<Page>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   (Mark One)

     [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2002

     [ ]  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                               84-1062895
     (State or other jurisdiction of           (IRS Employer Identification No.)
     incorporation or organization)

4391 S. PEARL STREET
LAS VEGAS, NEVADA                                                          89121
--------------------                                                       -----
(Address of principal executives offices)                             (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 [ ] No [X]

     As of November 1, 2002, the Registrant had 23,600,012 shares of its common
stock outstanding.

     Transitional Small Business Disclosure Format: Yes [ ] No [X]

<Page>

                       SOUTHWESTERN WATER EXPLORATION CO.
                                   FORM 10-QSB
                                      INDEX

<Table>
<Caption>
                                                                                Page
                                                                                ----
<S>                                                                             <C>
PART I FINANCIAL INFORMATION

       Item 1 - Financial Statements

               Consolidated Balance Sheet - September 30, 2002 (unaudited) and
                  March 31, 2002 (audited)......................................   2

               Consolidated Statement of Loss and Deficit - Three Months ended
                 September 30, 2002 and 2001, Six Months ended September 30,
                 2002 and 2001 and period April 1, 1992 (inception) to
                 September 30, 2002 (unaudited).................................   3

               Consolidated Statement of Cash Flows - Three Months ended
                 September 30, 2002 and 2001, Six Months ended
                 September 30, 2002 and 2001 and period April 1, 1992
                 (inception) to September 30, 2002 (unaudited)..................   4

               Notes to Consolidated Unaudited Financial Statements.............   5

       Item 2 - Management's Discussion and Analysis or Plan of Operations......  11

PART II OTHER INFORMATION.......................................................  15
</Table>

<Page>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SOUTHWESTERN WATER EXPLORATION CO.
(A Development Stage Enterprise)
Consolidated Balance Sheet

(Unaudited)
(Expressed in U.S. Dollars)

<Table>
<Caption>
                                                           September 30,       March 31,
                                                                2002             2002
                                                           -------------     -----------
                                                            (unaudited)
<S>                                                        <C>               <C>
Assets

Current assets:
     Cash                                                  $   801,654       $ 1,299,357
     Accounts receivable                                        10,193            10,193
     Prepaid to affiliated corporation                          54,200            77,000
                                                           -----------       -----------
                                                               866,047         1,386,550

Due from affiliated corporation                                 22,839                --

Capital assets, at cost less accumulated depreciation
   of $17,331 (2002 - $15,254)                                  21,364            20,109

License and other assets                                           201               201
                                                           -----------       -----------
                                                           $   910,451       $ 1,406,860
                                                           ===========       ===========
Liabilities and Shareholders' Equity

Current liabilities:
     Accounts payable and accrued liabilities              $   133,616       $   387,675

Due to affiliated corporation                                       --            17,303

Minority interest                                                9,975             9,975

Shares to be issued (note 4(c))                                 32,000           763,574

Shareholders' equity:
     Share capital (note 4)                                  5,638,428         4,087,889
     Deficit accumulated during development stage           (4,612,328)       (3,568,316)
     Deficit accumulated prior to April 1, 1992               (291,240)         (291,240)
                                                           -----------       -----------
                                                               734,860           228,333
                                                           -----------       -----------
                                                           $   910,451       $ 1,406,860
                                                           ===========       ===========
</Table>

See accompanying notes to consolidated unaudited financial statements.

                                       2
<Page>

SOUTHWESTERN WATER EXPLORATION CO.
(A Development Stage Enterprise)
Consolidated Statement of Loss and Deficit

(Unaudited)
(Expressed in U.S. Dollars)

<Table>
<Caption>
                                                                                                               Period from
                                                                                                             commencement of
                                            Three months ended                   Six months ended             operations on
                                                September 30,                       September 30,            April 1, 1992 to
                                        ------------------------------      -----------------------------      September 30,
                                           2002              2001              2002              2001              2002
                                        -----------       -----------       -----------       -----------       -----------
<S>                                     <C>               <C>               <C>               <C>               <C>
Interest income                         $     2,914       $     1,795       $    18,563       $     2,055       $    44,270

