----

----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-KSB/A**

**_____**

**Amendment      No. 1**

**For      the fiscal year ended December 31, 2005**

**001-32636**

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

| **Nevada**                                                                    | **88-0224817**                                         |
|-------------------------------------------------------------------------------|--------------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) | (I.R.S.                Employer Identification Number) |

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

**(775)      829-1310**

** **

**Common      Stock, Par Value $0.001 Per Share**

**None**

----

----

**EXPLANATORY      NOTE **

|   | · | Footnote                1 to the financial statements “Organization and Significant Accounting                Policies” is expanded to include sections for Stock Option Expenses to                Non-Employees and                Reclassifications. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                deferred tax asset and related valuation allowance at December 31,                2005                are decreased by $20,606 and footnote 6 to the financial statements                “Income Taxes” is revised. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Footnote                12 to the financial statements “Stock Options” and footnote 17 “New                Accounting Pronouncements” are                enhanced. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Footnote                18 to the financial statements “Subsequent Events” is modified to                correctly report the number of shares issued and proceeds received                in the                first quarter of 2006. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM      7. FINANCIAL STATEMENTS**

----

**ITEM      13. EXHIBITS **

|                  |                                                                                                                                                                     |
|-----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                                                                                     |
| 3.1*                  | Restated                Articles of Incorporation, as filed on December 30, 2003, with the                Nevada                Secretary of State.                      |
|                  |                                                                                                                                                                     |
| 3.2                ** | Amended                and Restated Bylaws.                                                                                                                              |
|                  |                                                                                                                                                                     |
| 4.1+                  | Form                of Additional Investment Rights initially issued on June 3,                2004.                                                                     |
|                  |                                                                                                                                                                     |
| 4.2++                 | Form                of Additional Investment Rights initially issued on June 15,                2004.                                                                    |
|                  |                                                                                                                                                                     |
| 4.3+                  | Form                of Warrant initially issued on June 3, 2004.                                                                                                         |
|                  |                                                                                                                                                                     |
| 4.4++                 | Form                of Warrant initially issued on June 15, 2004.                                                                                                        |
|                  |                                                                                                                                                                     |
| 4.5#                  | Form                of Warrant dated November 11, 2004, issued to Rubenstein Public Relations,                Inc.                                                       |
|                  |                                                                                                                                                                     |
| 4.6***                | Form                of Warrant dated March 29, 2006.                                                                                                                     |
|                  |                                                                                                                                                                     |
| 10.1*                 | 2003                Non-Officer Limited Stock Appreciation Rights Plan.                                                                                                  |
|                  |                                                                                                                                                                     |
| 10.2+                 | Securities                Purchase Agreement dated as of June 1, 2004, by and between SulphCo,                Inc.                and the Purchasers parties thereto.    |
|                  |                                                                                                                                                                     |
| 10.3++                | Securities                Purchase Agreement dated as of June 14, 2004, by and between SulphCo,                Inc.                and the Purchasers parties thereto.   |
|                  |                                                                                                                                                                     |
| 10.4#                 | Engagement                Agreement dated July 1, 2004, by and between SulphCo, Inc. and RWG,                Inc.                                                        |
|                  |                                                                                                                                                                     |
| 10.5#                 | Promissory                Note dated December 30, 2003, from SulphCo, Inc. to Rudolf W. Gunnerman                and Doris Gunnerman.                                    |
|                  |                                                                                                                                                                     |
| 10.6#                 | Promissory                Note dated December 30, 2003, from SulphCo, Inc. to Erika                Herrmann.                                                             |
|                  |                                                                                                                                                                     |
| 10.7#                 | Letter                dated April 28, 2004, from Rudolf W. Gunnerman to SulphCo,                Inc.                                                                     |
|                  |                                                                                                                                                                     |
| 10.8#                 | Promissory                Note dated April 28, 2004, from SulphCo, Inc. to Rudolf W.                Gunnerman.                                                           |
|                  |                                                                                                                                                                     |
| 10.9#                 | Finder’s                Fee Agreement made as of May 11, 2004 between SulphCo, Inc. and Vantage                Investments Group, Inc.                             |
|                  |                                                                                                                                                                     |
| 10.10#                | Letter                Agreement dated May 28, 2004 between SulphCo, Inc. and Olympus Securities,                LLC.                                                     |
|                  |                                                                                                                                                                     |
| 10.11#                | Engagement                Agreement dated July 1, 2004, by and between SulphCo, Inc. and RWG,                Inc.                                                        |
|                  |                                                                                                                                                                     |
| 10.12#                | Consulting                Agreement dated July 15, 2004, by and between SulphCo, Inc. and InteSec                Group LLC.                                              |
|                  |                                                                                                                                                                     |
| 10.13#                | Collaboration                Agreement dated August 6, 2004, by and between SulphCo, Inc. and                ChevronTexaco Energy Technology Company.                    |
|                  |                                                                                                                                                                     |
| 10.14#                | Contract                for Establishment of a Limited Liability Company (SulphCo Oil Technologies                Kuwait).                                               |
|                  |                                                                                                                                                                     |
| 10.15#                | Loan                Extension Agreement, dated for reference the 12th                day of December, 2004, between Rudolf W. Gunnerman and SulphCo,                Inc. |

----

| 10.16#    | Loan                Extension Agreement, dated for reference the 12th                day of December, 2004, between Erika Herrmann and SulphCo,                Inc.                                                                     |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |                                                                                                                                                                                                                                    |
| 10.17(1)  | Separation                Agreement and General Release dated as of December 28, 2004, by and                between SulphCo, Inc. and Kirk S. Schumacher.                                                                              |
|      |                                                                                                                                                                                                                                    |
| 10.18(2)  | Letter                Agreement dated as of January 6, 2005, by and between SulphCo, Inc.                and                Alan L. Austin, Jr.                                                                                         |
|      |                                                                                                                                                                                                                                    |
| 10.19(3)  | Promissory                Note from SulphCo, Inc. to Rudolf W. Gunnerman dated December 31,                2004.                                                                                                                        |
|      |                                                                                                                                                                                                                                    |
| 10.20#    | Letter                Agreement dated February 4, 2005, by and between SulphCo, Inc. and                ChevronTexaco Energy Technology Company.                                                                                        |
|      |                                                                                                                                                                                                                                    |
| 10.21(4)  | Agreement                dated February 22, 2005, by and between SulphCo, Inc. and OIL-SC,                Ltd.                                                                                                                          |
|      |                                                                                                                                                                                                                                    |
| 10.22(5)  | Letter                Agreement dated April 27, 2005, by and between SulphCo, Inc. and                ChevronTexaco Energy Technology Company.                                                                                          |
|      |                                                                                                                                                                                                                                    |
| 10.23(6)  | Employment                Agreement dated as of June 1, 2005, by and between SulphCo, Inc.                and Peter                Gunnerman.                                                                                           |
|      |                                                                                                                                                                                                                                    |
| 10.24(7)  | Test                Agreement by and between SulphCo, Inc. and Total France entered into                on                October 10, 2005.                                                                                             |
|      |                                                                                                                                                                                                                                    |
| 10.25(8)  | Employment                  agreement with Loren J. Kalmen dated November 10,                  2005.                                                                                                                                    |
|      |                                                                                                                                                                                                                                    |
| 10.26(9)  | Letter                Agreement by and between SulphCo and OIL-SC and dated as of November                9,                2005.                                                                                                       |
|      |                                                                                                                                                                                                                                    |
| 10.27(10) | Memorandum                of Association dated November 29, 2005, by and between SulphCo, Inc.                and                Trans Gulf Petroleum Co., a Government of Fujairah                company.                             |
|      |                                                                                                                                                                                                                                    |
| 10.28(11) | Employment                Agreement, dated as of January 1, 2006, by and between SulphCo, Inc.                and                Michael Applegate.                                                                                     |
|      |                                                                                                                                                                                                                                    |
| 10.29(12) | 2nd                Loan Extension and Modification Agreement by and between SulphCo,                Inc. and                Dr. Rudolf W. Gunnerman and Doris Gunnerman entered into on January                30,                2006. |
|      |                                                                                                                                                                                                                                    |
| 10.30***  | Securities                Purchase Agreement dated as of March 29, 2006, by and between SulphCo,                Inc. and the Purchasers parties thereto.                                                                                |
|      |                                                                                                                                                                                                                                    |
| 14*       | Code                of Ethics adopted by the Board of Directors on March 12,                2004.                                                                                                                                       |
|      |                                                                                                                                                                                                                                    |
| 16.1+++   | Letter                from Forbush and Associates to the SEC dated May 14,                2004.                                                                                                                                         |
|      |                                                                                                                                                                                                                                    |
| 31.1      | Certifications                pursuant to Rule 13a-14 under the Securities Exchange Act of                1934.                                                                                                                         |
|      |                                                                                                                                                                                                                                    |
| 31.2      | Certifications                pursuant to Rule 13a-14 under the Securities Exchange Act of                1934.                                                                                                                         |
|      |                                                                                                                                                                                                                                    |
| 32.1      | Certification                of CEO and CFO Pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to 906 of                the Sarbanes-Oxley Act of 2002.                                                                             |

