FORM 10-QSB

                       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 March 31, 1999

                                       OR

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

               For the transition period from ________ to ________

                          Commission File Number 0-9494

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

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


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

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                Yes [ X ] No [ ]

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

     Class                                     Outstanding at May 14, 1999
-----------------                              ---------------------------
  Common stock,
  $.005 par value                                       5,191,322


                                        1

<PAGE>

Part One.  FINANCIAL INFORMATION

     Item 1. Financial Statements

                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS


                                                    March 31,        June 30,
                                                      1999             1998
                                                   -----------      -----------
                                                   (Unaudited)       (Audited)
Current Assets:
  Cash and cash equivalents, including
   $259,500 and $331,894 of invested
   cash at March 31, 1999 and June 30,
   1998 respectively .........................     $   341,041      $   425,306
  Precious metals ............................          18,823           18,823
  Accounts receivable, trade .................         292,817          115,144
  Prepaid expenses ...........................           2,302            8,762
                                                   -----------      -----------
     Total current assets ....................         654,983          568,035
                                                   -----------      -----------
Investment in oil and gas properties,
  at cost (full cost method of
  accounting) ................................       2,161,018        1,682,521
  Less accumulated depletion and
    valuation allowance ......................      (1,081,902)      (1,006,902)
                                                   -----------      -----------
                                                     1,079,116          675,619
                                                   -----------      -----------
Property and equipment, at cost:
  Furniture, fixtures and vehicles ...........         178,403          171,122
  Less accumulated depreciation ..............        (129,544)        (120,544)
                                                   -----------      -----------
                                                        48,859           50,578
                                                   -----------      -----------
Undeveloped mining properties, at cost .......          25,856           27,826
Cash surrender value, life insurance .........         231,314          231,314

Other ........................................            --              3,400
                                                   ===========      ===========
     TOTAL ASSETS ............................     $ 2,040,128      $ 1,556,772
                                                   ===========      ===========

                              (Statement Continues)
                 See notes to Consolidated Financial Statements

                                        2

<PAGE>



                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (Continued)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                   March 31,          June 30,
                                                     1999               1998
                                                  ----------         ----------
                                                  (Unaudited)         (Audited)
Current liabilities:
  Accounts payable and accrued
    expenses ...............................      $   154,631       $   409,815
  Advances from joint owners ...............           86,948            87,999

  Due to related parties ...................             --              68,750
  Notes payable - current ..................          123,085            52,205
                                                  -----------       -----------
  Total current liabilities ................          364,664           618,769
                                                  -----------       -----------
  Notes payable - long term ................          308,444           280,360
                                                  -----------       -----------
Stockholders' equity:

  Common stock, $.005 par value:
    Authorized: 50,000,000 shares
    Issued: At March 31, 1999:
    5,191,322 and June 30, 1998:
    4,916,322 ..............................           25,956            24,581


  Capital in excess of par value ...........        5,951,602         5,677,977
  Accumulated deficit ......................       (4,582,538)       (5,016,915)
  Deferred compensation ....................          (28,000)          (28,000)
                                                  -----------       -----------
  Total stockholders' equity ...............        1,367,020           657,643
                                                  -----------       -----------
Total liabilities and stockholders'
  equity ...................................      $ 2,040,128       $ 1,556,772
                                                  ===========       ===========


                 See Notes to Consolidated Financial Statements

                                        3

<PAGE>

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

                                   Three Months Ended      Nine Months Ended
                                       March 31,                March 31,
                               -----------------------   -----------------------
                                   1999        1998         1999        1998
                                   ----        ----         ----        ----
Revenues:
---------
  Oil and gas ..............   $  292,612   $  229,219   $  920,415   $  517,857

  Management fees ..........        7,613       10,440       84,225       68,084
  Interest and other, net ..        3,891        1,495       18,846       13,383
                               ----------   ----------   ----------   ----------
Total Revenues .............      304,116      241,154    1,023,486      599,324
                               ----------   ----------   ----------   ----------

