Use these links to rapidly review the documentSOUTHWESTERN WATER EXPLORATION CO. FORM 10-QSB INDEX

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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

(Mark One)

|ý                                            | QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934  
|-------------------------------------------- | ------------------------------------------------------------------------------------
|For the quarterly period ended June 30, 2001
|o                                            | TRANSACTION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from            to

Commission file number 33-16110-D

SOUTHWESTERN WATER EXPLORATION CO.(Formerly Star Acquisitions Corporation)
(Exact name of small business issuer as specified in its charter)

COLORADO(State or other jurisdiction of
incorporation or organization)

84-1062895(IRS Employer Identification No.)4391 S. PEARL STREET
LAS VEGAS, NEVADA(Address of principal executives offices)

89121(Zip Code)


(800) 661-9169(Issuer's telephone number, including area code)

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
than the registrant required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No
ý

As
of July 1, 2002, the Registrant had 19,353,131 shares of its common stock outstanding.

Transitional
Small Business Disclosure Format: Yes o No ý

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SOUTHWESTERN WATER EXPLORATION CO.  FORM 10-QSB  INDEX



|        |  |                                                                     |  |                                                                                                                                                         
|------- |  | ------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I  |  | FINANCIAL INFORMATION                                              
|        |  | Item 1Financial Statements                                        
|        |  |                                                                     |  | Consolidated Balance Sheet  June 30, 2001 (unaudited) and March 31, 2001 (audited)                                                                     
|        |  |                                                                     |  | Consolidated Statement of Loss and Deficit  Three Months ended June 30, 2001 and 2000 and period April 1, 1992 (inception) to June 30, 2001 (unaudited)
|        |  |                                                                     |  | Consolidated Statement of Cash Flows  Three Months ended June 30, 2001 and 2000 and period April 1, 1992 (inception) to June 30, 2001 (unaudited)      
|        |  |                                                                     |  | Notes to Consolidated Unaudited Financial Statements                                                                                                    
|        |  | Item 2  Management's Discussion and Analysis or Plan of Operations
|PART II |  | OTHER INFORMATION                                                  

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PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SOUTHWESTERN WATER EXPLORATION CO.  (A DEVELOPMENT STAGE COMPANY)    CONSOLIDATED BALANCE SHEET  (Expressed in U. S. Dollars)

|                                                      |                                              | June 30,
2001 |          | March 31,
2001 |  
|----------------------------------------------------- | -------------------------------------------- | ------------- | -------- | -------------- | -
|
|Assets                                                |                                              |               |          |                |  
|Current assets:                                       |                                              |               |          |                |  
|                                                      | Cash and cash equivalents                    |               | $        | 239,837        |  
|                                                      | Accounts receivable                          |               |          | 5,261          |  
|                                                      | Due from shareholder                         |               |          | 1,673          |  
|                                                      |                                              |               |          |                |  
|                                                      |                                              |               | 246,771  |                |  
|Due from affiliated corporation                       |                                              |               | 14,192   |                |  
|Capital assets, at cost less accumulated depreciation |                                              |               | 10,508   |                |  
|License and other assets                              |                                              |               | 201      |                |  
|                                                      |                                              |               |          |                |  
|                                                      |                                              | $             | 271,672  |                | $
|                                                      |                                              |               |          |                |  
|Liabilities and Shareholders' Deficiency              |                                              |               |          |                |  
|Current liabilities:                                  |                                              |               |          |                |  
|                                                      | Accounts payable and accrued liabilities     |               | $        | 52,128         |  
|                                                      | Advances from shareholder                    |               |          |               |  
|                                                      |                                              |               |          |                |  
|                                                      |                                              |               | 52,128   |                |  
|Advances from affiliated corporation                  |                                              |               |         |                |  
|Minority interest                                     |                                              |               | 24,975   |                |  
|Shares to be issued (note 4)                          |                                              |               | 763,574  |                |  
|Shareholders' deficiency:                             |                                              |               |          |                |  
|                                                      | Share capital (note 4)                       |               |          | 2,395,577      |  
|                                                      | Deficit accumulated during development stage |               |          | (2,673,342     | )
|                                                      | Deficit accumulated prior to April 1, 1992   |               |          | (291,240       | )
|                                                      |                                              |               |          |                |  
|                                                      |                                              |               | (569,005 | )              |  
|                                                      |                                              |               |          |                |  
|                                                      |                                              | $             | 271,672  |                | $
|                                                      |                                              |               |          |                |  

See
accompanying notes to consolidated unaudited financial statements.

