UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-K





(Mark
One)


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





For the
fiscal year ended December 31, 2008


or





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





Commission
File Number:  000-16731





CROFF ENTERPRISES,
INC.


(Exact
name of registrant as specified in its charter)





Utah
            
            87-0233535(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)9903 Santa Monica
      Blvd, Suite 287, Beverly Hills, California
            
            90212(Address
      of principal executive offices)
            
            (Zip
      Code)





(818)
735-0050


(Registrant's
telephone number, including area code)





Securities
registered pursuant to Section 12(b) of the Act:





None





Securities
registered pursuant to Section 12(g) of the Act:





$0.10 par value common
stock


(Title of
class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.   YES [_]  NO
[X]





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.    YES [_]  NO
[X]





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
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form10-K or any amendment to this
Form 10-K.    YES [_]  NO [X]









Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company.  See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule12b-2 of the Exchange Act.





Large
      accelerated filer  [_]
            Accelerated
      filer  [_]Non-accelerated
      filer  [_]
            Smaller
      reporting company  [X]





Indicate
by check mark whether the registrant is a shell company (as defined by Rule12b-2
of the Act).


YES
[X]  NO [_]





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, based upon the average bid and asked price of
such common equity as of June 30, 2008, as reported by the OTC Bulletin Board,
was approximately $558,000.  Shares of common stock held by each
officer and director and by each person who owns 5% or more of the outstanding
common stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.





As of
March 18, 2009 (the latest practicable date), the registrant had outstanding
1,018,099 shares of its $0.10 par value common stock.




DOCUMENTS
INCORPORATED BY REFERENCE





None









CROFF
ENTERPRISES, INC.





INDEX TO
INFORMATION INCLUDED IN THE ANNUAL REPORT ON FORM 10-K


FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2008




Page
              NumberPART
      IItem
      1.
            Business.
            4Item
      2.
            Properties.
            4Item
      3.
            Legal
      Proceedings.
            5Item
      4.
            Submission
      of Matters to a Vote of Security Holders.
            5PART
      IIItem
      5.
            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases Equity Securities.
            5Item
      7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
            6Item
      8.
            Financial
      Statements and Supplementary Data.
            7Item
      9.
            Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.
            7Item
      9A.
            Controls
      and Procedures.
            7Item
      9B.
            Other
      Information.
            8PART
      IIIItem
      10.
            Directors,
      Executive Officers and Corporate Governance.
            8Item
      11.
            Executive
      Compensation.
            10Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
            11Item
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence.
            12Item
      14.
            Principal
      Accounting Fees and Services.
            12PART
      IVItem
      15.
            Exhibits,
      Financial Statement Schedules.
            13SIGNATURES
            14EXHIBIT
      INDEX
            15INDEX
      TO FINANCIAL STATEMENTS
            F-1






-3-




NOTE
REGARDING FORWARD-LOOKING STATEMENTS





This
report on Form 10-K and other reports filed by Croff Enterprises, Inc. (“Croff”
or the “Company”) from time-to-time with the Securities and Exchange Commission
(collectively the “Filings”) contain forward-looking statements and information
that are based upon beliefs of, and information currently available to, the
Company's management, as well as estimates and assumptions made by the Company's
management.  When used in the Filings, the words “anticipate,”
“believe,” “estimate,”  “expect,” “future,” “intend,” “plan” or the
negative of those terms and similar expressions as they relate to the Company or
the Company's management identify forward-looking statements.  Such
statements reflect the current view of the Company with respect to future events
and are subject to risks, uncertainties, assumptions and other factors relating
to the Company's industry, operations and results of operations and any
businesses that may be acquired by the Company.  Should one or more of
those risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may differ significantly from those anticipated,
believed, estimated, expected, intended or planned.







PART
I





Item
      1.
              Business.


Background.  The
Company was incorporated in Utah in 1907 under the name “Croff Mining
Company.”  The Company changed its name to “Croff Oil Company” in
1952, and in 1996 changed its name to the present “Croff Enterprises,
Inc.”  The Company’s office is located at 9903 Santa Monica Boulevard,
Suite 287, Beverly Hills, California.   The Company does not
currently maintain a website.





Description of
Business.  In December 2007, the Company transferred its oil
and gas assets, related bank accounts, and all related assets and liabilities to
a new wholly-owned subsidiary named Croff Oil Company, Inc. (the
“Spin-Off”).  All shares of Croff Oil Company, Inc. were then
exchanged for the Company’s outstanding Series B preferred shares and the Series
B preferred shares were then cancelled.  For more information
regarding the Spin-Off, see “Management’s Discussion and Analysis of Financial
Condition and Results of Operations - Restructure of Operations”
below.





In the 20
years prior to 2008, the Company’s operations consisted entirely of oil and
natural gas production.   Due to the Spin-Off, the Company
currently has no business operations or revenue source and is operating at a
minimal level (although it continues to file reports required under the
Securities Exchange Act of 1934).  As a result, the Company is a
“shell company” under the rules of the Securities and Exchange Commission (the
“SEC”).  The Company’s management is currently seeking opportunities
for a merger or other business combination with a privately-held operating
company (that will most likely not be in the energy business) on terms that may
or may not be favorable to the Company's existing shareholders.  For
additional information regarding the Company’s current status, see “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations” below.





Employees.  The
Company currently has no employees, with the services of Gregory R. Woodhill
(the Company’s sole officer) being provided pursuant to a consulting arrangement
between Mr. Woodhill and  the Company.   See “Item 13.
Certain Relationships and Related Transactions, and Director
Independence.”





Item
      2.
              Properties.





The
Company operates out of the office of Gregory Woodhill (its sole officer) at no
charge.  Due to its minimal level of operations, the Company expects
that this arrangement will be sufficient until such time as the Company
completes a merger or other business combination , as described above in “Item
1. Business.”





-4-


Item
      3.
              Legal
      Proceedings.





The
Company is not currently a party to any legal proceedings and, to the knowledge
of the Company’s management, there is no litigation threatened by or against the
Company.




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





No
matters were submitted to a vote of security holders during the fiscal quarter
ended December 31, 2008.








PART
II





Item
      5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity
Securities.





