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, 2001

                         Commission file number 0-27599

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



           Nevada                                           88-0222729
---------------------------------                      -------------------
(State or other jurisdiction                           (I.R.S. Employer
of incorporation or organization)                       Identification No.)


1650 Meadow Wood Lane, Reno, NV                                   89502
-------------------------------------                          -----------
 (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: The Issuer
has not had any revenue for the year ended December 31, 2001.

            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, 2002, 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 $8,117,805.

                                       1
<PAGE>


                                     PART I

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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,  hereby 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.

                                        3


<PAGE>

            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 is engaged in the business of
developing and marketing a process for removing sulfur from crude and fuel oils.
SulphCo's  principal business is licensing its proprietary  technology through a
self-contained  petroleum  desulfurization  unit that removes  sulfur from crude
oils,  lighter  distillates  and fuel oils.  SulphCo has developed a proprietary
closed loop "sulfur polishing" unit, which can be scaled to treat large or small
volumes of  petroleum  product.  The unit  operates at ambient  temperature  and
atmospheric pressure as a "plugs-in" to existing infrastructure.

            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, 2002,  there were issued and outstanding  40,277,170
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 offices 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, 2001.

(b)         BUSINESS OF THE ISSUER

(1)         Principal Products and Services and Their Markets

            The  Company's  principal  business is operating  and  licensing its
Proprietary technology through a self-contained petroleum de-sulfuring unit that
removes  sulfur  from crude  oils,  lighter  distillates  and fuel  oils.  These
proprietary closed-loop "sulfur polishing" units can be scaled to treat large or
small  volumes  of  petroleum  product.  They  operate  at low  temperature  and
atmospheric  pressure  and have a relatively  small  "footprint"  compared  with
existing de-sulfuring equipment.

                                       4
<PAGE>



            The market for the Company's  product will be the producers of crude
oils,  and refined  products.  Efficient  sulfur  removal in crude oil  provides
economic  advantages  in the oil  industry  by  equalizing  price  differentials
between high sulfur crude oils and residual  fuel oils and allowing  greater use
of domestic  reserves  that are  currently  underutilized  because of their high
sulfur content.  Refiners and fuel  distributors are faced with the challenge of
meeting tough new and proposed regulations in a cost effective way.

            U.S. refineries have decreased in numbers from more than 350 in 1945
to 155 currently,  with less than 95 of these facilities  producing diesel.  The
reduction  in  refineries  is due in  part  to the  large  capital  expenditures
necessary  to run a modern  facility.  Refiners  need new  technologies  because
existing  technologies  are  inadequate  and  enormously  expensive  in terms of
capital cost, infrastructure and operational expenses.  Current methods of using
light sweet crude as feed stock, or hydro treating to remove sulfur, will not be
sufficient to obtain regulated low sulfur levels. Light sweet crude reserves are
limited,  expensive  and will  continue  to rise in price as  demand  increases.
Hydro-treating is a dangerous and expensive  procedure,  requiring high heat and
pressure.  The  Company's  de-sulfuring  technology  provides  a cost  effective
solution that aid  refiners,  oil  producers  and fuel  distributors  in meeting
mandated sulfur limits.

(2)         Distribution Methods

            The  Company  is   marketing   its   technology   domestically   and
internationally to petroleum  refiners,  crude oil producers,  fuel distributors
and other strategic  partners.  In this regard, the Company granted an exclusive
technology   license  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. Mr Profumo is the operating manager
of both Eliop  International  and Innovative  Clean  Technologies.  Through this
relationship  and other  endeavors,  the Company intends to demonstrate  working
units which embody the Company's technology.

(3)         Status of Publicly Announced New Products or Services


(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,  such as
Eliop  S.r.l.,  to 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 in a Re-
organizational  stage and is in the process of  industrializing  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.

                                       5
<PAGE>


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

            The Company owns a number of pending patent  applications  for a de-
sulfuring  process for the removal of organic  sulfur from fossil or  petroleum-
derived fuels. This technology,  which operates at atmospheric  pressure and low
heat, allows much less expensive  environmentally  friendly fuels. Shortly after
March 11,  2002,  the Company  received a letter from its patent  counsel  which
indicates that the examiner of SulphCo's United States Patent Application Serial
No. 09/676,260 had issued a Notice of Allowances on that application.

            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-sulfuring  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.

            It is the Company's understanding that the Environmental  Protection
Agency (the "EPA") has issued new regulations that will require the nation's oil
refineries  to remove 97% of the sulfur from  diesel fuel by the year 2006.  The
new rule will require modern emission  controls on new trucks and buses, as well
as  cleaner  diesel  fuel.  The EPA  estimates  that this  combination  will cut
pollution from such vehicles by 95 percent,  annually preventing 8,300 premature
deaths and 23,000  bronchitis  cases and helping avoid more than 750,000  asthma
attacks and related symptoms.

            Diesel exhaust is associated with several air-quality  concerns.  It
contributes to ozone,  smog's chief ingredient.  It contains tiny soot particles
linked to several health problems.  And officials of federal,  international and
California agencies regard it as a potential or probable carcinogen.

(8)         Research and Development in the Last Two Years

            The  Company  is  engaged in a  vigorous  research  and  development
program for its  technology.  In this  regard,  the  Company  maintains a strong
relationship  with the  University of Southern  California.  Among the immediate
goals of the Company's  research and  development  program are the refinement of
its continuous flow system and expansion of the range of petroleum products that
can be de-sulfurized with the Company's  technology.  During the past two years,
SulphCo's  research and  development  costs have totaled  $185,589.  During that
time, all of SulphCo's  business efforts were spent on research and development.
The  Company  has a  contract  with  Professor  T. F. Yen at the  University  of
Southern  California wherein he performs 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.

                                       6
<PAGE>


(9)         Employees

            As of February 1, 2002, the Company had Six (6) full-time  employees
and One (1) part-time employees. Two of the three (3) officers and/or
directors of the Company  also perform  services on behalf of the Company but do
so on a  non-exclusive  basis.  None of the Company's  employees or  independent
contractors  are 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 call 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).

