**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**Form
      10-Q**





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





For
      the
      quarterly period ended................................................. June
      30,
      2006


OR





**[ 
       ] 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 Number)








**850
                Spice Islands Drive, Sparks, NV**
              (Address
                of principal executive offices)
            
            **89431**
              (Zip
                Code)





**(775)
      829-1310**


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 ü No
      __





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 __      Accelerated Filer ü Non-accelerated filer __





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





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 August 11, 2006Common
                  Stock, par value $.001
              
              72,520,910
                  shares








**PART
      I.**





**Item
      1. Financial Statements**





SULPHCO,
      INC.


(A
      Company in the Development Stage)


BALANCE
      SHEETS


June
      30,
      2006 and December 31, 2005


(unaudited)





June
                30, 2006
            
            December
                31, 2005**Current
                Assets:**Cash
                and cash equivalents
            
            $
            16,310,160
            
            $
            6,874,653Loan
                and accrued interest receivable
            
            
            203,985
            
            
            -Prepaid
                expenses and other
            
            
            97,600
            
            
            137,577Total
                current assets
            
            
            16,611,745
            
            
            7,012,230**Property
                and Equipment (net of accumulated depreciation of
                $936,818)**
            
            
            16,208,194
            
            
            397,416**Other
                Assets**Intangible
                assets (net of accumulated amortization of $30,310)
            
            
            451,540
            
            
            355,218Investment
                in Joint Venture
            
            
            947,740
            
            
            139,550Deposits
            
            
            48,672
            
            
            140,822Deferred
                tax asset (net of valuation allowance of $10,161,791)
            
            
            -
            
            
            -Total
                other assets
            
            
            1,447,952
            
            
            635,590Total
                assets
            
            $
            34,267,891
            
            $
            8,045,236**Current
                Liabilities**Accounts
                payable and accrued liabilities
            
            $
            2,921,840
            
            $
            779,413Refundable
                deposit
            
            
            550,000
            
            
            550,000Accrued
                fees and interest
            
            
            1,115,266
            
            
            1,035,572Related
                party note payable
            
            
            -
            
            
            500,000Total
                current liabilities
            
            
            4,587,106
            
            
            2,864,985**Long
                Term Related Party Note Payable**
            
            
            5,000,000
            
            
            7,000,000**Commitments
                and Contingencies**
            
            
            -
            
            
            -Total
                liabilities
            
            
            9,587,106
            
            
            9,864,985**Stockholders'
                Equity (Deficiency)**Preferred
                stock: 10,000,000 shares authorized ($0.001 par value) none
                issued
            
            
            -
            
            
            -Common
                stock: 100,000,000 shares authorized ($0.001 par value)72,520,910
                shares issued and outstanding at March 31, 2006
            
            
            72,521
            
            
            60,537Paid
                in capital
            
            
            68,497,101
            
            
            30,604,342Stock
                subscriptions receivable
            
            
            (744,500
            )
            
            (744,500
            )Deficit
                accumulated during the development stage
            
            
            (42,944,246
            )
            
            (31,740,128
            )Accumulated
                other comprehensive loss
            
            
            (4,091
            )
            
            (4,091
            )Total
                stockholders' equity (deficiency)
            
            
            24,876,785
            
            
            (1,823,840
            )Total
                liabilities and stockholders' equity (deficiency)
            
            $
            34,463,891
            
            $
            8,041,145





The
      Accompanying Notes are an Integral Part of the Financial
      Statements


1


SULPHCO,
      INC.


(A
      Company in the Development Stage)


STATEMENTS
      OF OPERATIONS and COMPREHENSIVE LOSS


For
      the
      Three and Six Months ended June 30, 2006 and 2005 and from
      Inception


(unaudited)





**Three
                Months Ended**
              **June**
            
            **Six
                Months Ended**
              **June**
            
            **Inception****2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **to
                date****Revenue**Sales
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            42,967**Expenses**Selling,
                general, and administrative expenses
            
            
            (4,632,823
            )
            
            (1,447,363
            )
            
            (8,107,533
            )
            
            (2,667,388
            )
            
            (36,072,799
            )Research
                and development expenses
            
            
            (1,651,402
            )
            
            (522,180
            )
            
            (2,265,832
            )
            
            (977,297
            )
            
            (4,374,486
            )Loss
                on investment in joint venture
            
            
            (836,944
            )
            
            -
            
            
            (837,720
            )
            
            -
            
            
            (837,720
            )Loss
                on disposal of asset
            
            
            (423
            )
            
            -
            
            
            (423
            )
            
            -
            
            
            (222,134
            )Loss
                on impairment of asset
            
            
            -
            
            
            -
            
            
            -
            
            
            (233,900
            )
            
            (233,900
            )Total
                operating expenses
            
            
            (7,121,592
            )
            
            (1,969,543
            )
            
            (11,211,508
            )
            
            (3,878,585
            )
            
            (41,741,039
            )Loss
                from operations
            
            
            (7,121,592
            )
            
            (1,969,543
            )
            
            (11,211,508
            )
            
            (3,878,585
            )
            
            (41,698,072
            )**Other
                income (expense)**Interest
                income
            
            
            194,440
            
            
            54,576
            
            
            247,533
            
            
            93,954
            
            
            498,132Interest
                expense
            
            
            (114,947
            )
            
            (79,213
            )
            
            (240,146
            )
            
            (149,963
            )
            
            (984,066
            )Late
                registration fees
            
            
            -
            
            
            (322,240
            )
            
            -
            
            
            (760,240
            )
            
            (760,240
            )Loss
                before taxes
            
            
            (7,042,099
            )
            
            (2,316,420
            )
            
            (11,204,121
            )
            
            (4,694,834
            )
            
            (42,944,246
            )Income
                tax benefit (provision)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -**Net
                loss**
            
            $
            (7,042,099
            )
            $
            (2,316,420
            )
            $
            (11,204,121
            )
            $
            (4,694,834
            )
            $
            (42,944,246
            )**Other
                comprehensive income (loss)**Foreign
                currency translation loss
            
            
            (4,091
            )
            
            -
            
            
            (4,091
            )
            
            -
            
            
            (4,091
            )**Net
                comprehensive loss**
            
            $
            (7,046,190
            )
            $
            (2,316,420
            )
            $
            (11,208,212
            )
            $
            (4,694,834
            )
            $
            (42,948,337
            )Loss
                per share - basic and diluted
            
            $
            (0.10
            )
            $
            (0.04
            )
            $
            (0.16
            )
            $
            (0.08
            )
            $
            (1.07
            )Weighted
                average shares - basic and diluted
            
            
            72,520,910
            
            
            56,627,718
            
            
            68,937,781
            
            
            56,578,552
            
            
            40,256,027








The
      Accompanying Notes are an Integral Part of the Financial
      Statements


2


SULPHCO,
      INC.


