**FORM
            10-K/AAmendment #1**
 **SECURITIES
        AND EXCHANGE COMMISSION**
  Washington,
        D.C. 20549
   MARK
        ONE
  x
              
              ANNUAL
                  REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIESEXCHANGE
                  ACT OF 1934For
                  the fiscal year ended December 31, 2006ORo
              
              TRANSITION
                  REPORT pursuant to section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934FOR
                  THE TRANSITION PERIOD FROM N/A TO
                  N/A
  Commission
        File Number: 000-16731
  **CROFF
        ENTERPRISES, INC.**
 (Exact
        Name Of Registrant As Specified In Its Charter)
  **Utah**
              
              **3773 Cherry Creek Drive North, Suite 1025**
                **Denver,
                  Colorado**
              
              **80209**State
                  of Incorporation
              
              Address
                  of principal executive offices
              
              Zip
                  Code**(303)
                  383-1555**
              
              **87-0233535**Registrant’s
                  telephone number, including area code
              
              I.R.S.
                  Employer Identification NumberSecurities
                  registered pursuant to Section 12(b) of the Act: 0Securities
                  registered pursuant to Section 12(g) of the Act:
                  551,244-Common**$0.10
                  Par Value**
              
              **None**Title
                  of each class
              
              Name
                  of each exchange on which registered
  Indicate
        by check mark if the Registrant is a well-known seasoned issuer, as defined
        in
        Rule 405 of the Securities Act. YES x  NO o
  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 xNO o
  Indicate
          by checkmark 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 Form 10-K or any amendment
          to this
          Form 10-K/A. x
  Indicate
        by check mark whether the Registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated. See definition of *“accelerated
        filer and large accelerated filer”* in Rule 12b-2 of the Exchange
        Act.
  Large
        accelerated filero 
        Accelerated filer  o 
        Non-accelerated filer  x
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act.) YES o  NO x
  As
        of
        March 1, 2007, the aggregate market value of the common voting stock held
        by
        non-affiliates of the Registrant, computed by reference to the average of
        the
        bid and ask price on such date was: $635,000.
  As
        of
        March 1, 2007, the Registrant had outstanding 551,244 shares of common stock
        (excludes 69,399 common shares held as treasury stock).
 
 
  
 **TABLE OF CONTENTS**Page**PART
                  I**ITEM
                  1
              
              BUSINESS:CURRENT
                  EVENTS: CHANGE OF CONTROL AND SALE OF ASSETS
              
              4ITEM
                  2
              
              PROPERTIES
              
              13ITEM
                  3
              
              LEGAL
                  PROCEEDINGS
              
              20ITEM
                  4
              
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              
              20**PART
                  II**ITEM
                  5
              
              MARKET
                  FOR REGISTRANT’S SECURITIES, RELATED STOCKHOLDERMATTERS
                  AND ISSUER PURCHASES OF EQUITY SECURITIES
              
              20ITEM
                  6
              
              SELECTED
                  FINANCIAL DATA
              
              22ITEM
                  7
              
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF FINANCIALCONDITION
                  AND RESULTS OF OPERATIONS
              
              22ITEM
                  7A
              
              QUANTITATIVE
                  AND QUALITATIVE DISCLOSURESABOUT
                  MARKET RISK
              
              27ITEM
                  8
              
              FINANCIAL
                  STATEMENTS AND SUPPLEMENTARY DATA
              
              27ITEM
                  9
              
              CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTSON
                  ACCOUNTING AND FINANCIAL DISCLOSURES
              
              27ITEM
                  9A
              
              CONTROLS
                  AND PROCEDURES
              
              27ITEM
                  9B
              
              OTHER
                  INFORMATION
              
              28**PART
                  III**ITEM
                  10
              
              DIRECTORS
                  AND EXECUTIVE OFFICERS OF THE REGISTRANT
              
              28ITEM
                  11
              
              EXECUTIVE
                  COMPENSATION
              
              30ITEM
                  12
              
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND
                  MANAGEMENT AND RELATED STOCKHOLDER MATTERS
              
              31ITEM
                  13
              
              CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS
              
              31ITEM
                  14
              
              PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES
              
              32**PART
                  IV**ITEM
                  15
              
              EXHIBITS
                  AND FINANCIAL STATEMENT SCHEDULES
              
              33SIGNATURES
              
              34EXHIBITSCERTIFICATIONS
                  PURSUANT TO THESARBANES-OXLEY
                  ACT OF 2002
 2
 Basis
        for
        10-K Amendment
 
 The
        following 10-K/A is being filed by
        Croff Enterprises, Inc. “The company” or “Croff” to correct what the company
        regards as certain technical accounting disclosure matters. In all events,
        the
        company does not believe that the accounting changed any of the actual
        performance data, such as, net earnings, cash flows or balance sheet data,
        but the changes were made primarily to conform to categorizations and
        description of certain financial information as requested by the SEC. Further,
        the company does not intend to, for the forgoing reasons, restate any of
        its
        prior financial statements or prior filings. Any person wishing to obtain
        a copy
        showing the specific amendments in the financial data and narrative information
        within the 10-K/A may obtain a copy identifying those changed sections from
        the
        company upon written request.
 
 3
 
 **CROFF
      ENTERPRISES, INC.**
 **Annual
      Report on Form 10-K**
 **December
      31, 2006**
 
 **PART
      I**
   **ITEM
      1.                      BUSINESS**
 
 General
 
 Croff
      Enterprises, Inc. (“Croff” or the “Company”) is an independent energy company
      engaged in the business of oil and natural gas production, primarily through
      ownership of perpetual mineral interests and acquisition of producing oil and
      natural gas leases.  The Company’s principal activity is oil and
      natural gas production from non-operated properties.  Croff’s business
      strategy is focused on targeting opportunities that are of lower risk with
      the
      potential for stable cash flow and long asset life while seeking to keep
      operating costs low.  The Company acquires and owns producing and
      non-producing leases and perpetual mineral interests in Alabama, Colorado,
      Michigan, Montana, New Mexico, North Dakota, Oklahoma, Texas, Utah and Wyoming.
      Over the past eleven years, the Company’s primary source of revenue has been oil
      and natural gas production from leases and producing mineral
      interests.  Other companies operate all of the wells from which Croff
      receives revenues and Croff has no control over the factors which determine
      royalty or working interest revenues, such as markets, prices and rates of
      production.  The Company presently participates as a working interest
      owner in 38 single wells and in 10 units of multiple wells.  Croff
      holds small royalty interests in approximately 215 wells.
 
 Summary
        of Current and Subsequent Material Events – (Discussion of Exchange Agreement
        terminated on June 1, 2007).
 
 Croff
        Enterprises, Inc. announced on December 12, 2006, a now terminated Stock
        Equivalent Exchange Agreement providing for the acquisition of the Taiyun
        Rongan
        Business Trading Company Limited, hereafter “TRBT”, a Chinese corporation
        located in the city of Taiyun, Shanxi Province, in the People’s Republic of
        China. The stock equivalent Exchange Agreement (hereafter “exchange agreement”)
        provided for a change in control of Croff, a change in the business of Croff,
        and a new management team.
 
 The
        essential provisions of the exchange agreement provided for Croff to issue
        over
        11 million new common shares (92.5%) of its common stock to the shareholders
        of
        TRBT in exchange for the acquisition of 80% of the outstanding equity and
        ownership interest in TRBT by Croff. In the event of the completion and closing
        of the Exchange Agreement, Croff would have owned eighty percent (80%) of
        all of
        the issued and outstanding equity interest of TRBT. TRBT owns a seventy-six
        percent (76%) interest in six shopping malls located in or around the city
        of
        Taiyun, China which is located approximately 400 kilometers west of Beijing,
        China. As a result, Croff would have owned approximately sixty-one percent
        (61%)
        net interest in the shopping malls as its sole assets. At closing, TRBT
        shareholders would have received and owned approximately 92.5% of the common
        shares of Croff and the Croff shareholders would have continued to hold
        approximately 7.5% of the then issued and outstanding common shares of
        Croff.
 
 As
        a provision of the exchange
        agreement, Mr. Gerald L. Jensen, Croff’s President, and his affiliated
        companies, the current principal shareholders of Croff, hereafter the “Croff
        Principals,” would have, subject to shareholder vote, acquired 67.2% of all of
        the Preferred B Oil and Gas assets from Croff in exchange for the conveyance
        to
        Croff of the 67.2% of the Class B Preferred Shares currently held by these
        Croff
        Principals. The Croff Principals would have exchanged three hundred sixty
        three
        thousand five hundred thirty five (363,535) shares, or 67.2% of the class
“B”
shares outstanding, in exchange for 67.2% of the shares of a new subsidiary
        to
        which all of the oil and gas assets and related bank accounts of the Company
        will be transferred. These class “B” preferred shares would have been cancelled
        by the Company upon assignment. The Croff Principals would have, concurrently,
        tendered the sum of six hundred thousand dollars ($600,000) in cash to the
        company, and assume all liabilities of the oil and gas assets, in exchange
        for
        the remaining 32.8% of the shares of the new subsidiary holding all of the
        Croff
        oil and gas assets.
 
 4
  Croff
        would have, as part of the
        exchange closing, converted all remaining preferred “B” shares held by the
        public, being approximately 32.8% of the issued and outstanding class of
        preferred “B” shares, to common shares on a ratio of two common shares for each
        class “B” preferred share cancelled.  Upon the closing of the exchange
        transaction, all class “B” preferred shares would have been cancelled and
        terminated of record, and all holders of Preferred “B” shares would have
        received two common shares in exchange.  All class “B” preferred
        shareholders subsequent to closing would have been deemed to hold common
        shares.
        As provided in the exchange agreement upon closing, the company would have
        outstanding only common shares. The company would have been authorized to
        pay a
        dividend of twenty cents per share to all common shareholders of record prior
        to
        closing. This dividend would not include the new common shares to be issued
        to
        the preferred shareholders at closing. The exchange agreement would also
        have
        provided that the sum of $530,000 must remain in Croff at closing, after
        payment
        of all proxy and closing expenses, dissenting shareholder rights, and the
        dividend.
 
 A
          majority of the preferred B shareholders would have been required to approve
          the
          sale of the Preferred B assets and a majority of the common would have
          been
          required to approve all the terms for the exchange agreement to be closed
          as
          outlined herein.
 
 The
          exchange agreement would have been
          subject to the completion of standard due diligence by both entities,
          dissemination of a proxy statement, and a shareholders vote by Croff common
          shareholders and Preferred B Shareholders, whose vote must approve this
          transaction.
 
 If
          the transaction were closed, the
          shareholders would have elected a new Board of Directors nominated and
          designated by TRBT. The new Board could have appointed new officers for
          the
          company. As a net result, the business of the company would have changed
          from
          oil and gas production to the acquisition, development, and management
          of retail
          properties in Taiyuan, China, including the initial six properties as
          identified. It was expected that the company’s offices in the United States
          would be moved to the Los Angeles area from Denver, CO.
 
 The
          exchange agreement would have also
          required majority approval by the common shareholders to increase the authorized
          but unissued preferred “A” shares, no par, from five million shares to ten
          million shares. It also required increasing the authorized common shares,
          $0.10
          par, from 20 million to 100 million shares. Each Croff common shareholder
          would
          have had the right to exercise dissenting shareholder rights and obtain
          cash in
          lieu of remaining as a common shareholder.
 
 The
          exchange agreement was anticipated
          to be approved since the principal shareholders held a majority of the
          preferred
“B” shares and the principal shareholders plus Mr. Julian D. Jensen, a director,
          held a majority of the common shares.
 
 The
          exchange agreement was the subject
          of negotiations for nearly one year, following the initial proposal to
          Croff by
          TRBT to have Croff acquire TRBT. After initial discussions beginning in
          December, 2005, the President of Croff visited Taiyuan, China, in April
          2006,
          and inspected the shopping malls and met with the officers, staff, and
          owners.
          The President also met with legal counsel in Beijing, China, to be briefed
          on
          the legalities of the transaction under Chinese law. Subsequently negotiations
          took place from April through November of 2006, with respect to all aspects
          of
          the transaction,
          resulting in the signing of the Exchange Agreement on December 12,
          2006.  On June 1, 2007 Croff announced the termination of the TRBT
          Exchange Agreement and filed an 8-K with the SEC announcing this
          termination.
 5
  Other
      Current Events in 2006
 
 The
      Company added non-operated working
      interests in Colorado, Wyoming, and Utah in 2006. The Company sold its principal
      oil and gas assets in DeWitt County, Texas. These interests were very small
      non-operated working interest participations.
 
 In
      the third quarter of 2006, Croff
      sold the balance of its principal properties in the Yorktown Reentry Program
      in
      Dewitt County, Texas. Previously the Company had participated with Tempest
      Energy Resources, LP., in the Yorktown area.  In June 2006, the
      company reached an agreement to sell all of its assets in the Yorktown program,
      except a working interest in two wells, one of which was commercial. The Company
      also attempted to sell these two wells but was unable to find a buyer. The
      sale
      of the principal assets included the Eyhorn Lease, including the 20% working
      interest in the Edward Dixel Gipps well. It also included the Panther Pipeline,
      approximately 7.2 miles of natural gas gathering line which Croff had acquired
      in 2006 from Panther Pipeline Limited of Houston, TX. The sale proceeds
      approximately equaled the Company’s cost in the DeWitt County program. Since the
      company had written off a portion of its cost in 2005, the sale resulted in
      a
      small gain reported in the third quarter of 2006. The Company agreed to sell
      its
      interest in the remaining two natural gas wells in Dewitt County, Texas, on
      or
      before the closing of the Exchange Agreement.
 
 The
      Company participated in the
      drilling of the Shriners 2-10c5 Well in Duchesne County, Utah, which was drilled
      by El Paso during 2006. The well currently is being completed, but has not
      produced any revenue. Croff has a working interest of approximately 1.7% of
      this
      well and incurred costs of approximately $60,000. The Company also participated
      in a small interest in three natural gas wells in Lincoln County, Wyoming,
      which
      were drilled by Whiting Petroleum. These three natural gas wells were successful
      and began producing at the end of 2006. The Company also participated, in the
      fourth quarter of 2006, in the Long knife Well in Eastern Colorado. This well
      also was successfully completed as a natural gas producer with Croff retaining
      an approximate one-eighth working interest. Croff expects revenues for this
      well
      to begin in 2007.
 
 There
      were also a number of small
      royalty interests which began paying revenues due to leases executed by Croff
      in
      earlier years on which new wells were drilled. The most significant of these
      wells were drilled in Uintah County, Utah by EOG Resources.
 
 In
        2006, two of the company’s long term
        directors resigned. Mr. Edwin Piker declined to stand for re-election at
        the
        Company’s annual meeting held on December 8, 2006. He was replaced by Mr. Harvey
        Fenster, a new Director. Mr. Dilworth Nebeker resigned just prior to the
        annual
        shareholders meeting, for which he was a candidate as director. The vacancy
        due
        to Mr. Nebeker’s resignation has not been filled. More information on these
        changes in the Board of Directors is found in Part III of this
        10-K.  All new oil and gas interests described in this section will be
        part of the class “B” preferred assets to be sold as part of the exchange
        agreement.
 
 Strategic
      Direction of the Company - 2005
  On
        April
        8, 2005, Croff filed a Form 8-K stating that the Board of Directors had
        determined to review Croff’s strategic alternatives. The Board stated such a
        review may include the possible sale or merger of all or part of the Company
        or
        the possible sale or disposition of all or part of the assets. In undertaking
        this review, the Board stated two primary objectives.  The first
        objective was to increase shareholder
        value.  The second was to provide liquidity to shareholders. The Board
        formed a non-management committee of its Board, excluding Gerald L. Jensen,
        to
        review acquisition proposals including an expected proposal from Gerald L.
        Jensen personally and in conjunction with Jensen Development Company, and
        C. S.
        Finance L.L.C, companies wholly owned by Mr. Jensen.
 
 6
  On
      April, 15, 2005 Jensen Development
      Company and CS Finance LLC,  two companies wholly owned by Gerald L.
      Jensen, submitted an offer to purchase the assets pledged to the Preferred
      B
      shareholders of Croff.  The offer was for $2.80 per Preferred B share.
      The Company filed a Form 8-K on April 19, 2005 reporting this Offer. After
      meeting to discuss the offer on April 20, 2005, the non-management committee
      reported to the Offerors that while the committee was generally in favor of
      a
      transaction, they had concerns with potential tax consequences and requested
      an
      extension. At a May 4, 2005 meeting, the non-management committee rejected
      this
      offer based primarily on adverse tax and corporate consequences to the Company,
      but invited the Offerors to make a tender offer directly to the
      shareholders.
 
 2005
      Tender Offer
 
 On
      June 7, 2005, the non-management
      committee received a draft of an issuer tender offer from the
      Offerors.  At a meeting of the Board of Directors on June 8, 2005, Mr.
      Gerald L. Jensen presented the issuer tender offer to the Board of Directors.
      On
      June 15, 2005, the Offerors filed with the SEC an issuer tender offer to all
      Preferred B shareholders for a cash purchase of $3 per share, for all shares
      of
      Preferred B stock not held by the Offerors.
 
 The
      Offerors received comments from the SEC in response to the Issuer Tender Offer
      filed by them on June 15, 2005.  The Offerors subsequently filed an
      Amended Third Party Tender Offer on June 29, 2005 and again on July 5, 2005.
      The
      non-management committee of the Board of Directors filed a Schedule 14D-9 with
      the SEC on July 6, 2005 on behalf of Croff. This Schedule included the position
      of the non-management committee to the Offer as follows: The non-management
      committee acting as the Board of Directors adopted the following resolution
      with
      respect to the Tender Offer: “The majority of the four Directors comprising the
      non-management committee of the Board of Directors believe that each Preferred
      B
      shareholder should decide whether or not to tender shares in this Tender Offer
      based upon their specific situation and investment
      objectives.  Therefore, the non-management committee was neutral and
      made no recommendation for or against this Tender Offer.”  Each
      Director on the non-management committee expressed in the SEC filings an
      inclination to tender all or part of their shares in this tender offer and
      subsequently did so.
 
 The
      tender offer expired at 12:00
      Midnight, Eastern Time, on August 19, 2005. The Offerors filed a final Amended
      Third Party Tender Offer with the SEC on August 29, 2005 reporting the results
      of the tender offer. The Offerors reported that the depository, American
      National Bank, had received a total of 75,050 shares tendered and not withdrawn
      prior to the expiration of the Offer, including 11,190 shares tendered subject
      to delivery. The tendered shares represent approximately 13.9% of the
      outstanding Class B Preferred stock of Croff Enterprises, Inc. The Offerors
      accepted and approved for payment all of the tendered shares at $3.00 per share
      for a total of $225,150. Along with the Class B Preferred shares previously
      held
      by Gerald L. Jensen and Jensen Development, the Offerors, after the expiration
      of the tender offer, collectively held 328,241 Preferred B shares out of 540,659
      Preferred B shares issued, or approximately 60.7% of the Preferred B shares
      of
      Croff Enterprises, Inc.
 
 Of
      the
      11,190 shares tendered by the expiration of the tender offer, subject to
      delivery, all but 150 shares were delivered by the deadline established by
      the
      Offerors. During the tender offer, two Directors tendered all of their shares
      of
      Preferred B stock. After the tender offer, one Director, Richard Mandel sold
      the
      majority of his Preferred B shares for a note due in 2006; retaining 8,000
      Preferred B shares.  After the tender offer, one of the Directors,
      Julian Jensen, who had tendered approximately one third
      of
      his shares, sold the balance of his Preferred B shares at the same price as
      offered for the tender offer for notes payable during 2006 and 2007. These
      Additional purchases after the tender offer, by C.S. Finance L.L.C. totaled
      another 33,418 Preferred B shares, of which 21,663 Preferred B shares were
      purchased from Julian Jensen, and of which 7,702 shares were purchased from
      Richard Mandel for the tender offer price. To date, the number of Preferred
      B
      shares collectively owned by Gerald L. Jensen, C.S. Finance L.L.C., and Jensen
      Development Company total 67.2% of the Preferred B shares.  The
      holders of approximately 94,394 Preferred B shares were not located during
      the
      tender offer.
 
