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, 1999

                                       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)                                     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  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  [   ]   No  [ X ]

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 November 12, 1999
     -----                                      --------------------------------
  Common stock,
 $.005 par value                                           5,191,322


                                        1
<PAGE>


Part One. FINANCIAL INFORMATION

     Item 1. Financial Statements

                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                  September 30,       June 30,
                                                      1999              1999
                                                   -----------      -----------
                                                   (Unaudited)       (Audited)
Current Assets:
  Cash and cash equivalents, including .......     $   924,624      $   335,603
   $828,716 and $296,294 of invested
   cash at September 30, 1999 and June
   30, 1999 respectively
  Precious metals ............................          18,823           18,823
  Accounts receivable, trade .................         296,739          108,913
  Prepaid expenses ...........................           5,932            9,770
                                                   -----------      -----------
     Total current assets ....................       1,246,118          473,109
                                                   -----------      -----------
Investment in oil and gas properties,
  at cost (full cost method of
  accounting) ................................       2,334,428        2,309,566
  Less accumulated depletion and
    valuation allowance ......................      (1,336,305)      (1,280,305)
                                                   -----------      -----------
                                                       998,123        1,029,261
                                                   -----------      -----------
Property and equipment, at cost:
  Furniture, fixtures and vehicles ...........         182,103          178,403
  Less accumulated depreciation ..............        (140,162)        (136,237)
                                                   -----------      -----------
                                                        41,941           42,166
                                                   -----------      -----------
Cash surrender value, life insurance .........         239,095          239,095
                                                   -----------      -----------

     TOTAL ASSETS ............................     $ 2,525,277      $ 1,783,631
                                                   ===========      ===========


                              (Statement Continues)
                 See notes to Consolidated Financial Statements

                                        2

<PAGE>

                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (Continued)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                 September 30,        June 30,
                                                      1999              1999
                                                  -----------       -----------
                                                  (Unaudited)         (Audited)
Current liabilities:
  Accounts payable and accrued
    expenses ...............................      $   750,242       $   280,920

  Advances from joint owners ...............          264,500            32,245

  Notes payable - current ..................          124,995           126,570
                                                  -----------       -----------
  Total current liabilities ................        1,139,737           439,735
                                                  -----------       -----------
  Notes payable - long term ................           68,750            81,003
                                                  -----------       -----------
Stockholders' equity:

  Common stock, $.005 par value:
    Authorized: 50,000,000 shares
    Issued: At September 30, 1999:
    5,191,322 and June 30, 1999:
    5,191,322 ..............................           25,956            25,956


  Capital in excess of par value ...........        5,951,602         5,951,602
  Accumulated deficit ......................       (4,632,768)       (4,686,665)
  Deferred compensation ....................          (28,000)          (28,000)
                                                  -----------       -----------

  Total stockholders' equity ...............        1,316,790         1,262,893
                                                  -----------       -----------
Total liabilities and stockholders'
  equity ...................................      $ 2,525,277       $ 1,783,631
                                                  ===========       ===========


                 See Notes to Consolidated Financial Statements

                                        3

<PAGE>


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


                                                           Three Months Ended
                                                              September 30,
                                                          --------------------
                                                               (unaudited)
                                                          1999            1998
                                                          ----            ----
Revenues:
---------
  Oil and gas ..................................      $  273,274      $  295,262
  Management fees ..............................          17,566          19,614
  Interest and other, net ......................           2,085           6,889
                                                      ----------      ----------
Total Revenues .................................         292,925         321,765
                                                      ----------      ----------

Costs and expenses:
  Oil and gas production .......................          14,854          11,262
  Depreciation, depletion and
    amortization ...............................          59,925          28,000

  Aspen Power Systems expense ..................          21,209             -0-
  Selling, general and administrative ..........         139,542         143,828
  Interest expense .............................           3,498           5,960
                                                      ----------      ----------
Total Costs and Expenses .......................         239,028         189,050
                                                      ----------      ----------
NET INCOME .....................................      $   53,897      $  132,715
                                                      ==========      ==========

Basic earnings per common share ................      $      .01      $      .03
                                                      ==========      ==========

Diluted earnings per common share ..............      $      .01      $      .03
                                                      ==========      ==========
Basic weighted average number of
 common shares outstanding .....................       5,191,322       4,916,322
                                                      ==========      ==========
Diluted weighted average number of
 common shares outstanding .....................       5,348,389       5,194,622
                                                      ==========      ==========


                     The accompanying notes are an integral
                            part of these statements.

