UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-KSB/A

Amendment No. 2

[X]
Annual Report  Under Section 13 or 15(d) of the Securities Exchange Act of
1934[   ]
Transition Report  Under  Section 13 or 15 (d) of the Securities Act of
1934




For the fiscal year ended December 31, 2003

Commission file number 0-27599

SULPHCO, INC.(Name of Small Business Issuer in its Charter)



|Nevada                                                             |  | 88-0224817                              
|------------------------------------------------------------------ |  | ----------------------------------------
|(State or other jurisdiction
    of incorporation or organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                   |  |                                         
|850 Spice Islands Drive, Sparks, NV                                |  | 89431                                   
|(Address of principal executive offices)                           |  | (Zip Code)                              

Issuer's Telephone number:   (775) 829-1310

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

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.001 Per Share

(Title of Class)

Check whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filings requirements for
the past 90 days. Yes [X] No [   ]

Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B is not contained in
this form, and no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated  by
reference in Part III of this Form 10-KSB or any amendment to the Form 10-KSB.
[X]

State issuer's revenues for its most
recent fiscal year:  The Company had no revenue for the year ending December 31,
2003.

State the aggregate market value of
the voting and non-voting common equity held by non-affiliates computed by
reference to the price at which the common equity was sold, or the average bid
and asked price of such common equity, as of a specified date within the past 60
days: On May 28, 2004, the aggregate market value of the voting and non-voting
common equity held by non-affiliates, based on the closing price of the common
equity on that date, equals $14,693,384.






EXPLANATORY NOTE

SulphCo, Inc. (the "Company") is
filing this Form 10-KSB/A ("Amendment No. 2") to amend its Annual Report on Form
10-KSB for the fiscal year ended December 31, 2003 (the "Original Filing") filed
on March 29, 2004 with the Securities and Exchange Commission ("SEC"), as
amended by Amendment No.1 filed with the SEC on June 14, 2004 ("Amendment No.
1") in order to (i) refile in its entirety "Part I - Item 7. Financial
Statements" to include restated audited financial statements for the years ended
December 31, 2003 and December 31, 2002 and the report thereon prepared by the
Company's new independent auditors, Mark Bailey & Company, Ltd. dated June
17, 2004, and (ii) to refile in its entirety "Part III - Item 13. Exhibits and
Reports on Form 8-K" to reflect the updated certifications of our Chief
Executive Officer and Chief Financial Officer included with this Amendment.

The Company is restating the financial
statements for the year ended December 31, 2003, in order to reflect an increase
in director fees that were originally       recorded in the 1st
quarter of 2004 and an increase in prepaid expenses.  The restatement
resulted in an increase in the Net Loss for the year ended December 31,2003 from
the Net Loss previously reported in Amendment No. 1 to the Original Filing by
$21,000 to $3,069,353 and an increase in prepaid expenses by $296,000 to
$306,973. There were no other material changes from the financial statements
filed with the Original Filing as amended by Amendment No. 1.

This Amendment does not amend any
other information previously filed in the Original Filing as amended by
Amendment No. 1.  The Original Filing as amended by Amendment No. 1 is hereby
superseded and amended with respect to the sections set forth in this
Amendment.






ITEM 7.  FINANCIAL STATEMENTS



SULPHCO, INC.

(A DEVELOPMENT STAGE COMPANY)

FINANCIAL STATEMENTS

FOR THE YEARS ENDED

DECEMBER 31, 2003

AND

DECEMBER 31, 2002

WITH

AUDIT REPORT OF

INDEPENDENT
  CERTIFIED PUBLIC ACCOUNTANTS



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TABLE OF CONTENTS

|Independent
      Auditors Report                  | 2
|--------------------------------------------------- | -
|                                                    |  
|Balance
      Sheet                                 | 4
|                                                    |  
|Statements
      of Operations                      | 5
|                                                    |  
|Statement
      of Changes in Shareholders Deficit | 6
|                                                    |  
|Statements
      of Cash Flows                      | 7
|                                                    |  
|Notes
      to Financial Statements                 | 8



---



**MARK
  BAILEY & CO. LTD.**

|                                                                            | Certified
      Public Accountants
      Management Consultants |                                                       
|--------------------------------------------------------------------------- | --------------------------------------------------------------- | ------------------------------------------------------
|                                                                            |                                                                 |                                                       
|Office Address:1495 Ridgeview Drive, Ste. 200
      Reno, Nevada 89509-6634 | Phone: 775/332.4200
      Fax: 775/332.4210                     | Mailing Address:P.O. Box 6060
      Reno, Nevada 89513

Independent
  Auditors Report

| | June 17,
      2004                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Board of
      Directors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Sulphco,
      Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | We have audited
      the accompanying balance sheet of Sulphco, Inc., (a company in the development
      stage) as of December 31, 2003, and the related statements of operations,
      shareholders deficit and cash flows for the years ended December 31,
      2003 and 2002. These financial statements are the responsibility of the
      Companys management.Our responsibility is to express an opinion
      on these financial statements based on our audits. The financial statements
      of SulphCo, Inc. from inception to December 31, 2001 were audited by other
      auditors whose reported dated May 13, 2002, expressed an unqualified opinion
      on those statements.                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | We conducted
      our audits in accordance with auditing standards generally accepted in the
      United States. Those standards require that we plan and perform the audits
      to obtain reasonable assurance about whether the financial statements are
      free of material misstatement. An audit includes examining, on a test basis,
      evidence supporting the amounts and disclosures in the financial statements.
      An audit also includes assessing the accounting principles used and significant
      estimates made by management, as well as evaluating the overall financial
      statement presentation. We believe that our audits provide a reasonable
      basis for our opinion. The statements of operations, changes in shareholders
      deficit, and statements of cash flows of the Company from inception to December
      31, 2001 were audited by other independent accountants whose report dated
      May 13, 2002 expressed an unqualified opinion on those statements.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | In our opinion,
      the financial statements referred to above present fairly, in all material
      respects, the financial position of Sulphco, Inc., (a company in the development
      stage), as of December 31, 2003, and the results of its operations and its
      cash flows from inception and for the years ended December 31, 2003 and
      2002, in conformity with accounting principles generally accepted in the
      United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Mark Bailey
      & Company, Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Reno, Nevada                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