 7
  Yorktown
      Re-entry Program
 
 In
      2005,
      the Company continued to participate in the development of oil and gas leases
      in
      Dewitt County, Texas. Croff contributed the bulk of its Dewitt leases to a
      participation agreement with Tempest Energy Resources L.P., for an area of
      mutual interest in late 2004. Croff and Tempest first drilled the Helen Gips
      #1
      well, which was unsuccessful. The Helen Gips #1 well was plugged and abandoned
      in 2005, and the Company incurred a loss of $52,638. Tempest and Croff purchased
      another lease on which there was an existing re-entry well, and an existing
      producing well, the A.C. Wiggins. The companies’ refraced (fracture or frac
      refers to the process by which a formation is subject to mechanical or chemical
      treatment to induce or enhance production) the Wiggins well in 2005 and it
      is
      currently producing approximately 50 Mcf per day.  The working
      interest in the Wiggins well is held 75% by Tempest and 25% by Croff. In 2005,
      Tempest informed Croff that it would not exercise its option, pursuant to the
      participation agreement, to acquire the additional Croff acreage in Dewitt
      County. Croff then re-leased certain leases in the former area of mutual
      interest. In December 2005, Croff prepared a re-entry well, the Dixel Gips,
      on a
      portion of its acreage and farmed out this wellbore and acreage, retaining
      a 20%
      carried interest through the drilling and completion phase. Croff then agreed
      to
      pay its 20% share of production and equipment costs after completion. The Dixel
      Gips well was completed by Pool Operating Company in the first quarter of 2006,
      and Croff’s position was then sold, as described above under other Current
      Events in 2006.
 
 Oil
      and
      Natural Gas Reserves
 
 During
      2006, the estimated value of the
      Company’s discounted future net cash flow from proved reserves decreased from
      $2,838,910 at December 31, 2005 to $2,585,000 at December 31, 2006. This
      decrease was due to a drop in the Company’s average crude oil price from $55.93
      per barrel on December 31, 2005, to $51.95 per barrel on December 31, 2006,
      and
      a drop in its average natural gas prices from $7.93 per Mcf on December 31,
      2005
      to $6.36 per MCF on December 31, 2006.  During 2005, the estimated
      value of the Company’s discounted future net cash flows from proved reserves
      increased from $1,642,805 at December 31, 2004, to $2,838,910, an increase
      of
      $1,196,105 or 72%. This increase in the estimated value of the Company’s
      discounted future net cash flows was the result of much higher prices at
      December 31, 2005 as compared to December 31, 2004.
 
 The
      December 31, 2006 valuation reflected average wellhead prices of $6.36 per
      Mcf
      and $51.95 per barrel, while the December 31, 2005 valuation reflected average
      wellhead prices of $7.93 per Mcf and $55.93 per barrel.  At December
      31, 2006, approximately 61% of the Company reserve values were from
      oil.  The Company’s proven oil reserves as of December 31, 2006 and
      2005 were estimated at 87,116 barrels and 77,696 barrels
      respectively.  During 2006, the Company had production of 7,888
      barrels of oil compared to production of 7,630 barrels during
      2005.  The Company’s proven natural gas reserves as of December 31,
      2006 and 2005 were estimated at 443,227 Mcf and 385,811 Mcf,
      respectively.  During 2006, the Company had production of 59,452 Mcf
      of natural gas compared to production of 59,403 Mcf of natural gas during 2005.
      The Company’s December 31, 2006, reserve study included an overall increase in
      the Company’s estimated proven natural gas reserves of 57,416 Mcf and an upward
      revision of proven oil reserves of 9,420 barrels.  The natural gas
      revisions were primarily in the
      four
      corners leases in Colorado, and additional natural gas wells in
      Utah.  The oil increases were from new wells in Utah, and reevaluation
      of oil wells in Michigan.
 
 8
  Revenues
        from oil and natural gas sales for 2006 totaled $842,400. Net income for
        2006
        was $373,015.  Net cash provided by operating activities in 2006
        totaled $329,840. The Company’s cash flow from operations is highly dependent on
        oil and natural gas prices.  Capital expenditures for 2006 totaled
        $57,746 and were primarily attributable to participation in new wells in
        Utah,
        Colorado, and Wyoming.  The Company had no short-term or long-term
        debt outstanding at December 31, 2006.
 
 History
 
 The
      Company was incorporated in Utah in 1907 as Croff Mining Company.  The
      Company changed its name to Croff Oil Company in 1952, and in 1996 changed
      its
      name to Croff Enterprises, Inc.  The Company, however, continues to
      operate its oil and natural gas properties as Croff Oil Company.
 
 In
      November 1991, Croff reverse-split the common stock on a ratio of 1 share of
      common stock for every 10 shares previously held.
 
 In
      1996,
      the Company created a class of Preferred B stock to which the perpetual mineral
      interests and other oil and natural gas assets were pledged.  Thus,
      the Preferred B stock represents the majority of the Company’s oil and natural
      gas assets, exclusive of the Company’s prior interests which were held in Dewitt
      County, Texas.  The Preferred B share assets consist of all oil and
      natural gas assets not located in Dewitt County, Texas, the Preferred B savings
      account and the checking account, and the receivables and liabilities related
      thereto. The common share assets consist of the remaining oil and gas assets
      in
      Dewitt County, Texas, the common stock savings and checking accounts, and the
      balance of the Company’s assets. Each common shareholder, as of the February 28,
      1996 record date, received one Preferred B share for each common share held,
      at
      the time of this restructuring of the capital of the Company. Subsequent to
      this
      date, the Company’s securities have been separately traded.  The
      Company’s common stock is listed and occasionally traded on the Over the Counter
      Bulletin Board (www.otcbb.com) under the symbol “COFF”.  The
      Preferred B shares have limited trading in private
      transactions.  There are currently one million Preferred B shares
      authorized and 540,659 issued and outstanding. All oil and gas assets presently
      remaining in the company as of the date of this report are pledged to the
      preferred “B” shares, except for non-operated working interests in two wells and
      equipment in Dewitt County, Texas.
 
 Available
      Information
 
 Our
      Internet address is www.croff.com.  We make available through
      our website our annual report on Form 10-K, quarterly reports on Form 10-Q,
      current reports on Form 8-K and amendments to those reports filed or furnished
      pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably
      practicable after we electronically file such material with, or furnish it
      to,
      the Securities and Exchange Commission.
 
 9
 
 Major
      Customers
 
 Customers
      which accounted for over 10%
      of oil and natural gas revenues were as follows for the years ended December
      31,
      2004, 2005 and 2006:
 2004
              
              2005
              
              2006Jenex
                  Petroleum Corp., a related party
              
              18.1%
              
              25.8%
              
              14.2%Merit
                  Energy
              
              14.4%
              
              20.1%
              
              18.1%Sunoco,
                  Inc.
              
              11.9%
              
              12.4%
              
              14.7%
  Management
      believes that the loss of any individual purchaser would not have a long-term
      material adverse impact on the financial position or results of operations
      of
      the Company.
 
 Financial
      Information About Industry Segments
 
 The
      Company’s operations presently consist of a single business, oil and natural gas
      production.  During previous years the Company has generated revenues
      through the sale or leasing of oil and natural gas leasehold interests; however,
      no significant revenues were generated from this source for the last six
      years.
 
 Government
      Regulation
  The
      Company’s operations are affected by political developments and by federal,
      state and local laws and regulations. Legislation and administrative regulations
      relating to the oil and natural gas industry are periodically changed for a
      variety of political, economic, environmental and other reasons. Numerous
      federal, state and local departments and agencies issue rules and regulations
      binding on the oil and natural gas industry, some of which carry substantial
      penalties and sanctions for failure to comply. The regulatory burden on the
      industry increases the cost of doing business, decreases flexibility in the
      timing of operations and may adversely affect the economics of capital
      projects.
 
 In
      the past, the federal government has regulated the prices at which oil and
      natural gas could be sold. Prices of oil and natural gas sold by the Company
      are
      not currently regulated, but there is no assurance that such regulatory
      treatment will continue indefinitely into the future. Congress, or in the case
      of certain sales of natural gas by pipeline affiliates over which it retains
      jurisdiction, the Federal Energy Regulatory Commission (“FERC”) could re-enact
      price controls or other regulations in the future.
  In
      recent
      years, FERC has taken significant steps to increase competition in the sale,
      purchase, storage and transportation of natural gas. FERC’s regulatory programs
      allow more accurate and timely price signals from the consumer to the producer
      and, on the whole, have helped natural gas become more responsive to changing
      market conditions. To date, the Company believes it has not experienced any
      material adverse effect as the result of these initiatives. Nonetheless,
      increased competition in natural gas markets can and does add to price
      volatility and inter-fuel competition, which increases the pressure on the
      Company to manage its exposure to changing conditions and position itself to
      take advantage of changing markets. Additional proposals are pending before
      Congress and FERC that might affect the oil and natural gas industry. The oil
      and natural gas industry has historically been heavily regulated at the federal
      level; therefore, there is no assurance that the less stringent regulatory
      approach recently pursued by FERC and Congress will continue.
  State
      statutes govern exploration and production operations, conservation of oil
      and
      natural gas resources, protection of the correlative rights of oil and natural
      gas owners and environmental standards. State Commissions implement their
      authority by establishing rules and regulations requiring permits for drilling,
      reclamation of production sites, plugging bonds, reports and other matters.
      There can be no assurance that, in the aggregate, these and other regulatory
      developments will not increase the cost of operations in the
      future.
 
 10
  Environmental
      Matters
  The
      Company’s operations are subject to stringent federal, state and local laws
      governing the discharge of materials into the environment or otherwise relating
      to environmental protection. Numerous governmental departments such as the
      federal Environmental Protection Agency (“EPA”) issue regulations to implement
      and enforce such laws, which are often difficult and costly to comply with
      and
      which carry substantial civil and criminal penalties and sanctions for failure
      to comply. These laws and regulations will require the acquisition of a permit
      before drilling commences, restrict the types, quantities and concentrations
      of
      various substances that can be released into the environment in connection
      with
      drilling, production and transporting through pipelines, limit or prohibit
      drilling activities on certain lands lying within wilderness, wetlands, frontier
      and other protected areas, require some form of remedial action to prevent
      pollution from former operations such as plugging abandoned wells, and impose
      substantial liabilities for pollution resulting from operations. In addition,
      these laws, rules and regulations may restrict the rate of production. The
      regulatory burden on the oil and natural gas industry increases the cost of
      doing business and therefore affects profitability. Changes in environmental
      laws and regulations occur frequently, and changes that result in more stringent
      and costly waste handling, disposal or clean-up requirements could adversely
      affect the Company’s operations and financial position, as well as the industry
      in general.
 
 The
      Company is not aware of any instance in which it was found to be in violation
      of
      any environmental or employee regulations or laws, and the Company is not
      subject to any present litigation or claims concerning such environmental
      matters.  In some instances the Company could in the future incur
      liability, even as a non-operator, for potential environmental waste or damages
      or employee claims occurring on oil and natural gas properties or leases in
      which the Company has an ownership interest.
 
 Forward-Looking
      Statements
 
 Certain
      information included in this report, other materials filed or to be filed by
      the
      Company with the Securities and Exchange Commission (“SEC”), as well as
      information included in oral statements or other written statements made or
      to
      be made by the Company contain or incorporate by reference certain statements
      (other than statements of historical or present fact) that constitute
“forward-looking statements” within the meaning of Section 27A of the Securities
      Act of 1933 and Section 21E of the Securities Exchange Act of
      1934.  All statements, other than statements of historical or present
      facts, that address activities, events, outcomes or developments that the
      Company plans, expects, believes, assumes, budgets, predicts, forecasts,
      estimates, projects, intends or anticipates (and other similar expressions)
      will
      or may occur in the future are forward-looking statements. These forward-looking
      statements are based on management’s current belief, based on currently
      available information, as to the outcome and timing of future events. When
      considering forward-looking statements, you should keep in mind the risk factors
      and other cautionary statements in this Form 10-K/A. Such forward-looking
      statements appear in a number of places and include statements with respect
      to,
      among other things, such matters as: future capital, development and exploration
      expenditures (including the amount and nature thereof), drilling, deepening
      or
      refracing of wells, oil and natural gas reserve estimates (including estimates
      of future net revenues associated with such reserves and the present value
      of
      such future net revenues), estimates of future production of oil and natural
      gas, expected results or benefits associated with recent acquisitions, business
      strategies, expansion and growth of the Company’s operations, cash flow and
      anticipated liquidity, grassroots prospects and development and property
      acquisition, obtaining financial or industry partners for prospect or program
      development, or marketing of oil and natural gas. We caution you that these
      forward-looking statements are subject to all of the risks and uncertainties,
      many of which are beyond our control, incident to the exploration for and
      development, production and sale
      of
      oil and natural gas. These risks include but are not limited to: general
      economic conditions, the market price of oil and natural gas, the risks
      associated with exploration, the Company’s ability to find, acquire, market,
      develop and produce new properties, operating hazards attendant to the oil
      and
      natural gas business, uncertainties in the estimation of proved reserves and
      in
      the projection of future rates of production and timing of development
      expenditures, the strength and financial resources of the Company’s competitors,
      the Company’s ability to find and retain skilled personnel, climatic conditions,
      labor relations, availability and cost of material and equipment, environmental
      risks, the results of financing efforts, regulatory developments and the other
      risks described in this Form 10-K/A.
 
 11
  Reserve
      engineering is a subjective process of estimating underground accumulations
      of
      oil and natural gas that cannot be measured in an exact way. The accuracy of
      any
      reserve estimate depends on the quality of available data and the interpretation
      of that data by geological and reservoir engineers. In addition, the results
      of
      drilling, testing and production activities may justify revisions of estimates
      that were made previously. If significant, these revisions could change the
      schedule of any further production and/or development drilling. Accordingly,
      reserve estimates are generally different from the quantities of oil and natural
      gas that are ultimately recovered.
 
 Should
        one or more of the risks or uncertainties described above or elsewhere in
        this
        Form 10-K/A occur, or should underlying assumptions prove incorrect, our
        actual
        results and plans could differ materially from those expressed in any
        forward-looking statements. We specifically disclaim all responsibility to
        publicly update any information contained in a forward-looking statement
        or any
        forward-looking statement in its entirety and therefore disclaim any resulting
        liability for potentially related damages.
 
 In
        addition, the company is in a transition period, with the company considering
        various “going forward” proposals that may materially alter the financing,
        structure, and core business of the company, which may, in turn, significantly
        affect current estimates or projections.
 
 All
      forward-looking statements attributable to Croff or its management are expressly
      qualified in their entirety by this cautionary statement.
 
 Fluctuations
      in Profitability of the Oil and Natural Gas Industry
 
 The
      oil
      and natural gas industry is highly cyclical and historically has experienced
      severe downturns characterized by oversupply and weak demand. Many factors
      affect our industry, including general economic conditions, international
      incidents (politics, wars, etc.) consumer preferences, personal discretionary
      spending levels, interest rates and the availability of credit and capital
      to
      pursue new production opportunities.  It is possible that the oil and
      natural gas industry will experience sustained periods of decline in the
      future.  Any such decline could have a material adverse affect on our
      business.
 
 Competition
 
 The
      oil
      and natural gas industry is highly competitive. The Company encounters
      competition in all of its operations, including the acquisition of exploration
      and development prospects and producing properties. The Company competes for
      acquisitions of oil and natural gas properties with numerous entities, including
      major oil companies, other independents, and individual producers and operators.
      Almost all of these competitors have financial and other resources substantially
      greater than those of the Company. The ability of the Company to increase
      reserves in the future will be dependent on its ability to select and
      successfully acquire suitable producing properties and prospects for future
      development and exploration.
 
 
 12
 
 Estimates
      of Oil and Natural Gas Reserves, Production and Replacement
 
 The
      information on proved oil and natural gas reserves included in this document
      are
      simply estimates. The accuracy of any reserve estimate is a function of the
      quality of available data, engineering and geological interpretation and
      judgment, assumptions used regarding quantities of oil and natural gas in place,
      recovery rates and future prices for oil and natural gas. Actual prices,
      production, development expenditures, operating expenses and quantities of
      recoverable oil and natural gas reserves will vary from those assumed in our
      estimates, and such variances may be significant. If the assumptions used to
      estimate reserves later prove incorrect, the actual quantity of reserves and
      future net cash flow could be materially different from the estimates used
      herein. In addition, results of drilling, testing and production along with
      changes in oil and natural gas prices may result in substantial upward or
      downward revisions.
 
 All
      of
      the above risk factors and other information on oil and natural gas properties
      could change in the event the TRBT exchange agreement is adopted. If the
      exchange agreement, which is discussed under, “Summary of Current Events –
Change of Control and Sale of Assets,” in Item 1 of this report, is adopted, the
      Company will exchange and then sell all of its oil and gas assets. The oil
      and
      gas assets, which are pledged to preferred “B” shares will be exchanged for
      cancellation of all preferred “B” shares. The foregoing analysis will then
      become irrelevant to the future operations of the Company.
 
 Corporate
      Offices and Employees
 
 The
      corporate offices are located at 3773 Cherry Creek Drive North, Suite 1025,
      Denver, Colorado 80209.  The Company is not a party to any lease, but
      during 2006 paid Jenex Petroleum Corporation, which is owned by the Company’s
      President, for office space and all office services, including rent, phone,
      office supplies, secretarial, land, and accounting.  The Company’s
      expenses for these services were $48,000, $50,554, and $49,872 for the years
      ended 2004, 2005, and 2006, respectively.  Although these transactions
      were not a result of “arms length” negotiations, the Company’s Board of
      Directors believed the transactions are reasonable.
 
 The
      Company currently has four (4) directors. One director slot of the normal five
      directors authorized by the bylaws is currently unfilled. The Company has one
      employee, the President, and three part-time contract workers, one of which
      is
      also an officer.  The contract workers are provided to the Company as
      part of its office overhead agreement.  The President and the contract
      workers work from the Company’s corporate offices.  None of the Croff
      staff is represented by a union.
 
 Foreign
      Operations and Subsidiaries
 
 The
      Company has no foreign operations, exports, or subsidiaries at
      present.
 
 **ITEM
      2.                      PROPERTIES**
 
 Present
      Activities
 
 In
      the
      third quarter of 2006, Croff sold the balance of its principal properties in
      the
      Yorktown Reentry Program in Dewitt County, Texas. Previously the Company had
      participated with Tempest Energy Resources, LP., in the Yorktown
      area.  In June 2006, the company reached an agreement to sell all of
      its assets in the Yorktown program except a working interest in two wells,
      one
      of which was commercial. The Company also attempted to sell these two wells
      but
      was unable to find a buyer. The sale of the principal assets included the Eyhorn
      Lease, including the 20% working interest in the Edward Dixel Gipps well. It
      also included the Panther Pipeline, approximately 7.2 miles of natural gas
      gathering line which Croff had acquired in 2006 from Panther Pipeline Limited
      of
      Houston, Texas. The sale proceeds approximately equaled the Company’s cost in
      the DeWitt County program. Since the Company had written off a portion of its
      cost in 2005, the sale resulted in a small gain reported in the third quarter
      of
      2006. The Company agreed to sell its interest in the remaining two wells in
      Dewitt County, Texas, on or before closing of the Exchange
      Agreement.
 
 13
  The
      Company participated in the
      drilling of the Shriner 2-10 Well in Duchesne County, Utah, which was drilled
      by
      El Paso during 2006. The Company also participated in a very small interest
      in
      three natural gas wells in Lincoln County, Wyoming. The Company also
      participated, in the fourth quarter of 2006, in the Longknife Well in Eastern
      Colorado. These participations are more particularly described under “Drilling
      Activities,” below.
 