                                        4

<PAGE>
<TABLE>
<CAPTION>


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



                                                      Three months ended September 30,
                                                              1999         1998
                                                           ---------    ---------

Cash flows from operating activities:
-------------------------------------

<S>                                                        <C>          <C>
Net gain................................................   $  53,897    $ 132,715

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

  Depreciation, depletion & amortization ...............      59,925       28,000
  Loss on write off of investments .....................        --          3,400

Changes in assets and liabilities:

  Increase in accounts receivable ......................    (187,826)     (72,207)
  Decrease in prepaid expense ..........................       3,838        4,430
  Increase (decrease) in accounts payable and accrued
    expense ............................................     701,577      (89,892)
  Decrease in due to related parties ...................        --         (8,333)
                                                           ---------    ---------
  Net cash provided (used) by operating activities .....     631,411       (1,887)
                                                           ---------    ---------

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

  Conveyance of oil & gas properties for cash ..........        --        477,950
  Development & acquisition of oil & gas properties ....     (24,862)    (103,642)
  Purchase of office equipment .........................      (3,700)      (3,428)
  Sale of mining data ..................................        --          1,970
                                                           ---------    ---------


  Net cash (used in) provided by investing activities ..     (28,562)     372,850
                                                           ---------    ---------

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

  Note payable - proceeds ..............................        --          2,571
  Repayment of notes payable ...........................     (13,828)     (14,356)
                                                           ---------    ---------

                                                             (13,828)     (11,785)

  Net increase in cash and cash equivalents ............     589,021      359,178

  Cash and cash equivalents, beginning of year .........     335,603      425,306
                                                           ---------    ---------

  Cash and cash equivalents, end of year ...............   $ 924,624    $ 784,484
                                                           =========    =========

  Interest paid ........................................   $   3,498    $   5,960
                                                           =========    =========


Schedule of non cash investing and financing activities:
--------------------------------------------------------

  Notes payable issued for properties ..................   $    --      $ 206,250
  Common stock issued for properties ...................        --        275,000
                                                           ---------    ---------

                                                           $    --      $ 481,250
                                                           =========    =========


                     The accompanying notes are an integral
                            part of these statements.

                                        5
</TABLE>
<PAGE>

                          ASPEN EXPLORATION CORPORATION

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

                               September 30, 1999


Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

     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 uranium and other mineral
     properties. The Company's oil and gas properties are located in California.

     The Company has two wholly owned  subsidiaries,  Aspen Gold Mining  Company
     and Aspen  Recursos de Mexico,  as well as 85% owned  Aspen  Power  Systems
     Corporation ("APS") formed in February 1999. Aspen Gold Mining has staked 6
     claims on Valdez Creek in central Alaska.  Other than those claims, none of
     the subsidiaries have any assets, liabilities or operations. The purpose of
     APS will be to  attempt to  design,  construct  and  possibly  operate  gas
     turbine power plants to generate electrical energy.

     Consolidated financial statements
     ---------------------------------

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

     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.

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

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted   accounting   principles  requires  management  to  make  certain
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities and the disclosure of contingent liabilities at the date of the
     financial statements and reported amounts of revenues and expenses.  Actual
     results could differ from those estimates.

                                        6
<PAGE>


Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


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

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

     The Company  evaluates the carrying  value of assets other than oil and gas
     assets for potential  impairment on an ongoing basis. The Company evaluates
     the  carrying  value of  long-lived  assets  and  long-lived  assets  to be
     disposed of for potential  impairment  periodically.  The Company considers
     projected  future  operating   results,   cash  flows,   trends  and  other
     circumstances in making such estimates and evaluations.

