting an increase of approximately 175% over comparable
      periods in 2007. The majority of the increase for the three month-period is
      a
      result of the Company incurring approximately $0.2 million in interest related
      to the accretion of a discount on the Convertible Notes Payable discussed in
      the
      financial statement footnotes.


16




**Deemed
      Dividend**





On
      March
      12, 2007, the Company executed Amendment No. 1 to Securities Purchase Agreements
      and Warrants (the “Agreement”) with the warrant holders (the “Warrant Holders”)
      that provided inducements to encourage the Warrant Holders to exercise their
      respective warrants. As consideration for Warrant Holders exercising their
      shares, the Company agreed that it would:





·
            reduce
                the exercise price on warrants to acquire 4,000,000 shares of the
                Company’s common stock held by the 2006 Warrant Holders from $6.805 per
                share to $2.68 per share; and





·
            issue
                the Warrant Holders the additional warrants, with an exercise price
                of
                $2.68 per share, on a one to one basis for each existing warrant
                that was
                exercised including granting up to 1,952,068 warrants to 2004 Warrant
                Holders and up to 4,000,000 warrants to the 2006 Warrant
                Holders.





As
      a
      result of the inducements included in the Agreement described above, during
      the
      quarter ended March 31, 2007, 1,952,068 warrants held by the 2004 Warrant
      Holders and 2,000,000 warrants held by the 2006 Warrant Holders were exercised
      resulting in the grant of 3,952,068 additional warrants. As a result of the
      inducements, the Company recorded a non-cash deemed dividend of approximately
      $11.5 million. The amount of the deemed dividend was estimated to be equal
      to
      the sum of the fair value of the inducements as the sum of (1) the incremental
      fair value conveyed to the 2006 Warrant Holders via the reduction of the
      exercise price of the 2006 Warrants determined as provided in paragraph 51
      of
      SFAS 123R utilizing the Black-Scholes Valuation Model and (2) the fair value
      of
      the 3,952,068 Additional Warrants estimated using the Black-Scholes Valuation
      Model.





**Net
      Loss and Net Loss Attributable to Common Stockholders**




We
      incurred a net loss of approximately $6.9 million for the three month period
      ended March 31, 2008. This compares to a net loss of approximately $3.0 million
      for the comparable period in 2007. This increase in net loss in the 2008 periods
      relative to the 2007 period is primarily a result of an increase in stock-based
      compensation.





We
      incurred a net loss attributable to common stockholders of approximately $6.9
      million for the three month period ended March 31, 2008. This compares to a
      net
      loss attributable to common stockholders of approximately $14.5 million for
      the
      comparable period in 2007. The difference is primarily attributable to the
      deemed dividend of approximately $11.5 million for the three month period ended
      March 31, 2007, combined with the increase in stock-based compensation for
      the
      three month period March 31, 2008.





**Liquidity
      and Capital Resources**





Working
      capital at March 31, 2008, was approximately $0.8 million. As of March 31,
      2008,
      we had current assets of approximately $4.7 million comprised primarily of
      cash
      and cash equivalents of approximately $3.9 million. As of March 31, 2008, we
      had
      current liabilities of approximately $3.9 million comprised primarily of
      accounts payable and accrued expenses of approximately $2.1 million, a
      refundable deposit of approximately $0.6 million and a late registration penalty
      (including accrued interest) of approximately $1.2 million. The late
      registration was incurred as a result of delays in the obtaining the
      effectiveness of an SEC registration statement in 2004 and
      2005.


17





The
      Company entered into an equity line of credit with Azimuth Opportunity Ltd.
      (“Azimuth”) pursuant to a Common Stock Purchase Agreement dated April 30, 2008.
      Subject to the conditions set forth in that agreement, Azimuth is committed
      to
      purchase up to $60,000,000 of the Company’s common stock pursuant to draw down
      notices that the Company may give to Azimuth from time to time at the Company’s
      discretion until November 1, 2009. The price of shares issued will be determined
      by reference to the volume weighted average price of the Company’s common stock
      during a ten trading day pricing period at the time of each draw down notice,
      less a small discount.





