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 September 30, 1996

                                       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 Registrant as Specified in its Charter)

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

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

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

Indicate by check mark whether the Registrant (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 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 February 24, 1997
     -----                                 --------------------------------
  Common stock,
$.005 par value                                      4,321,322


                                        1

<PAGE>
<TABLE>
<CAPTION>

One.  FINANCIAL INFORMATION

     Item 1. Financial Statements

                        ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                                  CONSOLIDATED BALANCE SHEETS

                                          ASSETS
                                                               September 30,            June 30,
                                                                    1996                  1996
                                                               -------------           -----------
                                                                (Unaudited)            (Unaudited)
<S>                                                             <C>                     <C>    
Current Assets:
  Cash and cash equivalents ..........................          $   109,254            $   102,223
  Precious metals ....................................              149,622                221,866
  Accounts receivable, trade .........................               47,280                 61,245
  Prepaid expenses ...................................               10,035                  4,923
                                                                -----------            -----------
     Total current assets ............................              316,191                390,257
                                                                -----------            -----------
Investment in oil and gas properties,
at cost (full cost method of
accounting) ..........................................            1,401,540              1,349,047
  Less accumulated depletion and valuation
  allowance ..........................................             (903,221)              (873,221)
                                                                -----------            -----------
                                                                    498,319                475,826
                                                                -----------            -----------
Property and equipment, at cost:
  Furniture, fixtures and vehicles ...................              141,987                146,087
  Less accumulated depreciation ......................              (98,121)               (95,094)
                                                                -----------            -----------
                                                                     43,866                 50,993
                                                                -----------            -----------

Undeveloped mining properties, at cost:
  less reserve for
  impairment of $193,495 .............................              111,527                 76,434
                                                                -----------            -----------

Cash surrender value, life insurance .................              190,307                179,470
                                                                -----------            -----------
Organization cost,
  Aspen Recursos de Mexico (Note 3) ..................               22,377                 23,869
                                                                -----------            -----------

     TOTAL ASSETS ....................................          $ 1,182,587            $ 1,196,849
                                                                ===========            ===========

                              (Statement Continues)
                 See notes to Consolidated Financial Statements

                                        2
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<TABLE>
<CAPTION>

                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (Continued)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                             September 30,              June 30,
                                                                  1996                    1996
                                                              ------------            ------------
                                                              (Unaudited)             (Unaudited)                 
<S>                                                           <C>                     <C>    
Current liabilities:
  Accounts payable and accrued
expenses ..................................................    $   187,590            $    80,713
  Advances from joint owners ..............................        245,481                245,481
  Severance taxes payable (Note 4) ........................         13,819                 13,819
  Due to related parties ..................................         21,446                  5,216
                                                               -----------            -----------
  Total current liabilities ...............................        468,336                345,229
                                                               -----------            -----------
Commitments and contingencies
    (Note 4)
Stockholders' equity (Note 4):
  Common stock, $.005 par value:
    Authorized: 50,000,000 shares
    Issued: At September 30, 1996:
      4,424,922 and 4,424,922 at June 30, 1996
    Outstanding: At September 30, 1996
      4,321,322 and 4,321,322 at June
      30, 1996 ............................................         22,124                 22,124


  Capital in excess of par value ..........................      5,651,388              5,651,388
  Accumulated deficit .....................................     (4,912,507)            (4,775,138)
                                                               -----------            -----------
                                                                   761,005                898,374
  Less common stock in treasury, at
    cost: 103,600 shares ..................................        (46,754)               (46,754)
                                                               -----------            -----------
  Total stockholders' equity ..............................        714,251                851,620
                                                               -----------            -----------
Total liabilities and stockholders'
  equity ..................................................    $ 1,182,587            $ 1,196,849
                                                               ===========            ===========


                          See Notes to Consolidated Financial Statemnts

                                              3

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<PAGE>
<TABLE>
<CAPTION>
                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                                                                                          
                                                         Three Months Ended
                                                             September 30,
                                                    ----------------------------
                                                            (unaudited)
                                                       1996              1995
                                                       ----              ----
<S>                                                 <C>                <C>    
Revenues:
  Oil and gas .................................     $    76,057      $    99,349
  Mineral .....................................             -0-          236,825
  Alaska mining tax exemption .................             -0-           45,000
  Interest and other, net .....................           4,240            6,268
                                                    -----------      -----------
Total Revenues ................................          80,297          387,442
                                                    -----------      -----------

