##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2005oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          
    to         Infinity Energy Resources, Inc.
 (Exact Name of Registrant as
    Specified in its Charter)
  Delaware

20-3126427(State of Incorporation or
    Organization)

(I.R.S. Employer Identification
    No.)950 Seventeenth Street,
    Suite 800
    Denver, Colorado

80202(Address of principal executive
    office)

(Zip Code)   (720) 932-7800
 (Registrants telephone number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
 None
  Securities registered pursuant to Section 12(g) of the
    Act:
 Common Stock
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2 o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 



TABLE OF
    CONTENTS
  PART IItem 1 and
    Item 2.

Business and
    Properties


3Item 1A.

Risk Factors


18Item 1B.

Unresolved Staff
    Comments


28Item 3.

Legal
    Proceedings


28Item 4.

Submission of
    Matters to a Vote of Security Holders


28PART
    IIItem 5.

Market for
    Registrants Common Equity and Related Shareholder
    Matters


29Item 6.

Selected Financial
    Data


30Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


31Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


43Item 8.

Financial
    Statements


44Item 9.

Changes In and
    Disagreements With Accountants on Accounting and Financial
    Disclosure


44Item 9A.

Controls and
    Procedures


44Item 9B.

Other
    Information


45PART IIIItem 10.

Directors and
    Executive Officers of the Registrant


45Item 11.

Executive
    Compensation


45Item 12.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


45Item 13.

Certain
    Relationships and Related Transactions


45Item 14.

Principal
    Accountant Fees and Services


45PART IVItem 15.

Exhibits and
    Financial Statement Schedules


45SubsidiariesConsent of Ehrhardt, Keefe, Steiner & Hottman, P.C.Consent of Netherland Sewell and Associates, Inc.Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906Calculation of the Maximum Notes Balance   1




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##### Table of Contents



FORWARD-LOOKING
    STATEMENTS
  Form 10-K,
  
    Infinitys business strategy and anticipated trends in
    Infinitys business and its future results of operations;
    the ability of Infinity to make and integrate acquisitions and
    the completion of the Nicaragua acquisition;
    commencement and progress of exploration, drilling and
    completion activities;
    availability of drilling rigs and other support equipment;
    the connection of Infinitys wells to third party pipeline
    systems;
    the costs and results of dewatering operations, including
    drilling water disposal wells;
    the closure of wells and the costs associated therewith;
    demand for oilfield services;
    the availability of financing on acceptable terms;
    the impact of governmental regulation; and
    the timing of engineering and environmental impact studies and
    permitting,    
    fluctuations in oil and natural gas prices and production,
    incorrect estimations of required capital expenditures,
    uncertainties inherent in estimating quantities of oil and gas
    reserves and projecting future rates of production and timing of
    development activities,
    an increase in the cost of oil and gas drilling, completion and
    production and in materials, fuel and labor costs,
    the availability, conditions and timing of required government
    approvals and third party financing,
    a decline in demand for Infinitys oil and gas production
    or oilfield services, and
    changes in general economic conditions. 2




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##### Table of Contents



PART I  ITEM 1.
    AND
    ITEM 2.  BUSINESS AND PROPERTIES  GENERAL
  Infinity, we our
    PV-10 PV-10
      (720) 932-7800. Form 10-K.
  Infinity-Texas
     3




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##### Table of Contents



Infinity-Wyoming
            Nicaragua
    Consolidated
   4




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##### Table of Contents



BUSINESS
    STRATEGY
    
    Exploration and Production.  We will seek to:
    (i) consummate acquisitions of early-stage oil and gas
    properties, acreage leaseholds and prospects; (ii) explore
    such properties or prospects to discover underlying,
    commercially-viable hydrocarbon resource bases;
    (iii) develop such hydrocarbon resource bases into proved
    and producing reserves; (iv) operate and produce
    hydrocarbons from such reserve bases; and (v) sell or
    otherwise monetize such reserve bases at attractive valuations.
    We will usually seek to operate our exploration and production
    projects with a maximum working interest and net revenue
    interest, with exceptions or adjustments being made in
    situations in which the risk or capital requirements to explore,
    develop and produce from a given project are deemed high enough
    to warrant a partner, which may bring to the given project
    greater financial and technical resources than we have or are
    willing to commit.
    Oilfield Services.  We will seek to grow
    Consolidated through: (i) the expansion of its
    pressure-pumping fleet through construction or fabrication,
    (ii) selected acquisitions in our existing operating areas
    and (iii) selected acquisitions in new geographical
    operating areas. We will seek to improve and increase our
    product and service offerings and increase our operating
    margins, utilizing increasing efficiencies of scale as they
    present themselves. Ultimately, as the proved and producing
    reserve base in our exploration and production operations
    reaches a point at which we believe we no longer require cash
    flow contributions from our oilfield services operations, and
    dependent upon industry conditions, we may explore potential
    opportunities to monetize our investment in Consolidated, which
    monetization may include: (i) a sale to an industry
    acquiror; (ii) a sale to a financial buyer or investor; or
    (iii) spin-off, split-off or other such corporate
    transaction with the intended consequence of Consolidated
    becoming a separate publicly traded entity.    OILFIELD
    SERVICES
  Mid-Continent
   5




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EXPLORATION
    AND PRODUCTION
    Fort Worth
    Basin
    Erath and
    Hamilton Counties, Texas
  shut-in,
  3-D
  3-D
  Comanche
    County, Texas
     6




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Greater
    Green River Basin
    Pipeline
    Field
  shut-in,
    freeze-ups,
  Labarge
    Field
  shut-in,
      Northwest
    Colorado
    Sand Wash
    Prospect
   7




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shut-in
      Piceance
    Basin Prospect
    Nicaragua
     8




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##### Table of Contents



Oil
    and Natural Gas Reserves
    (PV-10
  Developed


Undeveloped


TotalNatural gas (Mcf)


5,031,235



6,067,971



11,099,206Crude oil (barrels)


712,094



124,671



836,765Total (Mcfe)


9,303,799



6,815,997



16,119,796Future net revenue before income
    taxes (in thousands)

$
54,851


$
21,336


$
76,187Present value of future net
    revenue before income taxes (in thousands)

$
35,291


$
8,689


$
43,980      9




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##### Table of Contents



Production,
    Prices and Production Costs
    2005


2004


2003Production:Natural gas (Mcf)


875,543



953,428



1,080,456Crude oil (barrels)


68,497



33,668



57,654Total (Mcfe)


1,286,525



1,155,436



1,426,380Average daily
    production:Natural gas (Mcf)


2,399



2,612



2,960Crude oil (barrels)


188



92



158Total (Mcfe)


3,525



3,164



3,908Average sales price per
    unit:Natural gas ($per Mcf)

$
6.06


$
5.12


$
4.47Crude oil ($per barrel)

$
56.74


$
41.15


$
30.51Total ($ per Mcfe)

$
7.14


$
5.42


$
4.62Production costs per
    Mcfe

$
3.44


$
2.28


$
2.05     Development,
    Exploration and Acquisition Capital Expenditures
    2005


2004


2003Property acquisition costsProved

$
330


$
516


$
1,099Unproved


5,745



3,625



661Total property acquisition costs


6,075



4,141



1,760Development costs


17,099



6,156



3,168Exploration costs


17,583



5,294



3,492Asset retirement costs


907



93



503Total costs

$
41,664


$
15,684


$
8,923  10




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Drilling
    Activity
    2005


2004


2003Gross


Net


Gross


Net


Gross


NetExploratory WellsProductive


6



5.7



3



2.9







Nonproductive


1



1.0















Total


7



6.7



3



2.9







Development WellsService


1



1.0











1



1Productive


5



5.0



9



8.0







Nonproductive


1



1.0















Total


7



7.0



9



8.0



1



1     Acreage
    Data
    DevelopedAcreage


Undeveloped AcreageGross


Net


Gross


NetFort Worth Basin


1,916



1,724



68,418



57,578Greater Green River BasinWamsutter Arch


4,480



4,080



16,093



14,045Labarge


1,763



1,763



9,715



9,184Sand Wash Prospect


960



960



52,752



45,906Piceance Basin Prospect










9,063



9,063Total


9,119



8,527



156,041



135,776     Customers
    and Markets
  Exploration
    and Production
   11




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##### Table of Contents



DailyContract Term

Contract Volume(1)

