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 December 31, 2004

                                       OR

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

               For the transition period from          to
                                              --------    --------

                          Commission File Number 0-9494

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

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

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

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

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

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

              Class                            Outstanding at February 10, 2005
              -----                            --------------------------------

Common stock, $.005 par value                             6,337,120

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

                                       1

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Part One.  FINANCIAL INFORMATION

     Item 1.  Financial Statements

                          ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                              CONDENSED CONSOLIDATED BALANCE SHEETS

                                             ASSETS


                                                                     December 31,     June 30,
                                                                        2004            2004
                                                                        ----            ----
<S>                                                                  <C>            <C>
Current Assets:
Cash and cash equivalents, including $30,671 and
$1,127,874 of invested cash at December 31, 2004 and June
30, 2004 respectively.............................................   $ 2,190,545    $ 1,329,376
Precious metals ..................................................        18,823         18,823
Accounts receivables .............................................       635,100        556,558
Receivable, related party ........................................        15,903         12,742
Prepaid expenses .................................................         9,013         16,737
                                                                     -----------    -----------
     Total current assets ........................................     2,869,384      1,934,236
                                                                     -----------    -----------

Investment in oil and gas properties, at cost (full cost method of
accounting) ......................................................     9,413,349      8,216,136

Less accumulated depletion and valuation allowance ...............    (3,536,453)    (3,235,171)
                                                                     -----------    -----------
                                                                       5,876,896      4,980,965
                                                                     -----------    -----------

Property and equipment, at cost:
Furniture, fixtures and vehicles .................................       119,922        112,562
Less accumulated depreciation ....................................       (90,676)       (81,958)
                                                                     -----------    -----------
                                                                          29,246         30,604
                                                                     -----------    -----------

     TOTAL ASSETS ................................................   $ 8,775,526    $ 6,945,805
                                                                     ===========    ===========


                                      (Statement Continues)
                         See notes to Consolidated Financial Statements

                                               2
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                  ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                                    December 31,     June 30,
                                                       2004           2004
                                                       ----           ----
Current liabilities:
Accounts payable and accrued expenses ...........   $ 2,023,190    $   932,814
Accounts payable - related party (Note 2) .......        36,126         70,774
Advances from joint interest owners .............       327,396        621,015
Notes payable - current (Note 6), net of discount        75,000        410,719
                                                    -----------    -----------

Total current liabilities .......................     2,461,712      2,035,322
                                                    -----------    -----------

Asset retirement obligation (Note 3) ............        87,582         79,582
Deferred income taxes (Note 9) ..................       732,157        296,320
                                                    -----------    -----------
Total long term liabilities .....................       819,739        375,902
                                                    -----------    -----------
Total liabilities ...............................     3,281,451      2,411,224
                                                    -----------    -----------
Stockholders' equity:
(Notes 1 and 5):
Common stock, $.005 par value:
    Authorized: 50,000,000 shares
    Issued and outstanding: At December 31, 2004,
    6,337,120 shares and June 30, 2004, 5,958,979        31,686         29,796

Capital in excess of par value ..................     6,358,930      6,064,602
Accumulated deficit .............................      (872,532)    (1,556,225)
Deferred compensation and consulting fees .......       (24,009)        (3,592)
                                                    -----------    -----------
Total stockholders' equity ......................     5,494,075      4,534,581
                                                    -----------    -----------
Total liabilities and stockholders' equity ......   $ 8,775,526    $ 6,945,805
                                                    ===========    ===========


                 See Notes to Consolidated Financial Statements

                                       3

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


                                                       Three Months Ended            Six Months Ended
                                                          December 31,                 December 31,
                                                          ------------                 ------------

                                                      2004            2003          2004          2003
                                                      ----            ----          ----          ----
<S>                                                <C>            <C>           <C>           <C>
Revenues:
  Oil and gas ..................................   $ 1,132,359    $   362,942   $ 1,829,912   $   704,868
  Management fees ..............................        59,768         66,106       141,825       112,021
  Interest and other, net ......................        (1,794)         4,269         2,895         4,765
                                                   -----------    -----------   -----------   -----------
Total Revenues .................................     1,190,333        433,317     1,974,632       821,654
                                                   -----------    -----------   -----------   -----------

Costs and expenses:
  Oil and gas production .......................        99,495         63,287       163,856       102,389
  Depreciation, depletion and amortization .....       154,001        130,349       310,001       257,949
  General and administrative ...................       205,364        145,788       376,468       317,226
  Interest expense .............................         1,724            871         4,778           871
                                                   -----------    -----------   -----------   -----------
Total Costs and Expenses .......................       460,584        340,295       855,103       678,435
                                                   -----------    -----------   -----------   -----------
Income before taxes ............................       729,749         93,022     1,119,529       143,219
                                                   -----------    -----------   -----------   -----------
Provision for income taxes .....................       267,674            -0-       435,837           -0-
                                                   -----------    -----------   -----------   -----------
Net income .....................................   $   462,075    $    93,022   $   683,692   $   143,219
                                                   ===========    ===========   ===========   ===========
Basic income per common share ..................   $       .07    $       .01   $       .11   $       .02
                                                   ===========    ===========   ===========   ===========
Diluted income per common share ................   $       .07    $       .01   $       .10   $       .02
                                                   ===========    ===========   ===========   ===========
Basic weighted average number of common shares
outstanding ....................................     6,284,788      5,863,828     6,284,788     5,863,828
                                                   ===========    ===========   ===========   ===========
Diluted weighted average number of common shares
outstanding ....................................     6,576,591      6,144,999     6,576,591     6,144,999
                                                   ===========    ===========   ===========   ===========


                                  The accompanying notes are an integral
                                         part of these statements.