Costs and expenses:
  Oil and gas production ......................           9,086            7,046
  Depreciation, depletion and
    amortization ..............................          34,519            7,500

  Selling, general and administrative .........         174,061          157,454
                                                    -----------      -----------
Total Costs and Expenses ......................         217,666          172,000
                                                    -----------      -----------

NET INCOME (LOSS) .............................     $  (137,369)     $   215,442
                                                    ===========      ===========

Net income per common share ...................     $      (.03)     $       .05
                                                    ===========      ===========

Weighted average number of common shares
  outstanding ...................................     4,321,322        4,271,322
                                                    ===========      ===========





                     The accompanying notes are an integral
                            part of these statements.

                                        4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

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

                                                              Three months ended
                                                                 September 30,
                                                              1996         1995
                                                            ---------    ---------
<S>                                                          <C>          <C>   
Cash flows from operating activities:
Net income (loss) .......................................   $(137,369)   $ 215,442
Adjustments to reconcile net income
  to net cash provided by (used in)
  operating activities:
Proceeds from sale of precious metals ...................         -0-       99,554
Depreciation, depletion & amortization ..................      34,519       11,928
Loss on sale of precious metals .........................         -0-        9,765
Decrease (increase) in precious metals ..................      72,244     (246,589)
Decrease in accounts receivable .........................      13,965       13,255
(Increase) decrease in prepaid expense ..................      (5,112)       1,180
Increase in accounts payable and accrued
expenses ................................................     106,877       47,373
Increase (decrease) in due to related
  parties ...............................................      16,230       (1,995)
                                                            ---------    ---------
Net cash provided by operating
  activities ............................................     101,354      149,913
                                                            ---------    ---------
Cash flows from investing activities:
Proceeds - Return of equipment ..........................       4,100          -0-
Purchase of oil & gas properties ........................    (130,319)     (22,881)
Additions to undeveloped mining
  properties ............................................     (35,093)      (7,354)
Investment in subsidiaries ..............................         -0-         (575)
Proceeds - Prospect fees ................................      77,826          -0-
Additions to cash surrender value .......................     (10,837)     (14,083)
                                                            ---------    ---------
Net cash used in investing
activities ..............................................     (94,323)     (44,893)
                                                            ---------    ---------
Net increase in cash ....................................       7,031      105,020
                                                            ---------    ---------
Cash and cash equivalents,
  at beginning of period ................................     102,223      116,891
                                                            ---------    ---------
Cash and cash equivalents,
  at end of period ......................................   $ 109,254    $ 221,911
                                                            =========    =========

                   The accompanying notes are an integral
                            part of these statements.

                                        5
</TABLE>

<PAGE>
                          ASPEN EXPLORATION CORPORATION

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

                               September 30, 1996


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
three months ended  September  30, 1996 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 its audit of its  financial  statements  for
the year ended June 30,  1996 due to its  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 three months ended September 30, 1996,  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 $152,145, and the Company has a working capital deficit.

                                        6

<PAGE>

Note 1 - Basis of Presentation (Continued)

In  addition,  the  Company's  loss for the  first  quarter  of  fiscal  1997 is
$137,369.  As of February,  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.  These matters 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
its operations.

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  activities  the Company will attempt to form joint ventures with
well-financed  companies  and will  attempt  to  recover at least 100% above the
amount the Company has invested in any particular project.

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.  During the first quarter of fiscal 1997, the Company formed a
new subsidiary, ISL Resources Corporation,  for its uranium activities. No costs
have been incurred on behalf of ISL Resources through September 30, 1996.

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.

                                        7

<PAGE>

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.

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 September 30, 1996, the subsidiary had acquired no properties in Mexico.

Note 4 - Commitments and Contingencies

At September 30, 1996 the Company was  committed to the  following  drilling and
development projects in California:

         1.    Drill, complete and equip the Emigh #34-1 well.
         2.    Install a pipeline and put the Grey Wolf #1 well on production.
         3.    Complete seismic work on the Brandt 16X-27 well.


As of September  30, 1996,  the Company has received  approximately  $245,000 in
prepayments from third party investors for their share of the projects  outlined
above.

As of the date of February 12, 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.
Unexpended  funds due  investors or to be spent on projects  were  approximately
$15,000 at the time of filing.

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, 1997) 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.