----

----

**SIGNATURES**

|                        |                                                                                                                |                                                   |
|-----------------------------|---------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|
|                        | SULPHCO,              INC.                                                                                          |
|                   |                                                                                                           |                                              |
| April              28, 2006 | By:                                                                                                       | /s/ Rudolf              W.              Gunnerman |
|                        | Rudolf                W. Gunnerman, Chairman                of the Board and Chief                Executive Officer |

| /s/                  Rudolf W. Gunnerman    |   | Chairman                  of the Board, Chief Executive |   | April                  28, 2006   |
|---------------------------------------------|--------|---------------------------------------------------------|--------|-----------------------------------|
| Rudolf                  W. Gunnerman        |   | Officer,                  Director                      |   |                              |
|                                        |   | (Principal                  Executive Officer)          |   |                              |
|                                        |   |                                                    |   |                              |
| /s/                  Loren J. Kalmen   |   | Chief                  Financial Officer                |   | April                  28, 2006   |
| Loren                  J. Kalmen            |   | (Principal                  Financial Officer and       |   |                              |
|                                        |   | Principal                  Accounting Officer)          |   |                              |
|                                        |   |                                                    |   |                              |
| /s/                  Richard L. Masica      |   | Director                                                |   | April                    28, 2006 |
| Richard                  L. Masica          |   |                                                    |   |                              |
|                                        |   |                                                    |   |                              |
| /s/                  Raad Alkadiri          |   | Director                                                |   | April                    28, 2006 |
| Raad                  Alkadiri              |   |                                                    |   |                              |
|                                        |   |                                                    |   |                              |
| /s/                  Hannes Farnleitner     |   | Director                                                |   | April                    28, 2006 |
| Hannes                  Farnleitner         |   |                                                    |   |                              |
|                                        |   |                                                    |   |                              |
| /s/                  Christoph Henkel       |   | Director                                                |   | April                    28, 2006 |
| Christoph                  Henkel           |   |                                                    |   |                              |
|                                        |   |                                                    |   |                              |
| /s/                  Michael T. Heffner     |   | Director                                                |   | April                    28, 2006 |
| Michael                  T. Heffner         |   |                                                    |   |                              |

----

----

| Independent                  Auditor’s Report                        | F-3    |
|----------------------------------------------------------------------------|--------|
|                                                                       |   |
| Report                  of Mark Bailey & Co. LLP, Independent Auditors | F-4    |
|                                                                       |   |
| Balance                  Sheet                                             | F-5    |
|                                                                       |   |
| Statements                  of Operations                                  | F-6    |
|                                                                       |   |
| Statement                  of Changes in Stockholders’ Equity        | F-7    |
|                                                                       |   |
| Statements                  of Cash Flows                                  | F-12   |
|                                                                       |   |
| Notes                  to Financial Statements                             | F-13   |

----

----

**.          **

----

**SULPHCO,        INC.**

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

**BALANCE          SHEET**

**December          31, 2005**

|                                                                                                                                                 |   | **December                  31, 2005**  |        |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-------------|
|                                                                                                                                                 |   |                                         |        |
| **Current                  Assets:**                                                                                                                 |   |                                         |        |   |
| Cash                  and cash equivalents                                                                                                           |   | $                                            | 6,874,653   |   |
| Prepaid                  expenses and other                                                                                                          |   |                                         | 137,577     |   |
|                                                                                                                                                 |   |                                         |        |   |
| Total                  current assets                                                                                                                |   |                                         | 7,012,230   |   |
|                                                                                                                                                 |   |                                         |        |   |
|                                                                                                                                                 |   |                                         |        |   |
|                                                                                                                                                 |   |                                         |        |   |
| **Property                  and Equipment (net of accumulated depreciation of                  $828,140)**** **(Notes                  2&3) |   |                                         | 397,416     |   |
|                                                                                                                                                 |   |                                         |        |   |
| **Other                  Assets**                                                                                                                    |   |                                         |        |   |
| Intangible                  assets (net of accumulated amortization of $17,422) (Note                  4)                                            |   |                                         | 355,218     |   |
| Investment                  in Joint Venture (Note 5)                                                                                                |   |                                         | 139,550     |   |
| Deposits                                                                                                                                             |   |                                         | 140,822     |   |
| Deferred                  tax asset (net of valuation allowance of $7,116,368) (Note                  6)                                             |   |                                         | -           |   |
|                                                                                                                                                 |   |                                         |        |   |
| Total                  other assets                                                                                                                  |   |                                         | 635,590     |   |
|                                                                                                                                                 |   |                                         |        |   |
| Total                  assets                                                                                                                        |   | $                                            | 8,045,236   |   |
|                                                                                                                                                 |   |                                         |        |   |
| **Current                  Liabilities**                                                                                                             |   |                                         |        |   |
| Accounts                  payable and accrued liabilities                                                                                            |   | $                                            | 779,413     |   |
| Refundable                  deposit (Note 7)                                                                                                         |   |                                         | 550,000     |   |
| Accrued                  fees and interest (Note 8)                                                                                                  |   |                                         | 1,035,572   |   |
| Related                  party note payable (Note 9)                                                                                                 |   |                                         | 500,000     |   |
|                                                                                                                                                 |   |                                         |        |   |
| Total                  current liabilities                                                                                                           |   |                                         | 2,864,985   |   |
|                                                                                                                                                 |   |                                         |        |   |
| **Long                  Term Related Party Note Payable**                  (Note 9)                                                                  |   |                                         | 7,000,000   |   |
|                                                                                                                                                 |   |                                         |        |   |
| **Commitments                  and Contingencies**                  (Note 10)                                                                        |   |                                         | -           |   |
|                                                                                                                                                 |   |                                         |        |   |
| Total                  liabilities                                                                                                                   |   |                                         | 9,864,985   |   |
|                                                                                                                                                 |   |                                         |        |   |
| **Stockholders'                  Deficiency**                                                                                                        |   |                                         |        |   |
| Preferred                  stock: 10,000,000 shares authorized ($0.001 par value) none                  issued                                       |   |                                         | -           |   |
| Common                  stock: 100,000,000 shares authorized ($0.001 par value)                                                                      |   |                                         |        |   |
| 60,536,795                  shares issued and outstanding at December 31, 2005                                                                       |   |                                         | 60,537      |   |
| Paid                  in capital                                                                                                                     |   |                                         | 30,604,342  |   |
| Stock                  subscriptions receivable (Note 13)                                                                                            |   |                                         | (744,500    | ) |
| Deficit                  accumulated during the development stage                                                                                    |   |                                         | (31,740,128 | ) |
|                                                                                                                                                 |   |                                         |        |   |
| Total                  stockholders' deficiency                                                                                                      |   |                                         | (1,819,749  | ) |
|                                                                                                                                                 |   |                                         |        |   |
| Total                  liabilities and stockholders' deficiency                                                                                      |   | $                                            | 8,045,236   |   |

