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SOUTHWESTERN WATER EXPLORATION CO. FORM 10-QSB INDEX
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, 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, 2002
| 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 | 84-1062895 | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
| 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 o No ý
As of July 31, 2002, the Registrant had 19,583,131 shares of its common stock outstanding.
Transitional Small Business Disclosure Format: Yes o No ý
SOUTHWESTERN WATER EXPLORATION CO.
FORM 10-QSB
INDEX
SOUTHWESTERN WATER EXPLORATION CO.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
(Expressed in U. S. Dollars)
| | June 30, 2002 | March 31, 2002 | ||||||
|---|---|---|---|---|---|---|---|---|
| | (unaudited) | (audited) | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 887,406 | $ | 1,299,357 | ||||
| Accounts receivable | 10,193 | 10,193 | ||||||
| Prepaid to affiliated corporation | 65,600 | 77,000 | ||||||
| 963,199 | 1,386,550 | |||||||
| Due from affiliated corporation | 10,073 | — | ||||||
| Capital assets, at cost less accumulated depreciation of $16,259 (2002-$15,254) | 22,436 | 20,109 | ||||||
| License and other assets | 201 | 201 | ||||||
| $ | 995,909 | $ | 1,406,860 | |||||
| Liabilities and Shareholders' Deficiency | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 151,244 | $ | 387,675 | ||||
| Advances from affiliated corporation | — | 17,303 | ||||||
| Minority interest | 9,975 | 9,975 | ||||||
| Shares to be issued (note 4) | 934,464 | 763,574 | ||||||
| Shareholders' deficiency: | ||||||||
| Share capital (note 4) | 4,366,636 | 4,087,889 | ||||||
| Deficit accumulated during development stage | (4,175,173 | ) | (3,568,316 | ) | ||||
| Deficit accumulated prior to April 1, 1992 | (291,240 | ) | (291,240 | ) | ||||
| (99,774 | ) | 228,333 | ||||||
| $ | 995,909 | $ | 1,406,860 | |||||
See accompanying notes to consolidated unaudited financial statements.
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, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2002 | 2001 | 2002 | ||||||||
| | (unaudited) | (unaudited) | (unaudited) | ||||||||
| Interest income | $ | 15,649 | $ | 260 | $ | 41,356 | |||||
| Expenses: | |||||||||||
| Development | 114,876 | — | 1,820,510 | ||||||||
| Consulting fees | 46,000 | 35,989 | 353,485 | ||||||||
| Salary | 48,797 | 41,273 | 275,646 | ||||||||
| Office expense | 30,185 | 45,149 | 329,627 | ||||||||
| Travel | 21,332 | 4,268 | 90,433 | ||||||||
| Financing services | 296,895 | 117,738 | 909,693 | ||||||||
| Professional | 62,019 | 2,476 | 417,399 | ||||||||
| Compensation expense on granting of stock options | 649 | — | 108,691 | ||||||||
| Bank charges | 481 | 128 | 10,057 | ||||||||
| Miscellaneous | 267 | 347 | 4,868 | ||||||||
| Investor relations | — | 15,000 | 60,000 | ||||||||
| Commission | — | — | 20,055 | ||||||||
| Business Taxes | — | — | 4,146 | ||||||||
| Depreciation | 1,005 | 872 | 16,259 | ||||||||
| 622,506 | 263,240 | 4,421,139 | |||||||||
| Net loss | (606,857 | ) | (262,980 | ) | (4,379,783 | ) | |||||
| Deficit, beginning of period | (3,568,316 | ) | (2,410,362 | ) | — | ||||||
| Deficit, end of period | $ | (4,175,173 | ) | $ | (2,673,342 | ) | $ | (4,379,783 | ) | ||
| Net loss per common share | $ | (0.03 | ) | $ | (0.02 | ) | N/A | ||||
See accompanying notes to consolidated unaudited financial statements.