-2-

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This page is intentionally blank



-3-

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SULPHCO, INC.BALANCE SHEETDecember 31, 2003

**ASSETS**

|                                                                           |  |  | **2003** |            
|-------------------------------------------------------------------------- |  |  | -------- | -----------
|                                                                           |  | 
|                                                                           |  | 
|**Current
      Assets**                                                   |  | 
|Cash                                                                       |  |  | $        | 735,733    
|Accounts
      receivable                                                  |  |  |          | 231        
|Prepaid
      expenses                                                     |  |  |          | 306,973    
|                                                                           |  | 
|Total
      current assets                                                 |  |  |          | 1,042,937  
|                                                                           |  | 
|**Fixed
      Assets**                                                     |  | 
|Property
      and equipment (net of accumulated depreciation of $573,224) |  |  |          | 222,515    
|Desulfurization
      unit                                                 |  |  |          | 529,236    
|                                                                           |  | 
|Total
      fixed assets                                                   |  |  |          | 751,751    
|                                                                           |  | 
|**Other
      Assets**                                                     |  | 
|Deferred
      tax asset (net of valuation allowance of $6,130,948)        |  |  |          |           
|Deposits                                                                   |  |  |          | 36,822     
|                                                                           |  | 
|Total
      other assets                                                   |  |  |          | 36,822     
|                                                                           |  | 
|Total
      assets                                                         |  |  | $        | 1,831,510  
|                                                                           |  | 
|                                                                           |  | 
|**LIABILITIES
      AND STOCKHOLDERS DEFICIT**                            |  | 
|                                                                           |  | 
|**Current
      Liabilities**                                              |  | 
|Accounts
      payable                                                     |  |  | $        | 49,638     
|Accrued
      expenses                                                     |  |  |          | 80,376     
|Settlement
      liability                                                 |  |  |          | 13,636     
|Related
      party notes payable                                          |  |  |          | 750,000    
|                                                                           |  | 
|Total
      current liabilities                                            |  |  |          | 893,650    
|                                                                           |  | 
|**Stockholders
      Deficit**                                            |  | 
|Common
      stock, $.001 par value, 100,000,000 shares authorized         |  |  |          |            
|49,670,083
      shares issued and outstanding                             |  |  |          | 49,670     
|Additional
      paid-in-capital                                           |  |  |          | 19,731,339 
|Stock
      subscriptions receivable                                       |  |  |          | (812,000   
|Common
      stock subscribed                                              |  |  |          | 1,050      
|Deficit
      accumulated during the development stage                     |  |  |          | (18,032,199
|                                                                           |  | 
|Total
      stockholders deficit                                          |  |  |          | 937,860    
|                                                                           |  | 
|Total
      liabilities and stockholders deficit                          |  |  | $        | 1,831,510  
|                                                                           |  | 

The Accompanying
  Notes are an Integral Part of the Financial Statements

-4-

---



SULPHCO, INC.STATEMENTS OF OPERATIONS****From Inception and for the Years Ended December 31, 2003 and 2002

|                                                              |  | For the Years
      Ended |            
|------------------------------------------------------------- |  | ------------------------- | -----------
|
|                                                              |  |                           |            
|**Revenue**                                                   |  |                           |            
|Sales                                                         |  | $                         | 42,967     
|                                                              |  |                           |            
|Interest
      income                                         |  |                           | 39,309     
|                                                              |  |                           |            
|                                                              |  |                           |            
|Total
      revenue                                           |  |                           | 82,276     
|                                                              |  |                           |            
|**Expenses**                                                  |  |                           |            
|Salary
      and wage expense                                 |  |                           | (7,490,408 
|Director
      fees                                           |  |                           | (4,702,000 
|General
      and administrative expenses                     |  |                           | (3,857,205 
|Research
      and development expenses                       |  |                           | (1,231,493 
|Depreciation
      expense                                    |  |                           | (565,647   
|                                                              |  |                           |            
|                                                              |  |                           |            
|Total
      expenses                                          |  |                           | (17,846,753
|Loss
      from operations                                    |  |                           | (17,764,477
|                                                              |  |                           |            
|                                                              |  |                           |            
|Loss
      on disposal of assets                              |  |                           | (221,711   
|                                                              |  |                           |            
|Net
      loss before interest expense and income taxes       |  |                           | (17,986,188
|Interest
      expense                                        |  |                           | (46,011    
|                                                              |  |                           |            
|Net
      loss before income taxes                            |  |                           | (18,032,199
|                                                              |  |                           |            
|Provision
      for income taxes                              |  |                           |           
|                                                              |  |                           |            
|Net
      loss                                                |  | $                         | (18,032,199
|                                                              |  |                           |            
|Loss
      per share:                                         |  | $                         | (0.58      
|                                                              |  |                           |            
|Weighted
      average shares outstanding - basic and diluted |  |                           | 31,321,421 
|                                                              |  |                           |            

