<PAGE>   1
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

 (Mark One)

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

                For the quarterly period ended DECEMBER 31, 1997


   [ ]  TRANSITION 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)

        15 MACLEOD TRAIL S.E., SUITE 1100, ROCKY MOUNTAIN PLAZA, CALGARY,
                                 ALBERTA T2G 4T8
                    (Address of principal executive offices)

                                 (403) 531-2630
                (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 that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No X

        As of April 2, 1998, the Registrant had 5,633,000 shares of common stock
outstanding.

        Documents Incorporated by Reference: Exhibits in the Registration
Statement on Form 10-KSB for the year ended March 31, 1997.

        Transitional Small Business Disclosure Format:  Yes          No  X
                                                            -----      -----



<PAGE>   2


                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

        The following financial statements are filed as a part of this Form
10-QSB:

<TABLE>
<CAPTION>
        Financial Statements                                            Page
        --------------------                                            ----
<S>                                                                     <C>

        Consolidated Balance Sheet ................................      F-1  

        Consolidated Statements of Loss and Deficit ...............      F-2

        Consolidated Statements of Cash Flow ......................      F-3

        Notes to Consolidated Financial Statements ................      F-4
</TABLE>


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

General

        Southwestern Water Exploration Co. (the "Company"), formerly Star
Acquisitions Corporation, was incorporated in the State of Colorado on June 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 1995 and all expenses incurred were solely
related to maintaining the entity and reviewing potential business
opportunities.

        The Company intends to develop and market potable water throughout the
American Southwest. During its development stage, the Company acquired the
Database which it believes will provide surface drilling locations to mine deep
(below 2,000 ft) subsurface aquifers.

        The Company has identified a number of sites which it believes will
provide potable water, including a significant water reservoir in Nevada, by
utilizing the Database. Once developed, it is the intent of the Company to
market the water from these sites. If the marketing effort is unsuccessful, the
Company intends to sell the water rights to these sites. The Database provides
specific information including surface location, depth(s) of aquifers,
temperature, production capability, and mineral properties from wells previously
drilled for hydrocarbons and subsequently abandoned.

        Management believes that the Company can satisfy its cash requirements
from existing funds for another three months. The Company intends to meet its
future capital needs by raising additional funds through a private placement of
its securities. The Company anticipates that funding of future operations will
be provided by the completion of this private placement for a minimum of $1.5
million. There can be no assurances, however, that the Company will be
successful in the completion of the private placement. In the event the private
placement is not successful, or fails to raise sufficient funds, the Company may
seek alternative financing in the form of short-term or long-term debt or
securities convertible into common stock of the Company.

        In the event the private financing is successful, the Company intends to
engage Messrs. Misner and Webb as full-time employees and pay them monthly
salaries of approximately $5,000 per month, respectively. Even if the amount
raised in the private placement meets the Company's expectations, the Company
does not plan to hire additional employees or purchase or acquire plant or
significant equipment. The Company will meet its personnel, drilling and
pipeline requirements by contracting for these services with third parties.



<PAGE>   3


                                     PART II
                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

        The Company is not a party to any legal proceedings which in the opinion
of Company's management are individually or collectively, material to its
business.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

(c)  Recent Sales of Unregistered Securities

        From December 31, 1994 to December 31, 1997, the Company issued
approximately 531,000 Units to certain sophisticated individuals at a price per
Unit of $1.00 for a total offering of $531,000. Each Unit consisted of one share
of its $.001 par value common stock; a warrant to purchase one share of common
stock of the Company at an exercise price of $2.00 which expires on April 30,
1998; and a redeemable preferred share in the Company's subsidiary, AIFE. The
preferred share is redeemable at the option of the Company at any time or from
time to time at the discretion of AIFE's Board of Directors at a price of $1.00
per share. An overwhelming majority of investors were residents of Canada. The
securities comprising the Units were issued with a Rule 144 restrictive legend.
Each purchaser of a Unit was informed and advised about certain matters
concerning the Company including its business and financial affairs. No general
form of advertising was used in connection with the placement of such
securities. No underwriters were used in connection with the issuance of these
securities and no commissions were paid to any person. The Company relied on the
exemptions from registration contained in Sections 4(2) and 3(b) of the
Securities Act of 1933 (the "1933 Act") and Regulation S and Regulation D
promulgated under the 1933 Act.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number         Title of Exhibit
------         ----------------
<S>            <C>
27.1           Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K.

        The Company did not file any reports on Form 8-K during the first
quarter of the 1997-1998 fiscal year.



