U. S. SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549


                                  FORM 10-Q-SB

(MARK ONE)

[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO_______


Commission File Number 0-9494



                        ASPEN EXPLORATION CORPORATION
--------------------------------------------------------------------------------


         Delaware                                         84-0811316
-------------------------------                          -------------
(State or other jurisdiction of                          (IRS Employer
 incorporation or organization)                           I.D. Number)


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

                                 (303) 639-9860
--------------------------------------------------------------------------------

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                                Yes  [ X ]   No  [   ]

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 13, 1997
  ---------------                                ---------------------------
   Common stock,
  $.005 par value                                        4,356,322


                                        1

<PAGE>

Part One.  FINANCIAL INFORMATION
         Item 1.  Financial Statements


                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                                March 31,         June 30,
                                                 1997               1996
                                              -----------       -----------
                                              (Unaudited)       (Unaudited)
Assets
------
Current assets:
  Cash and equivalents................         $  152,273        $  102,223
  Precious metals.....................             18,824           221,866
  Accounts receivable.................             91,371            61,245
  Prepaid expenses and other..........              7,934             4,923
                                               ----------        ----------
    Total current assets..............            270,402           390,257
                                               ----------        ----------

Investment in oil and gas properties, 
  at cost (full cost method of
  accounting).........................          1,351,898         1,349,047
  Less accumulated depreciation, 
    depletion, amortization and
    valuation allowance...............           (939,271)         (873,221)
                                               ----------        ----------
    Net oil and gas properties........            412,627           475,826
                                               ----------        ----------
Property and equipment, at cost:
  Furniture, fixtures and vehicles....            145,037           146,087
  Less accumulated depreciation and
    amortization......................           (104,167)          (95,094)
                                               ----------         ---------
    Net property and equipment........             40,870            50,993
                                               ----------         ---------
Undeveloped mining properties, at cost
  less reserve for impairment of
  $193,495............................            163,287            76,434
                                               ----------         ---------
Organization cost - Aspen Recursos de   
  Mexico and ISL Resources (Note 3)...             26,058            23,869
                                               ----------         ---------
Cash Surrender Value, life insurance..            206,659           179,470
                                               ----------        ----------
    TOTAL ASSETS......................         $1,119,903        $1,196,849
                                               ==========        ==========

                              (Statement Continues)

                 See notes to Consolidated Financial Statements

                                        2

<PAGE>

                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)

                                                    March 31,        June 30,
                                                      1997            1996
                                                   -----------     ------------
                                                  (Unaudited)      (Unaudited)

Liabilities and Stockholders' Equity
------------------------------------

Current liabilities:
  Accounts payable & accrued expenses ........     $   207,504      $    80,713
  Advances from joint owners .................         138,793          245,481
  Severance taxes payable ....................          13,819           13,819
  Due to related parties .....................          54,622            5,216
                                                   -----------      -----------
Total liabilities ............................         414,738          345,229
                                                   -----------      -----------
Notes Payable ................................         150,000              -0-
                                                   -----------      -----------
Stockholders' equity:
  Common stock, $.005 par value:
     Authorized: 50,000,000 shares
     Issued:  At March 31, 1997:
       4,459,922 and 4,424,922 at June
       30, 1996 ..............................          22,124           22,124
     Outstanding: At March 31, 1997
       4,356,322 and 4,321,322 at
       June 30, 1996 .........................          



  Capital in excess of par value .............       5,651,388        5,651,388

  Accumulated deficit ........................      (5,071,593)      (4,775,138)
                                                   -----------      -----------

                                                       601,919          898,374
  Less common stock in treasury,
     at cost:  103,600 shares ................         (46,754)         (46,754)
                                                   -----------      -----------
  Total stockholders' equity .................         555,165          851,620
                                                   -----------      -----------
Total liabilities and stockholders'
equity .......................................     $ 1,119,903      $ 1,196,849
                                                   ===========      ===========

                     The accompanying notes are an integral
                            part of these statements.