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SOUTHWESTERN WATER EXPLORATION CO.  (A DEVELOPMENT STAGE COMPANY)    CONSOLIDATED STATEMENT OF LOSS AND DEFICIT  (Expressed in U. S. Dollars)

|                             |                                                   | Three months ended
June 30, |            | Cumulative
amounts from April 1, 1992
(inception) to
June 30,
2001 |  
|---------------------------- | ------------------------------------------------- | --------------------------- | ---------- | ------------------------------------------------------------------ | -
|
|
|Interest income              |                                                   | $                           | 260        |                                                                    | $
|Expenses:                    |                                                   |                             |            |                                                                    |  
|                             | Financing services                                |                             |            | 117,738                                                            |  
|                             | Office expense                                    |                             |            | 45,149                                                             |  
|                             | Salary                                            |                             |            | 41,273                                                             |  
|                             | Consulting fees                                   |                             |            | 35,989                                                             |  
|                             | Investor relations                                |                             |            | 15,000                                                             |  
|                             | Travel                                            |                             |            | 4,268                                                              |  
|                             | Professional                                      |                             |            | 2,476                                                              |  
|                             | Depreciation                                      |                             |            | 872                                                                |  
|                             | Compensation expense on granting of stock options |                             |            |                                                                   |  
|                             | Bank charges                                      |                             |            | 128                                                                |  
|                             | Development                                       |                             |            |                                                                   |  
|                             | Miscellaneous                                     |                             |            | 347                                                                |  
|                             | Commission                                        |                             |            |                                                                   |  
|                             | Business Taxes                                    |                             |            |                                                                   |  
|                             |                                                   |                             |            |                                                                    |  
|                             |                                                   |                             | 263,240    |                                                                    |  
|                             |                                                   |                             |            |                                                                    |  
|Net loss                     |                                                   |                             | (262,980   | )                                                                  |  
|Deficit, beginning of period |                                                   |                             | (2,410,362 | )                                                                  |  
|                             |                                                   |                             |            |                                                                    |  
|Deficit, end of period       |                                                   | $                           | (2,673,342 | )                                                                  | $
|                             |                                                   |                             |            |                                                                    |  
|Net loss per common share    |                                                   | $                           | (0.02      | )                                                                  | $
|                             |                                                   |                             |            |                                                                    |  

See
accompanying notes to consolidated unaudited financial statements.

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SOUTHWESTERN WATER EXPLORATION CO.  (A DEVELOPMENT STAGE COMPANY)    CONSOLIDATED STATEMENT OF CASH FLOWS  (Expressed in U. S. Dollars)