----

**SULPHCO,        INC.**

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

**STATEMENT          OF OPERATIONS**

**For          the Years Ended December 31, 2005 and 2004 and from          Inception**

|                                                                 |   |     |       |     |   |                         |   |
|----------------------------------------------------------------------|--------|----------|------------|----------|--------|------------------------------|--------|
|                                                                 |   |     |       |     |   | **Inception**                |   |
|                                                                 |   | **2005** |       | **2004** |   | **to                  date** |   |
|                                                                 |   |     |       |     |   |                         |   |
| **Revenue**                                                          |   |     |       |     |   |                         |   |   |   |   |
| Sales                                                           |   | $        | -          |     | $      | -                            |   | $ | 42,967 |   |
|                                                                 |   |     |       |     |   |                         |   |   |   |   |
| **Expenses**                                                         |   |     |       |     |   |                         |   |   |   |   |
| Selling,                  general, and administrative expenses  |   |     | (6,790,998 | )        |   | (3,453,357                   | )      |   | (26,891,114 | ) |
| Research                  and development expenses              |   |     | (1,442,096 | )        |   | (407,613                     | )      |   | (3,182,809 | ) |
| Loss                  on disposal of asset                      |   |     | -          |     |   | -                            |   |   | (221,711 | ) |
| Loss                  on impairment of asset                    |   |     | (233,900   | )        |   | -                            |   |   | (233,900 | ) |
|                                                                 |   |     |       |     |   |                         |   |   |   |   |
|  Total                  operating expenses                      |   |     | (8,466,994 | )        |   | (3,860,970                   | )      |   | (30,529,534 | ) |
|                                                                 |   |     |       |     |   |                         |   |   |   |   |
|  Loss                  from operations                          |   |     | (8,466,994 | )        |   | (3,860,970                   | )      |   | (30,486,567 | ) |
|                                                                 |   |     |       |     |   |                         |   |   |   |   |
| **Other                  income (expense)**                          |   |     |       |     |   |                         |   |   |   |   |
| Interest                  income                                |   |     | 193,987    |     |   | 17,303                       |   |   | 250,599 |   |
| Interest                  expense                               |   |     | (395,123   | )        |   | (302,786                     | )      |   | (743,920 | ) |
| Late                  registration fees                         |   |     | (760,240   | )        |   | -                            |   |   | (760,240 | ) |
|                                                                 |   |     |       |     |   |                         |   |   |   |   |
|  Loss                  before taxes on income                   |   |     | (9,428,370 | )        |   | (4,146,453                   | )      |   | (31,740,128 | ) |
|                                                                 |   |     |       |     |   |                         |   |   |   |   |
| Income                  tax benefit (provision)                      |   |     | -          |     |   | -                            |   |   | - |   |
|                                                                 |   |     |       |     |   |                         |   |   |   |   |
|  Net                  loss                                      |   | $        | (9,428,370 | )        | $      | (4,146,453                   | )      | $ | (31,740,128 | ) |
|                                                                 |   |     |       |     |   |                         |   |   |   |   |
|                                                                 |   |     |       |     |   |                         |   |   |   |   |
| Loss                  per share: basic and diluted                   |   | $        | (0.17      | )        | $      | (0.08                        | )      | $ | (0.83 | ) |
|                                                                 |   |     |       |     |   |                         |   |   |   |   |
| Weighted                  average shares                             |   |     |       |     |   |                         |   |   |   |   |
| basic                  and diluted                              |   |     | 56,973,284 |     |   | 53,713,346                   |   |   | 38,086,044 |   |

----

|                                                          |   | **Common                    Stock** |       | **Additional****Paid-in** |   | **Accumulated** |   | **Stock                      issued****for prepaid** |      | **Stock                      issued****for prepaid** |   | **Related                    party** |   | **Common****Stock** |   | **Stock****Subscriptions** |   | **Total**      |   |
|---------------------------------------------------------------|--------|-------------------------------------|------------|---------------------------|--------|-----------------|--------|------------------------------------------------------|-----------|------------------------------------------------------|--------|--------------------------------------|--------|---------------------|--------|----------------------------|--------|----------------|--------|
|                                                          |   | **Shares**                          |       | **Amount**                |   | **Capital**     |   | **Deficit**                                          |      | **interest**                                         |   | **expenses**                         |   | **receivable**      |   | **Subscribed**             |   | **Receivable** |   | **Equity** |   |
| Balance,                    January 13, 1999                  |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for cash at $167 per share    |   |                                | 1,000      |                      | $      | 1               |   | $                                                    | 166,999   |                                                 | $      | -                                    |   | $                   | -      |                       | $      | -              |   | $ | - |   | $ | - |   | $ | - |   | $ | 167,000 |   |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restatement                    for recapitalization GRD, Inc. |   |                                | 19,999,000 |                      |   | 19,999          |   |                                                 | (19,999   | )                                                    |   | -                                    |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | - |   |   | - |   |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    loss                                   |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   | (128,802                             | )      |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | (128,802 | ) |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 1999               |   |                                | 20,000,000 |                      | $      | 20,000          |   | $                                                    | 147,000   |                                                 | $      | (128,802                             | )      | $                   | -      |                       | $      | -              |   | $ | - |   | $ | - |   | $ | - |   | $ | 38,198 |   |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Contributions                    from stockholders            |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    December 2000                           |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                          |   |                                |       |                      |   |            |   |                                                 | 169,168   |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 169,168 |   |
| Equipment                                                     |   |                                |       |                      |   |            |   |                                                 | 362,331   |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 362,331 |   |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Acquisition                    of GRD, Inc.                   |   |                                | 1,200,000  |                      |   | 1,200           |   |                                                 | (251,200  | )                                                    |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | (250,000 | ) |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for cash and subscription     |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| receivable                    at $0.50 per share              |   |                                | 820,000    |                      |   | 820             |   |                                                 | 409,180   |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | (208,500 | ) |   | 201,500 |   |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    options granted at $.50 per share    |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    December 2000                           |   |                                |       |                      |   |            |   |                                                 | 919,401   |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 919,401 |   |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    options granted at $1.50 per share   |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    December 2000                           |   |                                |       |                      |   |            |   |                                                 | 94,799    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 94,799 |   |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    loss                                   |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   | (1,364,393                           | )      |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | (1,364,393 | ) |
|                                                          |   |                                |       |                      |   |            |   |                                                 |      |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2000               |   |                                | 22,020,000 |                      | $      | 22,020          |   | $                                                    | 1,850,679 |                                                 | $      | (1,493,195                           | )      | $                   | -      |                       | $      | -              |   | $ | - |   | $ | - |   | $ | (208,500 | ) | $ | 171,004 |   |