                                        3

<PAGE>
<TABLE>
<CAPTION>

                                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                                 (Unaudited)

                                    Three Months Ended                    Nine Months Ended
                                        March 31,                            March 31,
                               ---------------------------           ---------------------------
                                  1997               1996              1997               1996
                                  ----               ----              ----               ----
Revenues:
<S>                            <C>                <C>                <C>                <C>      
  Oil and gas............      $ 121,470          $  47,749          $ 284,907          $ 243,026
  Mineral................            204                -0-              2,975            246,589
  Alaska mining tax
   exemption.............            -0-                -0-                -0-             45,000
  Interest and other, net          1,308             (1,232)             9,886              4,213
                               ---------          ---------          ---------          ---------
Total Revenues...........        122,982             46,517            297,768            538,828 
                               =========          =========          =========          ========= 

Costs and expenses:
  Oil & gas production...          8,830             18,905             33,456            39,790
  Loss on sale of
   precious metals.......            -0-              6,519             10,002            52,835
  Depreciation, depletion
   and amortization......         30,510             23,109             79,548            55,588
  Selling, general and
   administrative........        111,346            141,407            471,217           417,230
                               ---------          ---------          ---------         ---------
Total Costs & Expenses...        150,686            189,940            594,223           565,443
                               ---------          ---------          ---------         ---------

NET INCOME...............      $ (27,704)         $(143,423)         $(296,455)        $ (26,615)
                               =========          =========          =========         ========= 

Net Income per share.....      $    (.01)              (.03)         $    (.07)             (.01)
                               =========          =========          =========         ========= 

Weighted average number of
 common shares outstanding     4,356,322          4,271,322          4,356,322         4,271,322
                               =========          =========          =========         =========


                     The accompanying notes are an integral
                            part of these statements.

                                        4
</TABLE>

<PAGE>

                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

                                                  Nine months ended March 31,
                                                   1997               1996
                                               -----------         -----------
Cash flows from operating activities:

Net income (loss).....................          $ (296,455)       $    (26,615)

Adjustments to reconcile net income
  to net cash provided by operating
  activities:
Proceeds from sale of precious metals.                  -0-            553,601

Depreciation, depletion & amortization               79,598             55,588

Loss on sale of precious metals.......                  -0-             52,835

Decrease (increase) in precious metals              203,042           (246,589)

Increase in accounts receivable.......              (30,126)           (42,363)

Increase in prepaid expenses..........               (3,011)            (1,558)

Increase (Decrease) in accounts           
payable and accrued expenses........                 20,103             27,211
Increase (Decrease) in payable to         
related parties.....................                 49,406             (3,991)
                                                 ----------          ---------

Net cash provided by (used in)            
operating activities................                 22,557            368,119
                                                 ----------          ---------





                             (Statement Continues)


                                        5

<PAGE>
                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

                                   (Continued)

                                                  Nine months ended March 31,
                                                    1997              1996
                                                  ----------       ---------- 

Cash flows from investing activities:
Additions to undeveloped mining
  properties..........................             (86,853)         (7,354)

Sale of oil & gas properties..........             100,000             -0-

Purchase of oil & gas properties......            (180,677)       (373,965)

Proceeds - prospect fees..............              77,826              -0-

Investment in subsidiaries "Aspen         
  Recursos de Mexico" and "ISL
  Resources Corporation"..............              (6,664)            (649)

Additions to office equipment and 
  vehicles............................              (3,050)         (22,310)

Proceeds - return of equipment........               4,100               -0-

Additions to cash surrender value.....             (27,189)          (42,251)
                                                 ---------         ---------

Net cash used in investing activities.            (122,507)         (446,529)
                                                 ---------         ---------
Cash flows from financing activities:

Note from insurance company...........             150,000               -0-
                                                 ---------         ---------

Net cash from financing activities....             150,000               -0-
                                                 ---------         ---------

Net (decrease) increase in cash.......              50,050           (78,410)
                                                 ---------         ---------
Cash and cash equivalents,               
  at beginning of period..............             102,223           116,891
                                                 ---------         ---------
Cash and cash equivalents,                
  at end of period....................           $ 152,273         $  38,481
                                                 =========         =========

                     The accompanying notes are an integral
                            part of these statements.