                                        8

<PAGE>


Note 4 - Commitments and Contingencies (Continued)

The Company entered into an employment  agreement with Robert Cohan on April 16,
1995,  which  provides  for  the  payment  of  $75,000  for  the  first  year of
employment,  plus reimbursement of expenses,  including health insurance and the
payments on a truck. 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, 1996 to April 15, 1997 at
the rate of $80,000 per year.

The Company has recently  drilled and  completed 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  commenced
production  November 13, 1996 and has produced  243,318 MMBTU of gas (an average
rate of 3042 MMBTU per day),  744  barrels  of  condensate,  and 588  barrels of
formation  water  through  January 31,  1997.  Gas sales by month is as follows:
November,  1996 - 59,467 MMBTU (17 days);  December,  1996 - 97,956  MMBTU;  and
January, 1997 - 85,895 MMBTU. Gas prices in January, 1997, were at record levels
of $4.245 per MMBTU (gas being produced has a BTU content of 1055).

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 may drill a follow-up well in the spring of 1997.

Gross revenues  produced by this well were $889,600 ($88,960 net to the Company)
through January 31, 1997. At payout  (anticipated to be prior to March 1, 1997),
the Company will back-in for an additional  11.55% working and 7.19% net revenue
interest, or a total working interest of 23.55% and 17.19% net revenue interest.

The Company has staked 219 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 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

                                       9
                                                            

<PAGE>


Note 4 - Commitments and Contingencies (Continued)

there is no assurance  that funding  will be  provided.  The Company  intends to
vigorously  pursue  funding for ISL  Resources  prior to the end of fiscal 1997.
There is no assurance  such funding  will take place.  If no outside  funding is
found,  the Company runs the risk of losing the mining claims and the investment
in them.

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.

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

September 30, 1996 as compared to September 30, 1995
----------------------------------------------------

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 prior to
April 1, 1997.  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 $152,145,  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  September 30, 1995 to September  30, 1996,  Registrant's  working  capital
(current assets less current liabilities) decreased by $1,024,802.  The decrease
in working  capital is primarily  attributable to a decrease of over $818,000 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  three-month  period  ended  September  30,  1995 as
compared to -0- ounces of raw gold for the  three-month  period ended  September
30, 1996. Cambior, the operator of the Valdez Creek mining property, has ceased

                                       10

<PAGE>

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 September 30, 1996
Registrant  owed  approximately  $21,500 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.

It is imperative that Registrant take 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.
However, certain costs cannot be avoided. Approximately $29,000 ($135 per claim)
was paid to the U. S. Bureau of Land  Management on November 25, 1996, to record
claims within the uranium  project in the Powder River basin,  Wyoming.  Holding
costs for mining claims are $100 per claim annually.

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 vigorously  pursue  funding  for ISL  Resources prior to

                                       11

<PAGE>

March 31, 1997.  Such  funding may include a private  placement of stock and the
possible  sale of  stock  on a  Canadian  market.  There  is no  assurance  such
placement or sale will take place.  If no outside  funding is found,  Registrant
runs the risk of losing the mining claims and the investment in them.

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 three months ended September 30, 1996 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.  In addition,  Registrant  received
in-kind gold royalties from its Valdez Creek until September, 1995.

Registrant  had no precious  metals  revenues for the  three-month  period ended
September 30, 1996 compared to $236,825 in revenues for the  three-month  period
ended  September 30, 1995. 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 three
months ended  September 30, 1996 decreased by 23% ($23,292) when compared to the
same period in the prior year. Such decrease was due to the sale of Registrant's
remaining  proved  producing  oil and gas  reserves in Montana and North  Dakota
which were marginally economic.

Oil and gas production expenses increased by about 29% ($2,040) when compared to
the prior year.  The  increase 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.

Depletion, depreciation and amortization increased $27,019 (360%) from $7,046 at
September 30, 1995 to $34,519 at September 30, 1996. 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,

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<PAGE>


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.

Selling,  general and administrative  expenses increased by $16,600 (10.5%) from
$157,454 at September 30, 1995 to $174,061 for the three months ended  September
30, 1996, reflecting increased costs incurred in pursuing the Anvil Gold-Newmont
litigation.

As a result of Registrant's  operations for the three months ended September 30,
1996, Registrant ended the quarter with a net loss of ($137,369) compared to net
income of $215,442  for the  previous  quarter.  This  decrease  reflected  both
decreased revenues and increased expenses for the current quarter as compared to
the prior year. The largest decline,  $236,825, 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,
February 24, 1997                         Chief Executive Officer,
                                          Principal Financial Officer

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