Expenses:
     Development                            136,853               445           251,729               445         1,957,003
     Professional                           152,821            12,072           214,840            14,548           570,220
     Consulting fees                         86,322            51,703           132,322            87,692           439,807
     Salary                                  64,871                --           113,668            41,273           340,517
     Investor relations (recovery)          (37,465)           15,000           (37,465)           30,000            22,535
     Office expense                          13,077            27,225            43,262            72,374           342,704
     Travel                                  11,823               436            33,155             4,704           102,256
     Compensation expense
       on granting of stock
       options                                9,975                --            10,624                --           118,936
     Bank charges                               475               300               956               428            10,532
     Financing services                         145                --           297,040           117,738           705,588
     Miscellaneous                              100                50               367               397             4,968
     Commission                                  --                --                --                --            20,055
     Business taxes                              --                --                --                --             4,146
     Depreciation                             1,072               872             2,077             1,744            17,331
                                        -----------       -----------       -----------       -----------       -----------
                                            440,069           108,103         1,062,575           371,343         4,656,598
                                        -----------       -----------       -----------       -----------       -----------
Net loss                                   (437,155)         (106,308)       (1,044,012)         (369,288)       (4,612,328)

Deficit, beginning of period             (4,175,173)       (2,673,342)       (3,568,316)       (2,410,362)               --
                                        -----------       -----------       -----------       -----------       -----------
Deficit, end of period                  $(4,612,328)      $(2,779,650)      $(4,612,328)      $(2,779,650)      $(4,612,328)
                                        ===========       ===========       ===========       ===========       ===========
Net loss per common share,
   basic and fully diluted              $     (0.07)      $     (0.01)      $     (0.18)      $     (0.02)              N/A
                                        ===========       ===========       ===========       ===========       ===========
</Table>

See accompanying notes to consolidated unaudited financial statements.

                                       3
<Page>

SOUTHWESTERN WATER EXPLORATION CO.
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows

(Unaudited)
(Expressed in U.S. Dollars)

<Table>
<Caption>
                                                                                                               Period from
                                                                                                             commencement of
                                            Three months ended                   Six months ended             operations on
                                                September 30,                       September 30,            April 1, 1992 to
                                        ------------------------------      -----------------------------      September 30,
                                           2002              2001              2002              2001              2002
                                        -----------       -----------       -----------       -----------       -----------
<S>                                     <C>               <C>               <C>               <C>               <C>
Cash flows from (used in) operating activities:

Operations:
     Net loss                           $  (437,155)      $  (106,308)      $(1,044,012)      $  (369,288)      $(4,816,938)
     Items not involving cash:
         Depreciation                         1,072               704             2,077             1,576            17,331
         Compensation expense
           on granting of stock
           options                            9,975                --            10,624                --           118,287
         Stock issued for services         (206,240)               --            38,240           120,000           512,760
         Warrants issued for
           services                              --                --           178,750            45,070           391,879
     Net change in non-cash
       operating working capital:
         Accounts receivable                     --               243                --            (3,224)          (10,193)
         Accounts payable and
           accrued liabilities              (17,628)           15,003          (254,059)           15,097           133,646
         Prepaid to affiliated
           corporation                       11,400                --            22,800                --           (65,600)
                                        -----------       -----------       -----------       -----------       -----------
                                           (638,576)          (90,358)       (1,045,580)         (190,769)       (3,718,828)

Financing:
     Net advances from (repayment
       to) affiliated corporation           (12,766)          168,938           (40,142)          120,701           559,895
     Advances from shareholder                   --                --                --           (14,939)           59,846
     Repayment of advances
       from shareholder                          --                --                --                --           (59,845)
     Issuance of share capital              606,240         1,300,000           575,351         1,300,000         2,748,800
     Minority interest                           --           (10,000)               --           (10,000)          601,189
     Shares to be issued                    (40,650)               --            16,000                --           649,985
                                        -----------       -----------       -----------       -----------       -----------
                                            552,824         1,458,938           551,209         1,395,762         4,559,870

Investments:
     Purchase of capital assets                  --           (11,110)           (3,332)          (11,110)          (39,388)
                                        -----------       -----------       -----------       -----------       -----------
Increase (decrease) in cash                 (85,752)        1,357,470          (497,703)        1,193,883           801,654
Cash, beginning of period                   887,406           239,837         1,299,357           403,424                --
                                        -----------       -----------       -----------       -----------       -----------
Cash, end of period                     $   801,654       $ 1,597,307       $   801,654       $ 1,597,307       $   801,654
                                        ===========       ===========       ===========       ===========       ===========
</Table>

See accompanying notes to consolidated unaudited financial statements.