                                                    4
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                    ASPEN EXPLORATION CORPORATION AND SUBSIDIARY
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (UNAUDITED)



                                                         Six months ended December 31,
                                                              2004           2003
                                                          -----------    -----------

<S>                                                       <C>            <C>
Cash flows from operating activities:
-------------------------------------

Net income ............................................   $   683,692    $   143,219

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

  Depreciation, depletion and amortization ............       310,001        257,949
  Stock issued for interest expense and consulting fees        15,082            -0-
  Deferred income tax provision .......................       435,837            -0-


Changes in assets and liabilities:

  Increase in receivable ..............................       (81,703)       (54,413)
  Decrease in prepaid expense .........................         7,724         10,811
  Increase in accounts payable and accrued expense ....       762,109        446,787
                                                          -----------    -----------
  Net cash provided by operating activities ...........     2,132,742        804,353
                                                          -----------    -----------

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

  Additions to oil and gas properties .................    (1,169,965)      (889,888)
  Purchase of producing properties ....................       (19,248)           -0-
  Purchase of furniture and fixtures ..................        (7,360)           -0-
                                                          -----------    -----------
  Net cash (used) by investing activities .............    (1,196,573)      (889,888)
                                                          -----------    -----------

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

  Payment of notes payable ............................       (75,000)           -0-
  Proceeds of notes payable ...........................           -0-        225,000
                                                          -----------    -----------
                                                              (75,000)       225,000
                                                          -----------    -----------

  Net increase in cash and cash equivalents ...........       861,169        139,465

  Cash and cash equivalents, beginning of year ........     1,329,376        776,566
                                                          -----------    -----------
  Cash and cash equivalents, end of year ..............   $ 2,190,545    $   916,031
                                                          ===========    ===========
Other information:

  Interest paid .......................................   $     4,778    $       871
                                                          ===========    ===========
  Non-cash investing activities
  Asset retirement obligation additions ...............   $     8,000    $    29,007
                                                          ===========    ===========


                       The accompanying notes are an integral
                              part of these statements.

                                         5
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                          ASPEN EXPLORATION CORPORATION

              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

                                December 31, 2004


Note 1        BASIS OF PRESENTATION


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

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


Note 2        RECEIVABLE - RELATED PARTIES, PAYABLE - RELATED PARTIES

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


Note 3        ASSET RETIREMENT OBLIGATION

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

                                       6

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Note 3        ASSET RETIREMENT OBLIGATION (CONTINUED)

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

     A reconciliation of our liability for the six months ended December 31,
     2004 is as follows:

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


Note 4        EARNINGS PER SHARE

     We follow Statement of Financial Accounting Standards ("SFAS") No. 128,
     addressing earnings per share. SFAS No. 128 established the methodology of
     calculating basic earnings per share and diluted earnings per share. The
     calculations differ by adding any instruments convertible to common stock
     (such as stock options, warrants, and convertible preferred stock) to
     weighted average shares outstanding when computing diluted earnings per
     share.

     The following is a reconciliation of the numerators and denominators used
     in the calculations of basic and diluted earnings per share. We had a net
     income of $683,692 for the six months ended December 31, 2004 and $143,219
     for the six months ended December 31, 2003.

                                                                      Six Months Ended
                                              December 31, 2004                                December 31, 2003
                                  -------------------------------------------    ------------------------------------------
                                                                     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         $683,692        6,284,788           $.11       $143,219      5,863,828            $.02

Dilutive securities:
stock options                                          392,000                                      776,000

Repurchased shares                                    (100,197)                                    (494,829)
                                  -----------      -----------    -----------    -----------    -----------     -----------
Diluted earnings per share:

Net income and assumed  share
conversion                           $683,692        6,576,591           $.10       $143,219      6,144,999            $.02
                                  ===========     ============    ===========    ===========    ===========     ===========


                                                             7
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Note 5        STOCKHOLDERS' EQUITY

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

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

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

     There are potentially two warrants, each for 300,000 shares of common
     stock. If the holder exercises the initial warrant before June 30, 2005, we
     will receive an additional $330,000 ($1.10 per share) and issue 300,000
     shares of stock; if the holder exercises the same warrant before June 30,
     2006 but after June 30, 2005, we receive an additional $360,000 ($1.20 per
     share) instead of $330,000 and no new warrants will be issued.

     If the holder exercises the initial warrant before March 31, 2005, the
     holder will receive an additional warrant exercisable to purchase another
     300,000 shares at $1.25 per share.