Contract PriceApril 1,
    2005  March 31, 2006


2,000 MMBtu


$4.15/MMBtu     (1)
    
    MMBtu of gas is equivalent to one million British thermal units
    (Btu), a standard measure of the heating value of
    the gas. The gas produced from the Pipeline project contains
    about 1100 Btu per cubic foot of gas.      Oil and Gas

Percentage ofPeriod

Revenue

Total Revenue2005

$
9.2 million



30
%2004

$
6.3 million



30
%2003

$
6.6 million



36
%     Oilfield
    Services
      Percent

Percent ofCustomer

Area of Operation

Revenue

of Total

Oilfield Service2005Yates Petroleum


northeast Wyoming


$
3.0 million



10
%


14
%Newfield Exploration


northeast Oklahoma


$
2.7 million



9
%


12
%2004Qwest Cherokee LLC


eastern Kansas/northeast Oklahoma


$
2.1 million



10
%


14
%northeast Wyoming


$
1.5 million



7
%


10
%northeast Oklahoma


$
1.4 million



7
%


10
%2003Equity


northeast Oklahoma


$
1.1 million



6
%


10
%Dart


eastern Kansas


$
0.9 million



5
%


8
%    12




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Competition
    Exploration
    and Production
    
    Acquisition of desirable producing properties or new leases for
    future exploration;
    Marketing our oil and natural gas production; and
    Seeking to acquire the services, equipment, labor and materials
    necessary to explore, operate and develop those properties.    Oilfield
    Services
    Delivery
    Commitments
   13




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Government
    Regulation of the Oil and Gas Industry
  General
  and/or
      Federal
    Regulation of the Sale of Oil and Gas
   14




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636-A, 636-D
  Regulation
    of Operations
          Environmental
    and Land Use Regulation
    
    unit production expenses primarily related to the control
    and limitation of air emissions, spill prevention and the
    disposal of produced water; 15




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
    capital costs to drill development wells resulting from expenses
    primarily related to the management and disposal of drilling
    fluids and other oil and natural gas exploration wastes;
    capital costs to construct, maintain and upgrade equipment and
    facilities;
    operational costs associated with ongoing compliance and
    monitoring activities; and
    exit costs for operations that we are responsible for closing,
    including costs for dismantling and abandoning wells and
    remediating environmental impacts.  and/or and/or clean-up
    Discharges to Waters.
      Oil Spill Regulations.
  Air Emissions.
   16




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clean-up
  Superfund.
  Abandonment and Remediation
    Requirements.
  Potentially
    Material Costs Associated with Environmental Regulation of Our
    Oil and Natural Gas Operations
  (ii) clean-up
     17




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Title
    to Properties
  rights-of-way
  Operating
    Hazards and Insurance
    Employees
    ITEM 1A.
    RISK
    FACTORS  We have a
    history of operating losses and we may be unable to achieve
    long-term profitability.
   18




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
    prices for oil and gas we produce may be lower than expected;
    the capital, equipment, personnel or services required to
    develop the leases for production may not be available;
    we may not find oil and gas reserves in the quantities
    anticipated;
    the reserves we find may not produce oil and gas at the rate
    anticipated;
    the costs of producing oil and gas may be higher than
    expected; and
    we may encounter one or more of many operating risks associated
    with drilling for and producing oil and gas.  Oil and
    gas prices are volatile, and declines in prices would hurt our
    ability to achieve profitable operations.
        
    worldwide and domestic supplies of oil and gas;
    political instability or armed conflict in oil or gas producing
    regions;
    the ability of the members of the Organization of Petroleum
    Exporting Countries to agree to and maintain oil prices;
    production controls;
    the price and level of foreign imports;
    worldwide economic conditions;
    marketability of production;
    the level of consumer demand;
    the price, availability and acceptance of alternative fuels;
    the price, availability and capacity of commodity processing and
    gathering facilities, and pipeline transportation; 19




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##### Table of Contents




    weather conditions; and
    actions of federal, state, local and foreign authorities.    
    impairing our financial condition, cash flows and liquidity;
    limiting our ability to finance planned capital expenditures;
    reducing our revenue, operating income and profitability;
    reducing the carrying value of our oil and natural gas
    properties; and
    reducing demand for our oilfield service business.      Prices
    may be affected by regional factors.
    Forward
    sales transactions may limit our potential gains or expose us to
    loss.
    
    our production is less than expected;
    the counterparties to our contracts fail to perform under the
    contracts; or
    our production costs on the contracted production significantly
    increase. 20




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Exploration
    and development of our oil and gas projects will require large
    amounts of capital which we may not be able to obtain.
  PV-10
    
    our oil and gas projects in the Fort Worth Basin of Texas,
    Greater Green River Basin of Wyoming, and Sand Wash and Piceance
    Basins of Colorado achieving a level of production that provides
    sufficient cash flow to support additional borrowings and to
    attract other forms of debt and equity capital;
    our success in locating and producing new reserves;
    prices of crude oil and natural gas;
    the level of production from existing wells; and
    amounts of necessary working capital and expenses.    
    all or a substantial portion of our operating cash flow being
    dedicated to the payment of principal and interest;
    an increase in interest expense as the amount of debt
    outstanding increases or as variable interest rates increase;
    increased vulnerability to competitive pressures and economic
    downturns; and
    restrictions on our operations that may be contained in any
    contract entered into with lenders.      The
    covenants and debt service obligations of our Senior Secured
    Note Facility may adversely affect our cash flow and our
    ability to raise additional capital.
    
    it may be more difficult for us to satisfy our debt repayment
    obligations;
    covenant violations, if any, could result in accelerated payment
    terms on existing debt; 21




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
    the amount of our interest expense may increase because our
    borrowings are at a variable rate of interest, which, if
    interest rates increase, would result in higher interest expense;
    we will need to use a portion of our revenue to pay principal
    and interest on our debt which will reduce the amount of money
    we have to finance our operations and other business
    activities; and
    substantially all of our properties are pledged as collateral to
    lenders and failure to pay could result in foreclosure and loss
    of assets.      
    any additional financing we obtain may be on unfavorable terms;
    we may have a higher level of debt than many of our competitors,
    which may place us at a competitive disadvantage;
    we may issue equity securities at an undesired or unanticipated
    point in time to repay indebtedness, causing additional dilution
    to our stockholders;
    we may be more vulnerable to economic downturns and adverse
    developments in our industry; and
    our debt level could limit our flexibility in planning for, or
    reacting to, changes in our business and the industries in which
    we operate.  Information
    concerning our reserves, future net cash flow estimates, and
    potential future ceiling write-downs is uncertain.
      
    the quality and quantity of available data;
    the interpretation of that data;
    the accuracy of various mandated economic assumptions; and
    the judgment of the persons preparing the estimate.   22




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##### Table of Contents




    the amount and timing of actual production;
    the price for which that oil and gas production can be sold;
    supply and demand for oil and natural gas;
    curtailments or increases in consumption by natural gas and oil
    purchasers; and
    changes in government regulations or taxation.      The oil
    and gas exploration business involves a high degree of business
    and financial risk.
        
    defects in title;
    the absence of producible quantities of oil and gas;
    insufficient formation attributes, such as porosity, to allow
    production; 23




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##### Table of Contents




    water production requiring disposal; and
    improperly pressured reservoirs from which to produce the
    reserves.    
    availability and cost of equipment and transportation for the
    production;
    demand for the oil and gas produced; and
    price for the oil and gas produced.  Our
    business is subject to operating hazards that could result in
    substantial losses against which we may not be
    insured.
    
    well blowouts;
    craterings;
    explosions;
    uncontrollable flows of oil, natural gas or well fluids;
    fires;
    formations with abnormal pressures;
    pipeline ruptures or spills; and
    releases of toxic gas and other environmental hazards and
    pollution.      We depend
    on successful exploration, development and acquisitions to
    maintain reserves and revenue in the future.
   24