(A
      Company in the Development Stage)


STATEMENTS
      OF CASH FLOWS


For
      the
      Six Months ended June 30, 2006 and 2005 and from Inception


(unaudited)


**Six
                Months Ended**
              **June
                30**
            
            **Inception****2006**
            
            **2005**
            
            **to
                date****Cash
                Flows From Operating Activities**Net
                loss
            
            $
            (11,204,121
            )
            $
            (4,694,834
            )
            $
            (42,944,246
            )Adjustments
                to reconcile net loss to cash used in
                operating activities:Depreciation
                & amortization
            
            
            123,039
            
            
            107,512
            
            
            1,008,405Stock
                issued for services
            
            
            1,983,550
            
            
            1,091,500
            
            
            9,353,067Stock
                issued for interest expense
            
            
            -
            
            
            -
            
            
            296,000Contribution
                from stockholder
            
            
            -
            
            
            -
            
            
            555,000Loss
                from joint venture
            
            
            837,720
            
            
            -
            
            
            837,720Losses
                on disposal and impairment of assets
            
            
            423
            
            
            233,900
            
            
            456,034(Increase)
                decrease in receivables
            
            
            (3,384
            )
            
            317,800
            
            
            (3,384
            )(Increase)
                decrease in prepaid expenses
            
            
            39,376
            
            
            12,806
            
            
            (98,201
            )Increase
                  (decrease) in accounts payable and accrued
                  liabilities
            
            
            1,684,991
            
            
            (320,517
            )
            
            2,464,404Increase
                in refundable deposit
            
            
            -
            
            
            500,000
            
            
            550,000Increase
                in accrued fees and interest
            
            
            79,811
            
            
            760,240
            
            
            900,796Net
                cash used in operating activities
            
            
            (6,458,595
            )
            
            (1,991,593
            )
            
            (26,624,405
            )**Cash
                Flows From Investing Activities**Advances
                for loan receivable
            
            
            (200,000
            )
            
            -
            
            
            (200,000
            )Purchase
                of property and equipment
            
            
            (40,298
            )
            
            (238,186
            )
            
            (1,161,386
            )Investment
                in construction-in-progress
            
            
            (14,941,501
            )
            
            
            
            
            (14,941,501
            )Investments
                in joint ventures and subsidiaries
            
            
            (1,650,000
            )
            
            -
            
            
            (2,011,261
            )Return
                (payment) of deposits
            
            
            92,150
            
            
            10,000
            
            
            (48,672
            )Investments
                in intangible assets
            
            
            (103,602
            )
            
            (125,982
            )
            
            (492,084
            )Net
                cash used in investing activities
            
            
            (16,843,251
            )
            
            (354,168
            )
            
            (18,854,904
            )**Cash
                Flows from Financing Activities**Net
                proceeds from issuance of stock
            
            
            35,237,353
            
            
            -
            
            
            50,999,109Proceeds
                from stock subscriptions
            
            
            -
            
            
            -
            
            
            4,240,887Proceeds
                from issuance of related party notes payable
            
            
            -
            
            
            -
            
            
            11,000,000Proceeds
                from issuance of line of credit
            
            
            -
            
            
            -
            
            
            750,000Return
                on capital
            
            
            -
            
            
            -
            
            
            (118,427
            )Principal
                payments on related party notes payable
            
            
            (2,500,000
            )
            
            -
            
            
            (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
            
            
            32,737,353
            
            
            -
            
            
            61,789,469Net
                increase (decrease) in cash and cash equivalents
            
            
            9,435,507
            
            
            (2,345,761
            )
            
            16,310,160Cash
                and cash equivalents at beginning of period
            
            
            6,874,653
            
            
            9,872,839
            
            
            -Cash
                and cash equivalents at end of period
            
            $
            16,310,160
            
            $
            7,527,078
            
            $
            16,310,160**Supplemental
                Information and non cash transactions**Total
                interest payments included in operations
            
            $
            160,335
            
            $
            149,963The
                Company paid no income taxes during the three months ended June 30,
                2006
                and 2005.The
                Company had the following noncash investing and financing activities
                in
                2006:Incurred
                fees payable for issuing securities
            
            $
            330,098Issued
                stock in exchange for a payable
            
            
            330,215Issued
                stock and options for construction-in-progress
            
            
            487,725Incurred
                payables for construction-in-progress
            
            
            451,829Incurred
                a payable for intangible assets
            
            
            5,607








The
      Accompanying Notes are an Integral Part of the Financial
      Statements





3


**SULPHCO,
      INC.**


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


NOTES
      TO THE INTERIM FINANCIAL STATEMENTS


June
      30,
      2006 (unaudited)





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




The
      accompanying unaudited interim financial statements of Sulphco, Inc., (the
      “Company”) have been prepared by the Company in accordance with generally
      accepted accounting principles for interim financial statements in the United
      States of America, pursuant to the Securities and Exchange Commission rules
      and
      regulations. In management’s opinion, all adjustments necessary for a fair
      presentation of the results for the interim periods have been reflected in
      the
      interim financial statements. The results of operations for any interim period
      are not necessarily indicative of the results for a full year. All adjustments
      to the financial statements are of a normal recurring nature.





Certain
      information and footnote disclosures normally included in audited financial
      statements prepared in accordance with generally accepted accounting principles
      for audited financial statements have been condensed or omitted. Such
      disclosures are those that would substantially duplicate information contained
      in the most recent audited financial statements of the Company, such as recent
      accounting pronouncements. Management presumes that users of the interim
      statements have read or have access to the audited financial statements and
      notes thereto included in the Company’s most recent annual report on Form
      10-KSB.





**Reclassification**





For
      comparative purposes, certain amounts previously included in selling, general
      and administrative expenses have been reclassified to research and development
      expenses for prior periods from the beginning of 2005. The reclassifications
      do
      not require any adjustments to assets, liabilities, equity, or
      income.