Costs and expenses:
-------------------
  Oil & gas production .....       32,879       13,985       63,061       47,154
  Depreciation, depletion
   and amortization ........       28,000       10,573       84,000       31,720
  Selling, general and
   administrative ..........      167,569       80,603      416,872      381,313
  Interest expense .........        7,409        3,572       25,176        7,128
                               ----------   ----------   ----------   ----------
Total Costs & Expenses .....      235,857      108,733      589,109      467,315
                               ----------   ----------   ----------   ----------
NET INCOME .................   $   68,259   $  132,421   $  434,377   $  132,009
                               ==========   ==========   ==========   ==========

Basic earnings (loss) per
  common share .............   $      .01   $      .03   $      .09   $      .03
                               ==========   ==========   ==========   ==========
Diluted earnings (loss) ....   $      .01   $      .03   $      .08   $      .03
                               ==========   ==========   ==========   ==========
  per common share

Weighted average number of
 common shares outstanding .    4,916,322    4,806,468    4,916,322    4,806,468
                               ==========   ==========   ==========   ==========





                     The accompanying notes are an integral
                            part of these statements.

                                        4

<PAGE>
                 ASPEN EXPLORATION CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                     Nine months ended March 31,
                                                          1999          1998
                                                        --------     ----------
Cash flows from operating activities:
-------------------------------------
Net gain (loss) .....................................   $ 434,377    $ 132,009

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

  Depreciation, depletion & amortization ............      84,000       31,721
  Loss on write off of investments ..................       3,400         --
  Services rendered for stock .......................        --         69,900

Changes in assets and liabilities:
----------------------------------
  Increase in accounts receivable ...................    (177,673)    (109,714)
  Decrease in prepaid expense .......................       6,460        1,764
  Increase (decrease) in accounts
    payable and accrued expense .....................    (324,985)     206,718
  Increase (decrease) in due to related parties .....        --         (8,273)
                                                        ---------    ---------
  Net cash provided (used) by
    operating activities ............................      25,579      324,125
                                                        ---------    ---------

Cash flows from investing activities:
-------------------------------------
  Conveyance of oil & gas properties for cash .......     477,950         --
  Development & acquisition of oil
    & gas properties ................................    (488,097)    (315,421)
  Purchase of office equipment ......................      (7,281)        --
  Sale of mining data ...............................       1,970      125,000
  Additions, undeveloped mining properties ..........        --         (2,596)
  Prospect fees .....................................      12,900       86,500
  Additions to cash surrender value .................        --         (9,487)
                                                        ---------    ---------

  Net cash used in investing activities .............      (2,558)    (116,004)
                                                        ---------    ---------

Cash flows from financing activities:
-------------------------------------
  Note payable - proceeds ...........................       2,571      151,000
  Repayment of notes payable ........................    (109,857)     (24,763)
                                                        ---------    ---------

                                                         (107,286)     126,237
                                                        ---------    ---------

  Net increase in cash and cash equivalents .........     (84,265)     334,358

  Cash and cash equivalents, beginning of period ....     425,306      238,465
                                                        ---------    ---------

  Cash and cash equivalents, end of period ..........   $ 341,041    $ 572,823
                                                        =========    =========

  Interest paid .....................................   $  25,176    $   7,128
                                                        =========    =========

Schedule of non cash investing
   and financing activities:
------------------------------
  Stock issued for services & mining data ...........   $    --      $  19,500
  Notes payable issued for properties ...............     206,250         --
  Common stock issued for properties ................     275,000         --
                                                        ---------    ---------

                                                        $ 481,250    $  19,500
                                                        =========    =========

                     The accompanying notes are an integral
                            part of these statements.

                                        5

<PAGE>



                          ASPEN EXPLORATION CORPORATION

                   Notes to Consolidated Financial Statements
                                   (Unaudited)

                                 March 31, 1999


Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

     The Company has oil and gas operations in California. The Company's primary
     mineral  projects  and  targets  of  exploration  (uranium)  are in central
     Wyoming.

     During  February,  1999 the Company formed a wholly owned  subsidiary named
     Aspen Power Systems  Corporation  (APS). The purpose of Aspen Power Systems
     will be to design,  construct and possibly operate gas turbine power plants
     to generate electrical energy.

