================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------
                                   FORM 10-KSB
(Mark One)

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

                     For the fiscal year ended June 30, 2002

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

                For the transition period from _______ to ______

                        Commission file number: 001-12531

                          ASPEN EXPLORATION CORPORATION
                  --------------------------------------------
                 (Name of small business issuer in its charter)

            Delaware                                              84-0811316
 ------------------------------                               -----------------
(State or other jurisdiction of                              (IRS Employer
 incorporation or organization)                              Identification No.)

      2050 S. Oneida St., Suite 208
            Denver, Colorado                                      80224-2426
 --------------------------------------                            --------
(Address of principal executive offices)                          (Zip Code)

                    Issuer's telephone number: (303) 639-9860

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.005 par value
                         ------------------------------

     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 X No
                                                                      ---  ---

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. Yes X No
                                         ---  ---

     Aspen's revenues for the fiscal year ended June 30, 2002 were $869,522.

     At September 19, 2002, the aggregate market value of the shares held by
non-affiliates was approximately $1,153,567.90. The aggregate market value was
calculated by multiplying the mean of the closing bid and asked prices ($0.305)
of the common stock of Aspen on the Over-the-Counter Bulletin Board listing for
that date, by the number of shares of stock held by non-affiliates of Aspen
(3,782,190).

     At September 19, 2002, there were 5,863,828 shares of common stock (Aspen's
only class of voting stock) outstanding.

     Transitional Small Business Disclosure Format (check one): Yes   No X
                                                                   ---  ---

================================================================================

<PAGE>


                                     PART I

ITEM 1.  BUSINESS
-----------------

     Because we want to provide you with more meaningful and useful information,
this Annual Report on Form 10-KSB contains certain "forward-looking statements"
(as such term is defined in Section 21E of the Securities Exchange Act of 1934,
as amended). These statements reflect our current expectations regarding our
possible future results of operations, performance, and achievements. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995.

     Wherever possible, we have tried to identify these forward-looking
statements by using words such as "anticipate," "believe," "estimate," "expect,"
"plan," "intend," and similar expressions. These statements reflect our current
beliefs and are based on information currently available to us. Accordingly,
these statements are subject to certain risks, uncertainties, and contingencies,
which could cause our actual results, performance, or achievements to differ
materially from those expressed in, or implied by, such statements. These risks,
uncertainties and contingencies include, without limitation, the factors set
forth under "Item 6. Management's Discussion and Analysis of Financial
Conditions or Plan of Operation - Factors that may affect future operating
results." We have no obligation to update or revise any such forward-looking
statements that may be made to reflect events or circumstances after the date of
this Form 10-KSB.

Summary of Our Business

     Aspen was incorporated under the laws of the State of Delaware on February
28, 1980 for the primary purpose of acquiring, exploring and developing oil and
gas and other mineral properties. Our principal executive offices are located at
2050 S. Oneida St., Suite 208, Denver, Colorado 80224-2426. Our telephone number
is (303) 639-9860, and our facsimile number is 303-639-9863. Our websites are
www.aspenexploration.com and www.aspnx.com and our email address is
aecorp2@qwest.net. We are currently engaged primarily in the exploration and
development of oil and gas properties in California. We also have a 25% interest
in Aspen Power Systems, LLC, a company we incorporated to investigate, finance,
and construct electrical power generation projects. We have also acquired some
acreage in Colorado for a possible coalbed methane project.

     Oil and Gas Exploration and Development. Our major emphasis has been
participation in the oil and gas segment, acquiring interests in producing oil
or gas properties and participating in drilling operations. We engage in a broad
range of activities associated with the oil and gas business in an effort to
develop oil and gas reserves. With the assistance of our management, independent
contractors retained from time to time by Aspen, and, to a lesser extent,
unsolicited submissions, we have identified and will continue to identify
prospects that we believe are suitable for drilling and acquisition.

     Currently, our primary area of interest is in the state of California. We
have acquired a number of interests in oil and gas properties in California, as
described below in more detail. In addition, we also act as operator for most of
our producing wells and receive management fees for these services.

     Aspen has information on hand which indicates coal deposits exist under the
approximate 2,074 acres of leases which Aspen has obtained in Arapahoe and
Elbert Counties, Colorado. We do not know if it is possible or economically
feasible to produce any coalbed methane which may exist on these leases. The
leases are paid-up oil and gas leases (which include coalbed methane) with a
three year term and are renewable for an additional two years. As of June 30,
2002 we have approximately 2,074 gross and net acres of nonproducing leasehold
in Colorado. We do not intend to proceed with exploration and development of
these properties on our own, rather, we intend to farm out the project to
another party. There is no assurance we will be successful in so doing.

     Mineral Exploration and Development. During fiscal 1997 and 1998, we also
focused our attention on uranium deposits in sandstone in Wyoming.

     We have curtailed, for the time being, exploration for precious metals in
Alaska and for uranium in Wyoming. We believe that pursuing activities in the
mineral segment would not be beneficial to Aspen at the present time.

     Power Generation. In 1999, we formed a subsidiary named Aspen Power
Systems, LLC ("APS"), a Colorado limited liability company to provide an
opportunity for Aspen to participate in the growing demand for electrical power

                                       2

<PAGE>


generated by turbines. Our objectives for APS were to seek opportunities or
situations where our analysis indicated that a gas turbine generation plant
could be constructed and operate profitably. Any plant construction will require
a significant amount of capital for property acquisition, permitting,
engineering and design, and construction. Neither Aspen nor the other owners of
APS will be able to provide this required capital. Consequently, any such
activities will likely require the availability of funds from third parties, and
we cannot offer any assurance that such funding will be available when needed on
commercially-reasonable terms. Currently Aspen owns a 25% interest in APS and we
are continuing to provide certain administrative services to APS. APS reimburses
us for the salary of R. V. Bailey when he is working on matters for APS.

     APS reimbursed us $42,700 for the 2001 fiscal year, and $10,406 for the
2002 fiscal year. At June 30, 2002 APS had paid us for all chargeable time of
our president.

     APS is currently being managed by Larry Baccari of Sheridan, Wyoming, an
electrical engineer with experience in constructing turbine power plants. The
board of directors of APS consists of Mr. Baccari, R. V. Bailey, President of
Aspen Exploration, and Ray K. Davis, accounting consultant to Aspen Exploration.

     In addition to Aspen, Messrs. Bailey, Baccari and Davis each own 25% of
APS. We account for our 25% interest in APS using the equity method of
accounting. As of December 31, 2001 (APS's most current reporting period), we
recorded net ordinary loss of $27,971 from APS. During fiscal 2002, we advanced
an additional $5,500 to APS. As of this writing, APS has not repaid that amount.

     Although APS has attempted to undertake projects with other power producers
(and received reimbursement of $246,000 in fees and expenses relating to our
Solano, California, project from a third party), there is currently no project
being actively pursued. We are now reviewing our possible options with regard to
the projects we had previously considered and other possibilities for the
future. See Item 12 for more information regarding APS.

Company Strategy:

     We believe that it is in our shareholders' best interests to diversify our
investments in all aspects of our operations. It is for this reason that we
reduced our interest in APS, we attempted to develop our uranium prospects
through a third party, and we frequently obtain financing for our oil and gas
acquisition and drilling activities from third parties.

     At the present time, we cannot finance our oil and gas acquisitions and
drilling activities solely through our own resources. Consequently, we identify
prospects or production to acquire and drill prospects, and seek other industry
investors who are willing to participate in these activities with us. We
frequently retain a promotional interest in these prospects, but generally we
have to finance a portion (and sometimes a significant portion) of the
acquisition and drilling costs. We have in the past acquired interests in
producing properties by issuing shares of our common stock, but because of the
current low price of our stock, it has become more difficult and expensive to do
so.

     Where we acquire an interest in acreage on which exploration or development
drilling is planned, we will seldom assume the entire risk of acquisition or
drilling. Rather, we prefer to assess the relative potential and risks of each
prospect and determine the degree to which we will participate in the
exploration or development drilling. Generally, we have determined that it is
more beneficial to invite industry participants to share the risk and the reward
of the prospect by financing some or all of the costs of drilling contemplated
wells. In such cases, we may retain a carried working interest, a reversionary
interest, or may be required to finance all or a portion of our proportional
interest in the prospect. Although this approach reduces our potential return
should the drilling operations prove successful, it also reduces our risk and
financial commitment to a particular prospect.

     Conversely, we may from time to time participate in drilling prospects
offered by other persons if we believe that the potential benefit from the
drilling operations outweighs the risk and the cost of the proposed operations.
This approach allows us to diversify into a larger number of prospects at a
lower cost per prospect, but these operations (commonly known as "farm-ins") are
generally more expensive than operations where we offer the participation to
others (known as "farm-outs"). As of this writing, we have participated in the
drilling of two farm-in wells.

                                       3

<PAGE>


     Principal Products Produced and Services Rendered. Our principal products
during fiscal 2002 were crude oil and natural gas. Crude oil and natural gas are
generally sold to various entities, including pipeline companies, which usually
service the area in which our producing wells are located. In the fiscal year
ended June 30, 2002, crude oil and natural gas sales and revenues from operating
oil and gas properties accounted for $828,150, or 95% of our total revenues;
while $41,372, or 5% was from interest and other income.

     Distribution Methods of the Products or Services. We are not involved in
the distribution aspect of the oil and gas industry.

     Status of any Publicly Announced New Products or Services. We do not have a
new product or service that would require the investment of a material amount of
our assets or which we believe is material to our business. Therefore, we have
not made a public announcement of nor have we made information otherwise public
about any such product or service.

     Although we are attempting to enter the electric power generation business
through Aspen Power Systems, LLC, no progress has been made thus far in that
attempt. If a situation is found where all the factors needed to generate
electrical power are present, of which there is no assurance, APS would have to
find a source of funding prior to initiating any significant activities.

     Competitive Business Conditions: The exploration for, and development,
production and acquisition of, oil, gas, precious metals and other minerals are
subject to intense competition, as is the production and sale of electrical
power. The principal methods of compensation for the acquisition of oil and gas
and other mineral properties are the payment of:

     (i)   cash bonuses at the time of the acquisition of leases;
     (ii)  delay rentals and the amount of annual rental payments;
     (iii) advance royalties and the use of differential royalty rates; and
     (iv)  the stipulations requiring exploration and production commitments by
           the lessee.

     General compensation in the electrical generation industry is price
sensitive. Electrical power can be sold into the local electrical power grid,
but the price at which the power can be sold may not be economical unless the
project has been economically acquired and designed, efficiently completed and
functions in accordance with its specifications.

     Some of our current competitors, and many of our potential competitors in
each of these industries have vast experience, are larger and have significantly
greater financial resources, existing staff and labor forces, equipment, and
other resources than we do. Consequently, these competitors may be in a better
position to compete for projects in our diverse industries.

     In addition, the availability of a ready market for oil and gas will depend
upon numerous factors beyond our control, including the extent of domestic
production and imports of oil and gas, proximity and capacity of pipelines, and
the effect of federal and state regulation of oil and gas sales, as well as
environmental restrictions on exploration and usage of oil and gas. Further, we
expect that competition for leasing of oil and gas prospects will become even
more intense in the future. We have a minimal competitive position in the oil
and gas industry. Should we participate in the electrical power generation
industry, we will also have a minimal competitive position in that industry.

     Sources and Availability of Raw Materials: To conduct business, we depend
on such items as drilling rigs and other equipment, casing pipe, drilling mud
and other supplies, core drilling equipment, and other equipment necessary for
our operations. Should APS commence constructing a plant, APS will be dependent
(among other things) on the availability of appropriate gas turbines for
generating electricity. Such items have been commonly available from a number of
sources. Although we foresee no short supply or difficulty in acquiring any
equipment relevant to the conduct of business, we cannot offer any assurances
that these items will be available or that we will be able to acquire the items
on economically feasible terms.

     Dependence Upon One or a Few Major Customers: We generally sell our oil and
gas production to a limited number of companies. In fiscal 2002 we obtained more
than 10% of our revenues from sales to Phillips Petroleum, Calpine Corporation
and Slawson Corporation; in 2001 more than 10% of our revenues derived from
Tosco Refining Company, Calpine Corporation and Enserco Energy, Inc. We do not

                                       4

<PAGE>


believe the loss of these customers would adversely impact our revenues because
we believe that oil and gas sales are primarily market driven and are not
dependent on particular purchasers. Consequently, we believe that substitute
purchasers would be available based on the widespread uses of and the need for
oil and gas.

     Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements
or Labor Contracts (Including Duration). We do not own any patents, licenses,
franchises, or concessions except oil, gas and other mineral interests granted
by governmental authorities and private landowners. We received a trademark
registration (serial no. 74-396,919 registered on March 1, 1994) for our
corporate logo. The registration is for a term of ten years. To maintain the
registration for its entire term we filed an affidavit of commercial use on
February 21, 2000.

     Need for Governmental Approval of Principal Products or Services. We do not
need to seek government approval of our principal products.

     Effect of Existing or Probable Governmental Regulation. Oil and gas
exploration and production, electric power generation, as well as mining
activities, are open to significant governmental regulation including worker
health and safety laws, employment regulations and environmental regulations.
Operations that occur on public lands may be subject to further regulation by
the Bureau of Land Management, the U.S. Army Corps of Engineers, or the U.S.
Forest Service as well as other federal and state agencies.

     Estimate of Amounts Spent on Research and Development Activities. We have
not engaged in any material research and development activities since our
inception.

     Costs and Effects of Compliance with Environmental Laws (federal, state and
local). Because we are engaged in extracting natural resources, our business is
subject to various federal, state and local provisions regarding environmental
and ecological matters. Therefore, compliance with environmental laws may
necessitate significant capital outlays, affect our earnings potential, and
cause material changes in our current and proposed business activities.

     At the present time, however, the environmental laws do not materially
hinder nor adversely affect our business. Capital expenditures relating to
environmental control facilities have not been material to our operations since
our inception.

Employees.

     At June 30, 2002, we employed three full-time persons. We also employ
independent contractors and other consultants, as needed.

ITEM 2.  PROPERTIES
-------------------

General Information:

     We have a significant amount of information regarding the proven developed
and undeveloped oil and gas reserves which can be found in below in this Item 2
as well as in the notes to our financial statements.

Drilling Activity:

     During the fiscal year ended June 30, 2002 we participated in the drilling
of 6 gross (1.32 net) wells, of which 4 gross (.98 net) were completed as gas
wells and 2 were dry holes. Of the 6 wells drilled, 2 operated gas wells were
drilled in the Sour Grass Prospect, 2 operated gas wells were drilled in the
Kirk-Buckeye Field, 1 operated dry hole was drilled in Kern County, and 1
non-operated dry hole was drilled in the Van Sickle Island Field.

Kirk-Buckeye Field, Colusa County, California

     The Kuppenbender #20-3 was Aspen's second well in the Kirk-Buckeye field
area in Colusa County, California and was drilled to a depth of 9,000 feet.
Production casing was run based on promising mud log and electric log responses
which indicated a possible 50 feet of pay. This well was tested from a Forbes
interval at a stabilized gas rate of 2,423 MCFPD (million cubic feet per day) of
high quality natural gas. The shut in tubing pressure was 4,250 psig and the
shut in casing pressure was 4,290 psig. Gas sales commenced in late June at a

                                       5

<PAGE>


rate of 550 MCFPD. An additional potential gas zone exists behind-pipe in this
well. Aspen's first well in this field, the Armstrong #17-4, was drilled in July
2001 to a depth of 9,000 feet and tested gas at 2,000 MCFPD. Gas production
commenced in September 2001 at a self-imposed restricted rate of 500 MCFPD and
is still producing at 450 MCFPD after one year of production. Aspen is the
operator of both of these wells and has a 36% working interest in the Armstrong
#17-4 and a 15.2% working interest in the Kuppenbender #20-3. Aspen plans to
drill another well in this field, the Kuppenbender #20-2, in the fall of 2002.

     In other future plans in this area, Aspen will commence drilling on its 600
acre Canal Prospect, located approximately 3 miles southwest of the Kirk-Buckeye
wells, in September 2002. The first well on this prospect, the McCullough #36-1,
will be drilled to a depth of 9,200 feet and has numerous targets in the Forbes
formation in addition to shallower objectives.

Sour Grass Prospect, Tehama County, California
----------------------------------------------

     The Sour Grass prospect area is a 2,800 acre play located in southern
Tehama County. In this project, for which a 7.5 square mile area 3-D seismic
survey has recently been acquired, Aspen has a 23.33% operated working interest.
There is also abundant well data for the area as well as previous 2-D seismic
survey information. Five to ten prospective locations have been identified
through an analysis of the data, with numerous pay zones from 2,000 to 6,000
feet in depth. Historic production from older wells has been quite good, with
initial production from individual wells often exceeding 2,000 MCFPD and total
ultimate gas reserves in the 1 to 2 BCF (billion cubic feet) range per well.
Drilling of the first two wells in this project resulted in two producers.

     The Porter #26-2 was directionally drilled in May 2002 to a depth of
approximately 6,750 feet and encountered several prospective gas zones in the
Forbes formation. One of these zones was tested at a rate of approximately 2,000
MCFPD of high quality natural gas but rapidly declined. The well was recompleted
in July 2002 and is currently producing 350 MCFPD. The other behind-pipe zones
in this well will be produced in the future.

     The Leal #22-1, the second well drilled on the Sour Grass prospect, was
also drilled to a depth of 5,600 feet and completed in May 2002. This well
tested in excess of 600 MCFPD from various intervals in the Forbes formation and
has been flowing at a stable rate of 425 MCFPD.

