<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                                   -----------

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES ACT
         OF1934

                     For the period ended December 31, 2002

                         Commission file number 0-27599

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



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


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

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


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

            Title of each class        Name of each exchange on which
                                       Registered

            Common Stock               Not Applicable
            -----------------          -------------------------------

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

                    Common Stock, Par Value $0.001 Per Share
                    ----------------------------------------
                                (Title of Class)

            Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filings requirements for the past 90 days. Yes [X]
No [ ] Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to the Form 10-KSB. [X]

            State issuer's revenues for its most recent fiscal year: $42,967 for
the year ending December 31, 2002.

            State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days: On March 24, 2003, the
aggregate market value of the voting and non-voting common equity held by
non-affiliates, based on the closing price of which the common equity was sold
on that date, equals $6,870,502.

<PAGE>

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ITEM 1.  DESCRIPTION OF BUSINESS
--------------------------------------------------------------------------------

(a)         Business Development

            SulphCo, Inc. (the "Company" or the "Registrant") is a Nevada
corporation which was originally incorporated on December 23, 1986 as Hair-Life,
Inc. On June 3, 1987, the Company completed a public offering pursuant to the
provisions of Rule 504 of Regulation D of the Securities Act of 1933, as
amended. During 1987, the Company pursued business activities which were
unsuccessful.

            On September 1, 1994, an Exchange Agreement was executed between the
Company and the stockholders of The Patterson Group, Inc., a California
corporation, whereby the California corporation was acquired as a wholly-owned
subsidiary of the Company. This transaction resulted in a name change for the
Company to The Patterson Group, Inc., a reverse split of the Company's stock of
40 to 1, and the issuance to the stockholders of the California corporation of
4,500,000 shares. Until 1996, the Company's business of providing hazardous
waste transportation was conducted through its wholly-owned subsidiary. During
1996, the subsidiary ceased its operations. In June of 1998, the subsidiary
sought relief under Chapter 7 of the Bankruptcy laws of the United States
Bankruptcy Court for the Central District of California. During 1997, the
Company organized another subsidiary, APF Holdings to conduct its business. As
part of this reorganization, the Company changed its name to American Pacific
Financial Services. APF Holdings ceased doing business in 1998.

            On July 19, 1999, the Company entered into an Exchange Agreement
under the terms of which the Company acquired certain assets of Daly
Consultants, Inc., a California corporation, and Belfair International, Inc., a
corporation organized pursuant to the laws of the Isle of Jersey, in exchange
for 7,013,392 shares of common stock of the Company. The assets acquired were
motion picture movie scripts and $50,000 in cash.

            As part of the Company's reorganization in July of 1999, the
Company's name was changed to FilmWorld, Inc. and the Company's issued and
outstanding shares underwent a ten (10) for one (1) reverse split. This reverse
split was effective prior to the issuance of the 7,013,392 shares pursuant to
the Exchange Agreement.

            On December 4, 2000, the Company entered into an Exchange Agreement
with GRD, Inc., a Nevada corporation. Under the terms of the Exchange Agreement,
GRD obtained equity and management control of the Company by exchanging all of
the issued and outstanding shares of GRD for 20,000,000 shares of the Company's
common stock. The Exchange Agreement represented not only a change in control of
the Company, but a change in the Company's principal line of business as well.
GRD operates under the name of SulphCo, Inc. and its principal business is
developing and licensing its proprietary technology for the reduction of the
sulfur content of crude oils, lighter distillates and fuel oils. SulphCo is
designing and developing proprietary closed loop desulfurization units which can
be scaled to treat large or small volumes of petroleum product.

                                       2
<PAGE>

            As part of the transaction with GRD, Inc., two of the Company's
former directors, namely John Daly and Menahem Golan, resigned their positions
with the Company. The Company's former President, Mark Tolner, also resigned. In
addition, the Company returned the assets associated with the Company's film
production and distribution operations to the entities contributing those
assets. In this regard, the Company received 1,168,898 shares from the Company's
former President, Mark Tolner; 2,922,247 shares from Daly Consultants, Inc.; and
2,872,247 shares from Belfair International, Ltd. John Daly and Mark Tolner
retained a combined total of 100,000 shares of the Company's common stock and
$50,000 in cash each in connection with their resignations and Menahem Golan
also retained 100,000 shares of the Company's common stock in connection with
his resignation and withdrawal from the Company's operations.

            As a "general housekeeping" matter, the Company merged with its
wholly owned subsidiary SulphCo, Inc. As part of the merger between the Company
and its subsidiary, the Company's name was changed to SulphCo, Inc. The shares
of the subsidiary were retired and no additional shares of the Company's common
stock were issued as part of this merger.

            As of March 24, 2003, there were issued and outstanding 47,671,170
shares of the Company's authorized shares of common stock.

            Except as described above, to management's knowledge, the Company
has not been subject to bankruptcy, receivership or any similar proceeding.

            The Company maintains its principal executive offices and facilities
at 850 Spice Islands Drive, Sparks, Nevada 89431. The Company has vacant office
and laboratory space at 1650 Meadow Wood Lane, Reno, Nevada 89502. The Company
owns all of its assets as shown on the financial statements hereunder as of
December 31, 2002.

(b) BUSINESS OF THE ISSUER

(1)         Principal Products and Services and Their Markets

            The Company's principal business is the development and licensing of
its proprietary technology for the reduction of the sulfur content of crude
oils, lighter distillates and fuel oils. The Company is also investigating
whether its technology will effectively reduce acids and certain metals in
petroleum products. The Company is designing and developing proprietary
closed-loop desulfurization units that can be scaled to treat large or small
volumes of petroleum product. The desulfurization units are expected to operate
at low temperature and atmospheric pressure and have a relatively small
"footprint" compared with existing de-sulfurizing equipment.

            The market for the Company's technology and desulfurization units
will be the producers and refiners of crude oils and refined products. If the
Company is able to commercially develop its technology for the reduction of
sulfur in petroleum products, producers would be able to equalize the price
differential between high sulfur crude oil and low sulfur crude oil. In
addition, crude oil reserves which are underutilized due to high sulfur content
would become more economically viable. By reducing the sulfur content of the
crude oils, refiners would be able to utilize high sulfur petroleum more
efficiently in their existing hydro treaters.

                                       3
<PAGE>

            Refiners and fuel distributors are faced with the challenge of
meeting tough new and proposed environmental regulations for reduced sulfur
fuels. The Company's technology provides a cost effective solution that aids
refiners, oil producers and fuel distributors in meeting the mandated sulfur
limits.

(2)         Distribution Methods

            The Company intends to continue marketing its technology and units
both domestically and internationally to crude oil producers, petroleum
refiners, fuel distributors and other strategic partners. In 2002, the Company
terminated the exclusive technology license granted in mid-2001 to Innovative
Clean Technologies S.A., a Luxembourg corporation wholly owned by Eliop
International, for the right to commercialize the process in the Economic Union
countries in Europe. Eliop International is a Luxembourg corporation owned 50.5%
by SulphCo and 49.5% by Eliop S.r.l., a corporation controlled by Mr. Luigi
Profumo. The Company terminated the license due to the failure of Eliop to make
monthly reports and pay the agreed royalty. The Company has granted no other
licenses of its technology.

(3)         Status of Publicly Announced New Products or Services

            The Company has announced no new products.

(4)         Competitive Business Conditions

            The Company is a new entrant in the market for development and sale
of equipment to the oil industry. The Company faces well-established and
well-funded competition.

            The Company intends to compete in this industry by entering into
working relationships with established participants in the industry and use the
financial strength and business experience of such participants to help the
Company overcome the obstacles it faces as a new entry into the market.

(5)         Dependence on Major Customers

            As indicated throughout this Item 1, the Company is a development
stage company which is in the process of commercializing its proprietary
technology. The Company is dependent on building relationships with established
participants in the oil industry in order to develop and market its products and
services.

(6) Patents, Trademarks, Licenses, Copyrights, etc.

            The Company owns two United States patents, Unites States Patent
Nos. 6,402,939 B1 and 6,500,219 B1, and has multiple foreign patent applications
pending relating to these two United States patents. In addition, the Company is
the owner in full of a patent application relating to the ultrasonic treatment
of petroleum products and a patent application relating to a corrosion resistant
ultrasonic horn.

                                       4
<PAGE>

            The Company attempts to minimize unauthorized duplication of its
process by a variety of methods, however, there can be no assurance that
unauthorized duplication will not occur. The Company attempts, and will continue
to attempt, to protect its de-sulfurizing process by relying on patent laws as
well as non-disclosure and confidentiality agreements with its employees and all
other persons who have access to its proprietary technology.

(7)         Governmental Approval, Effect of Governmental Regulations and Costs
            and Effects of Compliance with Environmental Laws.

            The Company does not expect to be adversely effected by any required
governmental approvals, or by the effect of any governmental regulations or the
costs of compliance with environmental laws.

(8)         Research and Development in the Last Two Years

            The Company is engaged in a research and development program for its
technology. The Company expects to continue to research and develop its
continuous flow system and to explore the expansion of the range of petroleum
products that can be desulfurized with the Company's technology. During the past
two years, SulphCo's research and development costs have totaled $374,905.
During that time, all of SulphCo's business efforts were spent on research and
development. The Company extended through 2001 its research contract with
Professor T. F. Yen at the University of Southern California. The Company paid
$100,000 for the extension through 2001.

(9)         Employees

            As of March 1, 2003, the Company had seven (7) full-time employees.
in addition one of the four (4) officers and/or directors of the Company also
performs services on behalf of the Company but does so on a non-exclusive basis.
None of the Company's employees or independent contractors is subject to a
collective bargaining agreement and the Company believes its relations with its
employees and independent contractors are good.

(c)         Reports to Security Holders

            The Company is a "reporting company" and it files reports with the
Securities and Exchange Commission. In this regard, the Company files quarterly
reports on Form 10-QSB, annual reports on Form 10-KSB and as required, files
reports on Form 8-K. To the extent that the Company is required to deliver
annual reports to security holders through its status as a reporting company,
the Company shall deliver annual reports. Also, to the extent the Company is
required to deliver annual reports by the rules or regulations of any exchange
upon which the Company's shares are traded, the Company shall deliver annual
reports. All annual reports will contain audited financial statements as may be
required.

            The public may read and copy any materials the Company files with
the Securities and Exchange Commission at the Commission's Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission. The Internet
address of the Commission's site is (http://www.sec.gov).

                                       5
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ITEM 2.  DESCRIPTION OF PROPERTY
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(1)         Principal Plants and Property and Description of Real Estate and
            Operating Data.

