FORM 10-Q-SB

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549

MARK ONE
 [ X ]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2005
                                                 --------------

                                       OR

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

               For the transition period from ________ to ________

                          Commission File Number 0-9494

                          ASPEN EXPLORATION CORPORATION
                 -----------------------------------------------
                (Exact Name of Aspen as Specified in its Charter)

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

      Suite 208, 2050 S. Oneida St.,
               Denver, Colorado                            80224-2426
               ----------------                            ----------
  (Address of Principal Executive Offices)                 (Zip Code)

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

Indicate by check mark whether Aspen (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that Aspen was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
                          Yes  [ X ]   No  [   ]

Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of the latest practicable date.

          Class                                     Outstanding at May 10, 2005
Common stock, $.005 par value                                  6,719,308

Transitional small business disclosure format:          Yes        XX    No
                                                -------          -------

<PAGE>

<TABLE>
<CAPTION>

Part One.  FINANCIAL INFORMATION

         Item 1.  Financial Statements

                                   ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                                         CONDENSED CONSOLIDATED BALANCE SHEETS

                                                      ASSETS



                                                                              March 31,                June 30,
                                                                                2005                     2004
                                                                                ----                     ----
<S>                                                                            <C>                    <C>
Current Assets:

Cash and cash equivalents, including $905,620 and
$1,127,874 of invested cash at
March 31, 2005 and June 30, 2004 respectively ...................            $ 1,109,628              $ 1,329,376

Precious metals .................................................                 18,823                   18,823

Accounts receivables ............................................                635,711                  556,558

Receivable, related party .......................................                 20,705                   12,742

Prepaid expenses ................................................                 17,333                   16,737
                                                                             -----------              -----------

     Total current assets .......................................              1,802,200                1,934,236
                                                                             -----------              -----------

Investment in oil and gas properties, at cost (full cost
method of accounting) ...........................................              9,461,604                8,216,136

Less accumulated depletion and valuation allowance ..............             (3,691,622)              (3,235,171)
                                                                             -----------              -----------
                                                                               5,769,982                4,980,965
                                                                             -----------              -----------
Property and equipment, at cost:

Furniture, fixtures and vehicles ................................                145,593                  112,562

Less accumulated depreciation ...................................                (95,403)                 (81,958)
                                                                             -----------              -----------
                                                                                  50,190                   30,604
                                                                             -----------              -----------

     TOTAL ASSETS ...............................................            $ 7,622,372              $ 6,945,805
                                                                             ===========              ===========

                                               (Statement Continues)
                                  See notes to Consolidated Financial Statements

                                                         2
<PAGE>


                               ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                             CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

                                   LIABILITIES AND STOCKHOLDERS' EQUITY



                                                                               March 31,                  June 30,
                                                                                2005                       2004
                                                                                ----                       ----
Current liabilities:

Accounts payable and accrued expenses ...........................            $   172,659               $   932,814

Accounts payable - related party (Note 2) .......................                  5,602                    70,774

Advances from joint interest owners .............................                 35,051                   621,015

Notes payable - current (Note 6), net of discount ...............                 37,500                   410,719
                                                                             -----------               -----------

Total current liabilities .......................................                250,812                  2,035,322
                                                                             -----------               -----------

Asset retirement obligation (Note 3) ............................                 87,582                    79,582

Deferred income taxes (Note 9) ..................................                733,430                   296,320
                                                                             -----------               -----------
Total long term liabilities .....................................                821,012                   375,902
                                                                             -----------               -----------
Total liabilities ...............................................              1,071,824                 2,411,224
                                                                             -----------               -----------
Stockholders' equity:
(Notes 1 and 5):
Common stock, $.005 par value:
    Authorized: 50,000,000 shares
    Issued and outstanding: At March 31, 2005,
    6,719,308 shares and June 30, 2004, 5,958,979 ...............                 33,597                    29,796

Capital in excess of par value ..................................              6,687,019                 6,064,602

Accumulated deficit .............................................               (170,068)               (1,556,225)

Deferred compensation and consulting fees .......................                    -0-                    (3,592)
                                                                             -----------               -----------
Total stockholders' equity ......................................              6,550,548                 4,534,581
                                                                             -----------               -----------
Total liabilities and stockholders' equity ......................            $ 7,622,372               $ 6,945,805
                                                                             ===========               ===========

                                  See Notes to Consolidated Financial Statements

                                                       3
<PAGE>


                                   ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                    (Unaudited)



                                                                       Three Months Ended                   Nine Months Ended
                                                                           March 31,                            March 31,
                                                                           ---------                            ---------

                                                                     2005              2004               2005              2004
                                                                     ----              ----               ----              ----
Revenues:
  Oil and gas .............................................       $ 1,103,687       $   401,941        $ 2,933,599       $ 1,106,809
  Management fees .........................................            59,616            38,613            201,441           150,634
  Interest and other, net .................................               443              (427)             3,338             4,338
                                                                  -----------       -----------        -----------       -----------
Total Revenues ............................................         1,163,746           440,127          3,138,378         1,261,781
                                                                  -----------       -----------        -----------       -----------

Costs and expenses:
  Oil and gas production ..................................           107,035            85,912            270,891           188,301
  Depreciation, depletion and amortization ................           159,895           127,575            469,896           385,524
  General and administrative ..............................           192,025           146,800            568,493           464,026
  Interest expense ........................................             1,053             3,078              5,831             3,949
                                                                  -----------       -----------        -----------       -----------
Total Costs and Expenses ..................................           460,008           363,365          1,315,111         1,041,800
                                                                  -----------       -----------        -----------       -----------
Income before taxes .......................................           703,738            76,762          1,823,267           219,981
                                                                  -----------       -----------        -----------       -----------
Provision for income taxes ................................             1,273               -0-            437,110               -0-
                                                                  -----------       -----------        -----------       -----------
Net income ................................................       $   702,465       $    76,762        $ 1,386,157       $   219,981
                                                                  ===========       ===========        ===========       ===========
Basic income per common share .............................       $       .11       $       .01        $       .22       $       .04
                                                                  ===========       ===========        ===========       ===========
Diluted income per common share ...........................       $       .11       $       .01        $       .21       $       .04
                                                                  ===========       ===========        ===========       ===========
Basic weighted average number of common shares
outstanding ...............................................         6,406,510         5,863,828          6,406,510         5,863,828
                                                                  ===========       ===========        ===========       ===========
Diluted weighted average number of common shares
outstanding ...............................................         6,640,818         5,951,553          6,640,818         5,951,553
                                                                  ===========       ===========        ===========       ===========

                                       The accompanying notes are an integral
                                             part of these statements.