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Exploratory
    drilling is an uncertain process with many risks.
    
    unexpected drilling conditions;
    pressure or irregularities in formations;
    equipment failures or accidents;
    adverse weather conditions;
    defects in title;
    compliance with governmental requirements, rules and
    regulations; and
    shortages or delays in the availability of drilling rigs, the
    delivery of equipment and adequate trained personnel.    Our
    business will depend on transportation facilities owned by
    others.
    The oil
    and gas industry is heavily regulated and we must comply with
    complex governmental regulations.
     25




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##### Table of Contents




    land use restrictions;
    drilling bonds and other financial responsibility requirements;
    spacing of wells;
    emissions into the air;
    unitization and pooling of properties;
    habitat and endangered species protection, reclamation and
    remediation;
    the containment and disposal of hazardous substances, oil field
    waste and other waste materials;
    the use of underground storage tanks;
    the use of underground injection wells, which affects the
    disposal of water from our wells;
    safety precautions;
    the prevention of oil spills;
    the closure of production facilities;
    operational reporting; and
    taxation.    
    personal injuries;
    property and natural resource damages;
    releases or discharges of hazardous materials;
    well reclamation costs;
    oil spill
    clean-up
    costs;
    other remediation and
    clean-up
    costs;
    plugging and abandonment costs, which may be particularly high
    in the case of offshore facilities;
    governmental sanctions, such as fines and penalties; and
    other environmental damages.      
    the containment and disposal of hazardous substances, oilfield
    waste and other waste materials; 26




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
    the use of underground storage tanks; and
    the use of underground injection wells.    
    administrative, civil and criminal penalties;
    revocation of permits; and
    corrective action orders.      The oil
    and gas industry is highly competitive.
    
    acquisition of desirable producing properties or new leases for
    future exploration;
    marketing our oil and natural gas production;
    arranging for growth capital on attractive terms; and
    seeking to acquire or secure the equipment, service, labor,
    other personnel and materials necessary to operate and develop
    those properties.    We may
    have difficulty managing growth in our business.
   27




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We depend
    on key personnel.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS      For

Against

Abstain6,903,033


252,543



46,477  28




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PART II  ITEM 5.
    MARKET
    FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS  Principal
    Market and Price Range of Common Stock
    Quarter Ended

High


LowMarch 31, 2004

$
5.15


$
2.75June 30, 2004


5.00



3.00September 30, 2004


5.85



3.87December 31, 2004


8.49



4.75March 31, 2005

$
13.79


$
7.68June 30, 2005


10.52



7.52September 30, 2005


8.97



7.21December 31, 2005


8.39



6.23   Approximate
    Number of Holders of Common Stock
    Dividends
   29




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA  two-for-one
  For the Period Ended
    December 31,2005


2004


2003


2002


2001(In thousands, except per share
    amounts)Statement of Operations
    DataRevenue:Oilfield service operations

$
21,583


$
14,721


$
11,634


$
8,570


$
9,854Exploration and production


9,192



6,267



6,589



2,368



1,759Total revenue


30,775



20,988



18,223



10,938



11,613Expenses:Oilfield service operations


10,769



7,890



6,222



4,621



5,154Oil and gas production expense


3,548



1,914



2,162



1,583



1,074Production taxes


877



722



759



238



66General and administrative expenses


5,836



5,462



5,311



4,647



2,789Depreciation, depletion and
    amortization


7,451



5,198



3,074



1,783



1,063Ceiling write-down of oil and gas
    properties


13,450



4,100



2,975







Total expenses


41,931



25,286



20,503



12,872



10,146Other income (expense)Financing costs


(4,828
)


(3,329
)


(7,795
)


(837
)


(1,866
)Change in derivative fair value


2,908















Gain (loss) on sale of assets


(96
)


2,824



20



(34
)


5,128Other, net


(405
)


170



130



104



(599
)Income (loss) before income taxes


(13,577
)


(4,633
)


(9,925
)


(2,701
)


4,130Income tax (expense) benefit














1,144



(1,590
)Net income (loss)

$
(13,577
)

$
(4,633
)

$
(9,925
)

$
(1,557
)

$
2,540Basic income (loss) per common share

$
(1.05
)

$
(0.49
)

$
(1.23
)

$
(0.22
)

$
0.39Diluted income (loss) per common
    share


(1.05
)


(0.49
)


(1.23
)


(0.22
)


0.37Statement of Cash Flows
    DataNet cash provided by (used in):Operating activities

$
9,650


$
5,463


$
2,845


$
136


$
1,361Investing activities


(42,454
)


(9,942
)


(6,902
)


(16,218
)


(3,232
)Financing activities


37,694



6,804



3,917



16,283



2,381Balance Sheet DataCash and cash equivalents

$
7,942


$
3,052


$
727


$
867


$
666Accounts receivable, net of
    allowance


4,748



3,494



1,767



1,514



1,600Net property and equipment


11,489



8,764



10,044



10,315



10,343Net oil and gas properties


66,548



44,387



36,162



32,284



17,191Net intangible assets


2,514



1,497



3,953



5,300



1,527Total assets


94,284



64,048



55,266



53,130



33,097Note payable and current portion of
    long-term debt


288



284



1,763



2,227



3,342Accounts payable


5,035



4,001



2,645



2,876



2,591Accrued liabilities


6,314



4,497



967



890



391Long-term debt, net of current
    portion


39,874



25,340



26,230



24,247



10,421Derivative liabilities


9,837















Stockholders equity


30,217



28,822



22,911



22,810



15,207  30




---



##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS    Form 10-K.
    Overview
    of Oil and Gas Exploration and Production Activity
       31




---



##### Table of Contents



2005


2004


2003Production:Natural gas (MMcf)


875.5



953.4



1,080.5Oil (thousands of barrels)


68.5



33.7



57.7Total (MMcfe)


1,286.5



1,155.4



1,426.4Financial Data (in
    thousands):Total revenue

$
9,192.0


$
6,267.5


$
6,589.3Production expenses


3,547.8



1,913.7



2,161.7Production taxes


877.1



722.2



758.8Financial Data per
    Mcfe:Total revenue

$
7.14


$
5.42


$
4.62Production expenses


2.76



1.66



1.52Production taxes


0.68



0.63



0.53     Overview
    of Oilfield Service Operations
    
    revenue of $21.6 million;
    subsidiary level gross profit of approximately
    $10.8 million;
    provided services to more than 500 customers; and
    subsidiary level income before taxes of approximately
    $6.3 million   32




---



##### Table of Contents



2005


2004


2003Job Type

Jobs

Revenue


Jobs

Revenue


Jobs

Revenue(Dollars in thousands)Cementing

3,445

$
10,890


3,059

$
8,213


1,955

$
4,801Acidizing

1,899


1,960


1,260


1,403


1,201


1,431Fracturing

1,303


9,556


790


5,992


1,015


6,108Discounts




(823
)




(887
)




(706
)$
21,583




$
14,721




$
11,634   2006
    Operational and Financial Objectives
  Exploration
    and Production
        
    The availability of the capital resources required to fund the
    activity;
    The availability of third party contractors for drilling rigs
    and completion services (although the Company has one rig under
    contract and operating in Texas during the first quarter of
    2006); and
    The approval by regulatory agencies of applications for permits
    to drill in a timely manner.  Oilfield
    Services
    
    expand the services that are provided;
    expand the area that is serviced; and
    gain market share by providing complementary services to
    Consolidateds existing services.   33




---



##### Table of Contents



Corporate
    Activities
  2-D
  Results
    of operations for the year ended December 31, 2005 compared
    to the year ended December 31, 2004
  Net
    Loss
    Revenue
    Cost of
    Revenue
    Gross
    Profit
    General
    and Administrative Expenses
   34




---



##### Table of Contents



Depreciation,
    Depletion, Amortization and Accretion
    Ceiling
    Write Down
    Other
    Income (Expense)
    Income
    Tax
    Results
    of operations for the year ended December 31, 2004 compared
    to the year ended December 31, 2003
  Net
    Loss
    Revenue
   35




---



##### Table of Contents



Cost of
    Revenue
    Gross
    Profit
    General
    and Administrative Expenses
    Depreciation,
    Depletion, Amortization and Accretion
    Ceiling
    Write Down
    Other
    Income (Expense)
   36




---



##### Table of Contents



Income
    Tax
    Liquidity
    and Capital Resources
            3-month
   37




---



##### Table of Contents



PV-10%
      Outlook
    for 2006
    PV-10%
       38




---



##### Table of Contents



Critical
    Estimates
    Reserve
    Estimates
  units-of-production
  Unproved
    Properties
    Fair
    Value of Derivatives
     39




---



##### Table of Contents











Asset
    Retirement Obligations








Valuation
    of Tax Asset








Critical
    Policies








Oil and
    Gas Properties, Depreciation and Full Cost Ceiling
    Test






40



---



##### Table of Contents











Regulation S-X Rule 4-10.
