                                        6

<PAGE>
                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

                                 March 31, 1997


Note 1 - Basis of Presentation

The accompanying unaudited, consolidated financial statements have been prepared
in  accordance  with Item 310 of  Regulation  S-B and do not  include all of the
information and footnotes required by generally accepted  accounting  principles
for complete consolidated  financial  statements.  In the opinion of management,
all  adjustments   (consisting  of  normal  recurring  adjustments)   considered
necessary for a fair presentation have been included.  Operating results for the
nine months ended March 31, 1997 are not  necessarily  indicative of the results
that may be expected for the fiscal year ending June 30, 1997.  These statements
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto  included in Form 10-K-SB for the fiscal year ended June 30, 1996,
which is available without cost from Aspen Exploration Corporation upon request.

Summary of Significant Accounting Policies
------------------------------------------

Aspen  Exploration  Corporation ("the Company") was incorporated on February 28,
1980 and is engaged in the business of  acquiring  and  developing  interests in
domestic oil and gas properties and gold and other mineral properties.


Unaudited Financial Statements
------------------------------

The Company has decided to postpone the audit of its  financial  statements  for
the year ended June 30,  1996 due to the  shortage of cash and efforts to reduce
its operating expenses.  As a result, the Company has presented the accompanying
annual  financial  statements  for fiscal year 1996 without audit along with the
financial  statements for the nine months ended March 31, 1997,  which were also
unaudited.  When and if the Company has sufficient financial resources to devote
to the audit,  it will have its  independent  auditors  complete  their audit of
fiscal 1996 and issue their audit opinion on those financial statements.

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

Going Concern
-------------

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles, which contemplates continuation of the
Company as a going  concern.  However,  the  Company has  sustained  substantial
operating losses in recent years. In addition,  the Company has used substantial
amounts of working capital in its operations. Current liabilities exceed current
assets by $144,336, and the Company has a working capital deficit.

                                        7

<PAGE>

Note 1 - Basis of Presentation (Continued)


In  addition,  the  Company's  loss for the nine months  ended March 31, 1997 is
$296,455.  As of May,  1997,  the  Company  has  used  all of its  cash and gold
reserves and has withdrawn  $150,000  against the cash value of a life insurance
policy  on its  president  and  has  sold  all  its  non-California  oil and gas
properties  for  $100,000 to pay  creditors.  From  certain  perspectives  these
matters  may raise  doubt  about the  Company's  ability to  continue as a going
concern.  Pending  the  financial  outcome of these  matters,  the  accompanying
financial statements do not include any adjustments that might result from these
uncertainties.

In view of these  matters,  realization  of a major portion of the assets in the
accompanying  balance  sheet  is  dependent  upon  continued  operations  of the
Company,  which in turn is  dependent  upon the  Company's  ability  to meet its
financing  requirements,  and  the  success  of  future  operations.  Management
believes that actions  presently  being taken to revise the Company's  operating
and financial  requirements  provide the opportunity for the Company to continue
and to improve its operations and cash flow.

In its oil and gas  operations,  the  Company  intends  to  focus  attention  on
opportunities in California, particularly those situations where the Company may
be able to require  investors to pay prospect  generation fees. Such fees may be
sufficient to pay for the  Company's  working  interest in an initial well.  The
Company  also  typically  will  "back in" after  payout  for a more  substantial
interest in successful wells. The Company will also seek out production purchase
situations and, upon finding same, will attempt to retain a carried  interest in
such purchases. Funding likely would come from outside sources.

In its uranium  operations  the Company has been seeking the best way to proceed
with two large uranium exploration  projects in which it is involved in Wyoming.
At the end of March, 1997, the Company was in advanced  discussions with a third
party to possibly  assign ISL Resources  Corporation  to the third party,  along
with the Company's interest in the two uranium projects. In this arrangement the
Company  would  subsequently  be  assigned  a  percentage  of the  stock  in ISL
Resources and would receive a future cash consideration if such were available.

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

The consolidated  financial  statements include the Company and its wholly-owned
subsidiaries,  Aspen Gold Mining  Company,  Aspen  Recursos  de Mexico,  and ISL
Resources Corporation.  Significant  intercompany accounts and transactions have
been eliminated.