Market
Information.  The Company's common stock is quoted on the OTC
Bulletin Board under the symbol “COFF.” The following table sets forth the
quarterly high and low bid prices for the common stock as reported by the OTC
Bulletin Board for the fiscal years ended December 31, 2007 and
2008:





Fiscal
      Year 2007:
                High*
                Low*First
      Quarter
                $3.00
                $1.75Second
      Quarter
                $2.75
                $2.00Third
      Quarter
                $2.50
                $2.00Fourth
      Quarter
                $1.75
                $1.00Fiscal
      Year 2008:First
      Quarter
                $1.01
                $0.51Second
      Quarter
                $2.00
                $0.51Third
      Quarter
                $2.00
                $1.50Fourth
      Quarter
                $1.50
                $1.50


____________________


* These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions.





Cash Dividends.The Company
declared and paid a special dividend of $0.40 per share of common stock to all
shareholders of record as of June 10, 2008.  The Company anticipates
that, for the foreseeable future, any earnings will be retained for use in its
operations.





-5-


Holders of
Record.  As of March 16, 2009 (the latest practicable date),
there were 1,016 holders of record of the Company’s common stock.





Purchases of Equity Securities by
the Issuer and Affiliated Purchasers.  No securities of the Company
were purchased by it or any affiliated purchasers during the fiscal quarter
ended December 31, 2008.





Item
      7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.





Overview.  Due to
the Spin-Off (as described in more detail below), the Company currently has no
business operations or revenue source and has reduced its operations to a
minimal level (although  it continues to file reports required under
the Securities Exchange Act of 1934).  As a result, the Company is a
“shell company” under the rules of the SEC.  As of December 31, 2008,
the Company had available cash and cash equivalents of $54,419, which it
believes will provide funding for its minimal operations until approximately
December 31, 2009.  During that period, it is expected that the
Company’s management will continue to pursue opportunities for a merger or other
business combination with a privately-held operating company (on terms that may
or may not be favorable to the Company's existing
shareholders).  Should the Company exhaust its available funds before
a merger or other business combination is completed and be unable to obtain
additional funds from the sale of debt or equity securities and/or other
financing sources (again on terms that may or may not be favorable to the
Company's existing shareholders), it is expected that the Company will be
required to discontinue operations entirely, seek protection under federal
bankruptcy laws, or both.





Restructure of
Operations.  In December 2007, Croff transferred its oil and
gas assets, related bank accounts, and all related assets and liabilities to a
new wholly-owned subsidiary named Croff Oil Company, Inc.  All shares
of Croff Oil Company, Inc. were then exchanged for Croff’s outstanding
Series B preferred shares and the Series B preferred shares were then
cancelled.  All of Croff’s oil and gas assets, including perpetual
mineral interests, had been pledged to its Series B preferred shareholders at
the creation of the Series B preferred class in 1996.  Upon creation
in 1996, all shareholders of Croff were issued an equivalent number of shares of
Series B preferred stock, while keeping their common stock.





The
Spin-Off occurred approximately three years after Croff’s Board of Directors had
determined to review its strategic alternatives with a view to obtain more
liquidity for the Croff’s two classes of stock and to increase the value to its
shareholders.  In the first quarter of 2005, the Board of Directors
believed the combined value of $2.30 for a common share plus a Series B
preferred share did not reflect the total value of Croff.  Therefore,
in the fourth quarter of 2007, the Board of Directors set the value of a
combined Series B preferred share and a common share at $5.25, allowing
shareholders to receive this cash buyout.  Under the Utah Dissenting
Shareholder’s Rights Act, Croff’s common and Series B preferred shareholders had
the option to receive cash in exchange for their shares.  Common
shares were redeemed at $1.00 per share and Series B preferred shares were
redeemed at $4.25 per share.  If a shareholder did not approve of the
price, the shareholder was able to propose a different price with
justification.  Pursuant to the buyout, 24,030 common shares of
Croff were redeemed at $1.00 per share, and an additional 10,415 common
shares were redeemed at various prices from $1.00 to $2.70 per
share.  In addition, 35,930 shares of Series B preferred stock were
redeemed, all for the $4.25 per share price. As a result of shareholders
exercising their rights, the number of outstanding common shares was reduced
from 551,244 to 516,799 by September 30, 2007.





Liquidity and Capital
Resources.  On December 31, 2008, the Company had assets of
$54,419, current assets of $54,419, and current liabilities of
$35,722.  On December 31, 2007, the Company had assets of $495,364,
current assets of $408,634, and current liabilities of
$77,826.  During the fiscal year ended December 31, 2008, net cash
used by operations totaled $133,003, as compared to cash provided by operations
of $344,098 during the fiscal year ended December 31, 2007.  All of
those changes are due to the Spin-Off, which left the Company with no business
operations or revenue source in 2008. The Company had no short-term or long-term
debt outstanding at December 31, 2008.  During the fiscal year ended
December 31, 2008, the Company purchased 33,245 shares of its common stock at a
cost of $46,570.





-6-


The
financial statements referenced below in “Item 8. Financial Statements and
Supplementary Data” have been prepared assuming that the Company will continue
as a going concern. As discussed in Note 1 to “Notes to Financial Statements”
(page F-7), the Company has suffered a loss from operations in 2008 that raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.





Results of
Operations.  The Company experienced a net loss of $395,553 for
the fiscal year ended December 31, 2008, compared to net income of $170,542 for
the prior fiscal year.  As a result of the Spin-Off, there was no
income in the fiscal year ended December 31, 2008, while there were oil revenues
in the prior fiscal year.  For the fiscal year ended December 31,
2008, expenses totaled $395,553, compared to $93,743 for the fiscal year ended
December 31,2007. The increase is attributable to expenses relating to the
Spin-Off, additional accounting and legal costs, and consulting fees (non-cash
compensation).  Provision for income taxes for the fiscal year ended
December 31, 2008, was zero, compared to $110,000 for fiscal 2007. The decrease
is attributable to the net loss for fiscal 2008.





Results of Discontinued
Operations.  Due to the Spin-Off, income from discontinued
operations for the fiscal year ended December 31, 2008, was zero, compared to
$221,543 for the prior fiscal year.  Also due to the Spin-Off,
interest income decreased to zero during the fiscal year ended December 31,
2008, from $42,740 during the prior fiscal year.





Recent Accounting Pronouncements.  For a description of recent accounting pronouncements, see
Note 2 in the “Notes to Financial Statements” referenced below in “Item 8.
Financial Statements and Supplementary Data.”





Item
      8.
            Financial
      Statements and Supplementary Data.





Reference
is made to the Index to Financial Statements on page F-1 for a listing of the
Company’s financial statements and notes thereto included with this report on
Form 10-K.





Item
      9.
            Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.





The
Company has had no change in accountants during its last two fiscal
years.




Item
      9A.
            Controls
      and Procedures.