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

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

     New Accounting Pronouncements
     -----------------------------

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

     In February 1997, the Financial Accounting Standards Board issued Financial
     Accounting  Standard  No. 128 ("SFAS No.  128"),  addressing  earnings  per
     share.  SFAS No. 128 changed the  methodology of  calculating  earnings per
     share and renamed the two calculations basic earnings per share and diluted
     earnings per share. The calculations differ by eliminating any common stock
     equivalents  (such as stock options,  warrants,  and convertible  preferred
     stock) from basic earnings per share and changes certain  calculations when
     computing  diluted  earnings per share. The Company adopted SFAS No. 128 in
     fiscal year 1998.

                                        7
<PAGE>


Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     The following is a reconciliation  of the numerators and denominators  used
     in the  calculations of basic and diluted earnings (loss) per share for the
     three months ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>

                                                September 30,                      September 30,
                                                     1999                              1998
                                                                   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               53,897     5,191,322      .01    132,715    4,916,322      .03

            Dilutive securities
             stock options                               460,000                          460,000

            Repurchased shares                          (302,933)                        (181,700)
                                        ------------------------------------------------------------------

          Diluted earnings per share:

            Net income and assumed
            share conversion                53,897     5,348,389      .01    132,715    5,194,622      .03
                                        ==========    ==========   ====== ==========   ==========   ======

</TABLE>


     Precious metals and revenues
     ----------------------------

     Precious  metals  inventories  are  valued at the  lower of cost  (specific
     identification  method) or market.  There was no allowance  for  unrealized
     losses against inventories due to market decline at September 30, 1999.

     Oil and gas properties
     ----------------------

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

     Depletion  and  amortization  of the full-cost  pool is computed  using the
     units-of-production  method based on proved reserves as determined annually
     by the Company and independent engineers. An additional depletion provision
     in the form of a valuation  allowance is made if the costs  incurred on oil
     and  gas  properties, or  revisions in  reserve  estimates, cause the total

                                        8

<PAGE>



Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     capitalized  costs of oil and gas  properties  in the cost center to exceed
     the capitalization  ceiling.  The capitalization  ceiling is the sum of (1)
     the present  value of future net  revenues  from  estimated  production  of
     proved oil and gas  reserves  applicable  to the cost  center  plus (2) the
     lower  of cost or  estimated  fair  value  of the  cost  center's  unproved
     properties less (3) applicable income tax effects.  The valuation allowance
     was $281,719 at September 30, 1999 and September 30, 1998.

     Property and equipment
     ----------------------

     Depreciation  and  amortization  of property and  equipment are expensed in
     amounts  sufficient to relate the expiring costs of  depreciable  assets to
     operations   over   estimated   service   lives,   principally   using  the
     straight-line  method.  Estimated  service  lives range from three to eight
     years.  When  assets  are  sold or  otherwise  disposed  of,  the  cost and
     accumulated  depreciation  are removed from the accounts and any  resulting
     gain or loss is reflected in operations in the period realized.

     Undeveloped mining properties
     -----------------------------

     The Company capitalizes all costs associated with acquiring,  exploring and
     developing  mineral  properties,  including  certain  internal  costs which
     specifically   relate  to  each  mining  property  area  ("cost   center").
     Capitalized  costs are  deferred  until the area of  interest to which they
     relate is put into operation,  sold,  abandoned or impaired.  The Company's
     pro rata  share of  advance  mineral  royalties,  bonuses  and  other  cash
     payments  received by the Company from joint  venture or other  exploration
     participants  reduce  the  amount  of  a  cost  center  as  a  recovery  of
     capitalized  costs.  The excess of the  Company's pro rata share of advance
     mineral royalties,  bonuses and other cash payments received by the Company
     from joint venture or other exploration participants over capitalized costs
     in a specific cost center are recognized as revenue in the period received.
     Gains or losses on the sale or abandonment of mining properties are charged
     to current operations.

     Deferred compensation Costs
     ---------------------------

     The  Company  records  stock  bonuses to  employees  as an  expense  and an
     increase  to paid-in  capital in the year of grant  unless the bonus  vests
     over future years. Bonuses that vest are deferred and expensed ratably over
     the vesting period.