                                        8

<PAGE>


Note 1 - Basis of Presentation (Continued)

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

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

Note 2 - Net Income (Loss) per Common Share

Net income  (loss) per common share is based on the weighted  average  number of
shares of common stock outstanding during the period.

The  Financial  Accounting  Standard  Board  recently  issued  Standard No. 128,
Earnings  per Share.  The  statement  simplifies  the  standards  for  computing
earnings per share and makes them compatible to international standards. FAS 128
supersedes   Accounting  Principles  Board  Opinion  No.  15  and  replaces  the
presentation  of primary EPS with a presentation of basic EPS. The Standard also
requires  dual  presentation  of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and provides guidance
on other computational changes.

The Company is aware of this new  Standard but does not know what effect the new
Standard will have, if any, on the financial  position and results of operations
of the Company once the Standard is adopted.

Note 3 - Organization Costs

During  the first  quarter  ended  September  30,  1994,  the  Company  formed a
subsidiary  (Aspen Recursos de Mexico,  S.A. de C.V.),  which is qualified to do
business  in Mexico,  so that the Company  can pursue  management's  decision to
investigate  and acquire  interests in mineral  prospects in Mexico.  During the
quarter ended  September 30, 1995,  the Company  began  amortizing  its costs to
organize its subsidiary  and will continue to do so over the next 60 months.  As
of March 31, 1997, the subsidiary had acquired no properties in Mexico.

During the quarter ended  December 31, 1996 the Company  formed a new subsidiary
(ISL Resources Corporation) for certain uranium activities. As of March 31, 1997
the Company  has  incurred  approximately  $6,120 in  organization  costs on its
behalf.

Note 4 - Commitments and Contingencies

As of March  31,  1997,  the Emigh  #34-1  and the Grey Wolf #1 wells  have been
completed as producing gas wells. The Company  discontinued  seismic work on the
Brandt 16X-27 well and refunded  approximately $46,500 to investors.  There were
no unexpended  funds due  investors or to be spent on the above  projects at the
time of this filing.


                                        9

<PAGE>



Note 4 - Commitments and Contingencies (Continued)

The Company  drilled a test well in the North Rosedale  Prospect (the Enron 66X)
during the quarter ended March 31, 1997. No oil or gas in commercial  quantities
were found and the well has been plugged and abandoned.  Approximately  $138,000
of investor funds remains to offset anticipated costs on this project.

The Company has an employment  agreement  with its president  which provides for
compensation of $125,000 per year to be paid, reimbursement of expenses,  health
insurance, and other benefits, including a split dollar life insurance plan. The
agreement provides for a two year term which is automatically  renewable for two
additional two year terms (through November 8, 1999) at the president's  option.
The Company is only entitled to terminate this  agreement  upon the  president's
death, disability, or for "cause" (as defined in the agreement).

The president  may terminate the agreement if his duties for the Company  change
substantially from those he is currently performing,  or in the event there is a
"change of control" in the Company as defined in the agreement. If the president
terminates the agreement for either of the foregoing  reasons,  the Company will
be  obligated  to pay the  president  severance  pay in an  amount  equal to the
remaining  amount due under the agreement,  but not less than two years' salary.
This payment must be made in a lump sum to the  president  within thirty days of
his termination of the agreement.

The Company entered into an employment  agreement with Robert Cohan on April 16,
1997,  which  provides  for  the  payment  of  $85,000  for  the  first  year of
employment,  plus reimbursement of expenses,  including health insurance and the
lease  payments  on a truck.  If the Company  wishes to employ Mr.  Cohan for an
additional  12 months and Mr. Cohan wishes to continue his  employment  with the
Company,  the renewal employment  agreement is effective April 16, 1998 to April
15, 1999 at the rate of $90,000 per year.