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, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2002 | 2001 | 2002 | |||||||||
| | (unaudited) | (unaudited) | (unaudited) | |||||||||
| Cash flows from (used in) operating activities: | ||||||||||||
| Operations: | ||||||||||||
| Net loss | $ | (606,857 | ) | $ | (262,980 | ) | $ | (4,379,783 | ) | |||
| Items not involving cash: | ||||||||||||
| Depreciation | 1,005 | 872 | 16,259 | |||||||||
| Compensation expense on granting of stock options | — | — | 108,312 | |||||||||
| Stock issued for services | 130,240 | 120,000 | 719,000 | |||||||||
| Warrants issued for services | 178,750 | 45,070 | 391,879 | |||||||||
| Net change in non-cash operating working capital: | ||||||||||||
| Accounts receivable | — | (3,467 | ) | (10,193 | ) | |||||||
| Accounts payable and accrued liabilities | (236,431 | ) | 94 | 151,244 | ||||||||
| Prepaid to affiliated corporation | 11,400 | — | (77,000 | ) | ||||||||
| (521,893 | ) | (100,411 | ) | (3,080,282 | ) | |||||||
| Financing: | ||||||||||||
| Advances to affiliated corporation | (10,073 | ) | — | 1,390,974 | ||||||||
| Repayment of advances from affiliated corporation | (17,303 | ) | (48,237 | ) | (818,313 | ) | ||||||
| Advances from shareholder | — | — | 59,846 | |||||||||
| Repayment of advances from shareholder | — | (14,939 | ) | (59,845 | ) | |||||||
| Issuance of share capital | 100,000 | — | 2,142,560 | |||||||||
| Minority interest | — | — | 601,189 | |||||||||
| Shares to be issued | 40,650 | — | 690,635 | |||||||||
| 113,274 | (63,176 | ) | 4,007,076 | |||||||||
| Investments: | ||||||||||||
| Purchase of capital assets | (3,332 | ) | — | (39,388 | ) | |||||||
| Increase (decrease) in cash and cash equivalents | (411,951 | ) | (163,587 | ) | 887,406 | |||||||
| Cash and cash equivalents, beginning of period | 1,299,357 | 403,424 | — | |||||||||
| Cash and cash equivalents, end of period | $ | 887,406 | $ | 239,837 | $ | 887,406 | ||||||
See accompanying notes to consolidated unaudited financial statements.
SOUTHWESTERN WATER EXPLORATION CO.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(Expressed in U. S. Dollars)
June 30, 2002
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, 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 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, 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 that it believes will provide potable water, including a significant water reservoir 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 it will be necessary to issue additional equity to fund future activities.
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 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 three months ended June 30, 2002, the Company repaid $27,376, (2001—$48,237) net of advances, to AIFE Canada.
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.
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 | 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 | 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 | 119,078 | — | ||||||
| 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 | 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 | ) | — | — | |||||
| Value attributed to warrants issued for services rendered | — | 79,800 | — | ||||||
| Stock issuance costs | — | (224,602 | ) | — | |||||
| Deferred compensation expense related to granting of stock options | — | (71,488 | ) | — | |||||
| Balance, March 31, 2002 | 19,353,131 | $ | 4,087,889 | $ | 100,000 | ||||
| Subscriptions received | — | 100,000 | (100,000 | ) | |||||
| Value attributed to warrants issued for services rendered | — | 178,750 | — | ||||||
| Balance, June 30, 2002 | 19,353,131 | $ | 4,366,639 | $ | — | ||||
During the three months ended June 30, 2002 the Company authorized for issuance 152,000 shares for services rendered during the quarter. The fair value of these shares was $130,240, of which $118,000 has been included in financing costs and $12,240 has been included in development expenses. In addition, a director exercised 135,500 options to purchase common shares, for consideration of $40,650. None of the shares related to these transactions had been issued at June 30, 2002.
The Company authorized for issuance 40,000 shares for services rendered during 2002 and 230,000 shares for services rendered during fiscal 2001 that were not yet issued at June 30, 2002. The fair value of these shares was $108,000, which was included in stock issuance costs in fiscal 2002 and 2001. These shares had not been issued at June 30, 2002.
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 had not been issued at June 30, 2002.