Denverton Creek Field, Solano County, California.
-------------------------------------------------

     For the past three years, we have been the recipient of the California
Division of Oil, Gas, and Geothermal Resources (CDOGGR) "Outstanding Lease
Maintenance Award" for our operations in the Denverton Creek gas field. CDOGGR
gives this award to operators who not only meet, but exceed, the requirements
for producing well operations set by CDOGGR.

     Aspen did not drill any wells in this field during the current fiscal year.
Aspen has drilled a total of 12 productive gas wells out of 15 attempts, an 80%
success rate. Cumulative gross production from the field is in excess of 9.2 BCF
of natural gas. The field is productive from 10 separate horizons ranging in
depth from 9,000 feet to 12,000 feet. Aspen has extended the former field limits
by 2 miles to the northeast and discovered new pay horizons. Current gross
production is in excess of 1,000 MCFPD of high quality natural gas (1097 BTU)
with numerous behind-pipe zones in many of the wells.

Drilling Activity:

         The following table sets forth the results of our drilling activities
during the fiscal years ended June 30, 2000, 2001 and 2002:

                                      Drilling Activity
                                      -----------------

                       Gross Wells                     Net Wells
                       -----------                     ---------------------
Year                   Total    Producing    Dry       Total    Producing    Dry
----                   -----    ---------    ---       -----    ---------    ---

2000 Exploratory        11          8         3         1.61      1.29       .32
2001 Exploratory        10          6         4         1.22       .58       .64
2002 Exploratory         6          4         2         1.32       .98       .34


                                       6

<PAGE>


Production Information:

Net Production, Average Sales Price and Average Production Costs (Lifting).
--------------------------------------------------------------------------

The table below sets forth the net quantities of oil and gas production (net of
all royalties, overriding royalties and production due to others) attributable
to Aspen for the fiscal years ended June 30, 2000, 2001, and 2002, and the
average sales prices, average production costs and direct lifting costs per unit
of production.

                                                Years Ended June 30,
                                                --------------------
                                        2002              2001             2000
                                        ----              ----             ----
         Net Production
         --------------
         Oil (Bbls)                     3,055             5,206            6,282
         Gas (MMcf)                       227               377              384

         Average Sales Prices
         --------------------
         Oil (per Bbl)                 $20.20            $26.64           $22.58
         Gas (per Mcf)                 $ 2.78            $ 9.20           $ 2.94

         Average Production Cost 1
         -----------------------
         Per equivalent
           Bbl of oil                  $11.21            $ 7.53           $ 4.90

         Average Lifting Costs 2
         ---------------------
         Per equivalent
           Bbl of oil                  $ 2.86            $ 1.65           $ 1.44

1 Production costs include all operating expenses, depreciation, depletion and
amortization, lease operating expenses and all associated taxes.

2 Direct lifting costs do not include impairment expense, ceiling write-down, or
depreciation, depletion and amortization.

                                       7

<PAGE>


Productive Wells and Acreage:

Gross and Net Productive Oil and Gas Wells, Developed Acres, and Overriding
---------------------------------------------------------------------------
Royalty Interests.
-----------------

     Leasehold Interests - Productive Wells and Developed Acres: The tables
below sets forth Aspen's leasehold interests in productive and shut-in oil and
gas wells, and in developed acres, at June 30, 2002:


                           Producing and Shut-In Wells
                           ---------------------------

                                        Gross                  Net 1
                                        -----                  ----
          Prospect                 Oil      Gas       Oil      Gas
          --------                 ---      ---       ---      ---

          California:
          Armstrong 17-4           --       1         --       0.36000
          Brandt 16X               1        --        0.18     --
          Brandt 26X               1        --        0.1343   --
          Comber 4                 --       1         --       0.03000
          Cygnus 2                 --       1         --       0.05125
          Deane 1                  --       1         --       0.12938
          Dragon 1                 --       1         --       0.28350
          Eastby 36-2              --       1         --       0.07770
          Elektra 1                --       1         --       0.07560
          Emigh 3-1                --       1         --       0.23800
          Emigh 34-1               --       1         --       0.28800
          Emigh 35-1               --       1         --       0.28525
          Emigh 35-2               --       1         --       0.32800
          Emigh 35-3               --       1         --       0.11900
          Emigh 35-4               -        1         --       0.05125
          Emigh 35-5               --       1         --       0.23800
          Firestone 1-10           --       1         --       0.03850
          Gay Unit                 --       2         --       0.42000
          Gay Unit 12-1            --       1         --       0.10500
          Grey Wolf 1              --       1         --       0.18000
          Houghton 25-1            --       1         --       0.07770
          Johnson Unit             --       4         --       0.84000
          Kuppenbender 20-3        --       1         --       0.15200
          Leal 22-1                --       1         --       0.23334
          Pinheiro 1-10            --       1         --       0.01890
          Pinheiro 2-10            --       1         --       0.01890
          Porter 26-2              --       1         --       0.23334
          Sanborn 3-3              --       1         --       0.12762
          Sanborn 4-10             --       1         --       0.02979
          Sciortino 1-7            --       1         --       0.03000
          Tiahrt 1-4               --       1         --       0.03617
          Zimmerman 1-24           --       1         --       0.23334

          TOTAL                     2       34        0.3143   5.32953




1 A net well is deemed to exist when the sum of fractional ownership working
interests in gross wells equals one. The number of net wells is the sum of the
fractional working interests owned in gross wells expressed as whole numbers and
fractions thereof.

                                       8

<PAGE>


                             Developed Acreage Table
                             -----------------------

                                            Aspen's Developed Acres1
     Prospect                               Gross 2            Net 3
     --------                               -----              ---
     California:

              Denverton Creek               1,431               244
              Firestone 1-10                  160                 6
              Grey Wolf 1                     120                22
              Kirk Buckeye                    800               199
              Malton Black
              Butte Field                   2,023               321
              Phillips Acquisition          1,280                71
              Sour Grass                      694               162
              W Bellevue Ext Fld              160                25
                                            -----             -----

                       TOTAL                6,668             1,050
                                            =====             =====

1 Consists of acres spaced or assignable to productive wells.

2 A gross acre is an acre in which a working interest is owned. The number of
gross acres is the total number of acres in which a working interest is owned.

3 A net acre is deemed to exist when the sum of fractional ownership working
interests in gross acres equals one. The number of net acres is the sum of the
fractional working interests owned in gross acres expressed as whole numbers and
fractions thereof.

Royalty Interests in Productive Wells and Developed Acreage: The following
tables set forth Aspen's royalty interest in productive gas wells and developed
acres at June 30, 2002:

                      Overriding Royalty Interests
                      ----------------------------

                                            Productive Wells          Gross
                                            ----------------          -----
     Prospect               Interest(%)     Oil      Gas              Acreage 1
     --------               -----------     ---      ---              --------

     California:
      Emigh 3-1             1.260150         --        1                160
      Emigh 35-3            1.142816         --        1                 80
      Gay Unit              5.000000         --        1                585
      Gay Unit 12-1         2.500000         --        1                 60
      Sanborn 3-3           0.101590         --        1                615

                                             --       ---              ----

                       TOTAL                 --        5              1,500
                                             ==       ==              =====

1 Consists of acres spaced or assignable to productive wells.

                                       9

<PAGE>


Undeveloped Acreage:

Leasehold Interests Undeveloped Acreage: The following table sets forth Aspen's
leasehold interest in undeveloped acreage at June 30, 2002:


                                           Undeveloped Acreage
                                           -------------------
                                          Gross            Net
                                          -----            ---
     California:
       CIA                                 233               35
       Denverton Creek                     834               89
       Kern River Vedder                 7,415            2,175
       McCullough 36-1                     583              115
       North Orland                        235              202
       Randall Island                      639              639
       Sacreiter                           245              245
       Sour Grass                        2,141              500
       Sugarfield                           75               38
                                        ------            -----


                       Sub Total        12,400            4,038

     Colorado:
       Coalbed Methane Prospect          2,074            2,074
                                        ------            -----

                       TOTAL            14,474            6,112
                                        ======            =====

Delivery Commitments:

     We are not obligated to provide a fixed and determinable quantity of oil
and gas in the future under existing contracts and agreements.

Drilling Commitments:

     At June 30, 2002, we were committed to the following drilling and
development projects in California:

          Project                                               Aspen Cost
          -------                                               ----------

          Klingenberg 24-1                                       $115,000
          Kuppenbender 20-2                                        65,000
          McCullough 36-1                                          65,000
          HSRCC 1                                                  10,000
                                                                 --------

          Total                                                  $255,000
                                                                 --------

Reserve Information - Oil and Gas Reserves:

     Cecil Engineering, Inc evaluated our oil and gas reserves attributable to
     our properties at June 30, 2002. Reserve calculations by independent
     petroleum engineers involve the estimation of future net recoverable
     reserves of oil and gas and the timing and amount of future net revenues to
     be received therefrom. Those estimates are based in numerous factors, many
     of which are variable and uncertain. Reserve estimators are required to
     make numerous judgments based upon professional training, experience and
     educational background. The extent and significance of the judgments in
     them are sufficient to render reserve estimates of future events, actual
     production determinations involve estimates inherently imprecise, since
     reserve revenues and operating expenses may not occur as estimated.
     Accordingly, it is common for the actual production and revenues later
     received to vary from earlier estimates. Estimates made in the first few
     years of production from a property are generally not as reliable as later
     estimates based on a longer production history. Reserve estimates based
     upon volumetric analysis are inherently less reliable than those based on

                                       10

<PAGE>


     lengthy production history. Also, potentially productive gas wells may not
     generate revenue immediately due to lack of pipeline connections and
     potential development wells may have to be abandoned due to unsuccessful
     completion techniques. Hence, reserve estimates may vary from year to year.

     Estimated Proved Reserves/ Developed and Undeveloped Reserves: The
following tables set forth the estimated proved developed and proved undeveloped
oil and gas reserves of Aspen for the years ended June 30, 2000 and 2001. See
Note 9 to the Consolidated Financial Statements and the above discussion.

Estimated Proved Reserves
-------------------------

          Proved Reserves                       Oil (Bbls)           Gas (Mcf)
          ---------------                       ----------           ---------

          Estimated quantity, June 30, 2000        15,000            2,373,000

            Revisions of previous estimates         1,000             (362,000)
            Discoveries                             2,000              589,000
            Production                             (5,000)            (377,000)
            Purchased reserves                          0               20,000
                                                ---------            ---------

          Estimated quantity, June 30, 2001        13,000            2,243,000
                                                ---------            ---------

            Revisions of previous estimates         2,000             (115,000)
            Discoveries                                 0              258,000
            Production                             (3,000)            (227,000)
            Purchased reserves                          0               51,000
            Sold reserves                          (1,000)                   0
                                                ---------            ---------

          Estimated quantity, June 30, 2002        11,000            2,210,000
                                                =========            =========

                       Developed and Undeveloped Reserves
                       ----------------------------------

                               Developed       Undeveloped          Total
                               ---------       -----------          -----
     Oil (Bbls)
           June 30, 2001           9,000             4,000          13,000
           June 30, 2002           7,000             4,000          11,000

     Gas (Mcf)
           June 30, 2001         584,000         1,659,000       2,243,000
           June 30, 2002         482,000         1,728,000       2,210,000

     For information concerning the standardized measure of discounted future
net cash flows, estimated future net cash flows and present values of such cash
flows attributable to our proved oil and gas reserves as well as other reserve
information, see Note 9 to the Consolidated Financial Statements.

     Oil and Gas Reserves Reported to Other Agencies: We did not file any
estimates of total proved net oil or gas reserves with, or include such
information in reports to, any federal authority or agency since the beginning
of the fiscal year ended June 30, 2002.

     Title Examinations: Oil and Gas: As is customary in the oil and gas
industry, we perform only a perfunctory title examination at the time of
acquisition of undeveloped properties. Prior to the commencement of drilling, in
most cases, and in any event where we are the Operator, a thorough title
examination is conducted and significant defects remedied before proceeding with
operations. We believe that the title to our properties is generally acceptable
to a reasonably prudent operator in the oil and gas industry. The properties we
own are subject to royalty, overriding royalty and other interests customary in
the industry, liens incidental to operating agreements, current taxes and other
burdens, minor encumbrances, easements and restrictions. We do not believe that
any of these burdens materially detract from the value of the properties or will
materially interfere with our business.

      We have purchased producing properties on which no updated title opinion
was prepared. In such cases, we have retained third party certified petroleum
landmen to review title.

                                       11

<PAGE>
<TABLE>
<CAPTION>


Office Facilities:

     Our principal office is located in Denver, Colorado. We also have offices
located in Castle Rock, Colorado and Bakersfield, California. The Denver office
consists of approximately 1,108 square feet with an additional 750 square feet
of basement storage. We entered into a one-year lease agreement to December 31,
2002 for a lease rate of $1,201 per month.

     Aspen also subleases from R.V. Bailey, its president, a portion of an
office building owned by Mr. Bailey in Castle Rock, Colorado on a month-to-month
basis for $500 per month.

     We pay $732 per month for the Bakersfield, California office, which
consists of approximately 546 square feet. The Bakersfield, California lease
expires February 2, 2003.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

     We are not subject to any pending or, to our knowledge, threatened, legal
proceedings.

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

     No matters were presented to security holders for a vote during the year
ended June 30, 2002, or any subsequent period.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

Market Information:

     Our common stock is quoted on the Over-the-Counter Bulletin Board ("OTCBB")
under the symbol "ASPN". The quotations reflect inter-dealer prices without
retail mark-up, mark-down or commission and may not reflect actual transactions.

     The OTCBB adopted new rules that result in companies not current in their
reporting requirements under the Securities Exchange Act of 1934 being removed
from the quotation service. At June 30, 2001 and 2002, we believe that we were
in full compliance with these rules.

                                              Quarter Ended
                                              Sept., 2001      Dec., 2001        March, 2002      June 30, 2002
<S>                                 <C>       <C>              <C>               <C>              <C>
Common Stock ("ASPN")
                                    High      $1.35            $1.00             $.73             $.73
                                    Low       $0.77            $0.63             $.54             $.55



                                              Quarter Ended
                                              Sept., 2000      Dec., 2000        March, 2001      June 30, 2001

Common Stock ("ASPN")
                                    High      $.53125          $.9375            $1.4375          $2.50
                                    Low       $.375            $.40625           $.6875           $1.25


                                                       12
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Holders:

     As of June 30, 2001 and 2002, there were approximately 1,319 and 1,197
holders of record of our Common Stock, respectively. This does not include an
indeterminate number of persons who hold our Common Stock in brokerage accounts
and otherwise in `street name.'

Dividends:

     We have never declared or paid a cash dividend on our Common Stock. We
presently intend to retain our earnings to fund development and growth of our
business. Decisions concerning dividend payments in the future will depend on
income and cash requirements.

     Holders of common stock are entitled to receive such dividends as may be
declared by Aspen's Board of Directors. There were no dividends declared by the
Board of Directors during the fiscal year ended June 30, 2002, or subsequently,
and we have paid no cash dividends on its common stock since inception. There
are no contractual restrictions on our ability to pay dividends to our
shareholders.

Securities authorized for issuance under equity compensation plans.

     The following is provided with respect to compensation plans (including
individual compensation arrangements) under which equity securities are
authorized for issuance as of the fiscal year ending June 30, 2002.

-------------------------------------------------------------------------------------------
                           Equity Compensation Plan Information (1)

-------------------------------------------------------------------------------------------
<S>                   <C>                <C>                   <C>
 Plan Category           Number of        Weighted-average        Number of securities
 and Description       Securities to be    exercise price of     remaining available for
                         issued upon         outstanding       future issuance under equity
                         exercise of      options, warrants,     compensation plans
                         outstanding          and rights          (excluding securities
                          options,                               reflected in column (a))
                        warrants, and
                           rights
                             (a)                 (b)                       (c)
--------------------- ------------------ --------------------- ----------------------------
--------------------- ------------------ --------------------- ----------------------------
Equity compensation
plans approved by
security holders                         $
--------------------- ------------------ --------------------- ----------------------------
--------------------- ------------------ --------------------- ----------------------------
Equity compensation
plans not approved
by security holders   676,000            $0.57                 NA
--------------------- ------------------ --------------------- ----------------------------
--------------------- ------------------ --------------------- ----------------------------
Total                 676,000            $0.57                 NA
--------------------- ------------------ --------------------- ----------------------------
--------------------- ------------------ --------------------- ----------------------------


(1)  This does not include options held by management and directors that were
     not granted as compensation. In each case, the disclosure refers to options
     or warrants unless otherwise specifically stated.

                                       13
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Recent Sales of Unregistered Securities -- Item 701 Disclosure.

The following sets forth information regarding sales of unregistered securities
within the past two years as required by Item 701 of Regulation S-B.