            The Company's executive offices and facilities are located at 850
Spice Islands Drive, Sparks, Nevada 89431. The Company leases this space from
Dermody Industrial Group and has an option to purchase the property for
$3,100,000. The Dermody Industrial Group lease and option expires March of 2004.
This property is adequate for the Company's currently anticipated needs and is
adequately insured. The Company also leases office space and a laboratory from
the Company's majority shareholder at 1650 Meadow Wood Lane, Reno, Nevada 89502
which is now vacant. The Company's lease on this office and laboratory space
expires in February of 2004. The Company is seeking to sublease, and the
Company's majority shareholder is attempting to sell, this office and laboratory
space. The Company's obligations with respect to this vacant space will
terminate upon any sublease or sale.

(2)         Investment Policies

            The Company's plan of operations is focused on the development of
its proprietary technology and marketing endeavors described in Item (1) above.
Accordingly, the Company has no particular policy regarding each of the
following types of investments:

            (1)   Investments in real estate or interests in real estate;
            (2)   Investments in real estate mortgages; or
            (3)   Securities of or interests in persons primarily engaged in
                  real estate activities.

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ITEM 3.  LEGAL PROCEEDINGS
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            The Company is not party to, and none of the Company's property is
subject to, any pending or threatened legal, governmental, administrative or
judicial proceedings that may have a materially adverse effect upon the
Company's financial condition or operation, except as follows:

            On or about March 4, 2002, the Salt Lake City, Utah office of the
Securities and Exchange Commission sent letters to the Company and its CEO,
Rudolf Gunnerman, indicating that as a result of its investigation captioned In
the Matter of SulphCo, Inc. (SL-02337), that the staff of the Salt Lake District
Office was recommending that a civil injunctive action be filed naming the
Company and Mr. Gunnerman as defendants. The letter to the Company alleges
violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1934 and
Section 10(b) of the Securities Act of 1934 and Rule 10b-5 thereunder. The
letter to Mr. Gunnerman alleges violations of Section 5(a), 5(c), and 17(a) of
the Securities Act of 1934 and Section 10(b) of the Securities Act of 1934 and
Rule10b-5 and Rule 101 under Regulation M thereunder. The letters invite the
Company and Mr. Gunnerman to submit written statements concerning the staff's
allegations. Such written statements are generally as known as "Wells Committee
Submissions." The Company and Mr. Gunnerman deny the allegations made by staff
in the letters and have retained counsel who has submitted a Wells submission
response to the staff's allegations. The Company has not been further contacted
by the Securities and Exchange Commission with respect to this matter.

                                       6
<PAGE>

            In March of 2003, Art Beroff filed suit as a plaintiff against the
Company in the Second Judicial District Court, State of Nevada. Mr. Beroff
claims that on or about January 20, 1998, he had exercised an option to acquire
nine percent (9%) of the common stock of the Company's predecessor, Patterson
Group, Inc., for $701.34 and had executed a Subscription Agreement for the
purchase of 701,339 shares. Mr. Beroff claims the Subscription Agreement was
accepted by the Company's predecessor but that no stock certificate was ever
issued for the shares. The number of shares claimed could equate to
approximately 70,134 shares of the Company's current common stock. The Company
is investigating the claims and notes the existence of an indemnification
agreement by Alexander H. Walker, Jr. respecting claims such as Mr. Beroff's
claims.

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ITEM 4.  SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
--------------------------------------------------------------------------------

            No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of the securities holders, through the
solicitation of proxies. No shareholder action was taken during that time via a
consent of a majority of shareholders pursuant to applicable state law.

                                     PART II

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ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------

a.          Market Information:

            Quotations for the Company's common stock are made on the system of
the National Association of Securities Dealers, Inc. ("NASDAQ"), known on the
Over the Counter Bulletin Board under the symbol "SLPH".

            The following table sets forth the range of high and low bid prices
for the Company's Common Stock for each quarterly period indicated as reported
by the Research Department of the NASDAQ Stock Market, Inc. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions. The Research Department of the NASDAQ
Stock Market, Inc. has indicated that high/low bid information is unavailable
for certain periods:

            Common Stock

            Quarter Ended                    High Bid       Low Bid
            -------------                    --------       -------
            December 31, 2002                $  0.39        $ 0.19
            September 30, 2002               $  0.39        $ 0.14
            June 30, 2002                    $  0.53        $ 0.18
            March 31, 2002                   $  0.73        $ 0.40
            December 31, 2001                $  1.18        $ 0.47
            September 30, 2001               $  4.00        $ 0.66
            June 30, 2001                    $ 11.85        $ 2.00
            March 31, 2001                   $  9.8125      $ 3.125
            December 31, 2000                $  4.50        $ 0.25
            September 28, 2000               Unavailable    Unavailable
            June 29, 2000                    Unavailable    Unavailable
            March 30, 2000                   Unavailable    Unavailable

                                       7
<PAGE>

b.          Holders:

            There were approximately 295 holders of record of the Company's
common stock as of March 24, 2003.

c.          Dividends

            There were no cash dividends declared on any class of the Company's
stock in 2000. During the year 2001 one dividend of $0.10 per unrestricted share
was declared and paid to common shareholders of record as of the close of
business on July 5, 2001. These shareholders also were offered one warrant to
purchase one (1) share of SulphCo common stock for every three (3) shares of
common stock owned. The warrants were exercisable into common stock at a price
equal to an amount one-third below the July 6, 2001, average trading price for
SulphCo common stock ($1.65 per share). There were no cash dividends declared on
any class of the Company's stock in 2002 and management does not anticipate that
dividends will be paid in the near future.

d.          Issuances of Shares in the Last Three Years:

            On January 27, 2000, the Company issued the following shares:

                        Registered Owner                No. Shares
                        -----------------------         ----------
                        Harry Holman                    14,875
                        Alexander H. Walker III         200,000

            All such shares were issued in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act of 1933, as
amended, and the certificates representing such shares bear a restrictive legend
reflecting the limitations on future transfer of those shares.

            On December 4, 2000, the Company issued 20,000,000 shares of its
common stock in accordance with the terms of the Exchange Agreement between the
Company and GRD, Inc. (SulphCo) as follows:

                        Registered Owner                No. Shares
                        -------------------             -----------
                        Rudolf Gunnerman                12,000,000
                        Kristina Gunnerman               2,000,000
                        Peter Gunnerman                  2,000,000
                        Alex Paior                       2,000,000
                        Mark T. Cullen                   2,000,000

            The shares issued were issued in consideration for cash and then
proprietary technology acquired by the Company pursuant to the Exchange
Agreement dated December 4, 2000. All such shares were issued in reliance on the
exemption from registration contained in Section 4(2) of the Securities Act of
1933, as amended, and the certificates representing such shares bear a
restrictive legend reflecting the limitations on future transfer of those
shares.

                                       8
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            On February 14, 2001, the Company issued the following shares:

                       Registered Owner                             No. Shares
                       ----------------                             ----------
                       R. W. Gunnerman                              700,000
                       M. T. Cullen                                 120,000
                       Erika Herrmann                               292,800

            All such shares were issued in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act of 1933, as
amended, and the certificates representing such shares bear a restrictive legend
reflecting the limitations on future transfer of those shares.

            On February 21, 2001, the Company issued 400,000 shares to Sutton
Ventures Group. Such shares were issued in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act of 1933, as
amended, and the certificates representing such shares bear a restrictive legend
reflecting the limitations on future transfer of those shares.

            On April 11, 2001, the Company issued 200,000 shares to Paul Moote.
Such shares were issued in reliance on the exemption from registration contained
in Section 4(2) of the Securities Act of 1933, as amended, and the certificates
representing such shares bear a restrictive legend reflecting the limitations on
future transfer of these shares.

            On April 11, 2001, the Company issued 350,000 shares to Vitro S.A.
De C.V. Such shares were issued in reliance on the exemption from registration
contained in Section 4(2) of the Securities Act of 1933, as amended, and the
certificates representing such shares bear a restrictive legend reflecting the
limitations on future transfer of these shares. These shares have since been
returned to the Company's treasury.

            On April 11, 2001, the Company issued 24,750 shares to Harry P.
Holman. Such shares were issued in reliance on the exemption from registration
contained in Section 4(2) of the Securities Act of 1933, as amended, and the
certificates representing such shares bear a restrictive legend reflecting the
limitations on future transfer of these shares.

            On May 24, 2001 the Company issued the following shares:

    Registered Owner                         Number of Shares
    ----------------                         -----------------

    R. W. Gunnerman                          7,150,000
    M. T. Cullen                             1,000,000
    A. H. Walker, Jr.                        1,000,000
    Paul Neilson                               100,000
    Kevin Brown                                  5,000
    P. M. Johnson                               15,000
    Erika Herrmann                             100,000
    H. P. Holman                               200,000
    Henry Heines                                50,000
    Loren Kalmen                                25,000
    S. D. Ligon                                 50,000
    Rohinis Govind                              50,000
    T. P. Orme                                  50,000
    Shri Kant Singh                             25,000
    Majtaba Ahadiantehrani                      25,000
    Edward Ripley                                5,000
    R. W. Chappell                               5,000
    P. C. Knauff                               206,000

                                       9
<PAGE>

            All such shares were issued in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act of 1933,as amended,
and the certificates representing such shares bear a restrictive legend
reflecting the limitations on future transfer of these shares.

            On June 21, 2001 and June 25, 2001, the Company issued 600,000
shares to Inline Investments Corporation. Such shares were issued in reliance on
the exemption from registration contained in section 4(2) of the Securities Act
of 1933, as amended, and the certificates representing such shares bear a
restrictive legend reflecting the limitations on future transfer of these
shares. Such shares later were returned to the Company's treasury.

            On June 29, 2001 the Company issued 200,000 shares to Sterne Agee &
Leach Inc. Such shares were $1.41 per share. Such shares were issued pursuant to
the exemption from registration under Section 4 (2) of the Securities Act of
1933, as amended. These shares were later returned to the Company's treasury.

            On July 17, 2001, the Company issued 200,000 shares to Coldwater
Capital LLC. Such shares were issued pursuant to the exemption from registration
under Section 4 (2) of the Securities Act of 1933, as amended. These shares were
later returned to the Company's treasury.

            On September 6, 2001, the Company issued 2,758,620 shares of its
common stock pursuant to a consulting agreement the Company entered into with
Mark Neuhaus. Such shares were valued at $0.725 per share. Such shares were
issued pursuant to a registration statement filed in connection with such shares
on Form S-8.