                                                         4
<PAGE>


                                   ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (UNAUDITED)



                                                                                 Nine months ended March 31,
                                                                                2005                     2004
                                                                            ------------------------------------
Cash flows from operating activities:
-------------------------------------

Net income ......................................................           $ 1,386,157              $   219,981

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

  Depreciation, depletion and amortization ......................               469,896                  385,524
  Stock issued for interest expense and consulting fees .........                39,091                      -0-
  Deferred income tax provision .................................               437,110                      -0-

Changes in assets and liabilities:

  Increase in receivable ........................................               (87,116)                 (38,445)
  Decrease (increase) in prepaid expenses .......................                  (596)                  12,656
  Decrease in accounts payable and accrued expense ..............            (1,411,291)                (111,494)
                                                                            -----------              -----------
  Net cash provided by operating activities .....................               833,251                  468,222
                                                                            -----------              -----------

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

  Proceeds - sale of oil and gas properties .....................                   -0-                  134,750
  Additions to oil and gas properties ...........................            (1,229,772)              (1,033,040)
  Purchase of producing properties ..............................               (19,248)                     -0-
  Purchase of furniture, fixtures & equipment inventory .........               (21,479)                     -0-
                                                                            -----------              -----------

  Net cash (used) by investing activities .......................            (1,270,499)                (898,290)
                                                                            -----------              -----------

Cash flow from financing activities:
------------------------------------

  Proceeds from issuance of common stock ........................               330,000                      -0-
  Payment of notes payable ......................................              (112,500)                 (37,500)
  Proceeds of notes payable .....................................                   -0-                  225,000
                                                                            -----------              -----------
                                                                                217,500                  187,500
                                                                            -----------              -----------

  Net decrease in cash and cash equivalents .....................              (219,748)                (242,568)

  Cash and cash equivalents, beginning of year ..................             1,329,376                  776,566
                                                                            -----------              -----------

  Cash and cash equivalents, end of year ........................           $ 1,109,628              $   533,998
                                                                            ===========              ===========
Other information:

  Interest paid .................................................           $     5,831              $     3,949
                                                                            ===========              ===========

  Non-cash investing activities
  Asset retirement obligation additions .........................           $     8,000              $    28,491
                                                                            ===========              ===========

                                      The accompanying notes are an integral
                                             part of these statements.

                                                        5
</TABLE>

<PAGE>


                          ASPEN EXPLORATION CORPORATION

              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

                                 March 31, 2005


Note 1     BASIS OF PRESENTATION

     The accompanying financial statements are unaudited. However, in our
     opinion, the accompanying financial statements reflect all adjustments,
     consisting of only normal recurring adjustments, necessary for fair
     presentation. Interim results of operations are not necessarily indicative
     of results for subsequent interim periods or the remainder of the year.
     These financial statements should be read in conjunction with our Annual
     Report on Form 10-KSB for the year ended June 30, 2004.

     Except for the historical information contained in this Form 10-QSB, this
     Form contains forward-looking statements that involve risks and
     uncertainties. Our actual results could differ materially from those
     discussed in this Report. Factors that could cause or contribute to such
     differences include, but are not limited to, those discussed in this Report
     and any documents incorporated herein by reference, as well as the Annual
     Report on Form 10-KSB for the year ended June 30, 2004.


Note 2     RECEIVABLE - RELATED PARTIES, PAYABLE - RELATED PARTIES

     The receivable from related parties constitutes amounts due from officers
     and consultants for joint operating costs of wells operated by us. The
     transactions are in the normal course of business with the same terms as
     other joint owners and are repaid in a normal business cycle. The payable
     from related parties represents unexpended prepayments made by officers and
     consultants on wells operated by us as well as unpaid business expenses due
     officers. These transactions are in the normal course of business.


Note 3     ASSET RETIREMENT OBLIGATION

     We have adopted the provisions of Statement of Financial Accounting
     Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations."
     SFAS No. 143 generally applies to legal obligations associated with the
     retirement of long-lived assets that result from the acquisition,
     construction, development and/or the normal operation of a long-lived
     asset. SFAS No. 143 requires us to recognize an estimated liability for the
     plugging and abandonment of our gas wells. We have recognized the future
     cost to plug and abandon the gas wells over the estimated useful lives of
     the wells in accordance with SFAS No. 143. A liability for the fair value
     of an asset retirement obligation with a corresponding increase in the
     carrying value of the related long-lived asset is recorded at the time a
     producing well is purchased or a drilled well is completed and ready for
     production. We will amortize the amount added to the oil and gas properties
     and recognize accretion expense in connection with the discounted liability
     over the remaining life of the respective well. The estimated liability is
     based on historical experience in plugging and abandoning wells, estimated
     useful lives based on engineering studies, external estimates as to the

                                       6
<PAGE>


Note 3     ASSET RETIREMENT OBLIGATION (CONTINUED)

     cost to plug and abandon wells in the future and federal and state
     regulatory requirements. The liability is a discounted liability using a
     credit adjusted risk-free rate of 6%. Revisions to the liability could
     occur due to changes in plugging and abandonment costs, useful well lives
     or if federal or state regulators enact new regulations on the plugging and
     abandonment of wells.

     A reconciliation of our liability for the nine months ended March 31, 2005
     is as follows:

                  Asset retirement obligations as of
                  June 30, 2004                               $79,582
                  ARO additions                                 8,000
                  Liabilities settled                             -0-
                  Accretion expense                               -0- *
                  Revision of estimate                            -0-
                                                              -------
                  Asset retirement obligation as of
                  March 31, 2005                              $87,582
                                                              =======

                           * - Accretion not material

Note 4     EARNINGS PER SHARE

     We follow 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.
<TABLE>
<CAPTION>

                                                                               Nine Months Ended
                                                       March 31, 2005                                   March 31, 2004
                                      ----------------------------------------------     -----------------------------------------

                                                                         Per                                             Per
                                       Net                               Share           Net                             Share
                                       Income            Shares          Amount          Income          Shares          Amount
                                       ------------      -----------     -----------     -----------     -----------     ---------

<S>                                     <C>                <C>             <C>            <C>              <C>           <C>
Basic earnings per share:

Net income and share amounts            $ 1,386,157        6,406,510      $      .22     $   219,981       5,863,828     $   .04

Dilutive securities:
stock options                                                292,000                                         676,000

Repurchased shares                                           (57,692)                                       (588,275)
                                        -----------      -----------      ----------     -----------     -----------     -------
Diluted earnings per share:

Net income and assumed  share
conversion                              $ 1,386,157        6,640,818      $      .21     $   219,981       5,951,553     $   .04
                                        ===========      ===========      ==========     ===========     ===========     =======
</TABLE>

                                                               7
<PAGE>


Note 5     STOCKHOLDERS' EQUITY

     Common Stock
     ------------

     During 2004, we issued a convertible debenture and detachable warrants to
     one accredited investor in exchange for the investor's payment to us of
     $300,000. On July 15, 2004, the debt and accrued interest were
     automatically converted into shares of our restricted common stock after
     our shares traded at prices greater than $1.00 per share for ten trading
     days. We issued 300,500 shares of our restricted common stock in
     satisfaction of the principal and interest due the investor. The debt net
     of unamortized discount related to warrants was recorded to equity upon
     conversion. See Note 6.

     The convertible debenture included warrants for up to 600,000 shares of
     common stock exercisable as follows:

     There are two warrants, each for 300,000 shares of common stock. The holder
     exercised the initial warrant on March 11, 2005 and we received $330,000
     ($1.10 per share) and issued 300,000 shares of stock. Because the holder
     exercised the first warrant before March 31, 2005, we issued an additional
     warrant to purchase another 300,000 shares at $1.25 per share on March 11,
     2005. The additional warrant will expire unless exercised by June 30, 2006.

     The initial warrants were valued using the Black-Scholes valuation method
     at $39,281 and have been recorded as a discount to the debt.

     On October 12, 2004 we entered into a six month investor relations
     consulting agreement with CEOcast, Inc. which provides for a monthly
     consulting fee and issuance of 28,000 shares of our restricted common
     stock. We valued the stock at $1.25 per share, or $35,000, and amortized
     that amount over the six month consulting engagement.

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

     On August 15, 2004, one officer, a consultant and an employee exercised
     options for 92,000 shares of our common stock granted March 14, 2002 at an
     average exercise price of $0.57 per share. As consideration for the options
     purchased, the individuals surrendered common stock with a fair value equal
     to the exercise price of the option shares and held longer than six months.
     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
     42,359. The effect of the transaction is a net increase to the common stock
     par value of $248 and a corresponding decrease to additional paid in
     capital of $248.