                                        9
<PAGE>


Note 2 SEGMENT INFORMATION

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

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

     During the  fourth  quarter  of 1998,  the  Company  adopted  Statement  of
     Financial Accounting  Standards No. 131,  "Disclosures about Segments of an
     Enterprise  and Related  Information"  (SFAS 131). The adoption of SFAS 131
     requires the  presentation  of  descriptive  information  about  reportable
     segments which is consistent  with that made available to the management of
     the Company to assess performance.

     The oil and gas segment  derives its revenues  from the sale of oil and gas
     and  prospect  generation  and  administrative  overhead  fees  charged  to
     participants in its oil and gas ventures.  The mining segment  receives its
     revenues  primarily from the sale of minerals and precious  metals and from
     time to time from the sale of a  mineral  venture  that it has  originated.
     Electrical generation construction will receive its revenues from the sale,
     design,  construction  and/or  operation of gas turbine or other electrical
     generation  projects.  As of  September  30,  1999 the  Company  was in the
     planning  stage  of  this  segment  and no  revenues  have  been  received.
     Corporate income is primarily derived from interest income on funds held in
     money market accounts.

     During the three months ended September 30, 1999 there were no intersegment
     revenues.  The accounting  policies applied by each segment are the same as
     those used by the Company in general.

     Net sales to one customer of the oil and gas segment totalled approximately
     $205,000 of revenues or 75% for the three months ended September 30, 1999.

     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 $25,000
     for the development and acquisition of oil and gas property.

                                       10
<PAGE>


Note 2 SEGMENT INFORMATION (CONTINUED)

     Segment  information  consists of the  following for the three months ended
     September 30:


<TABLE>
<CAPTION>

                               Oil and Gas      Mining   Power Plant     Corporate    Consolidated
                               -----------      ------   -----------     ---------    ------------
     <S>                       <C>            <C>         <C>           <C>           <C>
     Revenues:
        1999                   $   290,840    $     -0-   $      -0-    $    2,085    $   292,925
        1998                       314,876          -0-          -0-         6,889        321,765

     Income (loss) from
      operations:

        1999                   $   219,986    $     -0-   $  (21,209)   $ (144,880)   $    53,897
        1998                       275,614          -0-          -0-      (142,899)       132,715

     Identifiable assets:

        1999                   $ 1,294,862    $  18,823   $      -0-    $ 1,211,592   $ 2,525,277
        1998                       944,912       44,679          -0-      1,099,136     2,088,727

     Depreciation, depletion
      and valuation charged
      to identifiable assets:

        1999                   $(1,336,305)   $     -0-   $      -0-    $  (140,162)  $(1,476,467)
        1998                    (1,031,902)         -0-          -0-       (123,544)   (1,155,446)

     Capital expenditures:

        1999                   $    24,862    $     -0-   $      -0-    $     3,700   $    28,562
        1998                       103,642          -0-          -0-          3,428       107,070

</TABLE>


Note 3 MINING PROPERTIES

     KAYCEE AND SHAMROCK URANIUM PROSPECTS
     -------------------------------------

     In fiscal 1997, the Company began  exploration for in situ uranium deposits
     in Wyoming.  During the three months ended September 30, 1999 and 1998, the
     Company expended $-0- and $4,472, respectively,  on the Kaycee and Shamrock
     prospects.  In addition,  during 1998 the Company  issued to the  President
     100,000  shares  of the  Company's  common  stock,  valued at  $14,000,  in
     exchange for the  President's 25% interest in geological data and potential
     uranium prospects.

     During fiscal 1998, the Company sold the geological  data of the Kaycee and
     Shamrock  prospects to a privately-held  Canadian company and, in exchange,
     received a $125,000  cash payment and a commitment to receive an additional
     $125,000  prior to December 31, 1998. As of November 12, 1999,  the Company
     has not  received  the second  payment of $125,000  and the  privately-held
     Canadian  company is in  default.  Discussions  are  underway to attempt to
     resolve  this  issue.  Under the terms of the sales  agreement  reached  in
     March,  1998, the Company also received 2 million  shares or  approximately
     25% of the common stock of the privately-held  company. To the knowledge of

                                       11
<PAGE>


Note 3 MINING PROPERTIES (CONTINUED)

     the Company, at the time of this filing, the stock had no market value. All
     capitalized mining costs have been written off as of June 30, 1999.