In November,  1996, the Company drilled,  completed and built a gas pipeline for
the Emigh  #34-1 well  located in the  Denverton  Creek  Field,  Solano  County,
California. The Emigh #34-1 was drilled to a total depth of 10,200' and extended
the  previously  defined  productive  limits  of the  field  in a  northeasterly
direction.  The Company  perforated a six foot interval in the Bunker formation.
The well was hooked up to a CalResources,  LLC (Shell Oil Co.) pipeline November
13, 1996,  and  commenced  producing  3.3 million  cubic feet (MMCF) of high BTU
(1,056) gas per day.  [Note: in the oil and gas business M equals 1,000.] To the
end of March,  1997, the well produced  386,531 MMBTU of gas (an average rate of
2800 MMBTU per day),  1107 barrels of  condensate,  and 937 barrels of formation
water. Gas prices in January, 1997, were at record levels of $4.245 per MMBTU.


                                       10

<PAGE>



Note 4 - Commitments and Contingencies (Continued)

Based on log analysis and mud log shows, it appears that  approximately  70 feet
to 100 feet of additional pay may exist  behind-pipe  in the Bunker,  McCormick,
H&T,  and 1st  Starkey  Sands.  These  zones will be tested in the  future.  The
Company  has  approximately  1,280  gross  acres  under  lease in the  immediate
vicinity  and,  following  the  success  of the Emigh  #34-1,  has  carried  out
additional subsurface geological studies in the area including detailed analysis
of seismic  data.  The  Company is  encouraged  by the  apparent  potential  for
additional gas producing locations for this field and, accordingly,  is planning
to seek additional funding in order to drill at least one additional well in the
field,  probably  before  September,  1997, if funding is arranged for (of which
there can be no assurance).

Gross revenues produced by the Emigh #34-1 well were $1,229,791 ($128,700 net to
the Company)  through March 31, 1997. The well,  with  drilling,  completion and
pipeline costs of $817,000, paid out (returned the entire investment) after just
4 months of production.  Now that payout has occurred, the Company has backed in
for a total working interest of 23.55% (17.19% net revenue interest).  This well
is currently (May,  1997) producing 2.1 MMBTU/D,  and may produce as much as 3.5
billion  cubic  feet  (BCF) of gas over the life of the well.  Gas prices in May
1997 were $2.005 per MMBTU.

The  Company  has staked  certain  uranium  claims in the Powder  River basin of
Wyoming.  The  Company  owns 75%  interest  in these  claims  and R. V.  Bailey,
president  of the  Company,  owns 25%.  The  Company  has also filed a number of
Notices of Intent to Locate (NOITLs) with certain surface owners and with the U.
S. Bureau of Land Management.

The  Company  has formed a  subsidiary,  ISL  Resources  Corporation,  a Wyoming
corporation,  in order to carry on uranium  activities  in  certain  situations.
Management  of the  Company  believes  that  the in situ  leaching  of  uranium,
commonly  referred to as ISL, is the best  possible  way to license and commence
production of uranium under the present environmental  climate.  Discussions for
providing  financing for ISL Resources have been held with certain parties,  but
there is no assurance that funding will be provided.

The Company filed suit in 1993 against  Newmont  Exploration  Ltd. of Denver for
alleged breaches of contract  related to a lode gold project near Nome,  Alaska.
In 1996 attorneys  representing Newmont filed a motion for summary judgment with
the court in Barrow,  Alaska,  which the Company's  attorneys  have  opposed.  A
decision on the motion is expected some time in 1997. A tentative  trial date of
January, 1998 has been set.



                                       11

<PAGE>



Note 5 - Certain Relationships and Related Transactions

On February 11, 1997 Registrant  issued restricted shares of its common stock to
the following officers, directors, employees and consultants:

         Issued To                          Capacity                Shares
         ---------                          --------                ------

         Lawton L. Clark                    Director                20,000
         Robert F. Sheldon                  Director                20,000
         Robert A. Cohan                    Officer                 75,000
         Judith L. Shelton                  Employee                10,000
         Ray K. Davis                       Consultant              10,000


Shares  were  issued to such  persons  for  services  rendered  pursuant  to the
exemption from registration found in Section 4(2) of the Securities Act of 1933.