     On March 19, 2005, one officer and one director exercised options for
     100,000 shares of our common stock granted March 14, 2002 at an average
     exercise price of $0.57 per share. As consideration for the options
     purchased, the individuals surrendered common stock with a fair value equal
     to the exercise price of the option shares and held longer than six months.
     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
     17,812. The effect of the transaction is a net increase to the common stock
     par value of $411 and a corresponding decrease to additional paid in
     capital of $411.

                                       8

<PAGE>


Note 5     STOCKHOLDERS' EQUITY (CONTINUED)

     As of March 31, 2005, we had an aggregate of 292,000 common shares reserved
     for issuance under our 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:

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

Outstanding balance June 30, 2004       484,000               $   .57
                                                              =======

Granted                                     -0-                 --
                                                              =======

Exercised                              (192,000)                  .57
                                                              =======

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

Outstanding balance March 31, 2005      292,000               $   .57
                                       ========               =======

     The following table summarizes information concerning outstanding and
     exercisable options as of March 31, 2005:
<TABLE>
<CAPTION>

                            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>              <C>
 $.57     142,000           08/15/2005(1)     $.57             142,000          $.57

  .57     150,000           08/15/2007(1)      .57             150,000           .57
          -------

          292,000
          =======
</TABLE>

(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.

                                        9
<PAGE>


Note 5     STOCKHOLDERS' EQUITY (CONTINUED)

     We account for the two stock option plans using APB No. 25 for directors
     and employees and SFAS No. 123 for consultants. There were 676,000 options
     granted in 2002. Directors and employees were granted 601,000 options and
     consultants were granted 75,000 options. The consultant options were valued
     using the fair value method of SFAS No. 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%, credit
     adjusted 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 was included as an operating expense as the options vested.


Note 6     NOTES PAYABLE

     The Company incurred the following debt:

                                                       March 31,      June 30,
                                                         2005           2004
                                                      -------------------------

Note payable to a bank                                $  37,500       $ 150,000

Convertible debenture issued to a
privately held corporation                                  -0-         300,000
                                                      ---------       ---------

                                                         37,500         450,000
                                                      ---------       ---------

Less discount                                              --           (39,281)
                                                      ---------       ---------

                                                      $  37,500       $ 410,719
                                                      =========       =========

     Proceeds from the note payable to a bank were used for the acquisition of
     producing gas properties located in several counties in the Sacramento
     Valley, California. The note matures in June 2005, principal payments are
     $12,500 per month plus interest at the bank's prime rate plus 2%. The rate
     was 7.75% at March 31, 2005. The loan is collateralized by accounts
     receivable, other rights to payments and all inventory.

     On June 28, 2004, we issued the convertible debenture to the accredited
     investor in exchange for the investor's payment to us of $300,000. The
     convertible debenture with a principal amount of $300,000, paid interest at
     4% per annum and included warrants convertible into 300,000 shares of
     common stock. On July 15, 2004 the debenture was automatically converted
     into shares of our restricted common stock after our shares traded at
     prices greater than $1.00 per share for ten trading days. We issued 300,500
     shares of our restricted common stock in satisfaction of the principal and
     interest due the investor. See Note 5.

                                       10

<PAGE>


Note 7     SEGMENT INFORMATION

     We operate in one industry segment within the United States, oil and gas
     exploration.

     Identified assets by industry are those assets that are used in our
     operations in that industry. Corporate assets are principally cash,
     furniture, fixtures and vehicles.

     We have adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
     and Related Information." SFAS No. 131 requires the presentation of
     descriptive information about reportable segments which is consistent with
     that made available to the management of the Company to assess performance.

     Our 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. Corporate income is primarily
     derived from interest income on funds held in money market accounts.

     During the nine months ended March 31, 2005 and 2004, there were no
     intersegment revenues. The accounting policies applied by each segment are
     the same as those used by us in general.

     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
     $1,263,139 for the development and acquisition of oil and gas properties
     and $7,360 in the corporate segment for the purchase of office equipment
     and computers.

     Segment information consists of the following for the nine months ended
     March 31:
<TABLE>
<CAPTION>

                                    Oil and Gas         Corporate       Consolidated
                                    -----------         ---------       ------------
<S>                  <C>             <C>              <C>                <C>
 Revenues:

                     2005           $ 3,135,040       $       3,338      $3,138,378
                     2004             1,257,443               4,338       1,261,781

 Income (loss) from operations:

                     2005           $ 2,407,699       $    (584,432)     $1,823,267
                     2004               693,444            (473,463)        219,981

 Identifiable assets:

                     2005           $ 6,188,211       $   1,434,161      $7,622,372
                     2004             4,723,147             790,705       5,513,852

 Depreciation, depletion and valuation charged to identifiable assets:

                     2005           $(456,450)        $     (13,446)     $ (469,896)
                     2004            (371,749)              (13,775)       (385,524)

 Capital expenditures:

                     2005           $ 1,263,139       $       7,360      $1,270,499
                     2004             1,033,040                 -0-       1,033,040

                                       11

<PAGE>


Note 7     SEGMENT INFORMATION (CONTINUED)

     Segment information consists of the following for the three months ended
     March 31:

                                     Oil and Gas        Corporate        Consolidated
                                     -----------        ---------        ------------
  Revenues:

                     2005           $ 1,163,303       $         443      $1,163,746
                     2004               440,554                (427)        440,127

  Income (loss) from operations:

                     2005           $   900,855       $    (197,117)     $  703,738
                     2004               231,659            (154,897)         76,762
</TABLE>


Note 8     MAJOR CUSTOMERS

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

                                                      The Company
                                                      -----------

                                    A                 B                 C
                                    -                 -                 -
         Quarter ended:

           March 31, 2005           36%               51%                *
           March 31, 2004           23%               51%               14%

         * Less than 10% in 2005.


Note 9     INCOME TAXES

     We have recorded net deferred income tax liability of $733,430 as of March
     31, 2005. During the nine months ended March 31, 2005, we used
     approximately $1,229,100 in net operating loss carryforwards leaving
     approximately $774,700 in available federal net operating loss
     carryforwards as of March 31, 2005 (net operating losses expire beginning
     June 30, 2011 through the year ending June 30, 2023). For the three months
     ended March 31, 2005, we have recorded no income tax provision for federal
     or state income taxes due to the application of net operating loss
     carryforwards. We have recorded a deferred tax provision of $1,273. The
     deferred tax provision is nominal due to minimal additions to the oil and
     gas assets during the quarter resulting in minimal increase in net deferred
     tax liability.

     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. Primarily, our proved oil and
     gas reserves substantially exceed our expected future costs and hence, we
     believe it more likely than not that the benefit will be realized.