----------------------- ------------- ------------- ------------ ---------------- -----------
     Name and               Date       Number of     Offering     Registration    Option
Principal Position                      Common        Price        Exemption     Exercise
                                      Shares Sold       ($)                       Price Per
                                          (#)                                     Share ($)
----------------------- ------------- ------------- ------------ ---------------- -----------
<S>                      <C>            <C>           <C>           <C>              <C>
R. K. Davis,             2/27/2001      100,000       26,000        Rule 144         .26
consultant, options
exercised
----------------------- ------------- ------------- ------------ ---------------- -----------
----------------------- ------------- ------------- ------------ ---------------- -----------
J. L. Shelton, office    2/27/2001      100,000       26,000        Rule 144         .26
manager, options
exercised
----------------------- ------------- ------------- ------------ ---------------- -----------
----------------------- ------------- ------------- ------------ ---------------- -----------
R. V. Bailey, officer    6/11/2001      200,000       52,000        Rule 144         .26
& director, options
exercised
----------------------- ------------- ------------- ------------ ---------------- -----------
----------------------- ------------- ------------- ------------ ---------------- -----------
R. A. Cohan, officer     1/06/2001      200,000       52,000        Rule 144         .26
& director,
options exercised
----------------------- ------------- ------------- ------------ ---------------- -----------
----------------------- ------------- ------------- ------------ ---------------- -----------
R. F. Sheldon,           12/17/2001      80,000       20,800        Rule 144         .26
director, options
exercised
----------------------- ------------- ------------- ------------ ---------------- -----------
----------------------- ------------- ------------- ------------ ---------------- -----------
Total                                   680,000       176,800                        .26
----------------------- ------------- ------------- ------------ ---------------- -----------


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
------------------------------------------------------------------------------
OPERATION
---------

Overview:

     Founded in 1980, Aspen Exploration Corporation is an oil and gas company,
which participates in the oil and gas segment by acquiring interest in producing
oil and gas properties, and participating in drilling operations. Historically
we have also participated in exploration for precious minerals and, in uranium
exploration.

     In fiscal 2000, we expanded our business scope to include a goal of
participating in the electric power segment. We are not currently actively
pursuing either precious minerals exploration or participation in the electric
power segment (although we retain our 25% interest in APS as described above).
We have also acquired an interest in leases for approximately 2,074 acres which
we believe contain coalbed methane gas deposits.

Critical Accounting Policies and Estimates:

     We believe the following critical accounting policies affect our most
significant judgments and estimates used in the preparation of our Consolidated
Financial Statements.

Reserve Estimates:
-----------------

     Our estimates of oil and natural gas reserves, by necessity, are
projections based on geologic and engineering data, and there are uncertainties
inherent in the interpretation of such data as well as the projection of future
rates of production and the timing of development expenditures. Reserve
engineering is a subjective process of estimating underground accumulations of
oil and natural gas that are difficult to measure. The accuracy of any reserve
estimate is a function of the quality of available data, engineering and
geological interpretation and judgment. Estimates of economically recoverable

                                       14
</TABLE>

<PAGE>


oil and natural gas reserves and future net cash flows necessarily depend upon a
number of variable factors and assumptions, such as historical production from
the area compared with production from other producing areas, the assumed
effects of regulations by governmental agencies and assumptions governing future
oil and natural gas prices, future operating costs, severance and excise taxes,
development costs and workover and remedial costs, all of which may in fact vary
considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of oil and natural gas attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery, and estimates of the future net cash flows expected there from may
vary substantially. Any significant variance in the assumptions could materially
affect the estimated quantity and value of the reserves, which could affect the
carrying value of our oil and gas properties and/or the rate of depletion of the
oil and gas properties. Actual production, revenues and expenditures with
respect to our reserves will likely vary from estimates, and such variances may
be material.

     Many factors will affect actual future net cash flows, including:

     -    the amount and timing of actual production;
     -    supply and demand for natural gas;
     -    curtailments or increases in consumption by natural gas purchasers;
          and
     -    changes in governmental regulations or taxation.

Property, Equipment and Depreciation:
------------------------------------

     We follow the full-cost method of accounting for oil and gas properties.
Under this method, all productive and nonproductive costs incurred in connection
with the exploration for and development of oil and gas reserves are
capitalized. Such capitalized costs include lease acquisition, geological and
geophysical work, delay rentals, drilling, completing and equipping oil and gas
wells, including salaries, benefits and other internal salary related costs
directly attributable to these activities. Costs associated with production and
general corporate activities are expensed in the period incurred. Interest costs
related to unproved properties and properties under development are also
capitalized to oil and gas properties. If the net investment in oil and gas
properties exceeds an amount equal to the sum of (1) the standardized measure of
discounted future net cash flows from proved reserves, and (2) the lower of cost
or fair market value of properties in process of development and unexplored
acreage, the excess is charged to expense as additional depletion. Normal
dispositions of oil and gas properties are accounted for as adjustments of
capitalized costs, with no gain or loss recognized.

     We apply SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." Under SFAS No. 121, long-lived
assets and certain intangibles are reported at the lower of the carrying amount
or their estimated recoverable amounts. Long-lived assets subject to the
requirements of SFAS No. 121 are evaluated for possible impairment through
review of undiscounted expected future cash flows. If the sum of undiscounted
expected future cash flows is less than the carrying amount of the asset or if
changes in facts and circumstances indicate, an impairment loss is recognized.

Liquidity and Capital Resources:

     During prior years, we had to finance many of our oil and gas operations
through short-term borrowings, which were paid back out of the funds generated
from our operations. During fiscal 2002 and 2001, we were able to finance all of
our oil and gas operations from funds generated from operations and through
farmout agreements and other forms of third party participation. In fiscal 2001
we received cash flow from operations of nearly $3.8 million, a significant
portion of which was due to our positive net income of $2.5 million (which, in
turn, was due to abnormally high prices we were receiving for our California
natural gas production). We also increased our accounts payable and accrued
expenses by almost $925,000 during fiscal 2001 which also had a positive impact
on cash flow from operations. At the end of the 2001 fiscal year, we had working
capital in excess of $1.8 million. We used these funds to finance our use of
cash in operations ($640,954) and use of cash in investing activities
($1,138,628) during the 2002 fiscal year, resulting in working capital of
$844,599 remaining at year-end 2002.

     We did not have sufficient cash available to assist us in financing our
operations in prior years, and we may not in future years, since our ability to
generate working capital depends almost entirely on the prices we receive for
our natural gas production. For example, during the 2000 fiscal year, we
withdrew $125,000 against a split dollar life insurance plan to provide
financing for our operations and to pay interest in the amount of $30,430.
Previously, during October of 1997, we borrowed $130,000 from an affiliate to
finance our share of drilling an offset well on the Denverton Creek property. At
June 30, 2001, the $155,430 insurance loan was paid in full and the balance due

                                      15

<PAGE>


to the affiliate was also paid in full from cash made available by operations.
Because of our working capital surpluses through 2002, we did not need to borrow
any funds for operations or investing activities. We cannot now predict whether
we will be required to borrow funds or find alternative means of financing
operations during the fiscal year ending June 30, 2003.

June 30, 2002 as compared to June 30, 2001
------------------------------------------
                                           June 30, 2002       June 30, 2001
                                           -------------       -------------
     Current Assets                        $1,333,221          $3,303,463
     Current Liabilities                   $  488,622          $1,480,947
     Working Capital                       $  844,599          $1,822,516
     Investments in Oil & Gas
     Properties/Drilling Activities        $1,195,536          $1,370,905

     Compared to fiscal 2001, there was a 54% decrease in working capital. Our
investment in drilling projects and the acquisition of producing properties of
approximately $1,200,000 accounted for much of the decline in current assets.
2002 was a successful drilling year for us, having participated in the drilling
of six wells in California, four of them successful, for a 67% success ratio.
During 2002 we also acquired various interests in producing properties located
in California as well as increasing our working interests in three wells in the
Denverton Creek field. We believe that the increased revenues derived from the
late year drilling activities and acquisitions will have a positive effect on
next year's working capital and contribute significantly to our cash flow in the
year ahead. However, the average price we received during fiscal 2002 for our
oil and gas was $20.20 per barrel and $2.78 per MCF compared to $26.64 per
barrel and $9.20 per MCF for fiscal 2001. Given the current downturn of our
economy, we do not see any significant improvement, other than seasonal
adjustments, to natural gas prices in the short term. The price for oil has been
stable to improving due to unrest in the Middle East, but we derive only a small
portion of our revenue from oil sales. Our capital requirements can fluctuate
over a twelve month period because our drilling activities are usually carried
out during California's dry season (from late April until October) after which
wet weather either precludes further activity or makes it cost prohibitive.

Investments in Oil and Gas Properties/Drilling Activities
---------------------------------------------------------

     We invested $1,370,905 and $1,195,536 in our oil and gas properties for the
fiscal years ended June 30, 2001 and 2002. While we have not finalized drilling
plans for fiscal 2003, we have committed to participate in the drilling of 4
wells through June 2003, with our share of drilling costs estimated to be
approximately $255,000, and we anticipate additional drilling will occur in
fiscal 2003. We believe that internally generated funds will be sufficient to
finance our drilling and operating expenses for the next twelve months. We have
eliminated our outstanding loans in fiscal 2001 but may be required to again
seek outside funding to facilitate our fiscal 2003 drilling program.

Termination and Release of Agreement with Canadian Company
----------------------------------------------------------

     In March 1998, we negotiated an agreement with a privately-held Canadian
company which provided for Aspen to receive certain cash payments from, and to
be issued 2,000,000 shares of stock in, the Canadian company. In exchange, we
conveyed all of our interest in two uranium projects in Wyoming to the Canadian
company. On August 31, 2000, pursuant to a Termination Agreement and Release we
released the Canadian company from any further obligations in exchange for the
return of all of Aspen's geological data. These Canadian shares have no value
and we did not receive any cash from the Canadian company.

Aspen Power Systems, LLC
------------------------

     During fiscal 1999 and 2000, we dedicated certain cash resources to APS to
investigate the economic possibilities of the sale, design, construction and/or
operation of gas turbines to produce electricity. Through June 30, 2000, we
expended approximately $130,000 on this project, $45,657 of which was expensed
in the twelve months ended June 30, 2000. During fiscal 2001, we advanced a
further $20,000 to defray APS operating costs which were recorded as a
receivable at June 30, 2001. During fiscal 2002 an additional $5,500 was
advanced to APS to retire existing obligations of APS. Both the $20,000 and
$5,500 advances were expensed by us at June 30, 2002. The funding to APS came
from our operating funds derived from oil and gas production. As discussed
above, we did not assign a value to the $130,000 note receivable due from APS
and do not anticipate any significant future requirements to fund further
projects of APS.

                                       16

<PAGE>
<TABLE>
<CAPTION>


Contractual Obligations

     We had contractual and other obligations that will require use of our
working capital resources as of June 30, 2002. The following table lists our
significant obligations at June 30, 2002:

                                                    Payments Due By Period
                                -------------------------------------------------------------

                                Less than
     Contractual Obligations    1 year       2-3 years    4-5 years    After 5 years    Total
     -----------------------    ------       ---------    ---------    -------------    -----
<S>                             <C>           <C>              <C>         <C>         <C>
     Operating leases           $13,062       $-0-             $-0-        $-0-        $13,062
                                -------       ----             ----        ----        -------

     Total contractual
       cash obligations         $13,062       $-0-             $-0-        $-0-        $13,062
                                =======       ====             ====        ====        =======


     At June 30, 2002, we were committed to the following drilling and
development projects in California:

                  Project                                     Aspen Cost
                  -------                                     ----------

                  Klingenberg 24-1                            $115,000
                  Kuppenbender 20-2                             65,000
                  McCullough 36-1                               65,000
                  HSRCC 1                                       10,000
                                                              --------

                  Total                                       $255,000
                                                              ========

     We lease corporate offices in Denver, Colorado with support offices in
Castle Rock, Colorado and Bakersfield, California. The Denver office lease
expires December 31, 2002, the Bakersfield office lease expires February 28,
2003 and the Castle Rock office is leased on a month to month basis. Combined
yearly lease payments are approximately $13,062.

     In addition to office leases, we are responsible for various compressor
rentals located on our California producing properties. These leases are on a
month to month basis and total approximately $21,500 per year.

                                       17
</TABLE>

<PAGE>


Results of Operations:

     We continued to focus our operations on the production of oil and gas and
the investigation for possible acquisition of producing oil and gas properties
during the twelve months ended June 30, 2002.

June 30, 2002 as compared to June 30, 2001
------------------------------------------

     The following table sets forth, for the periods indicated, certain
statement of operations data expressed as a percentage of net revenues. The
table and the discussion below should be read in conjunction with the audited
financial statements and the notes thereto appearing elsewhere in this report.

                                                            Year Ended
                                                             June 30,
                                                      -----------------------
                                                       2002             2001
                                                      ------           ------

     Oil and Gas Revenues(a)                       $   828,150      $ 3,867,482
     Oil and Gas Production Expenses                  (117,014)        (122,114)
     Depreciation, depletion and amortization         (358,912)        (412,688)
     Total operating expenses                         (630,585)        (567,833)
                                                   -----------      -----------
                                                       278,361        2,764,847
     Other income                                       41,372           73,081
                                                   -----------      -----------
     Operating Income (loss)                          (236,989)       2,837,928
     Income tax (expense) recovery                     114,904         (339,424)
                                                   -----------      -----------
     Net income (loss)                             $  (122,085)     $ 2,498,504
                                                   ===========      ===========

         (a) Oil and gas revenues includes income from management fees

Oil and Gas Revenues
--------------------

     For the twelve months ended June 30, 2002, oil and gas revenues decreased
$3,039,332, a 79% decline. There were two major reasons for the decline in oil
and gas revenues, production declines and prices. The average price decreased
for gas (our major source of revenue) declined from $9.20 per MCF in 2001 to
$2.78 in fiscal 2002. The average price in fiscal 2001 was impacted positively
by the uncertainties in the California electric generation market caused by the
state's deregulation of the wholesale portion of that market. The resolution of
the long term electrical generation problems in California and the return to
more normal weather conditions during the summer months drove the price of
natural gas down to more traditions levels. Production declines in our more
mature producing properties had an adverse effect on revenues in fiscal 2002.
Oil production declined 2,151 barrels, or 41% when comparing fiscal 2002 to
fiscal 2001. This production decline was primarily due to the sale of our Arco
wells in Kern County during the third quarter of fiscal 2002. Gas production
declined 150,000 MCF from 377,000 MCF in fiscal 2001 to 227,000 in fiscal 2002,
a 40% decline. Abandonment of uneconomic wells in our Denverton Creek field and
normal production declines of our more mature properties contributed to the
overall reduction in produced reserves. However, the drilling of four successful
wells and the acquisition of several producing properties from unaffiliated
third parties late in fiscal 2002 should mitigate these declines in the coming
months.

Oil and Gas Production Expenses
-------------------------------

     Oil and gas production expenses decreased $5,100, or 4%. While we had a
larger number of producing wells in fiscal 2002, our recompletion and workover
expenses were lower than fiscal 2001 and we sold 2 oil wells with high operating
costs.

     Depletion, depreciation and amortization decreased $53,776, or 13% from
$412,688 in fiscal 2001 to $358,912 in fiscal 2002. While the depletable assets
in the full cost pool increased by approximately $1,120,000 in fiscal 2002, the
proved, recoverable reserves of oil and gas decreased from BOE 387,000 (barrel
of oil equivalent) in fiscal 2001 to BOE 380,000 in fiscal 2002, a 1% decrease.
While our reserves held fairly constant, our production rate declined by
approximately 28% causing the decline in depletion expense.

     Selling, general and administrative expenses increased $44,722 or 8% during
fiscal 2002, due to higher salary, consulting, audit and temporary services. We
continue our commitment to contain costs and increase cash flow wherever
possible.

                                       18

<PAGE>


     As a result of our operations for the fiscal year ended June 30, 2002, we
ended the year with a net loss of approximately $237,000 before recovery of
income taxes of approximately $115,000, compared to net income of approximately
$2,838,000 before a provision for income taxes of approximately $340,000. This
loss was directly attributable to a decline in both price and production rates
as discussed above as well as the 8% increase in general and administrative
costs. An Aspen Power expense of $25,500 represents a one time write off of
monies advanced to our affiliate and should not be considered a recurring item.
Interest and other income declined approximately $31,700, or 43%, and is
primarily due to declining interest rates received on our invested funds.

Factors that may Affect Future Operating Results
------------------------------------------------

     In evaluating our business, readers of this report should carefully
consider the following factors in addition to the other information presented in
this report and in our other reports filed with the SEC that attempt to advise
interested parties of the risks and factors that may affect our business. As
noted elsewhere herein, the future conduct of Aspen's business, non-oil and gas
exploration activities, participation in APS stock ownership, and discussions of
possible future activities is dependent upon a number of factors, and there can
be no assurance that Aspen will be able to conduct its operations as
contemplated herein. These risks include, but are not limited to:

     (1)  The possibility that the described operations, reserves, or
          exploration or production activities will not be completed or
          continued on economic terms, if at all.

     (2)  The exploration and development of oil and gas, and mineral properties
          are enterprises attendant with high risk, including the risk of
          fluctuating prices for oil, natural gas and other minerals being
          sought.

     (3)  Imports of petroleum products from other countries.

     (4)  Not encountering adequate resources despite expending large sums of
          money.

     (5)  Test results and reserve estimates may not be accurate,
          notwithstanding best effort precautions.

     (6)  The possibility that the estimates on which we are relying are
          inaccurate and that unknown or unexpected future events may occur that
          will tend to reduce or increase our ability to operate successfully,
          if at all.

     (7)  Our ability to participate in these projects may be dependent on the
          availability of adequate financing from third parties which may not be
          available on commercially-reasonable terms, if at all.

     (8)  Although we currently do not have active operations in the mining
          segment, mining exploration and mining have inherent risks including
          the environment, low prices for commodities, competition from better
          financed companies and the risk of failure in either exploration or
          mining. There is no assurance we will be able to compete successfully
          in the exploration and mining business should that course of action be
          undertaken.

     (9)  We currently do not have active operations in the power generation
          business. Risks involved in power generation include permitting,
          availability of fuel and power lines on an economical basis, a market
          for the product, availability of equipment, and competition from other
          better financed companies. There is no assurance we will be able to
          compete successfully in the power generation business should an
          opportunity be found.