Contractual
    Obligations








|                                              |  |                        |        |  |      |   |     |               |  |   |               |  |  |            |        |  |  |   |       | 
|--------------------------------------------- |  | ---------------------- | ------ |  | ---- | - | --- | ------------- |  | - | ------------- |  |  | ---------- | ------ |  |  | - | ----- | 
|                                              |  | Payments Due by Period |       
|                                              |  | Total                  |        |  | 2006 |   |     | 2007 and 2008 |  |   | 2009 and 2010 |  |  | Thereafter |       
|                                              |  | (In thousands)         |       
|                                             
|Senior Secured Notes(a)                       |  | $                      | 45,000 |  |      | $ |    |               |  | $ |              |  |  | $          | 45,000 |  |  | $ |      | 
|Note payable to seller(b)                     |  |                        | 2,203  |  |      |   | 118 |               |  |   | 203           |  |  |            | 183    |  |  |   | 1,699 | 
|Asset retirement obligations(c)               |  |                        | 1,413  |  |      |   | 284 |               |  |   | 697           |  |  |            | 60     |  |  |   | 372   | 
|Capital lease                                 |  |                        | 181    |  |      |   | 93  |               |  |   | 88            |  |  |            |       |  |  |   |      | 
|Operating leases                              |  |                        | 166    |  |      |   | 97  |               |  |   | 69            |  |  |            |       |  |  |   |      | 
|Gas gathering commitments(d)                  |  |                        | 4,954  |  |      |   | 400 |               |  |   | 1,680         |  |  |            | 1,916  |  |  |   | 958   | 
|Non-current production and
    property taxes |  |                        | 401    |  |      |   |    |               |  |   | 401           |  |  |            |       |  |  |   |      | 
|                                              |  |                        |        |  |      |   |     |               |  |   |               |  |  |            |        |  |  |   |       | 
|Total contractual obligations                 |  | $                      | 54,318 |  |      | $ | 992 |               |  | $ | 3,138         |  |  | $          | 47,159 |  |  | $ | 3,029 | 
|                                              |  |                        |        |  |      |   |     |               |  |   |               |  |  |            |        |  |  |   |       | 



41



---



##### Table of Contents



(a)
    
    The amounts included in the table above represent principal
    maturities only. The Senior Secured Notes accrue interest at the
    3-month
    LIBOR (London Interbank Offered Rate) plus 675 basis
    points, adjusted the first business day of each calendar quarter
    (11.23% at December 31, 2005). See Note 6 of Notes to
    Consolidated Financial Statements.(b)
    
    This note payable was given by the Company in connection with
    the acquisition of a 50% interest in an aircraft in 2003. In
    February 2006, the Company sold its 50% interest in the aircraft
    and settled the related note payable. The table above reflects
    the Companys obligation under the note payable as of
    December 31, 2005. See Note 16 of Notes to
    Consolidated Financial Statements.(c)
    
    The table above reflects the Companys best estimate of the
    settlement of its asset retirement obligations; however, neither
    the timing nor the ultimate settlement amounts of such
    obligations can be determined in advance with any precision. See
    Note 1 of Notes to Consolidated Financial Statements.(d)
    
    Gathering commitments represent minimum estimated gathering fees
    under a gas gathering contract for gas production from the
    Companys Erath County, Texas properties; however, the
    ultimate settlement amounts of these obligations can not be
    determined in advance with any precision. The table above does
    not reflect the obligations associated with a gas gathering
    contract related to the Companys Pipeline field. The
    Pipeline contract is subject to certain delivery commitments
    that Infinity-Wyoming has not met. However, the gas gatherer has
    also not been able to supply the additional system capacity to
    allow Infinity-Wyoming to meet its delivery obligations and,
    Infinity-Wyoming expects that the contract will be amended to
    reflect volume requirements that are consistent with deliveries,
    although the contract term will likely be lengthened. See
    Note 10 of Notes to Consolidated Financial Statements.  Recently
    Issued Accounting Pronouncements
  Share-Based
    Payment Accounting for Stock-Based Compensation. Accounting for Stock
    Issued to Employees Statement of Cash Flows.
    
    A modified prospective method in which compensation
    cost is recognized beginning with the effective date based on
    the requirements of SFAS No. 123(R) for all
    share-based payments granted after the adoption date and based
    on the requirements of SFAS No. 123 for all awards
    granted to employees prior to the effective date of
    SFAS No. 123(R) that remain unvested on the adoption
    date.
    A modified retrospective method which includes the
    requirements of the modified prospective method described above,
    but also permits entities to restate either all prior periods
    presented or prior interim periods of the year of adoption based
    on the amounts previously recognized under
    SFAS No. 123 for purposes of pro forma disclosures.   42




---



##### Table of Contents



Accounting for Conditional Asset
    Retirement Obligations  an interpretation of
    FASB Statement No. 143.
  Accounting for Certain Hybrid Financial
    Instruments  an amendment of FASB Statements
    No. 133 and 140. Application of Statement 133 to Beneficial Interests in
    Securitized Financial Assets.
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK      Delivery Dates

MMBtu per Day

Fixed PriceApril 1,
    2005 - March 31, 2006


2,000


$
4.15       Terms of Arrangements

Bbls per Day

Floor Price

Ceiling PriceJanuary 1,
    2006 - June 30, 2006


50


$
50.00


$
64.40October 1,
    2005 - December 31, 2006


50


$
52.50


$
74.00     Terms of Arrangement

Bbls per Day

Floor Price

Ceiling PriceJanuary 1,
    2007 - June 30, 2007


50


$
57.50


$
77.50     Form 10-Q Form 10-K 12-month and/or
 43




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS.  Form 8-K Form 10-K page F-1.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
  Form 10-K. Form 10-K,
  Managements
    Report on Internal Control over Financial Reporting
    
    pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of its assets;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of its financial statements in
    accordance with generally accepted accounting principles, and
    that its receipts and expenditures are being made only in
    accordance with authorizations of its management and
    directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    Companys assets that could have a material effect on its
    financial statements.     44




---



##### Table of Contents



Report of
    Registered Public Accounting Firm
  Form 10-K
  Changes
    in Internal Control over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10:
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT    ITEM 11:
    EXECUTIVE
    COMPENSATION  Form 10-K.
  ITEM 12:
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Form 10-K.
  ITEM 13:
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS  Form 10-K.
  ITEM 14:
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES  Form 10-K.
 PART IV  ITEM 15:
    EXHIBITS
    AND FINANCIAL STATEMENT SCHEDULES  Form 10-K
  Page F-1
 45




---



##### Table of Contents



Form 10-K
  EXHIBITS
  ExhibitNumber

Description of
    Exhibits3
.1

Articles of Incorporation(1)3
.2

Bylaws(1)4
.1

Form of Placement Agent Warrant in
    connection with 8% Convertible Subordinated Notes(2)4
.2

Form of Placement Agent Warrants
    in connection with 7% Convertible Subordinated Notes(3)4
.3

Form of Warrant Agreement for 12%
    Bridge Note Financing(2)4
.4

Form of Registration Rights
    Agreement in connection with January 2004 private placement(4)4
.5

Form of Registration Rights
    Agreement for November 2004 private placement(5)4
.6