The Accompanying
  Notes are an Integral Part of the Financial Statements

-5-

---



SULPHCO,
  INC.STATEMENTS OF CHANGES IN STOCKHOLDERSDEFICIT
  From Inception and For the Years Ended December 31, 2003 and 2002

|                                                 | Common Stock |            | Additional
      Paid-in
      Capital |   | Accumulated
      Deficit |   | Common
      Stock
      Subscribed |            | Stock
      Subscriptions
      Receivable |   | Total
      Equity |  
|------------------------------------------------ | ------------ | ---------- | -------------------------------------- | - | ------------------------- | - | ----------------------------------- | ---------- | ------------------------------------------ | - | ------------------ | -
|
|                                                 |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  
|Balance,
      January 13, 1999                  |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  
|Stock issued
      for cash at $167 per share    | $            | 1,000      |                                        | $ | 1                         |   | $                                   | 166,999    |                                            |   |                    |  
|Restate
      from recapitalization of GRD, Inc. |              | 19,999,000 |                                        |   | 19,999                    |   |                                     | (19,999    | )                                          |   |                   |  
|Net loss                                         |              |            |                                        |   |                           |   |                                     |            |                                            |   | (128,802           | )
|                                                 |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  
|Balance
      at December 31, 1999               |              | 20,000,000 |                                        |   | 20,000                    |   |                                     | 147,000    |                                            |   | (128,802           | )
|Contributions
      from stockholders:           |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  
|Cash                                             |              |            |                                        |   |                           |   |                                     | 169,168    |                                            |   |                    |  
|Equipment                                        |              |            |                                        |   |                           |   |                                     | 362,331    |                                            |   |                    |  
|Acquisition
      of Filmworld, Inc.             |              | 1,200,000  |                                        |   | 1,200                     |   |                                     | (251,200   | )                                          |   |                    |  
|Contribution
      of capital                    |              | 820,000    |                                        |   | 820                       |   |                                     | 409,180    |                                            |   |                    |  
|Issuance
      of stock options                  |              |            |                                        |   |                           |   |                                     | 1,014,200  |                                            |   |                    |  
|Net loss                                         |              |            |                                        |   |                           |   |                                     |            |                                            |   | (1,364,393         | )
|                                                 |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  
|Balance
      at December 31, 2000               |              | 22,020,000 |                                        |   | 22,020                    |   |                                     | 1,850,679  |                                            |   | (1,493,195         | )
|Stock issued
      for services                  |              | 200,000    |                                        |   | 200                       |   |                                     | 571,800    |                                            |   |                   |  
|Stock
      issued for related party services    |              | 4,342,800  |                                        |   | 4,342                     |   |                                     | 4,782,558  |                                            |   |                    |  
|Stock issued
      for related party cash        |              | 724,750    |                                        |   | 725                       |   |                                     | 1,207,162  |                                            |   |                    |  
|Stock
      issued for subscriptions receivable  |              | 12,639,620 |                                        |   | 12,640                    |   |                                     | 7,352,860  |                                            |   |                    |  
|Return of
      shareholder capital              |              |            |                                        |   |                           |   |                                     | (118,427   | )                                          |   |                    |  
|Net
      loss                                   |              |            |                                        |   |                           |   |                                     |            |                                            |   | (6,927,524         | )
|                                                 |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  
|Balance at
      December 31, 2001               |              | 39,927,170 |                                        |   | 39,927                    |   |                                     | 15,646,632 |                                            |   | (8,420,719         | )
|Stock
      issued for services                  |              | 50,000     |                                        |   | 50                        |   |                                     | 13,450     |                                            |   |                    |  
|Stock issued
      for related party services    |              | 10,000,000 |                                        |   | 10,000                    |   |                                     | 4,990,000  |                                            |   |                    |  
|Stock
      issued for cash                      |              | 100,000    |                                        |   | 100                       |   |                                     | 9,900      |                                            |   |                    |  
|Collection
      on subscriptions receivable     |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  
|Cancelled
      subscriptions receivable         |              | (1,000,000 | )                                      |   | (1,000                    | ) |                                     | (499,000   | )                                          |   |                    |  
|Issuance
      of stock subscription             |              | 75,000     |                                        |   | 75                        |   |                                     | (27,575    | )                                          |   |                    |  
|Return
      of shareholder capital              |              | (1,100,000 | )                                      |   | (1,100                    | ) |                                     | (570,900   | )                                          |   |                    |  
|Return of
      stock subscription               |              | (431,000   | )                                      |   | (431                      | ) |                                     | (440,069   | )                                          |   |                    |  
|Net
      loss                                   |              |            |                                        |   |                           |   |                                     |            |                                            |   | (6,542,127         | )
|                                                 |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  
|Balance at
      December 31, 2002               |              | 47,621,170 |                                        |   | 47,621                    |   |                                     | 19,122,438 |                                            |   | (14,962,846        | )
|Stock
      issued for services                  |              | 100,000    |                                        |   | 100                       |   |                                     | 32,400     |                                            |   |                    |  
|Stock subscribed
      for services              |              |            |                                        |   |                           |   |                                     | 20,950     |                                            |   |                    |  
|Payment
      on stock subscription              |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  
|Return of
      stock subscription               |              | (225,000   | )                                      |   | (225                      | ) |                                     | (237,275   | )                                          |   |                    |  
|Stock
      issued for cash                      |              | 2,173,913  |                                        |   | 2,174                     |   |                                     | 497,826    |                                            |   |                    |  
|Stock subscribed
      for prepaid interest      |              |            |                                        |   |                           |   |                                     | 295,000    |                                            |   |                    |  
|Net
      loss                                   |              |            |                                        |   |                           |   |                                     |            |                                            |   | (3,069,353         | )
|                                                 |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  
|Balance at
      December 31, 2003               |              | 49,670,083 |                                        | $ | 49,670                    |   | $                                   | 19,731,339 |                                            | $ | (18,032,199        | )
|                                                 |              |            |                                        |   |                           |   |                                     |            |                                            |   |                    |  