                                       12

<PAGE>


Note 9     INCOME TAXES (CONTINUED)

     At March 31, 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:

                                                                  2005
                                                                  ----
         Deferred tax assets:
           Federal tax loss carryforwards                     $   294,700
           Asset retirement obligation                             35,191
                                                              -----------

                                                                  329,891
                                                              -----------
         Deferred tax (liabilities):
           Property, plant and equipment                           (1,362)
           Oil and gas properties                              (1,061,959)
                                                              -----------

                                                               (1,063,321)
                                                              -----------
                                                              $  (733,430)
                                                              ===========

     A reconciliation between the statutory federal income tax rate (34%) and
     the effective rate of income tax expense for the nine months ended March 31
     is as follows:

                                                       2005             2004
                                                    ----------      -----------

           Statutory federal income tax rate              34%              34%

           Statutory state income tax
             rate, net of federal benefit                  9%               9%

           Other                                         (4)%              -0-

           Net operating loss                           (39)%            (43)%

           Change in deferred tax liability               23%              -0-
                                                        -----             -----
           Effective rate                                 23%              -0-%
                                                        =====             =====

     The provision for income taxes consists of the following components:

                                                       2005              2004
                                                    ----------        ----------

           Current tax expense, state               $      -0-        $      -0-

           Deferred tax expense                        437,110               -0-
                                                    ----------        ----------

           Total income tax provision               $  437,110        $      -0-
                                                    ==========        ==========
                                       13
<PAGE>


Note 10    DRILLING COMMITMENTS AND CONTINGENCIES

     We have a proposed drilling budget for the period March through December
     2005. The budget includes drilling ten wells in the Sacramento gas province
     of northern California, although the actual number of wells drilled will be
     based on permit, pipeline, and rig availability considerations. Our share
     of the estimated costs to complete this program is set forth in the
     following table:
<TABLE>
<CAPTION>
                                                  Drilling         Completion &
      Area                       Wells            Costs           Equipping Costs       Total
  -----------------------     ------------     ------------     ------------------    ----------

<S>                                <C>            <C>                    <C>           <C>
  West Grimes Field                4              $415,000                $312,000      $727,000
  Colusa County, CA
  Malton Black Butte               2               115,000                 122,000       237,000
  Field,
  Tehama County, CA
  Colusa County, CA                3               256,000                 292,000       548,000
  Yolo County, CA                  1                17,500                  43,000        60,500
 -----------------------      ------------    ------------      ------------------    ----------

  Total Expenditure               10              $803,500                $769,000     $1,572,500
                              ============    ============      ==================    ===========
</TABLE>


NOTE 11    NEW ACCOUNTING PRONOUNCEMENTS

     FASB 151 - Inventory Costs

     In November 2004, the Financial Accounting Standards Board ("FASB") issued
     SFAS No. 151, which revised ARB No.43, relating to inventory costs. This
     revision is to clarify the accounting for abnormal amounts of idle facility
     expense, freight, handling costs and wasted material (spoilage). This
     Statement requires that these items be recognized as a current period
     charge regardless of whether they meet the criterion specified in ARB 43.
     In addition, this Statement requires the allocation of fixed production
     overheads to the costs of conversion be based on normal capacity of the
     production facilities. This Statement is effective for financial statements
     for fiscal years beginning after June 15, 2005. Earlier application is
     permitted for inventory costs incurred during fiscal years beginning after
     the date of this Statement is issued. We believe this Statement will have
     no impact on our financial statements once adopted.

     FASB 152 - Accounting for Real Estate Time-Sharing Transactions

     In December 2004, the FASB issued SFAS No. 152, which amends SFAS No. 66,
     Accounting for Sales of Real Estate, to reference the financial accounting
     and reporting guidance for real estate time-sharing transactions that is
     provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real
     Estate Time-Sharing Transactions. This Statement also amends SFAS No. 67,
     Accounting for Costs and Initial Rental Operations of Real Estate Projects,
     to state that the guidance for (a) incidental operations and (b) costs
     incurred to sell real estate projects does not apply to real-estate
     time-sharing transactions. The accounting for those operations and costs is
     subject to the guidance in SOP 04-2. This Statement is effective for
     financial statements for fiscal years beginning after June 15, 2005. We
     believe this Statement will have no impact on our financial statements once
     adopted.

                                       14
<PAGE>


NOTE 11    NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

     FASB 153 - Exchanges of Nonmonetary Assets

     In December 2004, the FASB issued SFAS No. 153. This Statement addresses
     the measurement of exchanges of nonmonetary assets. The guidance in APB
     Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the
     principle that exchanges of nonmonetary assets should be measured based on
     the fair value of the assets exchanged. The guidance in that Opinion,
     however, included certain exceptions to that principle. This Statement
     amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges
     of similar productive assets and replaces it with a general exception for
     exchanges of nonmonetary assets that do not have commercial substance. A
     nonmonetary exchange has commercial substance if the future cash flows of
     the entity are expected to change significantly as a result of the
     exchange. This Statement is effective for financial statements for fiscal
     years beginning after June 15, 2005. Earlier application is permitted for
     nonmonetary asset exchanges incurred during fiscal years beginning after
     the date of this Statement is issued. We believe this Statement will have
     no impact on our financial statements once adopted.

     FASB 123R (revised 2004) - Share-Based Payments

     In December 2004, the FASB issued a revision to SFAS No. 123, Accounting
     for Stock Based Compensation. This Statement supersedes APB Opinion No. 25,
     Accounting for Stock Issued to Employees, and its related implementation
     guidance. This Statement establishes standards for the accounting for
     transactions in which an entity exchanges its equity instruments for goods
     or services. It also addresses transactions in which an entity incurs
     liabilities in exchange for goods or services that are based on the fair
     value of the entity's equity instruments or that may be settled by the
     issuance of those equity instruments. This Statement focuses primarily on
     accounting for transactions in which an entity obtains employee services in
     share-based payment transactions. This Statement does not change the
     accounting guidance for share-based payment transactions with parties other
     than employees provided in SFAS No. 123 as originally issued and EITF Issue
     No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than
     Employees for Acquiring, or in Conjunction with Selling, Goods or
     Services." This Statement does not address the accounting for employee
     share ownership plans, which are subject to AICPA Statement of Position
     93-6, Employers' Accounting for Employee Stock Ownership Plans.

     A public entity will initially measure the cost of employee services
     received in exchange for an award of liability instruments based on its
     current fair value; the fair value of that award will be re-measured
     subsequently at each reporting date through the settlement date. Changes in
     fair value during the requisite service period will be recognized as
     compensation cost over that period. A nonpublic entity may elect to measure
     its liability awards at their intrinsic value through the date of
     settlement.

     The grant-date fair value of employee share options and similar instruments
     will be estimated using the option-pricing models adjusted for the unique
     characteristics of those instruments (unless observable market prices for
     the same or similar instruments are available).

                                       15

<PAGE>


NOTE 11  NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

     Excess tax benefits, as defined by this Statement, will be recognized as an
     addition to paid-in-capital. Cash retained as a result of those excess tax
     benefits will be presented in the statement of cash flows as financing cash
     inflows. The write-off of deferred tax assets relating to unrealized tax
     benefits associated with recognized compensation cost will be recognized as
     income tax expense unless there are excess tax benefits from previous
     awards remaining in paid-in capital to which it can be offset.

     The notes to the financial statements of both public and nonpublic entities
     will disclose information to assist users of financial information to
     understand the nature of share-based payment transactions and the effects
     of those transactions on the financial statements.

     The effective date of this Statement for us is the first annual reporting
     period beginning July 1, 2006. We intend to comply with this Statement at
     the scheduled effective date for our relevant financial statements and
     believe the adoption of the Statement may have a material impact on our
     financial statements.


NOTE 12    SUBSEQUENT EVENTS

     On April 12, 2005, the board of directors approved the issuance of 14,000
     shares of restricted common stock to CEOcast, Inc. as partial consideration
     for consulting services to be provided over a six month term being
     performed pursuant to a consulting agreement dated April 12, 2005.