     In any case, the warrant (and any additional warrant) will expire unless
     exercised by June 30, 2006.

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

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

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

     During fiscal 2004, two officers, one director, a consultant and an
     employee exercised their options for 192,000 shares of our common stock
     granted March 14, 2002 at an average price of $0.57 per share. As
     consideration for the option shares purchased, the individuals surrendered
     common stock with a fair value equal to the exercise price of the option
     shares and held longer than six months. The fair value of the shares
     surrendered was based on a ten-day average bid price immediately prior to
     the exercise date. Total shares surrendered were 96,849. The effect of the
     transaction is a net increase to the common stock par value of $476 and a
     corresponding decrease to additional paid in capital of $476.

                                       8

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Note 5        STOCKHOLDERS' EQUITY (CONTINUED)

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

     As of December 31, 2004, we had an aggregate of 392,000 common shares
     reserved for issuance under our stock option plans. These plans provide for
     the issuance of common shares pursuant to stock option exercises,
     restricted stock awards and other equity based awards.

     The following information summarizes information with respect to options
     granted under our equity plans:

                                                              Number of         Weighted Average Exercise
                                                              Shares            Price of Shares Under Plans
                                                               -------          ---------------------------
         <S>                                                   <C>                      <C>
         Outstanding balance June 30, 2004                     484,000                  $ .57
                                                                                        =====

         Granted                                                   -0-                    -
                                                                                        =====

         Exercised                                             (92,000)                   .57
                                                                                        =====

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

         Outstanding balance December 31, 2004                 392,000                  $ .57
                                                              ========                  =====

         The following table summarizes information concerning outstanding and
         exercisable options as of December 31, 2004:

                                          Outstanding                                   Exercisable
                              ----------------------------------               --------------------------
                                    Weighted
                                    Average          Weighted                                    Weighted
                                    Remaining        Average                                     Average
         Exercise  Number           Contractual      Exercisable                Number           Exercise
          Price   Outstanding       Life In Years    Price                      Exercisable      Price
         -------- -----------       -------------    -----------                -----------      --------

         $.57     242,000           08/15/2005(1)     $.57                          -0-           $.57

          .57     150,000           08/15/2007(1)      .57                          -0-            .57
                  -------
                  392,000
                  =======

         (1) The term of the option will be the earlier of the contractual life
         of the options or 90 days after the date the optionee is no longer an
         employee, consultant or director of the Company.

     We account for the two stock option plans using APB No. 25 for directors
     and employees and SFAS No. 123 for consultants. There were 676,000 options
     granted in 2002. Directors and employees were granted 601,000 options and
     consultants were granted 75,000 options. The consultant options were valued
     using the fair value method of SFAS No. 123 as calculated by the
     Black-Scholes option-pricing model. The fair value of each option grant, as
     opposed to its exercisable price, is estimated on the date of grant using
     the Black-Scholes option-pricing model with the following weighted average

                                       9

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Note 5        STOCKHOLDERS' EQUITY (CONTINUED)

     assumptions: no dividend yield, expected volatility of 14.9%, credit
     adjusted risk free interest rates of 8.5% and expected lives of 3.4 to 4.4
     years. The resulting compensation expense relating to the consultant option
     grant will be included as an operating expense as the options vest.


Note 6        NOTES PAYABLE

     The Company incurred the following debt:

                                                December 31,         June 30,
                                                    2004               2004
                                                 ----------------------------

     Note payable to a bank                      $  75,000          $ 150,000

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

                                                    75,000            450,000
                                                 ---------          ---------

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

                                                 $  75,000          $ 410,719
                                                 =========          =========

     Proceeds from the note payable to a bank were used for the acquisition of
     producing gas properties located in several counties in the Sacramento
     Valley, California. The note matures in June 2005, principal payments are
     $12,500 per month plus interest at the bank's prime rate plus 2%. The rate
     was 7.5% at December 31, 2004. The loan is collateralized by accounts
     receivable, other rights to payments and all inventory.

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


Note 7        SEGMENT INFORMATION

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

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

                                       10

<PAGE>


Note 7        SEGMENT INFORMATION (CONTINUED)

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

     Our oil and gas segment derives its revenues from the sale of oil and gas
     and prospect generation and administrative overhead fees charged to
     participants in our oil and gas ventures. Corporate income is primarily
     derived from interest income on funds held in money market accounts.

     During the six months ended December 31, 2004 and 2003, there were no
     intersegment revenues. The accounting policies applied by each segment are
     the same as those used by us in general.

     There have been no differences from the last annual report in the basis of
     measuring segment profit or loss. There have been no material changes in
     the amount of assets for any operating segment since the last annual report
     except for the oil and gas segment which capitalized approximately
     $1,189,213 for the development and acquisition of oil and gas properties
     and $7,360 in the corporate segment for the purchase of office equipment
     and computers.