The Accompanying
  Notes are an Integral Part of the Financial Statements

-6-

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SULPHCO,
  INC.STATEMENTS OF CASH FLOWS****From Inception and For the Years Ended December 31, 2003 and 2002

|                                                              | Inception
      to date |  | 2003 |             | 2002 |  
|------------------------------------------------------------- | ----------------------- |  | ---- | ----------- | ---- | -
|                                                              |                         |  |      |             |      |  
|**Cash
      Flows from Operating Activities**                |                         |  |      |             |      |  
|Net
      loss                                                |                         |  | $    | (18,032,199 | )    | $
|Adjustments
      to reconcile net loss to net cash           |                         |  |      |             |      |  
|used in operating
      activities:                           |                         | 
|Depreciation
      expense                                    |                         |  |      | 565,647     |      |  
|Shares
      issued for services                              |                         |  |      | 5,608,668   |      |  
|                                                              |                         |  |     
|Shares
      subscribed for services                          |                         |  |      | 21,000      |      |  
|                                                              |                         |  |     
|Increase
      in accounts receivable                         |                         |  |      | (231        | )    |  
|Decrease
      in related party receivable                    |                         |  |      | 1,359,185   |      |  
|                                                              |                         |  |     
|Increase
      in work in progress                            |                         |  |      |            |      |  
|                                                              |                         |  |     
|(Increase)
      decrease in prepaid expenses                 |                         |  |      | (9,472      | )    |  
|                                                              |                         |  |     
|Increase
      (decrease) in accounts payable                 |                         |  |      | 26,254      |      |  
|Increase
      in accrued liabilities                         |                         |  |      | 103,758     |      |  
|                                                              |                         |  |     
|Increase
      (decrease) in legal settlement                 |                         |  |      | 13,636      |      |  
|                                                              |                         |  |      |             |      |  
|Net
      cash used in operating activities                   |                         |  |      | (10,343,754 | )    |  
|                                                              |                         |  |      |             |      |  
|                                                              |                         |  |      |             |      |  
|**Cash
      Flows from Investing Activities**                |                         |  |      |             |      |  
|Purchase
      of capital assets                              |                         |  |      | (719,137    | )    |  
|Investment
      in subsidiary                                |                         |  |      | (220,086    | )    |  
|                                                              |                         |  |     
|Payment
      of deposits                                     |                         |  |      | (36,822     | )    |  
|                                                              |                         |  |     
|Development
      of intangible assets                        |                         |  |      | (15,843     | )    |  
|                                                              |                         |  |      |             |      |  
|Net
      cash used in investing activities                   |                         |  |      | (991,888    | )    |  
|                                                              |                         |  |      |             |      |  
|                                                              |                         |  |      |             |      |  
|**Cash
      Flows from Financing Activities**                |                         |  |      |             |      |  
|Proceeds
      from issuance of stock                         |                         |  |      | 6,890,200   |      |  
|Proceeds
      from stock subscriptions                       |                         |  |      | 4,240,887   |      |  
|Proceeds
      from issuance of related party notes payable   |                         |  |      | 3,500,000   |      |  
|Proceeds
      from issuance of line of credit                |                         |  |      | 750,000     |      |  
|Return
      of capital                                       |                         |  |      | (118,427    | )    |  
|Payments
      on contracts 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               |                         |  |      | 12,071,375  |      |  
|                                                              |                         |  |      |             |      |  
|Net
      increase (decrease) in cash and cash equivalents    |                         |  |      | 735,733     |      |  
|Cash and
      cash equivalents at inception,                 |                         | 
|                                                              |                         |  |     
|December
      31, 2002 and 2001                              |                         |  |      |            |      |  
|                                                              |                         |  |      |             |      |  
|Cash and
      cash equivalents at December 31, 2003 and 2002 |                         |  | $    | 735,733     |      | $
|                                                              |                         |  |      |             |      |  

**Supplemental
  Information and Noncash Transactions**
  During the years ended December 31, 2003, and 2002, $27,950 and $16,869 were
  paid for interest, respectively, and no amounts were paid for income taxes.

In December 2003 one million
  common shares were subscribed at $0.296 per share for prepaid interest of $296,000.

In February 2003 a stock
  subscription of $3,575,000 was paid with $1,655,000 in cash and the relief of
  notes payable of $1,920,000.

In 2002 notes payable of
  $1,000,000 were relieved with the decrease of $1,000,000 in subscriptions payable.

The Accompanying
  Notes are an Integral Part of the Financial Statements

-7-

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SULPHCO,
  INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003,
  and 2002

| | 1. | Organization and Significant Accounting Policies
| | -- | ------------------------------------------------
| |    |                                                 

| | Sulphco, Inc. (the Company), formerly Film World, Inc., was originally organized under the laws of
the State of Nevada on December 23, 1986 under the name Hair Life Inc. The Company became inactive
during 1987 and remained inactive until September 1994. In September 1994, through a reverse acquisition
agreement, the Patterson Group became a wholly owned subsidiary of Hair Life, Inc. Operations were
conducted via two subsidiaries until 1998, at which time all operations were discontinued and the
Company remained dormant until July 1999.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | In July 1999 the Company acquired film rights and changed the corporate name to Film World, Inc. In
December 2000 the Company discontinued its film operations and distributed all assets and liabilities
related to that business to certain shareholders in exchange for their stock.                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | In December 2000, the Company entered into an exchange agreement with GRD, Inc. (DBA Sulphco) and issued
1,200,000 shares in exchange for all of the outstanding shares of GRD, Inc. Since the shareholders
of GRD, Inc. continue to control the Company, the merger was accounted for as a reverse acquisition
of Film World, Inc., and the name was changed to SulphCo, Inc.                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | The Company is still considered a developmental stage company in 2003, as defined by Statement of Financial
Accounting Standards (SFAS) No. 7. The Company is engaged in the business of developing and marketing
equipment and a process for removing sulfur from petroleum.                                                                                                                                                                                                                                                                                