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ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------------------------------------------------------

(1)         Principal  Plants  and  Property  and  Description  of Real  Estate
and Operating Data.

            The  Company's  executive  offices  are  located at 1650 Meadow Wood
Lane,  Reno,  Nevada  89502.  The Company  leases this space from the  Company's
majority  shareholder.  The Company's lease on this space expires in February of
2004.

(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
--------------------------------------------------------------------------------

   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:

                                        7
<PAGE>

            On or about June 22,  2001,  the Company  filed a complaint  against
Amir I.  Elgindy,  also  known as Anthony  Elgindy  and Tony  Elgindy  and doing
business as Pacific Equity  Investigations  and Inside Truth.com.  The complaint
was filed in the United States  District  Court for the District of Nevada.  Mr.
Elgindy failed to file an answer to the complaint and his default was entered on
or about July 19, 2001.  Thereafter,  on or about October 4, 2001,  Mr.  Elgindy
filed a motion to have the default set aside and to dismiss the  complaint.  The
Company  responded to the motion in October 2001 by filing an amended  complaint
against Mr. Elgindy and unnamed "doc" defendants.  In the amended complaint, the
Complaint  outlines  causes of action against Mr.  Elgindy for fraud,  deceptive
trade  practices,   trade   disparagement   and  interference  with  prospective
contractual and/or economic  advantage.  In the prayer for relief in the amended
complaint  the  Company  seeks an award of general  and  specific  damages in an
amount in excess of  $75,000  as well as an award of  punitive  damages  and its
costs and attorney fees.

            On or about  November 2, 2001,  Mark Cullen filed a complaint in the
Second  District  Court of the State of  Nevada in and for the  County of Washoe
naming the Company,  Rudolph Gunnerman,  Alexander H. Walker,  Jr., Harry Holman
and Joseph Sutton as  defendants.  The Complaint  alleges breach of contract and
breach of the covenant of good faith and fair dealing against all defendants. In
that regard,  the  Complaint  alleges  that  defendants  breached an  employment
agreement between the Company and Mr. Cullen.  The complaint alleges damages "in
excess of  $100,000"  and the prayer for relief  seeks a  judgement  against all
defendants  for  compensatory  damages in excess of $10,000,  plus interest from
August 3, 2001,  plus  reasonable  attorneys  fees and costs.  The  Company  has
answered the complaint and denied the allegations.

            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,
Rudolph 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.

            On or about April 12, 2002,  the Salt Lake City,  Utah office of the
Securities and Exchange Commission sent a letter to Alexander H. Walker, Jr., an
officer  and  director of the  Company.  The letter  also was  addressed  to the
Company's transfer agent. In this letter, the staff of the Salt Lake City branch
indicated  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 Mr. Walker and the
transfer  agent  as  defendants.   The  letter  alleges  violations  of  various

                                       8
<PAGE>

provisions of the  Securities Act of 1934 and the Securities Act of 1934 and the
Rules thereunder. The letter invites Mr. Walker and the Company's transfer agent
to submit written statements  concerning the staff's  allegations.  Such written
statements are generally known as "Wells Committee  Submissions." Mr. Walker and
the Company's  transfer agent deny the allegations  made by staff in the letters
and have retained counsel to defend against the allegations made.

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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. Any shareholder action taken during that time was taken
via 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, 2001             $  9.3125              $ 3.125
            September 30, 2001            $ 11.85                $ 2.0
            June 30, 2001                 $ 4.0                  $ 0.66
            March 31, 2001                $ 1.18                 $ 0.47
            December 31, 2000             $ 4.50                 $ 0.25
            September 28, 2000            Unavailable            Unavailable
            June 29, 2000                 Unavailable            Unavailable
            March 30, 2000                Unavailable            Unavailable



b.          Holders:

            There were  approximately  269  holders  of record of the  Company's
common stock as of March 24, 2002.

                                       9
<PAGE>

c.          Dividends

            There were no cash dividends  declared on any class of the Company's
stock in the 1999 and 2000 fiscal  years.  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).  Management
does not anticipate that dividends will be paid in the near future.

d.          Issuances of Shares in the Last Three Years:

            On July 19, 1999, the Company issued a total of 7,013,392  shares of
its common stock to the following in the following amounts:

            Daly Consultants, Inc.                                  2,922,247
            Belfair International, Inc.                             2,922,247
            Mark Tolner                                             1,168,898

            The  shares   issued  to  Daly   Consultants,   Inc.   and   Belfair
International,  Inc.  were issued in  consideration  for $50,000 in cash and the
intellectual  property  purchased  by  the  Company  pursuant  to  the  Exchange
Agreement  dated July 19, 1999.  Such property had a value of at least $525,000.
It is carried on the Company's  financial  statement at predecessor  cost due to
the relationship between directors and these shareholders.  The shares issued to
Mr.  Tolner were issued in  consideration  for his services to the Company.  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.  As part of the  transaction  with GRD,  Inc.,
described in Item 1 above,  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  1,118,898 shares from the Company's  former  President,  Mark
Tolner; 2,872,247 shares from Daly Consultants,  Inc.; and 2,822,247 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 received $50,000 in cash 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.

            On September 15, 1999,  5,000 shares were issued to Morgounova Corp.
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 October 29, 1999, the following shares were issued:

                       Registered Owner                         No.  Shares
                       ----------------                         -----------

                       Marlene Vallen                               16
                      George Newberry                              600
                     Christina Miller                              100

                                       10
<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 those shares.

            On  December  9, 1999,  the  Company  issued  50,000  shares to John
Smallcombe.   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 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
                       -------------------                         -----------
                       Rudolph 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 the
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.

            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.