The
      following summarizes the reclassifications made:





Quarter
                ended
            
            March,
              2005
            
            June,
              2005
            
            September,
              2005
            
            December,
              2005
            
            March,
              2006Sales,
                general, & administrative expensesand depreciationOriginal
                filing
            
            $
            1,478,634
            
            $
            1,723,424
            
            $
            1,109,738
            
            $
            2,479,202
            
            $
            3,770,144Reclassifications
            
            
            -258,609
            
            
            -276,061
            
            
            -275,196
            
            
            -266,053
            
            
            -294,658Reclassified
            
            $
            1,220,025
            
            $
            1,447,363
            
            $
            834,542
            
            $
            2,213,149
            
            $
            3,474,710Research
                & developmentOriginal
                filing
            
            $
            141,515
            
            $
            246,119
            
            $
            655,188
            
            $
            399,274
            
            $
            219,771Reclassifications
            
            
            258,609
            
            
            276,061
            
            
            275,196
            
            
            266,053
            
            
            294,658Reclassified
            
            $
            400,124
            
            $
            522,180
            
            $
            930,384
            
            $
            665,327
            
            $
            514,429





4





**2.** **Loan
      and Receivable and Accrued Interest**





On
      February 16, 2006 the Company committed to a loan agreement with SulphCo KorAsia
      (formerly known as OIL-SC, Ltd.) of South Korea. The agreement called for
      advances of $50,000 per month through May 15, 2006. A total of $150,000 was
      advanced through May, 2006. An additional $50,000 was advanced June 6, 2006,
      with a revision to the loan agreement that the full $200,000 in advances and
      related interest would be immediately repaid from revenues or from proceeds
      of
      any equity financings. Interest accrues at Prime rate plus 1%. Although SulphCo
      KorAsia has never had material revenue streams, the Company believes that the
      full amounts of principal and interest will be collected and that no allowance
      for doubtful collection is necessary.








**3.** **Prepaid
      Expenses**





Prepaid
      expenses include $46,152 in prepaid insurance, which is amortized over the
      duration of the policies, and a $40,000 payment to RWG, Inc. for July 2006
      pursuant to the consulting agreement as specified in Note 12. The insurance
      policies expire in 2006 and 2007.






**4.** **Property
      and Equipment**





Property
      and equipment includes construction-in-progress totaling $15,881,055 for
      equipment to be utilized in Fujairah (see Note 5). It is the Company's belief
      that it will hold such equipment as an asset separate from Fujairah Oil
      Technology, LLC.




The
      following is a summary of property, plant, and equipment - at cost, less
      accumulated depreciation:






**June
                30, 2006**
            
            **December
                31, 2005**Equipment
            
            $
            923,884
            
            $
            911,438Computers
            
            
            199,582
            
            
            176,226Office
                furniture
            
            
            57,116
            
            
            54,517Leasehold
                improvements
            
            
            83,375
            
            
            83,375Construction-in-progress
            
            
            15,881,055
            
            
            -17,145,012
            
            
            1,225,556Less:
                Accumulated depreciation
            
            
            (936,818
            )
            
            (828,140
            )Total
            
            $
            16,208,194
            
            $
            397,416





Depreciation
      expense was $51,033 and $108,678 for the three and six ended June 30, 2006,
      respectively, and $59,642 and $101,563 for the three and six months ended June
      30, 2005, respectively.




5




**5.** **Investment
      in Joint Venture**





In
      November 2005 the Company and Trans Gulf Petroleum Co., a Government of Fujairah
      company, formed Fujairah Oil Technology LLC (“LLC”), a United Arab Emirates
      limited liability company, to implement the Company’s SonocrackingTM
desulfurization technology. The LLC is 50% owned by Trans Gulf Petroleum and
      50%
      owned by SulphCo, Inc. Fujairah is one of the seven Emirates of the United
      Arab
      Emirates.





The
      formation agreement called for each shareholder to contribute 500,000 Dirhams
      for a 50% ownership in the LLC. On December 14, 2005, the Company wired to
      the
      LLC its 500,000 Dirhams, which equaled $139,550. The 50% contribution by Trans
      Gulf Petroleum was received by the LLC in January, 2006.





The
      LLC’s
      operations began in 2006. In the six months ended June 30, 2006 its financial
      activities consisted primarily of leasing office space and acquiring leasehold
      improvements and office furniture and equipment. The lease commenced March
      15,
      2006. There was a loss of 93,466 Dirhams of which 50% (US $12,720) has been
      reflected by the Company.





The
      Company entered into an agreement to construct a building for $1.6 million
      for
      the LLC operations. Subsequently the building plans were expanded requiring
      an
      additional $600,000 for construction. The Company has paid $1.65 million to
      the
      construction company. Although it is anticipated that the cost of the building
      will be borne by the LLC, as there is no agreement currently in place the
      Company is treating 50% of its contributions for the building construction,
      $825,000, as a loss from the investment. This amount has been included in loss
      on investment in joint venture.





The
      Company’s 50% share of distributions made by the joint venture will also be
      subject to other costs and expenses incurred directly by the Company from time
      to time, including commissions payable directly by the Company to third parties,
      presently estimated at up to 20% of the Company’s net joint venture
      profits.





As
      of
      June 30, 2006, and for the six months then ended, the LLC had the following
      condensed balance sheet and operating statement converted to US
      dollars:





Condensed
                Balance Sheet, June 30, 2006:Current
                assets
            
            $
            132,377Construction
                in progress and leasehold improvements (net)
            
            
            1,761,469Other
                assets
            
            
            1,633Total
                assets
            
            $
            1,895,479Liabilities
            
            $
            -0-Members’
                equity
            
            $
            1,895,479Operating
                Statement, Six Months Ended June 30, 2006:Revenue
            
            $
            -0-Operating
                expenses
            
            $
            (25,440
            )Net
                loss
            
            $
            (25,440
            )




A
      foreign
      currency translation loss of $4,091 has also been recognized as other
      comprehensive loss relative to this investment.








6




**6.** **Deposits**





The
      Company had the following deposits as of June 30, 2006: $36,822 on the lease
      of
      facilities in Nevada, and $11,850 for architectural design of future office
      space in Nevada.