|                                                |                                                          | Three months ended
June 30,                       |          | Cumulative
Amounts from April 1, 1992
(inception) to
June 30,
2001 |        
|----------------------------------------------- | -------------------------------------------------------- | ------------------------------------------------- | -------- | ------------------------------------------------------------------ | -------
|
|
|Cash flows from (used in) operating activities: |                                                          |                                                   |          |                                                                    |        
|Operations:                                     |                                                          |                                                   |          |                                                                    |        
|                                                | Net loss                                                 |                                                   | $        | (262,980                                                           | )      
|                                                | Items not involving cash:                                |                                                   |          |                                                                    |        
|                                                |                                                          | Depreciation                                      |          |                                                                    | 872    
|                                                |                                                          | Compensation expense on granting of stock options |          |                                                                    |       
|                                                |                                                          | Stock issued for services                         |          |                                                                    | 120,000
|                                                |                                                          | Warrants issued for services                      |          |                                                                    | 45,070 
|                                                | Net change in non-cash operating working capital:        |                                                   |          |                                                                    |        
|                                                |                                                          | Accounts receivable                               |          |                                                                    | (3,467 
|                                                |                                                          | Accounts payable and accrued liabilities          |          |                                                                    | 94     
|                                                |                                                          |                                                   |          |                                                                    |        
|                                                |                                                          |                                                   | (100,411 | )                                                                  |        
|Financing:                                      |                                                          |                                                   |          |                                                                    |        
|                                                | Net advances from (repayments to) affiliated corporation |                                                   |          | (48,237                                                            | )      
|                                                | Net repayments to shareholder                            |                                                   |          | (14,939                                                            | )      
|                                                | Issuance of share capital                                |                                                   |          |                                                                   |        
|                                                | Increase (decrease) in cash overdraft                    |                                                   |          |                                                                   |        
|                                                | Minority interest                                        |                                                   |          |                                                                   |        
|                                                |                                                          |                                                   |          |                                                                    |        
|                                                |                                                          |                                                   | (163,176 | )                                                                  |        
|Investments:                                    |                                                          |                                                   |          |                                                                    |        
|                                                | Purchase of capital assets                               |                                                   |          |                                                                   |        
|                                                |                                                          |                                                   |          |                                                                    |        
|Increase in cash and cash equivalents           |                                                          |                                                   | (163,587 | )                                                                  |        
|Cash and cash equivalents, beginning of period  |                                                          |                                                   | 403,424  |                                                                    |        
|                                                |                                                          |                                                   |          |                                                                    |        
|Cash and cash equivalents, end of period        |                                                          | $                                                 | 239,837  |                                                                    | $      
|                                                |                                                          |                                                   |          |                                                                    |        

See
accompanying notes to consolidated unaudited financial statements.

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SOUTHWESTERN WATER EXPLORATION CO.  (A DEVELOPMENT STAGE COMPANY)  NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS  (Expressed in U. S. Dollars)  June 30, 2001

1. Incorporation and basis of presentation:

Southwestern Water Exploration Co. (the "Company") is incorporated under the laws of the State of Colorado and is planning to develop projects for the production
of water reservoirs in the United States.

These
financial statements are presented using U.S. dollars as the functional and reporting currency and have been prepared in accordance with generally accepted accounting principles in
the United States. The financial information included herein is unaudited. These interim financial statements follow the same accounting policies and methods of application as the most recent annual
audited financial statements dated March 31, 2001, and should be read in conjunction with those financial statements. The disclosures herein are incremental to those included within the annual
financial statements.

2. Organization and business:

These financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assume that the Company will continue its
operations for the foreseeable future and will be able to realize its assets and discharge its obligations in the normal course of operations.

At
June 30, 2001 the Company is in the development stage and has no history of generating cash flow from its operations. The Company intends to develop and market potable water
throughout the
southwest United States and has identified a number of sites that it believes will provide potable water, including significant water reservoirs in Colorado. In order to develop these sites, the
Company needs to acquire access rights and raise financing in order to commence drilling. Once developed, it is the intent of the Company to market the water from these sites, or in the event it is
unsuccessful, to sell the water rights.

During
its development stage, the Company has funded its operating activities primarily by issuing equity. The Company anticipates that funding of future activities will continue to be
provided by the completion of private placements of its common stock.

There
can be no assurance that the Company will be successful in raising additional equity or of the Company's ability to continue as a going concern. The application of the going
concern concept is dependent upon the Company receiving the continued support of its shareholders, its ability to raise new capital and its ability to achieve a commercial level of production and
sales and profitable operations.

3. Related party transactions:

From time to time amounts are also advanced by AIFE Canada to the Company as and when required for operating purposes. There is, however, no obligation for AIFE
Canada to make future advances. During the quarter ended June 30, 2001, the Company repaid $48,327, net of advances to AIFE Canada, (2000net advances from AIFE Canada of $Nil). The
advances from AIFE Canada are non-interest bearing with no fixed terms of repayment and are classed as long-term as the affiliate has agreed not to demand repayment within the
next year.