                                       11
<PAGE>


            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 Neilsom                                   100,000
        Kevin Brown                                      5,000
        P. M. Johnson                                   15,000
        Erika Herrmann                                 100,000
        H. P. Holman                                   200,000
        Henry Heimes                                    50,000
        Loren Kalmen                                    25,000
        S. D. Ligon                                     50,000
        Rohinis Govind                                  50,000
        T. P. Orme                                      50,000
        Shii Kant Singh                                 25,000
        Majtaba Ahadiantehrani                          25,000
        Edward Ripley                                    5,000
        R. W. Chappell                                   5,000
        P. C. Knauff                                   206,000

            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 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.

                                       12
<PAGE>


            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.  Shares  representing  these shares were later returned to the
Company's treasury.

            On June  29,  2001,  the  Company  issued  350,000  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 July 17, 2001 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.
Shares representing 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.

--------------------------------------------------------------------------------
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 expectation
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,  with
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  2002,  the Company  intends to fully  expand the  industrial
production design for the Company's proprietary technology.


                                       13
<PAGE>

            During the year 2001, the Company formed a joint venture program for
the implementation of its de-sulfuring  process for the European Union Countries
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  will be managed by Mr. Luigi  Profumo,  who controls Eliop Sr.1. a
major petroleum refinery  operation  operating out of Genoa,  Italy.  Innovative
Clean  Technologies  S.A. has not fulfilled the  requirements  of its license in
that it has not  submitted the monthly  reports  along with the royalty  payment
envisioned in the agreement.

            At this  point,  the  Company  intends  to move  forward  with  this
licensing  and  joint  venture  format  through  other   established   petroleum
processors,  as opportunities become available.  In this regard,  SulphCo is now
fabricating  a 1,000  bbl per day unit to  de-sulfur  crude  oil.  This  unit is
expected to be  commercially  operating at a major USA oil  refinery  within the
next few months.

            During 2001, the Company's  agreements with Bechtel and Sinclair Oil
were terminated.  During March of this year, however, a USA oil refinery company
reported  the results of their  testing the  SulphCo  process and  independently
verified the SulphCo'  system  successfully  removed sulfur from their crude oil
samples.

            In May of 2002, the Company  entered into an agreement with Northrop
Grumman  Information  Technology,  a wholly owned subsidiary of Northrop Grumman
Corporation.  Pursuant to the contract,  the Company will fund refinments to its
proprietary technology with the goal to reduce sulfur in diesel type oil used by
Northrop  clients.  The contract  pertains to the study of the removal of sulfur
from F76 logistic fuel for fuel cell application.  Pursuant to the contract, the
Company  will  receive  payments  of $25,  000 every two  months  with  payments
totaling  $75,000.  The Company  initially will prepare a feasibility  study and
then will  provide  analysis of  ultrasonic  sulfur  removal in the test subject
fuels.  The  Company  will then  attempt to  demonstrate  at the lab scale,  the
capability  to achieve the reduction of sulfur in test fuels.  If feasible,  the
Company then will  provide  Northrop  with a written  report fo the analysis and
demonstrations,   and  will  make  recommendations  regarding  potential  future
reductions  in sulfur  levels in the test  fuels.  This  project  will  occupy a
majority of the Company's time during the last half of 2002.

            During  2002,  the  Company  intends  to fund  operations  with cash
generated from the royalty and production  revenues,  outside  research fees, 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.  On March 11, 2002,  the Company  received a
Notice  of  Allowance  from the U.S.  Patent  Office  that  its  process  patent
application  has been  approved.  There are  three  additional  patents  pending
pertaining o products related to the Company's de- sulfurization process.

            If the Company is required  to  initiate  litigation  to protect its
interest  in its  proprietary  technology  or is  required  to  defend an action

                                       14
<PAGE>

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.

            Also,  any  delays or  unforeseen  impasses  in  developing  working
relationships  with  third-parties  in connection  with develop 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
SEC will prelude 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  manufacturing
of  industrial  units  which  embody  the  Company's   proprietary   technology.
Management   anticipates  that  its  research  and  development  costs  will  be
approximately $470,000 for the year 2002.

3.          Facilities and Personnel

            In early year 2001,  the Company moved into its new facility at 1650
Meadow Wood Lane, Reno,  Nevada.  The Company new facilities  include a research
laboratory as well as the Company's  business  offices.  The Company  expects to
employee  approximately  12 people at any one time as part of its business plans
for 2002,  though the  Company  may  experience  an increase or decrease in that
number as its needs require and as is normal in general business operations.

4.          Change in G & A Expense

            The  Company's   general  and   administrative   expense  rose  from
$1,174,016 in 2000 to $6,655,442 in 2001. Stock-based compensation accounted for
$5,358,900 of the increase. This compensation was issued to officers,  directors
and others as compensation for services rendered to the Company. This expense is
valued at the market  price of the  Company's  stock at the time the shares were
issued and is recorded as a general and  administrative  expense to the Company.
In  addition  premised  rental  increase  $95,000  as the  Company  moved into a
facility that combined business offices with research facilities.

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

                                       15
<PAGE>
<PAGE>
                                  SULPHCO, INC.
                              Financial Statements

                                December 31, 2001

                                  SULPHCO INC.
                          (A Development Stage Company)

                                December 31, 2001

--------------------------------------------------------------------------------
                          Index to Financial Statements
--------------------------------------------------------------------------------


                                                                       Page
                                                                       ----

Report of independent auditor                                          F-2

Balance sheet                                                          F-3

Statement of operations                                                F-4

Statement of stockholders' equity                                      F-5

Statement of cash flows                                                F-6

Notes to financial statements                                          F-7


                                      F-1
<PAGE>

                                Daniel J. Forbush

                           Certified Public Accountant

                          INDEPENDENT AUDITOR'S REPORT

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

I have audited the balance sheet of SulphCo,  Inc. (A Development Stage Company)
as of December 31, 2001 and the related statements of operations,  stockholders'
equity, and cash flows for the year then ended. For the comparative statements I
relied upon the predecessor  auditor's  report issued June 13, 2001 for the year
ended  December 31, 2000 and the period from  inception to December 31, 1999, on
which an unqualified  opinion was given.  Some  reclassifications  of prior year
items were entered to facilitate comparisons. These financial statements are the
responsibility of the Company's  management.  My responsibility is to express an
opinion on the financial statements based on my audit.