----

**SULPHCO,              INC.**

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

**STATEMENT                OF CHANGES IN STOCKHOLDERS' DEFICIENCY**

**From                Inception through December 31, 2005**

|                                                             |   | **Common                    Stock** |       | **Additional****Paid-in** |   | **Accumulated** |   | **Stock****issued****for                    prepaid** |       | **Stock                      issued****for prep**aid |   | **Related                    party** |   | **Common****Stock** |   | **Stock****Subscriptions** |   | **Total**      |   |
|------------------------------------------------------------------|--------|-------------------------------------|------------|---------------------------|--------|-----------------|--------|-------------------------------------------------------|------------|------------------------------------------------------|--------|--------------------------------------|--------|---------------------|--------|----------------------------|--------|----------------|--------|
|                                                             |   | **Shares**                          |       | **Amount**                |   | **Capital**     |   | **Deficit**                                           |       | **interest**                                         |   | **expenses**                         |   | **receivable**      |   | **Subscribed**             |   | **Receivable** |   | **Equity** |   |
| Stock                    issued for intangible assets at $4.25   |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| per                    share in January 2001                     |   |                                | 292,800    |                      |   | 293             |   |                                                  | 1,244,107  |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 1,244,400 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for intangible assets at $2.85   |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| per                    share in February 2001                    |   |                                | 400,000    |                      |   | 400             |   |                                                  | 1,139,600  |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 1,140,000 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    sold to a related party at $1.47        |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| per                    share February 2001                       |   |                                | 24,750     |                      |   | 25              |   |                                                  | 36,431     |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 36,456 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for marketing services           |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $2.86 per share April 2001                 |   |                                | 200,000    |                      |   | 200             |   |                                                  | 571,800    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 572,000 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance                    of options to related parties for    |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| services                    in June 2001                         |   |                                |       |                      |   |            |   |                                                  | 773,931    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 773,931 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued in exchange for notes receivable |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $0.50 per share in May 2001                |   |                                | 9,556,000  |                      |   | 9,556           |   |                                                  | 4,768,444  |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | (4,778,000 | ) |   | - |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued in exchange for notes receivable |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $1.50 per share in June 2001               |   |                                | 425,000    |                      |   | 425             |   |                                                  | 637,075    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | (637,500 | ) |   | - |   |
| -                                                                |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    sold for cash at $2.94 per share        |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    June 2001                                  |   |                                | 100,000    |                      |   | 100             |   |                                                  | 293,900    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 294,000 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for a note receivable at $1.41   |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| per                    share in June 2001                        |   |                                | 200,000    |                      |   | 200             |   |                                                  | 281,800    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | (282,000 | ) |   | - |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a related party for cash at   |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.50                    per share in June 2001                  |   |                                | 350,000    |                      |   | 350             |   |                                                  | 174,650    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 175,000 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                    received for subscription in July 2001   |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | 282,000 |   |   | 282,000 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                    received for subscriptions               |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    August 2001                                |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | 340,000 |   |   | 340,000 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for subscription receivable      |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $0.725 per share in September 2001         |   |                                | 2,758,620  |                      |   | 2,759           |   |                                                  | 1,997,241  |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | (2,000,000 | ) |   | - |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a related party for           |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| consulting                    fees at $0.85 per share            |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    November 2001                              |   |                                | 4,000,000  |                      |   | 4,000           |   |                                                  | 3,396,000  |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 3,400,000 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    returned in November 2001               |   |                                | (300,000   | )                         |   | (300            | )      |                                                  | (1,558,147 | )                                                    |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | 784,500 |   |   | (773,947 | ) |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                    received for subscriptions               |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   | -                                    |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | 200,000 |   |   | 200,000 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    returned in December 2001               |   |                                | (100,000   | )                         |   | (100            | )      |                                                  | (49,900    | )                                                    |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   | 50,000 |   |   | - |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    options issued at a weighted            |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average                    issue price of $0.75 per share        |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    October 2001                               |   |                                |       |                      |   |            |   |                                                  | 89,020     |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 89,020 |   |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    loss                                      |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   | (6,927,525                           | )      |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | (6,927,524 | ) |
|                                                             |   |                                |       |                      |   |            |   |                                                  |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2001                  |   |                                | 39,927,170 |                      | $      | 39,928          |   | $                                                     | 15,646,632 |                                                 | $      | (8,420,720                           | )      | $                   | -      |                       | $      | -              |   | $ | - |   | $ | - |   | $ | (6,249,500 | ) | $ | 1,016,340 |   |