As
      of
      March 31, 2008, we had cash and cash equivalents of $3.9 million. Based upon
      our
      expected levels of expenditures and anticipated needs, we anticipate that our
      existing capital resources, taken together with amounts available to us in
      connection with the equity line of credit facility discussed above, will be
      sufficient to fund our cash requirements for at least the next 18 (eighteen)
      months. This assumes that our stock price stays above the minimum $3.00 per
      share requirement needed to access the facility. Our ability to meet future
      capital requirements will depend primarily upon our
      ability to access amounts under the equity line of credit discussed above,debt and equity financings, third party lease financing of Sonocracking
      equipment and components, and proceeds from future exercises of outstanding
      warrants and options. Other than the equity line of credit facility discussed
      above, we have no binding commitments for additional financings. To date, we
      have generated no material revenues from our business operations. We are unable
      to predict when or if we will be able to generate future revenues from
      commercial activities or the amounts expected from such activities. These
      factors raise substantial doubt regarding the Company’s ability to continue as a
      going concern.





**Forward-Looking
      Statements**





This
      report contains forward-looking statements within the meaning of the federal
      securities laws that relate to future events or our future financial
      performance. In some cases, you can identify forward-looking statements by
      terminology, such as "may," "will," "should," "could," "expect," "plan,"
      "anticipate," "believe," "estimate," "project," "predict," "intend," "potential"
      or "continue" or the negative of such terms or other comparable terminology,
      although not all forward-looking statements contain such terms.





In
      addition, these forward-looking statements include, but are not limited to,
      statements regarding implementing our business strategy; development,
      commercialization and marketing of our products; our intellectual property;
      our
      estimates of future revenue and profitability; our estimates or expectations
      of
      continued losses; our expectations regarding future expenses, including research
      and development, sales and marketing, manufacturing and general and
      administrative expenses; difficulty or inability to raise additional financing,
      if needed, on terms acceptable to us; our estimates regarding our capital
      requirements and our needs for additional financing; attracting and retaining
      customers and employees; sources of revenue and anticipated revenue; and
      competition in our market.





Forward-looking
      statements are only predictions. Although we believe that the expectations
      reflected in these forward-looking statements are reasonable, we cannot
      guarantee future results, levels of activity, performance or achievements.
      All
      of our forward-looking information is subject to risks and uncertainties that
      could cause actual results to differ materially from the results expected.
      Although it is not possible to identify all factors, these risks and
      uncertainties include the risk factors and the timing of any of those risk
      factors identified in “Part II, Item 1A. Risk Factors” section
      contained herein, as well as the risk factors described in the Company’s Form
      10-Q for the quarter ended March 31, 2008 and those set forth from time to
      time
      in our filings with the Securities and Exchange Commission (“SEC”). These
      documents are available through our web site, http://www.sulphco.com ,
      or
      through the SEC’s Electronic Data Gathering and Analysis Retrieval System at http://www.sec.gov .


18


**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk.**





**Interest
      Rates**





As
      of
      March 31, 2008, the Company had variable rate debt aggregating approximately
      $4.7 million. The variable rate debt exposes the Company to the risk of
      increased interest expense in the event of increases in short-term interest
      rates. If the variable interest rate were to increase by 1% from March 2008
      levels, interest expense would increase by approximately $47,000 annually.
      The
      carrying value of the variable interest rate debt approximates fair value as
      it
      bears interest at current market rates.





**Item
      4. Controls and Procedures.**





**Evaluation
      of Disclosure Controls and Procedures**





Our
      management, with the participation of the Company’s chief executive officer and
      chief financial officer, have evaluated the effectiveness of the Company’s
      disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
      under the Securities Exchange Act of 1934 (the “1934 Act”)) as of March 31,
      2008, the end of the period covered by this Form 10-Q.  Based on this
      evaluation, our chief executive officer and chief financial officer concluded
      that, as of March 31, 2008, the Company’s disclosure controls and procedures
      were effective.




**Changes
      in Internal Control Over Financial Reporting**





There
      were no changes in our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) and 15d-15(f) under the 1934 Act) during the period ended March
      31, 2008, that have materially affected, or are reasonably likely to materially
      affect, our internal control over financial reporting.