            On November 8, 2001, the Company issued 4,000,000 shares to R. W.
Gunnerman. Such shares were issued in reliance on the exemption from
registration contained in section 4(2) of the Securities Act of 1933, as
amended, and the certificates representing such shares bear a restrictive legend
reflecting the limitations on future transfer of these shares.

            On September 13, 2002, the Company issued 50,000 shares to Rohinis
Govind. Such shares were issued in reliance on the exemption from registration
contained in section 4(2) of the Securities Act of 1933, as amended, and the
certificates representing such shares bear a restrictive legend reflecting the
limitations on future transfer of these shares.

            On November 12, 2002, the Company issued 190,000 shares to Erika
Hermann. Such shares were issued in reliance on the exemption from registration
contained in section 4(2) of the Securities Act of 1933, as amended, and the
certificates representing such shares bear a restrictive legend reflecting the
limitations on future transfer of these shares.

            On December 18, 2002, the Company issued 50,000 shares to Loren
Kalmen. Such shares were issued in reliance on the exemption from registration
contained in section 4(2) of the Securities Act of 1933, as amended, and the
certificates representing such shares bear a restrictive legend reflecting the
limitations on future transfer of these shares

                                       10
<PAGE>

            On January 15, 2003, the Company issued 50,000 shares to Kirk S.
Schumacher. Such shares were issued in reliance on the exemption from
registration contained in section 4(2) of the Securities Act of 1933, as
amended, and the certificates representing such shares bear a restrictive legend
reflecting the limitations on future transfer of these shares.

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ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
--------------------------------------------------------------------------------

            Statements contained herein that are not historical facts are
forward-looking statements, as that term is defined by the Private Securities
Litigation Reform Act of 1995. Although the Company believes that expectations
reflected in such forward-looking statements are reasonable, the forward-looking
statements are subject to risks and uncertainties that could cause results to
differ from those projected. The Company cautions investors that any
forward-looking statements made by the Company are not guarantees of future
performance and that actual results may differ materially from those in the
forward-looking statements. Such risks and uncertainties include, without
limitation: well established competitors who have substantially greater
financial resources and longer operating histories, changes in the regulatory
environment in which the Company competes, and access to sources of capital.

PLAN OF OPERATION

1.          Business Plans

            During 2003, the Company intends to further develop its proprietary
technology and to develop and produce a commercially feasible desulfurization
unit to desulfurize crude oil. In this regard, the Company is now completing the
fabrication of a 1,000 bbl per day desulfurization unit. The Company expects to
test this desulfurization unit in a refinery where crude oil throughput adequate
for testing purposes can be obtained.

            If the testing is successful, the Company intends to develop a
desulfurization unit which will process more than 1,000 bbl per day of crude
oil. Once a larger desulfurization unit is developed and tested, the Company
intends to commence the manufacture of the unit in its manufacturing facilities
and lease the units to petroleum producers, refiners, and distributors. The
Company also intends to license petroleum producers, refiners and distributors
with rights to its proprietary technology.

            During 2003, the Company intends to fund operations with cash
generated from the royalty and production revenues, loans from its majority
stockholder, as well as the private sale of its common stock.

            The time frames set forth above may be adversely affected by factors
such as unforeseen delays in the marketing and implementation of the licensing
program. The Company's plans also could be adversely impacted by the patenting
process for the devises and methods which comprise the Company's proprietary
technology. In this regard, the need to keep aspects of the Company's technology
secret during the patenting process could delay the Company's plans to bring its
proprietary technology to market.

            If the Company is required to initiate litigation to protect its
interest in its proprietary technology or is required to defend an action
challenging the Company's interest, the costs and delays associated with such
litigation could negatively impact on the Company's ability to bring the
proprietary technology to market.

                                       11
<PAGE>

            Also, any delays or unforeseen impasses in developing working
relationships with third-parties in connection with development and marketing of
industrial units for the proprietary technology would have not only impact on
the timing of the Company's business plan but could entirely disrupt such plans
and prevent the Company from bringing the proprietary technology to market.

            Investigations into the Company's operations by the Securities and
Exchange Commission have had a negative impact on the Company's ability to bring
its proprietary technology to market. It is possible that further action by the
Securities and Exchange Commission will preclude the Company from moving forward
with its business plan.

2.          Research and Development

            The Company will continue its research and development program
during 2002 in order to expand the development of the design and manufacture of
commercial desulfurization units which embody the Company's proprietary
technology. Management anticipates that its research and development costs will
be approximately $125,000 for the year 2003.

3.          Facilities and Personnel

            In March of 2003, the Company moved from its offices and laboratory
at 1650 Meadow Wood Lane, Reno, Nevada 89502, to its offices, laboratory and
production space at 850 Spice Islands Drive, Sparks, Nevada 89431. The Company
employs approximately 7 full-time employees in March 2003 and would increase or
decrease that number as its needs require and as is normal in general business
operations.

4.          Change in G & A Expense

            The premises rental increased by $35,000 per month as the Company
moved into a facility that combined business offices, research facilities and
manufacturing space.


                                       12
<PAGE>

--------------------------------------------------------------------------------
ITEM 7.  FINANCIAL STATEMENTS
--------------------------------------------------------------------------------










                                  SULPHCO, INC.

                          (A Development Stage Company)

                              Financial Statements

                        December 31, 2002, 2001 and 2000













                                      F-1
<PAGE>







                                  SULPHCO INC.
                          (A Development Stage Company)
                        December 31, 2002, 2001 and 2000
--------------------------------------------------------------------------------
                          Index to Financial Statements

--------------------------------------------------------------------------------







                                                                       Page
                                                                       ----

Report of independent auditor                                          F-3

Balance sheet                                                          F-4

Statement of operations                                                F-5

Statement of stockholders' equity                                      F-6

Statement of cash flows                                                F-7

Notes to financial statements                                          F-8










                                      F-2
<PAGE>

                             Forbush and Associates
                       1155 West Fourth Street, Suite 210
                               Reno, Nevada 89503
                    Phone (775) 337-6001 Cell (775) 771-5129
                               Fax (775) 337- 1550
                           email: danforbush@juno.com

                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
    And Shareholders of
    SulphCo, Inc.

We have audited the balance sheet of SulphCo, Inc. (A Development Stage Company)
as of December 31, 2001 and 2002 and the related statements of operations,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audit.

We conducted the audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position of SulphCo,
Inc. (A Development Stage Company) as of December 31, 2002, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles in the United States of America.
The consolidated financial statements of SulphCo, Inc. as of December 31, 2000,
and the results of their operations and their cash flows for the years then
ended, included for comparative purposes, were audited by Tanner and Company and
their report follows this report.

The accompanying financial statements have been presented assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has suffered losses from operations and has
not sold any of its units, which raises doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.



Reno, Nevada
February 28, 2002


                                      F-3
<PAGE>
<TABLE>

                                                 SULPHCO, INC
                                         (A Development Stage Company)
                                                Balance Sheets

                                                                                    December 31
                                                                          -------------------------------
ASSETS                                                                       2002                2001
                                                                          -------------      ------------
<S>                                                                       <C>                <C>
Currents Assets:
    Cash and cash equivalents (Note 1)                                    $     13,574       $    173,432
    Receivable from related party (Note 8)                                          --          1,360,685
    Other Receivables                                                               --              1,500
    Deposits                                                                    21,080                 --
    Prepaid expenses                                                            11,184             50,631
                                                                          -------------      ------------

          Total current assets                                                  45,838          1,586,248

Property and equipment, net (Note 1)                                           202,575            322,514
Construction in progress (Note 1,3)                                            583,470                 --
Investment in subsidiary (Note 2)                                                   --            220,086
                                                                          -------------      ------------

                                                                          $    831,883       $ 2,128,848
                                                                          =============      ============


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                                      $    153,439       $     66,541
    Accrued liabilities                                                         75,732             45,968
    Line of credit (Note 4)                                                    500,000                 --
    Note payable (Note 5)                                                      420,000          1,000,000
    Current portion of lawsuit settlement-Cullen (Note 7)                      86,364                --
                                                                          -------------      ------------

          Total current liabilities                                          1,235,534          1,112,509

Lawsuit settlement-Cullen, net of current (Note 7)                              13,636                 --

Stockholders' equity:
    Preferred stock: 10,000,000 shares authorized ($0.001 par value)
        none issued                                                                 --                 --
    Common stock: 100,000,000 shares authorized ($0.001 par value)
         47,621,170 And 39,927,170 shares issued and outstanding at
         December 31, 2002 and 2001, respectively                               47,621             39,927
    Paid in capital                                                         19,122,438         15,646,632
    Stock subscription receivable (Note 9)                                  (4,624,500)        (6,249,500)
    Deficit accumulated during the development stage                       (14,962,846)        (8,420,720)
                                                                          -------------      ------------

           Total stockholders' equity                                         (417,287)         1,016,339
                                                                          -------------      ------------

                                                                          $    831,883       $ 2,128,848
                                                                          =============      ============
</TABLE>

See accompanying notes to financial statements.

                                                     F-4
<PAGE>
<TABLE>

                                                      SULPHCO, INC.
                                              (A Development Stage Company)
                                                 Statement of operations
                                      Year Ended December 31, 2002, 2001, 2000, and
                                                    Inception to date
<CAPTION>


                                                                                                    Inception to
                                                2002               2001              2000               date
                                           -------------      -------------      -------------      -------------
<S>                                        <C>                <C>                <C>                <C>
Revenue                                    $     42,967       $         --       $         --       $     42,967

Operating Expenses:
   Depreciation                            $    160,530       $    192,903       $     15,377       $    374,604
   General and administrative              $  6,168,148       $  6,655,442       $  1,174,016       $ 14,020,399
   Research and development (Note 10)      $    261,629       $    113,276       $    175,000       $    650,120
                                           -------------      -------------      -------------      -------------

      Total operating expenses             $  6,590,307       $  6,961,621       $  1,364,393       $ 15,045,123
                                           -------------      -------------      -------------      -------------

         Loss from operations              $ (6,547,340)      $ (6,961,621)      $ (1,364,393)      $(15,088,090)

Other income (expenses)                    $      5,213       $     34,096       $         --       $     39,310
                                           -------------      -------------      -------------      -------------

         Net income before taxes           $ (6,542,127)      $ (6,927,525)      $ (1,364,393)      $(15,048,780)

Income tax benefit (Note 11)               $         --       $         --       $         --       $         --
                                           -------------      -------------      -------------      -------------

         Net loss                          $ (6,542,127)      $ (6,927,525)      $ (1,364,393)      $(15,048,780)
                                           =============      =============      =============      =============

Loss per common share -
   basic and diluted                       $      (0.15)      $      (0.22)      $      (0.07)
                                           =============      =============      =============

Weighted average shares outstanding -
   basic and diluted                         43,774,170         31,448,585         20,400,000
                                           =============      =============      =============

</TABLE>

See accompanying notes to financial statements.