     The Company has three wholly owned subsidiaries: Aspen Gold Mining Company,
     Aspen  Recursos de Mexico and Aspen Power Systems  Corporation.  Aspen Gold
     Mining has staked 6 claims on Valdez  Creek in central  Alaska.  Other than
     those claims,  none of the  subsidiaries  have any assets,  liabilities  or
     operations.

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

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

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

     Statement of cash flows
     -----------------------

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

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

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted   accounting   principles  requires  management  to  make  certain
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities and the disclosure of contingent

                                        6

<PAGE>



Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     liabilities at the date of the financial statements and reported amounts of
     revenues and expenses. Actual results could differ from those estimates.

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

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

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

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

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

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

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

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

                                        7

<PAGE>



Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     The following is a reconciliation  of the numerators and denominators  used
     in the  calculations of basic and diluted earnings (loss) per share for the
     nine months ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>


                                        March 31,                         March 31,
                                         1999                                1998
                                                     Per                                Per
                           Net                      Share        Net                   Share
                           Income       Shares      Amount      Income      Shares     Amount
                           ------       ------      ------      ------      ------     ------
<S>                        <C>           <C>         <C>        <C>         <C>         <C>

Basic earnings per share:

  Net income (loss)
  and share amounts        434,377      4,916,322    .09        132,009   4,806,468     .03

  Dilutive securities
   stock options                          760,000                           760,000

  Repurchased shares                     (277,600)                         (459,535)
                           --------------------------------------------------------------------

Diluted earnings per share:

  Net income and assumed
  share conversion         434,377      5,398,722    .08        132,009    5,106,933    .03
                           =======      =========   ====        =======    =========   ====
</TABLE>


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

     Precious  metals  inventories  are  valued at the  lower of cost  (specific
     identification  method) or market.  There was no allowance  for  unrealized
     losses against inventories due to market decline at March 31, 1998.

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

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

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

                                        8

<PAGE>



Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     capitalized  costs of oil and gas  properties  in the cost center to exceed
     the capitalization  ceiling.  The capitalization  ceiling is the sum of (1)
     the present  value of future net  revenues  from  estimated  production  of
     proved oil and gas  reserves  applicable  to the cost  center  plus (2) the
     lower  of cost or  estimated  fair  value  of the  cost  center's  unproved
     properties less (3) applicable income tax effects.  The valuation allowance
     was $281,719 at March 31, 1999 and March 31, 1998.

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

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

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

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

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

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

                                        9

<PAGE>



Note 2 SEGMENT INFORMATION

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

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

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

     The oil and gas segment  derives its revenues  from the sale of oil and gas
     and  prospect  generation  and  administrative  overhead  fees  charged  to
     participants in its oil and gas ventures.  The mining segment  receives its
     revenues  primarily from the sale of minerals and precious  metals and from
     time to time from the sale of a  mineral  venture  that it has  originated.
     Electrical generation construction will receive its revenues from the sale,
     design,  construction  and/or  operation of gas turbine or other electrical
     generation  projects.  As of March 31, 1999 the Company was in the planning
     stage of this segment and no revenues have been received.  Corporate income
     is  primarily  derived from  interest  income on funds held in money market
     accounts.

     During the nine  months  ended  March 31,  1999 there were no  intersegment
     revenues.  The accounting  policies applied by each segment are the same as
     those used by the Company in general.

     Net sales to one customer of the oil and gas segment totalled approximately
     $802,000 of revenues or 87% for the nine months ended March 31, 1999.

     There have been no differences  from the last annual report in the basis of
     measuring  segment profit or loss.  There have been no material  changes in
     the amount of assets for any operating segment since the last annual report
     except for the oil and gas segment which capitalized approximately $478,500
     for the development and acquisition of oil and gas property.