     Segment information consists of the following for the six months ended
     December 31:

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

                   2004        $ 1,971,737       $     2,895       $ 1,974,632
                   2003            816,889             4,765           821,654

     Income (loss) from operations:

                   2004       $ 1,506,599        $  (387,070)      $ 1,119,529
                   2003           465,751           (322,532)          143,219

     Identifiable assets:

                   2004       $ 6,293,374        $ 2,482,152       $ 8,775,526
                   2003         4,849,966          1,182,905         6,032,871

     Depreciation, depletion and valuation charged to identifiable assets:

                   2004       $  (301,001)       $    (9,000)      $  (310,001)
                   2003          (248,749)            (9,200)         (257,949)

     Capital expenditures:

                   2004       $ 1,189,213        $     7,360       $ 1,196,573
                   2003           889,888                -0-           889,888

                                       11

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Note 8        MAJOR CUSTOMERS

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

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

                                        A          B          C
                                        -          -          -
     Quarter ended:

       December 31, 2004                35%        50%         *
       December 31, 2003                26%        54%        11%

     * Less than 10% in 2004.


Note 9        INCOME TAXES

     We have recorded deferred income taxes of $732,157 and $131,350 as of
     December 31, 2004 and 2003, respectively. During the six months ended
     December 31, 2004, we used approximately $1,044,500 in net operating loss
     carryforwards leaving approximately $639,500 in available federal net
     operating loss carryforwards as of December 31, 2004. During the first six
     months of 2003, we used approximately $50,000 in net operating loss
     carryforwards leaving a total of approximately $1,746,000.

     The deferred tax consequences of temporary differences in reporting items
     for financial statement and income tax purposes are recognized, if
     appropriate. Realization of future tax benefits related to the deferred tax
     assets is dependent on many factors, including our ability to generate
     taxable income within the net operating loss carryforward period. We have
     considered these factors in reaching our conclusion as to the valuation
     allowance for financial reporting purposes. Primarily, our proved oil and
     gas reserves substantially exceed our expected future costs and hence, we
     believe it more likely than not that the benefit will be realized.

     At December 31, the income tax effect of temporary differences comprising
     the deferred tax assets and deferred tax liabilities on the accompanying
     balance sheet is the result of the following:

                                                  2004               2003
                                               ---------         ---------
     Deferred tax assets:

       Federal tax loss
         carryforwards                         $ 285,462         $ 699,646
       Asset retirement obligation                 4,727              --
                                               ---------         ---------

                                                 290,189           699,646
                                               ----------        ---------

                                       12

<PAGE>


Note 9        INCOME TAXES (CONTINUED)

     Deferred tax (liabilities):
      Property, plant and
        equipment                                    (1,855)           (3,324)
     Oil and gas properties                      (1,020,491)         (827,672)
                                                 ----------        ----------

                                                 (1,022,346)         (830,996)
                                                 ----------        ----------
                                                 $ (732,157)       $ (131,350)
                                                 ==========        ==========

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

                                                     2004             2003
                                                    ------           ------
           Statutory federal income
             tax rate                                 34%              34%

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

           Other                                      (4)%             -0-

           Net operating loss                         -0-             (43)%
                                                    ------           ------

           Effective rate                              39%             -0-%
                                                    ======           ======

     The provision for income taxes consists of the following components:

                                                     2004             2003
                                                    ------           ------

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

           Deferred tax expense                   435,837                -0-
                                                 --------           --------

           Total income tax provision            $435,837           $    -0-
                                                 ========           ========

     At December 31, 2004, we have available federal net operating loss
     carryforwards of approximately $640,000 (net operating losses expire
     beginning June 30, 2011 through the year ending June 30, 2023).

                                       13

<PAGE>


Note 10      DRILLING COMMITMENTS AND CONTINGENCIES

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

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

      West Grimes Field          4      $378,000     $311,000         $  689,000
      Colusa County, CA
      Malton Black Butte         2       102,000      112,000            214,000
      Field,
      Tehama County, CA
      Colusa County, CA          3       236,000      304,000            540,000
      Yolo County, CA            1        17,500       45,000             62,500
      ---------------------    -----    --------     ---------------  ----------
      Total Expenditure         10      $733,500     $772,000         $1,505,500
                               =====    ========     ===============  ==========


NOTE 11       NEW ACCOUNTING PRONOUNCEMENTS

FASB 151 -  Inventory Costs

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

FASB 152 - Accounting for Real Estate Time-Sharing Transactions

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

                                       14

<PAGE>


NOTE 11       NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

FASB 153 - Exchanges of Nonmonetary Assets

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

FASB 123 (revised 2004) - Share-Based Payments

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

A nonpublic entity will measure the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value
of those instruments, except in certain circumstances.

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

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

                                       15

<PAGE>


NOTE 11       NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

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

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

The effective date for public entities that do not file as small business
issuers will be as of the beginning of the first interim or annual reporting
period that begins after June 15, 2005. For public entities that file as small
business issuers and nonpublic entities the effective date will be as of the
beginning of the first interim or annual reporting period that begins after
December 15, 2005. Management intends to comply with this Statement at the
scheduled effective date for the relevant financial statements of the Company.