 There
      were also a number of small
      royalty interests which began paying revenues due to leases executed by Croff
      in
      earlier years on which new wells were drilled. None of these wells has a
      material effect upon revenue or net income.
 
 During
      2005, the Company was informed that Tempest Energy Resources, hereafter
“Tempest,” pursuant to its 2004 Participation Agreement, declined to participate
      further in the re-entry program in Dewitt County, Texas.  Tempest’s
      decision followed the determination that the Helen Gips #1 well was
      non-commercial and, and subsequently, it was plugged and abandoned. In early
      2005, Croff, along with Tempest, acquired the Wiggins lease which was not
      included in the Participation Agreement.  This lease has an existing
      producing well, the Wiggins, as well as one re-entry well, the Gansow. The
      Company owns a 25% working interest in this lease and Tempest owns the remaining
      75%. Tempest and Croff participated in a refrac of the Wiggins well into the
      Wilcox zone during 2005. This well is currently producing 45-50 Mcf per day
      of
      natural gas.
 
 After
      Tempest had withdrawn from the re-entry program, Croff re-leased several leases
      for a farmout agreement for the re-entry of the Dixel Gips well.  The
      Company provided the leases, the re-entry wellbore, geological, engineering,
      and
      other wellsite improvements for a 20% working interest, carried through
      completion.  Under the Farmout Agreement, the Farmees pay for drilling
      and completion and all parties, including Croff, pay for production and
      equipment. The Dixel Gips well was completed in the first quarter of 2006.
      Croff
      subsequently purchased a gas gathering system in Dewitt County, and then sold
      all of these assets in the third quarter of 2006.
 
 In
      2004, Croff and Tempest Energy
      Resources L.P. had entered into a Prospect Participation Agreement which
      established an area of mutual interest, to participate in the development of
      the
      leases around Yorktown in Dewitt County, Texas. The Agreement outlined the
      Parties intent to potentially develop an area containing approximately 830
      acres
      with eight re-entry prospects, as well as potential new drilling
      locations.  Because Tempest chose not to exercise its options on the
      remaining acreage following the plugging and abandoning of the Helen Gips well,
      and Croff subsequently sold its leases, this Agreement is no longer
      material.
 
 Drilling
      Activities
 
 The
      Company participated in the drilling of the Shriner 2-10 Well in Duchense
      County, Utah, which was drilled by El Paso during 2006. The well currently
      is
      being completed, but has not produced any revenue. Croff has a working interest
      of approximately 1.7% of this well and incurred costs of approximately $60,000.
      The Company also participated in a very small interest in three natural gas
      wells in Lincoln County, Wyoming, which were drilled by Whiting Petroleum.
      These
      three natural gas wells were successful and began producing at the end of 2006.
      The Company expects payout within 30 months. The Company also participated,
      in
      the fourth quarter of 2006, in the Longknife Well in Eastern Colorado. This
      well
      was also successfully completed as a natural gas producer with Croff retaining
      an approximate one-eighth working interest. Croff expects revenues for this
      well
      to begin in 2007. There were also a number of small royalty interests which
      began paying revenues due to leases executed by Croff in earlier years
      on
      which new wells were drilled. The most significant of these were six natural
      gas
      wells drilled in the Green River formation in Uintah, County,
      Utah.
 
 14
  The
      Company re-entered the Helen Gips #1 well in DeWitt County, Texas, and
      re-completed the wellbore to the Wilcox formation during 2004.  The
      Helen Gips #1 well was not commercial and was plugged and abandoned by Tempest
      in 2005.
 
 The
      Company owns 25% of the Wiggins well and Tempest owns 75%. This well was
      fractured in the Wilcox formation in 2005. It is presently producing
      approximately 45 mcf per day of natural gas.
 
 Delivery
      Commitments
 
 For
      the years ended December 31, 2006
      and 2005, the Company had no delivery commitments with respect to the production
      of oil and natural gas. The Company is unaware of any arrangements pertaining
      to
      any delivery commitments on royalty wells.
 
 General
 
 The
      Company’s “Developed acreage” consists of leased acreage spaced or assignable to
      production on wells having been drilled or completed to a point that would
      permit production of commercial quantities of oil or natural gas.  The
      Company’s “Gross acreage” is defined as total acres in which the Company has an
      interest; “Net acreage” is the actual number of mineral acres owned or leased by
      the Company.  Most developed acreage is held by
      production.  The acreage is concentrated in Alabama, Michigan, New
      Mexico, Oklahoma, Texas, and Utah and is widely dispersed in Colorado, Michigan,
      Montana, North Dakota, and Wyoming.
 
 During
      2006, the Company produced approximately 59,452 Mcf of natural gas and 7,888
      barrels of crude oil. The Company’s production averaged approximately 163 Mcf of
      natural gas per day and approximately 21 Bbl of oil per day.  The
      Company’s average daily production during 2005 was 159 Mcf of natural gas and 21
      Bbl of oil.  “Proved developed” oil and natural gas reserves are
      reserves expected to be recovered from existing wells with existing equipment
      and operating methods.  “Proved undeveloped” oil and natural gas
      reserves are reserves that are expected to be recovered from new wells on
      undrilled acreage, or from existing wells where a relative major expenditure
      is
      required for re-completion.
 
 The
      quantities and values in the tables that follow are based on average prices
      over
      the year 2006, which averaged, over the 2006 year, were approximately $52.92
      per
      barrel of oil and approximately $5.84 per Mcf of natural gas, or in some cases,
      constant prices in effect at December 31, 2006. The prices used in the Company’s
      2006 reserve study used December 31, 2006, prices of $51.95 per barrel of oil
      and $6.36 per Mcf of natural gas. Higher prices increase reserve values by
      raising the future net revenues attributable to the reserves and increasing
      the
      quantities of reserves that are recoverable on an economic
      basis.  Price decreases have the opposite effect.
 
 Future
      prices received from production and future production costs may vary, perhaps
      significantly, from the prices and costs assumed for purposes of these
      estimates.  There can be no assurance that the proved reserves will be
      developed within the periods indicated or that the prices and costs will remain
      constant.  There can be no assurance that actual production will equal
      the estimated amounts used in the preparation of reserve
      projections.
 
 The
      present values shown should not be construed as the current market value of
      the
      reserves.  The quantities and values shown in the tables that follow
      are based on oil and natural gas prices in effect on December 31,
      2006.  The value of the Company’s assets is in part dependent on the
      prices the Company receives for oil and natural gas, and a decline in the price
      of oil or natural gas could have a material adverse effect on the Company’s
      financial condition and results of operations.  The 10% discount
      factor used to calculate present value, which is specified by the Securities
      and
      Exchange Commission (the “SEC”), is not necessarily the most appropriate
      discount rate, and present value, no matter what discount rate is used, is
      materially affected by assumptions as to timing of future production, which
      may
      prove to be inaccurate.  The calculation of estimated future net
      revenues does not take into account the effect of various cash outlays,
      including, among other things, general and administrative costs.
 
 15
  There
      are
      numerous uncertainties inherent in estimating quantities of proved reserves
      and
      in projecting future rates of production and timing of development
      expenditures.  The data in the tables that follow represent estimates
      only.  Oil and natural gas reserve engineering is a subjective process
      of estimating underground accumulations of oil and natural gas that cannot
      be
      measured in an exact way.  The accuracy of any reserve estimate is a
      function of the quality of available data and engineering and geological
      interpretation and judgment.  Results of drilling, testing and
      production after the date of the estimate may justify
      revisions.  Accordingly, reserve estimates are often materially
      different from the quantities of oil and natural gas which are ultimately
      recovered.
 
 An
        independent petroleum engineering firm compiled the proved oil and natural
        gas
        reserves and future revenues as of December 31, 2004, 2005 and 2006 for the
        Company’s oil and natural gas assets.  Since December 31, 2006, the
        Company has not filed any estimates of its oil and natural gas reserves with,
        nor was any such estimates included in any reports to, any state or federal
        authority or agency, other than the Securities and Exchange Commission. The
        reserve study provided to the Company for December 31, 2006 for its reserves
        and
        used in the preparation of this filing was prepared by McCartney Engineering,
        LLC, Consulting Petroleum Engineers, 4251 Kipling Street, Suite 575, Wheat
        Ridge, CO 80033, 303-830-7208.
 
 For
          additional information concerning oil and natural gas reserves, see Supplemental
          Information - Disclosures about Oil and Natural Gas Producing Activities
          -
          Unaudited, included with the Financial Statements filed as a part of this
          report.
 
 The
          following table sets forth summary information with respect to estimated
          proved
          reserves at December 31, 2006. (See table F-22 through
          F-24)
 ESTIMATED
          PROVED RESERVES
 **As
          of December 31, 2006**
 Net
                    Oil
                
                
                Net
                    Natural Gas
                
                
                Standardized
                    Measure
                  of
                    discounted future cash
                  flows
                    related to proved
                  Oil
                    and Gas ReservesArea
                
                (Bbls)
                
                
                (Mcf)Alabama
                
                
                -
                
                
                
                1,335
                
                
                $
                3,075Colorado
                
                
                -
                
                
                
                101,941
                
                
                
                277,945Michigan
                
                
                58,739
                
                
                
                126,508
                
                
                
                1,237,211Montana
                
                
                2,258
                
                
                
                -
                
                
                
                25,684New
                    Mexico
                
                
                152
                
                
                
                76,031
                
                
                
                256,954North
                    Dakota
                
                
                6,857
                
                
                
                3,788
                
                
                
                78,185Oklahoma
                
                
                1,405
                
                
                
                53,160
                
                
                
                134,333Texas
                
                
                329
                
                
                
                10,754
                
                
                
                44,699Utah
                
                
                9,153
                
                
                
                54,123
                
                
                
                367,292Wyoming
                
                
                8,223
                
                
                
                15,587
                
                
                
                159,622Total
                
                
                87,116
                
                
                
                443,227
                
                
                $
                2,585,000
 The
        above
        table is a state by state summary of the information disclosed on page
        F-22.
 
 16
 
 The
      following table sets forth summary information with respect to oil and natural
      gas production for the year ended December 31, 2006.
 
 **STATE
      GEOGRAPHIC DISTRIBUTION OF NET PRODUCTION**
  Net
                  Oil
              
              
              Net
                  Natural GasState
              
              (Bbls)
              
              
              (Mcf)Alabama
              
              
              -
              
              
              
              125Colorado
              
              
              41
              
              
              
              12,323Michigan
              
              
              4,571
              
              
              
              7,429Montana
              
              
              152
              
              
              
              -New
                  Mexico
              
              
              182
              
              
              
              7,337North
                  Dakota
              
              
              636
              
              
              
              215Oklahoma
              
              
              270
              
              
              
              15,582Texas
              
              
              110
              
              
              
              4,111Utah
              
              
              1,465
              
              
              
              10,027Wyoming
              
              
              461
              
              
              
              2,765Total
              
              
              7,888
              
              
              
              59,915
 
 
 The
      following table sets forth summary information with respect to the Company’s
      estimated number of productive wells as of December 31, 2006.
 
 **PRODUCTIVE
                WELLS AND ACREAGE (1)
                (2) (3)**
              **As
                of December 31, 2006**Area
            
            Gross
                Oil
              Wells(2)
            
            
            Gross
                Natural Gas
              Wells(2)
            
            
            Net
                Oil
              Wells
            
            
            Net
                Natural Gas
              Wells
            
            
            Net
                Acreage
              with
                ProductionAlabama
            
            
            -
            
            
            
            2
            
            
            
            -
            
            
            
            .01
            
            
            
            10Colorado
            
            
            1
            
            
            
            13
            
            
            
            .04
            
            
            
            .02
            
            
            
            40Michigan
            
            
            3
            
            
            
            33
            
            
            
            .98
            
            
            
            .19
            
            
            
            188Montana
            
            
            1
            
            
            
            -
            
            
            
            .05
            
            
            
            -
            
            
            
            5New
                Mexico
            
            
            1
            
            
            
            57
            (3)
            
            
            .01
            
            
            
            .03
            
            
            
            55North
                Dakota
            
            
            10
            
            
            
            6
            
            
            
            .12
            
            
            
            .12
            
            
            
            38Oklahoma
            
            
            3
            
            
            
            8
            
            
            
            .25
            
            
            
            1.28
            
            
            
            173Texas
            
            
            3
            
            
            
            11
            
            
            
            .38
            
            
            
            .38
            
            
            
            160Utah
            
            
            121
            
            
            
            36
            
            
            
            .22
            
            
            
            .19
            
            
            
            730Wyoming
            
            
            11
            
            
            
            5
            
            
            
            .14
            
            
            
            .18
            
            
            
            240Total
            
            
            154
            
            
            
            171
            
            
            
            2.19
            
            
            
            2.40
            
            
            
            1,639
 
 The
      Company’s “Gross Wells” are defined as the total number of wells in which the
      Company has any interest. “Net Wells” are defined as the Company’s total
      aggregate percentage of interest in all wells in that state. “Net acreage” is
      the actual number of acres in the producing well unit multiplied by the
      Company’s percentage interest in that acreage, listed by state.
 
 (1)
            This
                chart contains estimates associated with small mineral interests
                and small
                leases.
  (2)
            A
                well is included twice if it produces both oil and natural gas, so
                the
                actual total gross wells are less than the number
                shown.  (3)
            These
              natural gas wells in New Mexico also produce some
              condensate.
 
 
 17
 
  The
      following table sets forth summary information with respect to the Company’s
      undeveloped acreage as of December 31, 2006.
 
 **UNDEVELOPED
                  ACREAGE****As
                  of December 31, 2006**Total
                  Undeveloped AcreageArea
              
              Proven
              
              
              UnprovenGross
                  Acres
              
              
              Net
                  Acres
              
              
              Gross
                  Acres
              
              
              Net
                  AcresColorado
              
              
              80
              
              
              
              7
              
              
              
              600
              
              
              
              40Montana
              
              
              -
              
              
              
              -
              
              
              
              3,800
              
              
              
              250Texas
              
              
              160
              
              
              
              60
              
              
              
              160
              
              
              
              40Utah
              
              
              8,000
              
              
              
              140
              
              
              
              102,000
              
              
              
              3,300
  Oil
      and
      Natural Gas Mineral Interests and Royalties
 
 The
      Company owns perpetual mineral interests which total approximately 3,300 net
      mineral acres, of which approximately 1,100 net acres are
      producing.  The mineral interests are located in 102,000 gross acres
      primarily in Duchesne, Uintah, Carbon and Wasatch Counties in Utah, and
      approximately 40 net mineral acres in La Plata County, Colorado, and San Juan
      County, New Mexico.
 
 The
      Company continues to execute new
      leases or renewals on its perpetual mineral interests.  In 2006, the
      Company executed new leases on its acreage in Duchesne and Uintah County, Utah.
      The amount of new leasing activity during 2005 and 2006 was not
      significant.  In 2006, the Company elected to participate in the
      drilling of a well in Duchesne County, Utah, with El Paso Production Company
      based on the Company’s mineral ownership in the proposed location. In 2005, new
      wells were drilled on the recent leases in Uintah County by EOG Resources,
      Inc.
      In November and December 2004, the Company leased about 100 net acres in
      Duchesne and Uintah County, Utah.
 
 As
      of December 31, 2006, the Company
      was receiving royalties from approximately 216 producing wells, primarily in
      the
      Bluebell-Altamont field in Duchesne and Uintah Counties, Utah and from coal
      bed
      methane wells in the four corners region of Colorado and New Mexico. Royalties
      also were received from scattered interests in Alabama, Michigan, Texas, and
      Wyoming.
 
 Oil
      and
      Natural Gas Working Interests
 
 The
      Company has sought to increase its
      production of oil and natural gas through the purchase of producing
      leases.  The Company believes, in general, that it is able to purchase
      working interests at a more reasonable price than royalty
      interests.  A working interest requires the owner to pay its
      proportionate share of the costs of producing the well, while a royalty is
      paid
      out of the revenues without a deduction for the operating costs of the
      well.  When oil or natural gas prices drop, the proportion of the
      revenues going to pay the expense of operating the well increases, and when
      oil
      and natural gas prices are rising, expenses decrease as a percentage of total
      revenues.  The Company’s purchases of working interests are intended
      to increase oil and natural gas production over time.  The Company
      also participates in new wells as a royalty owner.  A royalty owner
      generally receives a smaller interest, but does not share in the expense of
      drilling or operating the wells.
 
 18
 AVERAGE
        SALES PRICES AND PRODUCTION COST
 
 The
        following table sets forth summary information with respect to the Company’s
        approximate average sales price per barrel (oil) and per Mcf (1000 cubic
        feet of
        natural gas), together with approximate average production costs for units
        of
        production for the Company’s production revenues by geographic area for the last
        three years.
 
 **AVERAGE
        SALES PRICES AND PRODUCTION COST**
 **Past
        Three Years by Geographic Area**
 Average
                Sales Price*
            
            
            Average
                Production Cost*2006
            
            
            2005
            
            
            2004
            
            
            2006
            
            
            2005
            
            
            2004Geographic
                Area
            
            Oil
            
            
            NaturalGas
            
            
            Oil
            
            
            NaturalGas
            
            
            Oil
            
            
            NaturalGas
            
            
            Oil
            
            
            Natural
              Gas
            
            
            Oil
            
            
            NaturalGas
            
            
            Oil
            
            
            NaturalGasAlabama
            
            $
            -
            
            
            $
            7.23
            
            
            $
            -
            
            
            $
            9.38
            
            
            $
            -
            
            
            $
            6.10
            
            
            $
            -
            
            
            $
            1.56
            
            
            $
            -
            
            
            $
            1.30
            
            
            $
            -
            
            
            $
            2.24Colorado
            
            $
            71.12
            
            
            $
            5.46
            
            
            $
            58.33
            
            
            $
            6.69
            
            
            $
            36.01
            
            
            $
            5.05
            
            
            $
            15.50
            
            
            $
            .55
            
            
            $
            14.76
            
            
            $
            0.23
            
            
            $
            16.64
            
            
            $
            1.11Michigan
            
            $
            58.38
            
            
            $
            7.34
            
            
            $
            53.56
            
            
            $
            8.29
            
            
            $
            38.80
            
            
            $
            6.10
            
            
            $
            23.20
            
            
            $
            1.12
            
            
            $
            26.79
            
            
            $
            0.92
            
            
            $
            16.91
            
            
            $
            2.82Montana
            
            $
            61.82
            
            
            $
            -
            
            
            $
            56.40
            
            
            $
            -
            
            
            $
            40.45
            
            
            $
            -
            
            
            $
            26.43
            
            
            $
            -
            
            
            $
            29.55
            
            
            $
            -
            
            
            $
            24.30
            
            
            $
            -New
                Mexico
            
            $
            61.26
            
            
            $
            6.80
            
            
            $
            53.14
            
            
            $
            7.02
            
            
            $
            40.26
            
            
            $
            4.73
            
            
            $
            16.10
            
            
            $
            .48
            
            
            $
            15.00
            
            
            $
            0.02
            
            
            $
            3.12
            
            
            $
            0.52North
                Dakota
            
            $
            55.78
            
            
            $
            4.78
            
            
            $
            52.16
            
            
            $
            4.98
            
            
            $
            39.25
            
            
            $
            2.12
            
            
            $
            18.20
            
            
            $
            2.10
            
            
            $
            17.18
            
            
            $
            2.08
            
            
            $
            10.60
            
            
            $
            1.63Oklahoma
            
            $
            50.17
            
            
            $
            5.42
            
            
            $
            54.05
            
            
            $
            6.44
            
            
            $
            38.20
            
            
            $
            4.66
            
            
            $
            22.17
            
            
            $
            2.32
            
            
            $
            18.96
            
            
            $
            2.21
            
            
            $
            10.46
            
            
            $
            1.74Texas
            
            $
            61.53
            
            
            $
            6.88
            
            
            $
            54.61
            
            
            $
            7.98
            
            
            $
            39.58
            
            
            $
            5.33
            
            
            $
            14.05
            
            
            $
            1.84
            
            
            $
            6.71
            
            
            $
            1.28
            
            
            $
            7.27
            
            
            $
            7.27Utah
            
            $
            58.51
            
            
            $
            5.04
            
            
            $
            53.92
            
            
            $
            6.38
            
            
            $
            40.42
            
            
            $
            5.07
            
            
            $
            2.90
            
            
            $
            .60
            
            
            $
            3.13
            
            
            $
            0.25
            
            
            $
            6.70
            
            
            $
            1.12Wyoming
            
            $
            51.26
            
            
            $
            6.38
            
            
            $
            48.40
            
            
            $
            7.05
            
            
            $
            34.73
            
            
            $
            4.64
            
            
            $
            9.83
            
            
            $
            1.30
            
            
            $
            8.66
            
            
            $
            1.28
            
            
            $
            10.03
            
            
            $
            1.67
  (*)
            States
                with higher production
                from Croff’s royalty interests such as New Mexico and Utah, reflect a
                lower average production cost per barrel or Mcf.   During
                2006 and 2005, different grades of crude oil traded at greater spreads
                than in prior years.  Sour crude traded at a greater discount to
                sweet crude, and Wyoming and Utah Sweet fell in price, compared to
                west
                Texas intermediate.
 