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4. Share capital:

|                                                                         |  | Number of
Shares |   | Amount |           | Subscriptions
Receivable |  
|------------------------------------------------------------------------ |  | ---------------- | - | ------ | --------- | ------------------------ | -
|Issued and outstanding, April 1, 1992                                    |  | 12,300,000       |   | $      | 492       |                          | $
|Effective of reverse split, October 23, 1993                             |  | (11,808,000      | ) |        |          |                          |  
|Elimination of deficit                                                   |  |                 |   |        | (492      | )                        |  
|Share issued in reverse takeover                                         |  | 4,500,000        |   |        | 325       |                          |  
|                                                                         |  |                  |   |        |           |                          |  
|Balance, March 31, 1994                                                  |  | 4,992,000        |   |        | 325       |                          |  
|Issued for cash                                                          |  | 30,000           |   |        | 30        |                          |  
|Amounts receivable collected                                             |  |                 |   |        | 15        |                          |  
|                                                                         |  |                  |   |        |           |                          |  
|Balance, March 31, 1995                                                  |  | 5,022,000        |   |        | 370       |                          |  
|Issued for cash and subscriptions receivable                             |  | 235,000          |   |        | 220       |                          |  
|                                                                         |  |                  |   |        |           |                          |  
|Balance, March 31, 1996                                                  |  | 5,257,000        |   |        | 590       |                          |  
|Issued for cash and subscriptions receivable                             |  | 265,000          |   |        | 245       |                          |  
|                                                                         |  |                  |   |        |           |                          |  
|Balance, March 31, 1997                                                  |  | 5,522,000        |   |        | 835       |                          |  
|Issued for cash and subscriptions receivable                             |  | 151,000          |   |        | 126       |                          |  
|                                                                         |  |                  |   |        |           |                          |  
|Balance, March 31, 1998                                                  |  | 5,673,000        |   |        | 961       |                          |  
|Issued on conversion of preferred shares                                 |  | 1,172,000        |   |        | 835,971   |                          |  
|Issued on conversion of warrants                                         |  | 1,008,120        |   |        |          |                          |  
|Issued for cash                                                          |  | 326,000          |   |        | 119,078   |                          |  
|Issued in exchange for reduction of amount due to affiliated corporation |  | 80,000           |   |        | 35,500    |                          |  
|Issued for consulting services rendered                                  |  | 300,000          |   |        |          |                          |  
|                                                                         |  |                  |   |        |           |                          |  
|Balance, March 31, 1999                                                  |  | 8,559,120        |   |        | 991,510   |                          |  
|Issued for cash                                                          |  | 1,200,000        |   |        | 1,200     |                          |  
|Value attributed to compensation expense on granting of stock options    |  |                 |   |        | 100,000   |                          |  
|                                                                         |  |                  |   |        |           |                          |  
|Balance, March 31, 2000                                                  |  | 9,759,120        |   |        | 1,092,710 |                          |  
|Issued for cash                                                          |  | 1,500,000        |   |        | 299,000   |                          |  
|Issued for services rendered                                             |  | 820,000          |   |        | 215,000   |                          |  
|Issued to correct prior period error                                     |  | 55,200           |   |        |          |                          |  
|Value attributed to warrants issued for services rendered                |  |                 |   |        | 102,791   |                          |  
|Stock issuance costs                                                     |  |                 |   |        | (132,979  | )                        |  
|                                                                         |  |                  |   |        |           |                          |  
|Balance, March 31, 2001                                                  |  | 12,134,320       |   |        | 1,576,522 |                          |  
|Issued for cash and services received in prior year                      |  | 1,550,000        |   |        | 669,985   |                          |  
|Issues for services rendered                                             |  | 300,000          |   |        | 120,000   |                          |  
|Correction of prior year overstatement                                   |  | (15,000          | ) |        |           |                          |  
|Value attributed to warrants issued for services rendered                |  |                 |   |        | 49,060    |                          |  
|Stock issuance costs                                                     |  |                 |   |        | (19,990   | )                        |  
|Issued for cash received subsequent to June 30, 2001                     |  | 250,000          |   |        |          |                          |  
|                                                                         |  |                  |   |        |           |                          |  
|Balance, June 30, 2001                                                   |  | 14,219,320       |   | $      | 2,395,577 |                          | $
|                                                                         |  |                  |   |        |           |                          |  