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

NOTE:  Company's financial statements at June 30, 1996 are not audited.
-----  ----------------------------------------------------------------

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

March 31, 1997 as compared to March 31, 1996
--------------------------------------------

Because  of  a  shortage  of  operating  funds,  Registrant  has  postponed  the
preparation of audited financial statements.  The financial statements contained
herein for the fiscal year ended June 30, 1996 are unaudited. Field work for the
audit has been completed and Registrant expects to complete the audit during the
1997 calendar year.  Registrant has sustained  substantial  operating  losses in
recent years. In addition,  Registrant has used  substantial  amounts of working
capital  in  its  operations.  Current  liabilities  exceed  current  assets  by
$144,336, and Registrant has a working capital deficit.

In view of this  deficit,  realization  of a major  portion of the assets in the
accompanying balance sheet is dependent upon continued operations of Registrant,
which in turn is  dependent  upon  Registrant's  ability  to meet its  financing
requirements,  and the success of future  operations.  Management  believes that
actions  presently being taken to revise  Registrant's  operations and financial
requirements  provide  the  opportunity  for  Registrant  to continue as a going
concern.

From March 31, 1996 to March 31, 1997,  Registrant's  working  capital  (current
assets less current liabilities)  decreased by $416,960. The decrease in working
capital is primarily  attributable  to a decrease of over $226,000 in the amount
of cash and precious  metals  (primarily  gold) held in inventory by Registrant.
The  decrease  in  precious  metals  inventory  is due to a decrease  of in-kind
production received by Registrant.  Registrant received approximately 748 ounces
of raw gold for the  nine-month  period  ended March 31, 1996 as compared to -0-


                                       12

<PAGE>


ounces of raw gold for the nine-month period ended March 31, 1997. Cambior,  the
operator of the Valdez  Creek  mining  property,  has ceased  mining  operations
effective June 30, 1995. Gold processing,  however, continued through September,
1995.  The surface area of the mine has been restored by Cambior,  and they have
reassigned all their interest in the mining claims to Registrant. Registrant may
explore for mineable lode gold deposits on the Valdez Creek  property if funding
can be obtained from outside parties.

The  financial  information  related to the June 30, 1996 Balance  Sheet in this
Form 10- Q-SB is unaudited  because  Registrant  is  postponing  the audit until
additional  funds  are  available  to pay for such  audit,  which  is  partially
complete.

Due to the  cessation  of  royalties  from the Valdez Creek gold mine in Alaska,
Registrant  does not have  sufficient cash flow to fully carry on all activities
as was  done  previously.  Management  made a  decision  to enter  into  uranium
exploration and promotion by acquiring  certain  uranium  properties in calendar
1995 and 1996.  However,  Registrant has been unsuccessful thus far in finding a
joint venture partner for the uranium ventures and this has caused a shortage of
operating  funds.  In order to provide  interim  financing,  Registrant  has, in
November, 1996, withdrawn $125,000 and $25,000 in February, 1997 against a split
dollar  insurance  plan  (total  value  of the  plan  assets  was  approximately
$200,000).  Registrant has also sold its  non-California  oil and gas production
for $100,000 cash to its consulting accountant, officer and shareholder. Certain
management of Registrant has also elected to go on a deferred compensation plan,
whereby  portions of salaries  are not paid and are  postponed  to a future time
when  Registrant  may be able to pay such deferred  salaries.  At March 31, 1997
Registrant  owed  approximately  $55,000 to officers of  Registrant  as deferred
compensation.

Although Registrant is looking forward to increased revenues from California oil
and gas  production in the future,  current  income from  California oil and gas
production is inadequate to fund the monthly general and administrative costs of
Registrant and there is no other current source of income.

Registrant  is  undertaking  steps in order to derive  revenues from the uranium
properties  at the  earliest  time.  Registrant  will also  take  such  steps as
feasible in order to keep costs for uranium-related activities to a minimum.

