. 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 DECEMBER 31, 1996

[   ] 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 March 14, 1997
  -------------                                 -----------------------------
  Common stock,
  $.005 par value                                        4,321,322


<PAGE>

Part One.  FINANCIAL INFORMATION
         Item 1.  Financial Statements

                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                December 31,        June 30,
                                                   1996               1996
                                                ------------      -----------
                                                (Unaudited)       (Unaudited)
Assets
------
Current assets:
  Cash and equivalents................          $   43,657        $  102,223
  Precious metals.....................              18,824           221,866
  Accounts receivable.................              56,946            61,245
  Prepaid expenses and other..........               7,934             4,923
                                                ----------        ----------
    Total current assets..............             127,361           390,257
                                                ----------        ----------
Investment in oil and gas properties, 
  at cost (full cost method of
  accounting).........................           1,290,853         1,349,047
  Less accumulated depreciation,
    depletion, amortization and
    valuation allowance...............            (913,221)         (873,221)
                                                ----------        ---------- 
    Net oil and gas properties........             377,632           475,826
                                                ----------        ----------
Property and equipment, at cost:
  Furniture, fixtures and vehicles....             144,383           146,087
  Less accumulated depreciation and
    amortization......................            (101,148)          (95,094)
                                                ----------        ---------- 
    Net property and equipment........              43,235            50,993
                                                ----------        ----------
Undeveloped mining properties, at cost
    less reserve for impairment of
    $193,495..........................             159,194            76,434
                                                ----------        ----------
Organization cost - Aspen Recursos de
   Mexico and ISL Resources (Note 3)..              25,539            23,869
                                                ----------        ----------
Cash Surrender Value, life insurance..             201,146           179,470
                                                ----------        ----------
    TOTAL ASSETS......................          $  934,107        $1,196,849
                                                ==========        ==========

                              (Statement Continues)

                 See notes to Consolidated Financial Statements

                                       2

<PAGE>
                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)


                                                December 31,         June 30, 
                                                   1996                1996
                                                -----------          --------
                                                (Unaudited)         (Unaudited)
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
  Accounts payable & accrued expenses.           $  80,936           $  80,713
  Advances from joint owners..........              94,630             245,481
  Severance taxes payable.............              13,819              13,819
  Due to related parties..............              36,853               5,216
                                                 ---------           ---------
Total liabilities.....................             226,238             345,229
                                                 ---------           ---------
Notes Payable.........................             125,000                -0-
                                                 ---------           --------- 
Stockholders' equity:
  Common stock, $.005 par value:
     Authorized: 50,000,000 shares
     Issued:  At December 31, 1996:
       4,424,922 and 4,424,922 at June
       30, 1996.......................              22,124              22,124
     Outstanding: At December 31, 1996 
       4,321,322 and 4,321,322 at
       June 30, 1996..................  

  Capital in excess of par value .....           5,651,388           5,651,388
 
  Accumulated deficit ................          (5,043,889)         (4,775,138)
                                                ----------          ---------- 
                                                   629,623             898,374
  Less common stock in treasury,
     at cost:  103,600 shares ........             (46,754)            (46,754)
                                                ----------          ---------- 
  Total stockholders' equity..........             582,869             851,620
                                                ----------          ----------
Total liabilities and stockholders'
equity................................          $  934,107          $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                 Six Months Ended
                                        December 31,                       December 31,   
                                ---------------------------          ----------------------------
                                  1996               1995              1996              1995
                                  ----               ----              ----              ----
<S>                              <C>               <C>               <C>              <C>  
Revenues:
  Oil and gas............       $  87,380         $  95,928          $ 163,437        $  195,277
  Mineral................           2,771             -0-                2,771           246,589
  Alaska mining tax
   exemption.............           -0-               -0-                -0-              45,000
  Interest and other, net           4,338              (823)             8,578             5,445
                                ---------         ---------          ---------        ----------
Total Revenues...........          94,489            95,105            174,786           492,311
                                =========         =========          =========        ==========
 
Costs and expenses:
  Oil & gas production...          15,540            13,839             24,626            20,885
  Loss on sale of
   precious metals.......          10,002            36,552             10,002            46,316
  Depreciation, depletion
   and amortization......          14,519            24,979             49,038            32,479
  Selling, general and
   administrative........         185,810           118,369            359,871           275,823
                                ---------         ---------          ---------         ---------
Total Costs & Expenses...         225,871           193,739            443,537           375,503
                                ---------         ---------          ---------         ---------
 
NET INCOME...............       $(131,382)        $ (98,634)         $(268,751)        $ 116,808
                                =========         =========          =========         =========
 
Net Income per share.....       $ (.03)              (.02)           $ (.06)              .03
                                =========         =========          =========         =========

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

                                                Six months ended December 31,
                                                    1996             1995
                                                ------------     ------------
Cash flows from operating activities:
 
Net income (loss).....................           $ (268,751)      $   116,808
 
Adjustments to reconcile net income
  to net cash provided by operating  
  activities:

Proceeds from sale of precious metals.                 -0-            447,602
Depreciation, depletion & amortization               49,038            32,479
Loss on sale of precious metals.......                 -0-             46,316
Decrease (increase) in precious metals              203,042          (246,589)
Decrease in accounts receivable.......                4,299             2,519
Increase in prepaid expenses..........               (3,011)           (4,003)
Increase (Decrease) in accounts           
   payable and accrued expenses.......             (150,628)          169,981
Increase in payable to related parties               31,637              -0-
                                                 ----------        ----------
 
Net cash provided by (used in)        
operating activities................               (134,374)          565,113
                                                 ----------        ----------





                              (Statement Continues)

                                       5

<PAGE>


                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

                                   (Continued)

                                             Six months ended December 31,
                                                1996               1995  
                                             ----------          ---------

Cash flows from investing activities:

Additions to undeveloped mining           
properties............................         (82,760)            (7,354)
Sale of oil & gas properties..........         100,000               -0-
Purchase of oil & gas properties......        (119,632)          (190,437)
Proceeds - prospect fees..............          77,826               -0-
Investment in subsidiaries "Aspen         
  Recursos de Mexico" and "ISL
  Resources Corporation"..............          (4,654)              (649)
Additions to office equipment and         
  vehicles............................          (2,396)            (1,434)

Proceeds - return of equipment........           4,100               -0-
Additions to cash surrender value.....         (21,676)           (28,167)
                                             ---------          ---------
Net cash used in investing activities.         (49,192)          (228,041)
                                             ---------          --------- 

Cash flows from financing activities:

Note from insurance company...........         125,000              -0-
                                             ---------          --------- 
Net cash from financing activities....         125,000              -0-
                                             ---------          --------- 
Net (decrease) increase in cash.......         (58,566)           337,072
                                             ---------          ---------
Cash and cash equivalents,                
  at beginning of period..............         102,223            116,891
                                             ---------          ---------
Cash and cash equivalents,                
  at end of period....................       $  43,657          $ 453,963
                                             =========          =========
Non cash transactions.................       $    -0-           $ 166,700
                                             =========          =========

                     The accompanying notes are an integral
                            part of these statements.

                                       6

<PAGE>
                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

                                December 31, 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
six months ended December 31, 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 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 six months ended December 31, 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

                                       7

<PAGE>

Note 1 - Basis of Presentation (Continued)

in its operations. Current liabilities exceed current assets by $98,877, and the
Company has a working capital deficit.

In  addition,  the  Company's  loss for the  second  quarter  of fiscal  1997 is
$268,751.  As of  March,  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
and improve 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.

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.

                                       8


<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 December 31, 1996, 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 December 31,
1996 the Company has incurred  approximately $4,650 in organization costs on its
behalf.

Note 4 - Commitments and Contingencies

At December  31, 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 March 14,  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.

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).

                                       9

<PAGE>

Note 4 - Commitments and Contingencies (Continued)

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,
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%.

                                       10
<PAGE>

Note 4 - Commitments and Contingencies (Continued)

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  intends to
pursue  funding for ISL  Resources  in the future.  There is no  assurance  such
funding will take place.

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

December 31, 1996 as compared to December 31, 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 $98,877,  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  December  31, 1995 to December  31,  1996,  Registrant's  working  capital
(current assets less current liabilities) decreased by $543,603. The decrease in
working capital is primarily  attributable to a decrease of over $862,000 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  six-month  period  ended  December  31,  1995 as
compared to -0- ounces of raw gold for the six-month  period ended  December 31,
1996.  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.

                                       11

<PAGE>

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 December 31, 1996
Registrant  owed  approximately  $37,000 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.
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 pursue  funding for ISL  Resources  in the  future.  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.


                                       12

<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 six months ended December 31, 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  six-month  period  ended
December  31, 1996  compared to $236,825 in revenues  for the  six-month  period
ended December 31, 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 six
months ended  December 31, 1996  decreased by 16% ($31,840) 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.

Oil and gas production expenses increased by about 18% ($3,741) 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  which are
working  interests,  and  the  sale  of  non-California  properties  which  were
primarily royalty interests which incurred no operating costs.

Depletion, depreciation and amortization increased $16,559 (51%) from $32,479 at
December 31, 1995 to $49,038 at December 31, 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,
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.

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<PAGE>


Selling,  general and  administrative  expenses  increased by $84,048 (30%) from
$275,823 at December 31, 1995 to $359,871 for the six months ended  December 31,
1996,  reflecting  increased  costs incurred in pursuing the Anvil  Gold-Newmont
litigation.

As a result of  Registrant's  operations  for the six months ended  December 31,
1996,  Registrant  ended  the  six-month  period  with a net loss of  ($268,751)
compared to net income of  $116,808  for the  previous  six-month  period.  This
decrease  reflected both decreased  revenues and increased expenses for the six-
month period as compared to the prior year. The largest decline,  $243,818,  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,
March 14, 1997                                 Chief Executive Officer,
                                               Principal Financial Officer

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