 19
 
 **ITEM
      3.                      LEGAL
      PROCEEDINGS**
 
 The
      Company is not a party to any legal
      actions.
 
 **ITEM
      4.                      SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 On
      December 8, 2006, the annual meeting
      of shareholders was held.  The shareholders elected the five board
      members listed in the proxy, ratified Ronald Chadwick as a new independent
      auditor of the Company, and authorized the President to execute the Acquisition
      Agreement with TRBT. Following the shareholders meeting, the Board accepted
      Dilworth Nebeker’s resignation from the Board of Directors, which had been
      previously submitted.
 
 **PART
      II**
 
 **ITEM
                5.**
            **MARKET
                FOR REGISTRANT’S SECURITIES, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY
                SECURITIES**
 
 The
      Company’s common stock is listed
      and traded on the Over The Counter Electronic Bulletin Board
      (www.otcbb.com) under the symbol “COFF”.  The Company has
      authorized 20,000,000 shares of common stock, of which only 551,244 shares
      are
      outstanding to 1,154 shareholders.  The Company has authorized
      Preferred B stock of which 540,659 is issued and outstanding. The Preferred
      B
      shares also have an extremely limited market, but have been traded from time
      to
      time through a clearinghouse held by the Company on its website, or in private
      transactions.  The Company acts as its own transfer agent with respect
      to these Preferred B shares. Shareholders interested in buying or selling
      Preferred B shares may contact the Company, which will provide information
      about
      the buyers and sellers.  The Company posts its SEC filings on the
      Croff website at www.croff.com.
 
 During
      the year ended December 31, 2005, the Company purchased 1,500 shares of its
      common stock for $2,362, which were cancelled.  In December 2005, the
      Company purchased on the Over-The-Counter-Bulletin-Board (“OTCBB”) 16,156 shares
      of its common stock for $24,643 and included in Treasury stock at December
      31, 2005. The Company has not repurchased any additional shares of its
      common stock since December 2005.**** The total number
      of common shares in the Treasury as of December 31, 2006 was
      69,399.
 
 The
      trading range for 2004 through 2006 is shown for common shares and preferred
      B
      shares as a guide to as to what transactions have either taken place or of
      which
      the Company is aware of or the high and low bid or asking price.
 COMMON
                  SHARES —
              551,244
                  SHARES OUTSTANDING FOR 2005 - (The following data is
                  generated
                from
                  limited trades on the Over-The-Counter Bulletin Board including
                  purchases
                  by
                the
                  Company’s management.)BID
                  RANGE
              Year
              Calendar
                  Quarter
              
              Low
              
              
              High2004:
              First
                  Quarter
              
              $
              .55
              
              
              $
              1.10Second
                  Quarter
              
              $
              .25
              
              
              $
              1.60Third
                  Quarter
              
              $
              1.75
              
              
              $
              1.80Fourth
                  Quarter
              
              $
              1.01
              
              
              $
              2.202005:
              First
                  Quarter
              
              $
              1.40
              
              
              $
              1.80Second
                  Quarter
              
              $
              1.20
              
              
              $
              1.50Third
                  Quarter
              
              $
              1.45
              
              
              $
              2.00Fourth
                  Quarter
              
              $
              1.25
              
              
              $
              1.852006:
              First
                  Quarter
              
              $
              1.40
              
              
              $
              1.75Second
                  Quarter
              
              $
              1.50
              
              
              $
              2.40Third
                  Quarter
              
              $
              1.50
              
              
              $
              2.00Fourth
                  Quarter
              
              $
              1.60
              
              
              $
              3.00
 20
  As
      of December 31, 2006, there were
      approximately 1,110 holders of record of the Company’s common stock. The Company
      has never paid a dividend and has no present plan to pay any
      dividend.
  PREFERRED
                  “B” SHARES-
              540,659
                  SHARES OUTSTANDING - (The following data is generatedsolely
                  from private transactions, internal purchases by the Company, or
                  the2005
                  tender offer described in Part I, Item 1)BID
                  RANGE
              Year
              Calendar
                  Quarter
              
              Bid
              
              
              Asked2004:
              First
                  Quarter
              
              $
              1.05
              
              
              $
              1.05Second
                  Quarter
              
              No
                  Trading
              
              
              No
                  TradingThird
                  Quarter
              
              No
                  Trading
              
              
              No
                  TradingFourth
                  Quarter
              
              No
                  Trading
              
              
              No
                  Trading2005:
              First
                  Quarter
              
              No
                  Trading
              
              
              No
                  TradingSecond
                  Quarter
              
              $
              2.80
              
              
              $
              3.00Third
                  Quarter
              
              $
              3.00
              
              
              $
              3.00Fourth
                  Quarter
              
              $
              3.00
              
              
              $
              3.002006:
              First
                  Quarter
              
              $
              3.00
              
              
              $
              3.00Second
                  Quarter
              
              $
              3.00
              
              
              $
              3.00Third
                  Quarter
              
              $
              3.00
              
              
              $
              3.00Fourth
                  Quarter
              
              $
              3.00
              
              
              $
              3.00
  Historical
      Events of Interest
 
 In
      November 1991, Croff reverse-split the common stock on a ratio of 1 share of
      common stock for every 10 shares previously held.
 
 On
      February 28, 1996, the shareholders approved the issuance of the Preferred
      B
      stock to be issued to each common shareholder on the basis of one share
      Preferred B for each share of common stock.  The Company issued all of
      the preferred shares and delivered the Preferred B shares to each of the
      shareholders for which it had a current address.  The oil and gas
      assets and the proceeds from production were pledged to the Preferred B
      shares.
 
 In
      June
      2000, the Company approved the increase in the authorized Class B Preferred
      stock to 1,000,000 shares.
 
 During
      2001, the Board determined that the cash of the Company, which had been building
      during a period of high oil prices, should be formally allocated between the
      common stock and the Preferred B stock. The Board decided to allocate $250,000
      cash to the common stock and the balance of cash remaining with the Preferred
      B
      stock.  The Board then determined that future oil and gas cash flow
      from the Preferred B assets would be accumulated for Preferred B
      shareholders.  The Company established separate investment accounts
      for the Preferred B and common stock investments.
  In
        2005,
        the Preferred B shareholders of Croff received a Tender Offer from Jensen
        Development Company and CS Finance L.L.C., (“Offerors”) two companies wholly
        owned by Gerald L. Jensen, Chairman, President, and CEO of Croff.  The
        Offerors offered to purchase all outstanding Preferred B shares,
        not owned by the Offerors for $3 per share. The tender offer was subsequently
        amended before its conclusion on August 19, 2005. The Offerors reported the
        results of the tender offer to the SEC on August 29, 2005. The Offerors reported
        that the depository, American National Bank, had received a total of 75,050
        Shares tendered and not withdrawn prior to the expiration of the Offer,
        including 11,190 Shares tendered subject to delivery. The tendered shares
        represent approximately 13.9% of the outstanding Class B Preferred stock
        of
        Croff Enterprises, Inc. The Offerors accepted and approved for payment all
        of
        the tendered shares at $3.00 per share for a total of $225,150. The Offerors
        acquired additional shares of Preferred B stock through independent stock
        purchases after the conclusion of the tender offer.  Offerors
        currently hold 363,535 Preferred B shares, or 67.2% of the total Preferred
        B
        shares. Please see 2005 Tender Offer under Item 1, for a more complete
        description of these transactions.
  21
 
 
 
 **ITEM
      6.                      SELECTED
      FINANCIAL DATA**
 
 The
        following table presents selected historical financial data of the Company
        for
        the five-year period ended December 31, 2006.  Future results may
        differ substantially from historical results because of changes in oil and
        natural gas prices, production increases or declines and other factors. This
        information should be read in conjunction with the Financial Statements,
        and
        notes thereto, and Management’s Discussion and Analysis of Financial Condition
        and Results of Operations, presented below, Item 7.
 
 STATEMENT
                    OF OPERATIONS DATAYear
                    Ended December 31,2002
                
                
                2003
                
                
                2004
                
                
                2005
                
                
                2006OperationsOil and Natural Gas
                
                $
                286,602
                
                
                $
                392,564
                
                
                $
                608,132
                
                
                $
                934,525
                
                
                $
                842,400Other
                    Revenues
                
                $
                28,726
                
                
                $
                23,362
                
                
                $
                (1,403
                )
                
                $
                7,330
                
                
                $
                660Expenses
                
                $
                216,416
                
                
                $
                321,817
                
                
                $
                434,046
                
                
                $
                644,025
                
                
                $
                519,716Net Income
                
                $
                98,912
                
                
                $
                94,109
                
                
                $
                142,116
                
                
                $
                289,887
                
                
                $
                373,015Per
                    Common Share(1)
                
                $
                .04
                (1)
                
                $
                .01
                (1)
                
                $
                (0.13
                )(1)
                
                $
                (0.05
                )(1)
                
                $
                0.15
                (1)Working
                    capital
                
                $
                419,475
                
                
                $
                336,471
                
                
                $
                330,243
                
                
                $
                625,862
                
                
                $
                995,498Dividends
                    per share
                
                NONE
                
                
                NONE
                
                
                NONE
                
                
                NONE
                
                
                NONEBALANCE
                    SHEET DATATotal
                    assets
                
                $
                753,212
                
                
                $
                898,221
                
                
                $
                1,088,553
                
                
                $
                1,807,502
                
                
                $
                1,867,161Long-term
                    debt**
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --Stockholders’
                    equity
                
                $
                736,408
                
                
                $
                866,112
                
                
                $
                1,051,438
                
                
                $
                1,314,320
                
                
                $
                1,687,335
  **
        There
        were no long-term obligations from 2002-2006.
 (1)The
                  Company allocates its net income between preferred B shares and
                  common
                  shares; accordingly, net income (loss) applicable to common shares
                  varies
                  from a fixed ratio to net income, depending on the source of income
                  and
                  expenses. See attached financials statement for further
                  detail.
 
 **ITEM
                7.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
                OPERATIONS**
 
 Critical
      Accounting Policies and Estimates
 
 The
      Company’s discussion and analysis of its financial condition and results of
      operation are based upon Financial Statements, which have been prepared in
      accordance with accounting principles generally accepted
      in the United States of America.  The preparation of these Financial
      Statements requires the Company to make estimates and judgments that affect
      the
      reported amounts of assets and liabilities and disclosures of contingent assets
      and liabilities at the date of the Financial Statements and the reported amounts
      of revenues and expenses during the year.  The Company analyzes its
      estimates, including those related to oil and natural gas revenues, oil and
      natural gas properties, marketable securities, income taxes and
      contingencies.  The Company bases its estimates on historical
      experience and various other assumptions that are believed to be reasonable
      under the circumstances.  Actual results may differ from these
      estimates under different assumptions or conditions.
 
 22
  The
      Company believes the following critical accounting policies affect its more
      significant judgments and estimates used in the preparation of its Financial
      Statements and the uncertainties that it could impact our results of operations,
      financial condition and cash flows.  The Company follows the
      "successful efforts" method of accounting for its oil and gas properties. Under
      this method, all property acquisition costs and costs of exploratory and
      development wells are capitalized when incurred, pending determination of
      whether the well has proven reserves. If an exploratory well does not result
      in
      reserves, the capitalized costs of drilling the well, net of any salvage, are
      charged to expense. The costs of development wells are capitalized, whether
      the
      well is productive or nonproductive.  Impairments are recorded when
      management believes that a property’s net book value is not recoverable based on
      current estimates of expected future cash flows.  The Company provides
      for depreciation and depletion of its investment in producing oil and natural
      gas properties on the unit-of-production method, based upon estimates of
      recoverable oil and natural gas reserves from the property.  The
      Company designated its marketable equity securities as “securities available for
      sale”.
 
 Liquidity
      and Capital Resources
 
 At
      December 31, 2006, the Company had assets of $1,867,161. At December 31, 2006,
      the Company’s current assets totaled $1,110,629 compared to current liabilities
      of $115,131.  Working capital at December 31, 2006 totaled $995,498,
      an increase of approximately 59% compared to $625,862 at December 31,
      2005.  The Company had a current ratio at December 31, 2006 of
      approximately 10:1.  During 2006, net cash provided by operations
      totaled $329,840, as compared to $412,339 for 2005.  This decrease was
      due to lower prices in 2006. Liquidity increased due to the sale of Panther
      Pipeline and the Edwards Dixel Gips lease. The cost basis for the Panther
      pipeline was $40,000 and the cost basis in the Edwards Dixel Gips lease was
      $102,459, for a total of $142,459. The proceeds from the sale were $255,000
      yielding a gross gain for this transaction of $112,543. The Company’s cash flow
      from operations is highly dependent on oil and natural gas prices; which were
      at
      historic highs in 2005, but dropped in 2006.  The Company had no
      short-term or long-term debt outstanding at December 31, 2006.  In
      December, 2005, the Company purchased 16,156 shares of its common stock at
      a
      cost of $24,643, which is included in the treasury as of year end.
 
 At
      December 31, 2006, there were no commitments for capital expenditures. In 2006,
      the Company committed approximately $42,000 for an 18.75% interest in the Long
      Knife #23-29 gas well in Colorado. The company decided to participate in the
      proposed drilling, receiving an 18.75% working interest in the well which was
      completed at the end of 2006. The company also decided to participate in
      drilling of the Anderson Canyon wells located in Wyoming. The Company spent
      approximately $7,000 yielding a working interest in the wells to .0015. The
      Anderson Canyon wells were completed around July 1, 2006. In late 2005 and
      early
      2006, the Company executed an authorization for the drilling and completion
      of
      the Shriners 10-C-2 well in Utah. The estimated costs to Croff for the Shriners
      10-C-2 well was around $52,000, and the Company would retain an approximate
      1.7%
      working interest in the well. The well is expected to be completed in early
      2007. The drilling and completion of the above named wells, increased proven
      oil
      and gas properties. Under the successful efforts method, proved properties
      increased from $1,016,442 as of December 31, 2005 to $1,074,188 as of December
      31, 2006.
 
 23
 
 While
      certain costs are affected by the general level of inflation, factors unique
      to
      the oil and natural gas industry result in independent price fluctuations.
      Over
      the past five years, significant fluctuations have occurred in oil and natural
      gas prices. Although it is particularly difficult to estimate future prices
      of
      oil and natural gas, price fluctuations have had, and will continue to have,
      a
      material effect on the Company.  Overall, it is management’s belief
      that inflation is generally favorable to the Company since it does not have
      significant operating expenses as a percent of revenues.
 
 Results
      of Operations
 
 Revenues
        for 2006 totaled $843,060, a
        decrease of approximately 11% from $941,855 in 2005.  Net income for
        2006 totaled $373,015 compared to $289,887 for 2005.  The increase in
        revenue was primarily due to the gain from the sale of the Edward Dixel Gips
        lease in Dewitt County, TX. Oil and gas sales for the December 31, 2006 year
        end
        totaled $842,400, a decrease of approximately 10% from $934,525, for the
        year
        ended December 31, 2005. A decrease in oil and gas prices were the factors
        causing this decrease in oil and gas sales compared to the same period in
        2005,
        while production rose slightly.
 
 Interest
      income rose from $12,057
      for the period ending December 31, 2005 to $49,671 for the year ending December
      31, 2006. The interest income increased because there was an increase in
      interest rates, and additional back interest from the settlement of the
*Parry v. Amoco Production*case. The interest income attributable to the
      Preferred B and Common account bank accounts was $35,818, and the interest
      income received from the settlement totaled $13,853 yielding a combined total
      of
      $49,671. Other Income as of the December 31, 2006 year end was $660 compared
      to
      $7,330 for the period ending December 31, 2005. The $660 was related to lease
      bonuses received during the year.
 
 Lease
      operating expenses for 2006,
      which includes all production related taxes, totaled $205,371 compared to
      $272,129 for 2005.  This decrease was due to the Company not having as
      many major work over expenses in 2006. The lease operating expenses remained
      nearly constant for the Company’s existing wells.  Proposed drilling
      program expense was zero as of December 31, 2006, compared to $52,638 for the
      same period ending December 31, 2005. This decrease is attributed to the sale
      of
      the Dewitt County leases in Texas.
 
 General
      and administrative expenses,
      including overhead expense paid to related party, for the year ending December
      31, 2006 totaled $262,520 compared to $215,766 for the same period in 2005.
      The
      increase in general and administrative and overhead expenses is primarily
      attributed to the costs of the audit increasing, printing and other costs paid
      to related third parties, and the higher professional fees of the Company.
      The
      primary reason for this increase was professional expenses related to the
      negotiating, drafting, and completing the exchange agreement entered into with
      TRBT and related SEC filings. These matters are discussed in detail above under
      Part I, Current Events 2006.
 
 Depletion
      and depreciation expense for
      the year ending December 31, 2006 totaled $48,500 compared to $45,000 for the
      year ending in 2005. This slight increase was due to the small increase in
      producing assets in 2006.  Accretion expense for the Asset Retirement
      accrual was $10,187 for the year ending December 31, 2005 compared to $5,868
      for
      the year ending December 31, 2006. This decrease occurred because in 2005 the
      Company established the asset retirement accruals and expensed the additional
      amount that needed to be expensed.
 
 Net
      income for the year ending December
      31, 2006 was $373,015 compared to $289,887 for the year ending December 31,
      2005. The reason for this increase is because the Company had a significant
      gain
      on the sale of the Edward Dixel Gips lease in Dewitt County, TX, and because
      the
      expenses during the year was lower than the expenses incurred during 2005.
      Provision for income taxes for the year ending December 31, 2006 totaled
      $110,000 compared to $82,478 from December 31, 2005.  This increase is
      primarily attributable to an increase in net income for the year, which also
      results in a higher tax bracket.
 
 24
  Recent
      accounting pronouncements
 
 In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) 123R, "Share-Based
      Payment." This revised standard addresses the accounting for share-based payment
      transactions in which a company receives employee services in exchange for
      either equity instruments of the company or liabilities that are based on the
      fair value of the company's equity instruments or that may be settled by the
      issuance of such equity instruments. Under the new standard, companies will
      no
      longer be able to account for share-based compensation transactions using the
      intrinsic method in accordance with APB 25. Instead, companies will be required
      to account for such transactions using a fair-value method and recognize the
      expense in the statements of operations. SFAS 123R became effective for all
      interim or annual periods beginning after June 15, 2005. SFAS 123R is not
      expected to have a material impact on the Company’s financial condition or
      results of operations as the Company currently does not receive employee
      services in exchange for either equity instruments of the Company or liabilities
      that are based on the fair value of the Company's equity instruments or that
      may
      be settled by the issuance of such equity instruments.
 