                                                          F-5
<PAGE>
<TABLE>
                                                           SULPHCO, INC.
                                                   (A Development Stage Company)
                                           Statement of changes in stockholders' equity
                                                  From Date of Inception through
                                                         December 31, 2002
<CAPTION>


                                                   Common Stock                                            Stock          Total
                                           ----------------------------    Additional    Accumulated   Subscriptions  Stockholders'
                                               Shares       Amount      Paid-in Capital    Deficit       Receivable       Equity
                                           -------------  -------------  -------------  -------------  -------------  -------------
<S>                                          <C>          <C>            <C>            <C>            <C>            <C>
BALANCE, JANUARY 13, 1999                            --   $         --   $         --   $         --   $         --   $         --

STOCK ISSUED FOR CASH AT $167 PER SHARE           1,000              1        166,999             --             --        167,000

RESTATE. FROM RECAPITAL. OF GRD, INC         19,999,000         19,999        (19,999)            --             --             --

NET LOSS                                             --             --             --       (128,802)            --       (128,802)
                                           -------------  -------------  -------------  -------------  -------------  -------------

BALANCE, DECEMBER 31, 1999                   20,000,000         20,000        147,000       (128,802)            --         38,198

CONTRIBUTIONS FROM STOCKHOLDER:
   CASH                                              --             --        169,168             --             --        169,168
   EQUIPMENT                                         --             --        362,331             --             --        362,331

ACQUISITION OF FILMWORLD, INC                 1,200,000          1,200       (251,200)            --             --       (250,000)

CONTRIBUTION OF CAPITAL                         820,000            820        409,180             --       (208,500)       201,500

ISSUANCE OF STOCK OPTIONS                            --             --      1,014,200             --             --      1,014,200

NET LOSS                                             --             --             --     (1,364,393)            --     (1,364,393)
                                           -------------  -------------  -------------  -------------  -------------  -------------

BALANCE, DECEMBER 31, 2000                   22,020,000         22,020      1,850,679     (1,493,195)      (208,500)       171,004

STOCK ISSUED FOR SERVICES                       200,000            200        571,800             --             --        572,000

STOCK ISSUED FOR SERVICES - RELATED PARTY     4,342,800          4,343      4,782,557             --             --      4,786,900

STOCK ISSUED FOR CASH - RELATED PARTY           724,750            725      1,207,162             --             --      1,207,887

STOCK ISSUED FOR SUBSCRIPTIONS RECEIVABLE    12,639,620         12,640      7,352,860             --     (6,041,000)     1,324,500

ISSUANCE OF STOCK OPTIONS                            --             --             --             --             --             --

RETURN OF SHAREHOLDER CAPITAL                        --             --       (118,427)            --             --       (118,427)

NET LOSS                                             --             --              1     (6,927,525)            --     (6,927,524)
                                           -------------  -------------  -------------  -------------  -------------  -------------

BALANCE, DECEMBER 31, 2001                   39,927,170         39,927     15,646,632     (8,420,720)    (6,249,500)     1,016,340

STOCK ISSUED FOR SERVICES                        50,000             50         13,450                                       13,500

STOCK ISSUED FOR SERVICES - RELATED PARTY    10,000,000         10,000      4,990,000                                    5,000,000

STOCK ISSUED FOR CASH                           100,000            100          9,900                                       10,000

COLLECTION ON SUBSCRIPTIONS RECEIVABLE                                                                      515,500        515,500

CANCELLED SUBSCRIPTIONS RECEIVABLE           (1,000,000)        (1,000)   (499,000.00)                      500,000             --

ISSUANCE OF STOCK OPTIONS                        75,000             75        (27,575)                        37500         10,000

RETURN OF SHAREHOLDER CAPITAL                (1,100,000)        (1,100)      (570,900)                      572,000             --

RETURN OF STOCK SUBSCRIPTION                   (431,000)          (431)   (440,069.00)                                    (440,500)

NET LOSS                                             --             --             --     (6,542,127)            --     (6,542,127)
                                           -------------  -------------  -------------  -------------  -------------  -------------

BALANCE, DECEMBER 31, 2002                   47,621,170   $     47,621   $ 19,122,438   $(14,962,846)  $ (4,624,500)  $   (417,287)
                                           =============  =============  =============  =============  =============  =============
</TABLE>


See accompanying notes to financial statements

                                                               F-6
<PAGE>
<TABLE>

                                                       SULPHCO, INC.
                                               (A DEVELOPMENT STAGE COMPANY)
                                                  STATEMENT OF CASH FLOWS
                                          YEAR ENDED DECEMBER 31, 2002, 2001, 2000
                                                      AND INCEPTION TO
                                                            DATE

<CAPTION>

                                                                                                               Inception
                                                                 2002            2001            2000           to date
                                                             -------------   -------------   -------------   -------------
<S>                                                          <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                     $ (6,542,127)   $ (6,927,525)   $ (1,364,393)   $(14,962,847)
Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities
     Depreciation and Amortization                                160,530         192,903          15,377         374,604
     Issuance of stock                                                 --       5,358,900       1,014,800       6,373,700
     (Increase) Decrease in:
        Receivable from related party                           1,360,685          16,935          (4,935)      1,359,185
        Construction in progress                                 (361,758)             --              --        (361,758)
        Prepaid expenses                                           40,948         (50,631)             --          (9,683)
        Inventory                                                  (1,625)             --              --          (1,625)
        Deposits                                                  (21,080)             --              --         (21,080)
     Increase (Decrease) in:
        Accounts payable                                           86,899          47,787          18,754         153,440
        Other payables                                            (23,384)             --              --         (23,384)
        Accrued liabilities                                        53,146          12,539          33,429          99,114
        Lawsuit settlement                                        100,000              --              --         100,000
                                                             -------------   -------------   -------------   -------------

          Net cash used in operating activities                (5,147,767)     (1,349,092)       (286,968)     (6,920,335)
                                                             -------------   -------------   -------------   -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                             (40,591)       (108,075)        (21,373)       (199,005)
   Investment in subsidiary                                            --        (220,086)             --        (220,086)
   Payments made to develop intangible assets                          --              --         (15,843)        (15,843)
                                                             -------------   -------------   -------------   -------------
          Net cash used in investing activities                   (40,591)       (328,161)        (37,216)       (434,934)
                                                             -------------   -------------   -------------   -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceed from issuance of stock subscription                     95,000       2,532,387        (208,500)      2,585,887
   Note payable                                                   250,000       1,000,000              --       1,250,000
   Line of credit                                                 500,000              --              --         500,000
   Return of capital                                                   --        (118,427)             --        (118,427)
   Stock issued for services                                    5,013,500              --         579,168       5,592,668
   Payments on contracs payable                                        --        (200,000)        (50,000)       (250,000)
   Proceeds from (repayment of) advance from related party       (830,000)     (1,461,285)        100,000      (2,191,285)
                                                             -------------   -------------   -------------   -------------
          Net cash provided by financing activities             5,028,500       1,752,675         420,668       7,368,843
                                                             -------------   -------------   -------------   -------------
Net increase in cash and cash equivalents                        (159,858)         75,422          96,484          13,574

Cash and cash equivalents at beginning of period                  173,432          98,010           1,526              --
                                                             -------------   -------------   -------------   -------------
Cash and cash equivalents at end of period                   $     13,574    $    173,432    $     98,010    $     13,574
                                                             =============   =============   =============   =============
</TABLE>

See accompanying notes to financial statements.

                                                               F-7
<PAGE>


                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000

Note 1-Organization and Significant Accounting Policies

ORGANIZATION
SulphCo, Inc. (the Company), formerly Film World, Inc. (Film World) was
originally organized under the laws of the State of Nevada on December 23, 1986,
under the name Hair Life Inc. The Company became inactive during 1987 and
remained inactive until September 1, 1994. On September 1, 1994, the
shareholders of Hair Life, Inc. and the "The Patterson Group" approved a reverse
acquisition agreement whereby the Patterson Group became a wholly owned
subsidiary of Hair Life, Inc. in exchange for 4,500,000 shares of common stock
(after giving effect to a reverse stock split) of Hair Life, Inc. Hair Life,
Inc. then changed its name to The Patterson Group. The Patterson Group changed
its capitalization by a reverse split of the then outstanding common stock of
one new share for each forty old shares. The Patterson Group conducted
operations via two subsidiaries until 1998, at which time in discontinued all
operations and remained dormant until July 1999.

On or about July 18, 1999, the Company acquired film rights and changed the
corporate name to Film World, Inc. The Company authorized a capitalization of
100,000,000 shares of common stock with a par value of $0.001 per share and
10,000,000 shares of preferred stock, with a par value of $0.001 per share.

On December 4, 2000, the Company discontinued its film operations and
distributed all assets and liabilities related to that business to certain
shareholders in exchange for their stock.

The Company on December 4, 2000 entered into an exchange agreement with GRD,
Inc. (GRD) (dba SulphCo) and issued 20,000,000 shares in exchange for all of the
outstanding shares of GRD.

Since the shareholders of GRD continue to control the Company the merger has
been accounted for as a recapitalization of GRD. Consequently the results of
operations are those of GRD since its inception on January 13, 1999 and GRD and
FilmWorld from December 4, 2000 to December 31, 2000.

Pro-forma amounts as if the Companies had been combined as of January 1, 1999
are as follows:

                                                  2000               1999
                                                  ----               ----
Revenues                                      $         -       $        -

Loss from operations                           (1,364,393)        (128,802)
Loss from discontinued operations              (2,889,600)        (197,011)
                                               -----------        ---------

Net loss                                      $(4,253,993)      $ (325,813)
                                              ============      ===========


Actual results for the years ended December 31, 2002 and 2001 are the same as
the pro-forma amounts.

BUSINESS
The Company was awarded with a $75,000 research contract with U.S. Navy to test
and develop a way to remove sulfur from diesel #6 in beginning of the year. In
July 2002, the Department of Defense delayed the research due to lack of a
funding authorization and the Company stopped progressing on the contract. The
Company received $42,967 in revenue as a result of this transaction. The Company
is still considered as a developmental stage company in 2002, as defined by SFAS
No. 7. The Company is engaged in the business of developing and marketing a
process for removing sulfur from petroleum and plans to collect royalties from
licensing and the deployment of their desulfurization units.