<PAGE>   4


                                   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: April 23, 1998                          By: /s/ Steven B. Misner
                                                  ---------------------
                                                      Steven B. Misner
                                                      President



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

<TABLE>
<CAPTION>
Signature                           Title                                       Date
---------                           -----                                       ----
<S>                                 <C>                                         <C>
/s/  Steven B. Misner               President and Director                      April 23, 1998
----------------------------
Steven B. Misner

/s/ Barbara J. McAllister           Chief Financial Officer (Principal          April 23, 1998
----------------------------        Accounting Officer), Secretary
Barbara J. McAllister               and Director
</TABLE>



<PAGE>   5


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

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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                               December 31,         March 31
                                                                   1997                1997
----------------------------------------------------------------------------------------------
<S>                                                            <C>                 <C>        
ASSETS

Current assets:
    Cash                                                       $       768         $     1,473

Property, plant and equipment, at cost less accumulated
  depreciation                                                       4,968               5,844

License and other assets                                               201                 201

----------------------------------------------------------------------------------------------
                                                               $     5,937         $     7,518
----------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

Current liabilities:
    Accounts payable and accrued liabilities                   $    23,446         $    33,599

Due to related company (note 3)                                    574,253             496,008

Minority interest (note 4)                                         850,956             735,072

Shareholders' deficiency:
    Share capital (note 5)                                             951                 835
    Deficit accumulated during development stage                (1,152,429)           (966,756)
    Deficit accumulated prior to April 1, 1992                    (291,240)           (291,240)
----------------------------------------------------------------------------------------------
                                                                (1,442,718)         (1,257,161)

----------------------------------------------------------------------------------------------
                                                               $     5,937         $     7,518
----------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.



                                      F-1
<PAGE>   6



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

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

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                           Three months ended                       Nine months ended
                                              December 31,                            December 31,
                                    -------------------------------         -------------------------------
                                        1997                1996                1997                1996
-----------------------------------------------------------------------------------------------------------
<S>                                 <C>                 <C>                 <C>                 <C>         
Interest revenue                             39                  32                  69                  61

Expenses:
    Development                          53,400              53,400             160,200             160,200
    Professional                          7,806               3,948              12,806              11,844
    Office expense                        3,000               3,026               9,981               9,626
    Miscellaneous                         1,245                 346               1,720                 521
    Bank charges                             64                  75                 159                 350
    Depreciation                            292                 355                 876               1,065
-----------------------------------------------------------------------------------------------------------
                                         65,807              61,150             185,742             183,606

-----------------------------------------------------------------------------------------------------------
Net loss                                (65,768)            (61,118)           (185,673)           (183,545)

Deficit, beginning of period         (1,086,661)           (844,975)           (966,756)           (722,548)

-----------------------------------------------------------------------------------------------------------
Deficit, end of period              $(1,152,429)        $  (906,093)        $(1,152,429)        $  (906,093)
-----------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.



                                      F-2
<PAGE>   7



SOUTHWESTERN WATER EXPLORATION CO.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flow

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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
                                                                 Nine months ended
                                                                     December 31,
                                                             ---------------------------
                                                                1997              1996
----------------------------------------------------------------------------------------
<S>                                                          <C>               <C>       
Cash provided by (used in):

Operations:
    Loss for the period                                      $(185,673)        $(183,545)
    Item not involving cash:
        Depreciation                                               876             1,065
----------------------------------------------------------------------------------------
                                                              (184,797)         (182,480)
    Net change in non-cash operating working capital:
        Accounts payable and accrued  liabilities              (10,153)            2,660
        Prepaid expenses                                            --             1,000
----------------------------------------------------------------------------------------
                                                              (194,950)         (178,820)

Financing:
    Decrease in cash overdraft                                      --               (16)
    Issuance of share capital                                      116               125
    Advances from related company                               78,245            54,312
    Shares issued to minority interest                         115,884           124,875
----------------------------------------------------------------------------------------
                                                               194,245           179,296

Investing:
    Purchase of capital assets                                      --              (335)

----------------------------------------------------------------------------------------
Cash provided during the period                                   (705)              141

Cash, beginning of the period                                    1,473                --

----------------------------------------------------------------------------------------
Cash, end of period                                          $     768         $     141
----------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>   8


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

Period ended December 31, 1997

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

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


INCORPORATION AND BASIS OF PRESENTATION:

    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 but has not commenced active business.

    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. They include
    the accounts of the Company and its wholly owned subsidiary.



1.  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 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 December 31, 1997 the Company is in the development stage, has a working
    capital deficiency, and has no history of generating cash flow from its
    operations. The Company intends to develop and market potable water
    throughout the United States southwest. During the development stage of the
    Company it has acquired the rights to a proprietary computerized drill stem
    test database (the "Database") which it believes will provide surface
    drilling locations to access deep (below 2,000 ft) subsurface aquifers. The
    Database provides specific information including surface location, depth(s)
    of aquifers, temperature, production capability, and mineral properties from
    wells previously drilled for hydrocarbons and subsequently abandoned.

    The Company has identified a number of sites which it believes will provide
    potable water, including a significant water reservoir in Nevada, by
    utilizing the Database. 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 the acquisition of the
    Database and its operating activities primarily by issuing equity and other
    financial instruments. The Company anticipates that funding of future
    activities will be provided by the completion of a private placement of
    common stock for a minimum of $1.5 million. There can be no assurances,
    however, that the Company will be successful in completing the private
    placement.