Note 4 NOTES PAYABLE

     The Company owes the following debt:
     ------------------------------------

                                                    September 30,   June 30,
                                                         1999         1999
                                                    -------------------------

     Note  payable  to  related   party,
     monthly   principal   and  interest
     payments of $4,269,  due September,
     2000,   collateralized  by  working
     interests in the Emigh lease                    $   48,243    $   59,487

     Note  payable  to auto  dealership,
     monthly   principal   and  interest
     payments of $879,  due July,  2000,
     collateralized by new vehicle                        7,752        10,336

     Note  payable  to  an  unaffiliated
     third party for the  acquisition of
     producing gas  properties in Tehama
     and  Glenn  Counties,   California,
     interest      at     5.475%     and
     collateralized by working interests
     in the Johnson and Gay Gas Units                   137,750       137,750

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

                                                        193,745       332,565

     Less current portion                               124,995        52,205
                                                     ----------    ----------

                                                     $   68,750    $  280,360
                                                     ==========    ==========



                                       12

<PAGE>


Note 5 COMMITMENTS AND CONTINGENCIES

     At September 30, 1999 the Company was  committed to the following  drilling
     and development projects in California:

          1.   Drill, complete and equip the Emigh 3-1.
          2.   Drill, complete and equip the Daughters of the Dragons 1 well.
          3.   Drill, complete and equip the Brandt 46X-27 well.
          4.   Drill, complete and equip the Hart 19-1 well.
          5.   Drill, complete and equip the Cigar 20-1 well.

     In July 1999,  the Houghton  25-1 well was drilled to a depth of 4,600' and
     dually  completed  from  two  Forbes  intervals  for an  initial  estimated
     combined rate of 3,200 MCFPD.  Gas sales  commenced in September  1999. The
     Company owns a 7.77% working interest in the well.

     In July  1999,  the Eastby  36-2 well was  drilled to a depth of 4,700' and
     dually completed from the Eocene and Forbes formations. Gas sales commenced
     in September 1999 from the Eocene formation at a rate of approximately  500
     MCFPD.  The Company owns a 7.77% working  interest in the Eocene  formation
     and a 7.00% working interest in the Forbes formation.

     In August 1999,  the Elektra 1 well located in the Malton Black Butte Field
     commenced  production at a rate of approximately 2,500 MCFPD. This rate was
     increased  to 3,000  MCFPD in  September  1999  when the well was tied into
     P.G.& E.'s 16" pipeline.

     The  Company  drilled  and plugged  and  abandoned  the Brandt  46X-27 well
     located in Kern County, California in October 1999. The Company's net share
     (5.73%  working  interest) of the dry hole costs was  approximately  $6,000
     ($18,000 - $12,000 in income from geologic and overhead fees).

     The Company drilled and plugged and abandoned the Yerxa 2-1 well located in
     Colusa County,  California in September  1999. The Company's net share (18%
     working interest) of the dry hole costs was approximately  $19,000 ($26,000
     - $7,000 in income for overhead fees).

     The Company  participated  in the drilling and plugging and  abandonment of
     the Hart #19-1 well located in Glenn  County,  California  in October 1999.
     The Company's net share (8.40% working  interest) of the dry hole costs was
     approximately $19,000.

                                       13
<PAGE>


Note 5 COMMITMENTS AND CONTINGENCIES (CONTINUED)

     The Company drilled and ran production  casing on the Cigar 20-1 located in
     the Winters gas field, Solano County, California. A completion attempt will
     occur in the  second  week of  November.  The  Company's  net  share of the
     drilling and completion costs is  approximately  $48,200 ($87,000 - $38,800
     in income for overhead and prospect  development  fees). The Company owns a
     15.05% working interest in the well.