                                       4
<Page>

SOUTHWESTERN WATER EXPLORATION CO.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements

Period ended September 30, 2002 and 2001
(Unaudited)
(Expressed in U.S. Dollars)

1.   INCORPORATION AND BASIS OF PRESENTATION:

     Southwestern Water Exploration Co. (the "Corporation") 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,
     2002, 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 Corporation
     will continue in operations for the foreseeable future and will be able to
     realize its assets and discharge its obligations in the normal course of
     operations.

     At September 30, 2002 the Corporation is in the development stage and has
     no history of generating cash flow from its operations. The Corporation
     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. In
     order to develop these sites the Corporation needs to acquire access rights
     and raise financing in order to commence drilling. Once developed, it is
     the intent of the Corporation to market the water from these sites, or in
     the event it is unsuccessful, to sell the water rights.

     During its development stage, the Corporation has funded its operating
     activities primarily by issuing equity. The Corporation anticipates that it
     will be necessary to issue additional equity to fund future activities.

     There can be no assurance that the Corporation will be successful in
     raising additional equity or of the Corporation's ability to continue as a
     going concern. The application of the going concern concept is dependent
     upon the Corporation 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.

                                       5
<Page>

3.   RELATED PARTY TRANSACTIONS:

     From time to time amounts are advanced by AIFE Canada to the Corporation as
     and when required for operating purposes. There is, however, no obligation
     for AIFE Canada to make future advances. During the six months ended
     September 30, 2002, the Corporation repaid $40,142 (2002 - $16,742) net of
     advances, to AIFE Canada.

     Amounts due to and 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.


4.   SHARE CAPITAL:

     (a)  Authorized:

          50,000,000 Preferred Shares with a par value of $.001 per share

          150,000,000 Common Shares with a par value of $.001 per share


                                       6
<Page>

4.   SHARE CAPITAL (CONTINUED):

     (b)  Issued and outstanding:

<Table>
<Caption>
                                                        Number of                          Subscriptions
                                                          shares            Amount           receivable
                                                       -----------       -----------       -------------
<S>                                                    <C>               <C>               <C>
     Issued and outstanding, April 1, 1992              12,300,000       $       492       $        --
     Effect of reverse split, October 23, 1993         (11,808,000)               --                --
     Elimination of deficit                                     --              (492)               --
     Shares issued in reverse takeover                   4,500,000               325                15
                                                       -----------       -----------       -----------
Balance, March 31, 1994                                  4,992,000               325                15
     Issued for cash                                        30,000                30                --
     Subscriptions received                                     --                15               (15)
                                                       -----------       -----------       -----------
Balance March 31, 1995                                   5,022,000               370                --
     Issued for cash and subscriptions receivable          235,000               220                15
                                                       -----------       -----------       -----------
Balance March 31, 1996                                   5,257,000               590                15
     Issued for cash and subscriptions receivable          265,000               245                20
                                                       -----------       -----------       -----------
Balance, March 31, 1997                                  5,522,000               835                35
     Issued for cash and subscriptions receivable          151,000               126                25
                                                       -----------       -----------       -----------
Balance, March 31, 1998                                  5,673,000               961                60
     Issued on conversion of preferred shares            1,172,000           835,971                --
     Issued on conversion of warrants                    1,008,120                --                --
     Issued for cash                                       326,000           119,018                --
     Subscriptions received                                     --                60               (60)
     Issued in exchange for reduction of amount
       due to affiliated corporation                        80,000            35,500                --
     Issued for 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                --
</Table>


                                       7
<Page>

4.   SHARE CAPITAL (CONTINUED):

     (b)  Issued and outstanding (continued):

<Table>
<Caption>
                                                        Number of                          Subscriptions
                                                          shares            Amount           receivable
                                                       -----------       -----------       -------------
<S>                                                   <C>              <C>               <C>
     Issued for cash                                   4,314,287         1,510,000                --
     Issued for services rendered                        952,857           381,035                --
     Stock options exercised                             166,667            50,000                --
     Value attributed to warrants issued for
       services rendered                                      --           116,637                --
     Issued for cash and services received
       in prior year                                   1,550,000           669,985                --
     Issued for cash received subsequent
       to year-end                                       250,000                --           100,000
     Correction of prior year overstatement              (15,000)               --                --
     Stock issuance costs                                     --          (224,602)               --
     Value attributed to compensation expense
       on granting of stock options                           --            79,800                --
     Deferred compensation expense related to
       granting of stock options                              --           (71,488)               --
                                                      -----------      -----------       -----------
Balance, March 31, 2002                               19,353,131         4,087,889           100,000
     Issued for cash                                     100,000           150,000                --
     Issued on conversion of warrants                    525,000           200,000                --
     Issued for services rendered in prior year          342,000           206,240                --
     Issued on conversion of long-term debt            2,979,880           655,574                --
     Stock options exercised                             333,334           100,000                --
     Cancellation on exercise of stock options           (33,333)          (50,000)               --
     Subscriptions received                                   --           100,000          (100,000)
     Value attributed to warrants issued for
       services rendered                                      --           178,750                --
     Value attributed to warrants issued for
       services to be rendered                                --           217,200                --
     Deferred consulting expense related to
       issuance of warrants                                   --          (217,200)               --
     Value attributed to compensation expense
       on granting of stock options                           --             9,975                --
                                                      -----------      -----------       -----------
Balance, September 30, 2002                           23,600,012       $ 5,638,428       $        --
                                                      ==========       ===========       ===========
</Table>