     On April 22, 2005, the Board of Directors approved the following stock
     options:

                  Officers and Directors
                  as a group                                   210,000

                  Employee                                      25,000

                  Consultant                                    25,000
                                                              --------

                  Total options granted                        260,000
                                                              ========

     The exercise price of these options is $2.67 per share and the options vest
     and may be exercised 1/3 each on January 1, 2006, 2007 and 2008. All of the
     options expire on January 1, 2010.

     On October 18, 2004, we entered into an agreement with UR-Energy Inc., a
     privately held Canadian corporation, which stipulated, among other things,
     that Aspen would exchange 2,000,000 shares it currently holds in ISL
     Resources Corporation for 2,000,000 shares of UR-Energy Inc. restricted
     common shares. We also received warrants for an additional 1,000,000 shares
     of UR-Energy Inc. exercisable at $.75 Cdn per share.

     The exchange of stock in ISL Resources Corporation stock in UR-Energy Inc.
     had no immediate financial impact on Aspen since Aspen had carried the ISL
     Resources Corporation shares at a zero basis on our books and no gain or
     loss was recognized on the exchange.

                                       16

<PAGE>


NOTE 12    SUBSEQUENT EVENTS (CONTINUED)

     On April 25, 2005, we entered into a transaction with UR-Energy Inc.
     exchanging the 2,000,000 shares of their common stock and the warrants
     referenced above for $560,000 (U.S.) and 500,000 shares of newly issued
     UR-Energy Inc. common stock. The funds received increased our working
     capital and will be used to cover a substantial portion of our fiscal 2005
     drilling program. Financial and tax consequences of this transaction will
     be recognized during our fourth quarter.

                                       17
<PAGE>


Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS

     This segment should be read in conjunction with the management's discussion
and analysis of financial condition and results of operations contained in our
Annual Report on Form 10-KSB for the year ended June 30, 2004, which has been
filed with the Securities and Exchange Commission. The management discussion and
analysis and other portions of this report contain 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 in our Form 10-KSB 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-QSB.

Overview
--------

     Aspen Exploration Corporation was organized in 1980 for the purpose of
acquiring, exploring and developing oil and gas and other mineral properties.
Since 1996, we have focused our efforts on the exploration, development and
operation of natural gas properties in the Sacramento Valley of northern
California. We are currently the operator of 47 gas wells and have a
non-operated interest in 15 additional gas wells.

     We currently have offices in Bakersfield, California and Denver, Colorado
and have 2 full time employees as well as the Chairman of the Board who
allocates a portion of his time to the Company. We also make extensive use of
consultants for the conduct of our business, ranging from financial,
engineering, land, legal, and geological and geophysical specialists.

     We will typically review 20 to 25 prospects for every well we participate
in, using 3-D seismic and well control geology to evaluate each prospect. Our
goal is to identify low to moderate risk wells with good gas reserve potential.

     Where possible, we attempt to be the operator of each property we invest
in. Our knowledge of drilling and operating wells in the Sacramento Valley
allows us to maximize the potential return of each property. Administrative
charges to the properties help cover approximately 35% of our selling, general
and administrative expenses.

Outlook and Trends
------------------

     We expect our natural gas production (in volume of gas produced) to
increase substantially during fiscal 2005 due to recent drilling successes.
Total production for the year will depend on the number of wells successfully

                                       18

<PAGE>


completed, the date they are put on line, their initial rate of production, and
their production decline rates. We also anticipate that the average price for
our product will be in the range of $6.00 to $6.50 per MMBTU for the fiscal year
ended June 30, 2005 as compared to an average price of $4.96 per MMBTU during
the fiscal year ended June 30, 2004. Based upon the increasing production levels
and continued strong gas prices, which currently exceed $6.00 per MCF, Aspen
expects continued strong earnings for the balance of the year.

     Over the past five years we have been able to replace our produced reserves
and increase our yearly natural gas production. We have also benefited from a
general increase in natural gas prices over the past two years, from a low of
$2.78 per MMBTU average during the first quarter of fiscal 2003 to $6.12 per
MMBTU for the nine months ended March 31, 2005.

Non-Cash Transactions
---------------------

     On October 18, 2004, we entered into an agreement with UR-Energy Inc., a
privately held Canadian corporation, which stipulated, among other things, that
Aspen would exchange 2,000,000 shares it currently holds in ISL Resources
Corporation for 2,000,000 shares of UR-Energy Inc. restricted common shares. We
also received warrants for an additional 1,000,000 shares of UR-Energy Inc.
exercisable at $.75 Cdn per share.

     The exchange of stock in ISL Resources Corporation stock in UR-Energy Inc.
had no immediate financial impact on Aspen since Aspen had carried the ISL
Resources Corporation shares at a zero basis on our books and no gain or loss
was recognized on the exchange.

     On April 25, 2005, we entered into a transaction with UR-Energy Inc.
exchanging the 2,000,000 shares of their common stock and the warrants
referenced above for $560,000 (U.S.) and 500,000 shares of newly issued
UR-Energy Inc. common stock. The funds received increased our working capital
and will be used to cover a substantial portion of our fiscal 2005 drilling
program. Financial and tax consequences of this transaction will be recognized
during our fourth quarter.


Quantitative and Qualitative Disclosure About Risk
--------------------------------------------------

     Our ability to replace reserves, dissipated through production or
recalculation, will depend largely on how successful our drilling and
acquisition efforts will be in the future. While we cannot predict the future,
our historic success ratio over the past four years has been 87%. With the use
of 3-D seismic and well control data, interpreted by our geological and
geophysical consultants, we feel we can manage our dry hole risk as well as
anyone in the industry.

     Commodity prices are impacted by many factors that are outside of our
control. Historically, commodity prices have been volatile and we expect them to
remain volatile. Commodity prices are affected by changes in market demands,
overall economic activity, weather, pipeline capacity constraints, inventory
storage levels, basis differentials and other factors. As a result, we cannot
accurately predict future natural gas and NGL (natural gas liquids) prices, and
therefore, we cannot determine what effect increases or decreases in production
volumes will have on future revenues.

     On regulatory and operational matters, we actively manage our exploration
and production activities. We value sound stewardship and strong relationships
with all stakeholders in conducting our business. We attempt to stay abreast of
emerging issues to effectively anticipate and manage potential impacts to our
operations.

                                       19

<PAGE>


     To manage commercial risk, we may use financial tools to hedge the price we
will receive for our product. The primary purpose of hedging is to provide
adequate return on our investments, grow our reserves while leaving as much
commodity price upside as possible. During the period April 1, 2005 through
September 30, 2005, we are contractually obligated to deliver 3,500 MMBTU per
day to two of our natural gas purchasers as follows:

         2,000 MMBTU/Day @ $6.49 per MMBTU
         1,500 MMBTU/Day @ $6.90 per MMBTU

     The average price received during the first nine months of fiscal 2005 for
our natural gas was approximately $6.12 per MMBTU as compared to $4.88 per MMBTU
during the first nine months of fiscal 2004.

     During December 2003, we borrowed $225,000 from a bank for an acquisition.
We currently pay 2% over the bank's prime rate for that facility. At March 31,
2005, the effective interest rate was 7.75% and the outstanding loan balance was
$37,500. In June 2004, we borrowed $300,000 from an Oklahoma corporation to
facilitate the drilling and completion of several wells in northern California.
This debt was converted to our common stock on July 15, 2004.

Liquidity and Capital Resources
-------------------------------

     We have historically financed our operations with internally generated
funds and limited borrowings from banks and third parties, and farmout
arrangements, which permit third parties (including some related parties) to
participate in our drilling prospects. Our principal uses of cash are for
operating expenses, the acquisition, drilling and production of prospects, the
acquisition of producing properties, working capital, servicing debt and the
payment of income taxes.