                                      F-8
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000


USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The market for the Company's
products and services are characterized by competition, rapid technological
development, regulatory changes and new product introductions, all of which may
impact the future value of the Company's assets.

CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities to
the Company of three months or less to be cash and cash equivalents.

INVENTORY
The Company's inventory is valued at cost. The Company recognizes inventory on
any replacement parts it intended to sell and spare parts for its
desulfurization unit.

CONSTRUCTION-IN-PROGRESS
Construction-In-Progress consist of uncommissioned and incomplete
desulfurization units at the end of period. See Note 2 and 3 for detail.

PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, less accumulated depreciation. The
Company reviews its long-lived assets for impairment whenever events or changes
in circumstances indicated that the carrying amount of the assets might not be
recovered through undiscounted future cash flows. If it is determined that an
impairment loss has occurred based on expected cash flows, such loss is
recognized in the statement of operations.

Depreciation is determined using the straight-line and accelerated methods over
the estimated useful lives of the asset for financial reporting purposes and
amounted to $160,530 during 2002 and $192,903 during 2001. Expenditures for
maintenance and repairs are expensed when incurred and betterments are
capitalized. Gains and losses on sale of property and equipment are reflected in
the statement of operations.


                                      F-9
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000


Property and equipment consisted of the following at December 31, 2002:

                                               2002        2001
                                               ----        ----
            Machinery and equipment         $ 454,410   $ 431,702
            Furniture and fixtures             26,458      26,458
            Computer                           45,901      28,018
            Leasehold improvements             11,434      10,605
                                            ----------  ----------

                                              538,203     496,783

            Less: accumulated depreciation   (334,799)   (174,269)
                                            ----------  ----------

                                            $ 203,404   $ 322,514
                                            ==========  ==========


INTANGIBLE ASSETS
Intangible assets consist primarily of patent costs. Patent costs are amortized
on a straight-line basis over the term of the patent. The Company assesses
recoverability of this intangible asset by determining whether the amortization
of the balance over its remaining life can be recovered through discounted
future operating cash flows of the acquired operation. The amount of impairment,
if any, is measured based on projected discounted future operating cash flow
using a discount rate that reflects the Company's average cost of funds. The
Company has no intangible assets as of December 31, 2002 and 2001.

RESEARCH AND DEVELOPMENT
The Company charges expenses to research and development as incurred. The
Company expensed $261,629 in 2002 and $113,276 in 2001.

INCOME TAXES
The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using the enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

GRD, Inc. was an S Corporation and was not subject to income taxes. Instead, the
shareholders were taxed on their proportionate share of GRD Inc.'s taxable
income. No pro forma adjustments for income taxes for GRD were necessary due to
the loss incurred and a valuation allowance being recorded to offset the pro
forma deferred tax asset.

It is estimated the Company does not owe any income taxes as of December 31,
2002 since it has not been profitable from its incorporation.

EARNINGS PER SHARE
The computation of basic and diluted earnings per common share is based on the
weighted average number of shares outstanding during the year, plus the common
stock equivalents. Common stock equivalents are not included in the diluted
earnings (loss) per share calculation when their effect is antidilutive. Common
stock equivalents arising from options have not been included in diluted
earnings per share.

                                      F-10
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000


FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, receivables, payables, and
notes payable. The carrying amounts of cash, receivables, and payables
approximate fair value because of the short-term nature of these items. The
carrying amount of notes payable approximates fair value as the individual
borrowings bear interest at market interest rates.

RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, was
issued in June 1998 and amended by SFAS No, 138, issued in June 2000. The
requirements of SFAS No. 133, as amended, are effective for the Company in the
first quarter of the fiscal year beginning January 1, 2001. The standard
establishes accounting and reporting standards for derivative instruments
embedded in other contracts and for hedging activities. Under the standard,
certain contracts that were not formerly considered derivatives may now meet the
definition of a derivative. The Company has determined SFAS 133 to have no
impact on the Company's financial position and results of operations because the
Company has no derivative activity.

SFAS No. 140, Accounting for transfers and servicing of Financial Assets and
Extinguishments of Liabilities, was issued in September 2000. SFAS No. 140 is a
replacement of SFAS No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. Most provisions of SFAS No. 125 were
carried forward to SFAS No. 140, without reconsideration by the Financial
Accounting Standards Board (FASB), and some were changed only in minor ways. In
issuing SFAS No. 140, the FASB included issues and decisions that had been
addressed and determined since the original publication of SFAS No. 125. SFAS
No. 140 is effective for transfers after March 31, 2001. Management does not
expect the adoption of SFAS No. 140 to have a significant impact on the
financial position or results of operations of the Company.

In December 1999, the Securities and Exchanges Commission ("SEC") issued Staff
Accounting Bulletin No. 101 (SAB 101"), Revenue Recognition in Financial
Statements, which provided guidance on the recognition, presentation, and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosure related to revenue recognition policies. The adoption of
this standard in 2000 did not result in any significant change in the Company's
financial statements.

NOTE 2-INVESTMENT IN SUBSIDIARY
On November 1, 2001, the Company formed a joint venture to implement its
desulfurization process throughout Europe. To initiate the program, the Company
granted an Exclusive Technology License to Innovative Clean Technologies S.A., a
Luxembourg corporation and wholly owned subsidiary of Eliop International. Eliop
International is a Luxembourg corporation owned 50.5% by the Company. These
corporations are managed by Mr. Luigi Profumo, who controls Eliop Sr.1., a major
petroleum refinery in Genoa, Italy. This investment was valued in 2001 based on
the net book value of equipment provided to the refinery in Italy under the
licensing agreement with Innovative Clean Technologies S.A. (ICT). ICT did not
fulfill the requirements of its license in that it did not submit the monthly
reports along with the royalty payments envisioned in the agreement.

                                      F-11
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000


The joint venture agreement was cancelled as of August 5, 2002. As of this date,
ICT has no authority to represent the Company and was demanded to immediately
return the Company's equipment valued at $221,771 contributed to this venture.
The Company reclassified the investment to construction-in-progress for
reporting purposes to recognize the cancellation of the joint venture. The
Company intends to lease out the unit or to use the parts in new equipment once
the equipment arrives. As of the report date, the Company had not received the
equipment from ICT.

NOTE 3-CONSTRUCTION-IN-PROGRESS
The Company has an incomplete desulfurization unit as of December 31, 2002. The
desulfurization unit consists of a trailer containing equipment and machine used
to remove sulfur from crude oil. The Company incurred $321,167 and accrued
$40,591 in sales taxes on this unit during the year. On January 29, 2002, the
Company's Board of Directors decided to maintain their ownership when the unit
is completed and rather than selling the unit. Therefore, $361,758 was
reclassified from inventory to Construction-In-Progress as of December 31, 2002.

NOTE 4-LINE OF CREDIT
The Company has negotiated a $500,000 revolving line of credit with Nevada State
Bank at an interest rate of prime (currently 4.25%) with Rudolf W. Gunnerman,
Chairman and CEO of the Company as the guarantor. The funds assisted the Company
in meeting short-term cash flow requirements. Interest payments on any amounts
borrowed are due 24th of each month. The line of credit expires on May 24, 2003,
unless extended. At that time, all amount of principal and unpaid interest are
due.

Under terms of the line of credit payable to Nevada State Bank, there is no
financial requirement on the Company in order to maintain their status on the
loan.

Payment obligations due in 2003 are as follows:

            Interest                         $  8,813
            Principal                         500,000
                                             ---------

                                             $508,813
                                             =========

At December 31, 2002, the Company owes $500,000 to Nevada State Bank under the
line of credit agreement.

NOTE 5-NOTES PAYABLE
The Company's notes payable consists of the following:

            Note payable to Erika Herrmann with
            interest payable monthly at 9.6%             $ 250,000

            Note payable to Rudolf W. Gunnerman with
            interest monthly payable at 6.25%              170,000
                                                         ----------

                                                         $ 420,000
                                                         ==========


The $250,000 note due to Erika Herrmann requires monthly interest payment of
$2,000. This note matures on August 30, 2003. Any unpaid accrued interest will
be due with principal when the note matures.

                                      F-12
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000


The $170,000 of notes sums numerous advances to the Company made by Rudolf W.
Gunnerman in order to maintain the Company's cashflow in 2002. All notes due to
Rudolf W. Gunnerman mature one year from the issuance date and bear interest at
the rate of 6.25%. Payment obligations due to Rudolf W. Gunnerman subsequent to
December 31, 2002 are as follows:

     Issuance Date                 Maturity Date               Amount
     -------------                 -------------               ------
    December 10,2002             December 10, 2003            $ 40,000
    December 2,2002              December 2, 2003               60,000
   November 27, 2002             November 27, 2003              20,000
   November 14, 2002             November 14, 2003              10,000
    October 29, 2002             October 29, 2003               30,000
    October 7, 2002               October 7, 2003               10,000
                                                              ---------

                                                              $170,000
                                                              =========

On January 29, 2003, the Board of Directors approved up to a $2.0 million dollar
loan from Rudolf W. Gunnerman to the Company. All notes due to Rudolf W.
Gunnerman will be consolidated into one promissory note with interest at prime
plus 2% (currently 6.25%).

NOTE 6-OPERATING LEASES
The Company leases its office space from the majority shareholder of the
company, Rudolf W. Gunnerman under a non-cancelable lease agreement. The lease
expires in February 2004.

Following is a schedule of payments required under the rental lease agreement:

         2003                                $ 78,000
         2004                                  13,000
                                              --------

                                             $ 91,000
                                             =========

Rent expense under the lease was $78,315 and $108,201 in 2002 and 2001,
respectively

Commencing March 1, 2003, the Company entered into a standard industrial lease
agreement with DP Partners Dermody Industrial Group to lease a property at 850
Spice Islands Drive, Sparks, Nevada 89431. This 92,125 square feet property will
allow the Company to assemble and market its desulfurization units more
effectively. The Company agreed to pay $36,822.36 monthly on the first of every
month. The lease term is one year.

NOTE 7-CONTINGENT LIABILITIES
On March 4, 2002, the Company received a letter from SEC Enforcement Division
Staff recommending to the Commission that a civil injunctive action be commenced
naming the Company and Rudolf W. Gunnerman as defendants for violating
provisions of the federal securities laws. This letter invited the Company to
submit a Wells Submission, providing defendants with an opportunity to respond
to the proposed action recommended by the SEC staff. The Company provided a
Wells Submission on March 27, 2002. It is uncertain as to what action the SEC
may initiate in the future against the Company or those associated with the
Company.