 In
      December 2004, the FASB issued SFAS
      No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No.
      29".
      This standard requires exchanges of productive assets to be accounted for at
      fair value, rather than at carryover basis, unless (1) neither the asset
      received nor the asset surrendered has a fair value that is determinable within
      reasonable limits or (2) the transactions lack commercial substance. The
      Statement is effective for non-monetary asset exchanges occurring in fiscal
      periods beginning after June 15, 2005.  The Company has not entered
      into these types of nonmonetary asset exchanges during the last five
      years.  Accordingly, the adoption of this pronouncement is not
      expected to have a material impact on the Company’s financial condition or
      results of operations.
 
 In
      March
      2005, the FASB issued FASB Interpretation (“FIN”) No. 47, “*Accounting for
      Conditional Asset Retirement Obligations*” (“*FIN No.
      47*”).  FIN No. 47 clarifies that the term conditional
      asset retirement obligation as used in FASB Statement No. 143, “Accounting for
      Asset Retirement Obligations,” refers to a legal obligation to perform an
      asset retirement activity in which the timing and (or) method of settlement
      are
      conditional on a future event that may or may not be within the control of
      the
      entity.  The obligation to perform the asset retirement activity is
      unconditional even though uncertainty exists about the timing and (or) method
      of
      settlement.  Uncertainty about the timing and/or method of settlement of a
      conditional asset retirement obligation should be factored into the measurement
      of the liability when sufficient information exists.  This
      interpretation also clarifies when an entity would have sufficient
      information to reasonably estimate the fair value of an asset retirement
      obligation.  Fin No. 47 is effective no later than the end of
      fiscal years ending after December 15, 2005 (December 31, 2005 for calendar-year
      companies).  Retrospective application of interim financial
      information is permitted but is not required.  Management does not
      expect adoption of FIN No. 47 to have a material impact on the Company’s
      financial statements.
  In
      May
      2005 the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections - a
      replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154
      replaces APB Opinion (“APB”) No. 20, “Accounting Changes”, and SFAS No. 3,
“Reporting Accounting Changes in Interim Financial Statements,” and changes the
      requirements for the accounting for and reporting of a change in accounting
      principle. SFAS No. 154 will apply to all voluntary changes in accounting
      principle as well as to changes required by an accounting pronouncement in
      the
      unusual instance that the pronouncement does not include specific transition
      provisions. APB No. 20 previously required that most voluntary changes in
      accounting principle be recognized by including in net income of the period
      of
      the change the cumulative effect of changing to the new accounting
      principle.  SFAS No. 154 requires retrospective application to prior
      periods' financial statements of changes in accounting principle, unless it
      is
      impracticable to determine either the period-specific effects or the cumulative
      effect of the change. When it is impracticable to determine the period-specific
      effects of an accounting change on one or more individual prior periods
      presented, SFAS No. 154 requires that the new accounting principle be applied
      to
      the balances of assets and liabilities as of the beginning of the earliest
      period for which retrospective application is practicable and that a
      corresponding adjustment be made to the opening balance of retained earnings
      (or
      other appropriate components of equity or net assets in the statement of
      financial condition).
 
 25
  SFAS
      155,
“*Accounting for Certain Hybrid Financial Instruments—an amendment of FASB
      Statements No. 133 and 140*” (‘SFAS No. 155”). This Statement shall be
      effective for all financial instruments acquired, issued, or subject to a
      remeasurement (new basis) event occurring after the beginning of an entity’s
      first fiscal year that begins after September 15, 2006. The fair value election
      provided for in paragraph 4(c) of this Statement may also be applied upon
      adoption of this Statement for hybrid financial instruments that had been
      bifurcated under paragraph 12 of Statement 133 prior to the adoption of this
      Statement. Earlier adoption is permitted as of the beginning of an entity’s
      fiscal year, provided the entity has not yet issued financial statements,
      including financial statements for any interim period, for that fiscal year.
      Management does not expect adoption of SFAS No. 155 to have a material impact
      on
      the Company’s financial statements.
  SFAS
      157,
“*Fair Value Measurements*”, defines fair value, establishes a framework
      for measuring fair value in generally accepted accounting principles (GAAP),
      and
      expands disclosures about fair value measurements. This Statement applies under
      other accounting pronouncements that require or permit fair value measurements,
      the Board having previously concluded in those accounting pronouncements that
      fair value is the relevant measurement attribute. Accordingly, this Statement
      does not require any new fair value measurements. However, for some entities,
      the application of this Statement will change current practice. Management
      has
      not evaluated the impact of this statement.
  In
      June 2005, the Emerging Issues Task Force reached a consensus on Issue
      No. 05-6 (“EITF No. 05-6”), *“Determining the Amortization Period for
      Leasehold Improvements Purchased after Lease Inception or Acquired in a Business
      Combination.”*   EITF No. 05-6 clarifies that the
      amortization period for leasehold improvements acquired in a business
      combination or placed in service significantly after and not contemplated at
      or
      near the beginning of the lease term should be amortized over the shorter of
      the
      useful life of the assets or a term that includes the required lease periods
      and
      renewals that are reasonably assured of exercise at the time of the acquisition.
      EITF No. 05-6 is to be applied prospectively to leasehold improvements purchased
      or acquired in reporting periods beginning after June 29, 2005. The
      adoption of EITF No. 05-6 did not have a material impact on the Company’s
      consolidated financial statements.
  In
      June
      2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “*Accounting
      forUncertainty in Income Taxes – an Interpretation of FASB Statement No.
      109*” (“*FIN No. 48*”).  FIN No. 48 clarifies the
      accounting for uncertainty in income taxes recognized in an enterprise’s
      financial statements in accordance with FASB Statement No. 109, “Accounting for
      Income Taxes”.  Fin No. 48 is effective for fiscal years
      beginning after December 15, 2005.  Management does not expect
      adoption of FIN No. 48 to have a material impact on the Company’s financial
      statements.
  26
 
 **ITEM
      7A.                  
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
  The
      Company’s major market risk exposure is in the pricing applicable to its oil and
      natural gas production. Realized pricing is primarily driven by the prevailing
      domestic price for oil and natural gas.  Historically, prices received
      for oil and natural gas production have been volatile and
      unpredictable.  Pricing volatility is expected to
      continue.  Natural gas prices received by the Company during 2006,
      ranged from an annual average low of $2.39 per Mcf to an annual average high
      of
      $7.84 per Mcf.  Oil prices received by the Company ranged from an
      annual average low of $35 per barrel to an annual average high of $63.62 per
      barrel during 2006. A decline in prices of oil or natural gas could have a
      material adverse effect on the Company’s financial condition and results of
      operations.  In 2006, a 10% reduction in oil and natural gas prices
      would have reduced revenues by approximately
      $84,000**.**
 
 **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 and for the financial statement
      schedules contained herein.
 
 Management
      Responsibility for Financial Statements
 
 The
      Financial Statements have been prepared by management in conformity with
      accounting principles generally accepted in the United States of
      America.  Management is responsible for the fairness and reliability
      of the Financial Statements and other financial data included in this
      report.  In the preparation of the Financial Statements, it is
      necessary to make informed estimates and judgments based on currently available
      information on the effects of certain events and transactions.  The
      Company maintains accounting and other controls which management believes
      provide reasonable assurance that financial records are reliable, assets are
      safeguarded and transactions are properly recorded.
 
 **ITEM
                9.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**
 
 The
      Company has had no disagreements on accounting and financial disclosure matters
      with its registered public accounting firm during 2004, 2005, 2006, or from
      January 1, 2007 through the date of this filing.
 
 **ITEM
      9A.                   CONTROLS
      AND PROCEDURES**
 
 As
        of the
        end of the period covered by this Annual Report, our Chief Executive Officer
        and
        Chief Accounting Officer (the “Certifying Officers”) conducted evaluations of
        our disclosure controls and procedures. As defined under Sections 13a-15(e)
        and
        15d-15(e) of the Securities Exchange Act of 1934 Act, as amended (the “Exchange
        Act”) the term “disclosure controls and procedures” means controls and other
        procedures of an issuer that are designed to ensure that information required
        to
        be disclosed by the issuer in the reports that it files or submits under
        the
        Exchange Act is recorded, processed, summarized and reported, within the
        time
        periods specified in the SEC’s rules and forms. Disclosure controls and
        procedures include, without limitation, controls and procedures designed
        to
        ensure that information required to be disclosed by an issuer in the reports
        that it files or submits under the Exchange Act is accumulated and communicated
        to the issuer’s management, including the Certifying Officers, to allow timely
        decisions regarding required disclosure. Based on this evaluation, the
        Certifying Officers originally concluded that our disclosure controls and
        procedures were effective to ensure that material information is recorded,
        processed, summarized and reported by our management on a timely basis in
        order
        to comply with our disclosure obligations under the Exchange Act, and the
        rules
        and regulations promulgated thereunder.
 
 27
  Further,
        there were no changes in our internal control over financial reporting during
        the fourth fiscal quarter that have materially affected, or are reasonably
        likely to materially affect, our internal control over financial
        reporting.
  **ITEM
      9B.                   OTHER
      INFORMATION**
 
 The
      Company is not aware of any previously undisclosed, but required information
      since its last filing; that is not included in this 10-K report.
 
 **PART
      III**
 
 **ITEM
      10.                    DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT**
 
 Identification
      of Directors, Officers and Significant Employees.
 
 The
        Croff
        Board consists of Gerald L. Jensen, Richard H. Mandel Jr., Harvey Fenster,
        and
        Julian D. Jensen. The fifth Director, Dilworth Nebeker, resigned, and a
        replacement has not been elected. Mr. Edwin Peiker did not stand for reelection
        at the annual meeting in 2006, and Mr. Harvey Fenster was elected as his
        replacement.  Each director will serve until the next annual meeting
        of shareholders, or until his successor is duly elected and
        qualified.  The Company has no knowledge of any arrangements or
        understandings between directors or any other person pursuant to which any
        person was or is to be nominated or elected to the office of director of
        the
        Company.  The following is provided with respect to each officer and
        director of the Company as of March 1, 2007:
 
 GERALD
      L.
      JENSEN, 67, PRESIDENT  & DIRECTOR
 
 President
      and Chairman of Croff Enterprises, Inc. since October 1985.  Mr.
      Jensen has been an officer and director of Jenex Petroleum Corporation, a
      private oil and natural gas company, for over ten years, and an officer and
      director of other Jenex companies.  In 2000, Mr. Jensen became
      Chairman of Provisor Capital Inc., a private finance company.  Mr.
      Jensen was a director of Pyro Energy Corp., a public company (N.Y.S.E.) engaged
      in coal production and oil and natural gas, from 1978 until it was sold in
      1989.  Mr. Jensen is also an owner of private real estate, finance,
      and oil and natural gas companies.
 
 RICHARD
      H. MANDEL, JR., 77, DIRECTOR
 
 Mr.
      Mandel has been a director of Croff Enterprises, Inc. since
      1985.  Since 1982, Mr. Mandel has been President and a Board Member of
      American Western Group, Inc., an oil and natural gas producing company in
      Denver, Colorado.  From 1977 to 1984, he was President of Universal
      Drilling Co., Denver, Colorado.  Prior to 1977, Mr. Mandel worked for
      The Superior Oil Co., Honolulu Oil Co., and Signal Oil and Gas Co. as an
      engineer and in management. Mr. Mandel was also director of Wichita River Oil,
      which was on the American Stock Exchange.
 
 HARVEY
      FENSTER, 66, DIRECTOR
 
 Mr. Fenster currently is the President of BA Capital Company, a financial
      advisory services company.  From 1991 to 1994, he served as Senior Vice
      President and Chief Financial Officer of The Katz Corporation, a publicly owned
      international media representation firm.  Previously, Mr. Fenster was
      Executive Vice President and Chief Financial Officer of Pyro Energy Corp.,
      a New
      York Stock Exchange listed public company engaged in coal mining, oil and gas
      exploration and development.  Mr. Fenster has also served as a director of
      Uranium Resources, Inc., a public company engaged in uranium exploration and
      production.  Mr. Fenster, a Certified Public Accountant, is retired from
      public practice.
 
 28
  JULIAN
      D.
      JENSEN, 59, DIRECTOR
 
 Mr.
      Jensen has been a director of Croff Enterprises, Inc. since November
      1991.  Mr. Jensen is the brother of the Company’s president and has
      served as legal counsel to the Company for the past twelve years.  Mr.
      Jensen has practiced primarily in the areas of corporate and securities law,
      in
      Salt Lake City, Utah, since 1975.  Mr. Jensen is currently associated
      with the firm of Jensen, Duffin & Dibb L.L.P., which acts as legal counsel
      for the Company.
 
 Compliance
      with Section 16(a) of the Securities Exchange Act of 1934
  Based
      solely on a review of such forms furnished to the Company and certain written
      representations from the Executive Officers and Directors, the Company believes
      that all Section 16(a) filing requirements applicable to its Executive Officers,
      Directors and greater than ten percent beneficial owners were complied with
      on a
      timely basis in 2006.
 
 Audit
      Committee
 
 The
      Board
      has an Audit Committee to assist it in the discharge of its responsibilities
      including the presentation and disclosures of Croff’s financial condition and
      results of operations and disclosure controls and procedures.  The
      Audit Committee is presently comprised of Harvey Fenster and Richard Mandel.
      both of whom are independent directors of Croff.  Mr. Fenster is the
      Chairman of the Committee and the “Audit Committee Financial Expert.” Prior to
      December 2006, the Audit Committee consisted of Dilworth Nebeker, Chairman
      and
“Audit Committee Financial Expert”, and Edwin Peiker, member which conducted all
      Audit Committee functions during the earlier part of 2006.
 
 During
      2006, the Audit Committee selected and recommended the firm of Ronald Chadwick
      to act as Croff’s auditors for the 2006 year to the full Board of
      Directors.  The Board of Directors and shareholders approved the
      retention of Ronald Chadwick.  The Audit Committee then negotiated and
      executed an agreement between Croff and Ronald Chadwick.
 
 The
      Audit
      Committee reviewed each of the quarterly Form 10-Q’s filed with the SEC during
      the year 2006.  Members of the Committee discussed each of the filings
      with management of Croff before the filings were made.  The Committee
      also discussed Croff’s disclosure controls and procedures with management each
      quarter.
 
 The
      Audit
      Committee members have each reviewed this 2006 Form 10-K.  Members of
      the Committee have discussed the Form 10-K and Financial Statements for the
      year
      2006 with management of Croff.  The Committee has also discussed
      Croff’s disclosure controls and procedures with management.  The Audit
      Committee met and discussed the Form 10-K and Financial Statements prior to
      this
      filing.  The Audit Committee voted to recommend this 2006 Form 10-K
      and Financial Statements to the Board of Directors for filing with the
      SEC.
 
 Members
      of the Audit Committee have discussed the audit and financial statements with
      the appropriate principal of Ronald Chadwick, and Causey, Demgen, and Moore,
      including those matters required by SAS 61.  They also discussed
      Croff’s disclosure controls and procedures.
 
 29
 
 
 The
      Croff
      Board of Directors have each received a letter from Ronald Chadwick that as
      of
      February 11, 2007, Ronald Chadwick was the independent accountant with respect
      to Croff, within the meaning of the Securities Acts administered by the SEC
      and
      the requirements of the Independence Standard Board.
 
 **ITEM
      11.                    EXECUTIVE
      COMPENSATION**
 
 Remuneration
 
 During
      the fiscal year ended December 31, 2006, there were no officers, employees
      or
      directors whose total cash or other remuneration exceeded $80,000.
 
 Summary
      Compensation Table
 
 2006
      Compensation Gerald L. Jensen, President and Chairman. (No other executive
      salaries)   2004
              
              2005
              
              2006Annual
                  CompensationSalary
              
              $54,000
              
              $54,000
              
              $54,000Bonus
              
              $0
              
              $0
              
              $0Other
                  Annual Compensation
              
              $0
              
              $0
              
              $0Long
                  Term CompensationAwardsRestricted
                  Stock Awards
              
              $0
              
              $0
              
              $0PayoutsNumber
                  of Shares Covered by Option Grant
              
              0
              
              0
              
              0Long
                  Term Incentive Plan Payout
              
              $0
              
              $0
              
              $0All Other Compensation
              
              $1,620
              (1)
              $1,620
              (1)
              $1,620
              (1)(1)
                  Company IRA Contribution
 Gerald
      L.
      Jensen is employed as the President and Chairman of Croff Enterprises,
      Inc.  Mr. Jensen commits a substantial amount of his time, but not
      all, to his duties with the Company.  Directors, excluding the
      President, are not paid a salary by the Company, but are paid $350 for each
      half-day board meeting and $500 for each full-day board meeting.  The
      Chairman of the Company’s Audit Committee is paid $500 per quarter and the other
      member of the Audit Committee is paid at the rate of $350 per
      meeting.
 
 Proposed
      Remuneration:
 
 During
      2007, the Company intends to compensate outside directors at the rate of $350
      for a half day meeting and $500 for a full day meeting.  The Chairman
      of the Company’s Audit Committee will be paid $500 per quarter and the other
      member of the Audit Committee will be paid at the rate of $350 per meeting.
      This
      compensation will be followed during 2007, unless a new Board of Directors
      is
      elected if the exchange agreement is closed. Based on the proposed remuneration,
      for the fiscal year ending December 31, 2007, no officer or director shall
      receive total cash remuneration in excess of $80,000.
 
 30
  Options,
      Warrants or Rights
 
 The
      Company had no outstanding stock options, warrants or rights as of December
      31,
      2005 or 2006.
 
 **ITEM
                12.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS**
 
 The
      following table sets forth the beneficial ownership of common stock and
      Preferred B stock of the Company as of March 1, 2007, by (a) each person who
      owned of record, or beneficially, more than five percent (5%) of the Company’s
      $.10 par value common stock, its common voting securities, and (b) each director
      and nominee and all directors and officers as a group.
  Shares
                  of
                Common
                Stock
                  Owned
                Beneficially
              
              Percentage
                of
                  Class of
                Common
                  Stock
              
              Shares
                  of
                Preferred
                  B
                Stock
                  Owned
                Beneficially
              
              Percentage
                of
                  Class B
                Preferred
                  StockGerald
                  L. Jensen
              
              257,878(1)
              
              47%
              
              363,535(1)
              
              67.2%3773 Cherry Creek Drive N, #1025Denver, Colorado 80209Richard
                  H. Mandel, Jr.
              
              18,100
              
              3.2
                  %
              
              8,000
              
              1.5%3333 E. Florida #94Denver, Colorado 80210Julian
                  D. Jensen
              
              31,663
              
              5.7%
              
              0
              
              0%311 South State Street, Suite 380Salt Lake City, Utah 84111Harvey
                  Fenster
              
              0
              
              0%
              
              0
              
              0%Directors
                  as a Group
              
              307,641
              
              55.9%
              
              371,535
              
              68.7%
 (1)
            Includes
                132,130 shares of Common and 240,584 shares Preferred B held by Jensen
                Development Company and CS Finance L.L.C., both of which are wholly
                owned
                by Gerald L. Jensen.
 
 **ITEM
      13.                   CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS**
 
 In
        2006, the Company entered into the
        exchange agreement with TRBT described under Item 1. This Transaction would
        have
        included the exchange of the principal shareholders Preferred “B” shares for
        shares of a new subsidiary which would be assigned the Company’s oil and gas
        assets.  This potential conflict is now moot.
 
 31
  In
      2005,
      the Company’s Preferred B Shareholders received a tender offer from Jensen
      Development Company and C.S. Finance L.L.C., companies wholly owned by Gerald
      L.
      Jensen, President and Chairman of the Company. This tender offer is fully
      described under Item 1 of the 2005 Form 10-K and is incorporated herein by
      reference.
 