**7.** **Note
      Payable**





The
      Company’s note payable as of June 30, 2006 is as follows:





On
      December 31, 2004, under the Board’s approval, the Company borrowed $7,000,000
      in the form of a long-term note from the Chairman and CEO. Interest on the
      note
      is adjusted quarterly based on a London Inter-Bank Offering Rate (“LIBOR”) plus
      0.5% per annum, with payments due on December 31 of 2005, and 2006, and the
      remaining accrued interest and principal due on December 31, 2007 when the
      note
      matures. On May 15, 2006, under Board approval, the Company paid $2,000,000
      in
      principal on the note. Also the accrued interest through May 15, 2006 of
      $133,809 was paid. As of June 30, 2006, interest payable of $20,057 has been
      accrued on this note at the adjusted rate for the quarter of 5.32563%. Beginning
      July 1, 2006 the rate was adjusted to 5.84625%.








**8.** **Capital
      Stock**





Other
      than the related party transactions disclosed in Note 12 and the compensation
      transactions disclosed in Note 10, the Company had the following transactions
      related to its common stock during the six months ended June 30,
      2006:





Additional
      Investment Rights and Warrants for 7,866,612 shares were exercised in 2006
      through March 31, generating $8,531,858. These rights and warrants relate to
      a
      June 2004 private placement.





On
      March
      29, 2006, the Company completed a private placement to a small number of
      accredited investors for the sale of 4,000,000 units, each unit consisting
      of
      one share of the Company’s common stock and one warrant to purchase a share of
      common stock. Each unit was sold at a price of $6.805 per share, resulting
      in
      gross proceeds at closing of $27.2million. The warrants are exercisable, in
      whole or in part, at a fixed price equal to $6.805 per share, and are
      exercisable for a period of 18 months following their issuance. The Company
      filed a registration statement with the SEC covering the resale of the shares
      of
      common stock issued at closing and shares issuable upon exercise of warrants.
      The registration statement was declared effective by the SEC on June 23,
      2006.





A
      fee of
      $100,000 was paid to an unrelated third party in consideration of introducing
      an
      investor to the Company relative to the March 29, 2006 placement. This amount
      was reflected as a reduction of the proceeds.





The
      Company is obligated to pay $760,240 in late registration fees due to the
      registration statement related to a private placement in June of 2004 not having
      become effective on time, as per the agreement with the investors. The agreement
      requires the Company to pay late registration fees to the selling security
      holders at the rate of 2% per month of the invested amount if the registration
      covering the placement shares is not declared effective by the SEC within 90
      days of the date of the investment. As of March 31, 2006, the full amount of
      fees has been accrued plus $120,499 of accrued interest at 18% per annum on
      the
      balance of unpaid fees since the registration date. The registration statement
      was declared effective by the SEC on June 27, 2005.





7





**9.** **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 stock options and unvested
      shares of restricted stock. Options to purchase 7,260,390 and 10,133,106 shares
      of common stock were not included in the June 30, 2006 and 2005
      computations of diluted net loss per share, respectively, because inclusion
      of
      such shares would have an anti-dilutive effect on net loss per
      share.







**10.** **Stock
      Plans and Share-Based Compensation**





The
      Company records compensation in the form of grants of common stock and options
      for common stock at fair value in accordance with the Statement of Financial
      Accounting Standards No. 123 R.





Effective
      January 1, 2006 in consideration of Michael Applegate’s agreement to join the
      Company as Chief Operating Officer, he was granted 50,000 shares of the
      Company’s common stock valued at $636,000 or $12.72 per share, the closing value
      on January 3, 2006, the first trading day after the effective date of the
      contract. This grant vested at the end of the 90 day period beginning January
      1,
      2006, thus is an expense for the first quarter of 2006.





In
      February 2006 the Company granted to Michael Heffner 50,000 restricted shares
      of
      common stock valued at $8.80 per share, the closing price on February 6, 2006,
      the effective date of his appointment to the Board of Directors, for services
      valued at $440,000.





Effective
      February 1, 2006, the Company entered into a consulting agreement with Thomas
      J.
      Nardi to provide engineering-construction consulting services on a
      month-to-month basis.  The consulting agreement provides that for each
      month the consulting agreement is in effect, Mr. Nardi will receive options
      to
      purchase 1,000 shares of our common stock, exercisable within one year, at
      an
      exercise price of $7.00 per share. During the quarter ended March 31, 2006,
      Mr.
      Nardi earned options to purchase 2,000 shares at $7.00 per share under this
      agreement. The fair value of these options totaled $8,050 based on the
      Black-Scholes valuation model using the assumptions described below.





On
      March
      29, 2006 the Company entered into a contract with Mustang International, L.P.
      (“Mustang”) for program management, engineering, procurement, construction
      management, and other services to be performed. Initially it will oversee
      engineering and construction for the project in Fujairah, United Arab Emirates.
      Its fee for these services includes stock grants and options as follows: (i)
      17,500 of the Company’s shares of common stock, with a provision for
      reimbursement to the Company by Mustang of the value of the grant if the
      contract is terminated by Mustang, and (ii) options to acquire 52,500 shares
      of
      the Company’s common stock at $6.00 per share, exercisable by April 1, 2010. The
      value of these services is included in plant and equipment as
      construction-in-progress. The 17,500 shares are valued at the $7.44 closing
      price on March 29, 2006, or $130,200. The options were valued at $357,525 based
      on the Black-Scholes valuation model using the assumptions described
      below.





On
      June
      19, 2006 the stockholders of the Company approved the 2006 Stock Option Plan
      (“Plan”), which authorizes the granting of options for up to 2,000,000 shares of
      the Company’s common stock. The Plan is administered by an Option Committee
      comprised of three independent directors. Effective May 23, 2006, subject to
      stockholder approval of the Plan, the Option Committee granted an option for
      125,000 shares to Vice Chairman of the Board Robert van Maasdijk and an option
      for 1 million shares to Chairman and CEO Rudolf Gunnerman. Each option has
      a
      term of three years and an exercise price of $9.03 per share.





8




Robert
      van Maasdijk’s option was valued at $687,500 based on the Black-Scholes
      valuation model using the assumptions described below.