----

**SULPHCO,                INC.**

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

**STATEMENT                  OF CHANGES IN STOCKHOLDERS' DEFICIENCY**

**From                  Inception through December 31, 2005**

|                                                           |   | **Common                    Stock** |       | **Additional****Paid-in** |   | **Accumulated** |   | **Stock                      issued****for prepaid** |       | **Stock                      issued****for prepaid** |   | **Related                    party** |   | **Common****Stock** |     | **Stock****Subscriptions** |   | **Total**      |   |
|----------------------------------------------------------------|--------|-------------------------------------|------------|---------------------------|--------|-----------------|--------|------------------------------------------------------|------------|------------------------------------------------------|--------|--------------------------------------|--------|---------------------|----------|----------------------------|--------|----------------|--------|
|                                                           |   | **Shares**                          |       | **Amount**                |   | **Capital**     |   | **Deficit**                                          |       | **interest**                                         |   | **expenses**                         |   | **receivable**      |     | **Subscribed**             |   | **Receivable** |   | **Equity** |   |
| Stock                    issued for related party services     |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $0.50 per share in March 2002            |   |                                | 10,000,000 |                      |   | 10,000          |   |                                                 | 4,990,000  |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 5,000,000 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    returned in May 2002                  |   |                                | (1,000,000 | )                         |   | (1,000          | )      |                                                 | (499,000   | )                                                    |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   | 500,000 |   |   | - |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    returned in June 2002                 |   |                                | (100,000   | )                         |   | (100            | )      |                                                 | (71,900    | )                                                    |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   | 72,000 |   |   | - |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    returned in July 2002                 |   |                                | (25,000    | )                         |   | (25             | )      |                                                 | (37,475    | )                                                    |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   | 37,500 |   |   | - |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Payment                    on stock subscription received      |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    July 2002                                |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   | 515,500 |   |   | 515,500 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    returned in July 2002                 |   |                                | (1,000,000 | )                         |   | (1,000          | )      |                                                 | (499,000   | )                                                    |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   | 500,000 |   |   | - |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for services at $0.10 per      |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                    in September 2002                     |   |                                | 50,000     |                      |   | 50              |   |                                                 | 4,950      |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 5,000 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    returned in September 2002            |   |                                | (431,000   | )                         |   | (431            | )      |                                                 | (440,069   | )                                                    |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | (440,500 | ) |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for services at $0.27 per      |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                    in October 2002                       |   |                                | 50,000     |                      |   | 50              |   |                                                 | 13,450     |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 13,500 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    Options issued in November 2002       |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| for                    $0.10 per share (restated)              |   |                                |       |                      |   |            |   |                                                 | 31,500     |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 31,500 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a related party for cash at |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.10                    per share in November 2002            |   |                                | 100,000    |                      |   | 100             |   |                                                 | 9,900      |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 10,000 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a related party for cash at |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.10                    per share in December 2002            |   |                                | 50,000     |                      |   | 50              |   |                                                 | 4,950      |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 5,000 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    loss (restated)                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   | (6,573,627                           | )      |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | (6,573,627 | ) |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2002                |   |                                | 47,621,170 |                      | $      | 47,621          |   | $                                                    | 19,153,938 |                                                 | $      | (14,994,346                          | )      | $                   | -        |                       | $      | -              |   | $ | - |   | $ | - |   | $ | (4,624,500 | ) | $ | (417,287 | ) |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    subscribed for services at $0.42 per  |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                    in February 2003                      |   |                                |       |                      |   |            |   |                                                 | 20,950     |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   | 50 |   |   |   |   |   | 21,000 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Payment                    on stock subscription               |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| received                    in February 2003                   |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   | 3,575,000 |   |   | 3,575,000 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a related party for cash at |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.33                    per share in March 2003               |   |                                | 50,000     |                      |   | 50              |   |                                                 | 16,450     |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 16,500 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for services at $0.32 per      |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                    in June 2003                          |   |                                | 50,000     |                      |   | 50              |   |                                                 | 15,950     |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 16,000 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    returned in August 2003               |   |                                | (196,870   | )                         |   | (197            | )      |                                                 | (196,678   | )                                                    |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   | 196,875 |   |   | - |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    returned in September 2003            |   |                                | (3,130     | )                         |   | (3              | )      |                                                 | (3,322     | )                                                    |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   | 3,325 |   |   | - |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a related party for cash at |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.23                    per share in November 2003            |   |                                | 2,173,913  |                      |   | 2,174           |   |                                                 | 497,826    |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 500,000 |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    returned in December 2003             |   |                                | (25,000    | )                         |   | (25             | )      |                                                 | (37,275    | )                                                    |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   | 37,300 |   |   | - |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    subscribed for prepaid interest to a  |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| related                    party at $0.296 per share           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    December 2003 (Note 14)                  |   |                                |       |                      |   |            |   |                                                 | 295,000    |                                                 |   |                                 |   |                | (296,000 | )                          |   |           |   |   |   |   |   | 1,000 |   |   |   |   |   | - |   |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    loss                                    |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   | (3,170,959                           | )      |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | (3,170,959 | ) |
|                                                           |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |     |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                    at December 31, 2003                |   |                                | 49,670,083 |                      |   | 49,670          |   |                                                 | 19,762,839 |                                                 | $      | (18,165,305                          | )      | $                   | (296,000 | )                          | $      | -              |   | $ | - |   | $ | 1,050 |   | $ | (812,000 | ) | $ | 540,254 |   |

----

**SULPHCO,                INC.**

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

**STATEMENT                  OF CHANGES IN STOCKHOLDERS' DEFICIENCY**

**From                  Inception through December 31, 2005**

|                                                            |   | **Common                    Stock** |       | **Additional****Paid-in** |   | **Accumulated** |   | **Stock                      issued****for prepaid** |       | **Stock                      issued****for prepaid** |   | **Related                    party** |   | **Common****Stock** |    | **Stock****Subscriptions** |   | **Total**      |   |
|-----------------------------------------------------------------|--------|-------------------------------------|------------|---------------------------|--------|-----------------|--------|------------------------------------------------------|------------|------------------------------------------------------|--------|--------------------------------------|--------|---------------------|---------|----------------------------|--------|----------------|--------|
|                                                            |   | **Shares**                          |       | **Amount**                |   | **Capital**     |   | **Deficit**                                          |       | **interest**                                         |   | **expenses**                         |   | **receivable**      |    | **Subscribed**             |   | **Receivable** |   | **Equity** |   |
| Restricted                    stock issued for                  |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest                    on notes at $0.296 per share        |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in                    January 2004.                             |   |                                | 1,000,000  |                      |   | 1,000           |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   | (1,000 | ) |   |   |   |   | - |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for services at $0.85 per       |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                    in January 2004                        |   |                                | 100,000    |                      |   | 100             |   |                                                 | 84,900     |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 85,000 |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issued                    subscribed stock at $0.42 per         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                    in March 2004                          |   |                                | 50,000     |                      |   | 50              |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   | (50 | ) |   |   |   |   | - |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Private                    placement stock issuance at $0.90    |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| per                    share in June 2004 (See Note 11 for      |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| attached                    rights and warrants)                |   |                                | 2,978,342  |                      |   | 2,978           |   |                                                 | 2,677,530  |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 2,680,508 |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Private                    placement stock issuance at $1.25    |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| per                    share in June 2004 (See Note 11 for      |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| attached                    rights and warrants)                |   |                                | 2,030,960  |                      |   | 2,031           |   |                                                 | 1,896,912  |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 1,898,943 |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    options exercised at $0.55 per         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                    in July 2004                           |   |                                | 200,000    |                      |   | 200             |   |                                                 | 109,800    |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 110,000 |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    options exercised at $0.35 per         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                    in July 2004                           |   |                                | 100,000    |                      |   | 100             |   |                                                 | 34,900     |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 35,000 |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued for services at $2.86 per       |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                    in August 2004                         |   |                                | 45,000     |                      |   | 45              |   |                                                 | 128,655    |                                                 |   |                                 |   |                |    |                       |   | (128,700       | )      |   |   |   |   |   |   |   |   |   |   | - |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cancellation                    of subscribed stock at $1.50    |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| per                    share in September 2004                  |   |                                | (45,000    | )                         |   | (45             | )      |                                                 | (67,455    | )                                                    |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   | 67,500 |   |   | - |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    options exercised at $0.55 per         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| share                    in December 2004                       |   |                                | 300,000    |                      |   | 300             |   |                                                 | 164,700    |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 165,000 |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                    of prepaid interest             |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                | 296,000 |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 296,000 |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                    of prepaid expenses             |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   | 53,625         |   |   |   |   |   |   |   |   |   |   |   | 53,625 |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Contribution                    from related party stockholder  |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| of                    option given former employee to buy       |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 100,000                    shares at $0.55 per share            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Note                    12)                                    |   |                                |       |                      |   |            |   |                                                 | 555,000    |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 555,000 |   |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related                    party receivable for tax withholding |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| on                    exercise of stock options                 |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   | (257,750 | ) |   |   |   |   |   |   |   | (257,750 | ) |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    loss                                     |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   | (4,146,453                           | )      |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | (4,146,453 | ) |
|                                                            |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |    |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                    December 31, 2004                    |   |                                | 56,429,385 |                      | $      | 56,429          |   | $                                                    | 25,347,781 |                                                 | $      | (22,311,758                          | )      | $                   | -       |                       | $      | (75,075        | )      | $ | (257,750 | ) | $ | - |   | $ | (744,500 | ) | $ | 2,015,127 |   |