Evaluation of Disclosure Controls
and Procedures.  The Company maintains controls and procedures
designed to ensure that information required to be disclosed in its filings
with the SEC is recorded, processed, summarized and reported within the
time periods required by the SEC. As of December 31, 2008, the Company’s Chief
Executive Officer, who is also the Company’s Chief Financial Officer, evaluated
the effectiveness of the design and operation of the Company’s disclosure
controls and procedures.  Based on that evaluation, the Company’s
Chief Executive Officer and Chief Financial Officer concluded that, as of the
end of the fiscal year ended December 31, 2008, the Company’s disclosure
controls and procedures are effective in alerting him to material information
that is required to be included its SEC filings.





Management’s Annual Report on
Internal Control over Financial Reporting.The Company’s
management is responsible for establishing and maintaining adequate internal
control over financial reporting.  The Company’s internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America. The Company’s
internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the Company, (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America, and
that receipts and expenditures of the Company are being made only in accordance
with authorizations of its management and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Company’s assets that could have a material effect on its
financial statements.




-7-


Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





Changes in Internal Control Over
Financial Reporting.  There have been no changes in the
Company’s internal control over financial reporting during the fiscal quarter
ended December 31, 2008, that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial
reporting.





Item
      9B.
            Other
      Information.


During
the fiscal quarter ended December 31, 2008, there was no information required to
be disclosed in a report on Form 8-K that was not so reported.








PART
III





Item 10.
            Directors,
      Executive Officers and Corporate
Governance.





Directors and Executive
Officers.Set forth below is information regarding the
directors and sole officer of the Company. The Company has no
employees.





Name
                            
                            Age
                            
                            Position(s)Gregory
      R. Woodhill
                            
                            34
                            
                            Chief
      Executive Officer,
                              Chief
      Financial Officer,
                              Secretary
      and a DirectorMichael
      Chester
                            
                            30
                            
                            DirectorDavid  S.
      Hamilton
                            
                            53
                            
                            Director





Mr.
Woodhill became the Company’s Chief Executive Officer, Chief Financial Officer,
Secretary and a director on June 17, 2008.  He has been a sales
representative and owner of R.W. Smith & Co., a restaurant equipment,
facilities and interior design company headquartered in San Diego, California,
since April 2004. From 1999 to 2004, Mr. Woodhill served as a director and
casting agent for the Thespyants Theatre Company, a theatre company based in Los
Angeles, California. He received his Bachelor of Arts degree in theatre from the
University of California at San Diego in 1997 and is currently obtaining his
Master of Arts in Counseling Psychology at the University of Santa
Monica.





Mr.
Chester became a director of the Company on June 17, 2008.  He is the
Director of West Coast Promotion for Island Def Jam (part of the Universal Music
Group). He has served in this position since 2006 and has been responsible for
the promotion and marketing of the label's artists at the top 40 radio format.
From 2003 to 2006, Mr. Chester served as Director of West Coast Promotion for
Atlantic Records, where he acted in a similar capacity.  From 2000 to
2003, he served as a Local Promotion Manager for Arista Records in both Chicago
and New York.





Mr.
Hamilton became a director of the Company on June 17, 2008.  He is an
attorney who has practiced law in California since 1980, maintaining a private
practice in Agoura Hills, California, since 1993. Mr. Hamilton specializes in
matters involving securities law, including public and private securities
offerings and securities regulation compliance filings. Mr. Hamilton also
practices law in the areas of business and corporate law involving a variety of
industries. He received a Bachelor of Science degree in biology from the
University of California at Los Angeles in 1977 and is a 1980 graduate of the
Loyola University School of Law.




-8-


Subject
to prior resignation or removal, each of the Company's directors serves in that
capacity until the next annual meeting of stockholders or until his successor is
elected or appointed and duly qualified.  Officers are appointed by
the Board of Directors and serve in that capacity until resignation or
removal.  There are no arrangements or understandings between any
officer or director and any other person pursuant to which he was selected for
his office or position and there are no family relationships between any of the
Company’s officers and directors.  Within the past five years (i) no
petition under the federal bankruptcy laws or any state insolvency law has been
filed by or against any officer or director, and no receiver, fiscal agent or
similar officer has been appointed by a court for the business or property of
such person, or any partnership in which such person was a general partner at or
within the two years before the time of such filing, or any corporation or
business association of which such person was an executive officer at or within
the past two years; (ii) no officer or director has been convicted in a criminal
proceeding (excluding traffic violations and other minor offenses); (iii) no
officer or director has been the subject of any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or otherwise
limiting, the following activities (the “Activities”): (A) acting as a futures
commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an associated person
of any of the foregoing, or as an investment adviser, underwriter, broker or
dealer in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance company, or
engaging in or continuing any conduct or practice in connection with such
activity, (B) engaging in any type of business practice, or (C) engaging in any
activity in connection with the purchase or sale of any security or commodity or
in connection with any violation of federal or state securities laws or federal
commodities laws; (iv) no officer or director has been the subject of any order,
judgment or decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise limiting for more
than 60 days the right of such person to engage in any of the Activities, or to
be associated with persons engaged in any of the Activities; (v) no officer or
director has been found by a court of competent jurisdiction in a civil action
or by the SEC to have violated any federal or state securities law, and the
judgment in such civil action or finding by the SEC has not been subsequently
reversed, suspended, or vacated; and (vi) no officer or director has
been  found by a court of competent jurisdiction in a civil action or
by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.  None of the Company’s directors holds a
directorship in (i) any company with a class of securities registered pursuant
to Section 12 of the Securities Exchange Act of 1934 (the “1934 Act”) or subject
to the requirements of Section 15(d) of the 1934 Act or (ii) any company
registered as an investment company under the Investment Company Act of
1940.





Section 16(a) Beneficial Ownership
Reporting Compliance.  During the fiscal year ended December
31, 2008, former significant beneficial shareholder Jensen Development Company
and former director Julian D. Jensen each failed to file on a timely basis one
report on Form 4 as required by Section 16(a) of the 1934 Act (each report being
late with respect to a single transaction).  In addition, it appears
that former officer, director and significant beneficial shareholder Gerald. L.
Jensen has failed to file a report on Form 4 with respect to a transaction that
occurred on June 17, 2008.





Code of
Ethics.  The Company has adopted a Code of Ethics and Business
Conduct that is applicable to its principal executive officer, principal
accounting officer and/or controller, principal financial officer, and any
persons performing similar functions. A copy of the Company’s Code of Ethics and
Business Conduct is attached as an exhibit to this Form 10-K (see “Item
15. Exhibits, Financial Statement Schedules,” below) and will be provided
to any person upon written request sent to the Company at 9903 Santa Monica
Blvd, Suite 287, Beverly Hills, California 90212.