Dr.
      Gunnerman’s option provides that he may not exercise the options unless the
      Company has reported at least $50 million in annual revenues or there is a
      “change in control” of the Company as defined in the Plan. This option was
      valued at $5.5 million based on the Black-Scholes valuation model using the
      assumptions described below. For purposes of determining the period over which
      this option will be expensed, the Company has made the assumption that it will
      generate at least $50 million in revenue by the end of the first quarter of
      2007. Therefore, the option value is being expensed pro-rata over the period
      from the effective grant date of June 19, 2006, to March 31, 2007, the implicit
      vesting period, causing $212,000 to be expensed in the second quarter of 2006.
      The timing and amount of revenues generated by the Company is subject to various
      risks and uncertainties. For further information regarding risks and
      uncertainties, please refer to the other information in this Report together
      with previous reports on Form 10-KSB for the year ended December 31, 2005,
      and
      Form 10-Q for the quarter ended March 31, 2006.





The
      following table describes the assumptions used in the Black-Scholes
      calculations:





Nardi
            
            Nardi
            
            Mustang
            
            Gunnerman
                &
              van
                MaasdijkDate
                of option
            2/28/2006
            
            3/31/2006
            
            3/29/2006
            
            6/19/2006Term
            One
                year
            
            One
                year
            
            to
                4/1/2010
            
            to
                5/22/2009Expected
                volatility (based uponcalculated
                historical volatility of stock over the same term)
            131%
            
            129%
            
            162%
            
            147%Expected
                dividends
            None
            
            None
            
            None
            
            NoneRisk-free
                interest rate
            5%
            
            5%
            
            5%
            
            5.2%Discount
                for post-vesting restrictions
            None
            
            None
            
            None
            
            None






**11.** **Commitments
      and Contingencies**





Financial
      instruments, which potentially subject the Company to concentrations of credit
      risk, consist mainly of cash equivalents. The Company maintains amounts in
      three
      U.S. accounts, two checking accounts and a money market account on deposit
      with
      two financial institutions, which exceed federally insured limits by
      approximately $16 million at June 30, 2006, and an account in Saudi Arabia.
      The
      Company has not experienced any significant losses in such accounts, nor does
      management believe it is exposed to any significant credit risk.





At
      June
      30, 2006 the Company has a $550,000 refundable deposit in connection with an
      agreement with KorAsia (formerly OIL-SC) for a pilot plant in South Korea.
      Until
      KorAsia accepts in writing the results of the pilot plant, the $550,000 is
      refundable at their option. The Company has agreed to receive the remaining
      payment of $450,000 within seven days after the first commercial license
      agreement for the SonocrackingTM technology between the Company and a Korean
      refining company, provided that KorAsia uses the funds for continued marketing
      activities regarding the Sonocracking technology in Korea.




9





The
      Company has committed to spend approximately $20 million for the production
      of
      equipment for the Fujairah project. Through June 30, 2006 $15.9 million has
      been
      incurred. The Company expects these processors will be operational prior to
      December 31, 2006, and has included their costs in property and equipment
      construction-in-progress.





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 at June 30,
      2006, 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.








**12.** **Related
      Party Transactions**





Under
      agreements entered into on July 1, 2004, and July 1, 2005, the Company was
      obligated to pay a consulting fee of $480,000 annually to RWG, Inc., a company
      wholly owned by Dr. Rudolf Gunnerman, the Chairman and CEO. Effective November
      1, 2004, this amount was reduced by mutual agreement from $40,000 to $30,000
      per
      month until the Company received substantial additional funds. On May 8, 2006,
      the Company’s Board of Directors approved the reinstatement of RWG, Inc.’s
      consulting fees to $40,000 per month effective April 1, 2006. Under the
      agreement $90,000 and $120,000, respectively, were paid during the first and
      second quarters of 2006. The agreement terminated on July 1, 2006, and on July
      5, 2006 the Board of Directors approved a new agreement effective July 1, 2006,
      wherein the Company is obligated to pay RWG, Inc. $40,000 per month through
      June
      30, 2007. Under the new agreement, RWG, Inc. is also entitled to receive amounts
      it previously waived under prior engagement agreements, totaling $170,000.
      This
      was paid in June, 2006.





See
      Note
      10 for share-based payments to Michael Applegate, an officer, and Michael
      Heffner, a director.




Dr.
      Rudolf Gunnerman personally granted to Mr. Kirk Schumacher, upon his termination
      December 28, 2004, an option to acquire 100,000 shares of the Company’s Common
      Stock owned by Dr. Gunnerman at an exercise price of $0.55 per share. Those
      100,000 options were exercised in February 2006. As Dr. Gunnerman is the
      Chairman, CEO, and controlling shareholder of the Company, the Company
      recognized an expense in 2004 of $555,000, the difference between the exercise
      price of the option and the market price on the date of grant, on December
      28,
      2004. Mr. Schumacher takes the position that the options received in 2004 were
      not for compensation for tax purposes.  The Company is maintaining an
      accrued liability for payroll taxes until it is reasonably certain of its
      position.




The
      Company had a consulting agreement with Peak One Consulting, Inc., a company
      owned 100% by a Director Richard Masica, which was paid $29,711 in fees for
      management and technical consulting and reimbursed $2,784 in travel related
      expenses in the first half of 2006.





The
      Company had a consulting arrangement with a Director Michael Heffner who was
      paid $5,216 in travel related expense reimbursements and $48,871 in technical
      consulting fees which were accrued in the first half of 2006.





The
      Company had a short-term note payable due to the Chairman and CEO Dr. Rudolf
      Gunnerman in the amount of $500,000. The note carried an annual interest rate
      of
      8%, payable quarterly, and matured on the earlier of December 30, 2006, or
      upon
      the demand of Dr. Gunnerman. The note was paid in full on May 15, 2006. Interest
      of $10,000 was paid for the first quarter of 2006 and $5,000 for the second
      quarter when paid in full.





See
      Note
      7 for other related party debt and interest.








10


**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. We anticipate generating
      material revenue on a sustained basis beginning late in 2006 when we have
      successfully commercialized our SonocrackingTM technology. When we emerge from the development stage, our reporting will change
      to reflect costs of sales against revenues. As revenue increases and prior
      tax
      losses are offset, the deferred tax estimate will require revision.





In
      2005 we received $550,000 from SulphCo KorAsia (formerly known as OIL-SC, Ltd.),
      pursuant to our Equipment Sale and Marketing Agreement. As this amount is fully
      refundable if the pilot plant does not meet the agreed specifications, no
      portion of the purchase price has been or will be recorded as revenue in our
      financial statements until the pilot plant meets all agreed specifications.
      We
      do not have an equity interest in SulphCo KorAsia. In the first half of 2006,
      we
      loaned SulphCo KorAsia $200,000 repayable when they receive income
      or  from
      proceeds of any equity financings. Interest accrues at Prime rate plus 1% on
      this loan.