                                       16

<PAGE>


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

     This segment should be read in conjunction with the management's discussion
and analysis of financial condition and results of operations contained in our
Annual Report on Form 10-KSB for the year ended June 30, 2004, which has been
filed with the Securities and Exchange Commission. The management discussion and
analysis and other portions of this report contain forward-looking statements
(as such term is defined in Section 21E of the Securities Exchange Act of 1934,
as amended). These statements reflect our current expectations regarding our
possible future results of operations, performance, and achievements. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995.

     Wherever possible, we have tried to identify these forward-looking
statements by using words such as "anticipate," "believe," "estimate," "expect,"
"plan," "intend," and similar expressions. These statements reflect our current
beliefs and are based on information currently available to us. Accordingly,
these statements are subject to certain risks, uncertainties, and contingencies,
which could cause our actual results, performance, or achievements to differ
materially from those expressed in, or implied by, such statements. These risks,
uncertainties and contingencies include, without limitation, the factors set
forth in our Form 10-KSB under "Item 6. Management's Discussion and Analysis of
Financial Conditions or Plan of Operation - Factors that may affect future
operating results." We have no obligation to update or revise any such
forward-looking statements that may be made to reflect events or circumstances
after the date of this Form 10-QSB.

Overview
--------

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

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

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

     Where possible, we attempt to be the operator of each property we invest
in. Our knowledge of drilling and operating wells in the Sacramento Valley
allows us to maximize the potential return of each property. Administrative
charges to the properties help cover approximately 33% of our selling, general
and administrative expenses.

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

         We expect our natural gas production to increase substantially during
fiscal 2005 due to recent drilling successes. Total production for the year will
depend on the number of wells successfully completed, the date they are put on

                                       17

<PAGE>


line, their initial rate of production, and their production decline rates. We
also anticipate that the average price for our product will be in the range of
$5.00 to $7.25 per MMBTU for the fiscal year ended June 30, 2005 as compared to
an average price of $4.96 per MMBTU during the fiscal year ended June 30, 2004.
Based upon the increasing production levels and continued strong gas prices,
which currently exceed $6.00 per MCF, Aspen expects continued strong earnings
for the balance of the year.

     Over the past five years we have been able to replace our produced reserves
and increase our yearly natural gas production. We have also benefited from a
general increase in natural gas prices over the past two years, from a low of
$2.78 per MMBTU average during the first quarter of fiscal 2003 to $5.92 per
MMBTU for the six months ended December 31, 2004.

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

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

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

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

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

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

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

     To manage commercial risk, we may use financial tools to hedge the price we
will receive for our product. The primary purpose of hedging is to provide
adequate return on our investments, grow our reserves while leaving as much
commodity price upside as possible. During the period November 1, 2004 through

                                       18

<PAGE>


March 31, 2005, we are contractually obligated to deliver 4,000 MMBTU per day to
two of our natural gas purchasers as follows:

     2,000 MMBTU/Day @ $7.97 per MMBTU
     1,000 MMBTU/Day @ $6.90 per MMBTU
       500 MMBTU/Day @ $7.52 per MMBTU
       500 MMBTU/Day @ $8.75 per MMBTU

The average price received during the first six months of fiscal 2005 for our
natural gas was approximately $5.92 per MMBTU as compared to $4.67 per MMBTU
during the first six months of fiscal 2004.

     During December 2003, we borrowed $225,000 from a bank for an acquisition.
We currently pay 2% over the bank's prime rate for that facility. At December
31, 2004, the effective interest rate was 7.5% and the outstanding loan balance
was $75,000. In June 2004, we borrowed $300,000 from an Oklahoma corporation to
facilitate the drilling and completion of several wells in northern California.
This debt was converted to our common stock on July 15, 2004.

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

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

     For the six months ended December 31, 2004 the increase in cash flow from
     operations of $1,328,389, or 165%, was due primarily to:

     An increase in net income of approximately $555,000 ($698,275 in 2004 as
     compared to $143,219 in 2003);
         and

     A $762,109 increase in accounts payable and accrued expenses in 2004 (which
     conserved cash during the 2004 period) compared to an increase in accounts
     payable and accrued expenses in 2003 of $446,787; and

     These increases were offset somewhat by an increase in receivables of
     $81,703 in 2004 (which used cash) compared to an increase in receivables of
     $54,413 during 2003.

     Investing activities used cash to increase capitalized oil and gas costs of
$1,189,213 and $889,888 in the six months ended December 31, 2004 and 2003. Cash
in the current six month period ended December 31, 2004 was used for lease
acquisition, seismic work, intangible drilling and well workovers ($810,883),
and the purchase of oil and gas well equipment ($378,330). These expenditures
are net of the sale of interests in wells to be drilled charged to third party
investors.