     (10) Our stock price may be hurt by future sales of our shares or the
          perception that such sales may occur. As of the date of this Form
          10-KSB, approximately 2,849,367 shares of Common Stock held by
          existing stockholders constitute "restricted shares" as defined in
          Rule 144 under the Securities Act. These shares may only be sold if
          they are registered under the Securities Act or sold under Rule 144 or
          another exemption from registration under the Securities Act. Sales
          under Rule 144 are subject to the satisfaction of certain holding
          periods, volume limitations, manner of sale requirements, and the
          availability of current public information about us.

                                       19

<PAGE>
<TABLE>
<CAPTION>


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

     The information required by this item begins on page 32 of Part III of this
Report on Form 10-KSB and is incorporated into this part by reference.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

     Not applicable.


                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
----------------------------------------------------------------------
COMPLIANCE  WITH SECTION 16(A) OF THE EXCHANGE ACT
--------------------------------------------------

Identification of Directors and Executive Officers:

     The following table sets forth the names and ages of all the Directors and
Executive Officers of Aspen, and the positions held by each such person. As
described below, the Board of Directors is divided into three classes which,
under Delaware law, must be as nearly equal in number as possible. The members
of each class are elected for three-year terms at each successive meeting of
stockholders serve until their successors are duly elected and qualified;
officers are appointed by, and serve at the pleasure of, the Board of Directors.
We have held no annual meetings since February 25, 1994. Therefore the terms of
each class of director expires at the next annual meeting of stockholders.

Name                 Age    Position                               Class          Director Since
----                 ---    --------                               -----          --------------
<S>                  <C>    <C>                                    <C>            <C>
R. V. Bailey         70     President, Chief Executive Officer,    I              1980
                            Chief Financial Officer, Treasurer
                            and Director

Robert F. Sheldon    79     Director                               II             1981

Robert A. Cohan      46     President, West Coast Division,        III            1998
                            Secretary, and Director

     Each of the directors will be up for reelection at the next annual meeting
of stockholders and until his successor is elected and qualified or until his or
her earlier death, resignation, or removal. We do not expect to hold an annual
meeting during fiscal 2003.

     Each officer is appointed annually and serves at the discretion of the
Board of Directors until his successor is duly elected and qualified. No
arrangement exists between any of the above officers and directors pursuant to
which any of those persons was elected to such office or position. None of the
directors are also directors of other companies filing reports under the
Securities Exchange Act of 1934.

     R. V. Bailey. R. V. Bailey obtained a Bachelor of Science degree in Geology
from the University of Wyoming in 1956. He has approximately 41 years experience
in exploration and development of mineral deposits, primarily gold, uranium,
coal, and oil and gas. His experience includes basic conception and execution of
mineral exploration projects. Mr. Bailey is a member of several professional
societies, including the Society for Mining and Exploration, the Society of
Economic Geologists and the American Association of Petroleum Geologists, and
has written a number of papers concerning mineral deposits in the United States.
He is the co-author of a 542-page text, published in 1977, concerning applied
exploration for mineral deposits. Mr. Bailey is the founder of Aspen and has
been an officer and director since its inception.

     Robert F. Sheldon. Mr. Sheldon obtained a Bachelor of Science degree in
Geological Engineering from the University of British Columbia in 1948. He
served a total of approximately 40 years at various mining companies, with his
experience covering a wide range of mineral commodities including gold, silver,

                                       20
</TABLE>

<PAGE>


copper, uranium, lead, zinc, nickel, mercury, molybdenum and tungsten. He is a
member of the Professional Engineers of British Columbia, the Society of Mining
Engineers, the Canadian Institute of Mining and Metallurgy, and the Yukon
Chamber of Mines (where he served as an officer for four years). Mr. Sheldon
joined Aspen's Board of Directors in April 1981.

     Robert A. Cohan. Mr. Cohan obtained a Bachelor of Science degree in Geology
from the State University College at Oneonta, NY in 1979. He has approximately
23 years experience in oil and gas exploration and development, including
employment in Denver, CO with Western Geophysical, H. K. van Poollen & Assoc.,
Inc., as a Reservoir Engineer and Geologist, Universal Oil & Gas, and as a
principal of Rio Oil Co., Denver, CO. Mr. Cohan served as Manager, Oil & Gas
Operations, Aspen Exploration Corporation, Denver, CO from 1989 to 1992. He was
employed as Vice President, Oil & Gas Operations, for Tri-Valley Oil & Gas Co.,
Bakersfield, CA. from 1992 to April 1995, at which time Mr. Cohan rejoined Aspen
Exploration Corporation as Vice President (now President), West Coast Division,
opening an office in Bakersfield, CA. He is a member of the Society of Petroleum
Engineers (SPE) and the American Association of Petroleum Geologists (AAPG).

Meetings of the Board and Committees:

     The Board of directors held one formal meeting during the fiscal year ended
June 30, 2002. Each director attended all of the formal meetings either in
person or by telephone, without exception. In addition, regular communications
were maintained throughout the year among all of the officers and directors of
the Company and the directors acted by unanimous consent six times during fiscal
2001 and three times subsequently through June 30, 2002.

     Aspen does not have an audit committee or other committee of the board that
performs similar functions.

Identification of Significant Employees:

     There are no significant employees who are not also directors or executive
officers as described above. No arrangement exists between any of the above
officers and directors pursuant to which any one of those persons was elected to
such office or position.

Family Relationships:

     As of June 30, 2002, and subsequently, there were no family relationships
between any director, executive officer, or person nominated or chosen by the
Company to become a director or executive officer.

Involvement in Legal Proceedings:

     We are not subject to any pending or, to our knowledge, threatened, legal
proceedings.

Section 16(a) Beneficial Ownership Reporting Compliance:

     Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires Aspen's directors and officers and any persons who own more than ten
percent of Aspen's equity securities, to file reports of ownership and changes
in ownership with the Securities and Exchange Commission (the "SEC"). All
directors, officers and greater than ten-percent shareholders are required by
SEC regulation to furnish Aspen with copies of all Section 16(a) reports files.
Based solely on our review of the copies of the reports it received from persons
required to file, we believe that during the period from July 1, 1995 through
September 19, 2002, all filing requirements applicable to its officers,
directors and greater-than-ten-percent shareholders were complied with. However,
there was one untimely-filed filing (Form 4) for one director, Robert F.
Sheldon.

                                       21

<PAGE>
<TABLE>
<CAPTION>


ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------

     The following table sets forth information regarding compensation awarded,
paid to, or earned by the chief executive officer and the other principal
officers of Aspen for the three years ended June 30, 2000, 2001 and 2002. No
other person who is currently an executive officer of Aspen earned salary and
bonus compensation exceeding $100,000 during any of those years. This includes
all compensation paid to each by Aspen and any subsidiary.

---------------------------- -------------------------------- --------------------------------------
                                   Annual compensation               Long-term Compensation
                                                                             Awards
---------------------------- -------------------------------- --------------------------------------
                                                                       Awards            Payout
------------------------------------------------------------- -------------------------- -----------
       (a)            (b)       (c)        (d)        (e)         (f)          (g)          (h)            (i)
------------------- -------- ----------- --------- ---------- ------------ ------------- ----------- -----------------
                                                                            Securities
                                                                  ($)       Underlying                     All
     Name and       Fiscal      ($)        ($)        ($)     Restricted    Options &       LTIP          Other
Principal Position   Year      Salary     Bonus    Other (1)    Awards       SARs (#)      Payout     Compensation (1)
------------------- -------- ----------- --------- ---------- ------------ ------------- ----------- -----------------
<S>                  <C>      <C>           <C>      <C>           <C>          <C>          <C>          <C>
R. V. Bailey,        2000     100,000       0        62,262        0            0            0            11,828
President and CEO    2001     100,000       0       143,600        0            0            0            12,663
                     2002     122,900       0        34,850        0            0            0            11,565
------------------- -------- ----------- --------- ---------- ------------ ------------- ----------- -----------------
------------------- -------- ----------- --------- ---------- ------------ ------------- ----------- -----------------
R. A. Cohan          2000      96,041       0        99,347        0            0            0                 0
President,           2001     101,250       0       146,400        0            0            0                 0
West Coast           2002     123,300       0        34,850        0            0            0               200
Division
------------------- -------- ----------- --------- ---------- ------------ ------------- ----------- -----------------
------------------- -------- ----------- --------- ---------- ------------ ------------- ----------- -----------------

(1)  We have an "Amended Royalty and Working Interest Plan" by which we, in our
     discretion, are able to assign overriding royalty interests or working
     interests in oil and gas properties or in mineral properties. This plan is
     intended to provide additional compensation to Aspen's personnel involved
     in the acquisition, exploration and development of Aspen's oil or gas or
     mineral prospects.

     We have a medical insurance plan for our employees and those of its
     subsidiaries, and a life insurance plan for our president and chief
     executive officer, R. V. Bailey. This life insurance plan includes the
     split-dollar insurance plan for the benefit of Mr. Bailey, which is
     described in Note 2 to the financial statements.

     No additional compensation has been recognized as reimbursement to the
president for income taxes for the years ended June 30, 2002 and 2001. Mr.
Bailey's taxable amount was $-0- for fiscal 2002 and 2001, equal to the
"economic benefit" attributed to the president as defined by the Internal
Revenue Code. The Company paid no premiums during fiscal 2002 and 2001.

     We adopted a Profit-Sharing 401(k) Plan which took effect July 1, 1990. All
employees are immediately eligible to participate in this Plan. Aspen's
contribution (if any) to this plan is determined by the Board of Directors each
year. At June 30, 2002 and 2001, we contributed $-0- to the plan. When amounts
are contributed to Mr. Bailey's and Mr. Cohan's accounts (which amounts are
fully vested), these amounts are also included in column (e) of the tables,
above.

     We have furnished a vehicle to Mr. Bailey, and the compensation allocable
to this vehicle, plus amounts paid for various travel and entertainment paid on
behalf of Mr. Bailey and Mr. Bailey's wife when she accompanied him for business
purposes, are also included in column (i) of the table. Aspen also purchased a
vehicle for Mr. Cohan. This vehicle is used substantially for business purposes;
therefore, no vehicle costs were charged to Mr. Cohan.

     We have agreed to reimburse its officers and directors for out-of-pocket
costs and expenses incurred on behalf of Aspen.

                                       22
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


     During fiscal 2002, we assigned to employees royalties, which accumulated
during the fiscal year ended June 30, 2002, on certain wells drilled during the
year. The value assigned to these overrides is considered nominal, as the
assignments were made before the leases were proved. The overriding royalty
interests in these California properties granted to our employees were as
follows:

                            R. V.            R. A.             J. L.
                            Bailey           Cohan             Shelton
                            ------           -----             -------

     Kuppenbender 20-3      0.756000%        0.756000%         0.288000%


Stock Options and Stock Appreciation Rights Granted during the Last Fiscal Year:

     Stock options were granted to executive officers and directors during the
fiscal year ended June 30, 2002. One director exercised his options during the
fiscal year ended June 30, 2002.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values:

     One of our directors exercised stock options during the fiscal year ended
June 30, 2002:

     The following table sets forth information regarding the year-end value of
options being held by the Chief Executive Officer and the other such named
officers and persons on June 30, 2002.


                                                                  Number of securities
                                                                 underlying unexercised          Value of unexercised
                                    Shares                            options/SARs             in-the-money options/SARs
                                 acquired on       Value            at June 30, 2002               at June 30, 2002
Name and Principal Position      exercise (#)     realized      Exercisable/Unexercisable      Exercisable/Unexercisable
---------------------------      ------------     --------      -------------------------      -------------------------
<S>                                   <C>           <C>               <C>                               <C>
R. V. Bailey
   President &  CEO........           -0-           -0-                0 /150,000                        $-0-

Robert A. Cohan
   President -
   West Coast Division.....           -0-           -0-                0 /250,000                        $-0-

Robert F. Sheldon
Director...................         80,000         $20,800             0 /150,000                        $-0-

Long Term Incentive Plans/Awards in Last Fiscal Year:

     We do not have a long-term incentive plan nor have we made any awards
during the fiscal year ended June 30, 2002.

Employment contracts and termination of employment and change in control
arrangements:

     Mr. Bailey: We currently have no employment agreement with Mr. Bailey. In
January 1983, we entered into a Stock Purchase Agreement with Mr. Bailey whereby
Mr. Bailey granted Aspen an option to purchase up to 75% of our common stock
owned by him at his death. This agreement was replaced by a Stock Purchase
Agreement dated June 4, 1993. The 1993 agreement requires that we apply 75% of
any key man insurance proceeds it receives upon Mr. Bailey's death towards the
purchase of up to 75% of the common shares owned by him at the time of his
death, and Mr. Bailey's estate is obligated to sell such shares to Aspen. The
purchase price of the shares acquired under the 1993 agreement shall be the fair
market value of the shares on the date of death. Both Aspen and Mr. Bailey agree
that the fair market value of the shares on the date of death may not
necessarily be the market price of the stock on the date of death as quoted on
the OTCBB, or as reported by any exchange. The 1993 agreement further requires
us to maintain one or more life insurance policies on Mr. Bailey's life in the
amount of $1,000,000 for the purposes of this agreement.

     Mr. Cohan: On April 16, 1998, we entered into an employment agreement with
Robert A. Cohan, which provides for the payment of $90,000 for the first year of
employment, plus reimbursement of expenses, including health insurance. We have
renewed the agreement effective April 15, 1999 to April 15, 2002 at the rate of
$95,000 per year for the year commencing April 15, 1999, $100,000 for the year
commencing April 15, 2000 and $105,000 for the year commencing April 15, 2001.

                                       23
</TABLE>

<PAGE>

On August 1, 2001 Mr. Cohan's salary was increased to $125,000 per year. Mr.
Cohan's employment agreement expired by its own terms on April 15, 2002 and has
not been renewed. However, we continue to pay him his salary and other benefits.
Prior to February 2000, we and Mr. Cohan agreed to utilize a portion of Mr.
Cohan's home in Bakersfield, California from which to conduct Aspen's business.
Mr. Cohan did not charge Aspen any rent for the use of his home as a business
office. Aspen agreed to pay for all office supplies, communication and copy
equipment used by Mr. Cohan in his office, as well as the monthly telephone
expense incurred by Mr. Cohan on behalf of Aspen. On February 7, 2000, we
entered into a three-year lease of office space in Bakersfield, California
thereby alleviating the necessity of home office reimbursement to Mr. Cohan.

     During fiscal 2002 we entered into a rental agreement with R. V. Bailey to
rent office space in Castle Rock, Colorado in an office building owned by Mr.
Bailey. The rental amount is $6,000 per year and is on a month to month basis.

     See also Item 12(a) Transactions with Management and Others.

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

         The following table sets forth as of September 19, 2002 the number and
percentage of Aspen's shares of $.005 par value common stock owned of record and
beneficially owned by each person owning more than five percent of such common
stock, and by each Director, and by all Officers and Directors as a group.

                                          Beneficial Ownership        Percent
                                          --------------------        -------
Beneficial Owner                          Number of Shares            of Total
----------------                          ----------------            --------

R. V. Bailey                              1,444,403i                   24.63%

Robert A. Cohan                             790,619ii                  13.48%

Robert F. Sheldon                           284,783iii                  4.86%

All Officers and Directors as a Group     2,519,805                    42.97%
(3 persons)


The address for all of the above directors and executives officers is:

2050 S. Oneida St., Suite 208, Denver, CO 80224

     (i) This number includes 1,146,083 shares of stock held of record in the
name of R. V. Bailey and 16,320 shares of record in the name of Mieko Nakamura
Bailey, his wife. In addition, all shares held in the name of R. V. Bailey are
subject to an obligation of Aspen to purchase up to 75% of the common shares of
Aspen owned by Bailey at the time of his death. This obligation expires 120 days
from the date of Bailey's death. In addition, the number of shares owned
includes 100,000 shares of common stock granted in a property exchange; stock
options to purchase 150,000 shares of restricted common stock; and 200,000
shares of restricted common stock that were exercised on June 11, 2001.
Additionally, Aspen issued 32,000 shares of common stock to the Aspen
Exploration Profit Sharing Plan for the benefit of R. V. Bailey as a corporation
contribution to Mr. Bailey's 401(k) account.

     (ii) This number includes 300,000 shares of common stock granted; stock
options to purchase 250,000 shares of restricted common stock; and stock options
to purchase 200,000 shares of restricted common stock that were exercised on
February 27, 2001. Additionally, Aspen issued 30,733 shares of common stock to
the Aspen Exploration Profit Sharing Plan for the benefit of Robert A. Cohan as
a corporation contribution to Mr. Cohan's 401(k) account.

     (iii) This number includes 20,000 shares of common stock granted December
13, 1996, 20,000 shares of common stock granted November 1, 1997; stock options
to purchase 150,000 shares of restricted common stock; and stock options granted
for 80,000 shares of common stock that were exercised on December 17, 2001.

                                       24

<PAGE>


     Except with respect to Aspen's option to purchase Mr. Bailey's shares upon
his death, and the employment agreement between Aspen and R. V. Bailey, which
has expired on its own terms, we know of no arrangement, the operation of which
may, at a subsequent date, result in change in control of Aspen.

     See Item 5, above, for information regarding securities authorized for
issuance under equity compensation plans in the form required by Item 201(d) of
Regulation S-B.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

     The following sets out information regarding transactions between officers,
directors and significant shareholders of Aspen during the most recent two
fiscal years and during the subsequent fiscal year.