I have  conducted  my audit in  accordance  with  auditing  standards  generally
accepted in the United States of America.  Those  standards  require that I 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. I believe that my audit
provides a reasonable basis for my opinion.

In my opinion, 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, 2001 and the  related  statements  of  operations,
stockholders'  equity, and cash flows for the year then ended in conformity with
generally accepted accounting principles.

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.

/s/ Daniel J Forbush
--------------------
   Daniel J Forbush
   Reno, Nevada
   May 13, 2002

                                       F-2

<PAGE>

<TABLE>
<CAPTION>

                                  SULPHCO, INC
                          (A Development Stage Company)
                                  Balance Sheet

                                     Assets
                                     ------
                                                                               December 31,
                                                                           2001            2000
                                                                       ------------    ------------
<S>                                                                    <C>             <C>
Currents Assets:
    Cash and cash equivalents                                          $    173,432    $     98,010
    Receivable from related party (Note 6)                                1,360,685            --
    Other Receivables                                                         1,500          18,435
    Prepaid expenses                                                         50,631            --
                                                                       ------------    ------------
          Total current assets                                            1,586,248         116,445

Property and equipment, net (Note 2)                                        322,514         391,499
Patent costs, net                                                              --            15,843
Investment in subsidiary (Note 3)                                           220,086            --
                                                                       ------------    ------------
                                                                       $  2,128,848    $    523,787
                                                                       ============    ============


Liabilities and Stockholders' Equity


Current liabilities:
    Accounts payable                                                   $     66,541    $     18,754
    Accrued liabilities                                                      45,968          33,429
    Note payable (Note 4)                                                 1,000,000            --
    Contracts payable (Note 5)                                                 --           200,000
    Advance to related party (Note 6)                                          --           100,000
                                                                       ------------    ------------
          Total current liabilities                                       1,112,509         352,183

Commitments and contingencies                                                  --              --

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)
         40,277,170 And 22,020,000 shares issued and outstanding at
         December 31, 2001 and 2000, respectively                            39,927          22,020
    Paid in capital                                                      15,646,632       1,851,279
    Stock subscription receivable (Note 7)                               (6,249,500)       (208,500)
    Deficit accumulated during the development stage                     (8,420,720)     (1,493,195)
                                                                       ------------    ------------
           Total stockholder's equity                                     1,016,339         171,604
                                                                       ------------    ------------
                                                                       $  2,128,848    $    523,787
                                                                       ============    ============
</TABLE>

           See accompanying notes to financial statements
                                      F-3
<PAGE>

<TABLE>
<CAPTION>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                             Statement of operations

                     Year Ended December 31, 2001, 2000 and
                 Period January 13, 1999 (Date of Inception) to
                    December 31, 2000 and Cumulative Amounts

                                                         December 31,                   Cumulative
                                            2001            2000            1999          Amounts
                                        ------------    ------------    ------------    ------------
<S>                                     <C>             <C>             <C>             <C>
Revenue                                 $       --      $       --      $       --      $       --

Operating Expenses:
   Depreciation                              192,903          15,377           5,794         214,074
   General and administrative              6,655,442       1,174,016          22,793       7,852,251
   Research and development (Note 9)         113,276         175,000         100,215         388,491
                                        ------------    ------------    ------------    ------------

      Total operating expenses             6,961,621       1,364,393         128,802       8,454,816
                                        ------------    ------------    ------------    ------------

         Loss from operations             (6,961,621)     (1,364,393)       (128,802)     (8,454,816)

Other income (expenses)                       34,096            --              --            34,096
                                        ------------    ------------    ------------    ------------

         Net income before taxes          (6,927,525)     (1,364,393)       (128,802)     (8,420,720)

Income tax benefit (Note 10                     --              --              --              --
                                        ------------    ------------    ------------    ------------

         Net loss                       $ (6,927,525)   $ (1,364,393)   $   (128,802)   $ (8,420,720)
                                        ============    ============    ============    ============

Loss per common share -
   basic and diluted                    $      (0.22)   $      (0.07)   $      (0.01)
                                        ============    ============    ============

Weighted average shares outstanding -
   basic and diluted                      31,448,585      20,400,000      20,000,000
                                        ============    ============    ============
</TABLE>

                See accompanying notes to financial statements.
                                      F-4
<PAGE>

<TABLE>
<CAPTION>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                  Statement of Changes in Stockholders' Equity

                       Year Ended December 31, 2001, 2000
                 and period January 13, 1999 (date of inception)
                                                                                                          Stock         Total
                                                     Common Stock        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

Restatement from recapitalization
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
                                               ==========   =========   ============    ============    ============  ============
</TABLE>


                See accompanying notes to financial statements.
                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                             Statement of Cash Flows

                       Year Ended December 31, 2001, 2000
               And Period January 13, 1999 (date of inception) to
                    December 31, 1999 and Cumulative Amounts

                                                                    December 31,                           Cumulative
                                                                2001            2000           1999          Amounts
                                                             -----------    -----------    -----------    -----------
<S>                                                          <C>            <C>            <C>            <C>
Cash flows from operating activities:
Net loss                                                     $(6,927,525)   $(1,364,393)   $  (128,802)   $(8,420,720)
Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities
    Depreciation and Amortization                                192,903         15,377          5,794        214,074
    Issuance of stock                                          5,358,900      1,014,800           --        6,373,700
    (Increase) Decrease in:
        Accounts receivable                                       16,935         (4,935)       (13,500)        (1,500)
        Prepaid expenses                                         (50,631)          --             --          (50,631)
    Increase (Decrease) in:
        Accounts payable                                          47,787         18,754           --           66,541
        Accrued liabilities                                       12,539         33,429           --           45,968
                                                             -----------    -----------    -----------    -----------
            Net cash used in operating activites              (1,349,092)      (286,968)      (136,508)    (1,772,568)
                                                             -----------    -----------    -----------    -----------
Cash flows from investing activities:

   Purchase of property and equipment                           (108,075)       (21,373)       (28,966)      (158,414)
   Investment in subsidiary                                     (220,086)          --             --         (220,086)
   Payments made to develop intangible assets                       --          (15,843)          --          (15,843)
                                                             -----------    -----------    -----------    -----------
            Net cash used in investing activites                (328,161)       (37,216)       (28,966)      (394,343)
                                                             -----------    -----------    -----------    -----------
Cash flows from financing activities:

   Proceeds from issuance of stock                             1,207,887           --          167,000      1,374,887
   Note payable                                                1,000,000           --             --        1,000,000
   Return of capital                                            (118,427)          --             --         (118,427)
   Capital contributions                                            --          579,168           --          579,168
   Stock subscriptions, net                                    1,324,500       (208,500)          --        1,116,000
   Payments on contracts payable                                (200,000)       (50,000)          --         (250,000)
   Proceeds from (repayment of) advance from related party    (1,461,285)       100,000           --       (1,361,285)
                                                             -----------    -----------    -----------    -----------
            Net cash provided by financing activites           1,752,675        420,668        167,000      2,340,343
                                                             -----------    -----------    -----------    -----------
Net increase in cash and cash equivalents                         75,422         96,484          1,526        173,432

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



                See accompanying notes to financial statements.
                                      F-6
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                          Notes to Financial Statements

                           December 31, 2001 and 2000

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:

 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)
                                              ===========       ==========

Net loss per share                            $     (0.21)      $    (0.02)
                                              ===========       ==========

Business

The Company has not  generated  revenues  from its business and is a development
stage company,  as defined by SFAS No. 7. The Company is engaged in the business
of developing and marketing a process for removing sulfur from crude oils.

                                      F-7
<PAGE>



                                  SULPHCO, INC.
                          (A Development Stage Company)
                     Notes to Financial Statements (cont'd)

                           December 31, 2001 and 2000

Cash and Cash Equivalents

The Company considered all highly liquid investments with original maturities to
the Company of three months or less to be cash equivalents.

Property and Equipment

Property and  equipment  are recorded at cost,  less  accumulated  depreciation.
Depreciation is determined using the straight-line and accelerated  methods over
the  estimated  useful lives of the assets.  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.

Intangible Assets

Intangible assets consist primarily of patent costs.  Patent costs are amortized
on a  straight-line  basis  over  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.

Research and Development

The Company  charges  research and  development  costs to  operating  expense as
incurred.

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  carryforwards.  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.

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-8
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                     Notes to Financial Statements (cont'd)

                           December 31, 2001 and 2000

Impairment of Long-Lived Assets

The Company  reviews its  long-lived  assets for impairment  whenever  events or
changes in  circumstances  indicated that the carrying  amount of the assets may
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.

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.

2.       Property and Equipment

     Property and  equipment is recorded at cost and  consisted of the following
at December 31, 2001:

                                                     December 31,
                                                2001            2000
                                              ---------      --------
Machinery and equipment                       $ 431,702      $393,613
Furniture and fixtures                           26,458        19,057
Computer                                         28,018          --
Leasehold improvements                          10,605           --
                                              ---------      --------
                                                496,783       412,670

Less: accumulated depreciation                 (174,269)      (21,171)
                                              ---------      --------
                                              $ 322,514      $391,499
                                              =========      ========

3.       Investment in Subsidiary

On  November  1,  2001,  the  Company  formed a joint  venture  program  for the
implementation  of its  de-sulfuring  process for the European  Union  Countries
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 is valued based on the net
book value of  equipment  provided to a refinery  in Italy  under the  licensing
agreement with Innovative Clean  Technologies  S.A.(ICT).  ICT has not fulfilled
the  requirements  of it's  license  in that it has not  submitted  the  monthly
reports along with the royalty payments envisioned in the agreement.

                                      F-9
<PAGE>


                                  SULPHCO, INC.
                          (A Development Stage Company)
                     Notes to Financial Statements (cont'd)

                           December 31, 2001 and 2000

4.       Note Payable

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

5.       Contracts Payable

There was no Contract  payable due at December 31, 2001.  Contract payable as of
December 31, 2000  consisted  of the amount due on contract  dated July 23, 1999
and revised on December 4, 2000 to Hidden Splendor Resources,  payable on demand
with no interest $ 200,000.

6.       Related Party

On June 29, 2001, the Company issued 350,000 shares to R. W. Gunnerman, Chairman
and President 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 R. W.  Gunnerman,
Chairman and President of the Company,  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.

Mr. R.W. Gunnerman, Chairman and President of the Company, had 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%. As of the date of
this report Mr. Gunnerman had essentially repaid the Company.

At December 31, 2000, the Company had advances from R.W. Gunnerman, Chairman and
President  of the  Company,  payable on demand with no interest in the amount of
$100,000.

Also see notes 7 and 8

7.       Commitments and Contingencies
         Lease Commitments

The Company leases its office space from the majority shareholder of the company
under a non-cancelable  lease agreement accounted for as an operating lease. The
lease expires in February 2004. The  approximate  minimum rental  payments under
the  non-cancelable  operating  lease are  $78,000  and 13,000 in 2003 and 2004,
respectively

         Rent expense under this lease was approximately $108,000 and $12,000 in
         2001 and 2000, respectively
                                      F-10

<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                     Notes to Financial Statements (cont'd)

                           December 31, 2001 and 2000

     Employment Agreements

The Company has entered into an employment  agreement with Mr. Mark T. Cullen to
act as the President and Chief  Executive  Officer  expiring March 31, 2005. The
agreement provides the employee with an annual base salary, car allowance, other
employee benefits, plus a severance package if the agreement is terminated.  Mr.
Cullen left the employ of the Company mid year in 2001. On or about  November 2,
2001, Mr. Cullen filed a complaint in the Second  District Court of the State of
Nevada in and for the County of Washoe  naming the Company,  Rudolph  Gunnerman,
Alexander H. Walker,  Jr.,  Harry Holman and Joseph  Sutton as  defendants.  The
Complaint  alleges  breach of contract  and breach of the covenant of good faith
and fair dealing against all defendants.  In that regard,  the Complaint alleges
that defendants  breached the employment  agreement  between the Company and Mr.
Cullen. The complaint alleges damages "in excess of $100,000" and the prayer for
relief  seeks a judgment  against all  defendants  for  compensatory  damages in
excess of $10,000,  plus interest from August 3, 2001, plus reasonable attorneys
fees  and  costs.  The  Company  has  answered  the  complaint  and  denied  the
allegations.