-8-

---



SULPHCO, INC.
  (A Company in the Development Stage)NOTES TO FINANCIAL STATEMENTSDecember 31, 2003, and
  2002

| | Use of Estimates in the Preparation of Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The markets for the Companys products and services
are characterized by competition, rapid technological development, regulatory changes, and new product
introductions, all of which may impact the future value of the Companys assets.                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | For the purpose of the statements of cash flows, all highly liquid investments with maturities of three
months or less are considered to be cash equivalents. There were no cash equivalents as of December
31, 2003 and 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Property and equipment are recorded at cost, less accumulated depreciation. The Company reviews its
long-lived assets for impairment. Whenever events or changes in circumstances indicate that the carrying
amount of the assets might not be recovered through undiscounted future cash flows, such loss is
recognized in the statement of operations.                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Depreciation is determined using the straight-line method over the remaining estimated useful lives
of the assets for financial reporting. Expenditures for maintenance and repairs are expensed when
incurred and betterments are capitalized. Gains and losses on the sale of property and equipment
are reflected in the statement of operations.                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Company has an uncommissioned desulphurization unit. This unit consists of a trailer containing
equipment to be used to remove sulfur from crude oil. The Company incurred $321,167 in costs and
accrued $40,591 in sales taxes on this unit in 2002 and classified it as property, plant and equipment
because the Company intended to own the unit and receive a rental payment for the unit. Management
has since determined that the unit may be manufactured and sold, so $361,758 was reclassified to
fixed assets from construction-in-progress as of December 31, 2003 and the sales tax accrual was
removed from the accounts of the Company. The Company records any replacement parts it intends to
sell and spare parts for its desulfurizing unit at cost.

-9-

---



SULPHCO, INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003,
  and 2002

| | Research
      and Development                                  
| | ----------------------------------------------------------------
| |                                                                 
| | The Company
      expenses research and development as incurred.
| |                                                                 
| | Income
      Taxes                                              
| |                                                                 

| | The Company
      provides for income taxes under the provisions of SFAS No. 109 Accounting
      for Income Taxes. SFAS No. 109 requires an asset and liability based
      approach in accounting for income taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Deferred
      income tax assets and liabilities are recorded to reflect the tax consequences
      in future years of temporary differences between revenue and expense items
      for financial statement and income tax purposes. Valuation allowances are
      provided against assets that are not likely to be realized. Deferred tax
      assets and liabilities are measured using the enacted tax rates expected
      to apply to taxable income in the years in which those temporary differences
      are expected to be recovered or settled. The effect on deferred tax assets
      and liabilities of a change in tax rates is recognized in income in the
      period that includes the enactment date.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Loss
      Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | The computation
      of basic and diluted earnings per common share is based on the weighted
      average number of shares outstanding during the year, plus the common stock
      equivalents. Common stock equivalents are not included in the diluted loss
      per share calculation when their effect is antidilutive.                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Revenue
      Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | In 2000 the
      Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
      (SAB) No. 101, Revenue Recognition in Financial Statements.
      Pursuant to SAB No. 101 and the relevant generally accepted accounting principles,
      the Company will recognize revenue upon the passage of title, ownership
      and the risk of loss to the customer. During the period ended December 31,
      2003, there was no revenue.                                                                                                                                                                                                                                                                    

-10-

---



SULPHCO, INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003, and 2002

| | New
      Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | In April
      2003 the Financial Accounting Standards Board (FASB) issued SFAS 149 Amendment
      of Statement 133 on Derivative Instruments and Hedging Activities.
      This statement, which amends and clarifies existing accounting pronouncements,
      addresses financial accounting and reporting for derivative or other hybrid
      instruments. This Statement requires that contracts with comparable characteristics
      be accounted for similarly. It is effective for contracts entered into or
      modified after September 30, 2003. The Company does not expect the adoption
      of SFAS 149 to have any impact on the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | In May 2003
      the FASB issued SFAS 150, Accounting for Certain Financial Instruments
      with Characteristics of both Liabilities and Equity, which is effective
      at the beginning of the first interim period beginning after March 15, 2003.
      This statement establishes standards for the Companys classification
      of liabilities in the financial statements that have characteristics of
      both liabilities and equity. The Company believes the adoption of SFAS 150
      will have no effect on the Companys financial position or results
      of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | In December
      2003 the FASB issued SFAS 132R, Employers Disclosures about
      Pensions and Other Postretirement Benefitsan amendment of SFAS 87,
      88, and 106. This Statement revises employers disclosures about
      pension plans and other postretirement benefit plans. It does not change
      the measurement or recognition of those plans required by SFAS 87, Employers
      Accounting for Pensions, SFAS 88, Employers Accounting
      for Settlements and Curtailments of Defined Benefit Pension Plans and for
      Termination Benefits, and SFAS 106, Employers Accounting
      for Postretirement Benefits Other Than Pensions. This Statement retains
      the disclosure requirements contained in SFAS 132, Employers
      Disclosures about Pensions and Other Postretirement Benefits, which
      it replaces. It requires additional disclosures to those in the original
      Statement 132 about the assets, obligations, cash flows, and net periodic
      benefit cost of defined benefit pension plans and other defined benefit
      postretirement plans. The required information is required to be provided
      separately for pension plans and for other postretirement benefit plans.
      The Company has no Pension or Other Postretirement Benefits.