 The
      Company currently has an office sharing arrangement with Jenex Petroleum
      Corporation, hereafter “Jenex”, which is owned by the Company’s
      President.  The Company is not a party to any lease, but during 2006
      paid Jenex for office space and all office services, including rent, phone,
      office supplies, secretarial, land, and accounting.  These
      arrangements were entered into to reduce the Company’s overhead and are
      currently on a month-to-month basis.  The Company’s expenses for these
      services were $49,872, $50,554, and $48,000 for the years ended 2006, 2005,
      and
      2004, respectively.  Although these transactions were
      not
      a result of “arms length” negotiations, the Company’s Board of Directors
      believes the transactions are reasonable.
 
 The
      Company retains the legal services of Jensen, Duffin, & Dibb, LLP. Julian
      Jensen, a Director of the Company, is part of this professional
      firm.  Legal fees paid to this law firm for the years ending 2006,
      2005, and 2004, were $23,493, $16,920, and $2,410, respectively.  The
      reason for the increase in legal fees in 2005 and 2006 is the added time and
      expense related to the strategic alternatives for the Company, the exchange
      agreement, and increased compliance costs.
 
 The
      Company has working interests in five Oklahoma natural gas wells, which are
      operated by Jenex, a company wholly owed by Gerald Jensen, the Company’s
      President.  As part of the 1998 purchase agreement, Jenex agreed to
      rebate to Croff $150 of operating fees per well, each month, which now totals
      $750 per month, as long as Jenex operated the wells and Croff retained its
      interest.
 
 The
      Company compensated Richard H. Mandel, Jr., a member of its Board of Directors,
      1,000 and 2,000 shares of common stock during 2003 and 2004, respectively,
      for
      consulting services rendered in connection with the Company’s Yorktown Re-entry
      Program in South Texas.  The common shares were valued at $1.00 per
      share.
 
 **ITEM
      14.        PRINCIPAL ACCOUNTANT FEES AND
      SERVICES**
 
 Audit
      Fees
 
 Ronald
      Chadwick was recommended by the Audit Committee of the Board and approved by
      the
      Company stockholder’s for appointment as the registered public accounting firm
      for the Company for the fiscal year ended December 31, 2006.  Ronald
      Chadwick is registered with the Public Company Accounting Oversight
      Board.  Ronald Chadwick is in the first year of acting as independent
      accountant for the company, and his fees for each quarterly review are $1,250
      and the fee for the 2006 year end audit is $10,000. Previously, Causey Demgen
      and Moore, “CDM,” has been acting as independent accountants for the Company for
      over fifteen years. Aggregate fees for professional services rendered by CDM
      in
      connection with its audit of the Company’s Financial Statements as of and for
      the year ended December 31, 2005, and its limited reviews of the Company’s
      unaudited condensed quarterly Financial Statements during 2005 totaled $14,145.
      During 2006, CDM did not perform any additional services for the
      Company.
 
 32
  **PART
      IV**
 
 **ITEM
      15.                   EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES**
 
 Financial
      Statements
 
 See
      index
      to Financial Statements, financial statement schedules and supplemental
      information as referenced in Part II, Item 8, and the financial index on page
      F-1 hereof, which follow the exhibits below.
 Reports
      on Form 8-K:
 
 8-K:
      December 15, 2006 Croff Announces
      Merger Plan
 (Includes
      definitive Stock for Stock Exchange Agreement filed as an exhibit)
 8-K:
      December 6, 2006 Resignation of
      Dilworth Nebeker from Board of Directors
 8-K:
      July 24, 2006 Completion of
      Acquisition or Disposition of Assets
 8-K/A:
      April 13, 2006 Changes in
      Registrants Certifying Accountant
 8-K:
      March 31, 2006 Changes in Registrants Certifying Accountant
 
 Other
      Filings:
 
 Schedule
      14A; November 8, 2006- 2006
      Proxy Statement
 
 10Q;
      November 9, 2006 For the Quarter
      and Nine Months ended September 30, 2006
 10Q;
      August 16, 2006 For the Quarter
      and Six Months ended Ended June 30, 2006
 10Q;
      May 15, 2006 For the Quarter Ended
      March 31, 2006
 10K;
      March 28, 2006 For the Fiscal Year
      Ended December 31, 2005
 
 Exhibit
      Index
 23.1
      Consent letter from Ronald R. Chadwick, P.C.
 23.2
      Consent letter from Causey Demgen & Moore Inc.
 31.1
      Certification by C.E.O.
 31.2
      Certification of C.A.O
 32.1
      Section 906 Certification by C.E.O.
 32.2
      Section 906 Certification by C.A.O
 
 
 
 33
  
 
 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 behalf by
      the
      undersigned, thereunto duly authorized.
 
  REGISTRANT:CROFF
                    ENTERPRISES,
                    INC.Date:
                08/27/2007
                
                By
                
                /s/
                    Gerald L. JensenGerald
                    L. Jensen,
                    President,Chief
                    Executive
                    OfficerDate:
                08/27/2007
                
                By
                
                /s/
                    Gerald L. JensenGerald
                    L. JensenActing
                    Chief Financial
                    Officer
 
  Pursuant
        to the requirements of the Securities Exchange Act of 1934, the following
        persons on behalf of the Registrant and in the capacities and on the date
        indicated have signed this report below.
  Date:
                08/27/2007
                
                By
                
                /s/
                    Gerald L. JensenGerald
                    L. Jensen,
                    ChairmanDate:
                08/27/2007
                
                By
                
                /s/
                    Richard H. Handel,
                    Jr.Richard
                    H. Mandel, Jr.,
                    DirectorDate:
                08/27/2007
                
                By
                
                /s/
                    Harvey FensterHarvey
                    Fenster,
                    DirectorDate:
                08/27/2007
                
                By
                
                /s/
                    Julian D. JensenJulian
                    D. Jensen,
                    Director
 
 34
    **CROFF
        ENTERPRISES, INC.**
 
 
 
 
 
 
 
 **FINANCIAL
        STATEMENTS**
  **December
        31, 2005 and 2006**
  
  
  
  **WITH**
 
 
 
 **REPORT
        OF REGISTERED PUBLIC ACCOUNTING FIRM**
  
 
 
  
  **CROFF
        ENTERPRISES, INC.**
  
  **INDEX
        TO FINANCIAL STATEMENTS, SCHEDULES**
  **AND
        SUPPLEMENTAL INFORMATION**
  Page
                      NumberI.
                  Financial
                      StatementsReport
                      of Registered Public Accounting Firm
                  F-2Report
                      of Registered Public Accounting Firm
                  F-3Balance
                      Sheets as of December 31, 2005 and 2006
                  F-4Statements
                      of Operations for the years ended December 31,2004,
                      2005 and 2006
                  F-5Statements
                      of Stockholders' Equity for the years endedDecember
                      31, 2004, 2005 and 2006
                  F-6Statements
                      of Cash Flows for the years ended December 31,2004,
                      2005 and 2006
                  F-7Notes
                      to Financial Statements
                  F-8II.
                  Supplemental
                      Information - Disclosures About Oil andGas
                      Producing Activities – Unaudited
                  F-20
 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.
 Denver,
        Colorado
 
 I
        have
        audited the accompanying balance sheet of Croff Enterprises, Inc. as of December
        31, 2006, and the related statements of operations, stockholders' equity
        and
        cash flows for the year 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, 2006, and the results of its operations and its cash flows
        for the year then ended in conformity with accounting principles generally
        accepted in the United States of America.
 
 Aurora,
        Colorado                                                                                                       Ronald
        R. Chadwick, P.C.
 March
        22,
        2007                                                                                                           RONALD
        R. CHADWICK, P.C.
 
  
  F-2
  
 REPORT
        OF
        REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 Board
        of
        Directors and Stockholders
 Croff
        Enterprises, Inc.
 
 
 We
        have
        audited the balance sheets of Croff Enterprises, Inc. at December 31, 2005,
        and
        the related statements of operations, stockholders' equity and cash flows
        for
        each of the two years in the period ended December 31, 2005. These financial
        statements are the responsibility of management. Our responsibility is to
        express an opinion on these financial statements based on our
        audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States).  Those standards require
        that we plan and perform the audits 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. We believe that
        our
        audit provides a reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Croff Enterprises, Inc. as of
        December 31, 2005, and the results of its operations and its cash flows for
        each
        of the two years in the period ended December 31, 2005, in conformity with
        U.S.
        generally accepted accounting principles.
 
 Denver,
                    ColoradoMarch
                    17, 2006
                CAUSEY
                    DEMGEN & MOORE INC.
  F-3
  CROFF
        ENTERPRISES, INC.
 BALANCE
        SHEETS
 December
        31, 2005 and 2006
 2005
                
                
                
                2006ASSETSCurrent
                    assets:Cash and cash equivalents
                
                $
                902,257
                
                
                
                $
                985,729Accounts receivable
                
                
                157,959
                
                
                
                
                124,9001,060,216
                
                
                
                
                1,110,629Oil
                    and gas properties, at cost, successful efforts method:Proved properties
                
                
                1,016,442
                
                
                
                
                1,074,188Unproved properties
                
                
                266,174
                
                
                
                
                266,1741,282,616
                
                
                
                
                1,340,362Accumulated depletion and depreciation
                
                
                (535,330
                )
                
                
                
                (583,830
                )747,286
                
                
                
                
                756,532Total assets
                
                $
                1,807,502
                
                
                
                $
                1,867,161LIABILITIES AND STOCKHOLDERS’
                    EQUITYCurrent
                    liabilities:Accounts payable
                
                $
                37,945
                
                
                
                $
                58,756Farmout agreement liability
                
                
                300,621
                
                
                
                
                -Current portion of ARO liability
                
                
                23,000
                
                
                
                
                23,000Accrued liabilities
                
                
                72,788
                
                
                
                
                33,375434,354
                
                
                
                
                115,131Long-term
                    portion of ARO liabilities
                
                
                58,828
                
                
                
                
                64,695Stockholders’
                    equity:Class A Preferred stock, no par value5,000,000 shares authorized, none issued
                
                ****
                **-**
                
                
                
                ****
                **-**Class B Preferred stock, no par value; 1,000,000 shares
                    authorized,540,659 shares issued and outstanding
                
                
                1,089,233
                
                
                
                
                1,380,387Common stock, $.10 par value; 20,000,000 shares
                    authorized,622,143 and 620,643 shares issued and
                    outstanding atDecember 31, 2005 and 2006
                
                
                62,064
                
                
                
                
                62,064Capital in excess of par value
                
                
                155,715
                
                
                
                
                155,715Treasury stock, at cost, 69,399 and 69,399 shares issued
                    andoutstanding at December 31, 2005 and 2006
                
                
                (107,794
                )
                
                
                
                (107,794
                )Retained earnings
                
                
                115,102
                
                
                
                
                196,9631,314,320
                
                
                
                
                1,687,335Total liabilities and stockholders’ equity
                
                $
                1,807,502
                
                
                
                $
                1,867,161See
                    accompanying notes to the financial statements.
  F-4
 
 **CROFF
        ENTERPRISES, INC.**
 STATEMENTS
        OF OPERATIONS
 For
        the
        years ended December 31, 2004, 2005 and 2006
 
 2004
                
                
                2005
                
                
                2006RevenuesOil and natural gas sales
                
                $
                615,731
                
                
                $
                934,525
                
                
                $
                842,400Loss on natural gas “put” contracts
                
                
                (7,599
                )
                
                
                --
                
                
                
                --Other income (lease payments)
                
                
                6,196
                
                
                
                7,330
                
                
                
                660614,328
                
                
                
                941,855
                
                
                
                843,060ExpensesLease operating expense includingproduction taxes
                
                
                192,187
                
                
                
                272,129
                
                
                
                205,371Proposed drilling program
                
                
                30,825
                
                
                
                52,638
                
                
                
                --General and administrative
                
                
                112,157
                
                
                
                165,212
                
                
                
                212,648Overhead expense, related party
                
                
                48,000
                
                
                
                50,554
                
                
                
                49,872(Gain) on sale of equipment
                
                
                --
                
                
                
                (14,173
                )
                
                
                (112,543
                )Accretion expense
                
                
                --
                
                
                
                10,187
                
                
                
                5,868Depletion and depreciation
                
                
                42,000
                
                
                
                45,000
                
                
                
                48,500425,169
                
                
                
                581,547
                
                
                
                409,716Income
                    from operations
                
                
                189,159
                
                
                
                360,308
                
                
                
                433,344Other
                    income (expense)Gain (loss) on sale of marketable equity securities
                
                
                (38,166
                )
                
                
                --
                
                
                
                --Interest income
                
                
                --
                
                
                
                12,057
                
                
                
                49,671(38,166
                )
                
                
                12,057
                
                
                
                49,671Income
                    before income taxes
                
                
                150,993
                
                
                
                372,365
                
                
                
                483,015Provision for income taxes
                
                
                8,877
                
                
                
                82,478
                
                
                
                110,000Net income
                
                $
                142,116
                
                
                $
                289,887
                
                
                
                373,015Net income applicable topreferred B shares
                
                
                213,634
                
                
                
                316,304
                
                
                
                291,154Net income (loss) applicable tocommon shares
                
                $
                (71,518
                )
                
                $
                (26,417
                )
                
                $
                81,861Basic and diluted net income(loss) per common share
                
                $
                (0.13
                )
                
                $
                (0.05
                )
                
                $
                0.15
  See
          accompanying notes to the financial statements.
  F-5
  **CROFF
        ENTERPRISES, INC.**
 STATEMENTS
        OF STOCKHOLDERS’ EQUITY
 For
        the
        years ended December 31, 2004, 2005 and 2006
 AccumulatedCapital
                    in
                
                
                
                
                
                
                
                
                
                other
                
                
                
                
                RetainedPreferred
                    B stock
                
                Common
                    stock
                
                
                
                excess
                    of
                
                
                
                
                Treasury
                
                
                
                
                comprehensive
                
                
                
                
                earningsShares
                
                
                Amount
                
                Shares
                
                
                
                
                Amount
                
                
                
                par
                    value
                
                
                
                
                stock
                
                
                
                
                loss
                
                
                
                
                (deficit)Balance
                    at December 31, 2003
                
                540,659
                
                $
                559,295
                
                620,143
                
                
                
                $
                62,014
                
                
                $
                369,761
                
                
                
                $
                (83,151
                )
                
                
                $
                (41,210
                )
                
                
                $
                (597
                )Realization of net loss onmarketable equity securities
                
                -
                
                
                -
                
                -
                
                
                
                
                -
                
                
                
                -
                
                
                
                
                -
                
                
                
                
                41,210
                
                
                
                
                -Net income for the year endedDecember 31, 2004
                
                -
                
                
                -
                
                -
                
                
                
                
                -
                
                
                
                -
                
                
                
                
                -
                
                
                
                
                
                
                -
                
                
                
                
                142,116Common stock issued for services
                
                -
                
                
                -
                
                2,000
                
                
                
                
                200
                
                
                
                1,800
                
                
                
                
                -
                
                
                
                
                
                
                -
                
                
                
                
                -Preferred stock reallocation
                
                -
                
                
                213,634
                
                -
                
                
                
                
                -
                
                
                
                (213,634
                )
                
                
                
                -
                
                
                
                
                
                
                -
                
                
                
                
                -Balance
                    at December 31, 2004
                
                540,659
                
                
                772,929
                
                622,143
                
                
                
                
                62,214
                
                
                
                157,927
                
                
                
                
                (83,151
                )
                
                
                
                
                
                -
                
                
                
                
                141,519Net income for the year endedDecember 31, 2005
                
                -
                
                
                -
                
                -
                
                
                
                
                -
                
                
                
                -
                
                
                
                
                -
                
                
                
                
                
                
                -
                
                
                
                
                289,887Cancellation of treasury stock
                
                -
                
                
                -
                
                (1,500
                )
                
                
                
                (150
                )
                
                
                (2,212
                )
                
                
                
                -
                
                
                
                
                
                
                -
                
                
                
                
                -Purchase of treasury stock
                
                -
                
                
                -
                
                -
                
                
                
                
                -
                
                
                
                -
                
                
                
                
                (24,643
                )
                
                
                
                
                
                -
                
                
                
                
                -Preferred stock reallocation
                
                -
                
                
                316,304
                
                -
                
                
                
                
                -
                
                
                
                -
                
                
                
                
                -
                
                
                
                
                
                
                -
                
                
                
                
                (316,304
                )Balance
                    at December 31, 2005
                
                540,659
                
                
                1,089,233
                
                620,643
                
                
                
                
                62,064
                
                
                
                155,715
                
                
                
                
                (107,794
                )
                
                
                
                
                
                -
                
                
                
                
                115,102Net income for the year endedDecember 31, 2006
                
                -
                
                
                -
                
                -
                
                
                
                
                -
                
                
                
                -
                
                
                
                
                -
                
                
                
                
                
                
                -
                
                
                
                
                373,015Preferred stock reallocation
                
                -
                
                
                291,154
                
                -
                
                
                
                
                -
                
                
                
                -
                
                
                
                
                -
                
                
                
                
                
                
                -
                
                
                
                
                (291,154
                )Balance
                    at December 31, 2006
                
                540,659
                
                $
                1,380,387
                
                620,643
                
                
                
                $
                62,064
                
                
                $
                155,715
                
                
                
                $
                (107,794
                )
                
                
                $
                
                
                -
                
                
                $
                
                196,963
  See
        accompanying notes to the financial statements.
 F-6
  **CROFF
      ENTERPRISES, INC.**
 STATEMENTS
      OF CASH FLOWS
 For
      the
      years ended December 31, 2004, 2005 and 2006
  2004
                
                
                2005
                
                
                2006Cash
                    flows from operating activities:Net income
                
                $
                142,116
                
                
                $
                289,887
                
                
                $
                373,015Adjustments to reconcile net income tonet cash provided by operating activities:Depletion, depreciation, and
                    accretion
                
                
                42,000
                
                
                
                55,187
                
                
                
                54,368Loss on abandonment
                
                
                -
                
                
                
                56,089
                
                
                
                --(Gain) on sale of equipment
                
                
                -
                
                
                
                (14,173
                )
                
                
                (112,000
                )Realized (gain) loss on
                    marketable equity securities
                
                
                38,166
                
                
                
                --
                
                
                
                --Loss on natural gas “put”
                    contracts
                
                
                7,599
                
                
                
                --
                
                
                
                --Other items, net
                
                
                2,000
                
                
                
                --
                
                
                
                --Accounts
                    receivable
                
                
                (29,160
                )
                
                
                (48,268
                )
                
                
                33,059Accounts
                    payable
                
                
                7,027
                
                
                
                9,535
                
                
                
                20,811Accrued
                    liabilities
                
                
                (2,021
                )
                
                
                64,082
                
                
                
                (39,413
                )Net cash provided by operating activities
                
                
                207,727
                
                
                
                412,339
                
                
                
                329,840Cash
                    flows from investing activities:Proceeds from natural gas “put” contracts
                
                
                61
                
                
                
                --
                
                
                
                --Proceeds from sale of investments
                
                
                128,943
                
                
                
                --
                
                
                
                --Proceeds from sale of equipment
                
                
                --
                
                
                
                48,500
                
                
                
                112,000Net participation fees received
                
                
                77,500
                
                
                
                --
                
                
                
                --Purchase of treasury stock
                
                
                --
                
                
                
                (24,643
                )
                
                
                --Acquisition of oil and gas properties and improvements
                
                
                (311,054
                )
                
                
                (92,228
                )
                
                
                (57,746
                )Net cash used in investing activities
                
                
                (104,550
                )
                
                
                (68,371
                )
                
                
                54,254Cash
                    flows from financing activities:Proceeds from Farmout agreement
                
                
                -
                
                
                
                450,000
                
                
                
                --Costs incurred for the benefit of Farmout agreement
                
                
                -
                
                
                
                (149,378
                )
                
                
                (300,622
                )Net cash provided by financing
                    activities
                
                
                -
                
                
                
                300,622
                
                
                
                (300,622
                )Net
                    increase (decrease) in cash and cash equivalents
                
                
                103,177
                
                
                
                644,590
                
                
                
                83,472Cash
                    and cash equivalents at beginning of year
                
                
                154,490
                
                
                
                257,667
                
                
                
                902,257Cash
                    and cash equivalents at end of year
                
                $
                257,667
                
                
                $
                902,257
                
                
                $
                985,729
 Supplemental
        disclosure of non-cash investing and financing activities:
 During
        the years ended December 31, 2004, the Company issued 2,000 shares of its
        common
        stock to a Director for services rendered valued at $2,000. During the year
        ended December 31, 2005, the Company purchased 1,500 shares of its common
        stock
        for $2,362 and the shares were cancelled.
  F-7
 
 **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
 
 
 1.        ORGANIZATIONS
      AND NATURE OF BUSINESS
 
 Croff
      Enterprises, Inc. (“Croff” or the “Company”) is an independent energy company
      engaged in the business of oil and natural gas production, primarily through
      ownership of perpetual mineral interests and acquisition of producing oil and
      natural gas leases.  The Company’s principal activity is oil and
      natural gas production from non-operated properties.  The Company’s
      business strategy is focused on targeting opportunities that are of lower risk
      with the potential for stable cash flow and long asset life while seeking to
      keep operating costs low.  The Company acquires and owns producing and
      non-producing leases and perpetual mineral interests in Alabama, Colorado,
      Michigan, Montana, New Mexico, North Dakota, Oklahoma, Texas, Utah, and Wyoming.
      Over the past eleven years, the Company’s primary source of revenue has been oil
      and natural gas production from leases and producing mineral
      interests.  Other companies operate almost all of the wells from which
      the Company receives revenues and the Company has no control over the factors
      which determine royalty or working interest revenues, such as markets, prices
      and rates of production. The Company presently participates as a working
      interest owner in 34 single wells and in 10 units of multiple wells. The Company
      holds small royalty interests in approximately 215 wells.
 