Securities Purchase Agreement for
    Senior Secured Notes dated January 13, 2005(6)4
.7

Form of Initial Note for Senior
    Secured Notes(6)4
.8

Form of Additional Note for Senior
    Secured Notes(6)4
.9

Registration Rights Agreement
    dated January 13, 2005(6)4
.10

Form of Warrant in connection with
    Senior Secured Notes(6)4
.11

Form of Security Agreement for
    Senior Secured Notes(6)4
.12

Form of Guaranty for Senior
    Secured Notes(6)4
.13

Form of Mortgage for Senior
    Secured Notes(6)10
.1

Stock Option Plan(2); 1999 Stock
    Option Plan(7); 2000 Stock Option Plan(8); 2001 Stock Option
    Plan(8); 2002 Stock Option Plan(9); 2003 Stock Option Plan(10);
    2004 Stock Option Plan(11); 2005 Equity Incentive Plan(12)10
.2

Promissory Note to Stanton E.
    Ross, dated June 11, 2004(13)10
.3

First Additional Closing Agreement
    dated September 7, 2005(14)21


Subsidiaries of the Registrant23
.1

Consent of Ehrhardt, Keefe,
    Steiner & Hottman, P.C.23
.2

Consent of Netherland Sewell and
    Associates, Inc.31
.1

Certification of Chief Executive
    Officer of Periodic Report pursuant to Rule 13a14(a) and
    Rule 15d-14(a)
    (Section 302 of the Sarbanes-Oxley act of 2002)31
.2

Certification of Chief Financial
    Officer of Periodic Report pursuant to Rule 13a14(a) and
    Rule 15d-14(a)
    (Section 302 of the Sarbanes-Oxley act of 2002)32
.1

Certification of Chief Executive
    Officer pursuant to 18 U.S.C. Section 1350
    (Section 906 of the Sarbanes-Oxley Act of 2002)32
.2

Certification of Chief Financial
    Officer pursuant to 18 U.S.C. Section 1350
    (Section 906 of the Sarbanes-Oxley Act of 2002)     (1)
    
    Incorporated by reference to our Registration Statement on
    Form 8-A
    filed on September 13, 2005.(2)
    
    Incorporated by reference to our Registration Statement
    (No. 33-17416-D).(3)
    
    Incorporated by reference to our Registration Statement on
    Form S-3
    filed on June 29, 2002 (File
    No. 333-96671).(4)
    
    Incorporated by reference to our Current Report on
    Form 8-K,
    filed on January 21, 2004.(5)
    
    Incorporated by reference to our Current Report on
    Form 8-K,
    filed on November 16, 2004.(6)
    
    Incorporated by reference to our Current Report on
    Form 8-K,
    filed on January 14, 2005.(7)
    
    Incorporated by reference to our Annual Report on
    Form 10-KSB
    for the fiscal year ended March 31, 2000. 46




---



##### Table of Contents



(8)
    
    Incorporated by reference to our Annual Report on
    Form 10-KSB
    for the fiscal year ended March 31, 2001.(9)
    
    Incorporated by reference to our Annual Report on
    Form 10-KSB
    for the transition period ended December 31, 2001.(10)
    
    Incorporated by reference to our Annual Report on
    Form 10-KSB
    for the fiscal year ended December 31, 2002.(11)
    
    Incorporated by reference to our Registration Statement on
    Form S-8
    filed on July 15, 2004 (File
    No. 333-117390).(12)
    
    Incorporated by reference to our Registration Statement on
    form S-8
    filed on August 29, 2005 (File
    No. 333-12794).(13)
    
    Incorporated by reference to our Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2004.(14)
    
    Incorporated by reference to our Current Report on
    Form 8-K,
    filed on September 8, 2005. 47




---



##### Table of Contents



SIGNATURES
      By:
    /s/  JAMES
    A. TUELL     President and Chief Executive Officer
     Signature

Capacity

Date/s/  JAMES
    A. TUELLJames
    A. Tuell

President and Chief Executive
    Officer (Principal Executive Officer) and Director

March 8, 2006/s/  TIMOTHY
    A. FICKERTimothy
    A. Ficker

Vice President, Chief Financial
    Officer (Principal Financial and Accounting Officer)

March 8, 2006/s/  STANTON
    E. ROSSStanton
    E. Ross

Director

March 8, 2006/s/  ELLIOT
    M. KAPLANElliot
    M. Kaplan

Director

March 8, 2006/s/  ROBERT
    O. LORENZRobert
    O. Lorenz

Director

March 8, 2006/s/  LEROY
    C. RICHIELeroy
    C. Richie

Director

March 8, 2006  48




---



##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  Report of
    Independent Registered Public Accounting Firm


F-2Consolidated Financial Statements:Consolidated
    Balance Sheets


F-3Consolidated
    Statements of Operations


F-4Consolidated
    Statements of Changes in Stockholders Equity


F-5Consolidated
    Statements of Cash Flows


F-6Notes to
    Consolidated Financial Statements


F-8  F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and
    Stockholders of

Infinity Energy Resources, Inc.

Denver, Colorado



We have audited the accompanying consolidated balance sheets of
    Infinity Energy Resources, Inc. as of December 31, 2005 and
    2004, and the related consolidated statements of operations,
    stockholders equity and comprehensive income, and cash
    flows for each of the three years in the period ended
    December 31, 2005. We also have audited managements
    assessment, included in the accompanying Managements
    Report on Internal Control over Financial Reporting included in
    Item 9A, that Infinity Energy Resources, Inc. maintained
    effective internal control over financial reporting as of
    December 31, 2005, based on criteria established in
    Internal Control-Integrated Frameworkissued by the
    Committee of Sponsoring Organizations of the Treadway Commission
    (the COSO Criteria). The Companys management
    is responsible for these financial statements, for maintaining
    effective internal control over financial reporting, and for its
    assessment of the effectiveness of internal control over
    financial reporting. Our responsibility is to express an opinion
    on these financial statements, an opinion on managements
    assessment, and an opinion on the effectiveness of the
    Companys internal control over financial reporting based
    on our audits.



We conducted our audits 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 and whether effective internal
    control over financial reporting was maintained in all material
    respects. Our audit of the financial statements included
    examining, on a test basis, evidence supporting the amounts and
    disclosures in the financial statements, assessing the
    accounting principles used and significant estimates made by
    management, and evaluating the overall financial statement
    presentation. Our audit of internal control over financial
    reporting included obtaining an understanding of internal
    control over financial reporting, evaluating managements
    assessment, testing and evaluating the design and operating
    effectiveness of internal control, and performing such other
    procedures as we considered necessary in the circumstances. We
    believe that our audits provide a reasonable basis for our
    opinions.



A companys internal control over financial reporting is a
    process designed to provide reasonable assurance regarding the
    reliability of financial reporting and the preparation of
    financial statements for external purposes in accordance with
    accounting principles generally accepted in the United States. A
    companys internal control over financial reporting
    includes those policies and procedures that (1) pertain to
    the maintenance of records that, in reasonable detail,
    accurately and fairly reflect the transactions and dispositions
    of the assets of the company; (2) provide reasonable
    assurance that transactions are recorded as necessary to permit
    preparation of financial statements in accordance with generally
    accepted accounting principles, and that receipts and
    expenditures of the company are being made only in accordance
    with authorizations of management and directors of the company;
    and (3) provide reasonable assurance regarding prevention
    or timely detection of unauthorized acquisition, use, or
    disposition of the companys assets that could have a
    material effect on the financial statements.



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



In our opinion, the consolidated financial statements referred
    to above present fairly, in all material respects, the financial
    position of Infinity Energy Resources, Inc. as of
    December 31, 2005 and 2004, and the results of its
    operations and its cash flows for each of the three years in the
    period ended December 31, 2005 in conformity with
    accounting principles generally accepted in the United States of
    America. Also in our opinion, managements assessment that
    Infinity Energy Resources, Inc. maintained effective internal
    control over financial reporting as of December 31, 2005,
    is fairly stated, in all material respects, based on criteria
    established in Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the
    Treadway Commission (the COSO Criteria).
    Furthermore, in our opinion, Infinity Energy Resources, Inc.
    maintained, in all material respects, effective internal control
    over financial reporting as of December 31, 2005, based on
    criteria established in Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the
    Treadway Commission (the COSO Criteria).