     For the nine months ended March 31, 2005, the increase in cash flow from
     operations of $833,251, or 78%, was due primarily to:

     An increase in net income of approximately $1,166,176 ($1,386,157 in 2005
     as compared to $219,981 in 2004); and

     A $1,411,291 decrease in accounts payable and accrued expenses in 2005
     (which used cash during the 2005 period) compared to a decrease in accounts
     payable and accrued expenses in 2004 of $111,494; and

     The increase in net income and decrease in payable were further reduced by
     an increase in receivables of $87,116 in 2005 (which used cash) compared to
     an increase in receivables of $38,445 during 2004.

     Investing activities used cash to increase capitalized oil and gas costs
and furniture and equipment of $1,270,499 and $1,033,040 in the nine months
ended March 31, 2005 and 2004. Cash in the current nine month period ended March
31, 2005 was used for lease acquisition, seismic work, intangible drilling and
well recompletions ($862,769), and the purchase of oil and gas well equipment
($400,370) and office equipment of ($7,360). These expenditures are net of the
sale of interests in wells to be drilled charged to third party investors.

                                       20

<PAGE>


     We have a proposed drilling budget for the period March through December
2005. The budget includes drilling ten wells in the Sacramento gas province of
northern California, although the actual number of wells drilled will be based
on permit, pipeline, and rig availability considerations. Our share of the
estimated costs to complete this program is set forth in the following table:

<TABLE>
<CAPTION>

                                                               Completion &
      Area                   Wells         Drilling Costs     Equipping Costs        Total
----------------------   -------------     --------------    ---------------    --------------

<S>                           <C>            <C>                <C>                 <C>
West Grimes Field             4              $415,000           $312,000            $727,000
Colusa County, CA
Malton Black Butte            2               115,000            122,000             237,000
Field,
Tehama County, CA
Colusa County, CA             3               256,000            292,000             548,000
Yolo County, CA               1                17,500             43,000              60,500
 ---------------------    -------------     --------------    ---------------    -------------
Total Expenditure             10             $803,500           $769,000          $1,572,500
                         =============      ==============    ===============    =============
</TABLE>


     Our working capital (current assets less current liabilities) at March 31,
2005, was $1,551,388, which reflects an approximate $1,652,474 increase from our
working capital deficit at June 30, 2004. Our working capital situation improved
during the first nine months of our 2005 fiscal year because of our positive
cash flow from operations and our ability to pay down our current liabilities,
both made possible by our increase in net revenues and in net income recognized
during the period. We anticipate that our working capital and anticipated cash
flow from operations and future successful drilling will be sufficient to pay
our current liabilities as long as our gas production continues to provide us
with sufficient cash flow. As discussed below, this is dependent, in part, on
maintaining or increasing our level of production and the national and world
market maintaining its current prices for our gas production.

     Our capital requirements can fluctuate over a twelve month period because
our drilling program is usually carried out in California's dry season, from
late April until November, after which wet weather either precludes further
activity or makes it cost prohibitive.

     We believe that internally generated funds will be sufficient to finance
our drilling and operating expenses for the next twelve months. In June 2004, we
borrowed $300,000 from an Oklahoma corporation to facilitate the drilling and
completion of several wells in northern California. This debt and accrued
interest were converted into 300,500 shares of our common stock at $1.00 per
share on July 15, 2004. If our drilling efforts are successful, the anticipated
increased cash flow from the new gas discoveries, in addition to our existing
cash flow, should be sufficient to fund our share of planned future completion
and pipeline costs.

                                       21

<PAGE>


Results of Operations
---------------------

March 31, 2005 Compared to March 31, 2004
-----------------------------------------

For the nine months ended March 31, 2005, our operations continued to be focused
on the production of oil and gas, and the investigation for possible acquisition
of producing oil and gas properties in California. During the nine months ended
March 31, 2005, our revenues increased by approximately $1,877,000 as compared
to the comparable period of our 2004 fiscal year because of:

     Increased production (476,500 MMBTU sold as compared to 226,700 MMBTU sold
     during the first nine months of our 2004 fiscal year);

     Increased price received for our production (an average of $6.12 per MMBTU
     during the first nine months of our 2005 fiscal year as compared to $4.88
     per MMBTU received during that period in 2004); and

     Increased management fees received ($201,441 during fiscal 2005 as compared
     to $150,634 during fiscal 2004) because we were operators of more wells
     during 2005 (47 wells compared to 33 wells in 2004).

For the three months ended March 31, 2005, our revenues increased by
approximately $702,000 as compared to the comparable period of 2004 because of:

     Increased production (169,150 MMBTU sold as compared to 71,900 during the
     three months ended March 31, 2004);

     Increased price received for our production (an average of $6.52 per MMBTU
     during the three months ended March 31, 2005 compared to $5.28 per MMBTU
     received for the three months ended March 31, 2004); and

     Oil and gas production costs increased $82,590, or 44%, for the nine months
     ended March 31, 2005 and increased $21,123, or 25%, for the three months
     ended March 31, 2005. The increase in operating costs can be attributed to
     the addition of 8 net wells, from 54 wells to 62 wells and our percentage
     working interests in these wells were somewhat higher than the average of
     wells owned at March 31, 2004. An operator of two of the wells we
     participated in provided us with a summary billing from inception to the
     current year which accounted for approximately 12% of the year to date
     increase. Equipment rental and water disposal fees increased due to the
     addition of compressors and increased water production in our more mature
     wells.

     Depletion and depreciation expense increased $84,372 and $32,320 for the
     nine and three months ended March 31, 2005. These increases of 22% and 25%,
     respectively, were the result of using the approximate same depletion rate
     as fiscal 2004, but applying it to a larger full cost pool which resulted
     in the higher total depletion taken.

     Management fees of $59,600, which is an increase of $21,000, or 54%, in
     management fees, received during the three month period ended March 31,
     2005 compared to management fees of $38,600 received in the prior three
     month period. Management fees increased because our current year drilling
     program was completed prior to the end of the second quarter. When the
     second and third quarters of fiscal 2005 and 2004 are compared, management
     fees increased $14,700, or 14%, from $104,700 to $119,400 and reflects
     timing differences in the second and third quarters of 2004.

                                       22

<PAGE>


The following table sets forth certain items from our Condensed Consolidated
Statements of Operations as expressed as a percentage of total revenues, shown
for the nine months of fiscal 2005, 2004 and 2003:

<TABLE>
<CAPTION>

                                                     For the Nine Months Ended
                                              -----------------------------------------
                                               3/31/2005     3/31/2004     3/31/2003
                                              ------------- ------------- -------------

<S>                                                 <C>            <C>           <C>
Total revenues                                      100.0%         100.0%        100.0%

Oil & gas production costs                             8.6          15.0          16.0
                                               ------------- ------------- -------------
Income from operations                                91.4          85.0          84.0
                                               ------------- ------------- -------------

Costs and expenses
  Depreciation and depletion                          15.0          30.7          33.1
  Selling, general and administrative                 18.1          36.9          54.3
  Interest expense                                       -             -             -
                                               ------------- ------------- -------------
Total costs and expenses                              33.1          67.6          87.4
                                               ------------- ------------- -------------

Income before income taxes                            58.3          17.4         (3.4)

Provision for income taxes                            13.9             -             -
                                               ------------- ------------- -------------
Net income (loss)                                     44.4          17.4         (3.4)
                                               ============= ============= =============