                                      F-13
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000


On or about June 22, 2001, the Company filed a complaint against Amir I.
Elgindy, also know as Anthony Elgindy and Tony Elgindy and doing business as
Pacific Equity Investigations and InsideTruth.com. In an amended complaint in
October 2001 the Company outlined causes of action as fraud, deceptive trade
practices, trade disparagement and interference with prospective contractual
and/or economic advantage. As of the reporting date, the Company entered into a
settlement agreement with Mr. Elgindy in October of 2002.

On or about November 2, 2001, Mark Cullen, the former President of the Company,
filed a complaint in the Second District Court of the State of Nevada in and for
the County of Washoe naming the Company, Rudolf W. Gunnerman, Alexander H.
Walker, Jr., Harry Holman and Joseph Sutton as defendants. The Complaint alleged
breach of contract and breach of the covenant of good faith and fair dealing
against all defendants. In that regard, the Complaint alleged that defendants
breached an employment agreement between the Company and Mr. Cullen. The
Complaint alleged the damages "in excess of $100,000" and the prayer for relief
seeks a judgment against all defendants for compensatory damages in excess of
$100,000, plus interest from August 3, 2001, plus reasonable attorneys fees and
costs.

A settlement was reached on this Complaint on February 12, 2003. Mr. Cullen will
receive 2 million shares previously cancelled when his employment ended at the
Company. A total of $100,000 will also be paid to Mr. Cullen by the Company in
installments with first payment of $25,000 due by March 3, 2003 and monthly
payment of $6,818.18 will be due on the 1st day of each month until paid,
without interest, beginning on April 1, 2003. The amount of this debt classified
as current is $86,364 while the remaining $13,636 is shown on the balance sheet
as long-term.

During the course of the audit, Mr. Art Beroff claimed that on or about January
15, 1998, the Company's predecessor known as the Patterson Group, Inc. granted
him the right to purchase 9% of the Company's then outstanding shares at par
value. Mr. Beroff claims to have issued a check in the amount of $701.34 as
payment for shares, which could equate to 70,134 shares of the Company's current
common stock. The Company is investigating the claim and notes the existence of
an indemnification against claims such as these provided by Mr. Alexander H.
Walker, Jr.

NOTE 8-RELATED PARTY
On April 11, 2001, the Company issued 24,750 shares to Harry P. Holman, a
director of the Company. Such shares were issued in reliance on the exemption
from registration contained in Section 4(2) of the Securities Act of 1933, as
amended, and the certificates representing such shares bear a restrictive legend
reflecting the limitations on future transfer of these shares.

On June 29, 2001, the Company issued 350,000 shares to Rudolf W. Gunnerman,
Chairman and CEO of the Company, for cash. Such shares were issued in reliance
on the exemption from registration contained in section 4(2) of the Securities
Act of 1933, as amended, and the certificates representing such shares bear a
restrictive legend reflecting the limitations on future transfer of these
shares.

On November 8, 2001, the Company issued 4,000,000 shares to Rudolf W. Gunnerman,
Chairman and CEO of the Company. On May 8, 2002, 4,000,000 shares and also on
September 25, 2002, 6,000,000 shares were awarded to Rudolf W. Gunnerman in
consideration for services rendered and consulting provided to the Company. Such
shares were issued in reliance on the exemption from registration contained in
section 4(2) of the Securities Act of 1933, as amended, and the certificates
representing such shares bear a restrictive legend reflecting the limitations on
future transfer of these shares.

                                      F-14
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000


Mr. Rudolf W. Gunnerman, Chairman and CEO of the Company, borrowed from the
Company $1,360,685 at December 31, 2001 under notes signed by him payable to the
Company upon demand and bearing interest at the prime rate on the date of each
note. The note rate confirmed by the note holder was 8%. At December 31, 2000,
the Company had advances from Rudolf W. Gunnerman, payable on demand with no
interest in the amount of $100,000. Mr. Gunnerman used the advances to offset
the receivable and repaid the remaining amount during 2002.

On May 24, 2002, the Company borrowed $500,000 line of credit at 4.25% from
Nevada State Bank naming Mr. Rudolf W. Gunnerman as the guarantor of the loan. A
guarantor was needed to borrow from the financial institution since the Company
had not yet established their credit. The line of credit matures on May 24,
2003. (See Note 4)

At the reporting date, Rudolf W. Gunnerman anticipates loaning up to a total of
$2.0 million dollars to the Company. (See Notes 5)

The Company leases its office space from the majority shareholder of the
Company, Rudolf W. Gunnerman, under a non-cancelable lease agreement accounted
for as an operating lease. (See Note 6)

Mr. Rudolf W. Gunnerman, through a company he wholly owns, has contracted with
the Company to provide services as Chairman of the Board and Chief Executive
Officer for a yearly fee. The agreement is set to terminate on July 1, 2003.

NOTE 9-STOCK SUBSCRIPTIONS RECEIVABLE/STOCK BASED COMPENSATION
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation.
Accordingly, no compensation cost has been recognized for employees' stock
options in the financial statements. Had compensation cost for the Company's
stock options been determined based on the fair value at the grant date for
awards in 2002, 2001, 2000 and 1999, consistent with the provisions of SFAS No
123, the Company's net earnings and earnings per share would have been reduced
to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                       2002           2001         2000          1999
                                                       ----           ----         ----          ----
<S>                                               <C>           <C>           <C>           <C>
Net earnings including stock option values        $ (6,576,607) $ (9,535,026) $ (2,379,193) $   (128,802)
                                                  ============= ============= ============= =============

Earnings per share including stock option values  $      (0.15) $      (0.30) $      (0.12) $      (0.01)
                                                  ============= ============= ============= =============

Weighted average shares outstanding                 43,774,170    31,448,585    20,400,000    20,000,000
                                                  ============= ============= ============= =============
</TABLE>


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

<TABLE>
<CAPTION>
                                                                 December 31,
                                            ----------------------------------------------------------
                                                2002                 2001                     2000
                                                ----                 ----                     ----
      <S>                                   <C>                   <C>                      <C>
      Expected dividend yield               $       -0-           $       -0-              $       -0-
      Expected stock price volatility       302.335               258.29% - 329.96%        695.40%
      Risk-free interest rate               3.2%                  3.44%-4.92%              6.00%
      Expected life of options              1 - 2 years           1 - 2 years              2 - 3 years
</TABLE>

The weighted average fair value of options granted during 2002 is $0.18 compared
to $1.11 in 2001 and to $0.46 in 2000.

                                      F-15
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000


During 2002, the Company offered to cancel all stock issuances and receivables
on the above stock options upon the return of the stock certificates. If the
stock option holder agreed, the Company would then reissue the stock options at
an exercise price of $0.10. The Company cancelled 431,000 issued shares under
this offer.

The following table summarizes information about stock option outstanding at
December 31, 2002, 2001 and 2000:

<TABLE>
<CAPTION>
                                              Option Outstanding                       Options Exercisable
                               ------------------------------------------------- --------------------------------
                                                  Weighted
                                                   Average
                                                  Remaining        Weighted                         Weighted
    Range of                                     Contractual        Average                          Average
    Exercise                       Number           Life           Exercise          Number         Exercise
    Prices                      Outstanding        (Years)          Prices        Exercisable        Prices
    ------                      -----------        -------          ------        -----------        ------
    December 31, 2000
    <S>                            <C>               <C>           <C>             <C>                <C>
    $                 .50          9,456,000         1.9           $    .50         9,456,000         $  .50
    $                1.50            325,000         1.9           $   1.50           325,000         $ 1.50
    -------------------------- --------------- ---------------- ---------------- --------------- ----------------
    $         .50 to 1.50          9,781,000         1.9           $    .53         9,781,000         $  .53
    December 31, 2001
    $                 .50          2,100,000         1.5           $    .50         2,100,000         $  .50
    $                1.50            244,000         1.8           $   1.50           244,000         $ 1.50
    -------------------------- --------------- ---------------- ---------------- --------------- ----------------
    $         .50 to 1.50          2,344,000         1.6           $    .75         2,344,000         $  .75
    December 31, 2002
    $                 .10            431,000         1.5           $    .10           431,000         $  .10
</TABLE>

On May 24, 2001, the Company issued the following shares in exchange for notes
from the registered owners secured by the shares and bearing interest at rates
varying from 4% to 7%:

<TABLE>
<CAPTION>
                                                                            Stock
                                                    Number of      Sybscription receivable
Registered Owner         Position                    Shares          2002          2001
----------------         --------                    ------          ----          ----
<S>                      <c>                        <C>          <C>           <C>
R. W. Gunnerman          Chairman                   7,150,000    $ 3,575,000   $ 3,575,000
M. T. Cullen             Former Presidnet & CEO     1,000,000*            --       500,000
A. H. Walker, Jr         Secretary                  1,000,000*            --       500,000
Erika Hermann            Employee                     100,000             --       150,000
H. P. Holman             Director                     200,000        200,000       200,000
Loren Kalmen             Contractor                    25,000             --        37,500
S. D. Ligon              Consultant                    50,000             --        75,000
Rohinis Govind           Employee                      50,000             --        75,000
T. P. Orme               Employee                      50,000         75,000        75,000
Shii Kant Singh          Employee                      25,000         37,500        37,500
Majaba Ahadiantehrani    Employee                      25,000             --        37,500
P. C. Knauff             Former CFO                   206,000             --       103,000
                                                                  -----------   -----------
                           Total                                  $3,887,500    $5,365,500
                                                                  ===========   ===========

* These shares were later returned to the Company and cancelled.
</TABLE>


All the shares identified in the table above were issued in reliance on the
exemption from registration contained in Section 4(2) of the Securities Act of
1933,as amended, and the certificates representing such shares bear a
restrictive legend reflecting the limitations on future transfer of these
shares.

                                      F-16
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000


On September 6, 2001, the Company issued 2,758,620 shares of its common stock
under a subscription agreement in which Mark Neuhaus agreed to place the shares
with investors interested in assisting the Company in reaching it objectives.
The shares were valued at $0.725 per share for a total value of $2,000,000. At
December 31, 2001, the Company had received $1,116,000 in cash from Mr. Neuhaus.
Subsequent to year-end another $75,000 was received. On April 16, 2002 the
Company requested Mr. Neuhaus to immediately remit the balance of $809,000 or
return 1,123,611 shares for cancellation. These shares were issued pursuant to a
registration statement filed in connection with such shares on Form S-8.

Including the Neuhaus shares and those issued on May 4, 2001 and September 6,
2001 the total stock subscription receivable was $4,624,500 and $6,249,500 at
December 31, 2002 and 2001, respectively.