 The
      Company was incorporated in Utah in 1907 as Croff Mining Company.  The
      Company changed its name to Croff Oil Company in 1952, and in 1996 changed
      its
      name to Croff Enterprises, Inc.  The Company continues to operate its
      oil and natural gas properties as Croff Oil Company.
 
 2.        SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
 
 Producing
      activities
 
 The
      Company follows the "successful efforts" method of accounting for its oil and
      gas properties. Under this method, all property acquisition costs and costs
      of
      exploratory and development wells are capitalized when incurred, pending
      determination of whether the well has proven reserves. If an exploratory well
      does not result in reserves, the capitalized costs of drilling the well, net
      of
      any salvage, are charged to expense. The costs of development wells are
      capitalized, whether the well is productive or nonproductive.
 
 The
      Company re-entered the Helen Gips #1 well in Dewitt County, Texas, and
      re-completed the wellbore to the Wilcox formation during 2004. Under the
      successful efforts method of accounting the Company has capitalized $65,213
      as
      of December 31, 2004, for costs incurred on this unevaluated exploratory
      well.  The capitalized costs associated with this unevaluated
      exploratory well have been excluded from depletion and depreciation during
      the
      2004. In 2005, the Helen Gips #1 was deemed noncommercial and was plugged and
      abandoned, and $52,638 of the capitalized costs was expensed to drilling
      operations for the year ended December 31, 2005. The amount to be recovered
      from
      the tubing of $13,000 remains capitalized at December 31, 2005.
 
 
 F-8
 
 **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
  In
      2005,
      the Company purchased a 25% working interest in a lease on which there is an
      existing re-entry well and a producing well. (A.C. Wiggins). The Wiggins well
      was refraced in 2005 and is currently producing gas.
   The
      Company was informed that Tempest Energy Resources, pursuant to its 2004
      Participation Agreement, declined to participate in the re-entry program in
      Dewitt County, Texas.  Although the Company abandoned most of these
      leases, it did renew several leases for a farmout agreement for the re-entry
      of
      the Dixel Gips well, in December 2005. The Company provided the leases, the
      re-entry wellbore, geological, engineering and other wellsite improvements
      for a
      20% working interest, carried through completion.  Under the Farmout
      Agreement, the Farmees pay for drilling and completion and all parties,
      including The Company, pay for production and equipment.
  The
      Dixel
      Gips well was completed in the first quarter of 2006 and sold in the third
      quarter of 2006. The proceeds from the sale of the Panther Pipeline and the
      Edward Dixel Gips lease in Dewitt County Texas was $255,000. The cost of
      the pipeline and lease were $142,459 and yielded a gain of
      $112,543.
 
 Maintenance
      and repairs are charged to expense; improvements of property are capitalized
      and
      depreciated as described below.
 
 Lease
      bonuses
 
 The
      Company defers bonuses received from leasing minerals in which unrecovered
      costs
      remain by recording the bonuses as a reduction of the unrecovered costs. Bonuses
      received from leasing mineral interests previously fully expensed are taken
      into
      income. For federal income tax purposes, lease bonuses are regarded as advance
      royalties (ordinary income).  The Company received lease bonuses
      totaling $3,743, $2,415 and $660, for the years ended December 31, 2004, 2005,
      and 2006, respectively, which were included in other income.
 
 Depreciation,
      depletion, and accretion
 
 The
      Company provides for depreciation and depletion of its investment in producing
      oil and gas properties on the unit-of-production method, based upon estimates
      of
      recoverable oil and gas reserves from the property.
 
 The
      Company has established a working interest reserve relating to the Asset
      Retirement Obligation (“ARO”) for the four wells that the Company operates. The
      reserve, based on the estimates of management, complies with the Financial
      Standards Board Rule 143 (FAS 143). The accretion of $10,187 and $5,868 for
      the
      years ended December 31, 2005 and 2006, respectively, represent an increase
      in
      the ARO liability based on the discounted cash flow of the future retirement
      costs.
  F-9
  **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
 Recent
      accounting pronouncements
 
 In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) 123R, "Share-Based
      Payment." This revised standard addresses the accounting for share- based
      payment transactions in which a company receives employee services in exchange
      for either equity instruments of the company or liabilities that are based
      on
      the fair value of the company's equity instruments or that may be settled by
      the
      issuance of such equity instruments. Under the new standard, companies will
      no
      longer be able to account for share-based compensation transactions using the
      intrinsic method in accordance with APB 25. Instead, companies will be required
      to account for such transactions using a fair-value method and recognize the
      expense in the statements of operations. SFAS 123R became effective for all
      interim or annual periods beginning after June 15, 2005. SFAS 123R is not
      expected to have a material impact on the Company’s financial condition or
      results of operations as the Company currently does not receive employee
      services in exchange for either equity instruments of the Company or liabilities
      that are based on the fair value of the Company's equity instruments or that
      may
      be settled by the issuance of such equity instruments.
 
 In
      December 2004, the FASB issued SFAS
      No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No.
      29".
      This standard requires exchanges of productive assets to be accounted for at
      fair value, rather than at carryover basis, unless (1) neither the asset
      received nor the asset surrendered has a fair value that is determinable within
      reasonable limits or (2) the transactions lack commercial substance. The
      Statement is effective for non-monetary asset exchanges occurring in fiscal
      periods beginning after June 15, 2005.  The Company has not entered
      into these types of nonmonetary asset exchanges during the last five
      years.  Accordingly, the adoption of this pronouncement is not
      expected to have a material impact on the Company’s financial condition or
      results of operations.
 
 In
      May
      2005 the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections - a
      replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154
      replaces APB Opinion (“APB”) No. 20, “Accounting Changes”, and SFAS No. 3,
“Reporting Accounting Changes in Interim Financial Statements,” and changes the
      requirements for the accounting for and reporting of a change in accounting
      principle. SFAS No. 154 will apply to all voluntary changes in accounting
      principle as well as to changes required by an accounting pronouncement in
      the
      unusual instance that the pronouncement does not include specific transition
      provisions. APB No. 20 previously required that most voluntary changes in
      accounting principle be recognized by including in net income of the period
      of
      the change the cumulative effect of changing to the new accounting
      principle.  SFAS No. 154 requires retrospective application to prior
      periods' financial statements of changes in accounting principle, unless it
      is
      impracticable to determine either the period-specific effects or the cumulative
      effect of the change. When it is impracticable to determine the period-specific
      effects of an accounting change on one or more individual prior periods
      presented, SFAS No. 154 requires that the new accounting principle be applied
      to
      the balances of assets and liabilities as of the beginning of the earliest
      period for which retrospective application is practicable and that a
      corresponding adjustment be made to the opening balance of retained earnings
      (or
      other appropriate components of equity or net assets in the statement of
      financial condition).
 
 F-10
 
 
 **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
 
 Recent
      accounting pronouncements (continued)
 
 In
      March
      2005, the FASB issued FASB Interpretation (“FIN”) No. 47, “*Accounting for
      Conditional Asset Retirement Obligations*” (“*FIN No.
      47*”).  FIN No. 47 clarifies that the term conditional
      asset retirement obligation as used in FASB Statement No. 143, “Accounting for
      Asset Retirement Obligations,” refers to a legal obligation to perform an
      asset retirement activity in which the timing and (or) method of settlement
      are
      conditional on a future event that may or may not be within the control of
      the
      entity.  The obligation to perform the asset retirement activity is
      unconditional even though uncertainty exists about the timing and (or) method
      of
      settlement.  Uncertainty about the timing and/or method of settlement of a
      conditional asset retirement obligation should be factored into the measurement
      of the liability when sufficient information exists.  This
      interpretation also clarifies when an entity would have sufficient
      information to reasonably estimate the fair value of an asset retirement
      obligation.  Fin No. 47 is effective no later than the end of
      fiscal years ending after December 15, 2005 (December 31, 2005 for calendar-year
      companies).  Retrospective application of interim financial
      information is permitted but is not required.  Management does not
      expect adoption of FIN No. 47 to have a material impact on the Company’s
      financial statements.
  SFAS
      155,
“*Accounting for Certain Hybrid Financial Instruments—an amendment of FASB
      Statements No. 133 and 140*” (‘SFAS No. 155”). This Statement shall be
      effective for all financial instruments acquired, issued, or subject to a
      remeasurement (new basis) event occurring after the beginning of an entity’s
      first fiscal year that begins after September 15, 2006. The fair value election
      provided for in paragraph 4(c) of this Statement may also be applied upon
      adoption of this Statement for hybrid financial instruments that had been
      bifurcated under paragraph 12 of Statement 133 prior to the adoption of this
      Statement. Earlier adoption is permitted as of the beginning of an entity’s
      fiscal year, provided the entity has not yet issued financial statements,
      including financial statements for any interim period, for that fiscal year.
      Management does not expect adoption of SFAS No. 155 to have a material impact
      on
      the Company’s financial statements.
  SFAS
      157,
“*Fair Value Measurements*”, defines fair value, establishes a framework
      for measuring fair value in generally accepted accounting principles (GAAP),
      and
      expands disclosures about fair value measurements. This Statement applies under
      other accounting pronouncements that require or permit fair value measurements,
      the Board having previously concluded in those accounting pronouncements that
      fair value is the relevant measurement attribute. Accordingly, this Statement
      does not require any new fair value measurements. However, for some entities,
      the application of this Statement will change current practice. Management
      has
      not evaluated the impact of this statement.
  
 F-11
  **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
  Recent
      accounting pronouncements (continued)
 
 In
      June 2005, the Emerging Issues Task Force reached a consensus on Issue
      No. 05-6 (“EITF No. 05-6”), *“Determining the Amortization Period for
      Leasehold Improvements Purchased after Lease Inception or Acquired in a Business
      Combination.”*   EITF No. 05-6 clarifies that the
      amortization period for leasehold improvements acquired in a business
      combination or placed in service significantly after and not contemplated at
      or
      near the beginning of the lease term should be amortized over the shorter of
      the
      useful life of the assets or a term that includes the required lease periods
      and
      renewals that are reasonably assured of exercise at the time of the acquisition.
      EITF No. 05-6 is to be applied prospectively to leasehold improvements purchased
      or acquired in reporting periods beginning after June 29, 2005. The
      adoption of EITF No. 05-6 did not have a material impact on the Company’s
      consolidated financial statements.
  In
      June
      2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “*Accounting
      forUncertainty in Income Taxes – an Interpretation of FASB Statement No.
      109*” (“*FIN No. 48*”).  FIN No. 48 clarifies the
      accounting for uncertainty in income taxes recognized in an enterprise’s
      financial statements in accordance with FASB Statement No. 109, “Accounting for
      Income Taxes”.  Fin No. 48 is effective for fiscal years
      beginning after December 15, 2005.  Management does not expect
      adoption of FIN No. 48 to have a material impact on the Company’s financial
      statements.
  Revenue
      recognition
 
 Oil
      and
      gas revenues are accounted for using the sales method. Under this method,
      revenue is recognized based on the cash received rather than the Company's
      proportionate share of the oil and gas produced.  Oil and gas
      imbalances and related value at December 31, 2004, 2005 and 2006 were
      insignificant.
  Risks
      and
      uncertainties
 
 Historically,
      oil and gas prices have experienced significant fluctuations and have been
      particularly volatile in recent years.  Price fluctuations can result
      from variations in weather, levels of regional or national production and
      demand, availability of transportation capacity to other regions of the country
      and various other factors.  Increases or decreases in prices received
      could have a significant impact on future results.
 
  F-12
  **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
  Comprehensive
      Income
 
 The
      Company follows the provisions of SFAS No. 130, "Reporting Comprehensive
      Income," which establishes standards for reporting comprehensive
      income.  In addition to net income, comprehensive income includes all
      changes in equity during a period, except those resulting from investments and
      distributions to the owners of the Company.  The components of other
      comprehensive income net of the related tax effects for the twelve months ended
      December 31, 2003 totaled $23,995, and was related to net unrealized gains
      (losses) on the Company’s marketable equity securities, which were available for
      sale. The Company liquidated its marketable equity securities and recognized
      a
      net realized loss of $38,166 for the year ended December 31, 2004.
  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, 2005
      and 2006.
  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.
  Derivative
      instruments and hedging activities
 
 On
      March
      21, 2003, the Company purchased a series of put contracts for 10,000 MMBTU’s per
      month of natural gas beginning in June 2003 and ending May 2004 at the strike
      price of $4.75.  The Company paid $58,044 for these twelve
      contracts.  The Company realized a loss during 2003 and 2004 of
      $45,022 and $7,599, respectively, related to its purchase of these natural
      gas
“put” contracts.  During the years ended December 31, 2006, 2005 and
      2004, the Company did not enter into commodity derivative contracts or
      fixed-price physical contracts to manage its exposure to oil and gas price
      volatility.
  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.
 
 F-13
  CROFF
      ENTERPRISES, INC.
 NOTES
      TO
      FINANCIAL STATEMENTSF or
      the
      years ended December 31, 2004, 2005 and 2006
  Accounts
      receivable
 
 The
      Company considers accounts receivable to be fully collectible; accordingly,
      no
      allowance for doubtful accounts is required. If amounts become un-collectible,
      they will be charged to operations when that determination is made.
  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 per common share
 
 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 preferred B 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 preferred B or common
      shares that would dilute the basic earnings per common share during the
      period.
  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.        RELATED
      PARTY TRANSACTIONS
 
 The
      Company retains the services of a law firm in which a partner of the firm is
      a
      director of the Company. Legal fees paid to this firm for the years ended
      December 31, 2004, 2005 and 2006 amounted to $2,410, $16,920 and $23,493,
      respectively.
 
 The
      Company currently has an office sharing arrangement with Jenex Petroleum
      Corporation, hereafter “Jenex”, which is owned by the Company’s
      President.  The Company is not a party to any lease, but paid Jenex
      for office space and all office services, including rent, phone, office
      supplies, secretarial, land, and accounting.  The Company’s expenses
      for these services were $48,000, $50,554, and $49,872 for the years ended 2004,
      2005 and 2006, respectively.  Although these transactions were not a
      result of “arms length” negotiations, the Company’s Board of Directors believes
      the transactions are reasonable.
 
 
 F-14
 
 
 **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
 
 3.        RELATED
      PARTY TRANSACTIONS (CONTINUED)
 
 The
      Company has working interests in five Oklahoma natural gas wells, which are
      operated by Jenex, a company solely owed by Gerald Jensen, the Company’s
      President.  As part of the 1998 purchase agreement, Jenex agreed to
      rebate to the Company $150 of operating fees per well, each month, which now
      totals $750 per month, as long as Jenex operated the wells and the Company
      retained its interest.  During the years ending December 31, 2004,
      2005 and 2006, $9,000, $9,000, and $9,000 respectively, have been offset against
      lease operating expense, in this manner.  Total trade accounts
      receivable from Jenex as of December 31, 2005, and 2006, totaled $35,307 and
      $16,973, respectively.
 
 The
      Company compensated a member of its Board of Directors 2,000 shares of common
      stock during 2004 for consulting services rendered in connection with the
      Company’s Yorktown Re-entry Program in South Texas.  The common shares
      were valued at $1.00 per share
 
 In
      2005,
      the Preferred B Shareholders received a tender offer from Jensen Development
      Company and C.S. Finance L.L.C., companies wholly owned by Gerald L. Jensen,
      President and Chairman of the Company. This tender offer is fully described
      in
      Footnote 4 below, and incorporated herein by reference.
 
 4.         PREFERRED
      B STOCK TENDER OFFER
  In
          April,
          2005, the Company’s Board of Directors reviewed the Company’s strategic
          alternatives, including the possible sale or merger of all or part of the
          Company.  The two objectives were to increase shareholder value and to
          provide liquidity to the shareholders.  The Board of Directors formed
          a non-management committee to review the objectives, and any opportunities
          related to these objectives.  The Preferred B shareholders of the
          Company received a tender offer from C.S. Finance L.L.C. and Jensen Development
          Company, “Offerors,” two companies wholly owned by Gerald L. Jensen, to purchase
          all of the outstanding shares of Preferred B stock at $3 per
          share.
  The
          Offerors Preferred B tender offer was filed with the SEC in June 2005.
          The
          Company filed a Form 14D9 with the SEC outlining the position of the
          non-management committee of the Board of Directors which was neutral as
          to the
          tender offer, and advised shareholders to consider the offer based on each
          individual’s situation. The results of the tender offer were reported to the SEC
          in September 2005. There were 75,050 shares tendered and accepted prior
          to the
          expiration of the tender offer, or 13.9% of the Preferred B stock, at a
          cost of
          $225,150.
 
 F-15
  **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
 
 4.
            PREFERRED
                B STOCK TENDER OFFER (CONTINUED)
 
 During
      the tender offer, two Directors tendered all of their shares of Preferred B
      stock. After the tender offer a Director, sold the majority of his Preferred
      B
      shares at the tender price for a note due in 2006; retaining 8,000 Preferred
      B
      shares. Also after the tender offer, a Director who had tendered one third
      of
      his shares, sold the balance of his Preferred B shares at the tender price
      for
      notes payable during 2006 and 2007. These subsequent purchases at $3 per share
      by C.S. Finance L.L.C. totaled another 33,418 Preferred B shares, of which
      29,365 Preferred B shares were purchased from the two Directors. To date, the
      number of Preferred B shares collectively owned by Gerald L. Jensen, C.S.
      Finance L.L.C., and Jensen Development Company total 363,535, or 67.2% of the
      Preferred B shares.  The holders of approximately 94,394 Preferred B
      shares were unable to be located during the tender offer.
 
 5.
            