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

                                       19

<PAGE>


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

      West Grimes Field          4      $378,000         $311,000     $  689,000
      Colusa County, CA
      Malton Black Butte         2       102,000          112,000        214,000
      Field,
      Tehama County, CA
      Colusa County, CA          3       236,000          304,000        540,000
      Yolo County, CA            1        17,500           45,000         62,500

      ----------------------   -----    --------     ------------     ----------
      Total Expenditure         10      $733,500         $772,000     $1,505,500
                               =====    ========     ============     ==========


     Our working capital (current assets less current liabilities) at December
31, 2004, was $407,672, which reflects an approximate $508,800 increase from our
working capital deficit at June 30, 2004. Our working capital situation improved
during the first six months of our 2005 fiscal year because of our positive cash
flow from operations and our ability to pay down our current liabilities, both
made possible by our increase in net revenues and in net income recognized
during the period. We anticipate that our working capital and anticipated cash
flow from operations and future successful drilling will be sufficient to pay
our current liabilities as long as our gas production continues to provide us
with sufficient cash flow. As discussed below, this is dependent, in part, on
maintaining or increasing our level of production and the national and world
market maintaining its current prices for our gas production.

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

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

                                       20

<PAGE>


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

December 31, 2004 Compared to December 31, 2003
-----------------------------------------------

For the six months ended December 31, 2004, our operations continued to be
focused on the production of oil and gas, and the investigation for possible
acquisition of producing oil and gas properties in California. During the 2004
period our revenues increased by more than $1,153,000 as compared to the
comparable period of our 2003 fiscal year because of:

     Increased production (307,350 MMBTU sold as compared to 152,550 MMBTU sold
     during the first six months of our 2003 fiscal year);

     Increased price received for our production (an average of $5.92 per MMBTU
     during the first six months of our 2005 fiscal year as compared to $4.70
     per MMBTU received during that period in 2004); and

     Increased management fees received ($141,825 during fiscal 2005 as compared
     to $112,021 during fiscal 2004) because we were operators of more wells
     during 2005 (44 wells compared to 33 wells in 2004).

For the three months ended December 31, 2004, our revenues increased by more
than $769,000 as compared to the comparable period of 2003 because of:

     Increased production (177,350 MMBTU sold as compared to 79,900 during the
     three months ended December 31, 2003);

     Increased price received for our production (an average of $6.37 per MMBTU
     during the three months ended December 31, 2004 compared to $4.64 per MMBTU
     received for the three months ended December 31, 2003); and

     Management fees of $59,800, which is a decrease of $6,300, or 9.5%, in
     management fees, received during the three month period ended December 31,
     2004 compared to management fees of $66,100 received in the prior three
     month period. Management fees declined somewhat because our current year
     drilling program was completed prior to the end of the second quarter.

                                       21

<PAGE>
<TABLE>
<CAPTION>


The following table sets forth certain items from our Condensed Consolidated
Statements of Operations as expressed as a percentage of total revenues, shown
by quarter for the six months of fiscal 2004, 2003 and 2002:


                                                      For the Six Months Ended
                                              -----------------------------------------
                                               12/31/2004    12/31/2003    12/31/2002
                                              ------------- ------------- -------------
<S>                                                 <C>           <C>           <C>
Total revenues                                      100.0%        100.0%        100.0%

Oil & gas production costs                             8.3          12.5          14.1

                                              ------------- ------------- -------------
Income from operations                                91.7          87.5          85.9
                                              ------------- ------------- -------------

Costs and expenses
  Depreciation and depletion                          15.7          31.4          33.7
  Selling, general and administrative                 19.0          38.6          63.1
  Interest expense                                       -             -             -

                                              ------------- ------------- -------------
Total costs and expenses                              34.7          70.0          96.8
                                              ------------- ------------- -------------

Income before income taxes                            57.0          17.5        (10.9)

Provision for income taxes                            22.1             -             -

                                              ------------- ------------- -------------
Net income (loss)                                     34.9          17.5        (10.9)
                                              ============= ============= =============


To facilitate discussion of our operating results for the six months ended
December 31, 2004 and 2003, we have included the following selected data from
our Condensed Consolidated Statements of Operations:


                                                     Comparison of the Fiscal
                                                   Six Months Ended December 31,             Increase (Decrease)
                                              ---------------------------------------- --------------------------------
                                                       2004                2003              Amount        Percentage
                                              ------------------- -------------------- --------------- ----------------
       Revenues:
       Oil and gas sales                              $1,829,912             $704,868      $1,125,044       160%
       Management fees                                   141,825              112,021          29,804        27
       Interest and other                                  2,895                4,765          (1,870)      (39)
                                              ------------------- -------------------- --------------- ----------------
         Total revenues                                1,974,632              821,654       1,152,978        140
                                              ------------------- -------------------- --------------- ----------------
       Cost and expenses:
       Oil and gas production                            163,856              102,389          61,467        60
       Depreciation and depletion                        310,001              257,949          52,052        20
       General and administrative                        376,468              317,226          59,242        19
       Interest expense                                    4,778                  871           3,907        449
                                              ------------------ -------------------- --------------- ----------------
         Total costs and expenses                        855,103              678,435         176,668        26
                                              ------------------- -------------------- --------------- ----------------

       Income before taxes                             1,119,529              143,219         976,310        682
       Provision for income taxes                        435,837                    -             N/A        N/A
                                              ------------------- -------------------- --------------- ----------------
       Net income                                       $683,692             $143,219        $540,473       377%
                                              =================== ==================== =============== ================