                                       10

<PAGE>



Note 2 SEGMENT INFORMATION (CONTINUED)

     Segment information consists of the following:

                                                   Nine months     Twelve months
                                                     ended            ended
                                                 March 31, 1999    June 30, 1998
                                                 --------------    -------------
Revenue:

  Oil and gas ..............................      $ 1,004,640       $   863,588
  Mining ...................................              -0-               -0-
  Power plant construction .................              -0-               -0-
  General corporate ........................           18,846            47,236
                                                  -----------       -----------

         Total revenue .....................      $ 1,023,486       $   910,824
                                                  ===========       ===========
Results of operations
  (excluding overhead
   and interest costs):

  Oil and gas ..............................      $   866,579       $   680,605
  Mining ...................................              -0-               -0-
  Power plant construction .................          (38,976)              -0-
  General corporate
    operations .............................         (393,226)         (570,067)
                                                  -----------       -----------

         Net income ........................      $   434,377       $   110,538
                                                  ===========       ===========
Depreciation, depletion
  amortization and valuation
  charged to identifiable assets:

  Oil & gas depletion ......................      $    75,000       $   107,208
  Mining ...................................              -0-               -0-
  Power plant construction .................            9,000               -0-
  General corporate ........................              -0-            12,445
                                                  -----------       -----------

         Total .............................      $    84,000       $   119,653
                                                  ===========       ===========
Capitalized expenditures:

  Oil and gas ..............................      $   488,097       $   545,034
                                                  ===========       ===========

  Mining ...................................      $       -0-       $     4,472
                                                  ===========       ===========

  Power plant construction .................      $       -0-       $       -0-
                                                  ===========       ===========

  Corporate ................................      $     7,281       $    40,291
                                                  ===========       ===========

Identifiable  assets,  net
  of accumulated depreciation,
  depletion and amortization:

  Oil and gas ..............................      $ 1,371,933       $   789,522
  Mining ...................................           44,679            47,890
  Power plant construction .................              -0-               -0-
  General corporate ........................          623,516           719,360
                                                  -----------       -----------

         Total .............................      $ 2,040,128       $ 1,556,772
                                                  ===========       ===========

Note 3 MINING PROPERTIES

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

     In the past three years the Company has carried out exploration for in situ
     uranium deposits in Wyoming. During the years ended June 30, 1998 and 1997,
     the Company  expended $4,472 and $63,352,  respectively,  on the Kaycee and
     Shamrock  prospects.  In addition  during 1998,  the Company  issued to the
     

                                       11

<PAGE>



Note 3 MINING PROPERTIES (CONTINUED)

     president 100,000 shares of the Company's common stock,  valued at $14,000,
     in exchange for the  president's 25% interest in geological and engineering
     data pertaining to the Kaycee uranium prospect.

     During fiscal 1998, the Company sold the geological  data of the Kaycee and
     Shamrock  prospects to a privately-held  Canadian company and, in exchange,
     received a $125,000  cash payment and a commitment to receive an additional
     $125,000  prior to December  31,  1998.  This payment was not received on a
     timely basis and the Company is engaged in  discussions  with the purchaser
     in order to arrange  terms for the  payment of the  amount  due.  Under the
     terms of the sales  agreement  reached in March,  1998,  the  Company  also
     received 2 million shares or  approximately  25% of the common stock of the
     privately-held  company.  To the  knowledge of the Company,  at the time of
     this filing, the stock had no market value.


Note 4 NOTES PAYABLE

     The Company owes the following debt:

                                                      March 31,      June 30,
                                                         1999         1998
                                                     ------------------------
     Borrowings  from life  insurance  company  on
     cash   surrender   value  of   officer   life
     insurance,  interest  at  6%  per  annum,  no
     specific  due  date,  however,   the  Company
     intends  to repay  this  obligation  in equal
     installments  during  fiscal years  6/30/2000
     and   6/30/2001,   collateralized   by   cash
     surrender value of policy                       $  210,437    $  210,437

     Note  payable  to  related   party,   monthly
     principal  and  interest  payments of $4,269,
     due  September,   2000,   collateralized   by
     working interests in the Emigh lease                70,422       101,456

     Note  payable  to  auto  dealership,  monthly
     principal and interest  payments of $879, due
     July, 2000, collateralized by new vehicle           12,920        20,672


                                       12

<PAGE>


Note 4 NOTES PAYABLE (CONTINUED)

     Note payable to an  unaffiliated  third party
     for  the   acquisition   of   producing   gas
     properties  in  Tehama  and  Glenn  Counties,
     California, interest at 5.475%                     137,750         --
                                                     ----------    ----------

                                                        431,529       332,565

     Less current portion                               123,085        52,205
                                                     ----------    ----------

                                                     $  308,444    $  280,360
                                                     ==========    ==========

Note 5 COMMITMENTS AND CONTINGENCIES

     At June 30, 1998 the Company was  committed to the  following  drilling and
     development projects in California:

             1.       Drill, complete and equip the Emigh 35-2.
             2.       Drill, complete and equip the Cilker 4-1 well.
             3.       Drill, complete and equip the Brandt 46X-27 well.