***Three
      and six months ended June 30, 2006 compared to the three and six months ended
      June 30, 2005***





**Research
      and Development Expenses**




For
      the
      three and six months ended June 30, 2006, we incurred approximately $1.7 million
      and $2.3 million, respectively, related to research and development of our
      SonocrackingTM technology. This compares to approximately $500,000 and $1 million
      for the three and six months ended June 30, 2005, respectively. Approximately
      $1.1 million in construction of a testing unit to be utilized in Austria was
      expensed in the second quarter of 2006 which reflects the greatest portion
      of
      these increases.




For
      the
      three and six months ended June 30, 2006, approximately $183,000 and $395,000,
      respectively, represents amounts paid to our engineers and other research and
      development employees as wages and related benefits and for design and testing
      of our SonocrackerTM units. For those periods approximately $66,000 and $129,000,
      respectively, were incurred for the procurement of control panels, probes,
      centrifuges, and generators related to the ongoing research and development
      of
      our units. The remainder of our research and development costs are recurring
      monthly expenses related to the maintenance of our warehouse
      facilities.




We
      expect
      our research and development expenses to continue at their current level until
      we successfully transition into generating sustained revenue. Thereafter,
      research and development will continue as needed to enhance our technology.





**Selling,
      General and Administrative Expenses**




For
      the
      three and six months ended June 30, 2006, we incurred approximately $4,633,000
      and $8,108,000, respectively, in selling, general and administrative expenses.
      This compares to approximately $1,447,000 and $2,667,000, respectively, for
      comparable periods in 2005 as reclassified (see note 1 of the financial
      statements).





11




Legal
      fees were approximately $2,139,000 and $3,274,000 for the three and six months
      ended June 30, 2006, respectively, reflecting increases over comparable periods
      in 2005 of approximately $1,961,000 and $2,995,000, respectively. These
      increases were primarily due to litigation fees relating to the discovery phase
      of lawsuits against us, which discovery was completed in the second quarter
      of
      2006. Although we expect to continue to incur significant litigation fees
      relating to these lawsuits through the end of 2006, we expect that the amounts
      should decrease.





Consulting
      fees, payroll and related expenses were approximately $1.14million and
      $2.45million for the three and six months ended June 30, 2006, respectively,
      reflecting increases over comparable periods in 2005 of approximately $688,000
      and $1,432,000, respectively. Salaries in the six month periods include grants
      of 50,000 shares to new officers, $636,000 in the first quarter of 2006 and
      $204,000 in the first quarter of 2005. In the second quarter of 2006, $212,000
      in stock option expense was incurred with related payroll taxes of approximately
      $10,000. Excluding the stock grants and options, our consulting fees, payroll
      and related expenses increased 102% and 97% for the respective periods which
      reflects the increased number and quality of our work force.





Travel
      and travel related expenses were approximately $278,000 and $558,000 for the
      three and six months ended June 30, 2006, respectively, reflecting increases
      over comparable periods in 2005 of approximately $171,000 and $346,000,
      respectively. These increases were due to meetings of the Board of Directors,
      meetings with the European manufacturers of our equipment, and meetings with
      our
      joint venture partner in Fujairah, United Arab Emirates.





Director
      fees were $687,500 and $1,127,500 for the three and six months ended June 30,
      2006, respectively, reflecting increases over comparable periods in 2005 of
      $226,500 and $393,000. Director fees in these periods represent grants to each
      new director of 50,000 shares each and a grant of options to Robert van
      Maasdijk, a director, in the second quarter of 2006. Specifically, in the first
      quarter of 2005, 50,000 shares valued at $273,500 were granted; in the second
      quarter of 2005, 100,000 shares valued at $461,000 were granted; in the first
      quarter of 2006, 50,000 shares valued at $440,000 were granted; and in the
      second quarter of 2006, options valued at $687,500 were granted to acquire
      125,000 shares.





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




**Interest
      Expense**




Interest
      expense was approximately $115,000 and $240,000 for the three and six months
      ended June 30, 2006, respectively, reflecting increases of approximately $36,000
      or 45% and $90,000 or 60%, respectively, over comparable periods in 2005. Of
      the
      increases, approximately $30,000 and $60,000, respectively, are due to the
      interest on the late registration (see “Late Registration” below). In addition,
      the interest rate on our $7 million note payable to Dr. Rudolf Gunnerman
      increased in both the first and second quarters of 2006 as it is indexed to
      a
      LIBOR rate. $2.5 million of debt principal was paid to Dr. Gunnerman in the
      second quarter of 2006, which will reduce interest expense in the future. If
      no
      decrease or increase in debt occurs in the third quarter, interest expense
      for
      that quarter will be approximately $103,000.




12





**Late
      Registration**




In
      accordance with the terms of our 2004 private placement, we accrued late fees
      of
      approximately $760,000, during the first two quarters of 2005, due to a delay
      in
      the effective date of our registration statement filed with the SEC. Our
      registration statement was declared effective by the SEC in June 2005.
      Accordingly, we have not accrued any such amounts for 2006 other than interest
      of approximately $60,000
      ($30,000 per quarter) which accrues on the unpaid amount at the rate of 18%
      per
      annum. However,
      as of the date of this report no formal demands have been made by investors
      to
      pay these fees.




**Depreciation
      and Amortization**




For the three and six months ended June 30, 2006, exclusive of
      construction-in-progress, we expended approximately $35,000 and $144,000,
      respectively, for equipment and to maintain exclusivity for the sale and/or
      licensing of our SonocrackingTM technology in the United States and abroad. Our
      depreciation and amortization expense related to these additions, and to our
      previously capitalized equipment and rights, for the three and six months ended
      June 30, 2006 were approximately $60,000, and $123,000, respectively, reflecting
      a decrease relative to the comparable three month period in 2005 of
      approximately $3,000 or 5% and an increase over the comparable six month period
      in 2005 of approximately $16,000 or 14%. We expect to continue our pursuit
      of
      exclusive distribution and licensing of our technology and purchasing equipment
      for the manufacture and upgrading of our Sonocracking technology.