-11-

---



SULPHCO, INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003,
  and 2002

|2. | Line
      of Credit                                                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                         
|   | In 2002 the
      Company negotiated a $500,000 revolving line of credit with Nevada State
      Bank at an interest rate of prime (4.25 percent), with the Chairman and
      CEO of the Company as the guarantor. The funds assisted the Company in meeting
      short-term cash flow requirements. The line of credit expired on May 24,
      2003.
|   |                                                                                                                                                                                                                                                                                                                                                         
|   | At December
      31, 2003 and 2002, the Company owed $-0- and $500,000, respectively, to
      Nevada State Bank under the line of credit agreement.                                                                                                                                                                                                   

|3. | Notes
      Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Companys
      notes payable consist of the following as of December 31, 2003:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The $250,000
      note due to a related party has an interest rate of 9.6 percent, and requires
      monthly interest payments of $2,000. This note matures on March 1, 2004.
      Any unpaid accrued interest will be due with the principal when the note
      matures. In 2003 the Company paid $24,000 of interest on the note. The principal
      amount of $250,000 was still outstanding at December 31, 2003 (See Note
      6).                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | On December
      30, 2003, under the Boards approval, the Company issued a $500,000
      note to the Chairman and CEO and a $500,000 note to a related party. For
      each of these notes, $250,000 was obtained before year end. The balance
      of $250,000 for each note will be obtained when the Company needs it. Each
      note required 500,000 shares of the Companys common stock, in lieu
      of interest payment, to be delivered to the note holder by January 15, 2004.
      The notes are due on demand. In January 2004 the Company issued 500,000
      shares to the Chairman and CEO and 500,000 shares to the related party.
      (See Note 6)

-12-

---



SULPHCO, INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003, and 2002

|4. | Operating
      Lease                                                                                                                                                                                                            
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                  
|   | In March
      2003 the Company entered into a lease agreement on its new location in Sparks,
      Nevada. In February 2004 the Company extended its lease term for an additional
      one year to March 3, 2005. (See Note 11)
|   |                                                                                                                                                                                                                                  
|   | Following
      is a schedule of payments required under the rental lease agreement with
      Dermody Industrial Group:                                                                                                         

|                                   |  
|---------------------------------- | -
|2004                               | $
|2005                               |  
|2006                               |  
|2007                               |  
|2008                               |  
|After
      2008                   |  
|                                   |  
|                                   |  
|Total minimum
      lease payments | $
|                                   |  

| |                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In 2003 the
      Company was also obligated for the lease of another property from the Chairman
      and CEO under a non-cancelable lease agreement. The lease required that
      the Company make lease payments until either the lease term expired in February
      2004 or the property was sold. The property sold in November 2003.
| |                                                                                                                                                                                                                                                                                                                                              
| | The Company
      paid $427,138 and $78,315 for rent expense in 2003 and 2002, respectively.                                                                                                                                                                                                                                                 

-13-

---



SULPHCO, INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003, and 2002

|5. | Contingent
      Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company
      is currently the subject of an SEC investigation. The SEC alleges violations
      of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1934 and Section
      10(b) of the Securities Act of 1934 and Rule 10b-5 thereunder . The Company
      has retained council and has responded to the inquiry and is awaiting response
      from the SEC. The outcome of the action is not determinable at this time.
      Any such action could have a material adverse effect on the Company.                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In November
      2001 a former employee brought a complaint against the Company, claiming
      that an employment agreement between the Company and the former employee
      had been breached. A settlement was reached in February 2003. The former
      employee received the 2 million shares that were previously cancelled when
      his employment ended with the Company. The Company was also required to
      pay $100,000 to the former employee on an installment basis. As of December
      31, 2003, the Company owes $13,636.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | Financial
      instruments which potentially subject the Company to concentrations of credit
      risk consist mainly of cash equivalents. The Company maintains amounts on
      deposit with financial institutions which exceed federally insured limits.
      The Company has not experienced any significant losses in such accounts,
      nor does management believe it is exposed to any significant credit risk.                                                                                                                      

|6. | Related
      Party Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In December
      2001 the Chairman and CEO of the Company borrowed $1,360,685 from the Company.
      The notes were payable upon demand and carried interest at the prime rate
      on the date of each note. At December 31, 2000, the Company had advances
      from the Chairman payable on demand with no interest in the amount of $100,000.
      The Chairman used the advances to offset the receivable and repaid the remaining
      receivable during 2002.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In May 2002
      the Company borrowed $500,000 under a line of credit at 4.23% from Nevada
      State Bank naming the Chairman as the guarantor of the loan. The line of
      credit matured in May 2003. (See Note 2).                                                                                                                                                                                                                                                

-14-

---



SULPHCO, INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003, and 2002

| | In August 2002 the Company issued a note to a related party at an interest rate of 9.6% and is due
in March 2004. For the year ended 2003 the Company paid a total of $24,000 in interest and the balance
of the note was $250,000 at December 31, 2003. (See Note 3)
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                      
| | In 2003 the Company leased property from the Chairman and CEO under a non-cancelable lease agreement.
The rent paid to the Chairman in 2003 and 2002 was $71,500 and 78,315, respectively.                                                                           
| |                                                                                                                                                                                                                                                                      
| | In December 2003 the Company borrowed $250,000 from the CEO and Chairman. (See Note 3).                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                      
| | In November 2003 the Company issued 2,173,913 shares of the Company stock at $0.23 per share to the
Chairman and CEO for $500,000. (See Note 7).                                                                                                                     
| |                                                                                                                                                                                                                                                                      
| | In June 2003 the Company issued 50,000 shares at $0.32 per share for the services of a Director valued
at $16,000. (See Note 7).                                                                                                                                     
| |                                                                                                                                                                                                                                                                      
| | In March 2003 the Company issued 50,000 shares at $0.33 per share to a director for cash of $16,500.
(See Note 7).                                                                                                                                                   
| |                                                                                                                                                                                                                                                                      
| | In February 2003 the Company subscribed 50,000 shares of common stock to a director at $0.42 per share
for director services of $21,000. These shares were issued in March 2004. (See Note 11).                                                                      
| |                                                                                                                                                                                                                                                                      
| | The CEO was paid consulting fees of $300,000 and $250,000 in 2003 and 2002, respectively, under an
employment contract. The agreement is set to terminate on July 1, 2004.                                                                                           