Audit
Committee.  Croff currently has only a three-person Board of
Directors, none of whom is an audit committee financial expert.  Croff
is currently a “shell company” (as defined by SEC rules), and so has very simple
financial statements.  As a result, it does not require an audit
committee financial expert.  The Company does not currently maintain a
separate audit committee; instead, the Company’s entire Board of Directors
performs any tasks required of that committee when appropriate.


-9-


Item
      11.
            Executive
      Compensation.


Executive Compensation. The
following table sets out the compensation earned during the fiscal years
indicated by the persons acting as the Company’s principal executive officer
during that fiscal year  (the Company had no officers other than
Gregory R. Woodhill at December 31, 2008):





Fiscal
              
              
              
              
              
              
              
              
              All
      OtherName
      and Principal Position
              
              Year
              
              
              Salary
              
              
              Bonus
              
              
              Compensation
              
              
              TotalGregory
      R. Woodhill,
              
              2008
      (1)
              
              
              $
              -0-
              
              
              $
              -0-
              
              
              $
              2,500
              
              
              $
              2,500Principal
      Executive OfficerGerald
      L. Jensen,
              
              2008(2)
              
              
              $
              1
              
              
              $
              -0-
              
              
              $
              10,000
              (3)
              
              $
              10,001Principal
      Executive Officer2007
              
              
              $
              54,000
              
              
              $
              -0-
              
              
              $
              1,620
              (4)
              
              $
              55,620





(1)  Mr.
Woodhill became the Company’s Chief Executive Officer, Chief Financial Officer,
Secretary and a director on June 17, 2008.  He is not an employee of
the Company but receives $500 per month for his services pursuant to a
consulting arrangement with the Company.  See “Item 13. Certain
Relationships and Related Transactions, and Director Independence”
below.





(2)   Mr.
Jensen resigned from all positions with the Company by June 18,
2008.





(3)   For
services as a director.  See “Compensation to Directors,”
below.





(4)   Consists
of an annual IRA contribution.





At
December 31, 2008, there were no outstanding equity awards by the Company to any
principal executive officer named above.





Compensation to
Directors.  Since June 17, 2008, the Company has not
compensated its directors for their services as such.  From January 1,
2008 until June 17, 2008, the Company compensated its directors with the
following cash payments:





Name
            AmountGerald
      L. Jensen
            $10,000Richard
      H. Mandel, Jr.
            $10,000Julian
      D. Jensen
            $10,000Harvey
      Fenster
            $10,000





-10-





Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.





The
following table sets forth the record ownership of the Company's common stock
(the Company's only class of equity securities) as of March 16, 2009 (the latest
practicable date) as to (i) each person or entity who owns more than 5% of the
Company's common stock, (ii) each person who was the Company’s principal
executive officer during the fiscal year ended December 31, 2008,
and  (iii) all current officers and directors of the Company as a
group:





Name and Address of Owner
            
            Number of Shares Owned(1)
            
            Percent of Class(2)Terrace
      Lane, LLC
            
            646,000(3)
            
            63.5%9200
      Sunset Boulevard, 9th
      FloorWest
      Hollywood, California 90069Gerald
      L. Jensen
            
            -0-
            
            N/A3773
      Cherry Creek Drive North, #1025Denver,
      Colorado 80209Gregory
      R. Woodhill
            
            -0-
            
            N/Ac/o
      Croff Enterprises, Inc.9903
      Santa Monica Blvd., Suite 287Beverly
      Hills, California 90212Michael
      Chester
            
            -0-
            
            N/Ac/o
      Croff Enterprises, Inc.9903
      Santa Monica Blvd., Suite 287Beverly
      Hills, California 90212David
      S. Hamilton
            
            -0-
            
            N/Ac/o
      Croff Enterprises, Inc.9903
      Santa Monica Blvd., Suite 287Beverly
      Hills, California 90212All officers and
      directors as
      a group (three persons)
            
            -0-
            
            N/A




(1) 
Except where otherwise noted, to the Company's knowledge, the persons named in
the table have sole voting and investment power with respect to all shares of
common stock owned by them, subject to community property laws where
applicable.





(2)  Based
on 1,018,099 shares of common stock outstanding.





(3)  Includes
250,000 shares that are subject to cancellation if certain conditions have not
been met by June 17, 2009.  See “Item 13. Certain Relationships and
Related Transactions, and Director Independence,” below.





The
Company has no class of non-voting securities presently outstanding and
currently has no securities authorized for issuance under any equity
compensation plans.




-11-





Item
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence.





Transactions with Related
Persons.  The following is a description of those transactions
by the Company in the past two fiscal years or which are presently proposed in
which (i) any Company director, officer or greater than 5% shareholder (or a
relative or spouse thereof, or any relative of such spouse) has or is to have a
direct or indirect interest and (ii) the amount involved exceeds
$2,749.





As of
June 18, 2008 , the Company and Terrace Lane, LLC (“TL”) entered into an
agreement pursuant to which TL is to provide its services to locate one or more
potential merger partner(s) for the Company.   For those
services, the Company has issued to TL 500,000 shares of restricted common
stock; provided, however, that if, by June 17, 2009, TL has not located a
potential merger partner that is acceptable to Croff (in its sole and absolute
discretion), one-half of those shares will be automatically
cancelled.  The agreement terminates on June 17,
2009.   TL is currently the owner of 63.5% of the Company’s
outstanding common stock (see “Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters”).





Pursuant
to a verbal agreement, Gregory R. Woodhill is paid $500 per month for acting as
the Company’s Chief Executive Officer, Chief Financial Officer and
Secretary.  The agreement is terminable at any time by either
party.





During
the fiscal year ended December 31, 2008, the Company paid David S. Hamilton (a
director of the Company) $33,000 for legal services with respect to corporate
and securities matters, including the preparation of filings with the
SEC.





Until
June 17, 2008, the Company had an office sharing arrangement with Jenex
Petroleum Corporation (“Jenex”), which is owned by Gerald L. Jensen, the
Company’s former President.  Pursuant to that arrangement, during 2007
and 2008, the Company paid Jenex for office space and all office services,
including rent, phone, office supplies, secretarial space and
accounting.  The Company’s expenses for those services were $51,258 in
fiscal 2007 and $-0- in fiscal 2008 through the date of
termination.