            STOCKHOLDERS’
                EQUITY
 
 During
      2001, the Board determined that the cash of the Company, which had been building
      during a period of high oil prices, should be formally allocated between the
      common stock and the Preferred B stock.  The Board decided to allocate
      $250,000 cash to the common stock and the balance of cash remaining with the
      Preferred B stock. The Board then determined that future oil and gas cash flow
      from the Preferred B assets would be accumulated for Preferred B
      shareholders.  The Company established separate investment accounts
      for the Preferred B and common stock investments.
 
 During
      the year ended December 31, 2005, the Company purchased 1,500 shares of its
      common stock for $2,362 and the shares were cancelled. In December 2005, the
      Company purchased on the Over–The-Counter-Bulletin-Board (“OTCBB”) 16,156 shares
      of its common stock for $24,643 and included in Treasury stock at December
      31,
      2005. The Company has not repurchased any additional shares of its common stock
      since December 2005.
 
 The
      Company has no outstanding stock options, warrants or rights as of December
      31,
      2005 or 2006.
 
 The
      Class
      A Preferred stock was authorized for possible future capitalization and funding
      purposes of the Company and has not yet been designated as voting or non-voting.
      Presently, there are no plans or intentions to issue these shares.
 
 
 F-16
 
 **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
 
 5.         STOCKHOLDERS’
      EQUITY (Continued)
 
 In
      1996,
      the Company created a class of Preferred B stock to which the perpetual mineral
      interests and other oil and gas assets were pledged.  Thus, the
      Preferred B stock represents the current oil and gas assets of the Company,
      along with all Preferred B checking and savings accounts and receivables owed
      to
      these accounts.  The common stock represents the 2004 Yorktown
      Re-entry Program and all of the oil and natural gas assets in Dewitt County,
      Texas, along with all common stock checking and savings accounts and receivables
      owed to these accounts.   Each common shareholder received an
      equal number of Preferred B shares, one for one, at the time of this
      restructuring of the capital of the Company.  The Class B Preferred
      stock has no par value and limited voting privileges. The Class B Preferred
      stockholders are entitled exclusively to all dividends, distributions, and
      other
      income, which are based directly or indirectly on the Preferred B oil and
      natural gas assets. In addition, in the event of liquidation, distribution
      or
      sale of the Company, the Class B Preferred stockholders have an exclusive
      preference to the net asset value of the natural gas and oil assets over all
      other classes of common and preferred stockholders.
 
 6.         INCOME
      TAXES
  The
      provisions for income taxes from operations consist of the
      following:
  **2004**
            
            
            **2005**
            
            
            **2006**Current  tax
                expense
            
            $
            8,877
            
            
            $
            82,478
            
            
            $
            110,000Deferred
                income tax expense
            
            
            -
                -
            
            
            
            -
                -
            
            
            
            -
                -$
            8,877
            
            
            $
            82,478
            
            
            $
            110,000
 
 
 A
      reconciliation of the Company’s effective income tax rate and the United States
      statutory rate is as follows:
 
 **2004**
            
            
            **2005**
            
            
            **2006**United
                States statutory rate
            
            
            34.00
            %
            
            
            34.00
            %
            
            
            34.00
            %State
                income taxes, net of Federal income tax benefit
            
            
            2.55
            
            
            
            2.55
            
            
            
            2.55Reduction
                of valuation allowance (used NOL)
            
            
            (2.55
            )
            
            
            (0.45
            )
            
            
            (0.45
            )Percentage
                depletion
            
            
            (29.79
            )
            
            
            (15.62
            )
            
            
            (14.45
            )Book
                depletion & depreciation in excess of tax
            
            
            1.67
            
            
            
            1.67
            
            
            
            1.125.88
            %
            
            
            22.15
            %
            
            
            22.77
            %
 
 
 F-17
 
 **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
 
 6.           INCOME
      TAXES (continued)
 
 At
      December 31, 2006, the Company had capital loss carry-forwards of approximately
      $31,000. The loss was due to the sale of marketable securities and hedging
      transactions during fiscal year December 2002. The capital loss has indefinite
      life and can only used to reduce gains created by sale of capital
      assets.
 
 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 net operating loss carry forward is only for
      two of the states the Company operates in and expires in 2006. The income tax
      percentage depletion continues to exceed book depletion and is considered a
      permanent difference.
 
 At
      December 31, 2004, 2005 and 2006, total deferred tax assets, liabilities and
      valuation allowance are as follows:
 
 Deferred
      tax assets resulting from:
 **2004**
            
            
            **2005**
            
            
            **2006**Net
                operating loss carry forwards
            
            $
            10,220
            
            
            $
            7,688
            
            
            $
            5,156Capital
                loss carry forward
            
            
            10,540
            
            
            
            10,540
            
            
            
            10,540Depreciation
                & depletion differences
            
            
            (2,532
            )
            
            
            (2,532
            )
            
            
            (5,425
            )Total
                deferred tax asset
            
            
            18,228
            
            
            
            15,696
            
            
            
            10,271Less
                valuation allowance
            
            
            (18,228
            )
            
            
            (15,696
            )
            
            
            (10,271
            )$
            --
            
            
            $
            --
            
            
            $
            --
 
 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.
 
 7.           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
      568,401 shares in 2004, 568,027 shares in 2005, and 551,244 shares in
      2006.
 
 
 F-18
 
 **CROFF
      ENTERPRISES, INC.**
  NOTES
      TO
      FINANCIAL STATEMENTS
 For
      the
      years ended December 31, 2004, 2005 and 2006
 
 8.        MAJOR
      CUSTOMERS
 
 Customers
      which accounted for over
      10% of oil and natural gas revenues were as follows for the years ended December
      31, 2003, 2004 and 2005:
  2004  
                      2005         
         2006
 Jenex
      Petroleum Corp., a related
      party                                  18.1%                 25.8%               
14.2%
 Merit
      Energy                                                                             14.4%                 20.1%                18.1%
 Sunoco,
      Inc.                                                                             11.9%                 12.4%                 14.7%
 
 Management
      believes that the loss of any individual purchaser would not have a long-term
      material adverse impact on the financial position or results of operations
      of
      the Company.
 
 9.
            SUBSQUENT
                  EVENT
  NOTE: The
      following footnote is now moot since the Exchange Agreement referred to herein,
      was terminated on June 1, 2007.
  The
      Company executed a definitive Stock Equivalent Exchange Agreement (the “Exchange
      Agreement”) on December 12, 2006. The Exchange Agreement is between Taiyuan
      Rongan Business Trading Company Limited, (TRBT), a private Chinese company.
      The
      Exchange Agreement provides that Croff will issue over eleven million shares
      (92.5%) of its common stock to the shareholders of TRBT in exchange for 80%
      of
      TRBT. Upon closing of the transaction Croff will own approximately sixty-one
      percent (61%) of the assets controlled by TRBT. The existing shareholders of
      record of Croff will hold approximately seven and half percent (7.5%) of the
      issued and outstanding common stock.
 
 As
      part
      of the Exchange Agreement the Preferred B shareholders will exchange their
      shares and cash for all of the oil and gas properties and related cash of Croff.
      The properties will be transferred into a newly formed entity that is controlled
      by the CEO of Croff for approximately (67.2%) or three hundred sixty three
      thousand five hundred thirty five shares of the Preferred B and is part of
      the
      Exchange Agreement. In addition, theses shareholders of the new entity will
      contribute cash of approximately six hundred thousand dollars ($600,000) to
      purchase the balance of the properties that represents the Preferred B
      shareholders who did not participate in the Preferred B tender offer. These
      Preferred B shareholders will receive 2 for 1 common shares for their Preferred
      B stock. Lastly, the Exchange Agreement provides for a payment of a $0.20 per
      share dividend to all common shareholders of record prior to the closing. Croff
      will have $530,000 in cash remaining to provide for the dividend and other
      closing related expenses, including dissenting shareholder rights
      cases.
 
 
 F-19
 
 **CROFF
      ENTERPRISES, INC**.
 SUPPLEMENTAL
      INFORMATION - DISCLOSURES
 ABOUT
      OIL
      AND GAS PRODUCING ACTIVITIES – UNAUDITED
  
 In
      November, 1982, the Financial Accounting Standards Board issued and the SEC
      adopted Statement of Financial Accounting Standards No. 69 (SFAS 69)
      "Disclosures about Oil and Gas Producing Activities". SFAS 69 requires that
      certain disclosures be made as supplementary information by oil and gas
      producers whose financial statements are filed with the SEC.  The
      Company bases these disclosures upon estimates of proved reserves and related
      valuations.  Independent petroleum engineering firms compiled oil and
      gas reserve and future revenues as of December 31, 2004, 2005 and 2006 for
      the
      Company’s most significant wells, and consolidated estimates for the balance of
      the wells.
 
 The
      standardized measure of discounted future net cash flows relating to proved
      reserves as computed under SFAS 69 guidelines may not necessarily represent
      the
      fair value of the Company’s oil and gas properties in the market place. Other
      factors, such as changing prices and costs and the likelihood of future
      recoveries differing from current estimates, may have significant effects upon
      the amount of recoverable reserves and their present value.
 
 The
      standardized measure does not include any "probable" and "possible" reserves,
      which may exist and may become available through additional drilling
      activity.
 
 The
      standardized measure of discounted future net cash flows is developed as
      follows:
 
 1.
            Estimates
                are made of quantities of proved reserves and the future periods
                during
                which they are expected to be produced based on year-end economic
                conditions.
 
 2.
            The
                estimated future production of proved reserves is priced on the basis
                of
                year-end prices except that future prices of gas are increased for
                fixed
                and determinable escalation provisions in contracts (if
                any).
 
 3.
            The
                resulting future gross revenue streams are reduced by estimated future
                costs to develop and produce the proved reserves, based on year-end
                cost
                and timing estimates.
 
 4.
            A
                provision is made for income taxes based upon year-end statutory
                rates.
                Consideration is made for the tax basis of the property and permanent
                differences and tax credits relating to proved reserves. The tax
                computation is based upon future net cash inflow of oil and gas production
                and does not contemplate a tax effect for interest income and expense
                or
                general and administrative costs.
 
 5.
            The
                resulting future net revenue streams are reduced to present value
                amounts
                by applying a 10% discount factor.
 
 F-20
 
 
 **CROFF
      ENTERPRISES, INC.**
  SUPPLEMENTAL
      INFORMATION - DISCLOSURES
 ABOUT
      OIL
      AND GAS PRODUCING ACTIVITIES – UNAUDITED
 
 Changes
      in the standardized measure of
      discounted future net cash flows are calculated as follows:
 
 1.
            Acquisition
                of proved reserves is based upon the standardized measure at the
                acquisition date before giving effect to related income
                taxes.
 
 2.
            Sales
                and transfers of oil and gas produced, net of production costs, are
                based
                upon actual sales of products, less associated lifting costs during
                the
                period.
 
 3.
            Net
                changes in price and production costs are based upon changes in prices
                at
                the beginning and end of the period and beginning
                quantities.
 
 4.
            Extensions
                and discoveries are calculated based upon the standardized measure
                before
                giving effect to income taxes.
 
 5.
            Purchase
                of reserves are calculations based on increases from the Company's
                acquisition activities.
 
 6.
            Revisions
                of previous quantity estimates are based upon quantity changes and
                end of
                period prices.
 
 7.
            The
                accretion of discount represents the anticipated amortization of
                the
                beginning of the period discounted future net cash
                flows.
 
 8.
            Net
                change in income taxes primarily represents the tax effect related
                to all
                other changes described above and tax rate changes during the
                period.
 
 All
      of
      the Company's oil and gas producing activities are in the United
      States.
 
 OIL
      AND
      GAS PRICES
  During
      the year ended December 31,
      2006, crude oil and natural gas prices remained highly volatile. The average
      sale price of oil per barrel in 2006 for the Company was $51.95, compared to
      $55.93 in 2005. The average sale price of natural gas per Mcf in 2006 for the
      Company was $6.36 per Mcf, compared to $7.93 per Mcf in 2005. The ultimate
      amount and duration of oil and gas price fluctuations and their effect on the
      recoverability of the carrying value of oil and gas properties and future
      operations is not determinable by management at this time.
 
 EXPLANATION
      OF REVISIONS TO PROVEN OIL AND GAS RESERVES IN 2006
  Crude
      oil
      reserves increased in Michigan and Montana due to the revision of previous
      estimates as the decline curve on these oil wells decreased. In North Dakota,
      rework on a well increased the recoverable reserves. Oil reserves decreased
      in
      Texas due to the sale of minerals in place. In Utah, oil reserves increased
      due
      to extensions and discoveries on Uintah County fields. Wyoming oil reserves
      increased due to revision of previous estimates resulting from the engineer’s
      increasing the life of a lease in Campbell County, Wyoming. Natural gas reserves
      increased in Colorado and New Mexico due to extensions of existing fields on
      the
      Company’s leases in the Four Corners coal bed methane production area. In
      Michigan, improved recovery on one lease and revisions of previous quantity
      estimates in Otsego County, increased natural gas reserves. Extensions and
      discoveries in Uintah County, Utah increased natural gas reserves in that
      area.
 
 F-21
 
 **CROFF
      ENTERPRISES, INC.**
  SUPPLEMENTAL
      INFORMATION - DISCLOSURES
 ABOUT
      OIL
      AND GAS PRODUCING ACTIVITIES – UNAUDITED
 
 
 RESULTS
      OF OPERATIONS FOR PRODUCING ACTIVITIES
  
 The
      results of operations for oil and gas producing activities, excluding capital
      expenditures, impairment charges, corporate overhead and interest expense,
      are
      as follows for the years ended December 31, 2004, 2005 and 2006:
 
 2004
              
              
              2005
              
              
              2006RevenuesOil and natural gas sales
              
              $
              615,731
              
              
              $
              934,525
              
              
              $
              842,400Loss on natural gas “put” contracts
              
              
              (7,599
              )
              
              
              --
              
              
              
              --Other revenue (lease payments)
              
              
              6,196
              
              
              
              7,330
              
              
              
              660614,328
              
              
              
              941,855
              
              
              
              843,060Lease
                  operating costs
              
              
              148,844
              
              
              
              257,813
              
              
              
              150,011Production
                  taxes
              
              
              43,343
              
              
              
              66,954
              
              
              
              55,360Impairment
                  charges
              
              
              --
              
              
              
              52,638
              
              
              
              --Depletion,
                  depreciation and accretion
              
              
              42,000
              
              
              
              55,187
              
              
              
              54,368Income
                  tax expense
              
              
              8,877
              
              
              
              82,478
              
              
              
              110,000243,064
              
              
              
              515,070
              
              
              
              369,739Results
                  of operations from producingactivities
                  (excluding capitalexpenditures,
                  corporate overhead,and
                  interest expense)
              
              $
              371,264
              
              
              $
              426,785
              
              
              $
              473,321
 
 
 F-22
 
 **CROFF
      ENTERPRISES, INC.**
  SUPPLEMENTAL
      INFORMATION - DISCLOSURES
 ABOUT
      OIL
      AND GAS PRODUCING ACTIVITIES – UNAUDITED
 
 
 STANDARDIZED
      MEASURE OF DISCOUNTED FUTURE
  NET
      CASH
      FLOWS AND CHANGES THEREIN
 RELATING
      TO PROVED OIL AND GAS RESERVES
   Year
                  ended December 31,2004
              
              
              2005
              
              
              2006Future
                  cash inflows
              
              $
              4,829,000
              
              
              $
              7,618,000
              
              
              $
              7,343,000Future
                  production and development costs
              
              
              (2,259,000
              )
              
              
              (2,790,000
              )
              
              
              (2,679,000
              )2,570,000
              
              
              
              4,828,000
              
              
              
              4,664,000Future
                  income tax expense
              
              
              (450,000
              )
              
              
              (966,000
              )
              
              
              (933,000
              )Future
                  undiscounted net cash flows
              
              
              2,120,000
              
              
              
              3,862,000
              
              
              
              3,731,00010%
                  annual discount forestimated timing of cash flows
              
              
              (477,000
              )
              
              
              (1,023,000
              )
              
              
              (1,146,000
              )Standardized
                  measure ofdiscounted future netcash flows
              
              $
              1,643,000
              
              
              $
              2,839,000
              
              
              $
              2,585,000The
                  following are the principal sources ofchange in the standardized measure ofdiscounted future net cash flows:Beginning
                  balance
              
              $
              1,257,000
              
              
              $
              1,643,000
              
              
              $
              2,839,000Evaluation
                  of proved undevelopedreserves, net of future productionand development costs
              
              
              --
              
              
              
              --
              
              
              
              --Purchase
                  of proved reserves
              
              
              7,000
              
              
              
              43,000
              
              
              
              58,000Sales
                  and transfer of oil and gasproduced, net of production costs
              
              
              (405,000
              )
              
              
              (607,000
              )
              
              
              (638,000
              )Net
                  increase (decrease) in prices and costs
              
              
              1,022,000
              
              
              
              2,207,000
              
              
              
              (124,000
              )Extensions
                  and discoveries
              
              
              -
              
              
              
              60,000
              
              
              
              223,000Revisions
                  of previous quantity estimates
              
              
              (106,000
              )
              
              
              522,500
              
              
              
              381,000Accretion
                  of discount
              
              
              (55,000
              )
              
              
              (649,500
              )
              
              
              (158,000
              )Net
                  change in income taxes
              
              
              (77,000
              )
              
              
              (380,000
              )
              
              
              4,000Other
              
              
              --
              
              
              
              --
              
              
              
              --Ending
                  balance
              
              $
              1,643,000
              
              
              $
              2,839,000
              
              
              $
              2,585,000
    F-23
  **CROFF
        ENTERPRISES, INC.**
  SUPPLEMENTAL
      INFORMATION - DISCLOSURES
 ABOUT
      OIL
      AND GAS PRODUCING ACTIVITIES – UNAUDITED
  PROVED
      OIL AND GAS RESERVE QUANTITIES
 (All
      within the United States)
 
 Oil
                  Reserves
              
              
              Gas
                  Reserves(bbls)
              
              
              (mcf)Balance
                  at December 31, 2003
              
              
              84,110
              
              
              
              531,377Revisions of previous estimates
              
              
              4,119
              
              
              
              (66,837Extensions, discoveries and other additions
              
              
              250
              
              
              
              2,500Production
              
              
              (8,011
              )
              
              
              (59,959Balance
                  at December 31, 2004
              
              
              80,468
              
              
              
              407,084Revisions of previous estimates
              
              
              5,434
              
              
              
              32,837Extensions, discoveries and other additions
              
              
              (576
              )
              
              
              5,293Production
              
              
              (7,630
              )
              
              
              (59,403Balance
                  at December 31, 2005
              
              
              77,696
              
              
              
              385,811Revisions of previous estimates
              
              
              11,198
              
              
              
              79,054Extensions, discoveries and other additions
              
              
              6,110
              
              
              
              38,277Production
              
              
              (7,888
              )
              
              
              (59,915Balance
                  at December 31, 2006
              
              
              87,116
              
              
              
              443,227Proved
                  developed reservesDecember 31, 2004
              
              
              72,262
              
              
              
              352,974December 31, 2005
              
              
              77,696
              
              
              
              385,811December 31, 2006
              
              
              87,116
              
              
              
              443,227
  Costs
        incurred in oil and gas producing activities for the years ended December
        31,
        2004, 2005, and 2006 are as follows:
  2004
              
              
              2005
              
              
              2006Property
                  acquisitionProven
              
              $
              122,222
              
              
              $
              30,000
              
              
              $
              --Unproven
              
              
              --
              
              
              
              --
              
              
              
              --Exploration
                  costs capitalized
              
              
              --
              
              
              
              --
              
              
              
              --Development
                  costs capitalized
              
              $
              188,832
              
              
              $
              62,228
              
              
              $
              57,825Impairment
                  of property
              
              
              --
              
              
              
              52,638
              
              
              
              --Production
                  costs
              
              
              192,187
              
              
              
              272,129
              
              
              
              205,371Depletion,
                  depreciation, and accretion
              
              
              42,000
              
              
              
              55,187
              
              
              
              54,368
  F-24