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During
the quarter ended June 30, 2001, the Company issued 2,100,000 common shares.

The
Company authorized for issuance 40,000 shares for services rendered during the three months ended June 30, 2001 and 230,000 shares for services rendered during fiscal 2001
that were not yet issued at June 30, 2001. The fair value of these shares was $108,000, of which $16,000 has been included in stock issuance costs in the quarter and $92,000 had been included
in stock issuance costs in fiscal 2001.

On
August 21, 2000, the Board of Directors resolved to issue 2,979,880 common shares to AIFE Canada as repayment of $655,574 of amounts owing to AIFE Canada. The value of $0.22
per share issued was determined by the Board to be the fair value of the common shares at that date. The shares were not yet issued at June 30, 2001.

The
warrants issued and outstanding at June 30, 2001 were as follows:

Number of
warrants

Exercise
price

Expiration
date200,000

$
0.25

July 1, 200250,000


0.25

July 8, 2002500,000


0.25

July 11, 20031,200,000


0.50

September 15, 2002200,000


0.50

November 15, 2002100,000


0.50

April 14, 2003230,000


0.50

February 23, 2004250,000


1.00

April 14, 2003500,000


0.50

July 11, 20031,000,000


1.00

October 1, 200340,000


1.00

February 26, 2003250,000


1.50

April 14, 20031,000,000


1.50

October 1, 200375,000


0.50

Conditional75,000


0.75

Conditional50,000


1.00

Conditional5,720,000


200,000
warrants have conditional expiry dates and all relate to the drilling and testing of the Company's first well in the Hygiene formation in Colorado. 75,000 warrants (the "$0.50
warrants") with an exercise price of $0.50 per warrant, expire six months following the completion of the drilling and testing of the Hygiene test well. An additional 75,000 warrants (the "$0.75
warrants") with an exercise price of $0.75 per warrant expire six months following the exercise of the $0.50 warrants. The remaining 50,000 warrants with an exercise price of $1.00 per warrant expire
six months following the exercise of the $0.75 warrants.

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790,000
of the warrants issued during the three months ended June 30, 2001 were for services rendered, the fair value of the warrants determined to be $49,060 calculated using the
Black Scholes pricing model with the following weighted average assumptions:

Risk

3.7
%Volatility

100
%Life of warrant

2.5 yearsDividend yield

0
%


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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the financial statements and accompanying notes appearing elsewhere in this quarterly
report for the period ended June 30, 2001.

FORWARD-LOOKING STATEMENTS

This report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements relate to future events or the Company's future financial performance. The Company intends the forward-looking statements throughout this quarterly report and
the information incorporated by reference to be covered by the safe harbor provisions for forward-looking statements. All projections and statements regarding the Company's expected financial position
and operating results, its business strategy, its financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by the use of
forward-looking words such as "may," "believe," "plan," "will," "anticipate," "estimate," "expect," "intend," and other words and phrases of similar meaning. Known and unknown risks, uncertainties and
other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on information available as of the date of this
report on Form 10-QSB and on numerous assumptions and developments that are not within our control. Although the Company believes these forward-looking statements are reasonable,
the Company cannot assure you they will turn out to be correct. Actual results could be materially different from our expectations due to a variety of factors, including the following:



This
list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included
elsewhere in this report.