Registrant  has  formed  a  wholly-owned   subsidiary  in  1996,  ISL  Resources
Corporation,  a  Wyoming  corporation,  in order to  carry  on  certain  uranium
activities.  Management  of  Registrant  believes  that the in situ  leaching of
uranium,  commonly  referred to as ISL, is the best  possible way to license and
commence  production  of  uranium  under  the  present  environmental   climate.
Discussions  for  providing  financing  for ISL  Resources  have  been held with
certain  parties,  but there is no  assurance  that  funding  will be  provided.
Registrant  intends to pursue funding for ISL Resources in the future.  There is
no assurance such funding will take place.  It is likely that, to the extent any
additional funding is received,  it will reduce the Registrant's interest in ISL
Resources. Such reduction may be significant.

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<PAGE>


Without  additional  funding from outside  sources,  Registrant may be unable to
continue to operate at the current level,  even though Registrant has only three
full time employees.

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

For the nine months ended March 31, 1997 Registrant's operations continued to be
focused on the  production  of oil and gas, and the  investigation  for possible
acquisition of producing oil and gas properties and properties  prospective  for
precious metals production.

Registrant had no precious metals revenues for the nine-month period ended March
31, 1997 compared to $246,589 in revenues for the nine-month  period ended March
31, 1996.  This  decrease in precious  metals  revenue was due to a cessation of
mining  activities  effective June 30, 1995,  although  Registrant  continued to
receive in-kind gold royalties through September 30, 1995.

Oil and gas revenues,  which includes income from management  fees, for the nine
months ended March 31, 1997 increased by 17% ($41,881) when compared to the same
period in the prior  year.  Such  increase  was due to the Emigh #34-1 gas well,
Solano County, California, which began production on November 15, 1996.

Oil and gas production expenses decreased by about 16% ($6,334) when compared to
the prior year.  The  decrease in overall  production  expenses  for the current
period, as compared to the prior year, is attributable to Registrant's  interest
in certain  properties  acquired in  November,  1995,  in  California  which are
working  interests,  and  the  sale  of  non-California  properties  which  were
properties with high operating costs.

Depletion, depreciation and amortization increased $23,960 (43%) from $55,588 at
March 31,  1996 to  $79,548  at March 31,  1997.  This  increase  in  depletion,
depreciation  and  amortization  was also largely due to the acquisition of new,
shorter lived producing properties in California in November, 1995.

During  January,  1995, the Registrant  received notice from the State of Alaska
Department of Revenue for unpaid  License Tax on Royalties from Mines and Mining
for the years 1991 through 1993.  Registrant  contested  these License Taxes and
believed  it to  be  exempt  from  these  taxes.  Pending  the  outcome  of  the
Registrant's  petition  seeking relief from these taxes,  Registrant  recorded a
liability of $45,000 at June 30, 1995 for the estimated  amount of taxes due. On
October 30, 1995 the Alaska  Department of Revenue  notified  Registrant that it
had accepted its petition for relief and no taxes were due through September 30,
1995.  Accordingly,  Registrant  reversed its recorded liability to the State of
Alaska  and  recorded  income in the amount of  $45,000  for the  Alaska  Mining
License Tax exemption at September 30, 1996.

                                       14

<PAGE>


Selling,  general and  administrative  expenses  increased by $53,987 (13%) from
$417,230 at March 31, 1996 to $471,217 for the nine months ended March 31, 1997,
reflecting   increased  costs  incurred  in  pursuing  the  Anvil   Gold-Newmont
litigation, and increased operating costs for the California office.

As a result of Registrant's operations for the nine months ended March 31, 1997,
Registrant ended the nine-month  period with a net loss of $296,455  compared to
net  income of  $116,808  for the  previous  nine-month  period.  This  decrease
reflected  both  decreased  revenues and increased  expenses for the  nine-month
period as compared to the prior year.  The  largest  decline,  $243,614,  was in
mineral  income due to the  cessation of  operations at the Valdez Creek Mine on
June 30, 1995.

Pursuant to the requirements of the Securities Exchange Act of 1934,  Registrant
has duly  caused  this  report  to be signed  on its  behalf by the  undersigned
thereunto duly authorized.


                                     ASPEN EXPLORATION CORPORATION
                                                 (Registrant)




                                     /s/ R. V. Bailey
                                     -------------------------------
                                     By:  R. V. Bailey,
May 13, 1997                              Chief Executive Officer,
                                          Principal Financial Officer

                                       15