NOTE 10-RESEARCH AND DEVELOPMENT EXPENSE
The Company had a contract with Professor T.F. Yen at the University of Southern
California (USC) wherein he performed research for the Company. The original
agreement required payments of $100,000 each in 1999 and 2000. In 2000 an
additional $75,000 was paid. The contract was extended through 2001 for an
additional $100,000. During 2001, equipment that had been placed at USC to
support Professor Yen's research was donated to USC; the net book value of this
equipment has been charged to research and development expense. No payments were
made in 2002.

NOTE 11-INCOME TAXES
A valuation allowance valued at nil has been provided for all deferred tax
assets or liabilities at December 31, 2002 and 2001. SulphCo has a net operating
loss carry forward for income tax purposes from the predecessor company, which
may be limited due to the changes in ownership and may not be realizable.
Therefore no amounts are reflected in the financial statements for these losses.

The Company has net operating loss carry forwards of approximately $15,000,000,
which can be carried forward to offset future taxable income until the year
2015. These losses may be of nominal value because the Company has not yet
developed a future income stream to offset these losses. Because the future
realization of these loss carry forwards is uncertain, the financial statements
show no provision for income taxes receivable on these losses.

Income tax expense differs from the amount computed at federal statutory rates
as follows:

                                                    December 31,
                                         2002           2001            2000
                                         ----           ----            ----
Federal income tax benefit
   at statutory rate               $   732,221     $ 2,424,634     $   209,857

Difference due to S-corporation
   election                                                 --        (209,857)

Unrealized net operating losses       (732,221)     (2,424,634)             --
                                   ------------    ------------    ------------

                                   $        --     $        --     $        --
                                   ============    ============    ============

                                      F-17
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements
                        December 31, 2002, 2001 And 2000


NOTE 12-DIVIDENDS
During the year 2001 a dividend of $0.10 per unrestricted share was declared and
paid to common shareholders of record as of the close of business on July 5,
2001. This dividend was accounted for as a return of paid in capital. No
dividends were declared and/or paid during 2002.

NOTE 13-SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The actual amounts paid for interest totaled $15,450 and $2,610 for the years
ended December 31, 2002 and 2001, respectively. There were no amounts paid for
income taxes in either year.

The Company reclassified the equipment contributed to the `Investment in
Subsidiary' to `Construction in Progress" to recognize the cancellation of joint
venture agreement with Innovative Technologies, S.A. in Italy.

NOTE 14-SUBSEQUENT EVENTS
The Company has entered into an employment agreement with Kirk S. Schumacher to
act as the President expiring February 17, 2008. The agreement provides the
employee with an annual base salary, other employee benefits, plus a severance
package if the agreement is terminated and an option to acquire 1,000,000 shares
of the Company's Stock at an exercise price of $0.55 per share.

Subsequent to year-end, the Company was notified of a claim made by Mr. Art
Beroff. (See Note 7)

Subsequent to the end of the year, the Company entered a month-to-month leasing
agreement with Dermody Industrial Group to lease a property on 850 Spice Islands
Drive, Sparks, Nevada. See note 6 for further details.

                                      F-18
<PAGE>

--------------------------------------------------------------------------------
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------

            On April 5, 2002, the Company's independent accountants, Tanner +
Co. in Salt Lake City, Utah, resigned as the Company's auditors. In a letter to
management dated April 5, 2002, Tanner + Co. indicated that their decision to
resign was based on their conclusion that they "may not be able to rely on
management's representations" and that this "conclusion is based on issues
raised by an investigation being conducted by the Securities and Exchange
Commission that have not been resolved to [Tanner + Co.'s] satisfaction." This
letter and their reportable conditions and material weakness letter of the same
date were included as exhibits to the Company filing on form 8-K filed April 5,
2002. The Company's current independent accountants, Forbush and Associates,
included the following going concern limitation in its audit of the Company's
financial statements for the year ending December 31, 2001:

            "The accompanying financial statements have been presented assuming
that the Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has suffered losses from operations and has
yet to make a sale of the process, which raises doubt about its ability to
continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty."

            Similarly, Forbush and Associates has included the following going
concern limitation in its audit of the Company's financial statements for the
years ending December 31, 2001 and 2002:

            "The accompanying financial statements have been presented assuming
that the Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has suffered losses from operations and has
raised minimal sale of the process, which raises doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty."

            The change in accountants was not recommended by the Board of
Directors. The Board of Directors approved Forbush and Associates as the
Company's accountants. The Company has authorized Tanner + Co. to respond fully
to the inquiries of Forbush & Associates. The Company has addressed with Forbush
and Associates each of the reportable conditions and material weaknesses noted
by Tanner + Co.

------------------------------------------------------------------------
ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-----------------------------------------------------------------------

(a)         Directors and Executive Officers

            As of March 24, 2003, the directors and executive officers of the
Company, their ages, positions in the Company, the dates of their initial
election or appointment as director or executive officer, and the expiration of
the terms as directors are as follows:

Name                      Age      Position                    Served As
                                   Officer/Director*
------------------       ----      -----------------        -----------------
Dr. Rudolf W. Gunnerman   74       Chief Executive Officer,
                                    Chairman of the Board,
                                     and Director           12-4-2000 to Present

Kirk S. Schumacher        47       President and Director   2-17-2003 to Present

Harry P. Holman           67       Director                 12-4-2000 to Present

Patrick E. Lacy           50       Controller and Director  7-14-2002 to Present

                                       13
<PAGE>

     *The Company's directors are elected at the annual meeting of stockholders
and hold office until their successors are elected and qualified. The Company's
officers are appointed annually by the Board of Directors and serve at the
pleasure of the Board.

(b)         Business Experience:

            Dr. Rudolf Gunnerman, Chief Executive Officer, the Company's
Chairman of the Board and Director, is a 74-year-old entrepreneur who studied
mathematics and physics at the University of Munich, Germany before he
immigrated to the United States. Dr. Gunnerman has invented a series of
successful technologies, including fireproof building materials and wood
pellets. Thereafter, in his quest to reduce Nitrous Oxide, a major source of
ozone depletion, Dr. Gunnerman invented A-55 Clean Fuels and is currently
Chairman of Clean Fuels Technology, Inc. Dr. Gunnerman holds three honorary
doctorate degrees.

            Kirk S. Schumacher, President and a Director, has been a lawyer in
private practice with broad experience representing businesses. Most recently,
Mr. Schumacher has been a shareholder with Woodburn and Wedge, a general
practice law firm located in Reno, Nevada, for more than 15 years. Mr.
Schumacher graduated with a bachelor's degree in business finance from the
University of Nevada, Reno, in 1980 and a law degree from the University of
Notre Dame in 1983. Mr. Schumacher was previously employed by Pillsbury, Madison
& Sutro, now Pillsbury Winthrop LLP.

            Harry P. Holman, Director, has been an active participant in the
security business, specializing in bringing private companies public on the
stock exchange. Mr. Holman has been a consistent top producer over the last
thirty years with three New York stock exchange firms. In 1980, he was awarded
the National Account Executive of the Year at Birr Wilson & Co. Mr. Holman
recently retired in November 2000 as First Vice President with the firm Dain
Rauscher. Mr. Holman is a graduate of the University of Southern California in
1957 with a bachelor's degree in business administration. He is founder of the
Northern Nevada University of Southern California Alumni Club.

            Patrick E. Lacy, Controller and a Director, received his bachelor's
degree in accounting from Central Washington University in 1980 and his license
as a Certified Public Accountant in 1986. Mr. Lacy has over twenty years of
progressive accounting experience primarily in the manufacturing and
agricultural industries.

            None of the directors hold directorships in any other reporting
company.

(c)         Family Relationships:

            There are no family relationships between the directors, executive
officers or any other person who may be selected as a director or executive
officer of the Company.

(d)         Involvement in Certain Legal Proceedings:

            Except as noted below, none of the officers, directors, promoters or
control persons of the Company have been involved in the past five (5) years in
any of the following:

            (1) Any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time. Except for Starbright
Charter, a company which Rudolf W. Gunnerman is President, filed for bankruptcy
on August 29th 2002;

            (2) Any conviction in a criminal proceedings or being subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);

                                       14
<PAGE>

            (3) Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, or any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or

            (4) Being found by a court of competent jurisdiction (in a civil
action), the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities laws or commodities law, and the judgment
has not been reversed, suspended, or vacated. The officers and directors who are
identified above are significant employees of the Company.

(e)         Audit Committee Expert.

            The Company does not currently have any audit committee financial
expert. The Company is in the process of locating such an expert.

(f)         Section 16a Beneficial Ownership Compliance

            To the Company's knowledge the officers, directors and beneficial
owners of more than 10% of the Company's common stock have filed their initial
statements of ownership on Form 3, and the officers, directors and beneficial
owners of more than 10% of the Company's common stock have also filed the
required Forms 4 or 5, or shall file such Forms concurrent with the filing of
this Form 10-KSB.

--------------------------------------------------------------------------------
ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------

            The following table sets forth information about compensation paid
or accrued by the Company during the years ended December 31, 2002, 2001, and
2000 to the Company's chief executive officer. No other executive officer of the
Company earned more than $100,000 during the years ended December 31, 2002, 2001
or 2000.