**Loss
      on Impairment of Asset**




In
      accordance with SFAS No. 144 *Accounting
      for the Impairment or Disposal of Long Lived Assets* we
      determined in the first quarter of 2005 that a previously capitalized prototype
      no longer reflected the value of our commercially viable technology, resulting
      in an impairment loss of approximately $234,000. There was no comparable item
      either in the second quarter of 2005 or in the first two quarters of
      2006.




**Net
      Loss**




We
      incurred net losses of approximately $7.0 million and $11.2 million for the
      three and six month periods ending June 30, 2006, respectively, compared to
      approximately $2.4 million and $4.7 million, respectively, for comparable
      periods in 2005. These increases in net loss in the 2006 periods primarily
      reflect increases in selling, general, and administrative expenses and in
      research and development expenses in 2006, and the absence in these periods
      of
      late registration fees, and for the six month period the absence of loss on
      impairment of asset.




**Liquidity
      and Capital Resources**




As
      of
      June 30, 2006 we had approximately $16.3 million in available cash reserves,
      which includes funds received from the March 2006 private placement described
      below under “Recent Financing Activities.”




In
      December 2005 we formed Fujairah Oil Technology, LLC, a 50/50 joint venture
      with
      the Government of Fujairah, one of the United Arab Emirates. Under the terms
      of
      the joint venture SulphCo is respons ible
      for
      contributing its Sonocracking unit, and operation and maintenance of the
      Fujairah facility is the responsibility of the joint venture. Our present
      timetable calls for commercial operation to begin in the fourth quarter of
      2006.
      Until Fujairah Oil Technology, LLC generates revenues, operating expenses of
      the
      Fujairah Sonocracking facility, estimated initially at $800,000 per month,
      are
      expected to be funded from capital contributions of the partners.




We
      expect that following the successful rollout of the 210,000 bbl/day facility,
      funding of direct expenditures by SulphCo for equipment will be available from
      joint venture cash distributions.




13





During
      the first two quarters of 2006 we incurred approximately $17.6 million of
      expenditures relating to the startup of the Fujairah facility, including $15.9
      million related to the construction of Sonocracking equipment and $1.7 million
      relating to building and infrastructure. We expect to incur approximately an
      additional $4 million in 2006 in connection with the fabrication and
      installation of our Sonocracking equipment and completion of the infrastructure
      associated with the 210,000 bb/day facility.





We
      expect
      that the majority of the facility construction activities will be completed
      by
      the end of August 2006, and that onsite assembly and installation of
      Sonocracking equipment will begin in August 2006 and will be substantially
      completed in September 2006. Commencement of initial commercial production
      is
      targeted for the fourth quarter of 2006, following commissioning and
      testing. Commencement of commercial production activities will require that
      Fujairah Oil Technology, LLC first finalize and implement arrangements for
      the
      construction of a pipeline from the storage tanks to the Fujairah Oil
      Technology, LLC facility, as well as arrangements for oil storage, purchase
      and
      sale. Delays in finalizing and implementing these arrangements could affect
      the
      overall project timing.





Due
      to
      the inherent complexities involved in the installation of a facility of this
      magnitude, and because the Fujairah facility will be the first commercial
      installation of its kind utilizing our Sonocracking technology, there may be
      delays in our current timetable, which will in turn affect the timing and
      availability of revenues. In addition, future costs and expenses are estimates,
      and therefore our costs may vary significantly from current
      estimates.





We
      anticipate that our existing capital resources will be sufficient to fund our
      cash requirements through June, 2007 from cash presently on hand, based upon
      our
      expected levels of expenditures and anticipated needs during this period. We
      expect attorney fees to be reduced substantially, and we expect to reduce our
      expenditures for research and development. The extent and timing of our future
      capital requirements will depend primarily upon the rate of our progress in
      the
      commercialization of our technologies, including the successful implementation
      of our venture with Fujairah Oil Technology, LLC and other third parties, and
      the timing of future customer orders. Potential sources of additional working
      capital include future revenues, debt and equity financings, and proceeds from
      future exercises of outstanding warrants and options. Presently 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.





***Recent
      Financing Activities***





On
      March
      29, 2006, we completed a private placement to a small number of accredited
      investors for the sale of 4,000,000 units, each unit consisting of one share
      of
      the Company’s Common Stock and one Warrant to purchase a share of Common Stock.
      Each unit was sold at a price of $6.805 per share, resulting in gross proceeds
      at closing of $27.2 million. The Warrants are exercisable, in whole or in part,
      at a fixed price equal to $6.805 per share, and are exercisable for a period
      of
      18 months following their issuance. Up
      to an
      additional $27.2 million may be generated upon exercise of warrants by these
      investors. On June 23, 2006 the SEC approved a registration for the resale of the common stock acquired by these
      investors.





In
      2004
      we conducted two private placements with institutional and other third party
      investors for the sale of units consisting of our common stock, warrants, and
      rights to acquire additional stock and warrants, generating net cash proceeds
      of
      approximately $4.6 million. An additional amount of approximately $3.8 million
      was generated in 2005, approximately $7.8 million was generated in the first
      quarter of 2006 from the exercise of outstanding rights and warrants, and up
      to
      approximately $2.6 million may be generated in the future if investors in the
      June 2004 private placements exercise all of the remaining warrants.




14





In
      December 2004 Dr. Gunnerman advanced $7 million to us as a loan. The loan is
      evidenced by a promissory note which bears interest at the rate of 0.5% above
      the 30 day “LIBOR” rate, adjusted quarterly and payable annually,
      and the entire principal amount is due and payable in December 2007. In April,
      2006 we repaid $2 million of loan principal.





**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 and Form 10-Q/A for the quarter ended March 31, 2006, this report 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
      (“EDGAR”) at http://www.sec.gov .








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





Not
      applicable.




15





**Item
      4. Controls and Procedures**





We
      maintain disclosure controls and procedures designed to ensure that information
      required to be disclosed in reports filed under the Securities Exchange Act
      of
      1934, as amended, is recorded, processed, summarized and reported within the
      specified time periods and that such information is accumulated and communicated
      to management to allow timely decisions on required disclosure . As of
      the end of the period covered by this report, our management evaluated, with
      the
      participation of our Chief Executive Officer and Chief Financial Officer, the
      effectiveness of our disclosure controls and procedures. Based on the
      evaluation, our Chief Executive Officer and Chief Financial Officer concluded
      that our disclosure controls and procedures were effective as of the end of
      the
      period.