----

**SULPHCO,                INC.**

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

**STATEMENT                  OF CHANGES IN STOCKHOLDERS' DEFICIENCY**

**From                  Inception through December 31, 2005**

|                                                         |   | **Common                    Stock** |       | **Additional****Paid-in** |   | **Accumulated** |   | **Stock                      issued****for prepaid** |       | **Stock                      issued****for prepaid** |   | **Related                    party** |   | **Common****Stock** |   | **Stock****Subscriptions** |   | **Total**      |   |
|--------------------------------------------------------------|--------|-------------------------------------|------------|---------------------------|--------|-----------------|--------|------------------------------------------------------|------------|------------------------------------------------------|--------|--------------------------------------|--------|---------------------|--------|----------------------------|--------|----------------|--------|
|                                                         |   | **Shares**                          |       | **Amount**                |   | **Capital**     |   | **Deficit**                                          |       | **interest**                                         |   | **expenses**                         |   | **receivable**      |   | **Subscribed**             |   | **Receivable** |   | **Equity** |   |
| Stock                    issued to a Director for services   |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $5.47 per share in January 2005        |   |                                | 50,000     |                      | $      | 50              |   |                                                 | 273,450    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 273,500 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to an Officer for services   |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $4.08 per share in January 2005        |   |                                | 50,000     |                      | $      | 50              |   |                                                 | 203,950    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 204,000 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Receipt                    of related Party Receivables      |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| January                    2005                              |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   | 257,750 |   |   |   |   |   |   |   |   | 257,750 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a consultant for services |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $5.91 per share in April 2005          |   |                                | 15,000     |                      | $      | 15              |   |                                                 | 88,635     |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 88,650 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a Director for services   |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $4.99 per share in April 2005          |   |                                | 50,000     |                      | $      | 50              |   |                                                 | 249,450    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 249,500 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a Director for services   |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $3.54 per share in May 2005            |   |                                | 50,000     |                      | $      | 50              |   |                                                 | 176,950    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 177,000 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warrants                    and Additional Investment        |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rights                    ("AIR's") exercised - August 2005  |   |                                | 79,430     |                      | $      | 79              |   |                                                 | 81,151     |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 81,230 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warrants/AIR's                    exercised - September 2005 |   |                                | 83,230     |                      | $      | 83              |   |                                                 | 84,565     |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 84,648 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warrants/AIR's                    exercised - October 2005   |   |                                | 16,126     |                      | $      | 16              |   |                                                 | 21,812     |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 21,828 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warrants/AIR's                    exercised - November 2005  |   |                                | 585,244    |                      | $      | 585             |   |                                                 | 535,094    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 535,679 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a Director for services   |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $3.61 per share in November 2005       |   |                                | 50,000     |                      | $      | 50              |   |                                                 | 180,450    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 180,500 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock                    issued to a Director for services   |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at                    $6.40 per share in December 2005       |   |                                | 50,000     |                      | $      | 50              |   |                                                 | 319,950    |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 320,000 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warrants/AIR's                    exercised - December 2005  |   |                                | 3,028,380  |                      | $      | 3,028           |   |                                                 | 3,041,104  |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | 3,044,132 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization                    of prepaid expenses          |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   | 75,075         |   |   |   |   |   |   |   |   |   |   |   | 75,075 |   |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                    loss                                  |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   | (9,428,370                           | )      |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   | (9,428,370 | ) |
|                                                         |   |                                |       |                      |   |            |   |                                                 |       |                                                 |   |                                 |   |                |   |                       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                    December 31, 2005                 |   |                                | 60,536,795 |                      | $      | 60,537          |   | $                                                    | 30,604,342 |                                                 | $      | (31,740,128                          | )      | $                   | -      |                       | $      | -              |   | $ | - |   | $ | - |   | $ | (744,500 | ) | $ | (1,819,749 | ) |

----

**SULPHCO,              INC.**

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

**STATEMENT                OF CASH FLOWS**

**For                the Years Ended December 31, 2005 and 2004 and from                Inception**

|                                                                                                                                                                                     |   | **Years                      Ended** |          |          |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|---------------|---------------|--------|
|                                                                                                                                                                                     |   | **December                      31** |          | **Inception** |   |
|                                                                                                                                                                                     |   | **2005**                             |          | **2004**      |   | **to                      date** |   |
| **Cash                      Flows From Operating Activities**                                                                                                                            |   |                                 |          |          |   |   |   |   |   |   |
| Net                      loss                                                                                                                                                            |   | $                                    | (9,428,370    | )             | $      | (4,146,453 | ) | $ | (31,740,128 | ) |
| Adjustments                      to reconcile net loss to cash used                                                                                                                      |   |                                 |          |          |   |   |   |   |   |   |
| in                      operating activities:                                                                                                                                            |   |                                 |          |          |   |   |   |   |   |   |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| Depreciation                      & amortization                                                                                                                                     |   |                                 | 215,478       |          |   | 104,242 |   |   | 885,366 |   |
| Stock                      issued for services                                                                                                                                           |   |                                 | 1,568,225     |          |   | 138,625 |   |   | 7,369,517 |   |
| Stock                      issued for interest expense                                                                                                                                   |   |                                 | -             |          |   | 296,000 |   |   | 296,000 |   |
| Contribution                      from stockholder                                                                                                                                       |   |                                 | -             |          |   | 555,000 |   |   | 555,000 |   |
| Loss                      on disposal of subsidiary                                                                                                                                      |   |                                 | -             |          |   | - |   |   | 221,711 |   |
| Loss                      on impairment of asset                                                                                                                                         |   |                                 | 233,900       |          |   |   |   |   | 233,900 |   |
| Decrease                      in legal settlement                                                                                                                                        |   |                                 |          |          |   | (13,636 | ) |   | - |   |
| (Increase)                      decrease in accounts receivable                                                                                                                          |   |                                 | 317,800       |          |   | (317,569 | ) |   | - |   |
| (Increase)                      decrease in prepaid expenses and other                                                                                                                   |   |                                 | (98,718       | )             |   | (27,887 | ) |   | (137,577 | ) |
| Increase                      (decrease) in accounts payable                                                                                                                             |   |                                 |          |          |   |   |   |   |   |   |
| and                      accrued liabilities                                                                                                                                             |   |                                 | (1,070        | )             |   | 650,468 |   |   | 779,413 |   |
| Increase                      in refundable deposit                                                                                                                                      |   |                                 | 550,000       |          |   |   |   |   | 550,000 |   |
| Increase                      in accrued fees and interest                                                                                                                               |   |                                 | 820,985  |          |   |   |   |   | 820,985  |   |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| Net                      cash used in operating activities                                                                                                                               |   |                                 | (5,821,770    | )             |   | (2,761,210 | ) |   | (20,165,813 | ) |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| **Cash                      Flows From Investing Activities**                                                                                                                            |   |                                 |          |          |   |   |   |   |   |   |
| Purchase                      of property and equipment                                                                                                                                  |   |                                 | (224,962      | )             |   | (58,508 | ) |   | (1,121,088 | ) |
| Investments                      in joint ventures and subsidiaries                                                                                                                      |   |                                 | (139,550      | )             |   |   |   |   | (361,261 | ) |
| Return                      / (payment) of deposits                                                                                                                                      |   |                                 | (94,000       | )             |   | (10,000 | ) |   | (140,822 | ) |
| Investments                      in intangible assets                                                                                                                                    |   |                                 | (200,011      | )             |   | (172,628 | ) |   | (388,482 | ) |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| Net                      cash used in investing activities                                                                                                                               |   |                                 | (658,523      | )             |   | (241,136 | ) |   | (2,011,653 | ) |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| **Cash                      Flows from Financing Activities**                                                                                                                            |   |                                 |          |          |   |   |   |   |   |   |
| Proceeds                      from issuance of stock                                                                                                                                     |   |                                 | 3,982,107     |          |   | 4,889,452 |   |   | 15,761,759 |   |
| Proceeds                      from stock subscriptions                                                                                                                                   |   |                                 | -             |          |   | - |   |   | 4,240,887 |   |
| Proceeds                      from issuance of related party notes payable                                                                                                               |   |                                 | -             |          |   | 7,500,000 |   |   | 11,000,000 |   |
| Proceeds                      from issuance of line of credit                                                                                                                            |   |                                 | -             |          |   | - |   |   | 750,000 |   |
| Return                      on capital                                                                                                                                                   |   |                                 | -             |          |   | - |   |   | (118,427 | ) |
| Principal                      payments on related party notes payable                                                                                                                   |   |                                 | (500,000      | )             |   | (250,000 | ) |   | (750,000 | ) |
| Decrease                      in related party receivable                                                                                                                                |   |                                 | -             |          |   | - |   |   | 1,359,185 |   |
| Payments                      on contract payable                                                                                                                                        |   |                                 | -             |          |   | - |   |   | (250,000 | ) |
| Principal                      payments on line of credit                                                                                                                                |   |                                 | -             |          |   | - |   |   | (750,000 | ) |
| Principal                      payments on advance from related party                                                                                                                    |   |                                 | -             |          |   | - |   |   | (2,191,285 | ) |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| Net                      cash provided by financing activities                                                                                                                           |   |                                 | 3,482,107     |          |   | 12,139,452 |   |   | 29,052,119 |   |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| Net                      increase (decrease) in cash and cash equivalents                                                                                                                |   |                                 | (2,998,186    | )             |   | 9,137,106 |   |   | 6,874,653 |   |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| Cash                      and cash equivalents at beginning of period                                                                                                                    |   |                                 | 9,872,839     |          |   | 735,733 |   |   | - |   |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| Cash                      and cash equivalents at end of period                                                                                                                          |   | $                                    | 6,874,653     |          | $      | 9,872,839 |   | $ | 6,874,653 |   |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| **Supplemental                      Information and non cash transactions**                                                                                                              |   |                                 |          |          |   |   |   |   |   |   |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| Total                      interest payments included in operations                                                                                                                      |   | $                                    | 334,251       |          | $      | 6,000 |   |   |   |   |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| The                      Company paid no income taxes during 2005 and 2004.                                                                                                              |   |                                 |          |          |   |   |   |   |   |   |
|                                                                                                                                                                                     |   |                                 |          |          |   |   |   |   |   |   |
| Noncash                      investing and financing activity: The Company incurred a payable                      of                      $214,587 in issuing securities (see Note 11). |   |