General

Southwestern Water Exploration Co. (the "Company"), formerly Star Acquisitions Corporation, was incorporated in the State of Colorado on July 10, 1987. The
Company's activities from inception

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consisted primarily of reviewing possible business opportunities and acquisitions and maintaining the business entity. The Company had only nominal net assets and no operational activities from the
fiscal years 1987 through 1993, and all expenses incurred were solely related to maintaining the entity and reviewing potential business opportunities.

As
of June 30, 2001, the Company is in the development stage and has no history of generating cash flow from its operations. The Company intends to develop and market potable
water throughout the southwest United States and has identified a number of sites which it believes will provide potable water, including a significant water reservoir in Colorado and other western
states. In order to develop these sites and commence drilling the Company needs to acquire access rights and raise additional
capital. Once developed, it is the intent of the Company to market the water from these sites, or in the event it is unsuccessful, to sell the water rights.

Results of Operation

The Company had no revenue from operations for the three fiscal years ended March 31, 2001 and the three months ended June 30, 2001. Moreover, the
Company does not anticipate earning revenues until such time as it has successfully acquired water rights and marketed the water or sold the water rights. The Company incurred operating expenses in
the amount of $263,240 for the three months ended June 30, 2001, as compared to $9,215 for the same period in 2000. The operating expenses included $117,738 in financing fees, which is a
non-cash item reflecting the fair market value of stocks and warrants issued to third parties in connection with equity financing services. The increase in operating expense is primarily
due to consulting and financing fees, as well as increased office expense and salaries. The Company has incurred operating losses and negative cash flow each quarter and each year since 1993. The
Company's accumulated deficit was $2,410,362 and $2,673,342 at March 31, 2001 and June 30, 2001, respectively. The Company believes it will continue to experience net losses on a
quarterly and annual basis.

Liquidity and Capital Resources

During its development stage, the Company has funded its operating activities primarily by issuing equity and through loans from shareholders and AIFE, American
Institute of Formation Development, Ltd. ("AIFE Canada"), a Canadian corporation controlled by Steven Misner and Barbara McAllister, each of whom are officers and directors of the Company.

In
August 2000, the Board of Directors resolved to issue 2,979,880 shares of common stock to AIFE Canada, as repayment of $655,574 of amounts owed to AIFE Canada. The value of
$0.22 per share issued was determined by the Board to be the fair value of the common stock at that date. The shares of common stock were issued to AIFE Canada in August 2002 and subsequently
distributed by AIFE Canada to its shareholders.

As
of March 31, 2001, the Company owed AIFE Canada $34,045 from prior advances during the fiscal year ended 2001. During the quarter ended June 30, 2001, the Company
received an additional $5,817 in advances from AIFE Canada. During the same period, the Company repaid $54,054 to AIFE Canada. During the same period in fiscal year 2000, the Company had no financial
transactions with AIFE Canada, but did receive a loan from a shareholder in the amount of $10,933. See Note 3 to the Consolidated Unaudited Financial Statements"Related party
transactions."

From
March 31, 2000 through March 31, 2002, the Company has raised an aggregate of $2.5 million from a series of private placements to certain accredited investors,
which the Company is currently using to
pursue its leasing, drilling and marketing activities for the sites identified in Colorado. The Company anticipates that funding of future activities will continue to be provided by the completion of
private placements of the Company's common stock.

---



PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings that management believes to be material, and there are no such proceedings that are known to be contemplated.

ITEM 2. CHANGES IN SECURITIES

During the three months ended June 30, 2001, the Company issued the following securities in exchange for the services set forth below that were performed
on behalf of the Company:

Name of Shareholder

Number of Shares & Warrants Issued

Services RenderedBrian Gibbs

50,000 shares

DirectorThomas Lenney

50,000 shares

GeologicalRadcliffe Latimer

200,000 shares

Financial ConsultingSirius Financial

Warrants to purchase 50,000 shares at $0.25 per share

AccountingMid-Ocean Investments

40,000 shares and warrants to purchase 40,000 shares at $1.00 per share

Financial ConsultingApollo Nominees, Inc.