Until
June 17, 2008, the Company retained the legal services of Jensen, Duffin, &
Dibb, LLP. Julian Jensen, a former director of the Company, is part of that law
firm.  Legal fees paid to that law firm were $28,073.83 in fiscal 2007
and $5,052 in fiscal 2008 through the date of termination.





Director
Independence.  The Company currently has three directors:
Gregory R. Woodhill, Michael Chester and David S. Hamilton.  During
fiscal 2008, the Company also had four other directors: Gerald L. Jensen,
Richard H. Mandel, Jr., Julian D. Jensen and Harvey Fenster, each of whom
resigned from their positions on or prior to June 17, 2008.  The
Company does not currently maintain separate audit, nominating or compensation
committees.  When necessary, the entire Board of Directors performs
the tasks that would be required of those committees.  Because the
Company's common stock is quoted on the OTC Bulletin Board, there is no
requirement that a majority of its Board of Directors or any committee be
“independent” or that it adhere to any particular definition of “independence”
with respect to its directors.  The Company has, however, previously
adopted the following definition of an independent director: “A director who is
not an officer or employee of the Company, is not in a position to exercise
control over other directors or shareholders and who holds less than 10% of the
voting stock of the Company.”  Based on that definition, two of the
Company’s current directors (Michael Chester and David S. Hamilton) are
“independent.”





Item
      14.
            Principal
      Accounting Fees and Services.





Engagement of
Auditor.  The engagement of Ronald R. Chadwick, P.C. (the
“Auditor”) as the Company’s independent auditor was approved in 2006 by the
Board of Directors upon recommendation by the audit committee; that engagement
was then ratified by the Company’s shareholders in December 2006.  The
Auditor is registered with the Public Company Accounting Oversight
Board.  As described above, the Company does not currently maintain a
separate audit committee, with the Company’s entire Board of Directors
performing any tasks required of that committee when appropriate.  To
date, there has been no need for the Company to establish any pre-approval
policies and procedures with respect to the engagement of
accountants.


-12-





Audit Fees.  The
aggregate fees billed in the fiscal years ended December 31, 2008 and 2007, for
professional services rendered by the Auditor for the audit of Croff’s annual
financial statements and quarterly review of the financial statements included
in its Form 10-K or services that are normally provided by an accountant in
connection with statutory and regulatory filings or engagements for the fiscal
year were $15,690 and $14,500, respectively.





Audit-Related Fees. For the
fiscal years ended December 31, 2008 and 2007, there were fees billed for
services reasonably related to the performance of the audit or review of the
financial statements outside of those fees disclosed above under “Audit
Fees.”  For the fiscal years ended December 31, 2008 and 2007, Croff
was billed a total of $5,000 and $2,375, respectively, by an accountant for
consulting services in preparation for the annual audit and quarterly reviews of
the financial statements and general accounting services.




Tax Fees.  For the
fiscal years ended December 31, 2008 and 2007, another separate accountant
rendered services for tax compliance, tax advice, and tax planning work for
which Croff paid $2,500 and $2,300.





PART
IV





Item
      15.
            Exhibits,
      Financial Statement Schedules.





(a)
            The
      following financial statements are filed as part of this
      report:Reference
      is made to the Index to Financial Statements on page F-1 for a listing of
      the Company’s financial statements and notes thereto included with this
      report on Form 10-K.(b)
            No
      financial statement schedules are filed as part of this
      report.(c)
            The
      following exhibits are filed as part of this report:Reference
      is made to the Exhibit Index on page 15 for a listing of the exhibits
      included with this report on Form
10-K.





-13-


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





Dated:
      March 18, 2009
            CROFF
      ENTERPRISES, INC.By: /s/  GREGORY R.
      WOODHILLGregory
      R. Woodhill, President andChief
      Financial Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.




Dated:
      March 18, 2009
            /s/  GREGORY R. WOODHILLGregory
      R. Woodhill, President, Chief FinancialOfficer
      and DirectorDated:
      March 18, 2009
            /s/  DAVID S. HAMILTONDavid
      S. Hamilton, DirectorDated:
      March 18, 2009
            /s/  MICHAEL CHESTERMichael
      Chester, Director







-14-


EXHIBIT
INDEX








Exhibit
      Number
            Description10
            Share
      Issuance Agreement between the Company and Terrace Lane, LLC dated asof
      June 18, 2008.14
            Code
      of Ethics31
            Rule
      13a-14(a)/15d-14(a) Certification.32
            Section
      1350 Certification.




15





INDEX TO
FINANCIAL STATEMENTS











Page
      No.Report
      of Independent Registered Public Accounting Firm
            F-2Balance
      Sheet
            F-3At
      December 31, 2008Statements
      of Operations
            F-4For
      the Years Ended December 31, 2008 and 2007Statements
      of Stockholders’ Equity
            F-5For
      the Years Ended December 31, 2008 and 2007Statements
      of Cash Flows
            F-6For
      the Years Ended December 31, 2008 and 2007Notes
      to Financial Statements
            F-7
      to F-11





F-1


RONALD R.
CHADWICK, P.C.


Certified
Public Accountant


2851
South Parker Road, Suite 720


Aurora,
Colorado  80014


Telephone
(303)306-1967


Fax
(303)306-1944














REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








Board of
Directors and Stockholders


Croff
Enterprises, Inc.


Beverly
Hills, California





I have
audited the accompanying balance sheets of Croff Enterprises, Inc. as of
December 31, 2008 and 2007, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my
audit.





I
conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  I believe that my audit provides a
reasonable basis for my opinion.





In my
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Croff Enterprises, Inc. as of
December 31, 2008 and 2007, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements the Company has suffered a loss from operations in 2008 that raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.





Aurora,
      Colorado
            /s/ Ronald R. Chadwick, P.C.March
      12, 2009
            RONALD
      R. CHADWICK, P.C.








F-2





CROFF
ENTERPRISES, INC.