Mr. R. 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, 2002.

8.       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 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 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>
                                                                            December 31,
                                                               2001            2000           1999
                                                           -----------         -------       -------
<S>                                                        <C>             <C>             <C>
Net earnings including stock option values                 $(9,535,026)    $(2,379,193)    $(128,802)
                                                           -----------         -------       -------
Earnings per share including stock option values           $     (0.30)        $ (0.12)      $ (0.01)
                                                           ===========         =======       =======
</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:

                                                     December 31,
                                        ------------------------------------
                                            2001                     2000
                                            ----                     ----
   Expected dividend yield                 $ -0-                    $ -0-
   Expected stock price volatility      258.29% - 329.96%          695.40%
   Risk-free interest rate               3.44%  -   4.92%            6.00%
   Expected life of options                   1 - 2 years        2 - 3 years

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

The following table  summarizes  information  about stock option  outstanding at
December 31, 2001 and 2000:
                                      F-11

<PAGE>
<TABLE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                     Notes to Financial Statements (cont'd)

                           December 31, 2001 and 2000

                                                    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
          ------                    -----------          -------             ------           -----------           ------
<S>             <C>                 <C>                       <C>          <C>                 <C>                <C>
December 31, 2000
                $      .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
--------------------------- ------------------ ------------------- ------------------ ------------------- ------------------
</TABLE>

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 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%:
                                                                      Stock
                                                   Number of       Subscription
Registered Owner            Position                 Shares         Receivable
----------------            --------               ---------       ------------
R. W. Gunnerman         Chairman                   7,150,000       $ 3,575,000
M. T. Cullen            Former President & CEO     1,000,000           500,000
A. H. Walker, Jr        Secretary                  1,000,000           500,000
Paul Neilson            Consultant                   100,000 *               -
Kevin Brown                                            5,000 *               -
P. M. Johnson                                         15,000 *               -
Erika Herrmann          Employee                     100,000           150,000
H. P. Holman            Director                     200,000           200,000
Henry Heimes            Consultant                    50,000 *               -
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
Shii Kant Singh         Employee                      25,000            37,500
Majtaba Ahadiantehrani  Employee                      25,000            37,500
Edward Ripley                                          5,000 *               -
R. W. Chappell                                         5,000 *               -
P. C. Knauff            Former CFO                   206,000          103,000
                                                                  -----------
                            Total                                 $ 5,365,500
                                                                  ===========
* These shares were later returned to the Company and cancelled.

                                      F-12
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                     Notes to Financial Statements (cont'd)

                           December 31, 2001 and 2000

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.

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 the Mr. Neuhaus  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 shares issued on May 4, 2001 and September 6, 2001 the total Stock
Subscription Receivable at December 31, 2001 was $6,249,500.

9.       Research and Development Expense

The Company had a contract with Professor T.F. Yen at the University of Southern
California  (USC)  wherein he performs  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.

10.      Income Taxes

A  valuation  allowance  has  been  provided  for all  deferred  tax  assets  or
liabilities  at December  31, 2001 and 2000.  SulphCo has a net  operating  loss
carry  forward for income tax  purposes,  which is limited due to the changes in
ownership  and may not be  realizable.  These  losses  may be of  nominal  value
because of the change in ownership.

The Company has net operating loss carry forwards of  approximately  $8,000,000,
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.

At  December  31,  2001 and 2000,  income tax  expense  differs  from the amount
computed at federal statutory rates as follows:

                                      F-13
<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                     Notes to Financial Statements (cont'd)

                           December 31, 2001 and 2000

                                         2001            2000           1999
                                     -----------     -----------     -----------
Federal income tax benefit
   at statutory rate                 $ 2,424,634     $ 209,857       $ 45,081

Difference due to S-corporation
   election                              --           (209,857)       (45,081)

Unrealized net operating losses       (2,424,634)         --             --
                                     -----------     -----------     -----------
                                     $   --          $    --         $   --
                                     ===========     ===========     ===========


11.      Dividends

There were no cash dividends declared on any class of the Company's stock in the
1999 and 2000  fiscal  years.  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.  This  dividend  was  accounted  for as a
return of paid in capital.

12.      Supplemental Disclosure of Cash Flow Information

The actual  amounts paid for interest  totaled $2,610 and $0 for the years ended
December 31, 2001 and 2000, respectively.  There were no amounts paid for income
taxes in either year.

13.      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.

14.      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

                                      F-14


<PAGE>

                                  SULPHCO, INC.
                          (A Development Stage Company)
                     Notes to Financial Statements (cont'd)

                           December 31, 2001 and 2000

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.

15.      Subsequent Events

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, Rudolph 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 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.

In May of 2002,  the Company  entered into an agreement  with  Northrop  Grumman
Information   Technology,   a  wholly  owned   subsidiary  of  Northrop  Grumman
Corporation.  Pursuant to the contract, the Company will fund refinements to its
proprietary technology with the goal to reduce sulfur in diesel type oil used by
Northrop  clients.  The contract  pertains to the study of the removal of sulfur
from F76 logistic fuel for fuel cell application.  Pursuant to the contract, the
Company will receive payments of $25,000 every two months with payments totaling
$75,000.  The Company  initially will prepare a feasibility  study and then will
provide  analysis of ultrasonic  sulfur removal in the test subject  fuels.  The
Company will then attempt to  demonstrate  at the lab scale,  the  capability to
achieve the  reduction of sulfur in test fuels.  If  feasible,  the Company then
will provide Northrop with a written report for the analysis and demonstrations,
and will make  recommendations  regarding  potential future reductions in sulfur
levels in the test fuels.  This project will occupy a majority or the  Company's
time during the last half of 2002.