19


**PART
      II. OTHER INFORMATION**





**Item
      1.**  **Legal
      Proceedings**





Clean
      Fuels Litigation


In *Clean
      Fuels Technology v. Rudolf W. Gunnerman, Peter Gunnerman, RWG, Inc. and SulphCo,
      Inc.* ,
      Case
      No. CV05-01346 (Second Judicial District, County of Washoe) the Company, Rudolf
      W. Gunnerman, Peter Gunnerman, and RWG, Inc., were named as defendants in a
      legal action commenced in Reno, Nevada.  The Plaintiff, Clean Fuels
      Technology later assigned its claims in the lawsuit to EcoEnergy Solutions,
      Inc., which entity was substituted as Plaintiff.  In general, Plaintiff
      EcoEnergy Solutions, Inc. alleged claims related to ownership of the “sulfur
      removal technology” originally developed by Professor Teh Fu Yen and Dr.
      Gunnerman with financial assistance provided by Dr. Gunnerman, and subsequently
      assigned to the Company.  On September 14, 2007, after a jury trial and
      extensive post-trial proceedings, the trial court entered final judgment against
      Plaintiff EcoEnergy Solutions, Inc. on all of its claims.  Per the final
      judgment, all of Plaintiff’s claims were resolved against Plaintiff and were
      dismissed with prejudice.  In addition, the trial court found that the
      Company was the prevailing party in the lawsuit and entered judgment in favor
      of
      the Company and against Plaintiff of approximately $124,000, with post-judgment
      interest. The
      Plaintiff appealed the judgment on October 5, 2007.  On December 19, 2007,
      and as required by Nevada statute, the Company participated in a mandatory
      settlement conference at which time a settlement was not reached. A briefing
      schedule has been issued, but there has been no date set for oral arguments. As
      of
      March 31, 2008, no liability has been accrued relative to this
      action.





Talisman
      Litigation


In *Talisman
      Capital Talon Fund, Ltd. v. Rudolf W.Gunnerman and SulphCo, Inc* .,
      Case
      No. 05-CV-N-0354-BES-RAM, the Company and Rudolf W. Gunnerman were named as
      Defendants in a legal action commenced in federal court in Reno, Nevada. The
      Plaintiff alleged claims relating to the Company's ownership and rights to
      develop its "sulfur removal technology." The Company regards these claims as
      without merit. Discovery in this case formally concluded on May 24, 2006. On
      September 28, 2007, the court granted, in part, the Defendants' motion for
      summary judgment and dismissed the Plaintiff's claims for bad faith breach
      of
      contract and unjust enrichment that had been asserted against Rudolf Gunnerman.
      The court denied the Plaintiff's motion for partial summary judgment. Trial
      has
      been set for August 4, 2008. As
      of
      March 31, 2008, no liability has been accrued relative to this
      action.





Neuhaus
      Litigation


On
      October 20, 2006, Mark Neuhaus filed a lawsuit against the Company and Rudolf
      W.
      Gunnerman, *Mark
      Neuhaus v. SulphCo, Inc., Rudolph W. Gunnerman* ,
      in the
      Second Judicial District Court, in and for the County of Washoe, Case No.
      CV06-02502, Dept. No. 1. The lawsuit is based on a purported Non-Qualified
      Stock
      Option Agreement and related Consulting Agreement between Mark Neuhaus and
      the
      Company dated March of 2002. Mark Neuhaus claims that according to the terms
      of
      the Non-Qualified Stock Option Agreement, he was granted an option to purchase
      three million (3,000,000) shares of the Company’s common stock at the exercise
      price per share of $0.01. On or about February of 2006, Mark Neuhaus attempted
      to exercise the option allegedly provided to him under the Non-Qualified Stock
      Option Agreement. At that time, the Company rejected Mr. Neuhaus’s attempt to
      exercise the option. Thereafter, Mr. Neuhaus filed this lawsuit seeking to
      enforce the Non-Qualified Stock Option Agreement. In his suit, Mr. Neuhaus
      includes claims for specific performance, breach of contract, contractual breach
      of the covenant of good faith and fair dealing, and tortious breach of the
      covenant of good faith and fair dealing. He requested that the Court compel
      the
      Company to issue the shares or alternatively to award him damages equal to
      the
      fair market value of the three million (3,000,000) shares of stock when he
      purported to exercise the options, minus the exercise price. On December 7,
      2006, the Company moved to dismiss the lawsuit. On January 4, 2007, the Court
      issued an Order denying the motion on the ground that there were factual issues
      to be resolved which prevented dismissal at that time. The Company filed an
      Answer to the Complaint, as well as a counterclaim against Mr. Neuhaus and
      a
      cross claim against Rudolf W. Gunnerman on March 29, 2007. That cross-claim
      against Dr. Gunnerman was subsequently voluntarily discontinued, without
      prejudice.


20





Mr.
      Neuhaus filed a motion to dismiss the counterclaim on April 11, 2007, which
      the
      Company opposed. On July 20, 2007, the Court issued an Order granting Mr.
      Neuhaus’ Motion to Dismiss. The Court found that Nevada was not the proper venue
      for the counterclaim and that the Nevada Courts did not have jurisdiction over
      the counterclaim. The Company has filed an action in the New York State Supreme
      Court seeking to obtain the same relief as was sought in the counterclaim that
      was dismissed.