BALANCE
SHEET


DECEMBER
31, 2008





December 31,
              2008
            
            
            December 31,
              2007ASSETSCURRENT
      ASSETSCash
      and cash equivalents
            
            $
            54,419
            
            
            $
            408,634Accounts
      receivable
            
            
            -
            
            
            
            86,730TOTAL
      CURRENT ASSETS
            
            
            54,419
            
            
            
            495,634TOTAL
      ASSETS
            
            $
            54,419
            
            
            $
            495,634LIABILITIES
      AND STOCKHOLDERS’ EQUITYLIABILITIESAccounts
      payable
            
            $
            3,646
            
            
            $
            7,159Dividends
      payable
            
            
            32,076
            
            
            
            -Accrued
      liabilities
            
            
            -
            
            
            
            70,667TOTAL
      LIABILITIES
            
            
            35,722
            
            
            
            77,826STOCKHOLDERS’
      EQUITYClass
      A Preferred stock; no par valueAuthorized
      – 10,000,000 sharesIssued
      and outstanding – 0 shares
            
            
            -
            
            
            
            -Common
      stock, par value $0.10 per shareAuthorized
      – 50,000,000 shares; 1,017,573 issued and outstanding(2008)
      and 620,743 issued and 551,344 outstanding (2007)
            
            
            101,757
            
            
            
            62,064Additional
      paid-in capital
            
            
            495,558
            
            
            
            439,615Treasury
      stock, at cost –  -0- and 69,399 shares,
      respectively
            
            
            -
            
            
            
            (107,794
            )Retained
      (deficit) earnings
            
            
            (578,618
            )
            
            
            23,653TOTAL
      STOCKHOLDERS’ EQUITY
            
            
            18,697
            
            
            
            417,538TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            54,419
            
            
            $
            495,364








The
accompanying notes are an integral part of the financial
statements





F-3





CROFF
ENTERPRISES, INC.


STATEMENTS
OF OPERATIONS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007





2008
                    
                    
                    2007EXPENSESGeneral
      and administrative
                    
                    $
                    145,553
                    
                    
                    $
                    93,743Consulting
      fees, non-cash compensation
                    
                    
                    250,000
                    
                    
                    
                    -TOTAL
      EXPENSES
                    
                    
                    395,553
                    
                    
                    
                    93,743(LOSS)
      FROM OPERATIONS
                    
                    
                    (395,553
                    )
                    
                    
                    (93,743
                    )OTHER
      INCOME (EXPENSE)Interest
      income
                    
                    
                    -
                    
                    
                    
                    42,740OTHER
      INCOME (EXPENSE)
                    
                    
                    -
                    
                    
                    
                    42,740(LOSS)
      FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
                    
                    
                    (395,553
                    )
                    
                    
                    (51,001
                    )Provision
      for income taxes
                    
                    
                    -
                    
                    
                    
                    -(LOSS)
      FROM CONTINUING OPERATIONS
                    
                    
                    (395,553
                    )
                    
                    
                    (51,001
                    )DISCONTINUED
      OPERATIONSIncome
      discontinued operations
                    
                    
                    -
                    
                    
                    
                    331,543Provision
      for income taxes
                    
                    
                    -
                    
                    
                    
                    (110,000
                    )INCOME
      FROM DISCONTINUED OPERATIONS
                    
                    
                    -
                    
                    
                    
                    221,543NET
      (LOSS)
                    
                    $
                    (395,553
                    )
                    
                    $
                    170,542NET
      (LOSS) INCOME PER COMMON SHAREBasic
      and diluted:Continuing
      operations
                    
                    $
                    (0.45
                    )
                    
                    $
                    (0.09
                    )Discontinued
      operations
                    
                    
                    -
                    
                    
                    
                    0.40Net
      (loss) income
                    
                    $
                    (0.45
                    )
                    
                    $
                    0.31WEIGHTED AVERAGE
      NUMBER OF COMMON
      SHARES OUTSTANDINGBasic
      and diluted
                    
                    
                    856,931
                    
                    
                    
                    551,224







The
accompanying notes are an integral part of the financial statements





F-4




CROFF
ENTERPRISES, INC.


STATEMENTS
OF STOCKHOLDERS’ EQUITY


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
  Preferred
      B Stock
                                
                                
                                Common
      Stock
                                
                                
                                Additional
                                  Paid-in
                                
                                
                                Treasury
                                
                                
                                RetainedShares
                                
                                
                                Amount
                                
                                
                                Shares
                                
                                
                                Amount
                                
                                
                                Capital
                                
                                
                                Stock
                                
                                
                                Deficit
                                
                                
                                TotalBalance,
      December 31, 2006
                                
                                
                                540,659
                                
                                
                                $
                                1,380,387
                                
                                
                                
                                620,743
                                
                                
                                $
                                62,074
                                
                                
                                $
                                155,705
                                
                                
                                $
                                (107,794
                                )
                                
                                $
                                196,963
                                
                                
                                $
                                1,687,335Preferred
      stock reallocation
                                
                                
                                -
                                
                                
                                
                                343,852
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (343,852
                                )
                                
                                
                                -Contribution
      to capital, common
                                
                                
                                -
                                
                                
                                
                                (283,900
                                )
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                
                                283,900
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Preferred
      redemption
                                
                                
                                (540,659
                                )
                                
                                
                                (1,440,339
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (1,440,339
                                )Net
      income for the year ended December 31, 2007
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                
                                -
                                
                                
                                
                                170,542
                                
                                
                                
                                170,542Balance,
      December 31, 2007
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                620,743
                                
                                
                                $
                                62,074
                                
                                
                                $
                                439,605
                                
                                
                                $
                                (107,794
                                )
                                
                                $
                                23,653
                                
                                
                                $
                                417,538Issuance
      of common stock for deferred consulting fees
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                500,000
                                
                                
                                
                                50,000
                                
                                
                                
                                200,000
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                250,000Purchase
      of treasury stock
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                
                                (46,570
                                )
                                
                                
                                -
                                
                                
                                
                                (46,570
                                )Treasury
      share cancellation
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (103,170
                                )
                                
                                
                                (10,317
                                )
                                
                                
                                (144,047
                                )
                                
                                
                                154,364
                                
                                
                                
                                -
                                
                                
                                
                                -Dividend
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (206,718
                                )
                                
                                
                                (206,718
                                )Net
      (loss) for the year ended December 31, 2008
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (395,553
                                )
                                
                                
                                (395,553
                                )Balance,
      December 31, 2008
                                
                                
                                -
                                
                                
                                $
                                -
                                
                                
                                
                                1,107,573
                                
                                
                                $
                                101,757
                                
                                
                                $
                                495,558
                                
                                
                                $
                                -
                                
                                
                                $
                                (578,618
                                )
                                
                                $
                                18,697














The
accompanying notes are an integral part of the financial
statements


F-5


CROFF
ENTERPRISES, INC.