                                      F-15
<PAGE>

                                    PART III

------------------------------------------------------------------------
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 1, 2002,  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. Rudolph Gunnerman       73       Chairman of the Board    12-4-00 to Present
                                     and a Director

Alexander H. Walker, Jr.    76       Secretary and Director    7-1-99 to Present

Harry P. Holman             65       Director

            *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. Rudolph  Gunnerman,  Director and the Company's  Chairman of the
Board, is a 72- 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.

            Alexander  H.  Walker,  Jr., age 76, has served as a director of the
Company  since  July 1, 1999.  He was  elected as  Secretary  of the  Company on
December 18, 2000. He received his B.A. from Waynesburg  College in 1950 and his
J.D. from the  University of Pittsburgh  School of Law in 1952.  Since 1956, Mr.
Walker has been a practicing  attorney,  which  practice has included  trial and
transactional  work,  with an emphasis on corporate  securities  matters.  After
serving  as the  Attorney  Advisor  for the  Division  of  Corporate  Finance in
Washington,  D.C. from 1954 to 1955, Mr. Walker served as the Attorney in Charge
of the Salt Lake City, Utah Branch of the United States  Securities and Exchange
Commission  from 1955 to 1956.  From 1956  through the present,  Mr.  Walker has
maintained  a  private  practice.   He  maintains  licenses  in  both  Utah  and
Pennsylvania.


                                       16
<PAGE>

            Harry P.  Holman  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  of Science  degree in  business  administration.  He is founder of the
Northern Nevada University of Southern California Alumni Club.

            Dr.  Teh  Fu  Yen,  Chief  Scientific  Advisor  to  SulphCo,   is  a
72-year-old  Professor of Environmental  and Civil Engineering at the University
of Southern California. Dr. Yen has a B.S. in Chemistry, a M.S. in Chemistry and
Chemical  Engineering  and a Ph.D.  in  Organic  and  Biochemistry.  Dr. Yen has
completed   a   Postgraduate   program   in   Mathematics,    Certification   of
Bioengineering,  Columbia  University  D.Sc.  (hon.)  And an Energy  Engineering
certificate from Pepperdine University D.Sc.(hon.).  His positions have included
Senior  Research  Chemist,  Goodyear  Tire and Rubber Co.,  Senior Fellow Mellon
Institute,   Carnegie-Mellon  University;   Associate  Professor  of  Chemistry,
California  State  University,  Los Angeles.  Dr. Yen has authored and edited 26
books, 156 peer-reviewed  journal papers and 118 entries for book chapters.  Dr.
Yen has 114 entries under conference proceedings and 17 U.S. patents listed.

(c)          Directors of Other Reporting Companies:

            Mr.  Walker is an officer and  director of  Entertech  Media  Group,
Inc., a  corporation  which filed a Form 10-SB with the  Commission  on or about
June 11, 1999. As of the filing of this Form 10-KSB,  Entertech is responding to
the comments from NASD Regulation made in connection with that company's efforts
to obtain a trading  symbol for the shares of its common for  listing on the OTC
Bulletin Board.  Entertech's shares are not currently quoted on the OTC Bulletin
Board.

            Mr. Walker also is a director of Talk Visual Corp. whose shares are
traded under the symbol TVCP on the OTC Bulletin Board market. He also is an
officer and director of Harvard Scientific Corp. whose shares are traded under
the symbol "VGEN" on the Over-the-Counter NASDAQ Bulletin Board.

(d)         Employees:

            The Company has seven (7) full-time  employees and one (1) part-time
employees.  The three (3)  officers  and  directors  of the Company also perform
services on behalf of the Company but do so on a non-exclusive basis.

(e)         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.

(f)         Involvement in Certain Legal Proceedings:

            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;

                                       17
<PAGE>


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

            (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.

(g)         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,  2001,  2000 and
1999 to the Company's officers and directors.  None of the Executive Officers of
the Company earned more than $100,000  during the years ended December 31, 2001,
2000 or 1999.

                                       18
<PAGE>

<TABLE>
<CAPTION>


                                                          Summary Compensation Table

                                                            Long Term Compensation

                                  Annual Compensation                           Awards                    Payouts

                                                              (e)                             (g)
                                                            Other          (f)         Securities                            (i)
                (a)          (b)                            Annual        Restri        Under-              (h)            Other
Name and Principal                     (c)        (d)       Compe         cted          Lying               LTIP           Compen-
Position                           Salary     Bonus         n-            Stock         Options/            Payouts        sation
                          Year     $          ($)           sation        Awards        SARs(#)             ($)            ($)
                                                            ($)           ($)
Rudolph Gunnerman

------------------------
<S>                       <C>      <C>        <C>           <C>           <C>           <C>                 <C>            <C>
Chairman of               2001     $None      $None         $None         $None         None                $None          $None
Board and Director        2000     $None      $None         $None         $None         7,500,000           $None          $None
                          1999     $None      $None         $None         $None         None                $None          $None

Mark T. Cullen

------------------------
President,                2001     $None      $None         $None         $None         None                $None          $None
CEO and Director          2000     $None      $None         $None         $None         1,000,000           $None          $None
                          1999     $None      $None         $None         $None         None                $None          $None

Alexander H. Walker,
Jr.
------------------------
Secretary and             2001     $None      $None         $None         $None         None                $None          $None
Director                  2000     $None      $None         $None         $None         1,000,000           $None          $None
                          1999     $None      $None         $None         $None         None                $None          $None

Paul Knauff

------------------------
Chief Financial           2001     $None      $None         $None         $None         None                $None          $None
Officer and               2000     $None      $None         $None         $None         106,000             $None          $None
Treasurer                 1999     $None      $None         $None         $None         None                $None          $None
</TABLE>