                                       15
<PAGE>

<TABLE>
                                                         SUMMARY COMPENSATION TABLE
<CAPTION>
                                                               (e)                        (g)
                                                               Other      (f)             Securities                (i)
(a)                                                            Annual     Restricted      Under-         (h)        Other
Name and                           (c)          (d)            Compen-    Stock           lying          LTIP       Compen-
Principal                 (b)      Salary       Bonus          sation     Awards          Options/       Payouts    sation
Position                  Year     ($)          ($)            ($)        ($)             SARs (#)       ($)        ($)
----------                ----     ------       ----------     ------     ----------      ----------     -------    -------
<S>                       <C>      <C>          <C>            <C>        <C>             <C>            <C>        <C>
Rudolf Gunnerman
----------------
CEO and                   2002     $None        $3,000,000     $None      $None           None           $None      $300,000
Chairman of               2001     $None        $4,400,000     $None      $None           None           $None      $None
the Board                 2000     $None        $None          $None      $None           7,500,000      $None      $None

Mark T. Cullen
--------------
Former CEO,               2002     $None        $None          $None      $None           None           $None      $None
President and             2001     $131,002     $None          $None      $None           1,000,000      $None      $None
Director                  2000     $50,002      $None          $None      $None           None           $None      $None

A. H. Walker, Jr.
-----------------
Former Secretary and
Director                  2002     $None        $1,500,000     $None      $None           None           $None      $None
                          2001     $None        $None          $None      $None           1,000,000      $None      $None
                          2000     $None        $None          $None      $None           None           $None      $None

Paul Knauff
-----------
Former Chief              2002     $None        $None          $None      $None           None           $None      $None
Financial Officer         2001     $None        $None          $None      $None           None           $None      $56,300
                          2000     $None        $None          $1,000     $None           106,000        $None      $2,917

Harry P. Holman
---------------
Director                  2002     $None        $500,000       $None      $None           None           $None      $30,000
                          2001     $None        $None          $None      $None           None           $None      $7,500
                          2000     $None        $None          $None      $None           None           $None      $None
</TABLE>

--------------------------------------------------------------------------------
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------------------------

            The following information sets forth certain information as of March
24, 2003 about each person who is known to the Company to be the beneficial
owner of more than five percent (5%) of the Company's Common Stock and sets
forth the securities ownership of management:

                                       16
<PAGE>

(a)         5% Shareholders:

<TABLE>
<CAPTION>

  (1)                          (2)                        (3)                              (4)
 Title                   Name and Address           Amount and Nature                   Percent of
Of Class               Of Beneficial Owner           Of Beneficial                        Class
                                                       Ownership
--------------------------------------------------------------------------------------------------
<S>                    <C>                               <C>                              <C>
Common                 Rudolf Gunnerman                  18,603,500                       39.02%
                       850 Spice Islands Drive
                       Sparks, Nevada 89431

Common                 Rudolf Gunnerman                  11,400,000                       23.91%
                       Doris Gunnerman, JJTEN
                       850 Spice Islands Drive
                       Reno, Nevada 89431

Common                 Cede & Co.                         5,158,402                       11.29%
                       P.O. Box 20
                       Bowling Green Station
                       New York, New York 10004

(b)         Security Ownership of Management

  (1)                          (2)                        (3)                              (4)
 Title                   Name and Address           Amount and Nature                   Percent of
Of Class               Of Beneficial Owner           Of Beneficial                        Class
                                                       Ownership
--------------------------------------------------------------------------------------------------

Common                 Rudolf Gunnerman                 30,003,500                        62.93%
                       850 Spice Islands Drive
                       Sparks, Nevada  89431

Common                 Harry P. Holman                   1,196,175                         2.62%
                       850 Spice Islands Drive
                       Sparks, Nevada  89431

Common                 Kirk S. Schumacher                   50,000                        Less than 1%
                       850 Spice Islands Drive
                       Sparks, Nevada  89431

Common                 Patrick E. Lacy                      52,000                        Less than 1%
                       850 Spice Islands Drive
                       Sparks, Nevada  89431

Common                 All Directors and                31,301,675                        66.08%
                       Officers as a Group
</TABLE>

(c)         Changes in Control:

            None.

                                       17
<PAGE>

--------------------------------------------------------------------------------
ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------

            During the past two (2) years, the Company has not entered into a
transaction with a value in excess of $60,000 with a director, officer or
beneficial owner of 5% or more of the Company's capital stock, except as
follows:

            On February 14, 2001, the Company issued 700,000 shares of the
Company's common stock to Rudolf W. Gunnerman for services rendered and issued
120,000 shares of the Company's common stock to Mark T. Cullen, then President,
for services rendered.

            In May of 2001, Alexander H. Walker, Jr. exercised previously
granted option rights to acquire 1,000,000 shares of the Company's common stock
in exchange for a promissory note. These shares have been returned to treasury
and the promissory note has been canceled.

            On May 24, 2001 the Company issued 7,150,000 shares of the Company's
common stock to Rudolf W. Gunnerman, the Chairman of the Board of Directors and
Chief Executive Officer, in consideration of an unsecured promissory note in the
principal amount of $3,575,000, bearing interest at 7% and due June 1, 2003. On
May 24, 2001, the Company also issued to Harry P. Holman, a Director, 200,000
shares of the Company's common stock in consideration of an unsecured promissory
note in the principal amount of $200,000, bearing interest at 7% and due June 1,
2003.

            On May 24, 2001, the Company issued to Mark T. Cullen, then
President, 1,000,000 shares of the Company's common stock in consideration of an
unsecured promissory note. These 1,000,0000 shares have been returned to
treasury and the unsecured promissory note has been canceled pursuant to a
settlement agreement.

            On May 24, 2001, the Company issued to Alexander H. Walker, Jr.,
then a Director, 1,000,000 shares of the Company's common stock in consideration
of an unsecured promissory note. On May 30, 2002, these 1,000,000 shares were
returned to treasury and the unsecured promissory note cancelled.

            On November 8, 2001, the Company issued 4,000,000 shares of the
Company's common stock to Rudolf W. Gunnerman, Chairman of the Board and Chief
Executive Officer, for services rendered.

            On March 25, 2002, the Company issued 6,000,000 shares of the
Company's common stock to Rudolf W. Gunnerman, Chairman of the Board and Chief
Executive Officer, for services rendered.

            Pursuant to an Employment Agreement, dated February 17, 2003, the
Company granted to Kirk S. Schumacher, President, options to acquire 1,000,000
shares of the Company's common stock for $0.55 per share, expiring February 17,
2005.

            The Company leases vacant office space from Rudolf Gunnerman
pursuant to a non-cancelable lease agreement which expires in February 2004. The
approximate minimal rental payments under that lease are $78,000 for 2002,
$78,000 for 2003 and $13,000 for 2004. Rental payments on this lease were
approximately $12,000 in 2000, $108,000 in 2001, and $78,000 in 2002.

            During the year ended December 31, 2002, the Company obtained loans
from Rudolf Gunnerman in the aggregate amount of $170,000. These loans were
consolidated, together with additional borrowings in 2003, in a single note with
a principal loan balance of $1,920,000. This consolidated note bears interest at
7.5% and is due on demand.

                                       18
<PAGE>

--------------------------------------------------------------------------------
ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------------

(4)         Exhibits

Assigned
Number                 Description
------                 -----------

(2)                    Plan of acquisition, reorganization, arrangement,
                       liquidation, or succession: None.

(3)(iii)               By-laws of the Company: incorporated by reference from
                       the Company's October 8, 1999 Form 10-SB filing.

(4)                    Instruments defining the rights of holders including
                       indentures: None

(9)                    Voting Trust Agreement: None

(10)                   Material Contracts: None

(11)                   Statement regarding computation of per share earnings:
                       Computations can be determined from financial statements.

(16)                   Letter on Change in Certifying Accountant: None

(18)                   Letter on Change in Accounting Principles: None

(22)                   Published Report Regarding Matters Submitted to Vote:
                       None

(23)                   Consent of Experts and Counsel: None

(24)                   Power of Attorney: None

99(a)                  Certification of Rudolf W. Gunnerman

99(b)                  Certification of Patrick E. Lacy

(5)                    Reports on Form 8-K: None

                                       19
<PAGE>

--------------------------------------------------------------------------------
            SIGNATURES
--------------------------------------------------------------------------------

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

                                          SULPHCO, INC.


March 27, 2003                            By: /S/ Rudolf W. Gunnerman
                                              ----------------------------------
                                              Rudolf W. Gunnerman
                                              Chief Executive Officer

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

<TABLE>
<CAPTION>


SIGNATURE                         POSITION                                     DATE

<S>                               <C>                                          <C>
/S/ Rudolf W. Gunnerman           Chairman of the Board of Directors,          March 27, 2003
--------------------------        and Chief Executive Officer
Rudolf W. Gunnerman               (Principal Executive Officer)


/S/ Kirk S. Schumacher            President, Secretary and Director            March 27, 2003
--------------------------
Kirk S. Schumacher


/S/ Patrick E. Lacy               Controller and Director                      March 27, 2003
--------------------------        (Principal Financial and
Patrick E. Lacy                              Accounting Officer)


/S/ Harry P. Holman               Director                                     March 27, 2003
--------------------------
Harry P. Holman

</TABLE>

                                       20
<PAGE>

                          SECTION 302 CERTIFICATION

         I, Rudolf W. Gunnerman, Chairman of the Board and Chief Executive
Officer of Sulphco, Inc., certify that:

1.    I have reviewed this annual report on Form 10-KSB of SulpCo, Inc.;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this annual
      report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)   designed such disclosure controls and procedures to ensure that
           material information relating to the registrant, including its
           consolidated subsidiaries, is made known to us by others within those
           entities, particularly during the period in which this annual report
           is being prepared;

      b)   evaluated the effectiveness of the registrant's disclosure controls
           and procedures as of a date within 90 days prior to the filing date
           of this annual report (the "Evaluation Date"); and

      c)   presented in this annual report our conclusions about the
           effectiveness of the disclosure controls and procedures based on our
           evaluation as of the Evaluation Date;

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)   all significant deficiencies in the design or operation of internal
           controls which could adversely affect the registrant's ability to
           record, process, summarize and report financial data and have
           identified for the registrant's auditors any material weaknesses in
           internal controls; and

      b)   any fraud, whether or not material, that involves management or other
           employees who have a significant role in the registrant's internal
           controls; and

6.    The registrant's other certifying officers and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.


Date: March 27, 2003                       /S/ Rudolf W. Gunnerman
                                           -------------------------------------
                                           Rudolf W. Gunnerman
                                           Chairman of the Board and
                                           Chief Executive Officer

                                       21
<PAGE>


                           SECTION 302 CERTIFICATION

         I, Patrick E. Lacy, Controller of SulphCo, Inc., certify that:

1.    I have reviewed this annual report on Form 10-KSB of SulphCo, Inc.;

2.    Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of, and for, the periods presented in this annual
      report;

4.    The registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)   designed such disclosure controls and procedures to ensure that
           material information relating to the registrant, including its
           consolidated subsidiaries, is made known to us by others within those
           entities, particularly during the period in which this annual report
           is being prepared;

      b)   evaluated the effectiveness of the registrant's disclosure controls
           and procedures as of a date within 90 days prior to the filing date
           of this annual report (the "Evaluation Date"); and

      c)   presented in this annual report our conclusions about the
           effectiveness of the disclosure controls and procedures based on our
           evaluation as of the Evaluation Date;

5.    The registrant's other certifying officer and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)   all significant deficiencies in the design or operation of internal
           controls which could adversely affect the registrant's ability to
           record, process, summarize and report financial data and have
           identified for the registrant's auditors any material weaknesses in
           internal controls; and

      b)   any fraud, whether or not material, that involves management or other
           employees who have a significant role in the registrant's internal
           controls; and

6.    The registrant's other certifying officer and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.


Date: March 27, 2003                      /S/ Patrick E. Lacy
                                          ----------------------------------
                                          Patrick E. Lacy
                                          Controller