                                                           22
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Central to the issue of success of the six months operations ended December 31,
2004 is the discussion of changes in oil and gas sales, volumes of natural gas
sold and the price received for those sales. We present them here in tabular
form:

                                                    Oil & Gas            MMBTU                  (1)
                                                      Sales               Sold              Price/MMBTU
                                                  --------------     --------------        --------------
                 2005
                 ----------------------------
                 <S>                                  <C>                 <C>                     <C>
                 lst Quarter                           $697,553            130,000                 $5.31
                 2nd Quarter                          1,132,359            177,350                  6.37
                                                  --------------     --------------        --------------
                   Year to date                       1,829,912            307,350                  5.95
                                                  --------------     --------------        --------------

                 2004
                 ----------------------------
                 lst Quarter                            341,926             72,600                  4.75
                 2nd Quarter                            362,942             79,900                  4.64
                 3rd Quarter                            401,941             71,900                  5.28
                                                  --------------     --------------        --------------
                 Year to date                         1,106,809            224,400                  4.88
                                                  --------------     --------------        --------------
                 2003
                 ----------------------------
                 lst Quarter                            198,431             65,800                  2.78
                 2nd Quarter                            241,700             63,700                  3.76
                 3rd Quarter                            314,222             57,900                  5.47
                                                  --------------     --------------        --------------
                   Year to date                         754,353            187,400                  3.23
                                                  --------------     --------------        --------------

                 Second Quarter change
                 ----------------------------
                 2005
                 ----------------------------
                 Amount                                $769,417             97,450                 $1.73
                 Percentage                                212%               122%                   37%
                 2004
                 ----------------------------
                 Amount                                $121,242             16,200                  $.88
                 Percentage                                 50%                25%                   23%

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

Oil and gas revenue, volumes sold and price received for our product have shown
a steady improvement over the first six months of fiscal 2005 and the twelve
months of fiscal 2004. As the table above notes, revenue has increased
approximately 212% when comparing the two three month periods ended December 31,
2004 and 2003. Volumes sold increased approximately 122%, while the price
received for our product increased 37%.

Total revenue increased $1,153,000, or 140% when comparing the two periods,
while operating and production costs increased $61,500, or 60%.

A significant ratio presented is the percentage of management fees charged to
operated wells versus our general and administrative costs. This coverage of
general and administrative costs improved from approximately 35% for the six
months ended December 31, 2003 to approximately 38% at December 31, 2004.

When comparing general and administrative expense for 2005 and 2004, costs
increased by $59,242, or 19% due to increased audit and accounting fees,
officers salaries and the initiation of an investor relations service.

                                       23
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


Results of operations and net income are presented in the following table:

                                          Quarterly Financial Information (unaudited)

                                                          (1)                  (2)                    Net Income (loss)
                                     Total             Operating            Net Income                    Per Share
                                    Revenues            Income                (loss)               Basic           Diluted
                                 ---------------     --------------      -----------------       -----------     -------------
    <S>                              <C>                 <C>                    <C>                   <C>               <C>
    2005
    ------------------------
    1st Quarter                        $784,299           $715,249               $389,781             $.063             $.061
    2nd Quarter                       1,190,333          1,092,632                729,749              .074              .070
                                 ---------------     --------------      -----------------       -----------     -------------
      Total                           1,974,632          1,807,881              1,119,530              .137              .131
                                 ---------------     --------------      -----------------       -----------     -------------

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

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

(1)  Operating income is oil and gas sales plus management fees less direct
     operating costs.
(2)  Before provision for deferred income taxes.

As can be seen in the table, revenues and operating income have improved in
every quarter when comparing the six month periods ended December 31, 2004 and
2003. We believe this is due to the steady increase in production volumes sold
in each subsequent quarter and the fact that we have enjoyed an appreciating
price received for our product. Operating income has increased because
production costs have increased at a lesser rate than production and prices.

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

We had four contractual obligations as of December 31, 2004. The following table
lists our significant liabilities at December 31, 2004:

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

Employment Obligations                       $210,964          $176,928          $107,952               $-0-             495,844

Bank Loans                                     75,000               -0-               -0-                -0-              75,000

Operating Leases                                9,240             1,540               -0-                -0-              10,780
                                       ---------------    --------------    --------------    ---------------     ---------------
Total contractual
  cash obligations                           $295,204          $178,468          $107,952               $-0-            $581,624
                                       ===============    ==============    ==============    ===============     ===============

                                                                24
</TABLE>

<PAGE>


We maintain office space in Denver, Colorado, our principal office, and
Bakersfield, California. The Denver office consists of approximately 1,108
square feet with an additional 750 square feet of basement storage. We entered
into a one-year lease agreement on the Denver office through December 31, 2004
at a lease rate of $1,261 per month. We are currently leasing this space on a
month to month basis. The Bakersfield, California office has 546 square feet and
a monthly rental fee of $730 to $770 over the term of the lease. The three year
lease expires February 8, 2006. Rent expense for the six months ended December
31, 2004 and 2003 was $12,066 and $11,946, respectively.