     (c)  Shares to be issued:

          The Corporation authorized for issuance 80,000 shares, with a fair
          value of $32,000, for services rendered during fiscal 2002 and 2003
          that were not yet issued at September 30, 2002.


                                       8
<Page>

4.   SHARE CAPITAL (CONTINUED):

     (d)  Warrants:

          The warrants issued and outstanding at September 30, 2002 were as
          follows:

<Table>
<Caption>
Number of                     Exercise                Expiration
    warrants                   price                    date
------------------            --------                ----------
<S>                           <C>                  <C>
     500,000                    0.25                    July 11, 2003
   1,200,000                    0.50               September 15, 2002
     100,000                    0.50                   April 14, 2003
     230,000                    0.50                February 23, 2004
     250,000                    1.00                   April 14, 2003
   1,000,000                    1.00                  October 1, 2003
     500,000                    1.00                February 23, 2003
      40,000                    1.00                February 26, 2003
     250,000                    1.50                   April 14, 2003
   1,000,000                    1.50                  October 1, 2003
   4,627,762                    1.50                 November 1, 2004
      28,572                    1.50                  January 2, 2005
     540,000                    2.00                November 19, 2003
     250,000                    2.50                    June 28, 2005
     600,000                    2.50               September 25, 2006
   4,285,175                    3.00                 November 1, 2004
      28,572                    3.00                  January 2, 2005
     342,587                    3.50                November, 1, 2004
      75,000                    0.75                      Conditional
      50,000                    1.00                      Conditional
  ----------
  15,897,668
  ==========
</Table>


     During the three months ended September 30, 2002, 600,000 warrants, with an
     exercise price of $2.50 and an expiry date of September 24, 2006, were
     issued for consulting services to be rendered. The fair value of these
     warrants at the date of grant was calculated to be $217,200 in accordance
     with the Black Scholes option pricing model, using the following
     assumptions:

<Table>
<S>                                                                             <C>
Risk free interest rate                                                               4.0%
Volatility                                                                            155%
Life of the warrant                                                              4.0 years
Dividend yield                                                                          0%
Fair value of common share at date of grant (discounted due to hold period)          $0.54
</Table>


                                       9
<Page>

4.   SHARE CAPITAL (CONTINUED):

     (d)  Warrants (continued):

          125,000 warrants have conditional expiry dates and all relate to the
          drilling and testing of the Corporation's first well in the Hygiene
          formation in Colorado. 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.

     (e)  Stock options:

          The Corporation has an incentive stock option plan, which provides for
          the granting by the Board of Directors of stock options to directors
          and officers for the purchase of authorized but unissued common
          shares. On August 1, 2002 the Corporation granted 1,500,000 stock
          options to its directors with an exercise price of $0.70 per share.
          These options have an exercise price equal to the market price at the
          date of grant and are exercisable from the grant date up to August 1,
          2012.

          Had the Corporation determined compensation costs for options granted
          to directors based on the fair value at the date of grant for its
          stock options under SFAS 123, the 2002 net loss would have been as
          reported in the following table. The Corporation has not recognized in
          income any amount for stock-based employee compensation expense. These
          pro forma loss amounts reflect compensation cost amortized over the
          options' vesting period, and were calculated using the Black-Scholes
          option pricing model with the following average assumptions: risk free
          interest rate of 4%, expected life of ten years and expected
          volatility of 155%.

<Table>
<S>                                                 <C>
Net loss:
     As reported                                    $     437,155
     Pro forma                                          1,010,645
                                                    -------------
Basic and fully diluted loss per common share:
     As reported                                    $        0.07
     Pro forma                                               0.17
                                                    -------------
</Table>


                                       10
<Page>

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 September 30, 2002.