----

**SULPHCO,              INC.**

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

**NOTES              TO FINANCIAL STATEMENTS**

**December              31, 2005, and 2004**

**1.**
**Organization              and Significant Accounting Policies**

**Business**

**Use              of Estimates in the Preparation of Financial              Statements**

**Cash              and Cash Equivalents**

**Foreign              Currency Translation and Transactions**

----

**Accounts              Receivable and Allowance for Doubtful Accounts**

**Fair              Value of Financial Instruments**

**Property              and Equipment**

**Equity              method**

**Research              and Development**

**Stock              Option Expenses to Non-Employees**

**Income              Taxes**

----

**Loss              Per Share**

**Concentrations**

**Reclassifications**

**2.**
**Property              and Equipment**

|                                                     |   | **2005** |      | **2004** |   |
|----------------------------------------------------------|--------|----------|-----------|----------|--------|
| Equipment                                                |   | $        | 911,438   |     | $      | 629,056 |   |
| Computers                                                |   |     | 176,226   |     |   | 73,895 |   |
| Office                        furniture                  |   |     | 54,517    |     |   | 44,669 |   |
| Leasehold                        improvements            |   |     | 83,375    |     |   | 55,457 |   |
| Desulfurization                        unit (see Note 3) |   |     | -         |     |   | 431,417 |   |
|                                                     |   |     | 1,225,556 |     |   | 1,234,494 |   |
| Less:                        Accumulated depreciation    |   |     | (828,140  | )        |   | (630,084 | ) |
| Total                                                    |   | $        | 397,416   |     | $      | 604,410 |   |

**3.**
**Loss              On Impairment of Asset**

**4.**
**Investment              in Joint Venture**

----

**5.**
**Intangibles              Assets**

*Intangible              Assets*

|   Year | EstimatedAmortizationExpense |
|------------------|------------------------------|
| 2006             | $23,000                      |
| 2007             | 23,000                       |
| 2008             | 23,000                       |
| 2009             | 23,000                       |
| 2010             | 23,000                       |

**6.**
**Income              Taxes **

----

| Deferred                        tax assets relative to the following:      |   |   |       |   |
|----------------------------------------------------------------------------|--------|--------|------------|--------|
| Net                        operating loss carryforwards                    |   | $      | 6,765,788  |   |
| Depreciable                        assets                                  |   |   | 122,012    |   |
| Plant                        constructed for sale                          |   |   | 186,622    |   |
| Directors                        fees deferred                             |   |   | 170,170    |   |
| Accrued                        payroll tax                                 |   |   | 7,548      |   |
| Total                        deferred tax assets prior to offsets          |   |   | 7,252,140  |   |
|                                                                       |   |   |       |   |
| Offsets:                                                                   |   |   |       |   |
| Deferred                        tax liabilities relative to the following: |   |   |       |   |
| Patent                        costs                                        |   |   | (120,774   | )      |
| Depreciable                        assets                                  |   |   | (14,998    | )      |
| Total                        deferred tax liabilities                      |   |   | (135,772   | )      |
|                                                                       |   |   |       |   |
| Valuation                        allowance                                 |   |   | (7,116,368 | )      |
|                                                                       |   |   |       |   |
| Net                        deferred tax assets                             |   | $      | -          |   |

| Computed                        expected benefit                                    |   | $      | (3,205,646 | )      |
|-------------------------------------------------------------------------------------|--------|--------|------------|--------|
| Nondeductible                        expenses:                                      |   |   |       |   |
| Equipment                        expensed as research and development               |   |   | 276,686    |   |
| Deferred                        director fees                                       |   |   | 170,170    |   |
| Loss                        on impairment of asset                                  |   |   | 80,814     |   |
| Research                        credit amount                                       |   |   | 34,768     |   |
| Other                                                                               |   |   | 70,202     |   |
| Tax                        related deductions not expensed on financial statements: |   |   |       |   |
| Patent                        costs                                                 |   |   | (68,004    | )      |
| Depreciation                                                                        |   |   | (31,691    | )      |
| Increase                        in benefit from net operating loss                  |   |   | (2,672,701 | )      |
|                                                                                |   |   |       |   |
| (Increase)                        decrease in other deferred tax assets             |   |   | (458,424   | )      |
| Increase                        (decrease) in deferred tax liabilities              |   |   | 24,527     |   |
|                                                                                |   |   |       |   |
| Increase                        in valuation allowance                              |   |   | 3,106,598  |   |
|                                                                                |   |   |       |   |
| Provision                        (benefit) for income taxes                         |   | **$**  | **-**      |   |