-15-

---



SULPHCO, INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003,
  and 2002

| | In December 2003 the Company issued a $500,000 note to a related party. Upon signing the note, $250,000
of the principal was obtained, with the balance of $250,000 to be obtained upon demand by the Company.
(See Note 3). In January 2004 the Company issued 500,000 shares to the related party in lieu of interest
on this note. (See Note 11)
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. | Common
      Stock                                                                                                                                                                                                                                                                                                                                           
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | In December
      2003 one million common shares were subscribed for prepaid interest of $296,000
      on related party notes.                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | In November
      2003 the Company issued 2,173,913 shares of the Company stock at $0.23 per
      share to the Chairman and CEO for $500,000.                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | In August
      2003 196,870 shares were returned to the Company to cancel part of a subscription
      receivable of $200,000. In September 2003 3,125 shares were returned to
      the Company to cancel the balance of the subscription receivable.                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | In June 2003
      the Company issued 50,000 shares at $0.32 per share for the services of
      a Director valued at $16,000.                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | In March
      2003 the Company issued 50,000 shares at $0.33 per share for cash of $16,500.                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | In February
      2003 the Company subscribed 50,000 shares of common stock to a director
      at $0.42 per share for director services of $21,000. These shares were issued
      in March 2004. Also, in February 2003, a subscription of $3,575,000 was
      relieved when a loan of $1,920,000 was forgiven, and cash of $1,655,000
      was received.

-16-

---



SULPHCO, INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003, and 2002



|8. | Stock
      Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The Company
      has adopted the disclosure-only provisions of SFAS No. 123, Accounting
      for Stock-Based Compensation. Accordingly, no compensation cost has
      been recognized for employees in the financial statements. Had compensation
      cost for the Companys stock options been determined based on the fair
      value at the grant date for awards in 2003 and 2002, consistent with the
      provisions of SFAS No. 123, the Companys net earnings and earnings
      per share would have been reduced to the pro forma amounts indicated below:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                                      | 2003 |           
|------------------------------------- | ---- | ----------
|                                      |      |           
|Net earnings
       as reported      | $    | (3,069,353
|                                      |      |           
|Net earnings
       pro forma        | $    | (3,087,376
|                                      |      |           
|Earning per
      share  as reported | $    | (0.06     
|                                      |      |           
|Earning per
      share  pro forma   | $    | (0.06     
|                                      |      |           
|                                      |      |           

| | The fair value of each option granted is estimated at the date of grant using the Black-Scholes option-pricing
model with the following assumptions:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                     

|                                      | 2003 |          
|------------------------------------- | ---- | ---------
|                                      |      |          
|Expected
      Dividend yield         | $    | -0-      
|Expected
      stock price volatility |      | 272      
|Risk free
      interest rate         |      | 4.00-4.65
|Expected
      life of options        |      | 3 years  

| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | The following
      table summarizes information about stock options outstanding at December
      31, 2003:
| |                                                                                                             

|                                             | Shares |            | Weighted Average
      Exercise Price |  
|-------------------------------------------- | ------ | ---------- | ------------------------------------- | -
|                                             |        |            |                                       |  
|Options outstanding,
      beginning of year |        | -0-        |                                       | $
|                                             |        |           
|Options exercised                            |        | -0-        |                                       | $
|Options granted                              |        | 1,100,000  |                                       | $
|                                             |        |           
|                                             |        |            |                                       |  
|Options outstanding,
      end of year       |        | 1,100,000  |                                       | $
|                                             |        |           
|                                             |        |           
|                                             |        |            |                                       |  
|Option price
      range at end of year      | $      | 0.35-$0.55 |                                      
|Weighted-average
      fair value of options |        |            |                                       |  
|Granted during
      the year                | $      | 0.59       |                                      

-17-

---



SULPHCO, INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003,
  and 2002

| | There were no stock options at December 31, 2002.                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                    
| | The Company has
      a Non-Officer Limited Stock Appreciation Rights Plan. In August 2003 ten
      employees were granted awards for 2,500 Limited Stock Appreciation Rights,
      each with a multiplier of eighteen, at a base price of $0.24.

|9. | Stock
      Subscriptions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | In September
      2001 the Company issued 2,758,620 shares under a subscription agreement
      in which a third party agreed to place the shares with investors interested
      in assisting the Company in reaching its objectives. The shares were valued
      at $0.725 per share for a total value of $2,000,000. At December 31, 2002,
      the Company had received $1,116,000 in cash from the third party. In early
      2003 another $75,000 was received. In April 2002 the Company requested that
      the third party immediately remit the balance of $737,000 or return 1,023,611
      shares for cancellation. This dispute has not yet been resolved as of the
      report date (See Note 11).
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The total
      stock subscription receivable was $812,500 and $4,624,500 at December 31,
      2003 and 2002 respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|10. | Provision
      for Income Taxes                                                                                                                                                                     
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                      
|    | The Company
      recognizes deferred tax liabilities and benefits for the expected future
      tax consequences of events that have been included in the financial statements
      or tax returns.
|    |                                                                                                                                                                                                      
|    | Deferred
      tax liabilities and benefits are recognized using enacted tax rates in effect
      for the year in which the differences are expected to reverse.                                    