                           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:

     o    the Company's ability to locate and utilize significant potable water
          reserves capable of being transported to the end user;

     o    the Company's ability to obtain water rights to deep-water reserves;

     o    the Company's ability to obtain government approvals to drill
          exploratory wells, construct pipelines and appropriate water;

     o    the Company's ability to comply with current and future laws or
          regulations that could require material expenditures by the Company;

     o    the Company's ability to obtain significant additional capital
          required to commence drilling, operate the wells, construct pipelines
          and storage facilities, and develop a marketing program for the sale
          of water to end users;

     o    water allocation regulations imposed by states that control the amount
          of water that the Company can draw from water sources;

     o    intense competition with government agencies and other companies that
          are better

                                       11
<Page>

          capitalized than the Company; and

     o    the Company's status as a development stage company with limited
          operating history and continuing losses.

     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.

OVERVIEW

     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 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 September 30, 2002, 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.

                                       12
<Page>

RESULTS OF OPERATIONS

     THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

     The Company has incurred operating losses and negative cash flow each
quarter and each year since 1993. The Company incurred a net loss of $437,155
for the three month period ending September 30, 2002, as compared to a net loss
of $106,308 for the same period in 2001. This increased loss is due primarily to
an increase in operating expenses in the fiscal year 2003 as the Company has
significantly increased its level of activity.

     The Company incurred $136,853 in development expenses for the three months
ended September 30, 2002, as compared to development expenses of $445 during the
same period in 2002. The increase in the Company's development expense consisted
primarily of additional drilling and lab evaluation costs related to the
drilling of the Company's exploratory well, which was commenced in the fourth
quarter of the Company's 2002 fiscal year, and the acquisition and processing of
new well information to update the Company's informational database.

     Travel expenses increased to $11,823 during the three months ended
September 30, 2002, as compared to $436 in the same period in 2001. The increase
in travel resulted primarily from the Company's expanded level of operations in
Colorado.

     Professional expenses increased to $152,821 during the three months ended
September 30, 2002 as compared to professional expenses of $12,072 during the
same period in 2001. The increase in professional expenses is primarily due to
the Company's continuing initiative to bring its taxation and securities filings
up to date.

     The Company also experienced increased consulting fee and salary expenses
during the three months ended September 30, 2002. Consulting fee expenses
increased during the three months ended September 30, 2002 to $86,322 compared
to consulting fee expenses of $51,703 in the same period in 2001. Salary
expenses increased during the three months ended September 30, 2002 to $64,871
compared to $0 in the same period in 2001.

     Office expenses decreased to $13,077 during the three months ended
September 30, 2002 as compared to office expenses of $27,225 in the same period
in 2001.

     SIX MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

     The Company incurred a net loss of $1,044,012 for the six month period
ending September 30, 2002, as compared to a net loss of $369,288 for the same
period in 2001. This increased loss is due primarily to an increase in operating
expenses in the fiscal year 2003 as the Company significantly increased its
level of activity.

     The Company incurred $251,729 in development expenses for the six months
ended September 30, 2002, while the Company incurred development expenses of
$445 during the same period in 2002. The Company's total development expense
consisted primarily of additional drilling and lab evaluation costs related to
the drilling of the Company's exploratory

                                       13
<Page>

well, which was commenced in the fourth quarter of the Company's 2002 fiscal
year, and the acquisition and processing of new well information to update the
Database.

     Travel expenses increased to $33,155 during the six months ended September
30, 2002, as compared to $4,704 in the same period in 2001. The increase in
travel resulted primarily from the Company's expanded level of operations in
Colorado.

     Professional expenses increased to $214,840 during the six months ended
September 30, 2002 as compared to $14,548 in the same period in 2001. The
increase in professional expenses is primarily due to the Company's continuing
initiative to bring its taxation and securities filings up to date.

     The Company also experienced increased consulting fee and salary expenses
during the six months ended September 30, 2002. Consulting fee expense increased
to $132,322 in this period compared to $87,692 in the same period in 2001.
Salary expense increased to $113,668 in this period compared to $41,273 in the
same period in 2001.