As discussed in Note 1 to the consolidated financial
    statements, effective January 1, 2003, the Company changed
    its method of accounting for asset retirement obligations.



/s/ Ehrhardt Keefe Steiner &
    Hottman PC



March 3, 2006

Denver, Colorado

F-2




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  December 31,2005


2004(In thousands, except share and
    per share data)ASSETSCurrent assets:Cash and cash equivalents

$
7,942


$
3,052Accounts receivable, less
    allowance for doubtful accounts of $70 (2005) and $85 (2004)


4,748



3,494Note receivable






1,581Inventories


453



286Prepaid expenses and other


422



654Total current assets


13,565



9,067Property and equipment, at cost,
    net of accumulated depreciation


11,489



8,764Oil and gas properties, using full
    cost accounting, net of accumulated depreciation, depletion,
    amortization and ceiling write-down:Proved


43,699



28,792Unproved


22,849



15,595Intangible assets, at cost, less
    accumulated amortization


2,514



1,497Other assets, net


168



333Total assets

$
94,284


$
64,048LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Note payable and current portion
    of long-term debt

$
288


$
284Accounts payable


5,035



4,001Accrued liabilities


6,314



4,497Current portion of asset
    retirement obligations


284



Total current liabilities


11,921



8,782Long-term liabilities:Production taxes payable


401



469Asset retirement obligations, less
    current portion


1,129



635Accrued interest


905



Derivative liabilities


9,837



Long-term debt, less current
    portion


39,874



11,330Subordinated convertible notes
    payable






14,010Total liabilities


64,067



35,226Commitments and contingencies
    (Note 10)Stockholders equity:Preferred stock, par value $.0001,
    authorized 10,000,000 shares, issued and outstanding -0-
    (2005) and -0- (2004) shares






Common stock, par value $.0001,
    authorized 75,000,000 shares, issued and outstanding
    13,501,988 (2005) and 10,628,196 (2004) shares


1



1Additional
    paid-in-capital


58,335



43,363Accumulated deficit


(28,119
)


(14,542
)Total stockholders equity


30,217



28,822Total liabilities and
    stockholders equity

$
94,284


$
64,048    F-3




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
  For the Years Ended
    December 31,2005


2004


2003(In thousands, except per share
    data)Revenue:Oilfield service operations

$
21,583


$
14,721


$
11,634Exploration and production


9,192



6,267



6,589Total revenue


30,775



20,988



18,223Cost of revenue:Oilfield service operations


10,769



7,890



6,222Oil and gas production expenses


3,548



1,914



2,162Oil and gas production taxes


877



722



759Total cost of revenue


15,194



10,526



9,143Gross profit


15,581



10,462



9,080General and administrative expenses


5,836



5,462



5,311Depreciation, depletion,
    amortization and accretion


7,451



5,198



3,074Ceiling write-down of oil and gas
    properties


13,450



4,100



2,97526,737



14,760



11,360Operating loss


(11,156
)


(4,298
)


(2,280
)Other income (expense):Financing costs:Interest expense


(2,486
)


(1,232
)


(1,594
)Amortization of loan discount and
    costs


(1,066
)


(1,741
)


(6,146
)Early extinguishment of debt


(1,276
)


(356
)


(55
)Change in derivative fair value


2,908







Gain (loss) on sales of other
    assets


(96
)


2,824



20Other


(405
)


170



130Total other expense


(2,421
)


(335
)


(7,645
)Net loss before income taxes


(13,577
)


(4,633
)


(9,925
)Income taxes










Net loss

$
(13,577
)

$
(4,633
)

$
(9,925
)Basic and diluted net loss per
    share

$
(1.05
)

$
(0.49
)

$
(1.23
)Weighted average shares
    outstanding (basic and diluted)


12,936



9,495



8,048    F-4




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
    For the years ended December 31, 2005, 2004 and
    2003  (Accumulated





AccumulatedAdditional


Deficit)


Total


OtherCommon Stock


Paid-In


Retained


Comprehensive


Comprehensive


StockholdersShares


Amount


Capital


Earnings


Loss


Income (Loss)


Equity(In thousands, except share
    data)Balance, December 31, 2002


7,558,462


$
1


$
22,871


$
16






$
(77
)

$
22,811Issuance of common stock upon the
    exercise of options and warrants


146,169







824















824Conversion of subordinated
    convertible notes and accrued interest into common stock


499,401







3,236















3,236Options and warrants granted in
    connection with amendments and agreements related to bridge loans










5,790















5,790Comprehensive loss:Net loss














(9,925
)

$
(9,925
)






(9,925
)Change in fair value of fixed price
    delivery contract, net of tax benefit


















257



257



257Reclassifications, net of income
    tax expense


















(82
)


(82
)


(82
)Comprehensive loss

















$
(9,750
)Balance, December 31, 2003


8,204,032



1



32,721



(9,909
)






98



22,911Issuance of common stock in private
    equity placement, net of financings costs


2,027,000







8,918















8,918Issuance of common stock to
    partially repay related party debt


125,000







500















500Issuance of common stock upon the
    exercise of options and warrants


146,300







428















428Conversion of subordinated
    convertible notes and accrued interest into common stock


125,864







796















796Comprehensive loss:Net loss














(4,633
)


(4,633
)






(4,633
)Reclassifications, net of income
    tax expense


















(98
)


(98
)


(98
)Comprehensive loss

















$
(4,731
)Balance, December 31, 2004


10,628,196



1



43,363



(14,542
)










28,822Reclassification of non-employee
    warrants to derivative liabilities










(6,090
)














(6,090
)Reclassification of non-employee
    warrants from derivative liabilities in connection with exercise










2,174















2,174Issuance of common stock upon the
    exercise of options and warrants


857,556







4,707















4,707Conversion of subordinated
    convertible notes and accrued interest into common stock


2,016,236







14,181















14,181Comprehensive loss:Net loss














(13,577
)


(13,577
)






(13,577
)Comprehensive loss

















$
(13,577
)Balance, December 31, 2005


13,501,988


$
1


$
58,335


$
(28,119
)





$



$
30,217    F-5




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  For the Years Ended
    December 31,2005


2004


2003(In thousands)Cash flows from operating
    activities:Net loss

$
(13,577
)

$
(4,633
)

$
(9,925
)Adjustments to reconcile net loss
    to net cash provided by operating activities:Depreciation, depletion,
    amortization, accretion and ceiling write-down


20,901



9,298



6,049Amortization of loan discount and
    costs


1,066



1,741



6,146Non-cash early extinguishment of
    loan cost


1,052



356



55Change in fair value of derivative
    liabilities


(2,908
)






Impairment of note receivable and
    other


530







(Gain) loss on sales of other
    assets


96



(2,824
)


(20
)Unrealized loss on commodity
    derivative instruments


28







Change in operating assets and
    liabilitiesIncrease in accounts receivable


(1,273
)


(1,687
)


(252
)(Increase) decrease in inventories


(167
)


65



(11
)(Increase) decrease in prepaid
    expenses and other


232



(89
)


(12
)Increase in accounts payable


1,034



1,526



33Increase in accrued liabilities


2,636



1,710



782Net cash provided by operating
    activities


9,650



5,463



2,845Cash flows from investing
    activities:Capital
    expenditures  exploration and production


(39,271
)


(11,714
)


(6,274
)Capital
    expenditures  oilfield services


(4,190
)


(1,149
)


(460
)Acquisitions  exploration
    and production


(330
)


(516
)


Acquisitions  oilfield
    services, net of cash acquired






(1,189
)


Proceeds from sale of fixed
    assets  exploration and production


133



156



Proceeds from sale of fixed
    assets  oilfield services


31



4,654



105Increase in other assets


(31
)


(200
)


(288
)Proceeds from note receivable


1,204



16



15Net cash used in investing
    activities


(42,454
)


(9,942
)