Warrants to purchase 75,000 shares at $0.50 per, 75,000 shares at $0.75 per share and 50,000 shares at $1.00 per share

Financial Consulting


On
April 14, 2001, the Company sold 250,000 units to an accredited investor, Providence Capital Ltd., at a price of $0.40 per unit for total offering proceeds of $100,000.
Each unit consisted of one share of common stock and warrants to purchase one share of common stock at $1.00 per share and an additional share of common stock at $1.50 per share. The total proceeds
from this transaction were received subsequent to June 30, 2001.

The
offers and sales set forth above were made in reliance upon the exemption from registration provided by Section 4(2) of the 1933 Act and Regulation S and
Regulation D adopted thereunder. No broker/dealers were involved in the sales and no commissions were paid. Based upon written representations made by the purchasers, the Company believes that
all of the purchasers were accredited investors at the time of their purchase. All purchasers represented that they purchased the securities for investment, and all certificates issued to the
purchasers contained a restrictive legend advising that the shares represented by the certificates may not be sold, transferred, pledged or hypothecated without having first been registered or the
availability of an exemption from registration established.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None during this reporting period.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None during this reporting period.

---

ITEM 5. OTHER INFORMATION

None during this reporting period.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

|Exhibit Number |   | Title of Exhibit                                                                                                                                                                                                                                                                                      
|-------------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |   | Agreement and Plan of Reorganization between Star Acquisitions Corporation and Southwestern Water Exploration Co., dated October 23, 1993, incorporated by reference to Exhibit 2.1 of registrant's Annual Report on Form 10-KSB for fiscal year ended
March 31, 1997, filed May 4, 1998.             
|3.1            |   | Amended and Restated Articles of Incorporation, incorporated by reference to Exhibit 3.1 of registrant's Annual Report on Form 10-KSB for fiscal year ended March 31, 1997, filed May 4, 1998.                                                                                                        
|3.2            |   | By-laws, incorporated by reference to Exhibit 3.2 of registrant's Annual Report on Form 10-KSB for fiscal year ended March 31, 1997, filed May 4, 1998.                                                                                                                                               
|10.1           |   | License Agreement between American Institute of Formation Evaluation Ltd. and American Institute of Formation Evaluation Co., dated September 1, 1993, incorporated by reference to Exhibit 10.1 of registrant's Annual Report on Form 10-KSB for fiscal
year ended March 31, 1997, filed May 4, 1998.
|10.2           |   | 1999 Performance Stock Option Plan, incorporated by reference to Exhibit 10.2 of registrant's Annual Report of Form 10-KSB for fiscal year ended March 31, 2001, filed August 8, 2002.                                                                                                                
|10.2(a         | ) | Amendment No. 1 to 1999 Performance Stock Option Plan, incorporated by reference to Exhibit 10.2(a) of registrant's Annual Report of Form 10-KSB for fiscal year ended March 31, 2001, filed August 8, 2002.                                                                                          
|10.3           |   | Employment Agreement dated October 10, 2001, by and between the registrant and Thomas Lenney incorporated by reference to Exhibit 10.3 of registrant's Annual Report of Form 10-KSB for fiscal year ended March 31, 2001, filed August 8,
2002.                                                       
|10.3(a         | ) | Amendment to the Employment Agreement by and between the registrant and Thomas Lenney, effective June 29, 2002, incorporated by reference to Exhibit 10.3(a) of registrant's Annual Report of Form 10-KSB for fiscal year ended March 31, 2001, filed
August 8, 2002.                                 
|99.1           |   | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                               
|99.2           |   | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                               

The
Company did not file any reports on Form 8-K during the first quarter ended June 30, 2001.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

|      |  |                 |  | Southwestern Water Exploration Co.                                                                               
|----- |  | --------------- |  | -----------------------------------------------------------------------------------------------------------------
|Date: |  | August 17, 2002 |  | /s/STEVEN B. MISNERSteven B. Misner
Chief Executive Officer and Director                                         
|      |  |                 |  | /s/BARBARA J. MCALLISTERBarbara J. McAllister
Chief Financial Officer (Principal
Accounting Officer) and Director

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