     The Company experienced a decrease in its office expense during the six
months ended September 30, 2002. Office expense decreased to $43,262 during this
period compared to $72,374 in the same period in 2001.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has financed its operations since inception primarily through
the net proceeds generated from the sale of its common stock and through loans
and advances from stockholders and American Institute of Formation Evaluation,
Ltd. ("AIFE Canada"), a Canadian corporation controlled by Steven Misner and
Barbara McAllister, each of whom are officers and directors of the Company.
During the three months ended September 30, 2002, the Company received $12,530
from AIFE Canada and advanced $25,296 to AIFE Canada. During the same period in
2001, the Company received $168,938 from AIFE Canada in advances. See Note 3 to
the Consolidated Unaudited Financial Statements - "Related party transactions."

     As of September 30, 2002, the Company's working capital was $732,431 as
compared to $988,875 as of March 31, 2002. The Company's anticipated immediate
liquidity and capital needs relate primarily to working capital, development
costs, securing ground water leases, seeking buyers for the water and / or water
rights and other general corporate requirements. Based on current plans,
management believes the Company will meet its obligations and expenditure plans
for the next year from existing capital resources.

         Substantial financial, operational and management resources are needed
for the exploration and utilization of deep-water reservoirs to provide potable
water to municipalities. As a result, the Company's ability to locate
substantial deep-water reservoirs capable of being utilized or sold is unknown.
The Company's inability to locate and utilize significant water reserves capable
of being transported to the end user in a financially viable fashion would have
a material adverse effect on the Company's operations and financial condition.

     The Company's ability to pursue its current projects in Nevada and Colorado
and other

                                       14
<Page>

projects and implement its business strategy is substantially dependent upon its
ability to locate additional financing in significant quantities. The exact
amount of additional financing required will depend on various factors including
the following: the ability of the Company to enter into an agreement with a
municipality or water provider, the speed with which the water extraction can be
completed, the ability of the Company to arrange for transport of the water to
the end user and the ability of the Company to obtain local, state and federal
approvals. There can be no assurance that the Company will be able to obtain the
funds necessary to exploit the Database, complete the Nevada and Colorado
Projects or otherwise conduct its business.

                           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 September 30, 2002, both Steven Misner and
Barbara McAllister, current directors of the Company, exercised options to each
purchase 166,667 (333,334 total) shares of the Company's common stock for total
proceeds to the Company of $100,000. Barbara McAllister exercised her option by
cashless exercise, exchanging 33,333 of her then-existing shares at a fair
market value of $1.50 on the day of exercise.

     During the three months ended September 30, 2002, the Company sold 100,000
shares of its common stock to an accredited investor, Steven Antebi, at a price
of $1.50 per share for a total offering proceeds of $150,000. The Company also
granted Steven Antebi warrants to purchase 600,000 shares of its common stock at
$2.50/share, such warrant exercisable until September 25, 2006, in exchange for
consulting services to be provided to the Company. The fair market value of such
warrants at the date of grant is calculated to be $217,200.

     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 D adopted thereunder. No broker/dealers were involved in the sales
and no commissions were paid. 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.


                                       15
<Page>

ITEM 5. OTHER INFORMATION

     None during this reporting period.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

<Table>
<Caption>
Exhibit
Number    Title of Exhibit
-------   ----------------
<S>       <C>
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.
</Table>

                                       16
<Page>

<Table>
<S>       <C>
99.1      Miscellaneous Exhibit.

99.2      Miscellaneous Exhibit.
</Table>


(b)  Reports on Form 8-K

     The Company did not file any reports on Form 8-K during the quarter ended
     September 30, 2002.


                                       17
<Page>

                                   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: November 12, 2002                 /s/ Steven B. Misner
                                        -------------------------------------
                                        Steven B. Misner
                                        Chief Executive Officer and Director



                                        /s/ Barbara J. McAllister
                                        -------------------------------------
                                        Barbara J. McAllister
                                        Chief Financial Officer (Principal
                                        Accounting Officer) and Director


                                       18
<Page>

CERTIFICATIONS

I, Steven B. Misner, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Southwestern Water
Exploration Co.;

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

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

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

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

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

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

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

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

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

6.   The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: November 12, 2002                 /s/ Steven B. Misner
                                        -----------------------
                                        Steven B. Misner
                                        Chief Executive Officer

<Page>

CERTIFICATIONS

I, Barbara J. McAllister, certify that:

1.   I have reviewed this quarterly report on Form 10-QSB of Southwestern Water
Exploration Co.;

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

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

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

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

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

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

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

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

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

6.   The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: November 12, 2002                 /s/ Barbara J. McAllister
                                        ---------------------------
                                        Barbara J. McAllister
                                        Chief Financial Officer