-18-

---



SULPHCO, INC.
  (A Company in the Development Stage)NOTES TO FINANCIAL STATEMENTS
  December 31, 2003, and 2002

| | The following is a schedule of the composition of the provision for income taxes:
| | ---------------------------------------------------------------------------------
| |                                                                                  

|2003                                           |   | 2002 | 
|---------------------------------------------- | - | ---- | 
|                                               |   |      | 
|Current                                        | $ | -0-  | 
|Deferred                                       |   | -0-  | 
|                                               |   |      | 
|Total
      provision for federal income taxes |   | -0-  | 
|                                               |   |      | 

| | Deferred
      tax benefits and liabilities are calculated using enacted tax rates in effect
      for the year in which the differences are expected to reverse.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                  

|The
following is a schedule of the composition of the income tax benefit:
|-------------------------------------------------------------------------
|                                                                         

|                                       | 2003 |             | 2002 |  
|-------------------------------------- | ---- | ----------- | ---- | -
|                                       |      |             |      |  
|Net operating
      loss carryforward  | $    | 18,032,199  |      | $
|Valuation                              |      | (18,032,199 | )    |  
|                                       |      |             |      |  
|Total
      provision for income taxes | $    | -0-         |      | $
|                                       |      |             |      |  

| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | Reconciliation
      of the statutory federal income tax rate to the Companys effective
      tax rate is as follows:
| |                                                                                                                       

|                                                     | December
      31 |           
|---------------------------------------------------- | ----------------- | ----------
|
|
|Net loss
      before taxes                          | $                 | (3,069,353
|U.S. statutory
      rate                            |                   | 34.00     
|
|Change in
      deferred tax                         |                   | 1,043,580 
|Change in
      deferred tax asset valuation account |                   | (1,043,580
|
|Total tax
      expense                              | $                 | 0.00      
|
|Effective
      tax rate                             |                   | 0.0       
|

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The net change
      in the valuation account was $1,043,580 and $2,224,323, in the years ended
      December 31, 2003, and 2002, respectively. The valuation allowance has been
      estimated in an amount equal to the projected future benefit of the loss
      carryforward because there is no assumption that the Company will generate
      sufficient income to utilize the tax benefit. The Company has incurred losses
      since its inception. The Company has unused net operating losses available
      for carryforwards of approximately $18,050,000 that will start to expire
      in 2019.

-19-

---



SULPHCO, INC.
  (A Company in the Development Stage)NOTES TO FINANCIAL STATEMENTS
  December 31, 2003, and 2002

|10. | Fair
      Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Financial
      Accounting Standards Board SFAS No. 107, Disclosure About Fair Value
      of Financial Instruments is a part of a continuing process by the
      FASB to improve information on financial statements. The following methods
      and assumptions were used by the Company in estimating its fair value disclosures
      for such financial instruments as defined by the Statement.
|    |                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The carrying
      amounts reported in the balance sheets for accounts receivable approximate
      fair value due to their short-term nature. Notes payable approximate fair
      value as their stated interest rates approximate a market rate available
      to the Company.                                                                                                                       

|11. | Subsequent
      Events                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                          
|    | In January
      2004 the Company issued 500,000 shares to the Chairman and 500,000 shares
      to a related party in lieu of prepaid interest of $296,000 on the notes
      payable to them.                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Also in January
      2004 the Company filed suit for the remittance of $737,000, the balance
      of the stock subscription that is in dispute (See Note 9)                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                          
|    | In February
      2004 the Company extended their lease term for an additional one year to
      March 3, 2005.                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                          
|    | In March
      2004 the Company issued the 50,000 shares subscribed at $0.42 per share
      to a director for director fees of $21,000.                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                          
|    | Also in March
      2004, the Company retired the note payable to a related party in the amount
      of $250,000 (See Note 3).                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                          
|    | On June 3,
      2004 the Company entered into a securities purchase agreement to sell up
      to $2.6 million of units of its securities in a private placement to
      certain institutional and individual investors. As of the close of business
      on June 3, 2004, the Company
      completed the initial closing of the private placement and received approximately
      $1,300,000 of the

-20-

---



SULPHCO, INC.(A Company in the Development
  Stage)NOTES TO FINANCIAL
  STATEMENTSDecember 31, 2003,
  and 2002

| | On June 15,
      2004, entered into a securities purchase agreement to sell up to $2.5 million of
      units of its securities in a private placement to certain institutional
      and individual investors. As of the close of business on June
      15, 2004, the Company completed the initial closing of the private
      placement and received approximately $1,250,000 of the total.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                  

-21-








ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

AssignedNumber

Description**(3)(i)

Restated Articles of Incorporation of SulphCo, Inc. as filed on December 30,
2003 with the Nevada Secretary of State.*(3)(ii)
.
Amended and Restated By-laws of the Company*(10.1)

Executive Employment Agreement dated as of February 17, 2003, by and between
SulphCo, Inc. and Kirk S. Schumacher.**(10.2)

2003 Non-Officer Limited Stock Appreciation Rights Plan.**(14)

Code of Ethics, adopted by the Board of Directors on March 12, 2004.(31.1)

Certifications of Chief Executive Officer pursuant to Rule 13a-14 under the
Securities Exchange Act of 1934.(31.2)

Certifications of Chief Financial Officer pursuant to Rule 13a-14 under the
Securities Exchange Act of 1934.(32.1)

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


_______________

*
Incorporated by reference from the Company's Form 10-QSB for the quarter ended
March 31, 2003 (SEC File No. 000-27599) as filed with the SEC on May 14,
2003.**
Incorporated by reference from the Company's Form 10-KSB for the year ended
December 31, 2003 (SEC File No. 000-27599) as filed with the SEC on March 29,
2004.









SIGNATURES

In accordance with Section 13 of the
Securities Exchange Act of 1934, the registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

SULPHCO, INC.June 29, 2004
By:
/s/ Rudolf W. GunnermanRudolf W. GunnermanChief Executive Officer




In accordance with the Exchange Act,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURE

POSITION

DATE/s/ Rudolf W. Gunnerman

Chairman of the Board of Directors,

June 29, 2004Rudolf W. Gunnerman

Chief Executive Officer(Principal Executive Officer)/s/ Kirk S. Schumacher

President, Secretary and Director

June 29, 2004Kirk S. Schumacher/s/ Patrick E. Lacy

Controller and Director

June 29, 2004Patrick E. Lacy

(Principal Financial andAccounting Officer)/s/ Harry P. Holman

Director

June 29, 2004Harry P. Holman/s/ Loren J. Kalmen

Director

June 29, 2004Loren J. Kalmen