            The amount  listed as other annual  compensation  for Paul Knauff in
the year 2000 represents  amounts the Company pays in a monthly fee to McDermitt
Investment  Company,   Inc.  Mr.  Knauff's  wife  owns  and  controls  McDermitt
Investment  and this  monthly  fee is intended  as partial  compensation  to Mr.
Knauff for his services to the Company.  Pursuant to the  agreement  between the
Company's  subsidiary,  SulphCo  and  McDermitt  Investment,  the  Company  pays
McDermitt $1,000 per month plus an amount equal to $20.83 per hour for each hour
Mr.  Knauff  performs  his  duties as  SulphCo.,  which  includes 5 days of paid

                                       19
<PAGE>

holidays each year and 10 days of paid vacation each year. The agreement between
SulphCo.  and McDermitt is for a period of 12 months beginning November 16, 2000
and ending November 15, 2001.  Also, the 106,000 shares of the Company's  common
stock  subject to the option  listed  for Mr.  Knauff in 2000 are  subject to an
option granted McDermitt Investment Company, Inc.

            Options granted other members of management are described in Item 12
below.

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

            The following information sets forth certain information as of March
26,  2002 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:

(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               Cede & Co.                             4,577,400                     11%
                     P.O. Box 20
                     Bowling Green Station
                     New York, New York 10004

Common               Mark T. Cullen                         3,120,000                     7.7%
                     Reno, Nevada

Common               Rudolph Gunnerman                      11,400,000                    28.3%
                     Doris Gunnerman, JJTEN
                     1650 Meadow Wood Lane
                     Reno, Nevada 89502

Common               Rudolph Gunnerman                      11,846,000                    29.4%
                     1650 Meadow Wood Lane
                     Reno, Nevada 89502
</TABLE>

                                       20
<PAGE>


<TABLE>
<CAPTION>

(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
----------------------------------------------------------------------------------------------------
<S>                  <C>                                    <C>                                <C>
Common               Rudolph Gunnerman                      23,246,0001                        58%
                     5250 Neil Road
                     Suite 303
                     Reno, Nevada

Common               Harry P. Holman                            194,875               Less than 1%

Common               Alexander H. Walker, Jr.                1,225,1322                         3%
                     1700 Coronet Drive
                     Reno, Nevada 89501

Common               All Directors and                       24,666,007                      61.2%
                     Officers as a Group
</TABLE>


(c)         Changes in Control:


--------------------------------------------------------------------------------
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 December 4, 2000, the Company issued a total of 20,000,000 shares
of its common stock to the following in the following amounts:

                       Registered Owner                 No. Shares
                       ------------------               ----------
                       Rudolph 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 the
proprietary  technology  acquired 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.

            On December  4, 2000,  the  Company's  board of  directors  approved
several options to purchase the Company's  shares of the Company's common stock.
These  options  are  effective  for a period of two  years.  Such  options  were
approved in the following amounts to the following individuals:

--------

            1 Of this amount,  11,400,000  shares are  registered in the name of
Rudolph Gunnerman and Doris Gunnerman, JTTEN.

            2 Of this amount,  225,132  shares are registered in the name Hidden
Splendor Resources, LTD.

                                       21
<PAGE>

<TABLE>
<CAPTION>

                  (1)                                (2)                    (3)                     (3)
          Name of Beneficial                  Amount and Nature           Price of              Percent of
                 Owner                          Of Beneficial              Option                  Class
                                                  Ownership
--------------------------------------- ----------------------------- ---------------- -------------------
<S>                                                 <C>                     <C>                     <C>
Rudolph Gunnerman                                   7,500,000               $0.50                   $0.50
Mark Cullen                                         1,000,000               $0.50                   $0.50
Alexander H. Walker, Jr.                            1,000,000               $0.50                   $0.50
Harry Holman                                          100,000               $0.50                   $0.50
</TABLE>


            In December of 2000, Mr. Gunnerman exercised his option rights and
purchased 700,000 shares of the Company's common stock for cash in the amount
of $350,000. Dr. Cullen also exercised his option rights in December 2000, and
purchased 120,000 shares for cash in the amount of $60,000.

            In May of 2001, Alexander H. Walker, Jr. exercised his option rights
and acquired 1,000,000 shares of the Company's common stock in exchange for a
promissory note.

            The Company leases its office space from Rudolph Gunnerman  pursuant
to a  non-concellable  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 $108,000 in 2001 and $12,000 in 2000.

            During the year ended  December  31,  2001,  the  Company  loaned to
Rudolph  Gunnerman and received  notes  receivable in the amount of  $2,000,000.
During the year the Company  received  payment of $654,700  plus interest on the
notes.  The note bears  interest at prime,  is due on demand,  and is secured by
Company common stock owned by Mr. Gunnerman. At December 31, 2001 the balance on
the notes  totaled  $1,345,300.  By the date of this  filing of this report this
amount had been essentially repaid to the Company.

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

(4)         Exhibits

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

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

                                       22
<PAGE>


(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:

(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)          Additional Exhibits: None

(5)           Reports on Form 8-K.

            On  November  1, 2001,  the  Company  filed a Form 8-K which  listed
information  under  Item  No.2,   Acquisition  or  Disposition  of  Assets.  The
information reported therein is incorporated herein by this reference.

            On or about April 16,  2002,  the Company  filed a Form 8-K with the
Securities and Exchange Commission  regarding the resignation of Tanner & Co. as
the Company's independent auditors and the subsequent appointment of Forbush and
Associates  in that  capacity.  The  information  disclosed in that Form 8-K are
incorporated herein by this reference.

                                       23
<PAGE>


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

            In  accordance  with  Section 13 or 15(d) of the  Exchange  Act, the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
hereunto duly authorized.

Dated:      May 14, 2002.

                                            SULPHCO, INC.

                                             By /s/Rudolph W. Gunnerman
                                             ---------------------
                                                   Rudolph W. Gunnerman
                                                   Chief Executive Officer
                                                   and President


                                       24
<PAGE>