     The  Company  is  currently  drilling  its  Emigh 3-1 well  located  in the
     Denverton  Creek  gas  field.  The  Company's  net  share  (23.80%  working
     interest)  of the dry hole  costs is  approximately  $110,000  ($149,000  -
     $39,000 in income for geologic and overhead fees).

     The Company  will be  participating  for a 5.565%  working  interest in one
     additional  well,  the  Daughters  of the Dragons 1,  located in the Malton
     Black Butte Field,  Tehama County,  California,  in late November 1999. The
     Company's net share of the dry hole costs is approximately $12,000.










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<PAGE>


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


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

September 30, 1999 as compared to September 30, 1998
----------------------------------------------------

Commencing  in fiscal 1996 and  continuing  through  1998,  Aspen  reviewed  all
aspects  of its  operations  in an  effort  to  reduce  expenditures  as much as
possible while making efforts to preserve Aspen's assets and build up cash flow.
These  decisions  included:  the sale of Aspen's  oil and gas assets in Montana,
North Dakota,  Oklahoma and Texas; the decision to defer the payment of portions
of officers'  salaries;  the decision to defer compliance with Aspen's reporting
obligations  under the Securities  Exchange Act of 1934, as amended,  as of June
30,  1998,  Aspen is current  with all SEC filing  requirements;  the  voluntary
reduction of certain officers' salaries;  and the decision to concentrate on the
development of cash flow from oil and gas operations in California,  in which an
officer of Aspen has significant experience.

From June 30, 1999 to September 30, 1999 Aspen's working capital  increased from
$33,109 to  $106,381,  a 221%  increase.  This  increase  in working  capital is
expected to be reduced  somewhat in the second  quarter  when  Aspen's  share of
current drilling activity, which began in October of 1999, will be paid for.

During fiscal 1999, Aspen  Exploration  Corporation  created Aspen Power Systems
Corporation  ("APS"), an 85% owned subsidiary.  Aspen has dedicated certain cash
resources  to  investigate  the  economic  possibilities  of the  sale,  design,
construction and/or operation of gas turbines to produce electricity.  Aspen has
dedicated a total of  approximately  $130,000 of  financing  in order to provide
funding  for  APS to  attempt  to  commence  funding  its own  operations.  Such
dedicated  funding will come from Aspen's  operating  funds derived from oil and
gas  production.  There  is no  assurance  APS  will be  able  to  fund  its own
operations after the dedicated funding by Aspen is fulfilled.  Through September
30,  1999,  APS has  expended  $105,159  on this  project,  $21,209 of which was
expended in the current quarter.

In March 1998, Aspen reached an agreement with a privately-held Canadian company
which provided for Aspen to receive certain cash payments from, and to be issued
2,000,000 shares of stock in, a privately-held  Canadian company. Aspen conveyed
to the privately-held company all of Aspen's interest in two uranium projects in
Wyoming.  The  privately-held  Canadian  company  is in  default to Aspen in the
amount of $125,000 which was to be paid prior to December 31, 1998.  Discussions
are underway to attempt to resolve this issue.

Aspen  believes that it has  sufficient  funds on hand or that will be generated
from current operations to fund its activities for the next twelve months.


                                       15
<PAGE>


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


September 30, 1999 Compared to September 30, 1998
-------------------------------------------------

For the three months ended September 30, 1999 Aspen'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 in California.

Oil and gas revenues for the three months  ended  September  30, 1999  decreased
$24,036, from $314,876 to $290,840, a 7.6% decrease.  This decrease reflects the
normal decline in production of mature oil and gas properties and will be offset
somewhat by new production that will come on line in the second quarter.

Oil and gas production expenses increased $3,592 from $11,262 to $14,854 for the
period ended  September  30,  1999.  This  increase  was due to increased  water
production  in existing oil wells and the cost of putting a  previously  flowing
oil well on a pumping unit.

Depletion,  depreciation and amortization increased significantly,  from $28,000
to $59,925, a 114% increase. This increase reflects the under estimate of actual
depletion expense for the first quarter of 1998 by approximately $40,000.