(6,902
)Cash flows from financing
    activities:Proceeds from notes payable


434



295



Proceeds from borrowings on
    long-term debt


45,000



5,845



11,453Proceeds from issuance of common
    stock


4,707



9,666



824Debt and equity issuance costs


(2,751
)


(320
)


Repayment of notes payable


(406
)


(664
)


Repayment of long-term debt


(9,290
)


(8,018
)


(8,360
)Net cash provided by financing
    activities


37,694



6,804



3,917Net increase (decrease) in cash
    and cash equivalents


4,890



2,325



(140
)Cash and cash equivalents,
    beginning of period


3,052



727



867Cash and cash equivalents, end of
    period

$
7,942


$
3,052


$
727    F-6




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH
    FLOWS  (Continued)
  For the Years Ended
    December 31,2005


2004


2003(In thousands)Supplemental cash flow disclosures:Cash paid for interest, net of
    amounts capitalized

$
1,175


$
436


$
1,590Non-cash transactions:Non-cash costs capitalized in the
    full cost pool for oil and gas properties


764



1,070



2,715Property and equipment acquired
    through capital lease or assumption of debt


189



195



968Oil and gas properties acquired
    through seller financed debt










263Options and warrants granted in
    connection with debt, recorded as loan costs or debt discount


8,828



120



5,791Conversion of subordinated
    convertible notes and accrued interest to common stock


14,181



796



3,236Issuance of common stock to
    partially repay related party debt






500



Issuance of additional notes in
    lieu of cash interest payment on 7% subordinated convertible
    notes






795



379    F-7




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  Note 1  Organization
    and Summary of Significant Accounting Policies
  Nature
    of Operations
    Mid-Continent
  Basis
    of Presentation
    Reclassifications
    Management
    Estimates
    Cash
    and Cash Equivalents
    Accounts
    Receivable
   F-8




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Inventories
  first-in,
  Derivative
    Instruments
  Accounting for Derivative Instruments and Hedging
    Activities.
      Property
    and Equipment
    Assets

Useful LivesBuildings


30 yearsSite improvements


15 yearsMachinery, equipment and vehicles


3-20 yearsOffice furniture and equipment


3-10 years   Long-Lived
    Assets
   F-9




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Oil
    and Gas Properties
        units-of-production
   F-10




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Asset
    Retirement Obligations
  Accounting for Asset Retirement
    Obligations.
  2005


2004


2003(In thousands)Asset retirement obligations at
    January 1

$
635


$
521


$
448Accretion expense


70



21



17Liabilities incurred


51



93



56Liabilities assumed


17







Liabilities settled


(199
)






Revision in estimates


839







Asset retirement obligations at
    December 31


1,413



635



521Less: current portion of asset
    retirement obligations


(284
)






Asset retirement obligations at
    December 31, less current portion

$
1,129


$
635


$
521   Capitalized
    Interest
    Intangible
    Assets
      Revenue
    Recognition
   F-11




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Transportation
    Costs
  Issue 00-10, Accounting for Shipping and Handling Fees and Costs
  Per
    Share Information
    Stock
    Options
  Accounting for Stock
    Issued to Employees Accounting for Stock-Based
    Compensation
  For the Years Ended
    December 312005


2004


2003(In thousands,except per share
    amounts)Net loss as reported

$
(13,577
)

$
(4,633
)

$
(9,925
)Deduct: Total stock-based employee
    compensation expense, determined under fair value based method
    for all awards, net of tax


(3,177
)


(1,703
)


(26
)Pro forma net loss

$
(16,754
)

$
(6,336
)

$
(9,951
)Basic and diluted loss per share
    as  reported

$
(1.05
)

$
(0.49
)

$
(1.23
)Basic and diluted loss per
    share  pro forma

$
(1.30
)

$
(0.67
)

$
(1.23
)     Income
    Taxes
   F-12




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Comprehensive
    Income (Loss)
    Recently
    Issued Accounting Pronouncements
  Share-Based Payment Accounting for Stock-Based
    Compensation. Accounting for Stock Issued to
    Employees Statement of
    Cash Flows.
    
    A modified prospective method in which compensation
    cost is recognized beginning with the effective date based on
    the requirements of SFAS No. 123(R) for all
    share-based payments granted after the adoption date and based
    on the requirements of SFAS No. 123 for all awards
    granted to employees prior to the effective date of
    SFAS No. 123(R) that remain unvested on the adoption
    date.
    A modified retrospective method which includes the
    requirements of the modified prospective method described above,
    but also permits entities to restate either all prior periods
    presented or prior interim periods of the year of adoption based
    on the amounts previously recognized under
    SFAS No. 123 for purposes of pro forma disclosures.  Stock Options.
  Accounting for Conditional Asset
    Retirement Obligations  an interpretation of
    FASB Statement No. 143.
  Accounting for Certain Hybrid Financial
    Instruments  an amendment of FASB Statements
    No. 133 and 140. Application of Statement 133 to Beneficial Interests in
    Securitized Financial
    Assets.
 F-13




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 2  Accounts
    Receivable
    December 31,2005


2004(In thousands)Accounts receivable oil field
    services

$
2,771


$
2,740Revenue receivable oil and gas
    production


2,004



722Other receivables


43



117Total receivables


4,818



3,579Less allowance for doubtful
    accounts


(70
)


(85
)Net receivables

$
4,748


$
3,494   Note 3  Property
    and Equipment
    December 31,2005


2004(In thousands)Buildings, site costs and
    improvements

$
1,601


$
777Machinery, equipment, vehicles and
    aircraft


16,610



13,569Office furniture and equipment


548



467Total cost


18,759



14,813Less accumulated depreciation


(7,270
)


(6,049
)Net property and equipment

$
11,489


$
8,764     Note 4  Intangible
    Assets
    December 31,2005


2004(In thousands)Loan costs

$
2,889


$
4,032Goodwill


225



225Other


20



563,134



4,313Less accumulated amortization


(620
)


(2,816
)Net intangible assets

$
2,514


$
1,497  F-14




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Note 5  Accrued
    Liabilities
    December 31,2005


2004(In thousands)Production taxes
    payable  current portion

$
516


$
236Oil and gas revenue payable to oil
    and gas property owners


680



131Accrued interest


247



223Accrued drilling costs


2,918



2,650Other accrued liabilities


1,953



1,257$
6,314


$
4,497   Note 6  Debt
    December 31,2005


2004(In thousands)Senior Secured Notes, net of
    discount of $7,417 at December 31, 2005

$
37,583


$
Promissory note to seller (for a
    50% interest in an aircraft), with interest at 7.0% due
    quarterly. Annual principal payments equal to 5% of the current
    outstanding principal due each February until paid in full. The
    note was settled in February 2006 in connection with the sale of
    the related aircraft. See Note 16


2,203



2,3268% Subordinated Convertible
    Notes






2,4937% Subordinated Convertible
    Notes






11,517$25 million Development
    Credit Facility






5,000Various revolving credit and term
    loans






3,582Other


376



70640,162



25,624Less current portion


(288
)


(284
)Long-term debt

$
39,874


$
25,340  F-15




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ending
    December 31,

(In thousands)2006

$
2882007


882008


2009


37,5832010


Thereafter


2,203$
40,162   Senior
    Secured Notes Facility
  3-month
    PV-10%
 F-16




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   EITF 00-19, Accounting for Derivative Financial Instruments Index to, and
    Potentially Settled in, a Companys Own Stock
  Promissory
    Note to Seller
    8% Convertible
    Subordinated Notes
      7% Convertible
    Subordinated Notes
     F-17




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   $25 Million
    Development Credit Facility
    Revolving
    Credit and Term Loans
    Debt
    Discount
    Note 7  Derivative
    Instruments
  Commodity
    Derivatives
    Term of Arrangements

Bbls per Day

Floor Price

Ceiling PriceJanuary 1,
    2006  June 30, 2006


50


$
50.00


$
64.40October 1,
    2005  December 31, 2006


50


$
52.50


$
74.00       Term of Arrangement

Bbls per Day

Floor Price

Ceiling PriceJanuary 1,
    2007  June 30, 2007


50


$
57.50


$
77.50  F-18




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Other
    Derivatives
  EITF 00-19
  EITF 00-19,
  Note 8  Stockholders
    Equity
  Private
    Institutional Equity Placements
    Non-Employee
    Warrants and Options
     F-19