Critical Accounting Policies and Estimates:
-------------------------------------------

We believe the following critical accounting policies affect our most
significant judgments and estimates used in the preparation of our Condensed
Consolidated Financial Statements.


Reserve Estimates:
------------------

Our estimates of oil and natural gas reserves, by necessity, are projections
based on geologic and engineering data, and there are uncertainties inherent in
the interpretation of such data as well as the projection of future rates of
production and the timing of development expenditures. Reserve engineering is a
subjective process of estimating underground accumulations of oil and natural
gas that are difficult to measure. The accuracy of any reserve estimate is a
function of the quality of available data, engineering and geological
interpretation and judgment. Estimates of economically recoverable oil and
natural gas reserves and future net cash flows necessarily depend upon a number
of variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of
regulations by governmental agencies and assumptions governing future oil and
natural gas prices, future operating costs, severance and excise taxes,
development costs and workover and remedial costs, all of which may in fact vary
considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of oil and natural gas attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery, and estimates of the future net cash flows expected therefrom may
vary substantially. Any significant variance in the assumptions could materially
affect the estimated quantity and value of the reserves, which could affect the
carrying value of our oil and gas properties and/or the rate of depletion of the
oil and gas properties. Actual production, revenues and expenditures with
respect to our reserves will likely vary from estimates, and such variances may
be material.

Many factors will affect actual future net cash flows, including:

     -    The amount and timing of actual production;
     -    Supply and demand for natural gas;
     -    Curtailments or increases in consumption by natural gas purchasers;
          and
     -    Changes in governmental regulations or taxation.

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

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

                                       25

<PAGE>


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

We follow the full-cost method of accounting for oil and gas properties. Under
this method, all productive and nonproductive costs incurred in connection with
the exploration for and development of oil and gas reserves are capitalized.
Such capitalized costs include lease acquisition, geological and geophysical
work, delay rentals, drilling, completing and equipping oil and gas wells,
including salaries, benefits and other internal salary related costs directly
attributable to these activities. Costs associated with production and general
corporate activities are expensed in the period incurred. Interest costs related
to unproved properties and properties under development are also capitalized to
oil and gas properties. If the net investment in oil and gas properties exceeds
an amount equal to the sum of (1) the standardized measure of discounted future
net cash flows from proved reserves, and (2) the lower of cost or fair market
value of properties in process of development and unexplored acreage, the excess
is charged to expense as additional depletion. Normal dispositions of oil and
gas properties are accounted for as adjustments of capitalized costs, with no
gain or loss recognized.

We apply SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." Under SFAS No. 144, long-lived assets and certain intangibles are
reported at the lower of the carrying amount or their estimated recoverable
amounts. Long-lived assets subject to the requirements of SFAS No. 144 are
evaluated for possible impairment through review of undiscounted expected future
cash flows. If the sum of undiscounted expected future cash flows is less than
the carrying amount of the asset or if changes in facts and circumstances
indicate, an impairment loss is recognized.

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

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

                                       26

<PAGE>


Item 3.       CONTROLS AND PROCEDURES

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

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



PART II


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

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

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

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

     The convertible debenture included a potential 600,000 common stock
warrants exercisable as follows:


     If the holder exercises the first warrant before June 30, 2005, we will
     receive an additional $330,000 ($1.10 per share) and issue 300,000 shares
     of restricted stock; if the holder exercises the warrant before June 30,
     2006 but after June 30, 2005, we receive an additional $360,000 ($1.20 per
     share) instead of $330,000.

     If the holder exercises the warrant before March 31, 2005, the holder will
     receive an additional warrant exercisable to purchase another 300,000
     restricted shares at $1.25 per share.

     In any case, the warrant (and any additional warrant) will expire unless
     exercised by June 30, 2006.

                                       27

<PAGE>


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

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

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

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

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

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

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

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

     On December 3, 2004, the board of directors approved the issuance of 28,000
shares of restricted common stock to CEOcast, Inc. as partial consideration for
consulting services to be provided over a six month term being performed
pursuant to a consulting agreement dated October 12, 2004. The following sets
forth the information required by Item 701 in connection with that transaction:

(a)  The issuance was completed on December 3, 2004.

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

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

(d)  We relied on the exemption from registration provided by Sections 4(2) and
4(6) under the Securities Act of 1933 and Regulation D for the issuance of the
shares. In addition, we did not engage in any public advertising or general
solicitation in connection with this transaction; and we provided the investor
with disclosure of all aspects of our business, including providing the investor

                                       28

<PAGE>


with our reports filed with the Securities and Exchange Commission, our press
releases, access to our auditors, and other financial, business, and corporate
information. Based on our investigation, we believe that the investor obtained
all information regarding Aspen Exploration it requested, received answers to
all questions it posed, and otherwise understood the risks of accepting our
securities for investment purposes.

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

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

Item 3.       Defaults Upon Senior Securities.
              --------------------------------
     None.

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

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

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

     None.

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

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


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

                                            ASPEN EXPLORATION CORPORATION



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

                                       29