Selling,  general and  administrative  expenses  decreased  by $4,286 or 3% from
$143,828 to $139,542.  Selling,  general and  administrative  expenses  remained
fairly  constant when comparing the two quarters with no  significant  change in
any category.

As a result of Aspen's operations for the three months ended September 30, 1999,
Aspen  ended the  quarter  with net income of $53,897  compared to net income of
$132,715 a year earlier.  This  decrease of  approximately  $79,000  reflected a
decrease in total  revenues of $28,840 due primarily to a decline in oil and gas
revenues received from mature producing properties.  Aspen also incurred $21,209
in operating  expenses  associated with Aspen Power Systems  Corporation.  These
costs were primarily for prospect  review,  financial  studies and travel costs.
Depletion  expense  increased by approximately  $32,000 from September 30, 1998.
However,  the first quarter 1998  depletion  was  understated  by  approximately
$40,000.

Year 2000
---------

The following Year 2000 statements  constitutes a Year 2000 Readiness Disclosure
with the meaning of the Year 2000  Information  and Readiness  Disclosure Act of
1998.

Year 2000 issues  result from the inability of certain  electronic  hardware and
software to accurately calculate, store or use a date subsequent to December 31,
1999. These dates can be erroneously  interpreted in a number of ways, e.g., the
year 2000 could be interpreted as the year 1900.  This inability could result in

                                       16

<PAGE>



a  system  failure  or  miscalculations  that  could in turn  cause  operational
disruptions.  These issues could affect not only information  technology  ("IT")
systems,  such as computer  systems used for accounting,  land,  engineering and
seismic processing, but also systems that contain embedded chips.

Aspen has completed an  assessment of its IT systems to determine  whether these
systems are Year 2000  compliant.  Aspen has  determined  that these systems are
either  compliant or with relatively  minor  modifications  or upgrades (many of
which would have been made in any event as part of Aspen's  continuing effort to
enhance its IT systems)  will be  compliant.  All  necessary  modifications  and
upgrades and the testing thereof were completed by September 30, 1999.

Aspen has  assessed  its  non-information  systems to  ascertain  whether  these
systems  contain  embedded  computer  chips  that  will  not  properly  function
subsequent to December 31, 1999.  These systems include office equipment and the
automatic  wellhead  equipment used to operate wells.  All of these systems have
been determined to be Year 2000 compliant.

To date  Aspen  has  relied  upon its  internal  staff to  access  its Year 2000
readiness.  The costs  associated  with  assessing  Aspen's  Year 2000  internal
compliance  and  related  systems  modification,  upgrading  and testing are not
currently expected to be material.

Aspen  is in the  process  of  communicating  with  certain  of its  significant
suppliers, service companies, gas gatherers and pipelines, electricity providers
and  financial  institutions  to determine the  vulnerability  of Aspen to third
parties'  failure to address  their Year 2000  issues.  While  Aspen has not yet
received  definitive  responses  indicating  all such  entities  are  Year  2000
compliant,  it has not received  information  suggesting  Aspen is vulnerable to
potential year 2000 failures by these parties. These communications are expected
to  continue  into the  fourth  quarter  of 1999.  At this  time  Aspen  has not
developed any contingency plans to address third party  non-compliance with Year
2000 matters. However, should its communications with any third parties indicate
any vulnerability, appropriate contingency plans will be developed.

Aspen does not anticipate any  significant  disruptions of its operations due to
Year 2000 issues.  Among the potential  "worst case"  problems  Aspen could face
would be the loss of electricity  used to power well pumps and compressors  that
would  result in wells  being  shut-in,  or the  inability  of a third party gas
gathering  company or pipeline  to accept gas from  Aspen's  wells or  gathering
lines which would also result in Aspen's  wells being  shut-in.  A disruption in
production would result in the loss of income.


                                       17

<PAGE>



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


                                             ASPEN EXPLORATION CORPORATION




                                             /s/ R. V. Bailey
                                             -------------------------------
                                             By:  R. V. Bailey,
November 12, 1999                                 Chief Executive Officer,
                                                  Principal Financial Officer






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