On
      December 21, 2007, the Company filed a Motion for Summary Judgment with the
      Court seeking dismissal of Neuhaus's claims. The Company argued that the
      Non-Qualified Stock Option Agreement was not valid in that there was no evidence
      of a board resolution approving the terms of the options, as is required by
      Nevada law. Neuhaus opposed the Motion. On February 4, 2008, the Court denied
      the Motion for Summary Judgment, finding that there remain material issues
      of
      disputed facts relating to the creation of the Non-Qualified Stock Option
      Agreement and the Consulting Agreement. The Company is proceeding with
      discovery.





On
      March
      25, 2008, Neuhaus moved for partial summary judgment of liability against the
      Company. On April 21, 2008, the Company filed its response (a) opposing summary
      judgment for Neuhaus and (b) cross-moving for summary judgment in favor of
      the
      Company dismissing all of Neuhaus’s claims, on the ground that discovery had now
      confirmed that there was no Board resolution adopted authorizing the purported
      option grant. Neuhaus has not yet filed his response to the Company’s
      cross-motion, and the motions have not yet been submitted to the Court for
      decision.





Trial
      in
      this action has been rescheduled for July 14, 2008. As
      of
      March 31, 2008, no liability has been accrued relative to this action. The
      Company regards the claim as without merit.




Hendrickson
      Derivative Litigation


On
      January 26, 2007, Thomas Hendrickson filed a shareholder derivative claim
      against certain current and former officers and directors or the Company in
      the
      Second Judicial District Court of the State of Nevada, in and for the County
      of
      Washoe. The case is known as *Thomas
      Hendrickson, Derivatively on Behalf of SulphCo, Inc. v. Rudolf W. Gunnerman,
      Peter W. Gunnerman, Loren J. Kalmen, Richard L. Masica, Robert Henri Charles
      Van
      Maasdijk, Hannes Farnleitner, Michael T. Heffner, Edward E. Urquhart, Lawrence
      G. Schafran, Alan L. Austin, Jr., Raad Alkadiri and Christoph
      Henkel* ,
      Case
      No. CV07-00137, Dept. No. B6. The complaint alleges, among other things, that
      the defendants breached their fiduciary duty to the Company by failing to act
      in
      good faith and diligence in the administration of the affairs of the Company
      and
      in the use and preservation of its property and assets, including the Company’s
      credibility and reputation. The Company and the Board had intended to file
      a
      Motion for Dismissal with the Court, based upon the Plaintiff’s failure to make
      a demand upon the Board. On
      July
      10, 2007, the Company received notice that a stipulation (the “Stipulation”) of
      voluntary dismissal without prejudice had been entered, with an effective date
      of July 3, 2007, regarding this action. The Stipulation provides that in
      connection with the dismissal of this action each of the parties will bear
      their
      own costs and attorney fees and thereby waive their rights, if any, to seek
      costs and attorney fees from the opposing party.  Further, neither the
      plaintiff nor his counsel has received any consideration for the dismissal
      of
      this action, and no future consideration has been promised.





In
      September of 2007, the Company’s Board of Directors received a demand letter
      (the “Hendrickson Demand Letter”) from Mr. Hendrickson’s attorney reasserting
      the allegations contained in the original derivative claim and requesting that
      the Board of Directors conduct an investigation of these matters in response
      thereto. In response to the Hendrickson Demand Letter, the Company’s Board of
      Directors formed a committee comprised of three independent directors to
      evaluate the Hendrickson Demand Letter and to determine what, if any, action
      should be taken. The committee has retained independent counsel to advise it. As
      of
      March 31, 2008, no liability has been accrued relative to this action.