Working Interest Participation:

     Some of the directors and officers of Aspen are engaged in various aspects
of oil and gas and mineral exploration and development for their own account.
Aspen has no policy prohibiting, nor does its Certificate of Incorporation
prohibit, transactions between Aspen and its officers and directors. We plan to
enter into cost-sharing arrangements with respect to the drilling of its oil and
gas properties. Directors and officers may participate, from time to time, in
these arrangements and such transactions may be on a non-promoted basis (actual
costs), although they have participated mainly on a promoted basis, but must be
approved by a majority of the disinterested directors of our Board of Directors.

     R. V. Bailey, president and director of Aspen, Robert A. Cohan, president -
West Coast Division and director of Aspen, and Ray K. Davis, consultant to
Aspen, each have working and royalty interests in certain of the California oil
and gas properties operated by Aspen. The affiliates paid for their
proportionate share of all costs to acquire, develop and operate these
properties. As of June 30, 2002, working interests of the Company and its
affiliates in certain producing California properties are set forth below:

                                 GROSS WELLS                 NET WELLS
                               OIL         GAS             OIL       GAS
                               ---         ---             ---       ---
      Aspen Exploration         2          33             .31        4.13
      R. V. Bailey              2          25             .04         .31
      R. A. Cohan               1          25             .01         .32
      R. K. Davis               2          33             .13         .52
      J. L. Shelton             -          11              -          .02

Amended Royalty and Working Interest Plan:

     The allocations for royalty under Aspen's "Royalty and Working Interest
Plan" for employees are based on a determination of whether there is any "room"
for royalties in a particular transaction. In some specific cases an oil or gas
property or project is sufficiently burdened with existing royalties so that no
additional royalty burden can be allocated to our employees for that property or
project. In other situations a determination may be made that there are royalty
interests available for assignment to our employees. The determination of
whether royalty interests are available and how much to assign to employees
(usually less than 3%) is made on a case by case basis by Robert A. Cohan,
president - West Coast Division, and R. V. Bailey, president, both of whom may
benefit from royalty interests assigned. Within approximately the past two
fiscal years, assignments to Mr. Cohan and Mr. Bailey have been on an equal
basis, while Ms. Judy Shelton, the corporate office manager, was assigned a
lesser amount. A discussion of specific royalties assigned is included in Item
10 "Executive Compensation" above.

Aspen Power Systems, LLC:

     In order to provide an opportunity for Aspen to participate in the growing
demand for electrical power generated by turbines, our management established an
85% owned subsidiary named Aspen Power Systems, LLC ("APS"), a Colorado limited
liability company. On March 1, 2000 our interest in APS was reduced to 25%. The
transaction is more fully described in Item 1 "Aspen Power Systems, LLC".

     APS organized Solano Power, LLC on December 27, 1999 for the purpose of
carrying out The Solano Project. Solano Power plans to find a joint venture
partner to develop a 50 MW natural gas powered electric generation plant in
Solano County, California. We own a 25% interest in Solano Power, the managers;

                                       25

<PAGE>


Larry Baccari, R. V. Bailey and Ray K. Davis each contributed $5,000 to fund
Solano operations and own a 25% interest each in the project. The managers are
seeking an industry partner in order to financially assist Solano Power to build
and operate the plant. At June 30, 2000 APS had expended approximately $28,400
on behalf of Solano Power as well as accruing expenses for consulting fees of R.
V. Bailey and Ray K. Davis of $31,050 and $7,462, respectively. At June 30, 2002
Solano had no outstanding obligations and was inactive for most of the year. APS
has assumed the responsibilities of finding partners to fund the power plant. At
June 30, 2001 Solano transferred its operations to Aspen Power Systems and APS
has assumed the responsibility for pursuing this project.

     On September 17, 2001, we were advised by the State of California that our
25% owned project in Solano County, California has not been selected by the
California Power Commission for further negotiations. We are now reviewing other
possible options with regard to the future, if any, of this project.

Aspen Borrowings:

     During fiscal 2000 Aspen borrowed an additional $125,000 against the cash
surrender value of the split dollar life insurance policy and that amount plus
accrued interest of $30,430 at 6% per annum was outstanding at June 30, 2000. On
October 5, 2000, these amounts were repaid in full.

     We borrowed $130,000 from Ray K. Davis (a director of APS and a consultant
to Aspen) on October 15, 1997 for the drilling and completion of the Emigh 2-1
payable over 36 months. This loan bore interest of 11.2% and was paid in full
during August 2000.

Other Arrangements:

     In addition, during the fiscal year 2002 Aspen paid for various hospitality
functions and for travel, lodging and hospitality expenses for spouses who
occasionally accompanied directors when they were traveling on company business.
Our president has also supplied Aspen with certain promotional items. The net
effect of these items has been a cost to Aspen of less than $5,000 for the
fiscal years ended June 30, 2002 and 2001, respectively. Management believes
that the expenditures were to Aspen's benefit. During the years ended June 30,
2002 and 2001, Aspen provided one vehicle each to Aspen's president and to an
officer/director.

     We also have entered into an employment agreement, which has expired, and a
Stock Purchase Agreement with our president, as discussed in "Item 10 - Employee
Compensation" and "Item 11 - Security Ownership."

     We sublease a portion of our president's office in a building owned by him
in Castle Rock, Colorado on a month to month basis for a monthly fee of $500.

Certain Business Relationships:

     None.

(1)-(5) Indebtedness of Management:

     None.

Transactions with Promoters:

     Not applicable.

Compensation Agreements:

     Please refer to the prior section, Item 10. Executive Compensation,
describing the employment agreements between the Company and Messrs. Bailey and
Cohan.

                                       26

<PAGE>



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

Exhibits Pursuant to Item 601 of Regulation S-B:

Exhibit No.                          Title
-----------         ----------------------------------------------------------

     3.01           Certificate of Incorporation (1)

     3.02           Registrant's Bylaws. (1)

     3.03           Bylaws - Subsidiary (1)

     4.01           Specimen Common Stock Certificate. (1)

    10.01           Royalty and Working Interest Plan (1)

    10.08           Stock Purchase Agreement between Aspen Exploration
                    Corporation and R.V. Bailey dated January, 1983 (7)

    10.11           Employment Agreement between Aspen Exploration Corporation
                    and R.V. Bailey dated November 8, 1991 (8)

    10.13           Split-Dollar Life Insurance Plan for R.V. Bailey (8)

    10.15           Stock Purchase Agreement between Aspen Exploration
                    Corporation and R.V. Bailey dated June, 1993 (9)

    22.1            Subsidiaries of Aspen Exploration Corporation
                        Aspen Gold Mining Company, a Colorado corporation
                        Aspen Power Systems, LLC, a Colorado limited liability
                        company



1    Incorporated by reference from Commission File No. 2-69324.

7    Incorporated by reference from Annual Report on Form 10-K dated June 30,
     1991 (filed on September 27, 1991).

8    Incorporated by reference from Annual Report on Form 10-K dated June 30,
     1992 (filed on October 3, 1992).

9    Incorporated by reference from Annual Report on Form 10-KSB dated June 30,
     1993 (filed on September 27, 1993).


Reports on Form 8-K.

     No Report on Form 8-K was filed by the Company during the fiscal year
ending June 30, 2002.

ITEM 14.  CONTROLS AND PROCEDURES.
----------------------------------

     (a) Item 307(a) of Regulation S-B is not applicable to the Company pursuant
to the transition provisions found in the third sentence of part V of Rel.
34-46427 (August 29, 2002).

     (b) Item 307(b) of Regulation S-B is applicable to the Company, but there
is no disclosure of significant changes in the Company's internal controls
because the Company has not conducted an evaluation of the internal control
procedures.

                                       27

<PAGE>


                                   SIGNATURES


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

     September 19, 2002

                                            ASPEN EXPLORATION CORPORATION,
                                            a Delaware Corporation


                                            By:  /s/  R. V. Bailey
                                               --------------------------------
                                                      R. V. Bailey
                                                      President, Chief Executive
                                                      Officer, Chief Financial
                                                      Officer and
                                                      Chairman of the Board


     Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:


           Date           Name and Title                 Signature

September 19, 2002        R. V. Bailey                   /s/  R. V. Bailey
                          Principal Executive Officer,   ----------------------
                          Principal Financial Officer         R. V. Bailey
                          Chairman of the Board
                          Director


September 19, 2002        Robert F. Sheldon             /s/  Robert F. Sheldon
                          Director                      -----------------------
                                                             Robert F. Sheldon



September 19, 2002        Robert A. Cohan               /s/  Robert A. Cohan
                          Director                      -----------------------
                                                             Robert A. Cohan


                                       28

<PAGE>


CERTIFICATIONS - principal executive and financial officers
-----------------------------------------------------------

I, R.V. Bailey, Chief Executive Officer and Chief Financial Officer of Aspen
Exploration Corporation, certify that:


1. I have reviewed this annual report on Form 10-KSB of Aspen Exploration
Corporation;


2. Based on my knowledge, this annual 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 annual
report;


3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 19, 2002                   /s/  R. V. Bailey
                                            -----------------------------------
                                                 R. V. Bailey, Chief Executive
                                                 Officer and Chief Financial
                                                 Officer
                                                 (principal executive and
                                                 financial officer)

                                       29

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page

Report of Independent Auditors' Report.......................................31

Financial Statements as of June 30, 2002 and June 30, 2001:

Consolidated Balance Sheets..................................................32

Consolidated Statements of Operations........................................34

Consolidated Statement of Stockholders' Equity...............................35

Consolidated Statements of Cash Flows........................................36

Notes to Consolidated Financial Statements...................................37


                                       30

<PAGE>


                          INDEPENDENT AUDITORS' REPORT





Board of Directors
Aspen Exploration Corporation and Subsidiary
Denver, Colorado

We have audited the consolidated balance sheets of Aspen Exploration Corporation
and Subsidiary as of June 30, 2002 and 2001 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
ended June 30, 2002 and 2001. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Aspen Exploration
Corporation and Subsidiary as of June 30, 2002 and 2001, and the results of
their consolidated operations and cash flows for the years ended June 30, 2002
and 2001 in conformity with accounting principles generally accepted in the
United States of America.




/s/  GORDON, HUGHES & BANKS, LLP
----------------------------------
     GORDON, HUGHES & BANKS, LLP


Greenwood Village, Colorado
August 30, 2002


                                       31

<PAGE>


<TABLE>
<CAPTION>


Item 7.  Financial Statements and Supplementary Data
----------------------------------------------------



                        ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                                 CONSOLIDATED BALANCE SHEETS

                                           ASSETS

                                                                         June 30,
                                                                    2002           2001
                                                                -----------    -----------


Current Assets:

<S>                                                             <C>            <C>
  Cash and cash equivalents, including $822,060 and
    $2,636,342 of invested cash in 2002 & 2001, respectively
    (Note 1) ................................................   $   916,001    $ 2,695,583

  Precious metals (Note 1) ..................................        18,823         18,823

  Accounts & trade receivables ..............................       365,705        550,785

  Accounts receivable - related party (Notes 1 and 7) .......        12,872         23,374

  Prepaid expenses ..........................................        19,820         14,898
                                                                -----------    -----------

  Total current assets ......................................     1,333,221      3,303,463
                                                                -----------    -----------

Investment in oil & gas properties, at cost (full cost method
    of accounting) (Note  9) ................................     5,427,741      4,297,306

    Less accumulated depletion and valuation allowance ......    (2,262,649)    (1,921,413)
                                                                -----------    -----------
                                                                  3,165,092      2,375,893
                                                                -----------    -----------
Property and equipment, at cost:

  Furniture, fixtures &  vehicles ...........................       112,562        104,368

    Less accumulated depreciation ...........................       (45,810)       (28,133)
                                                                -----------    -----------
                                                                     66,752         76,235
                                                                -----------    -----------

Cash surrender value, life insurance (Note 2) ...............       239,095        239,095
                                                                -----------    -----------

Total assets ................................................   $ 4,804,160    $ 5,994,686
                                                                ===========    ===========

                                    (Statement Continues)
                       See Summary of Accounting Policies and Notes to
                             Consolidated Financial Statements

                                            32
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Item 7.  Financial Statements and Supplementary Data
----------------------------------------------------



                   ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                      CONSOLIDATED BALANCE SHEETS (Continued)


                       LIABILITIES AND STOCKHOLDERS' EQUITY


                                                                   June 30,
                                                              2002         2001
                                                           ----------   ----------

Current liabilities:

  <S>                                                      <C>          <C>
  Accounts payable and accrued expenses ................   $  236,587   $1,034,114

  Accounts payable - related party (Note 7) ............       21,260       43,452

  Advances from joint interest owners ..................      230,775      403,381

                                                           ----------   ----------
  Total current liabilities ............................      488,622    1,480,947
                                                           ----------   ----------

Deferred income tax payable - long term (Note 5) .......       89,250      179,200
                                                           ----------   ----------

  Total liabilities ....................................      577,872    1,660,147
                                                           ----------   ----------

Stockholders' equity:
    (Notes 1 and 4):
    Common stock, $.005 par value:
    Authorized:  50,000,000 shares
    Issued and outstanding:  At June 30, 2002: 5,863,828
    and June 30, 2001:  5,812,205 ......................       29,320       29,060

  Capital in excess of par value .......................    6,025,797    6,015,279

  Accumulated deficit ..................................   (1,814,677)  (1,692,592)

  Deferred compensation ................................      (14,152)     (17,208)
                                                           ----------   ----------

  Total stockholders' equity ...........................    4,226,288    4,334,539
                                                           ----------   ----------

Total liabilities and stockholders' equity .............   $4,804,160   $5,994,686
                                                           ==========   ==========


                 See Summary of Accounting Policies and Notes to
                         Consolidated Financial Statements

                                        33
</TABLE>

<PAGE>


Item 7.  Financial Statements and Supplementary Data
----------------------------------------------------



                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                         Year ended June 30,
                                                        2002           2001
                                                     -----------    -----------

Revenues:

  Oil and gas (Note 9) ...........................   $   693,421    $ 3,610,508

  Management fees (Note 9) .......................       134,729        256,974

  Interest and other income ......................        41,372         73,081
                                                     -----------    -----------
                                                         869,522      3,940,563
                                                     -----------    -----------

Costs and expenses:

  Oil and gas production .........................       117,014        122,114

  Aspen Power Systems expense (Note 14) ..........        25,500            -0-

  Depreciation, depletion and  amortization ......       358,912        412,688

  Interest expense ...............................           479          7,949

  Selling, general and administrative ............       604,606        559,884
                                                     -----------    -----------

                                                       1,106,511      1,102,635
                                                     -----------    -----------

Net income (loss) before taxes ...................   $  (236,989)   $ 2,837,928

(Provision for) recovery of income taxes .........       114,904       (339,424)
                                                     -----------    -----------

Net income (loss) ................................   $  (122,085)   $ 2,498,504
                                                     ===========    ===========

Basic earnings (loss) per common share ...........   $      (.02)   $       .46
                                                     ===========    ===========

Diluted earnings (loss) per common share .........   $      (.02)   $       .45
                                                     ===========    ===========

Basic weighted average number of common shares
outstanding ......................................     5,839,784      5,454,441
                                                     ===========    ===========

Diluted weighted average number of common shares
 outstanding .....................................     5,839,784      5,551,011
                                                     ===========    ===========


                 See Summary of Accounting Policies and Notes to
                       Consolidated Financial Statements

                                       34

<PAGE>
<TABLE>
<CAPTION>


Item 7.  Financial Statements and Supplementary Data
----------------------------------------------------


                                          ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                                         CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY




                                                Common Stock (par $.005)
                                Shares          ------------------------         Retained          Deferred         Total
                                outstanding     Par Value       APIC             Earnings          Compensation     Equity
                                -----------     ---------       -----            --------          ------------     -------
<S>                            <C>             <C>             <C>              <C>               <C>              <C>
Balance, June 30, 2000          5,345,538       $26,729         $6,017,610       $(4,191,096)      $(36,833)        $1,816,410

Amortization of deferred
 compensation                        --            --                 --                --           19,625             19,625

Options exercised by
 consultant, net                   78,125           390              (390)              --             --                 --

Options exercised by
 employee, net                     78,125           390              (390)              --             --                 --

Options exercised by
 directors, net                   310,017         1,551            (1,551)              --             --                 --

Net income                           --            --                --            2,498,504           --            2,498,504
                                ----------------------------------------------------------------------------------------------

Balance, June 30, 2001          5,812,205        29,060         6,015,279         (1,692,592)       (17,208)         4,334,539

Options exercised
 by director                       51,623           260              (260)              --             --                 --

Amortization of deferred
 compensation                        --            --                --                 --           13,834             13,834

Options granted to consultant        --            --              10,778               --          (10,778)              --

Net loss                             --            --                --             (122,085)          --             (122,085)
                                ----------------------------------------------------------------------------------------------
Balance, June 30, 2002          5,863,828       $29,320        $6,025,797        $(1,814,677)      $(14,152)        $4,226,288
                                ==============================================================================================


                                         See Summary of Accounting Policies and Notes to
                                                Consolidated Financial Statements

                                                               35
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

Item 7.  Financial Statements and Supplementary Data
----------------------------------------------------


                             ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                              Year Ended June 30,
                                                                              2002           2001
                                                                              ----           ----
Cash flows from operating activities:
-------------------------------------
<S>                                                                       <C>            <C>
  Net income (loss) ...................................................   $  (122,085)   $ 2,498,504

  Adjustments to reconcile net income to net cash
   provided (used) by operating activities:

       Amortization of deferred compensation ..........................        13,834         19,625
       Depreciation, depletion, and amortization ......................       358,912        412,688
       Loss - sale of assets ..........................................          --              800

  Changes in assets and liabilities:
       Decrease (increase) in accounts receivable, and prepaid expenses       190,660       (239,622)
       Increase (decrease) in accounts payable and accrued expenses ...      (993,025)       924,279
       Increase (decrease) in deferred income taxes payable ...........       (89,250)       179,200
                                                                          -----------    -----------

Net cash provided (used) by operating activities ......................      (640,954)     3,795,474

Cash flows from investing activities:
-------------------------------------

  Additions to oil and gas properties .................................    (1,122,906)    (1,370,905)
  Producing oil and gas properties purchased ..........................       (72,629)          --
  Office equipment purchased ..........................................        (8,194)       (21,133)
  Sale of oil and gas equipment .......................................        26,998         21,511
  Sale of oil and gas properties ......................................        38,103           --
                                                                          -----------    -----------

Net cash (used) by investing activities ...............................    (1,138,628)    (1,370,527)

Cash flows from financing activities:
-------------------------------------

  Notes payable-repayments ............................................          --         (236,746)
                                                                          -----------    -----------

Net increase (decrease) in cash and cash equivalents ..................    (1,779,582)     2,188,201

Cash and cash equivalents, beginning of year ..........................     2,695,583        507,382
                                                                          -----------    -----------

Cash and cash equivalents, end of year ................................   $   916,001    $ 2,695,583
                                                                          ===========    ===========
Other information:
------------------

Interest paid .........................................................   $       479    $     7,949
                                                                          ===========    ===========

Income taxes paid (refunded) ..........................................   $   (24,954)   $   165,000
                                                                          ===========    ===========

Non-cash investing and financing activities:
--------------------------------------------

  Trade - in of vehicle ...............................................   $      --      $    13,322
                                                                          ===========    ===========
  Exercise of stock options ...........................................   $       260    $     2,331
                                                                          ===========    ===========


                            See Summary of Accounting Policies and Notes to
                                  Consolidated Financial Statements

                                                  36
</TABLE>

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Nature of Business
         ------------------

         We were incorporated under the laws of the State of Delaware on
         February 28, 1980 for the primary purpose of acquiring, exploring and
         developing oil and gas and other mineral properties. Our principal
         executive offices are located at 2050 S. Oneida St., Suite 208, Denver,
         Colorado 80224. Our telephone number is (303) 639-9860, and our
         facsimile number is 303-639-9863. We are currently engaged primarily in
         the exploration and development of oil and gas properties in
         California, although we have a significant amount of geologic data
         regarding uranium prospects in Wyoming and precious mineral prospects
         in Alaska. We also have a 25% interest in Aspen Power Systems, LLC, a
         company we incorporated to investigate, finance, and construct
         electrical power generation projects.

         Oil and Gas Exploration and Development. Our major emphasis has been
         our participation in the oil and gas segment acquiring interests in
         producing oil or gas properties and participating in drilling
         operations. We engage in a broad range of activities associated with
         the oil and gas business in an effort to develop oil and gas reserves.
         With the assistance of our management, independent contractors retained
         from time to time by Aspen, and, to a lesser extent, unsolicited
         submissions, we have identified and will continue to identify prospects
         that we believe are suitable for drilling and acquisition. Currently,
         our primary area of interest is in the state of California. We have
         acquired a number of interests in oil and gas properties in California,
         as described below in more detail. In addition, we also act as operator
         for a number of our producing wells and receive management revenues for
         these services.

         Mineral Exploration and Development. During fiscal 1997 and 1998, we
         also focused our attention on uranium deposits in sandstone in Wyoming.
         However, the market for uranium projects did not develop as we had
         anticipated, and we made the decision not to carry out the extensive
         mining claim and lease acquisition and maintenance necessary to
         assemble large blocks of land needed for uranium exploration programs.
         In March 1998, we transferred our interest in two uranium projects in
         Wyoming to a privately-held Canadian company which issued its capital
         stock and made cash payments to Aspen. The Canadian company returned
         the projects and all geologic data to us in August 31, 2000, and we
         released the unaffiliated company from any further obligations. The
         mineral exploration and development investment is fully impaired.

         We have curtailed, for the time being, exploration for precious metals
         in Alaska and for uranium in Wyoming. We believe that pursuing
         activities in the mineral segment would not be beneficial to Aspen at
         the present time.

         Power Generation. In 1999, we formed a subsidiary named Aspen Power
         Systems, LLC ("APS"), a Colorado limited liability company to provide
         an opportunity for Aspen to participate in the growing demand for
         electrical power generated by turbines. Our objectives for APS were to
         seek opportunities or situations where our analysis indicated that a
         gas turbine generation plant could be constructed and operate
         profitably. Any plant construction will require a significant amount of
         capital for property acquisition, permitting, engineering and design,
         and construction. Neither Aspen nor the other owners of APS will be
         able to provide this required capital. Consequently, any such
         activities will likely require the availability of funds from third
         parties, and we cannot offer any assurance that such funding will be
         available when needed on commercially-reasonable terms. We account for
         our investment in APS using the equity method of accounting.

         A summary of our Company's significant accounting policies follows:

                                       37

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         Consolidated Financial Statements
         ---------------------------------

         The consolidated financial statements include our Company and its
         wholly-owned subsidiary, Aspen Gold Mining Company. Significant
         intercompany accounts and transactions, if any, have been eliminated.
         The subsidiary is currently inactive.

         The equity method has been used to account for our Company's 25%
         interest Aspen Power Systems, LLC formed in February 1999. Using the
         equity method, an investment in a company is recorded at acquisition
         cost which is subsequently adjusted for the Company's share of
         dividends, earnings, or losses.

         Statement of Cash Flows
         -----------------------

         For statement of cash flows purposes, we consider short-term
         investments with original maturities of three months or less to be cash
         equivalents. Cash restricted from use in operations beyond three months
         is not considered a cash equivalent.

         Management's Use of Estimates
         -----------------------------

         Generally accepted accounting principles require us to make certain
         estimates and assumptions that affect the reported amounts of assets
         and liabilities and the disclosure of contingent liabilities at the
         date of the financial statements and reported amounts of revenues and
         expenses. Actual results could differ from those estimates.

         The mining and oil and gas industries are subject, by their nature, to
         environmental hazards and cleanup costs for which we carry catastrophe
         insurance. At this time, we know of no substantial costs from
         environmental accidents or events for which we may be currently liable.
         In addition, our oil and gas business makes it vulnerable to changes in
         wellhead prices of crude oil and natural gas. Such prices have been
         volatile in the past and can be expected to be volatile in the future.
         By definition, proved reserves are based on current oil and gas prices
         and estimated reserves. Price declines reduce the estimated quantity of
         proved reserves and increase annual depletion expense (which is based
         on proved reserves).

         Investment in Unconsolidated Companies
         --------------------------------------

         The equity method of accounting is used for all investments in which
         our interest is 20% or more. Under the equity method, we record our
         share of the investee's net income or (loss) as an increase or
         (decrease) of its investment less its share of dividends or
         distributions from the investee. Investments in business entities in
         which we own less than 20% of the company are recorded using the cost
         basis of the investment. Under the cost method, our share of net income
         or loss is not recorded. Our share of the investee's dividends or
         distributions is recorded as income on the accrual basis.

         Impairment of Long-lived Assets
         -------------------------------

         Long-lived assets and identifiable intangibles are reviewed for
         impairment whenever events or changes in circumstances indicate that
         the carrying amount may not be recoverable. If the expected
         undiscounted future cash flow from the use of the assets and their
         eventual disposition is less than the carrying amount of the assets, an
         impairment loss is recognized and measured using the asset's fair value
         or discounted cash flows.

         Financial Instruments
         ---------------------

         The carrying value of current assets and liabilities reasonably
         approximates their fair value due to their short maturity periods. The
         carrying value of our debt obligations reasonably approximates their
         fair value as the stated interest rate approximates current market
         interest rates of debt with similar terms.

                                       38

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         Precious Metals and Revenues
         ----------------------------

         Precious metals inventories are valued at the lower of cost (specific
         identification method) or market. There is no allowance for unrealized
         losses against inventories due to market decline at June 30, 2002.
         There were no sales of gold from inventory for the years ended June 30,
         2002 and 2001.

         Oil and Gas Properties
         ----------------------

         We follow the "full-cost" method of accounting for our oil and gas
         properties. Under this method, all costs associated with property
         acquisition, exploration and development activities, including internal
         costs that can be directly identified with those activities, are
         capitalized within one cost center. No gains or losses are recognized
         on the receipt of prospect fees or on the sale or abandonment of oil
         and gas properties, unless the disposition of significant reserves is
         involved.

         Depletion and amortization of our full-cost pool is computed using the
         units-of-production method based on proved reserves as determined
         annually by us and independent engineers. An additional depletion
         provision in the form of a valuation allowance is made if the costs
         incurred on our oil and gas properties, or revisions in reserve
         estimates, cause the total capitalized costs of our oil and gas
         properties in the cost center to exceed the capitalization ceiling. The
         capitalization ceiling is the sum of (1) the present value of our
         future net revenues from estimated production of proved oil and gas
         reserves applicable to the cost center plus (2) the lower of cost or
         estimated fair value of our cost center's unproved properties less (3)
         applicable income tax effects. The valuation allowance was $281,719 at
         June 30, 2002 and 2001. Depletion and amortization expense was $341,236
         and $400,824 for the years ended June 30, 2002 and 2001, respectively.

         Property and Equipment
         ----------------------

         Depreciation and amortization of our property and equipment are
         expensed in amounts sufficient to relate the expiring costs of
         depreciable assets to operations over estimated service lives,
         principally using the straight-line method. Estimated service lives
         range from three to eight years. When assets are sold or otherwise
         disposed of, the cost and accumulated depreciation are removed from the
         accounts and any resulting gain or loss is reflected in operations in
         the period realized. Depreciation expense was $17,676 and $11,864 for
         the years ended June 30, 2002 and 2001, respectively.

         Deferred Compensation Costs
         ---------------------------

         We record the fair value of stock bonuses to employees as an expense
         and an increase to paid-in capital in the year of grant unless the
         bonus vests over future years. Bonuses that vest are deferred and
         expensed ratably over the vesting period. During the fiscal year ended
         June 30, 2002 and 2001, we expensed $13,834 and $19,625, respectively,
         in stock bonuses.

         Allowance for Bad Debts
         -----------------------

         We consider accounts receivable to be fully collectible as recorded as
         of June 30, 2002 and 2001; accordingly, no allowance for doubtful
         accounts is required.

         Revenue Recognition
         -------------------

         Sales of oil and gas production are recognized at the time of delivery
         of the product to the purchaser.

                                       39

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         Management fees from outside parties are recognized at the time the
         services are rendered.

         Earnings Per Share
         ------------------

         We follow Financial Accounting Standard No. 128 ("SFAS No. 128"),
         addressing earnings per share. SFAS No. 128 established the methodology
         of calculating basic earnings per share and diluted earnings per share.
         The calculations differ by adding any instruments convertible to common
         stock (such as stock options, warrants, and convertible preferred
         stock) to weighted average shares outstanding when computing diluted
         earnings per share.

         The following is a reconciliation of the numerators and denominators
         used in the calculations of basic and diluted earnings per share. We
         had a net loss of $122,085 for the year ended June 30, 2002. Because of
         the net loss, the basic and diluted average outstanding shares are
         considered the same, since including the shares would have an
         antidilutive effect on loss per share calculation.

                                                          2001
                                                                          Per
                                              Net                         Share
                                              Income           Shares     Amount
                                              ------           ------     ------
               Basic earnings per share:

                 Net income and
                 share amounts                $2,498,504     5,454,441    $ .46

                 Dilutive securities
                  stock options                                180,000

                 Repurchased shares                            (83,430)

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

               Diluted earnings per share:

                 Net income and assumed
                 share conversion             $2,498,504     5,551,011    $ .45
                                              ==========     =========    =====


         Segment Reporting
         -----------------

         We follow SFAS No. 131, "Disclosure about Segments of an Enterprise and
         Related Information" ("SFAS No. 131"), which amended the requirements
         for a public enterprise to report financial and descriptive information
         about its reportable operating segments. Operating segments, as defined
         in the pronouncement, are components of an enterprise about which
         separate financial information is available that is evaluated regularly
         by us in deciding how to allocate resources and in assessing
         performance. The financial information is required to be reported on
         the basis that is used internally for evaluating segment performance
         and deciding how to allocate resources to segments.

                                       40

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         Business Combinations
         ---------------------

         In June 2001, the Financial Accounting Standards Board finalized FASB
         Statement No. 141, Business Combinations ("SFAS 141"), and No. 142,
         Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 141 requires
         the use of the purchase method of accounting and prohibits the use of
         the pooling-of-interests method of accounting for business combinations
         initiated after June 30, 2001. SFAS 141 also requires that the Company
         recognize acquired intangible assets apart from goodwill if the
         acquired intangible assets meet certain criteria. SFAS 141 applies to
         all business combinations initiated after June 30, 2001 and for
         purchase business combinations completed on or after July 1, 2001. It
         also requires, upon adoption of SFAS 142, that the Company reclassify
         the carrying amounts of intangible assets and goodwill based on the
         criteria in SFAS 141. During the year ended June 30, 2002, we adopted
         SFAS 141 with no impact to our financial position or results of
         operations.

         Goodwill and Other Intangible Assets
         ------------------------------------

         SFAS 142 requires, among other things, the companies no longer amortize
         goodwill, but instead test goodwill for impairment at least annually.
         In addition, SFAS 142 requires that the Company identify reporting
         units for the purposes of assessing potential future impairments of
         goodwill, reassess the useful lives of other existing recognized
         intangible assets, and cease amortization of intangible assets with an
         indefinite useful life. An intangible asset with an indefinite useful
         life should be tested for impairment in accordance with the guidance in
         SFAS 142. SFAS 142 is required to be applied in fiscal years beginning
         after December 15, 2001 to all goodwill and other intangible assets
         recognized at the date, regardless of when those assets were initially
         recognized. SFAS 142 requires the Company to complete a transitional
         goodwill impairment test six months from the date of adoption. The
         Company is also required to reassess the useful lives of other
         intangible assets within the first interim quarter after adoption of
         SFAS 142. During the year ended June 30, 2002, we adopted SFAS 142 with
         no impact to our financial position or results of operations.

         Income Taxes
         ------------

         We account for income taxes under Statement of Financial Accounting
         Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Temporary
         differences are differences between the tax basis of assets and
         liabilities and their reported amounts in the financial statements that
         will result in taxable or deductible amounts in future years.

         Stock Award and Stock Option Plans
         ----------------------------------

         We grant common stock and stock options to employees and non-employees
         and apply Accounting Principles Board (APB) Opinion No. 25 (APB 25),
         "Accounting for Stock Issued to Employees", and related Interpretations
         in accounting for all stock award and stock option plans for employees
         and directors.

         Following the guidance of APB 25, compensation cost has been recognized
         for stock options issued to employees and directors as the excess of
         the market price of the underlying common stock on the date of the
         grant over the exercise price of the Company's stock options on the
         date of the grant.

         Statement of Financial Accounting Standards No. 123, "Accounting for
         Stock-Based Compensation" (SFAS 123), requires us to provide pro forma
         information regarding net income as if compensation cost for the
         Company's stock option plans had been determined in accordance with the
         fair value based method prescribed in SFAS 123. To provide the required
         pro forma information, we estimate the fair value of each stock option
         at the grant date by using the Black-Scholes option-pricing model.

         In certain circumstances, we issue common stock for invoiced services,
         to pay creditors and in other similar situations. In accordance with
         SFAS No. 123, payments in equity instruments to non-employees for goods

                                       41

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         or services are accounted for by the fair value method, which relies on
         the valuation of the service at the date of the transaction, or public
         stock sales price, whichever is more reliable as a measurement.

         Recent Accounting Pronouncements
         --------------------------------

         In June 2001, the Financial Accounting Standards Board ("FASB"), issued
         Statement of Financial Accounting Standards No. 143, Accounting for
         Asset Retirement Obligations, ("SFAS No. 143"). SFAS No. 143 addresses
         financial accounting and reporting for obligations associated with the
         retirement of tangible long-lived assets and the associated asset
         retirement costs. SFAS No. 143 generally requires obligations
         associated with asset retirements to be recognized earlier and
         displayed as liabilities rather than as contra-assets. The
         pronouncement is effective for financial statements issued for fiscal
         years beginning after June 15, 2002. Management does not believe that
         the adoption of SFAS No. 143 will have any impact on its financial
         position or results of operations.

         In August 2001, the Financial Accounting Standards Board ("FASB")
         issued Statement of Financial Accounting Standards No. 144, Accounting
         for the Impairment or Disposal of Long-Lived Assets, ("SFAS No. 144").
         SFAS No. 144 addresses financial accounting and reporting for the
         impairment or disposal of long-lived assets. SFAS No. 144 establishes a
         single accounting model for long-lived assets to be disposed of by
         sale. The pronouncement is effective for financial statements issued
         for fiscal years beginning after December 15, 2001. Management does not
         believe that the adoption of SFAS No. 144 will have any impact on its
         financial position or results of operations.