The warrants issued and outstanding at June 30, 2002 were as follows:
| Number of warrants | Exercise price | Expiration date | |||
|---|---|---|---|---|---|
| 200,000 | $ | 0.25 | July 1, 2002 | ||
| 50,000 | 0.25 | July 8, 2002 | |||
| 500,000 | 0.25 | July 11, 2003 | |||
| 1,200,000 | 0.50 | September 15, 2003 | |||
| 200,000 | 0.50 | November 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 | |||
| 4,285,175 | 3.00 | November 1, 2004 | |||
| 28,572 | 3.00 | January 2, 2005 | |||
| 342,587 | 3.50 | November 1, 2004 | |||
| 75,000 | 0.50 | Conditional | |||
| 75,000 | 0.75 | Conditional | |||
| 50,000 | 1.00 | Conditional | |||
| 15,822,668 | |||||
During the three months ended June 30, 2002, 250,000 warrants, with an exercise price of $2.50 and an expiry date of June 28, 2005, were issued for financing services rendered. The fair value of these warrants at the date of grant was calculated to be $178,750 in accordance with the Black Scholes option pricing model, using the following assumptions:
| Risk free interest rate | 3.7% | |
| Volatility | 150% | |
| Life of warrant | 3.0 years | |
| Dividend yield | 0% | |
| Fair value of common share at date of grant (discounted due to hold period) | $1.02 |
Subsequent to June 30, 2002, 400,000 warrants were exercised for cash proceeds of $150,000.
200,000 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 "$0.50 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.
During the three months ended June 30, 2002, the Company authorized the grant of 250,000 stock options to each of its five directors. The options vest evenly over three years and are exercisable at $0.70 per share, the fair market value on the date of grant. The options were granted on August 1, 2002. At June 30, 2002, the Company had 1,647,833 stock options outstanding.
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, 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:
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 June 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.
Results Of Operations
Three Months ended June 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 $606,857 for the three months ended June 30, 2002, as compared to a net loss of $262,980 for the same period in 2001. This increased loss is due primarily to an increase in operating expenses in the fiscal year 2002 as the Company significantly increased its level of activity.
The Company incurred $114,876 in development expenses for the three months ended June 30, 2002, while the Company incurred no development expenses 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 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.
During the three months ended June 30, 2002, the Company incurred $296,895 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, as compared to $117,738 for the same period in 2001.
Travel expenses increased significantly to $21,332 during the three months ended June 30, 2002, as compared to $4,268 in the same period in 2001. The increase in travel resulted primarily from the Company's expanded level of operations in Colorado.
Professional expense increased to $62,019 during the three months ended June 30, 2002 as compared to $2,476 in the same period in 2001. The increase in professional expense is primarily due to the Company's initiative to bring its taxation and securities filings up to date.
Liquidity and Capital Resources
The Company has financed its operations since inception primarily through the net proceeds generated from the sale of common stock and through loans and advances from stockholders and AIFE, 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. As of March 31, 2002, the Company owed AIFE Canada $17,303 from prior advances, which the Company repaid in full during the three months ended June 30, 2002. During this same period, the Company made an advance to AIFE Canada in the amount of $10,073, which was repaid in full by AIFE Canada in July 2002. During the same period in 2001, the Company received from AIFE Canada $5,817 in advances and repaid $54,054 of prior advances to the Company from AIFE Canada. See Note 3 to the Consolidated Unaudited Financial Statements—"Related party transactions."
As of June 30, 2002, the Company's working capital was $811,955 as compared to $998,875 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, we believe the Company will meet its obligations and expenditure plans 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 the Nevada and Colorado Projects and other 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.
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, 2002, the Company authorized for issuance the following securities in exchange for the services that were performed on behalf of the Company, as set forth below:
| Name of Shareholder | Number of Shares & Warrants Issued | Services Rendered | ||
|---|---|---|---|---|
| Gary Van Nest | 100,000 shares of common stock and warrants to purchase 250,000 shares of common stock at $2.50 per share. | Financial consulting services | ||
Zane Jones | 10,000 shares of common stock | Land brokerage services | ||
Nir Bar | 2,000 shares of common stock | Website design |
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. 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.
On June 28, 2002, the Company authorized the grant of options to purchase 250,000 shares of the Company's common stock to each of its five directors, pursuant to the terms and conditions of the Company's 1999 Performance Stock Option Plan, as amended. The options vest evenly over three years and are exercisable at the fair market value of the Company's common stock on the date of grant.
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 | Miscellaneous Exhibit. | |
99.2 | Miscellaneous Exhibit. |
The Company did not file any reports on Form 8-K during the first quarter ended June 30, 2002.
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: September 9, 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 |
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: September 9, 2002
| /s/ STEVEN B. MISNER Steven B. Misner Chief Executive Officer |
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: September 9, 2002
| /s/ BARBARA J. MCALLISTER Barbara J. McAllister Chief Financial Officer |