                                      F-4
<PAGE>   9

SOUTHWESTERN WATER EXPLORATION CO.
(A Development Stage Enterprise)
Notes to Consolidated financial Statements, page 2

Period ended December 31, 1997

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

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



1.  ORGANIZATION AND BUSINESS (CONTINUED):

    In the event the private placement is not completed, the Company may incur
    additional short or long term debt, or seek to sell additional shares of
    common stock or stock purchase warrants, as deemed necessary by the Company,
    to generate working capital. There can be no assurance 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.



2.  SIGNIFICANT ACCOUNTING POLICIES:

    (a) Property, plant and equipment

        Property, plant and equipment are stated at cost. Depreciation is
        provided using a rate of 20% on a declining balance.

    (b) Development costs:

        Costs incurred in the development of water projects are expensed in the
        period incurred.

    (c) Foreign currency translation:

        The functional currency of the company is the U.S. dollar. Monetary
        assets and liabilities expressed in other currencies are translated at
        the period end rate and the resulting translation adjustments are
        recognized in income. Operating statement items are translated at the
        exchange rate in effect at the transaction date.

    (d) Use of estimates:

        The preparation of financial statements in conformity with generally
        accepted accounting principles requires management to make estimates and
        assumptions that affect the reported amounts of assets and liabilities
        and disclosure of contingent assets and liabilities at the date of the
        financial statements and the reported amounts of revenue and expenses
        during the period. Actual results could differ from these estimates.

    (e) Period from commencement of operations:

        April 1, 1992 is considered the commencement of the current development
        stage activities of the Company. Prior to this date, the subsidiary was
        involved in other unrelated activities. Accordingly, cumulative amounts
        from April 1, 1992 to December 31, 1997 have been reported in the
        statements of loss and deficit, cash flow and the share capital note.



                                      F-5

<PAGE>   10

SOUTHWESTERN WATER EXPLORATION CO.
(A Development Stage Enterprise)
Notes to Consolidated financial Statements, page 3

Period ended December 31, 1997

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

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



3.  RELATED PARTY TRANSACTIONS:

    AIFE, American Institute of Formation Evaluation Ltd. ("AIFE Canada"), a
    related company, provides updates to the Company's licensed proprietary data
    base. During the three months ended December 31, 1997 $53,400 (1996 -
    $53,400) was charged by AIFE Canada for the updates, which costs are
    included in development expenses of the Company. In addition, $3,000 (1996 -
    $3,000) of office expenses were allocated by AIFE Canada to the Company.
    These transactions are in the normal course of operations and are measured
    at the exchange amount, which is the amount of consideration established and
    agreed to by the related parties.

    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 nine months ended
    December 31, 1997 a net amount of $78,245 was advanced (1996: $54,312).

    On September 1, 1993 the Company acquired an exclusive 20 year license to
    use data owned by AIFE Canada to explore for water in the Continental United
    States. The license was acquired for $1 plus a license fee of 10% of the
    annual net cash flow from operations of the Company, to a maximum aggregate
    license fee of $1.5 million over the license term.

    The amount due to related company (AIFE Canada) of $574,253 (March 1997:
    $496,008) is non-interest bearing with no fixed terms of repayment and is
    classed as long term as AIFE Canada has agreed not to demand repayment
    within the next year.


4.  MINORITY INTEREST:

    The minority interest consists of preferred shares issued by the Company's
    operating subsidiary. The 912,000 preferred shares are redeemable at the
    discretion of the subsidiary at the issued value of $1 per share and
    dividends are payable at the discretion of the subsidiary.



                                      F-6

<PAGE>   11

SOUTHWESTERN WATER EXPLORATION CO.
(A Development Stage Enterprise)
Notes to Consolidated financial Statements, page 4

Period ended December 31, 1997

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

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



5.  SHARE CAPITAL:

    The following share capital of Southwestern Water Exploration Co. was
    authorized, issued and outstanding as at December 31, 1997:

    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

    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         $        --
    Effective 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                  --
    Amounts receivable collected                                 --                  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            136,000                 116                  20

-----------------------------------------------------------------------------------------------------------
    Balance, December 31, 1997                            5,658,000         $       951         $        55
-----------------------------------------------------------------------------------------------------------
</TABLE>


    Amounts receivable are not included in share capital on the balance sheet
until settled.



6.  INCOME TAXES:

    The Company has loss carry forwards for income tax purposes approximating
    its cumulative deficit. However, these may be subject to change following
    filing and assessment of current and prior year income tax returns with US
    tax authorities.



                                      F-7
<PAGE>   12


                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>

Exhibit
Number            Title of Exhibit
-------           ----------------
<S>               <C>

27.1              Financial Data Schedule

</TABLE>