To facilitate discussion of our operating results for the nine months ended
March 31, 2005 and 2004, we have included the following selected data from our
Condensed Consolidated Statements of Operations:

                                        Comparison of the Fiscal
                                       Nine Months Ended March 31,                   Increase (Decrease)
                                   ----------------------------------------------------------------------------
                                       2005                 2004                Amount             Percentage
                                   ----------------------------------------------------------------------------
Revenues:
Oil and gas sales                  $ 2,933,599          $ 1,106,809          $ 1,826,790                   165%
Management fees                        201,441              150,634               50,807                    34
Interest and other                       3,338                4,338               (1,000)                  (23)
                                   -----------          -----------          -----------           -----------
  Total revenues                     3,138,378            1,261,781            1,876,597                   149
                                   -----------          -----------          -----------           -----------

Cost and expenses:
Oil and gas production                 270,891              188,301               82,590                    44
Depreciation and depletion             469,896              385,524               84,372                    22
General and administrative             568,493              464,026              104,467                    23
Interest expense                         5,831                3,949                1,882                    48
                                   -----------          -----------          -----------           -----------
   Total costs and expenses          1,315,111            1,041,800              273,311                    26
                                   -----------          -----------          -----------           -----------

Income before taxes                  1,823,267              219,981            1,603,286                   729
Provision for income taxes             437,110                 --                437,110                   N/A
                                   -----------          -----------          -----------           -----------
 Net income                        $ 1,386,157          $   219,981          $ 1,166,176                   530%
                                   ===========          ===========          ===========           ===========

                                                       23

<PAGE>


Central to the issue of success of the nine months operations ended March 31,
2005 is the discussion of changes in oil and gas sales, volumes of natural gas
sold and the price received for those sales. We present them here in tabular
form:

                                   Oil & Gas           MMBTU                 (1)
                                     Sales              Sold             Price/MMBTU
                                 --------------    ---------------    ------------------
 2005
----------------------------
lst Quarter                           $697,553            130,000                 $5.31
2nd Quarter                          1,132,359            177,350                  6.37
3rd Quarter                          1,103,687            169,150                  6.52
                                 --------------    ---------------    ------------------
  Year to date                       2,933,599            476,500                  6.16
                                 --------------    ---------------    ------------------

2004
----------------------------
lst Quarter                            341,926             72,600                  4.75
2nd Quarter                            362,942             79,900                  4.64
3rd Quarter                            401,941             71,900                  5.28
                                 --------------    ---------------    ------------------
  Year to date                       1,106,809            224,400                  4.88
                                 --------------    ---------------    ------------------

2003
----------------------------
lst Quarter                            198,431             65,800                  2.78
2nd Quarter                            241,700             63,700                  3.76
3rd Quarter                            314,222             57,900                  5.47
                                 --------------    ---------------    ------------------
  Year to date                         754,353            187,400                  3.23
                                 --------------    ---------------    ------------------

Third Quarter change
----------------------------
2005
----------------------------
Amount                                $701,746             97,250                 $1.24
Percentage                                175%               135%                   23%
2004
----------------------------
Amount                                 $87,719             14,000                $(.19)
Percentage                                 28%                24%                  (3%)
</TABLE>

(1)  Price per MMBTU may not agree with oil and gas sales because of the
     inclusion of oil and NGL sales.

Oil and gas revenue, volumes sold and price received for our product have shown
a steady improvement over the first nine months of fiscal 2005 and the twelve
months of fiscal 2004. As the table above notes, revenue has increased
approximately 175% when comparing the two three month periods ended March 31,
2005 and 2004. Volumes sold increased approximately 135%, while the price
received for our product increased 23%.

Total revenue increased $1,876,600, or 149% when comparing the two periods,
while operating and production costs increased $82,600, or 44%.

A significant ratio presented is the percentage of management fees charged to
operated wells versus our general and administrative costs. This coverage of
general and administrative costs improved from approximately 32% for the nine
months ended March 31, 2004 to approximately 35% at March 31, 2005.

When comparing general and administrative expense for 2005 and 2004, costs
increased by $104,500, or 23% due to increased audit and accounting fees,
officers salaries and the initiation of an investor relations service.


                                       24
<PAGE>


Results of operations and net income are presented in the following table:
<TABLE>
<CAPTION>

                                           Quarterly Financial Information (unaudited)

                                                          (1)                  (2)                    Net Income (loss)
                                     Total             Operating            Net Income                    Per Share
                                    Revenues            Income                (loss)               Basic           Diluted
                                 ---------------     --------------      -----------------       -----------    -------------
    2005
    ------------------------
<S>                                    <C>                <C>                    <C>                  <C>               <C>
    1st Quarter                        $784,299           $715,249               $389,781             $.063             $.061
    2nd Quarter                       1,190,333          1,092,632                729,748              .074              .070
    3rd Quarter                       1,163,746          1,056,268                703,738              .109              .109
                                 ---------------     --------------      -----------------       -----------     -------------
      Total                           3,138,378          2,864,149              1,823,267               .25               .24
                                 ---------------     --------------      -----------------       -----------     -------------

    2004
    ------------------------
    lst Quarter                         388,337            348,739                 50,197              .010              .010
    2nd Quarter                         433,317            365,761                 93,022              .010              .010
    3rd Quarter                         440,127            354,642                 76,762              .010              .010
                                 ---------------     --------------      -----------------       -----------     -------------
      Total                           1,261,781          1,069,142                219,981              0.03              0.03
                                 ---------------     --------------      -----------------       -----------     -------------

    2003
    ------------------------
    lst Quarter                         264,896            223,246               (41,650)             (.01)             (.01)
    2nd Quarter                         279,080            237,155               (15,660)                 -                 -
    3rd Quarter                         337,476            271,845                28,748                  -                 -
                                 ---------------     --------------      -----------------       -----------     -------------
      Total                         $   881,452        $   732,246            $  (28,562)                 -                 -
                                 ---------------     --------------      -----------------       -----------     -------------

(1)  Operating income is oil and gas sales plus management fees less direct
     operating costs.

(2)  Before provision for deferred income taxes.

As can be seen in the table, revenues and operating income have improved in
every quarter when comparing the nine month periods ended March 31, 2005 and
2004. We believe this is due to the steady increase in production volumes sold
in each subsequent quarter and the fact that we have enjoyed an appreciating
price received for our product. Operating income has increased because
production costs have increased at a lesser rate than production and prices.

Contractual Obligations:
------------------------

We had four contractual obligations as of March 31, 2005. The following table
lists our significant liabilities at March 31, 2005:

                                                               Payments Due By Period
                              ------------------------------------------------------------------------------------------
                                Less than                                                After
Contractual Obligations           1 year           2-3 years         4-5 years          5 years              Total
-------------------------     ---------------    --------------    --------------    ---------------     ---------------

Employment Obligations              $214,714          $500,678          $261,020               $-0-             976,412

Bank Loans                            37,500               -0-               -0-                -0-              37,500

Operating Leases                       8,470               -0-               -0-                -0-               8,470
                              ---------------    --------------    --------------    ---------------     ---------------

Total contractual
  cash obligations                  $260,684          $500,678          $261,020               $-0-          $1,022,382
                              ===============    ==============    ==============    ===============     ===============
</TABLE>

                                       25
<PAGE>


In addition to the contractual obligations disclosed in the preceding table, we
also have made certain commitments for drilling pursuant to a budget described
in Note 10 to the financial statements for the nine months ended March 31, 2005.
Based on that budget, we also expect to expend $733,500 in drilling ten wells
through December 2005, and up to an additional $772,000 if all ten wells are
completed and equipped for production.