     The Emigh 35-2 well was  successfully  deepened to a depth of approximately
     11,100' and  completed  as a producing  gas well,  producing  approximately
     2,100 MMBTU and 20 BO per day.

     The Cilker 4-1 well was drilled and  abandoned  as a dry hole in  November,
     1998.

     The  drilling of the Brandt  46X-27 well was  deferred  until a future date
     because of low oil prices.

     At March 31, 1999 the Company was committed to the  following  drilling and
     development projects in California:

            1.       Drill, complete and equip the Emigh 4-1 well.
            2.       Conduct a 3-D seismic study on the Compton Landing lease.


                                       13

<PAGE>



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


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

March 31, 1999 as compared to March 31, 1998
--------------------------------------------

Registrant  has  sustained   operating  losses  in  prior  years.  In  addition,
Registrant has used  substantial  amounts of working  capital in its operations.
However,  at March 31, 1999  current  assets  exceeded  current  liabilities  by
$290,319, and cash provided by operations was approximately $25,579. At June 30,
1998 current liabilities exceeded current assets by $50,734 and Registrant had a
working capital  deficit to that extent.  The improvement of $341,053 in working
capital  from a negative  $50,734 to a positive  $290,319 is due  primarily to a
significant increase in net income and cash flow from its California  properties
during the nine months  ended March 31,  1999 and the  acquisition  of a net 21%
working  interest  (16.17% net revenue  interest) in two natural gas units,  the
Johnson and Gay Units, in addition to a 5.00% royalty  interest in the Gay Unit,
located in Tehama and Glenn  Counties,  California.  Registrant  acquired a 100%
working interest in the two properties from D. E. Craggs,  Inc., an unaffiliated
third  party for  $68,500  in cash a note for  $206,500  and  275,000  shares of
Registrant's  restricted common stock valued at $1.00 per share.  Simultaneously
with  the  acquisition,  Registrant  sold a 79%  working  interest  in  the  two
prospects to certain  unaffiliated and three  affiliated  purchasers for a total
price of $477,950.  The date of the  acquisition  and  disposition  was July 16,
1998.  Pursuant to the agreement with Craggs,  Registrant paid Craggs 25% of the
cash and stock at the closing  ($68,750  and 68,750  shares)  and an  additional
$68,750  and  68,750  shares on  January 3,  1999,  and is  obligated  to pay an
additional  25% (plus interest on the cash from the date of closing at the daily
rate of 0.015%) in January 2000 and 2001.

In light  of  recent  successful  drilling  operations  and the  acquisition  of
producing properties, increased revenues will continue to have a positive effect
on Registrant's working capital and contribute significantly to its cash flow in
the coming months.

Registrant  is now focusing most of its efforts on drilling for or acquiring oil
and gas production in the state of California.

Registrant  shares certain oil and gas drilling  opportunities  with third party
investors  (including  some affiliated  investors) and takes a reduced  interest
until after payout to the third party  investors.  Payout in Registrant's  major
oil and gas projects has occurred, and consequently  Registrant is now receiving
increased revenues from its oil and gas operations.  This commenced in the first
quarter of calendar  year 1997 when Emigh 34-1 paid out,  and will  continue for
the foreseeable future.



                                       14

<PAGE>



Registrant  has dedicated  certain cash  resources to  investigate  the economic
possibilities of the sale, design, construction and/or operation of gas turbines
to  produce  electricity.  Through  March  31,  1999,  Registrant  has  expended
approximately $39,000 on this project.


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


March 31, 1999 Compared to March 31, 1998
-----------------------------------------

For the nine months ended March 31, 1999 Registrant's operations continued to be
focused on the  production  of oil and gas, and the  investigation  for possible
acquisition of producing oil and gas properties.