         In June 2002, the Financial Accounting Standards Board ("FASB") issued
         Statement of Financial Accounting Standards No. 146, Accounting for
         Costs Associated with Exit or Disposal Activities, ("SFAS No. 146").
         SFAS No. 146 addresses financial accounting and reporting for costs
         associated with exit or disposal activities and nullifies Emerging
         Issues Task Force Issue No. 94-3, Liability Recognition for Certain
         Employee Termination Benefits and Other Costs to Exit an Activity. SFAS
         No. 146 generally requires a liability for a cost associated with an
         exit or disposal activity to be recognized and measured initially at
         its fair value in the period in which the liability is incurred. The
         pronouncement is effective for exit or disposal activities initiated
         after December 31, 2002. Management does not believe that the adoption
         of SFAS No. 146 will have any impact on its financial position or
         results of operations.

         Reclassification
         ----------------

         Certain 2001 amounts have been reclassified to conform to 2002
         presentation.


Note 2   EMPLOYEE BENEFIT PLANS

         Defined Contribution Plan
         -------------------------

         We have a 401(k) defined contribution plan that covers all employees.
         Under the amended terms of the plan, an employee is eligible to
         participate in the plan immediately upon being hired to work at least
         1,000 hours per year and having attained age 21. Participants may
         contribute up to a maximum of 11.75% of their pre-tax earnings (not to
         exceed $11,000) to the plan. Under the plan, we may make discretionary
         contributions to the plan. We made no plan contribution for fiscal 2002
         or fiscal 2001.

                                       42

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         Split Dollar Life Insurance Plan
         --------------------------------

         As part of the President's employment agreement, we purchased a split
         dollar life insurance policy for the President's benefit. We paid total
         premiums of $360,000 on behalf of the President, of which a portion
         ("split") constituted compensation for the President. At each
         anniversary we pay the President an amount as a bonus to reimburse the
         President for personal income tax on his split. No additional
         compensation has been recognized as reimbursement to the President for
         income taxes for the years ended June 30, 2002 and 2001. The
         President's taxable amount was $-0- for fiscal 2002 and 2001, equal to
         the "economic benefit" attributed to the President as defined by the
         Internal Revenue Code. We paid no premiums during fiscal 2002 and 2001.

         In the event of termination of the plan, we would receive the lesser of
         the policy cash surrender value, or the accumulated Corporate Premium
         Payments (split). The President would receive the excess of the total
         policy cash surrender value over the corporate cash surrender value, if
         any. In the event of premature death of the President, we would receive
         an amount equal to the accumulated corporate premium payments and the
         President's named beneficiary would receive the proceeds of the death
         benefit.

         As of June 30, 2002 and 2001, our accumulated cash surrender value was
         $239,095, which has been included as an asset on our balance sheet.
         During 2000, we borrowed $125,000 against the cash surrender value of
         the policy and that amount plus capitalized and accrued interest of
         $30,430 and $3,084, respectively, was outstanding at June 30, 2000.
         That amount was paid in full on October 5, 2000. The death benefit
         payable to the named beneficiary as of June 30, 2002 and 2001 is
         approximately $760,000.

         Medical Benefit Plan
         --------------------

         For the fiscal years ended June 30, 2002 and 2001, we had a policy of
         reimbursing employees for medical expenses incurred but not covered by
         our paid medical insurance plan. Expenses reimbursed for fiscal 2002
         and fiscal 2001 were $7,786 and $14,751, respectively.


Note 3   MAJOR CUSTOMERS

         We derived in excess of 10% of our revenue from various sources (oil
         and gas sales and mineral royalties) as follows:

                               The Company
                              -------------
                                A        B        C        D
                              -----    -----    -----    -----
         Year ended:

           June 30, 2002      30%         *       33%    13%
           June 30, 2001      39%        11%      45%      -

                              * Less than 10% for fiscal 2002.


Note 4   STOCKHOLDERS' EQUITY

         Stock Options
         -------------

         On March 2, 2000 stock options were granted to the President of Aspen
         Power Systems, LLC for 100,000 shares of the Company's common stock at
         a grant price of $0.625 per share. These options are exercisable for
         25,000 shares per annum from March 15, 2000 through March 15, 2003.

                                       43

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         During fiscal 2001 two officers, one employee and a consultant
         exercised their stock options for 600,000 shares of our common stock at
         an average exercise price of $0.26 per share. As consideration for the
         option shares purchased, the individuals surrendered common stock with
         a fair value equal to the exercise price of the option shares. The fair
         value of the shares surrendered was based on a ten-day average bid
         price immediately prior to the exercise date. Total shares surrendered
         were 133,733. The effect of this transaction is a net increase to the
         common stock par value of $2,331 and a corresponding decrease to
         additional paid in capital of $2,331.

         During fiscal 2002 one director exercised his option for 80,000 shares
         of our common stock at an average price of $0.26 per share. As
         consideration for the option shares purchased, the individuals
         surrendered common stock with a fair value equal to the exercise price
         of the option shares. The fair value of the shares surrendered was
         based on a ten-day average bid price immediately prior to the exercise
         date. Total shares surrendered were 28,377. The effect of the
         transaction is a net increase to the common stock par value of $260 and
         a corresponding decrease to additional paid in capital of $260.

         Total compensation expense in the statement of operations includes
         amortization of prior stock awards of $13,834 during 2002 and $19,625
         during 2001.

         As of June 30, 2002, we had an aggregate of 776,000 common shares
         reserved for issuance under its stock option plans. These plans provide
         for the issuance of common shares pursuant to stock option exercises,
         restricted stock awards and other equity based awards.

         The following information summarizes information with respect to
         options granted under our equity plans:

                                                                Weighted Average
                                                                 Exercise Price
                                                 Number of         of Shares
                                                 Shares           Under Plans
                                                 -------        ---------------

         Outstanding balance June 30, 2000       780,000            $ .31

         Granted                                     -0-              -0-

         Exercised                              (600,000)             .26

         Forfeited or expensed                       -0-              -0-
                                                 --------            ----

         Outstanding balance June 30, 2001       180,000              .46

         Granted                                 676,000              .57

         Exercised                               (80,000)             .26

         Forfeited or expensed                       -0-              -0-

                                                 -------             ----

         Outstanding balance June 30, 2002       776,000             $.58
                                                 =======             ====

         The following table summarizes information concerning outstanding and
         exercisable options as of June 30, 2002:

                                       44

<PAGE>
<TABLE>
<CAPTION>


                           ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                      Outstanding                               Exercisable
                     -----------------------------------------------      -------------------------

                                       Weighted
                                       Average          Weighted                           Weighted
                                       Remaining        Average                            Average
         Exercise     Number           Contractual      Exercisable       Number           Exercise
          Price      Outstanding       Life In Years    Price             Exercisable      Price
         --------    -----------       -------------    -----------       -----------      --------

         <S>         <C>               <C>              <C>                <C>             <C>
         $.625       100,000           03/15/2004(1)    $.625              75,000          $.625

          .57        426,000           08/15/2005(1)      .57                 -0-            .57

          .57        250,000           08/15/2007(1)      .57                 -0-            .57
                     -------                                              -------
                     776,000                                               75,000
                     =======                                              =======


         (1) The term of the option will be the earlier of the contractual life
         of the options or 90 days after the date the optionee is no longer an
         employee, consultant or director of the Company.

         We account for the two stock option plans using APB Opinion No. 25 for
         directors and employees and SFAS 123 for consultants. There were
         676,000 options granted in 2002. Directors and employees were granted
         601,000 and consultants were granted 75,000. The consultant options
         were valued using the fair value method of SFAS 123 as calculated by
         the Black-Scholes option-pricing model. The fair value of each option
         grant, as opposed to its exercisable price, is estimated on the date of
         grant using the Black-Scholes option-pricing model with the following
         weighted average assumptions: no dividend yield, expected volatility of
         14.9%, risk free interest rates of 8.5% and expected lives of 3.4 to
         4.4 years. The resulting compensation expense relating to the
         consultant option grant will be included as an operating expense as the
         options vest.

         Options were granted but not exercisable to directors and employees
         during the fiscal year 2002. An adjustment to net income for
         compensation expense would be recorded under SFAS No. 123, on a pro
         forma basis, as reflected in the following table:

                                                         2002             2001
                                                       -------          -------

              Net Income (loss):      As Reported     (122,085)        2,498,504
                                      Pro Forma       (128,150)        2,498,504
              Basic EPS:              As Reported        (.02)             .46
                                      Pro Forma          (.02)             .46
              Diluted EPS:            As Reported        (.02)             .45
                                      Pro Forma          (.02)             .45


                                       45
</TABLE>

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 5   INCOME TAXES

         We deferred income taxes of $89,250 in fiscal 2002 and $179,200 in
         income taxes for the year ended June 30, 2001. We paid $160,224 in
         California state income taxes in fiscal 2001. During 2002, we added
         approximately $629,000 in net operating loss carryforwards for a total
         of approximately $1,212,000 in available federal net operating loss
         carryforwards. During 2001, we used $1,834,878 in net operating loss
         carryforwards to offset fiscal June 30, 2001 federal taxable income. At
         June 30, 2002 and 2001, no net operating loss carryforwards expired;
         but $1,200 in general business credits expired in fiscal 2002.

         During 2001, we reduced the valuation allowance related to the deferred
         tax assets to $-0-.

         The deferred tax consequences of temporary differences in reporting
         items for financial statement and income tax purposes are recognized,
         if appropriate. Realization of future tax benefits related to the
         deferred tax assets is dependent on many factors, including our ability
         to generate taxable income within the net operating loss carryforward
         period. We have considered these factors in reaching our conclusion as
         to the valuation allowance for financial reporting purposes.

         The income tax effect of temporary differences comprising the deferred
         tax assets and deferred tax liabilities on the accompanying balance
         sheet is the result of the following:

         Deferred tax assets:                  2002               2001
                                            ----------        -----------

           General business credit          $      -0-         $    1,200
           Federal tax loss
             carryforwards                     490,862            258,850
                                            ----------         ----------

                                               490,862            260,050
                                            ----------         ----------
         Deferred (liabilities):
           Property, plant and
             equipment                          (6,241)            (3,750)
          Oil and gas properties              (573,871)          (435,500)
                                            -----------        ----------

                                              (580,112)          (439,250)
                                            ----------         ----------
                                            $   89,250         $  179,200
                                            ==========         ==========

                                       46

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         A reconciliation between the statutory federal income tax rate (34%)
         and the effective rate of income tax expense for the two years ended
         June 30 is as follows:

                                              2002              2001
                                            ---------        ---------
           Statutory federal income
             tax rate                             34%            34%

           Statutory state income tax
             rate, net of federal benefit        9.0%           9.0%

           Utilization of net operating
             loss carryforwards                  (91%)          (31%)
                                            ---------      ---------

           Effective rate                        (48%)           12%
                                            =========      =========

         The provision for income taxes consists of the following components:

                                               2002             2001
                                            ---------        ---------

           Current tax expense, refund,
             state                          $ (25,654)       $ 160,224

           Deferred tax expense
             (recovery)                       (89,250)         179,200
                                            ---------        ---------

           Total income tax
             provision (recovery)           $(114,904)       $ 339,424
                                            =========        =========


         We have available federal net operating loss carryforwards of
         approximately $1,212,000 (net operating losses expire beginning June
         30, 2011 through the year ending June 30, 2022). The valuation
         allowance was reduced to $-0- in the year ended June 30, 2001 due to
         usage of net operating loss carryforwards and increased profitability
         of operations.

                                       47

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




Note 6   SEGMENT INFORMATION

         We operate in three industry segments within the United States: (1) oil
         and gas exploration and development, (2) mineral exploration and
         development and (3) electrical generation construction.

         Identified assets by industry are those assets that are used in our
         operations in each industry. Corporate assets are principally cash,
         cash surrender value of life insurance, and furniture, fixtures and
         vehicles.

         We have adopted Statement of Financial Accounting Standards No. 131,
         "Disclosures about Segments of an Enterprise and Related Information"
         (SFAS 131). The adoption of SFAS 131 requires the presentation of
         descriptive information about reportable segments which is consistent
         with that made available to our management to assess performance.

         The oil and gas segment derives its revenues from the sale of oil and
         gas and prospect generation and administrative overhead fees charged to
         participants in our oil and gas ventures.

         The mining segment receives its revenues primarily from the sale of
         minerals and precious metals and from time to time from the sale of a
         mineral venture that it has originated. Currently, this segment is
         inactive.

         The electrical generation construction segment will receive its
         revenues from the sale, design, construction and/or operation of gas
         turbine or other electrical generation projects. As of June 30, 2002,
         we were in the planning stage of this segment and no revenues have been
         received. However, we did advance APS $5,500 for operating expenses.

         During the years ended June 30, 2002 and 2001, there were no
         intersegment revenues. The accounting policies applied by each segment
         are the same as those used by us in general.

         Net sales to three customers were approximately $229,000, $205,000 and
         $91,000, or 33%, 30% and 13% for fiscal 2002. Net sales to one customer
         of the oil and gas segment totaled approximately $1,625,000 of revenues
         or 45% for the year ended June 30, 2001.

         There have been no differences from the last annual report in the basis
         of measuring segment profit or loss. There have been no material
         changes in the amount of assets for any operating segment since the
         last annual report except for the oil and gas segment which capitalized
         approximately $1,196,000 for the development and acquisition of oil and
         gas property.

                                       48

<PAGE>
<TABLE>
<CAPTION>


                                      ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         Segment information consists of the following:

                                  Oil and Gas          Mining          Power Plant          Corporate          Consolidated
                                  -----------          ------          -----------          ---------          ------------
         Revenues:

           <S>                     <C>                <C>               <C>                 <C>                <C>
           2002                    $  828,150         $    -0-          $    -0-            $   41,372         $   869,522
           2001                     3,867,482              -0-               -0-                73,081           3,940,563

         Income (loss) from
           operations:

           2002                    $  369,900         $    -0-          $(25,500)           $ (581,389)        $  (236,989)
           2001                     3,344,544              -0-               -0-              (506,616)          2,837,928

         Identifiable assets:

           2002                    $3,543,669         $18,823           $    -0-            $1,241,668         $ 4,804,160
           2001                     2,930,052          18,823             20,000             3,025,811           5,994,686

         Income tax expense
           (recovery):

           2002                    $ (114,904)        $    -0-          $    -0-            $      -0-         $  (114,904)
           2001                       400,520              -0-               -0-               (61,096)            339,424

         Depreciation, depletion
         and valuation charged
         to identifiable assets:

           2002                    $  341,236         $    -0-          $    -0-            $   17,676         $   358,912
           2001                       400,824              -0-               -0-                11,864             412,688

         Capital expenditures:

           2002                    $1,195,535         $    -0-          $    -0-            $    8,194         $ 1,203,729
           2001                     1,370,905              -0-               -0-                21,133           1,392,038



Note 7   RELATED PARTY TRANSACTIONS

         During the years ended June 30, 2002 and 2001, we provided one vehicle
         each to our president and to an officer/director. We also paid travel,
         lodging and meal expenses for spouses who, from time to time,
         accompanied directors or officers when they were traveling or
         entertaining on company business. The cost of these items to us totaled
         less than $5,000 in each of the years ended June 30, 2002 and 2001. We
         believe that the expenditures were to our benefit.

         In January 1983, we entered into a Stock Purchase Agreement with our
         president, R. V. Bailey, whereby Mr. Bailey granted us an option to
         purchase up to 75% of our common stock owned by him at his death. The
         agreement was replaced by a Stock Purchase Agreement dated June 4, 1993
         which requires us to apply 75% of any key man insurance proceeds it
         receives upon Mr. Bailey's death towards the purchase of up to 75% of
         the common shares owned by him at the time of his death. Mr. Bailey's
         estate is obligated to sell such shares to us. The purchase price of
         the shares acquired under the Agreement shall be the fair market value
         of the shares on the date of death. We and Mr. Bailey agree that the
         fair market value of the shares on the date of death may not
         necessarily be the market price of the stock on the date of death as
         quoted on the OTC Bulletin Board, or as reported by another NASDAQ
         quotation service or any exchange on which our common stock is quoted.
         The 1993 Agreement further requires that we maintain one or more life
         insurance policies on Mr. Bailey's life in the amount of $1,000,000 for
         the purpose of this Agreement. Therefore, we may be required to expend
         up to $750,000 of the insurance proceeds to acquire up to 75% of the
         shares owned by Mr. Bailey at the time of his death. Premiums for this
         policy were $6,970 for each of the fiscal years ended June 30, 2002 and
         2001.

                                       49
</TABLE>

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




         Prior to February 2000, Mr. Cohan, our West Coast Division president
         who resides in California, provided us an office in his home at no
         cost. We reimbursed Mr. Cohan for expenses he incurred in his home
         office on behalf of ourselves, such as telephone and other general and
         administrative expenses. During February 2000, we opened a separate
         office in Bakersfield and no longer reimburse home office expense to
         Mr. Cohan.

         During fiscal 2002 we entered into a rental agreement with R. V. Bailey
         to rent office space in Castle Rock, Colorado in an office building
         owned by Mr. Bailey. The rental amount is $6,000 per year and is on a
         month to month basis.