We maintain office space in Denver, Colorado, our principal office, 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 on the Denver office through December 31, 2004
at a lease rate of $1,261 per month. We are currently leasing this space on a
month to month basis. The Bakersfield, California office has 546 square feet and
a monthly rental fee of $730 to $770 over the term of the lease. The three year
lease expires February 8, 2006. Rent expense for the nine months ended March 31,
2005 and 2004 was $18,921 and $18,337, respectively.

We have sufficient working capital to meet all of these commitments and
obligations.


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 Condensed
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 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 therefrom 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.

                                       26
<PAGE>


Accounts Receivable:
--------------------

Accounts receivable balances are evaluated on a continual basis and allowances
are provided for potentially uncollectable accounts based on management's
estimate of the collectability of customer accounts. If the financial condition
of a customer were to deteriorate, resulting in an impairment of its ability to
make payments, an additional allowance may be required. Allowance adjustments
are charged to operations in the period in which the facts that give rise to the
adjustments become known.

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

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. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." Under SFAS No. 144, 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. 144 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.

Asset retirement obligations:
-----------------------------

We recognize the future cost to plug and abandon gas wells over the estimated
useful life of the wells in accordance with the provision of SFAS No. 143. SFAS
No. 143 requires that we record a liability for the present value of the asset
retirement obligation with a corresponding increase to the carrying value of the
related long-lived asset. We amortize the amount added to the oil and gas
properties and recognize accretion expense in connection with the discounted
liability over the remaining lives of the respective gas wells. Our liability
estimate is based on our historical experience in plugging and abandoning gas
wells, estimated well lives based on engineering studies, external estimates as
to the cost to plug and abandon wells in the future and federal and state
regulatory requirements. The liability is discounted using a credit-adjusted
risk-free rate of 6%. Revisions to the liability could occur due to changes in
well lives, or if federal and state regulators enact new requirements on the
plugging and abandonment of gas wells.

                                       27
<PAGE>


Item 3.    CONTROLS AND PROCEDURES

     As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of
the filing date of this report, we carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures. This evaluation was carried out under the supervision and with the
participation of our principal executive officer (who is also our principal
financial officer), who concluded that our disclosure controls and procedures
are effective. There have been no significant changes in our internal controls
or in other factors, which could significantly affect internal controls
subsequent to the date we carried out our evaluation.

         Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in our
reports filed or submitted under the Securities Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
     procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Exchange Act is accumulated and communicated to management, including our
principal executive officer and our principal financial officer, as appropriate,
to allow timely decisions regarding required disclosure.


PART II

Item 1.    Legal Proceedings.
           ------------------

     There are no material pending legal or regulatory proceedings against Aspen
Exploration Corporation, and it is not aware of any that are known to be
contemplated.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.
           ------------------------------------------------------------

     During 2004, we issued a convertible debenture and detachable warrants to
one accredited investor in exchange for the investor's loan to us of $300,000.
On July 15, 2004, the debt was converted to 300,500 shares of restricted common
stock as consideration for payment of principal and interest.

     The convertible debenture included warrants for up to 600,000 shares of
common stock exercisable as follows:

     There were two warrants, each for 300,000 shares of common stock. The
     holder exercised the initial warrant on March 11, 2005 and we received
     $330,000 ($1.10 per share) and issued 300,000 shares of stock. Because the
     holder exercised the first warrant before March 31, 2005, we issued an
     additional warrant exercisable to purchase another 300,000 shares at $1.25
     per share. The warrant will expire unless exercised by June 30, 2006.

     The initial warrants were valued using the Black-Scholes valuation method
     at $39,281 and have been recorded as a discount to the debt.

     On July 15, 2004, the debenture was automatically converted into shares of
our restricted common stock after our shares traded at prices greater than $1.00
per share for ten trading days. We issued 300,500 shares of our restricted
common stock in satisfaction of the principal and interest due the investor.

                                       28

<PAGE>


     The following sets forth the information required by Item 701 in connection
with that transaction:

(a) The conversion was completed effective July 15, 2004.

(b) There was no placement agent or underwriter for the transaction or the
original transaction that took place in fiscal year 2004.

(c) The shares were not sold for cash. The shares of common stock were issued in
exchange for (and in conversion of) outstanding convertible debt.

(d) We relied on the exemption from registration provided by Sections 3(a)(9)
under the Securities Act of 1933 for the conversion transaction, and upon the
exemptions from registration provided by Sections 4(2), 4(6), and Regulation D
for the issuance of the initial debt. In addition, we did not engage in any
public advertising or general solicitation in connection with this transaction;
and we provided the accredited investor with disclosure of all aspects of our
business, including providing the accredited investor with our reports filed
with the Securities and Exchange Commission, our press releases, access to our
auditors, and other financial, business, and corporate information. Based on our
investigation, we believe that the accredited investor obtained all information
regarding Aspen Exploration it requested, received answers to all questions it
posed, and otherwise understood the risks of accepting our securities for
investment purposes.

(e) The common stock issued in this transaction are not convertible or
exchangeable. Warrants were issued in this transaction as described above. There
are no registration rights associated with the issuance of the common stock or
the warrants.

(f) We received no cash proceeds from the issuance of the shares of common
stock. The original loan made by the accredited investor was used for working
capital and drilling operations.

     On April 12, 2005, the board of directors approved the issuance of 14,000
shares of restricted common stock to CEOcast, Inc. as partial consideration for
consulting services to be provided over a six month term being performed
pursuant to a consulting agreement dated April 12, 2005. The following sets
forth the information required by Item 701 in connection with that transaction:

(a) The issuance was completed on April 22, 2005.

(b) There was no placement agent or underwriter for the transaction.

(c) The shares were not sold for cash. The shares of common stock were issued in
exchange for services pursuant to a consulting agreement.

(d) We relied on the exemption from registration provided by Sections 4(2) and
4(6) under the Securities Act of 1933 and Regulation D for the issuance of the
shares. In addition, we did not engage in any public advertising or general
solicitation in connection with this transaction; and we provided the investor
with disclosure of all aspects of our business, including providing the investor
with our reports filed with the Securities and Exchange Commission, our press
releases, access to our auditors, and other financial, business, and corporate
information. Based on our investigation, we believe that the investor obtained
all information regarding Aspen Exploration it requested, received answers to
all questions it posed, and otherwise understood the risks of accepting our
securities for investment purposes.

                                       29

<PAGE>


(e) The common stock issued in this transaction is not convertible or
exchangeable. Aspen Exploration granted piggyback registration rights to
CEOcast, Inc.

(f) We received no cash proceeds from the issuance of the shares of common
stock.

Item 3.    Defaults Upon Senior Securities.
           --------------------------------

     None.

Item 4.    Submission of Matters to a Vote of Security Holders.
           ----------------------------------------------------

     No matter was submitted during the first quarter of the fiscal year covered
by this report to a vote of security holders, through the solicitation of
proxies or otherwise.

Item 5.    Other Information.
           ------------------

     None.

Item 6.           Exhibits.
-------           ---------

31.      Rule 13a-14(a) Certification
32.      Section 1350 Certification


     In accordance with the requirements of the Securities Exchange Act of 1934,
we have duly caused this report to be signed on our behalf by the undersigned,
thereunto duly authorized.

                                             ASPEN EXPLORATION CORPORATION



                                             /s/  Robert A. Cohan
                                             -----------------------------------
                                             By:  Robert A. Cohan,
May 10, 2005                                      Chief Executive Officer,
                                                  Principal Financial Officer

                                       30