STATEMENTS
OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007





2008
                
                
                
                2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      (loss) from continuing operations
                
                $
                (395,553
                )
                
                $
                170,542Adjustments
      to reconcile net (loss) to net cash(used)
      by operating activities:Income
      from discontinued operations
                
                
                -
                
                
                
                182,460Consulting
      fees, non-cash compensation
                
                
                250,000
                
                
                
                -Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                86,730
                
                
                
                (39,843
                )Accounts
      payable
                
                
                (3,513
                )
                
                
                (6,353
                )Accrued
      liabilities
                
                
                (70,667
                )
                
                
                37,292NET
      CASH (USED) PROVIDED BY OPERATING ACTIVITIES
                
                
                (133,003
                )
                
                
                344,098CASH
      FLOWS FROM INVESTING ACTIVITIES:Discontinued
      operations
                
                
                -
                
                
                
                22,756NET
      CASH (USED) PROVIDED BY INVESTING ACTIVITIES
                
                
                -
                
                
                
                22,756CASH
      FLOWS FROM FINANCING ACTIVITIES:Dividends
      paid
                
                
                (174,642
                )
                
                
                -Purchase
      of treasury stock
                
                
                (46,570
                )
                
                
                -Discontinued
      operations
                
                
                
                
                
                
                (943,949
                )NET CASH (USED) BY FINANCING
      ACTIVITIES
                
                
                (221,212
                )
                
                
                (943,949
                )NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                
                
                (354,215
                )
                
                
                (577,095
                )CASH
      AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD
                
                
                408,634
                
                
                
                985,729CASH
      AND CASH EQUIVALENTS AT THE END OF THE PERIOD
                
                $
                54,419
                
                
                $
                408,634







The
accompanying notes are an integral part of the financial statements





F-6





CROFF
ENTERPRISES, INC.


NOTES TO
FINANCIAL STATEMENTS


FOR THE
YEARS ENDED DECEMBER 31, 2008 AND 2007





1.           
 ORGANIZATION AND NATURE OF BUSINESS





General.





Croff Enterprises, Inc. (“Croff’ or the
“Company”) was incorporated in Utah in 1907.  Due to the Spin-Off (as
described below), the Company currently has no business operations or revenue
source and has reduced its operations to a minimal level (although it
continues to file reports required under the Securities Exchange Act of
1934).   As a result, the Company is a “shell company” under the
rules of the Securities and Exchange Commission (the “SEC”).  During
that period, it is expected that the Company’s management will seek
opportunities for a merger or other business combination with a privately-held
operating company (on terms that may or may not be favorable to the Company's
existing shareholders).  Should the Company exhaust its available
funds before a merger or other business combination is completed and be unable
to obtain additional funds from the sale of debt or equity securities and/or
other financing sources (again on terms that may or may not be favorable to the
Company's existing shareholders), it is expected that the Company will be
required to discontinue operations entirely, seek protection under federal
bankruptcy laws, or both.





Restructure
of Operations.





In December 2007, Croff transferred its
oil and gas assets, related bank accounts, and all related assets and
liabilities to a new wholly-owned subsidiary named Croff Oil Company, Inc. (the
“Spin-Off”).  All shares of Croff Oil Company, Inc. were then
exchanged for Croff’s outstanding Series B preferred shares and the Series B
preferred shares were then cancelled.  All of Croff’s oil and gas
assets, including perpetual mineral interests, had been pledged to its Series B
preferred shareholders at the creation of the Series B preferred class in
1996.  All shareholders of Croff at the date of issuance in 1996 were
given an equivalent number of shares of Series B preferred stock, while keeping
their common stock.





The Spin-Off occurred approximately
three years after Croff’s Board of Directors had determined to review its
strategic alternatives with a view to obtain more liquidity for the Company’s
two classes of stock and to increase the value to its
shareholders.  In the first quarter of 2005, the Board believed the
combined value of $2.30 for a common share plus a Series B preferred share did
not reflect the total value of the Company.  Therefore, in the fourth
quarter of 2007 the Board of Directors set the value of a combined Series B
preferred share and a common share at $5.25, allowing shareholders to receive
this cash buyout.  Under the Utah Dissenting Shareholder’s Rights Act,
Croff’s common and Series B preferred shareholders had the option to receive
cash from the Company in exchange for their shares.  Common shares
were redeemed at $1.00 per share and Series B preferred shares were redeemed at
$4.25 per share.  If a shareholder did not approve of the price, the
shareholder was able to propose a different price with
justification.  Pursuant to the buyout, 24,030 common shares of
Croff were redeemed at $1.00 per share, and an additional 10,415 common
shares were redeemed at various prices from $1.00 to $2.70.  In
addition, 35,930 shares of Series B preferred stock were redeemed, all for the
$4.25 per share price.  As a result of shareholders exercising their
rights, the number of outstanding preferred shares was reduced from 551,244 to
-0- by December 31, 2007.





Going
Concern.





As shown in the accompanying financial
statements, the Company has incurred a net operating loss of $(395,553) during
the year ended December 31, 2008.





The Company is subject to those risks
associated with shell companies.  The Company has sustained losses
since the Spin-Off and additional debt and equity financing will be required by
the Company to fund its activities and to support
operations.  However, there is no assurance that the Company will be
able to obtain additional financing.





F-7





2.          
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Recent Accounting
Pronouncements.





SFAS No. 141(R) - In December 2007, the
FASB issued Statement No. 141(R), “Business Combinations.”   This
Statement replaces FASB Statement No. 141, “Business
Combinations.”  This   Statement retains the
fundamental requirements in Statement No. 141 that the acquisition method of
accounting (which Statement No. 141 called the purchase method) be used for all
business combinations and for an acquirer to be identified for each business
combination. This Statement defines the acquirer as the entity that obtains
control of one or more businesses in the business combination and establishes
the acquisition date as the date that the acquirer achieves control. Statement
No. 141 did not define the acquirer, although it included guidance on
identifying the acquirer, as does this Statement. This Statement’s scope is
broader than that of Statement No. 141, which applied only to business
combinations in which control was obtained by transferring consideration. By
applying the same method of accounting - the acquisition method - to all
transactions and other events in which one entity obtains control over one or
more other businesses, this Statement improves the comparability of the
information about business combinations provided in financial
reports.





This Statement applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. An entity may not apply it before that date. The Company is currently
evaluating SFAS No. 141(R), and has not yet determined its potential impact on
its future results of operations or financial position.





SFAS No. 160 - In December 2007, the
FASB issued Statement No. 160, “Noncontrolling Interests in Consolidated
Financial Statements - an Amendment of ARB No. 51.”  This Statement
amends ARB No. 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this Statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This Statement improves
comparability by eliminating that diversity.