         During fiscal 2002, we assigned the following overrides at no cost to
         employees:

                                    R. V.            R. A.             J. L.
                                    Bailey           Cohan             Shelton
                                    ------           -----             -------

              Kuppenbender 20-3    0.756000%        0.756000%         0.288000%

         R. V. Bailey, President and director of the Company, Robert A. Cohan,
         President - West Coast Division and director of the Company, have
         working and royalty interests in certain of the California oil and gas
         properties operated by us. The related parties paid for their
         proportionate working interest share of all costs to acquire, develop
         and operate these properties on the same terms as other unaffiliated
         participants. Mr. Bailey and Mr. Cohan received working interests
         amounts totaling $31,180 and $27,896, respectively, for the year ended
         June 30, 2002, and $85,847 and $77,946, respectively, for the year
         ended June 30, 2001. Mr. Bailey and Mr. Cohan also received royalty
         interest amounts totaling $34,849 and $34,844, respectively, for the
         year ended June 30, 2002, and $143,601 and $146,402, respectively, for
         the year ended June 30, 2001. As of June 30, 2002, our working
         interests of us and related parties in certain producing California
         properties are as set forth below:

                                        GROSS WELLS                NET WELLS
                                        OIL      GAS               OIL     GAS
                                        ---      ---               ---     ---

              Aspen Exploration         2        33                .31     4.13

              R. V. Bailey              2        25                .04      .31

              R. A. Cohan               1        25                .01      .32

              R. K. Davis               2        33                .13      .52

              J. L. Shelton             -        11                  -      .02

         We have received advances from Messrs. Bailey, Cohan and Davis for
         working interests in uncompleted wells of $5,306, $4,676 and $6,107,
         respectively, as of June 30, 2002 and $563, $3,355 and $36,933 as of
         June 30, 2001, respectively. Additionally, we owed Mr. Bailey $5,171
         and $2,601 for reimbursement of expenses made on our behalf as of June
         30, 2002 and 2001, respectively. Messrs. Bailey, Cohan and Davis owed
         us $4,638, $3,060 and $5,174, respectively, as of June 30, 2002 and
         $988, $562 and $1,824, respectively, as of June 30, 2001 for their
         portion of well operating expenses.

         See Note 11 for additional related party disclosure.

                                       50

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 8   CONCENTRATION OF CREDIT RISK

         Financial instruments, which potentially subject us to concentrations
         of credit risk, consist principally of cash and cash equivalents,
         accounts receivable and the cash surrender value of life insurance.
         While we have approximately $189,000 in excess of the FDIC $100,000
         limit at one bank, we place our cash and cash equivalents with high
         quality financial institutions in order to limit credit risk.
         Concentrations of credit risk with respect to accounts receivable are
         limited since relatively small amounts are due from each account, and
         the accounts are distributed across unrelated businesses and
         individuals, with the exception of two major gas purchasers, who
         normally settle within 25 days of the previous month's gas purchases.
         An international insurance company holds the cash surrender value of
         the split dollar life insurance contract. We believe our exposure to
         credit risk is minimal.

         Cash equivalents are invested through a quality national brokerage firm
         and a major regional bank. The cash equivalents consists of liquid
         short-term investments. The Securities Investor Protection Corporation
         insures the Fund's accounts at this brokerage firm and a commercial
         insurer up to the total amount held in the account.


Note 9   OIL AND GAS ACTIVITIES

         Capitalized costs
         -----------------

         Capitalized costs associated with oil and gas producing activities are
         as follows:


                                                         June 30,
                                                 2002              2001
                                              ----------        ----------

              Proved properties               $5,427,741        $4,297,306
                                              ----------        ----------

              Accumulated depreciation,
                depletion and
                amortization                  (1,980,930)       (1,639,694)

              Valuation allowance               (281,719)         (281,719)
                                              ----------        ----------

                                              (2,262,649)       (1,921,413)
                                              ----------       -----------
              Net capitalized costs           $3,165,092        $2,375,893
                                              ==========       ===========

                                       51

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Results of operations
         ---------------------

         Results of operations for oil and gas producing activities are as
         follows:

                                                  Year ended June 30,
                                                ------------------------
                                                 2002              2001
                                                ------            ------

         Revenues*                            $  828,150        $3,867,482
         Production costs                       (117,014)         (122,114)
         Depreciation and depletion             (341,236)         (400,824)
                                              ----------        ----------
         Results of operations
           (excluding corporate overhead)     $  369,900        $3,344,544
                                              ==========        ==========

         *Includes oil and gas related fees and management fees.

         Fees charged by us to operate the properties totaled approximately
         $11,230 per month in 2002 and $21,400 per month in 2001.

         Unaudited oil and gas reserve quantities
         ----------------------------------------

         The following unaudited reserve estimates presented as of June 30, 2002
         and 2001 were prepared by an independent petroleum engineer. There are
         many uncertainties inherent in estimating proved reserve quantities and
         in projecting future production rates and the timing of development
         expenditures. In addition, reserve estimates of new discoveries that
         have little production history are more imprecise than those of
         properties with more production history. Accordingly, these estimates
         are expected to change as future information becomes available.

         Proved oil and gas reserves are the estimated quantities of crude oil,
         condensate, natural gas and natural gas liquids which geological and
         engineering data demonstrate with reasonable certainty to be
         recoverable in future years from known reservoirs under existing
         economic and operating conditions.

         Proved developed oil and gas reserves are those reserves expected to be
         recovered through existing wells with existing equipment and operating
         methods.

                                       52

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         Unaudited net quantities of proved and proved developed reserves of
         crude oil (including condensate) and natural gas (all located within
         the United States) are as follows:

         Changes in proved reserves                            (Bbls)   (MCF)
         --------------------------                            -----    -----
                                                                (in thousands)

         Estimated quantity, June 30, 2000                       15     2,373

           Revisions of previous estimates                        1      (362)
           Discoveries                                            2       589
           Purchased                                              -        20
           Production                                            (5)     (377)
                                                               -----    -----

         Estimated quantity, June 30, 2001                       13     2,243

           Revisions of previous estimates                        2      (115)
           Discoveries                                            -       258
           Purchased                                              -        51
           Production                                            (3)     (227)
           Sold                                                  (1)     -
                                                               -----    -----

         Estimated quantity, June 30, 2002                       11     2,210
                                                               =====    =====




         Proved reserves                               Developed
         at year end               Developed         Non-Producing        Total
         -----------               ---------         -------------        -----
                                                     (In Thousands)


         Oil (Bbls)

           June 30, 2001              9                      4               13
           June 30, 2002              7                      4               11

         Gas (MCF)

           June 30, 2001            584                  1,659            2,243
           June 30, 2002            482                  1,728            2,210


                                       53

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         Unaudited standardized measure
         ------------------------------

         The following table presents a standardized measure of the discounted
         future net cash flows attributable to our proved oil and gas reserves.
         Future cash inflows were computed by applying year-end prices of oil
         and gas to the estimated future production of proved oil and gas
         reserves. The future production and development costs represent the
         estimated future expenditures (based on current costs) to be incurred
         in developing and producing the proved reserves, assuming continuation
         of existing economic conditions. Future income tax expenses were
         computed by applying statutory income tax rates to the difference
         between pre-tax net cash flows relating to our proved oil and gas
         reserves and the tax basis of proved oil and gas properties and
         available net operating loss carryforwards. Discounting the future net
         cash inflows at 10% is a method to measure the impact of the time value
         of money.

                                                               June 30,
                                                        2002             2001
                                                      --------         --------
                                                           (in thousands)

         Future cash inflows                          $  6,352         $ 22,774
         Future production and development costs          (772)          (1,334)
         Future income tax expense                      (1,779)          (8,335)
                                                      --------         --------

         Future net cash flows                           3,801           13,105

         10% annual discount for estimated timing
           of cash flows                                (1,198)          (4,647)
                                                      --------         --------

         Standardized measure of discounted future
           net cash flows                             $  2,603         $  8,458
                                                      ========         ========


                                       54

<PAGE>


ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         The following presents the principal sources of the changes in the
         standardized measure of discounted future net cash flows:

                                                           Years ended June 30,
                                                         -----------------------
                                                           2002           2001
                                                         --------       --------
                                                             (in thousands)

         Standardized measure of discounted
           future net cash flows, beginning of year      $  8,458      $  5,208
                                                         --------      --------

         Sales and transfers of oil and gas produced,
           net of production costs                           (576)       (3,488)

         Net changes in prices and production costs
           and other                                       (9,368)        6,748

         Net change due to discoveries                        394         3,200

         Acquisition of reserves                               78           108

         Revisions of previous quantity estimates            (468)       (1,126)

         Development costs incurred                           459           207

         Accretion of discount                              1,406           736

         Sale of existing reserves                             (6)          -0-

         Net change in income taxes                         4,198        (3,725)

         Other                                             (1,972)          590
                                                         --------      --------

                                                           (5,855)        3,250
                                                         --------      --------
         Standardized measure of discounted future
           cash flows, end of year                       $  2,603      $  8,458
                                                         ========      ========

         Net changes in prices and production costs of $9,368 were the result of
         a decrease in the price received for oil and gas at year end which was
         offset slightly by a decrease in operating costs associated with more
         producing gas wells in 2002 than in 2001 and fewer oil wells. The
         revision of previous estimates of ($468) was the result of assigning
         1,500 more recoverable barrels of oil and reducing recoverable reserves
         of gas by approximately 227,000 MCF. All adjustments were based on
         performance reviews of individual wells.

Note 10  COMMITMENTS AND CONTINGENCIES

         At June 30, 2002, we were committed to the following drilling and
development projects in California:

                  Project                              Aspen Cost
                  -------                              ----------

                  Klingenberg 24-1                      $115,000
                  Kuppenbender 20-2                       65,000
                  McCullough 36-1                         65,000
                  HSRCC 1                                 10,000
                                                        --------
                  Total                                 $255,000
                                                        ========


                                       55

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         In 1991, we entered into an employment agreement with our president, R.
         V. Bailey, which provides for the payment of $100,000 per year to him,
         as salary, and also the reimbursement of expenses, health insurance,
         and other benefits (including the split-dollar life insurance plan).
         The agreement provided for a two-year term which was automatically
         renewed for two additional two-year terms (through November 1999) at
         Mr. Bailey's option. We were not entitled to terminate this agreement
         except upon Mr. Bailey's death, disability, or for cause (as defined in
         the agreement). This agreement expired by its own terms on November 30,
         1999 and has not been renewed. However, we continue to pay Mr. Bailey
         $125,000 salary per year plus other benefits.

          In January 1983, we entered into a Stock Purchase Agreement with Mr.
         Bailey whereby Mr. Bailey granted Aspen an option to purchase up to 75%
         of our common stock owned by him at his death. This agreement was
         replaced by a Stock Purchase Agreement dated June 4, 1993. The 1993
         agreement requires that we apply 75% of any key man insurance proceeds
         it receives upon Mr. Bailey's death towards the purchase of up to 75%
         of the common shares owned by him at the time of his death, and Mr.
         Bailey's estate is obligated to sell such shares to Aspen. The purchase
         price of the shares acquired under the 1993 agreement shall be the fair
         market value of the shares on the date of death. Both Aspen and Mr.
         Bailey agree that the fair market value of the shares on the date of
         death may not necessarily be the market price of the stock on the date
         of death as quoted on the OTCBB, or as reported by any exchange. The
         1993 agreement further requires us to maintain one or more life
         insurance policies on Mr. Bailey's life in the amount of $1,000,000 for
         the purpose of this agreement.

          On April 16, 1998, we entered into an employment agreement with Robert
         A. Cohan, which provides for the payment of $90,000 for the first year
         of employment, plus reimbursement of expenses, including health
         insurance. We have renewed the agreement effective April 15, 1999 to
         April 15, 2002 at the rate of $95,000 per year for the year commencing
         April 15, 1999, $100,000 for the year commencing April 15, 2000 and
         $105,000 for the year commencing April 15, 2001. On August 1, 2001 Mr.
         Cohan's salary was increased to $125,000 per year. Mr. Cohan's
         employment agreement expired by its own terms on April 15, 2002 and has
         not been renewed. However, we continue to pay him his salary and other
         benefits. Prior to February 2000, we and Mr. Cohan agreed to utilize a
         portion of Mr. Cohan's home in Bakersfield, California from which to
         conduct Aspen's business. Mr. Cohan did not charge Aspen any rent for
         the use of his home as a business office. Aspen agreed to pay for all
         office supplies, communication and copy equipment used by Mr. Cohan in
         his office, as well as the monthly telephone expense incurred by Mr.
         Cohan on behalf of Aspen. On February 7, 2000, we entered into a
         three-year lease of office space in Bakersfield, California thereby
         alleviating the necessity of home office reimbursement to Mr. Cohan.


Note 11  SUBSEQUENT EVENTS

         On August 29, 2002 the HSRCC #1 well was spudded. We have a small
         non-operating interest in this well and at the date of this writing
         production casing is being run based on encouraging mud and electric
         logs.

         Effective September 1, 2002 we sold our working interest in the Brandt
         16X and 26X wells located in Kern County, California for approximately
         $100,000. The proceeds will be applied to future oil and gas
         development.

         On July 17, 2002 the Van Sickle Island #9 well, which was spudded on
         July 9, 2002, was plugged and abandoned as a dry hole. We had a
         non-operating interest in this well.

                                       56

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 12  INTERIM FINANCIAL DATA

         The year-end adjustment that is material to the results of the fourth
         quarter ending June 30, 2002 is the adjustment to depreciation,
         depletion and amortization as a result of receiving the reserve study
         from an independent reservoir engineer. The aggregate effect of this
         year-end adjustment to the results of the fourth quarter was to
         decrease depletion expense for the year from an estimated $447,000
         based on prior years' reserve studies to an actual depletion expense of
         approximately $341,000, a decrease of $106,000 or 24%.

         There were no year-end adjustments that were material to the results of
         the fourth quarter ending June 30, 2001.


Note 13  OPERATING LEASE

         We maintain office space in Denver, Colorado, our principal office;
         Castle Rock, Colorado and Bakersfield, California. The Denver office
         consists of approximately 1,108 square feet with an additional 750
         square feet of basement storage. We entered into a one-year lease
         agreement to December 31, 2001 for a lease rate of $1201 per month. We
         also sublease from R. V. Bailey, its president, a portion of an office
         building owned by Mr. Bailey in Castle Rock, Colorado on a month to
         month basis for $500 per month. The Bakersfield, California office has
         546 square feet and a monthly rental fee of $732. The three year lease
         expires February 2, 2003. Rent expense for the years ended June 30,
         2002 and 2001 were $26,663 and $25,320, respectively.

         Future minimum lease payments are as follows:

                   2003     $13,062


Note 14  ASPEN POWER SYSTEMS, LLC

         On March 1, 2000, we passed a resolution concerning Aspen Power
         Systems, LLC ("APS") which (1) reduced our interest in APS from 85% to
         25%; (2) accepted a note receivable from APS in the amount of $130,000
         with interest at 8% per annum and (3) transferred our 60% relinquished
         interest to R. V. Bailey, president and chairman, Ray K. Davis,
         consulting accountant, and Larry Baccari, consultant, in exchange for
         $15,000 each which was contributed to the working capital of APS. The
         ownership of Aspen Power Systems, LLC is now 25% each for us and
         Messrs. Bailey, Baccari and Davis.

         We will not be required to fund any future projects of APS and no
         further dilution of our equity in APS is anticipated. We have expensed
         the entire amount of funds advanced to APS prior to June 30, 2000 and
         assigned no value to the note receivable due from APS.

         We have been providing a limited amount of office space and certain
         general and administrative costs to APS, which are a nominal expense.
         In addition, we have been paying all of Mr. Bailey's salary at a direct
         rate of approximately $48.00 per hour (excluding benefits). APS has
         reimbursed us $53,100 at the rate of $75.00 per hour for services from
         inception through June 30, 2002. Actual expenses incurred by Mr. Bailey
         in connection with work on behalf of APS are reimbursed to Mr. Bailey
         by APS from its own funds. At June 30, 2002, there were no outstanding
         balances due Mr. Bailey from APS.

                                       57

<PAGE>


                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



         On March 2, 2000 Larry Baccari, president of APS and consultant to us,
         was granted non-qualified stock options to purchase 100,000 shares of
         our common stock. The options are exercisable at a price of $0.625 per
         share for a period of four years through March 15, 2003.

         Operating costs relative to Aspen Power Systems, LLC were $5,500 and
         $20,000 for the years ended June 30, 2002 and 2001, respectively, with
         the total of $25,500 expensed in fiscal 2002.

         On December 1, 2000 APS entered into an agreement with a major
         independent power producer. Under the agreement APS will be paid
         certain success fees if the power producer goes forward with the
         development of electric power generation facilities within a defined
         area in Solano County, California. To date, APS has received $246,000
         in fees and reimbursed expenses. At June 30, 2002 our agreement with
         the power producer has lapsed and no further payments are anticipated.
         We have been advised by the State of California that our proposed 25%
         owned project in Solano County, California, was not selected by the
         California Power Commission for further negotiations. We are now
         reviewing our possible options with regard to the future, if any, of
         this project.

         APS organized Solano Power, LLC on December 27, 1999 for the purpose of
         carrying out The Solano Project. Solano Power plans to find a joint
         venture partner to develop a 50 MW natural gas powered electric
         generation plant in Solano County, California. We own a 25% interest in
         Solano Power, the managers; Larry Baccari, R. V. Bailey and Ray K.
         Davis each contributed $5,000 to fund Solano operations and own a 25%
         interest each in the project. The managers are seeking an industry
         partner in order to financially assist Solano Power to build and
         operate the plant. At June 30, 2000, APS had expended approximately
         $28,400 on behalf of Solano Power as well as accruing expenses for
         consulting fees of R. V. Bailey and Ray K. Davis of $31,050 and $7,462,
         respectively. At June 30, 2001 Solano had no outstanding obligations
         and was inactive for most of the year. APS has assumed the
         responsibilities of finding partners to fund the power plant. At June
         30, 2001 Solano transferred its operations to Aspen Power Systems and
         APS has assumed the responsibility for pursuing this project. Solano
         Power, LLC was inactive for the fiscal year ending June 30, 2002.


                                       58