----

**7.**
**Refundable              Deposit**

**8.**
**Accrued              Fees and Interest**

**9.**
**Notes              Payable - Related Party**

----

|                                      |   | Principal |      | Interest |   | Total   |   |
|-------------------------------------------|--------|-----------|-----------|----------|--------|---------|--------|
| 2006:                                     |   |      |      |     |   |    |   |   |   |   |
| Principal                        due      |   | $         | 500,000   |     |   |    |   | $ | 500,000 |   |
| Interest                        due:      |   |      |      |     |   |    |   |   |   |   |
| On                        $500,000 note   |   |      |      |     | $      | 40,000  |   | $ | 40,000 |   |
| On                        $7 million note |   |      | __        |     | $      | 341,950 |   | $ | 341,950 |   |
| Totals                                    |   | $         | 500,000   |     | $      | 381,950 |   | $ | 881,950 |   |
|                                      |   |      |      |     |   |    |   |   |   |   |
| 2007:                                     |   |      |      |     |   |    |   |   |   |   |
| Principal                        due      |   | $         | 7,000,000 |     |   |    |   | $ | 7,000,000 |   |
| Interest                        due       |   |      | __        |     | $      | 341,950 |   | $ | 341,950 |   |
| Totals                                    |   | $         | 7,000,000 |     | $      | 341,950 |   | $ | 7,341,950 |   |
|                                      |   |      |      |     |   |    |   |   |   |   |
| Thereafter                                |   |      | None      |     |   | None    |   |   | None |   |
|                                      |   |      |      |     |   |    |   |   |   |   |
| Totals                                    |   | $         | 7,500,000 |     | $      | 723,900 |   | $ | 8,223,900 |   |

**10.**
**Commitments              and Contingencies**

*Talisman              Capital Talon Fund, Ltd. v. Rudolf Gunnerman and Sulphco, Inc*

----

*Clean              Fuels Technology v. Rudolf W. Gunnerman, Peter Gunnerman, RWG, Inc.              and SulphCo,              Inc.*

**11.**
**Common              Stock**

----

**12.**
**Stock              Options**

|                                                |   | 2004   |       |
|-----------------------------------------------------|--------|--------|------------|
| Net                        loss - as reported       |   | $      | (4,146,453 | ) |
|                                                |   |   |       |   |
| Net                        loss - pro forma         |   | $      | (4,158,453 | ) |
|                                                |   |   |       |   |
| Loss                        per share - as reported |   | $      | (0.08      | ) |
|                                                |   |   |       |   |
| Loss                        per share - pro forma   |   | $      | (0.08      | ) |

----

|                                          |   | **2005** |    | **2004**                                |   |
|-----------------------------------------------|--------|----------|---------|-----------------------------------------|--------|
|                                          |   |     |    | Weighted                        Average |   |   |   | Weighted                        Average |   |
|                                          |   | Shares   |    | Exercise                        Price   |   | Shares |   | Exercise                        Price |   |
| Outstanding,                        beginning |   |     | 150,000 |                                    | $      | 1.01 |   |   | 1,100,000 |   | $ | 0.53 |   |
|                                          |   |     |    |                                    |   |   |   |   |   |   |   |   |   |
| Options                        exercised      |   |     | -       |                                    |   | - |   |   | (600,000 | ) |   | 0.52 |   |
|                                          |   |     |    |                                    |   |   |   |   |   |   |   |   |   |
| Options                        forfeited      |   |     | -       |                                    |   | - |   |   | (500,000 | ) |   | 0.55 |   |
|                                          |   |     |    |                                    |   |   |   |   |   |   |   |   |   |
| Option                        granted         |   |     | 50,000  |                                    |   | 3.85 |   |   | 150,000 |   |   | 1.01 |   |
|                                          |   |     |    |                                    |   |   |   |   |   |   |   |   |   |
| Outstanding,                        ending    |   |     | 200,000 |                                    | $      | 1.72 |   |   | 150,000 |   | $ | 1.01 |   |

**13.**
**Stock              Subscriptions**

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**14.**
**Related              Party Transactions**

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**15.**
**Operating              Lease**

| 2006                                                |   | $      | 461,060 |   |
|-----------------------------------------------------|--------|--------|---------|--------|
| 2007                                                |   |   | 76,843  |   |
| After                        2007                   |   |   | -0-     |   |
| Total                        minimum lease payments |   | $      | 537,903 |   |

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**16.**
**Quarterly              Financial Information (Unaudited) **

|                                                            |   | **2005**                             |                                       |
|-----------------------------------------------------------------|--------|--------------------------------------|--------------------------------------------|
|                                                            |   | Dec.                        31, 2005 |                                       | Sep.                        30, 2005 |   | Jun.                        30, 2005 |   | Mar.                        31, 2005 |   |
|                                                            |   |                                 |                                       |   |   |   |   |   |   |
| Net                        revenues                             |   | $                                    | -                                          |   | $ | - |   | $ | - |   | $ | - |   |
|                                                            |   |                                 |                                       |   |   |   |   |   |   |   |   |   |   |
| Gross                        profit                             |   | $                                    | -                                          |   | $ | - |   | $ | - |   | $ | - |   |
|                                                            |   |                                 |                                       |   |   |   |   |   |   |   |   |   |   |
| Net                        (loss)                               |   | $                                    | (2,906                                     | ) | $ | (1,840 | ) | $ | (2,357 | ) | $ | (2,325 | ) |
|                                                            |   |                                 |                                       |   |   |   |   |   |   |   |   |   |   |
| Net                        (loss) per share - basic and diluted |   | $                                    | (0.05                                      | ) | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.04 | ) |
|                                                            |   |                                 |                                       |   |   |   |   |   |   |   |   |   |   |
|                                                            |   | **2004**                             |
|                                                            |   |                                 | Dec.                        31, 2004  |   |   | Sep.                        30, 2004 |   |   | Jun.                        30, 2004 |   |   | Mar.                        31, 2004 |   |
|                                                            |   |                                 |                                       |   |   |   |   |   |   |   |   |   |   |
| Net                        revenues                             |   | $                                    | -                                          |   | $ | - |   | $ | - |   | $ | - |   |
|                                                            |   |                                 |                                       |   |   |   |   |   |   |   |   |   |   |
| Gross                        profit                             |   | $                                    | -                                          |   | $ | - |   | $ | - |   | $ | - |   |
|                                                            |   |                                 |                                       |   |   |   |   |   |   |   |   |   |   |
| Net                        loss                                 |   | $                                    | (1,692                                     | ) | $ | (915 | ) | $ | (736 | ) | $ | (803 | ) |
|                                                            |   |                                 |                                       |   |   |   |   |   |   |   |   |   |   |
| Net                        loss per share - basic and diluted   |   | $                                    | (0.02                                      | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.02 | ) |

**17.**
**New              Accounting Pronouncements**

Opinion              No. 29, *Accounting              for Nonmonetary Transactions*.              This              Statement amends Opinion              29 to eliminate the exception from measuring exchanges at fair value              for              nonmonetary exchanges of similar productive assets and replaces it              with a              general exception for exchanges of nonmonetary assets that do not have              commercial substance. A nonmonetary exchange has commercial substance              if the              future cash flows of the entity are expected to change significantly              as a result              of the exchange. Any such exchange will be measured at the fair values              of the              assets exchanged. The new standard will be effective for the Company              beginning              January 1, 2006. As such transactions arise, the Company will report              them at              fair values based upon the best evidence available.

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*Accounting              Changes,*
*Reporting              Accounting Changes in Interim Financial Statements,*

**18.**
**Subsequent              Events**