21





Nevada
      Heat Treating Litigation


On
      November 29, 2007, Nevada Heat Treating, Inc. (“NHT”) filed at lawsuit against
      the Company, *Nevada
      Heat Treating, Inc., d/b/a California Brazing* ,
      in the
      Second Judicial District Court of the State of Nevada, in and for the County
      of
      Washoe, Case No. CV07-02729. In its complaint, NHT alleges trade secret
      misappropriation and breach of contract relative to certain information alleged
      to have been disclosed to the Company beginning in late 2006 and continuing
      through early 2007 pursuant to a consulting engagement with NHT. Among other
      things, NHT is asserting that certain information, alleged to have been
      disclosed to the Company during the term of the consulting engagement, is the
      subject of a nondisclosure/confidentiality agreement executed at the inception
      of the consulting engagement. NHT is contending that this certain information
      represents a trade secret that should no longer be available for use by the
      Company following the termination of the consulting engagement with NHT in
      the
      spring of 2007. In connection with filing this action, NHT also filed a motion
      for preliminary injunction against the Company seeking to enjoin it from using
      certain information until the matter can be resolved through the courts.
      Hearings on the preliminary injunction motion took place on March 24 and 25,
      2008, and May 8, 2008. On May 8, 2008, the court ruled from the bench, at
      the conclusion of the hearing on the motion for preliminary injunction. The
      court denied the plaintiff's motion on the grounds that the plaintiff had failed
      to demonstrate a probability of success on the merits of its claims. Trial
      has
      been set for April 27, 2009. As of March 31, 2008, no liability has been accrued
      relative to this action.





Securities
      and Exchange Commission Subpoena


On
      February 25, 2008, the Company received a subpoena from the Denver office of
      the
      Securities and Exchange Commission (the “SEC”). The subpoena formalizes
      virtually identical requests the Company received in May, June and August 2007
      and subsequently responded to which requested the voluntary production of
      documents and information, including financial, corporate, and accounting
      information related to the following subject matters: Fujairah Oil Technology
      LLC, the Company’s restatements for the first three quarterly periods of 2006
      and the non-cash deemed dividend for the quarter ended March 31, 2007, and
      information and documents related to certain members of former management,
      all
      of whom have not been employed by the Company for over a year. We have been
      advised by the SEC that, despite the subpoena and formal order of investigation
      authorizing its issuance, neither the SEC nor its staff has determined whether
      the Company or any person has committed any violation of law. The Company
      intends to continue to cooperate with the SEC in connection with its requests
      for documents and information.





**Item
      1A.**  **Risk
      Factors**





As
      of the
      date of this filing, there have been no material changes from the risk factors
      previously disclosed in our “Risk Factors” in the Form 10-K for the period ended
      December 31, 2007. An investment in our common stock involves various risks.
      When considering an investment in our company, you should consider carefully
      all
      of the risk factors described in our most recent Form 10-K. These risks and
      uncertainties are not the only ones facing us and there may be additional
      matters that we are unaware of or that we currently consider immaterial. All
      of
      these could adversely affect our business, financial condition, results of
      operations and cash flows and, thus, the value of an investment in our company.




**Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds.** –
      None.




**Item
      3. Defaults Upon Senior Securities.**– None.


22


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





A
      Special
      Meeting of the Stockholders (the “Special Meeting”) was held on February 26,
      2008, to vote on the following propositions:





1.
            To
                amend the Company’s Articles of Incorporation to increase the number of
                authorized shares of the Company’s capital stock to 120,000,000 shares by
                increasing the authorized shares of Common Stock, par value $0.001
                (the
                “Common Stock”) from 100,000,000 to 110,000,000 shares; and





2.
            To
                approve and adopt the Company’s 2008 Omnibus Long-Term Incentive Plan
                (“the “Plan”) pursuant to which an aggregate of 2,250,000 shares of Common
                Stock are available for issuance.





The
      voting results are as follows:





**Proposition
                1**
            
            **Proposition
                2****For**
            
            **Against**
            
            **Abstain**
            
            **For**
            
            **Against**
            
            **Abstain**49,179,025
            
            
            602,717
            
            
            77,180
            
            
            46,280,089
            
            
            3,456,816
            
            
            71,737




**Item
      5. Other Information.**–None.





**Item
      6.**  **Exhibits**





31.1
            Certification
                pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange
                Act of
                1934.


31.2
            Certification
                pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange
                Act of
                1934.


32.1
            Certifications
                of CEO and CFO Pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to§
                906 of the Sarbanes-Oxley Act of
                2002.


23




**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this Report to be signed on its behalf by the undersigned thereunto
      duly authorized.





SULPHCO,
                INC.(Registrant)Date:
                May 9, 2008
            /s/
              Larry D. RyanBy:
            Larry
                D. RyanChief
                Executive Officer(Principal
                Executive Officer)Date:
                May 9, 2008
            /s/
              Stanley W. FarmerBy:
            Stanley
                W. FarmerVice
                President andChief
                Financial Officer(Principal
                Financial and Accounting Officer)


24