Oil and gas  revenues  for the  nine  months  ended  March  31,  1999  increased
$402,558,  from  $517,857 to $920,415,  a 78% increase.  This increase  reflects
Registrant's  continued successful efforts in drilling exploratory and extension
wells in California  as well as bringing  recent  acquisitions  into the revenue
stream.

Oil and gas production expenses increased $15,907 or 34% from $47,154 to $63,061
for the period ended March 31,  1999.  This  increase was due to a  compensatory
royalty  payment  made on the  Emigh  Lease  of  $15,700  in March of 1999 and a
corresponding  payment made in April of 1998,  thereby distorting the quarter to
quarter and year to date  comparisons.  Production  costs as a percentage of oil
and gas revenues  were 6.9% for the nine months ended March 31, 1999 compared to
9.1% for the nine months ended March 31, 1998.

Depletion,  depreciation and amortization increased significantly,  from $31,720
to $84,000,  a $52,280 or 165%  increase.  This increase  reflects added volumes
produced  from the new wells which  caused  Registrant  to deplete the full cost
pool at a higher rate.

Selling,  general and administrative  expenses increased by $35,559 or 9.3% from
$381,313 to $416,872.  The bulk of this  increase  resulted  from an increase in
consulting  fees of  approximately  $39,000  because  Registrant  began actively
reviewing potential electrical generation projects.

Oil and gas revenues for the three months ended March 31, 1999 increased $63,393
from $229,219 to $292,612, a 28% increase. The increase in revenues from oil and
gas sales slowed in the third quarter  because of reduced product pricing but is
expected to recover in the fourth quarter of fiscal 1999.

Oil and gas production  expenses  increased  $18,894,  or 135%,  from $13,985 to
$32,879. Again, the increase was primarily due to a compensatory royalty payment
made on the Emigh Lease of $15,700 in March of 1999 and a corresponding  payment
made in April of 1998,  thereby  distorting  the  quarter to quarter and year to
date comparisons. Production costs for the third quarter ended March 31, 1999 as

                                       15

<PAGE>



a  percentage  of oil and gas sales  were  11.2%  compared  to 6.2% for the same
period  last  year.  This  percentage  increase  is due to a decline  in product
pricing in the current  period and an  increase  in taxes based on prior  period
production.

Selling,  general and administrative  expenses increased by $86,966 or 108% from
$80,603 to $167,569. Approximately $39,000 of this increase can be attributed to
costs  incurred to  research  and review  electrical  generation  projects.  The
balance of the  increase  of  approximately  $48,000 is the result of  increased
salary, consulting, accounting fees and travel expense.

During the nine months ended March 31, 1999, the energy industry experienced the
worst oil price in a  generation.  The energy  industry  suffered  the  negative
aspects  of  these  low  prices  with  employee   layoffs  and  exploration  and
development curtailments.  However,  beginning in April of 1999 the price of oil
has  improved by 90% from  approximately  $8.10 per barrel to $15.40 per barrel.
Gas prices have increased  approximately  32% when comparing March to May sales.
Assuming  stable  oil  and  gas  prices  at  their  current  level,   Registrant
anticipates  continued improvement in its oil and gas sales with the addition of
the Emigh 35-2 well which  came on line  January  12,  1999.  With  management's
continued emphasis on controlling costs and its improving gas sales,  Registrant
believes its net income and per share earnings will continue to grow through the
end of its fiscal year which ends June 30, 1999.

Year 2000
---------

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

Year 2000 issues  result from the inability of certain  electronic  hardware and
software to accurately calculate, store or use a date subsequent to December 31,
1999. These dates can be erroneously  interpreted in a number of ways, e.g., the
year 2000 could be interpreted as the year 1900.  This inability could result in
a  system  failure  or  miscalculations  that  could in turn  cause  operational
disruptions.  These issues could affect not only information  technology  ("IT")
systems,  such as computer  systems used for accounting,  land,  engineering and
seismic processing, but also systems that contain embedded chips.

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


                                       16

<PAGE>


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

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

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

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

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


                                             ASPEN EXPLORATION CORPORATION
                                                       (Registrant)




                                             /s/  R. V. Bailey
                                             -----------------------------------
                                             By:  R. V. Bailey,
May 14, 1999                                      Chief Executive Officer,
                                                  Principal Financial Officer

                                       17