This Statement is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Earlier adoption is prohibited. The effective date of this
Statement is the same as that of the related Statement No. 141(R). This
Statement shall be applied prospectively as of the beginning of the fiscal year
in which this Statement is initially applied, except for the presentation and
disclosure requirements. The presentation and disclosure requirements shall be
applied retrospectively for all periods presented.  The Company is
currently evaluating Statement No. 160 and has not yet determined its potential
impact on its future results of operations or financial position.





SFAS No. 161 - In March 2008, the FASB
issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging
Activities—an amendment of FASB Statement No. 133.” This Statement changes the
disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under Statement No. 133 and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows.





This Statement is intended to enhance
the current disclosure framework in Statement No. 133. The Statement requires
that objectives for using derivative instruments be disclosed in terms of
underlying risk and accounting designation. This disclosure better conveys the
purpose of derivative use in terms of the risks that the entity is intending to
manage. Disclosing the fair values of derivative instruments and their gains and
losses in a tabular format should provide a more complete picture of the
location in an entity’s financial statements of both the derivative positions
existing at period end and the effect of using derivatives during the reporting
period. Disclosing information about credit-risk-related contingent features
should provide information on the potential effect on an entity’s liquidity from
using derivatives. Finally, this Statement requires cross-referencing within the
footnotes, which should help users of financial statements locate important
information about derivative instruments.


F-8





This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. This Statement encourages,
but does not require, comparative disclosures for earlier periods at initial
adoption.   The Company is currently evaluating Statement No. 161
and has not yet determined its potential impact on its future results of
operations or financial position.





SFAS No. 162 - In May 2008, the
FASB issued Statement No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” This Statement identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements presented in conformity with generally
accepted accounting principles in the United States of America.  This
Statement will be effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendments to AU Section 411,“The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles.” The Company does not believe the implementation of this Statement
will have a material impact on its consolidated financial
statements.





Fair value of financial
instruments.





The carrying amounts of financial
instruments including cash and cash equivalents, marketable equity securities,
accounts receivable, notes receivable, accounts payable and accrued liabilities
approximate fair value as of December 31, 2008 and 2007.





Concentrations of credit
risk.





Financial instruments, which
potentially subject the Company to concentrations of credit risk, consist
principally of cash, cash equivalents and accounts receivable. The Company
places its cash with high quality financial institutions.  At times
during the year, the balance at any one financial institution may exceed FDIC
limits.





Stock options and
warrants.





The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123R “Share-Based Payment” related to its stock options and
warrants.  Since December 2001, the Company has had no outstanding
stock options or warrants.





Cash
equivalents.





For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments purchased with
maturity of three months or less to be cash equivalents.





Income taxes.





The provision for income taxes is based
on earnings reported in the financial statements.  Deferred income
taxes are provided using a liability approach based upon enacted tax laws and
rates applicable to the periods in which the taxes become payable.





Net
income.





In accordance with the provisions of
SFAS No. 128, “Earnings per Share,” basic income per common share amounts were
computed by dividing net income after deduction of the net income attributable
to the Company’s Series B preferred shares by the weighted average number of
common shares outstanding during the period.  Diluted income per
common share assumes the conversion of all securities that are exercisable or
convertible into either Series B preferred shares or common shares that would
dilute the basic earnings per common share during the period.





F-9


Use of
estimates.





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





3.            
INCOME TAXES





The provisions for income taxes from
operations consist of the following:





2008
            
            
            2007Current  tax
      expense
            
            $
            -
            
            
            $
            110,000Deferred
      income tax expense
            
            
            -
            
            
            
            -$
            -
            
            
            $
            110,000




A reconciliation of the Company’s
effective income tax rate and the United States statutory rate is as
follows:





2008
            
            
            2007United
      States statutory rate
            
            
            34.00
            %
            
            
            
            34.00
            %State
      income taxes, net of Federal income tax benefit
            
            
            2.55
            
            
            
            
            2.5536.55
            %
            
            
            
            36.55
            %





Deferred taxes results primarily from
state net operating loss carry forwards and capital loss carry forwards and
asset basis differences between book and income tax depreciation and depletion
methods. In addition, the Company uses percentage depletion which does not
create a basis difference between book and tax above the book/tax cost
depletion. The income tax percentage depletion continues to exceed book
depletion and is considered a permanent difference.





At December 31, 2008 and 2007, total
deferred tax assets, liabilities and valuation allowance are as
follows:




Deferred
      tax assets resulting from:2008
            
            
            2007Net
      operating loss carry forwards
            
            $
            145,000
            
            
            $
            -Less
      valuation allowance
            
            
            (145,000
            )
            
            
            -$
            -
            
            
            $
            -





F-10


A 100%
valuation has been established against the deferred tax assets, as utilization
of the net operating and capital loss carry forwards cannot be reasonably
assured.





4.            
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE





Basic income (loss) per common share
information is based on the weighted average number of shares of common stock
outstanding during each year, approximately 888,503 shares in 2008, and 551,244
shares in 2007.





5.            
DISCONTINUED OPERATIONS





As of December 31, 2007, pursuant to a
plan adopted by the Company’s shareholders, the Company had transferred its oil
and gas operations to a company owned by the holders of the Company’s Series B
preferred shares.  The effect of those discontinued operations on the
Company is included in the Schedule of Discontinued Operations as of December
31, 2007, set out below:





SCHEDULE
OF DISCONTINUED OPERATIONS


For the
year ended December 31, 2007


RevenuesOil and natural gas sales
            
            $
            876,505Other income (lease payments)
            
            
            --876,505ExpensesLease operating expense including production taxes
            
            
            267,328Proposed drilling program
            
            
            --General and administrative
            
            
            78,140Overhead expense, related party
            
            
            27,258(Gain) loss on sale of assets
            
            
            108,489Accretion expense
            
            
            7,157Depletion and depreciation
            
            
            56,610544,963Income
      from discontinued operations
            
            
            331,591Provision
      for income taxes
            
            
            110,000Net
      income from discontinued operations
            
            $
            221,543





6.            
RELATED PARTY TRANSACTIONS





During the year ended December 31,
2008, the Company issued 500,000 shares of common stock valued at $250,000 to
Terrace Lane LLC for services rendered.  Terrace Lane LLC is a
majority shareholder in the Company.





During the year ended December 31,
2008, the Company paid David Hamilton $33,000 for legal services
rendered.  Mr. Hamilton is a director of the Company.





7.           
TREASURY STOCK CANCELLATION





During the year ended December 31,
2008, the Company cancelled 103,107 treasury shares with a cost value of
$154,364.  Due to a lack of record availability as to the original
sales price of the treasury shares, all amounts over par value of $10,317, being
$144,047, have been recorded as a reduction to paid in capital.






F-11