There
      has
      been no change in our internal controls over financial reporting during the
      quarter ended June 30, 2006 that has materially affected, or is reasonably
      likely to materially affect, our internal controls over financial reporting,
      except as follows. At the end of M arch,
      2006 we began and since such time have subsequently completed, written policies
      for all areas wherein material weaknesses in disclosure controls and procedures
      had been identified. These were submitted for review by management to the Audit
      Committee and the Company’s registered public accounting firm  in
      May,
      2006. The accounting staff has been apprised of these policies and the Chief
      Financial Officer has been charged with assigning specific tasks to accounting
      personnel to execute such policies. In June, 2006 we also developed a timetable
      for conforming to section 404 of the Sarbanes-Oxley Act within the timeframe
      allowed by the SEC.


16


**PART
      II. OTHER INFORMATION**





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





No
      legal
      proceedings have been instituted against the Company during the three months
      ended June 30, 2006. Except as described below, during the three months ended
      June 30, 2006, there have been no material developments in litigation previously
      reported in the Company’s Form 10-KSB for the year ended December 31, 2005. The
      Company believes that these cases are wholly without merit and will continue
      to
      vigorously defend itself in these matters. However, an adverse outcome may
      have
      a materially adverse effect on our financial condition or
      operations.





*Talisman
      Capital Talon Fund, Ltd. v. Rudolf Gunnerman and Sulphco, Inc* .; *Clean
      Fuels Technology v. Rudolf W. Gunnerman, Peter Gunnerman, RWG, Inc. and SulphCo,
      Inc.* As
      previously reported, on June 9, 2005, our company and our CEO, Rudolf Gunnerman,
      were named as defendants in two separate legal actions commenced in Reno,
      Nevada. Though the plaintiffs, factual allegations and theories of recovery
      asserted in the two cases are different, they both allege claims to intellectual
      property belonging to us, which claims we and the other named defendants regard
      as wholly without merit.





Discovery
      in both of these cases formally concluded on May 24, 2006. In June 2006 SulphCo
      filed comprehensive motions for summary judgment in both cases seeking dismissal
      of all counts in the complaints. The plaintiffs in these cases have filed
      cross-motions seeking summary judgment on some of the counts in their respective
      complaints. The parties are now awaiting a hearing on these summary judgment
      motions. A tentative trial date of December 4, 2006, has been set in the *Clean
      Fuels Technology* case. A
      trial date has not yet been set in the *Talisman* case.





*SulphCo,
      Inc. v. Alexander H. Walker, Jr. and Nevada Agency & Trust Company.* On
      January 5, 2004, we filed a lawsuit in the Second Judicial District Court for
      the State of Nevada, Case No. CV04-00013, against Alexander H. Walker, Jr.,
      our
      former general counsel and director, and Nevada Agency & Trust Company, our
      former transfer agent. The lawsuit alleges breaches of fiduciary duty, contract
      violations, conversion, and other related claims, in connection with the sale
      of
      shares of our common stock to Coldwater Capital, LLC and Mark Neuhaus in 2001.
      SulphCo claims it did not receive approximately $737,000 of the purchase price
      for the shares sold. The defendants have answered the complaint, generally
      denying the allegations and raising affirmative defenses, and cross-complaining
      against Coldwater Capital, LLC and Mark Neuhaus for the payment of the funds
      owed to SulphCo. We subsequently obtained an injunction requiring any proceeds
      of the sale of the SulphCo stock owned by Mr. Walker to be held by the court
      pending trial. This matter has been set for trial on December 4,
      2006.





*In
      The Matter of the Arbitration between Stan L. McLelland v. SulphCo, Inc.* On
      July
      12, 2005, Stan McLelland filed an arbitration demand against the Company before
      the American Arbitration Association. The demand alleges that Mr. McLelland
      was
      the Company’s president from August 13, 2001, until he resigned on September 12,
      2001. The demand seeks to exercise stock options that had not vested prior
      to
      Mr. McLelland’s resignation. Mr. McLelland also seeks salary for the six months
      following his resignation and $20,000 of alleged unpaid commuting expenses,
      as
      well as attorneys' fees and costs. Discovery
      is closed and both parties have filed motions for summary judgment on the
      options issues in July 2006, and a hearing on the motions is scheduled to take
      place on August 25, 2006. A trial date has not yet been set.




17





**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-Q as amended by Form
      10-Q/A for the period ended March 31, 2006 (“March 2006 Filings”). 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 March 2006 Filings. 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**





Not
      applicable.





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





Our
      2006
      Annual Meeting of Stockholders was held on June 19, 2006.  At the Annual
      Meeting each of our six nominees was elected to serve as a director until the
      next Annual Meeting of Stockholders and the SulphCo, Inc. 2006 Stock Option
      Plan
      was adopted.  The election results are as follows:





**Election
      of Six Directors:**





Name
            
            For
            
            WithheldDr.
                Rudolf W. Gunnerman
            
            39,820,834
            
            16,530Richard
                L. Masica
            
            39,820,834
            
            7,180Robert
                van Maasdijk
            
            39,820,534
            
            7,480Dr.
                Raad Alkadiri
            
            39,820,534
            
            7,480Dr.
                Hannes Farnleitner
            
            39,820,834
            
            7,180Christoph
                Henkel
            
            39,748,138
            
            7,480





**Adoption
      of 2006 Stock Option Plan:**





For
            
            Against
            
            Abstain39,726,624
            
            416,953
            
            12,667







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




31.1
              Certifications
                  pursuant to Rule 13a-14 under the Securities Exchange Act of
                  1934.31.2
              Certifications
                  pursuant to Rule 13a-14 under the Securities Exchange Act of
                  1934.32.1
              Certification
                  of CEO and CFO Pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to § 906
                  of the Sarbanes-Oxley Act of
                  2002.


18


**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: August
              14, 2006
            By:
            /s/ Rudolf
              W.
              GunnermanRudolf
                W. Gunnerman
              Chairman of the Board of Directors
              and Chief Executive
                Officer




Date: August
                14, 2006
              By:
              /s/ Loren
                J.
                KalmenLoren
                  J. Kalmen,
                Chief Financial Officer
                (Principal Financial and Accounting
                  Officer)


19