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Weighted AverageWeighted Average


Grant Date FairNumber of Shares


Price Per Share


Value Per ShareOutstanding, January 1, 2003


1,030,000


$
7.66


$Granted


1,163,500



8.75



4.98Exercised


(83,350
)


7.34Outstanding, December 31, 2003


2,110,150



8.27Granted


47,746



8.24



4.80Outstanding, December 31, 2004


2,157,896



8.17Granted


2,507,363



9.87



3.38Exercised


(546,850
)


6.97Outstanding, December 31, 2005


4,118,409



9.36     NumberOutstanding andExercisable at


Weighted AverageDecember 31,


Remaining

Weighted AverageRange of Exercise
    Prices

2005


Contractual Life

Exercise Price$7.34 - 8.03


558,428


3.1 years

$
7.85$8.75 - 9.77


2,603,733


3.2 years

$
9.02$11.06 - 11.44


956,248


4.2 years

$
11.154,118,409   Options
    Under Employee Option Plans
     F-20




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Weighted AverageWeighted Average


Grant Date FairNumber of Shares


Price Per Share


Value Per ShareOutstanding, January 1, 2003


1,140,900


$
5.23


$Granted


10,000



8.75



5.25Canceled or forfeited


(61,781
)


7.28Exercised


(62,819
)


3.38Outstanding, December 31, 2003


1,026,300



5.25Granted


403,750



4.26



4.22Canceled or forfeited


(118,500
)


7.22Exercised


(146,300
)


2.92Outstanding, December 31, 2004


1,165,250



5.00Granted


530,000



7.83



6.00Exercised


(312,000
)


3.07Outstanding, December 31, 2005


1,383,250



6.52     Number








NumberOutstanding at


Weighted Average





Exercisable atRange of

December 31,


Remaining


Weighted Average


December 31,


Weighted AverageExercise Prices

2005


Contractual Life


Exercise Price


2005


Exercise Price$4.26 - 5.00


620,250



2.2 years


$
4.58



620,250


$
4.58$7.51 - 7.80


365,000



9.6 years


$
7.53



365,000


$
7.53$8.50 - 8.70


398,000



5.2 years


$
8.62



398,000


$
8.621,383,250











1,383,250   Note 9  Income
    Taxes
    For the Years Ended
    December 31,2005


2004


2003(In thousands)Current income tax expense

$



$



$
Deferred income tax benefit


(5,464
)


(1,784
)


(4,003
)Change in valuation allowance and
    other


5,464



1,784



4,003Total income tax benefit

$



$



$
  F-21




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     For the Years Ended
    December 31,2005


2004


2003(In thousands)Federal income tax rate


(34.0
)%


(34.0
)%


(34.0
)%State income tax rate


(4.5
)


(6.0
)


(6.0
)Tax benefit of derivatives settled
    with equity


1.9







Other temporary and permanent
    differences


(3.6
)






Change in valuation allowance and
    other


40.2



40.0



40.0Effective tax rate



%



%



%     December 31,2005


2004(In thousands)Deferred tax assetsAccruals and other

$
214


$
132Net operating loss carry-forward


13,635



10,387Gross deferred tax assets


13,849



10,519Deferred tax liabilitiesProperty and equipment


1,185



4,694Derivative liabilities


1,375



Gross deferred tax liabilities


2,560



4,694Net deferred tax asset


11,289



5,825Less valuation allowance


(11,289
)


(5,825
)Deferred tax asset

$



$
       Note 10  Commitments
    and Contingencies
  Gas
    Gathering Contracts
   F-22




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Fixed
    Price Delivery Contracts
    Lease
    Agreements
    Year Ending
    December 31,

Operating Lease(In thousands)2006

$
972007


69Total minimum lease payments

$
166     Regulations
    Environmental
    Note 11  Retirement
    Plan
   F-23




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Note 12  Industry
    Segments
  Disclosures about Segments of an
    Enterprise and Related Information
    Oil Field


Oil & Gas


Corporate andServices


Production


Other


Total(In thousands)RevenueFor the year ended
    December 31, 2005

$
21,583


$
9,192


$



$
30,775For the year ended
    December 31, 2004


14,721



6,267







20,988For the year ended
    December 31, 2003


11,634



6,589







18,223Depreciation, depletion,
    amortization and accretionFor the year ended
    December 31, 2005


1,268



6,033



150



7,451For the year ended
    December 31, 2004


1,450



3,611



137



5,198For the year ended
    December 31, 2003


1,421



1,561



92



3,074Ceiling write-downFor the year ended
    December 31, 2005






13,450







13,450For the year ended
    December 31, 2004






4,100







4,100For the year ended
    December 31, 2003






2,975







2,975Operating income
    (loss)For the year ended
    December 31, 2005


6,712



(14,870
)


(2,998
)


(11,156
)For the year ended
    December 31, 2004


2,669



(4,823
)


(2,144
)


(4,298
)For the year ended
    December 31, 2003


1,411



(1,630
)


(2,061
)


(2,280
)Total assetsAs of December 31, 2005


14,552



68,299



11,433



94,284As of December 31, 2004


10,972



48,001



5,075



64,048As of December 31, 2003


9,069



40,220



5,977



55,266Capital expendituresFor the year ended
    December 31, 2005


4,190



39,590



11



43,791For the year ended
    December 31, 2004


2,247



15,652



53



17,952For the year ended
    December 31, 2003


460



6,076



198



6,734   Note 13  Significant
    Customers
     F-24




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Note 14  Fair
    Value of Financial Instruments
      Note 15  Earnings
    Per Share
    Note 16  Subsequent
    Events
  Conversion
    of Accrued Interest and Senior Secured Notes
    Sale
    of Aircraft
    Note 17  Supplemental
    Oil and Gas Information
  Estimated
    Proved Oil and Gas Reserves (Unaudited)
   F-25




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Natural Gas


Crude Oil(Mcf)


(Barrels)Proved reserves as of
    December 31, 2002


95,790,200



182,700Revisions of previous estimates


(90,374,776
)


1,991Extension, discoveries and other
    additions


3,175,927



66,102Production


(1,080,456
)


(57,654
)Proved reserves as of
    December 31, 2003


7,510,895



193,139Purchases of reserves in place


1,476,067



Revisions of previous estimates


(1,230,288
)


16,535Extension, discoveries and other
    additions


1,239,700



17,571Production


(953,428
)


(33,668
)Proved reserves as of
    December 31, 2004


8,042,946



193,577Purchases of reserves in place






140,591Revisions of previous estimates


(2,887,783
)


550,832Extension, discoveries and other
    additions


6,819,586



20,262Production


(875,543
)


(68,497
)Proved reserves as of
    December 31, 2005


11,099,206



836,765Proved Developed Reserves as of:December 31, 2003


4,724,523



124,968December 31, 2004


3,773,033



117,031December 31, 2005


5,031,235



712,094     
    operational issues at the existing Labarge wells;
    a lack of financial resources to rectify the operational issues
    on a timely basis or to complete exploration on other
    wells; and
    geological studies that indicate the producing Pipeline wells
    were producing from the sands rather than the coals thus leading
    the Company to change the classification of Pipeline from a coal
    play to a sand play. F-26




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##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Costs
    Incurred in Oil and Gas Activities
    For the Years Ended
    December 312005


2004


2003(In thousands)Property acquisition costsProved

$
330


$
516


$
1,099Unproved


5,745



3,625



661Total property acquisition costs


6,075



4,141



1,760Development costs


17,099



6,156



3,168Exploration costs


17,583



5,294



3,492Asset retirement costs


907



93



503Total costs

$
41,664


$
15,684


$
8,923   Aggregate
    Capitalized Costs
    December 31,2005


2004(In thousands)Proved oil and gas properties

$
75,484


$
41,210Unproved oil and gas properties


22,849



15,595Total


98,333



56,805Less accumulated depreciation,
    depletion, amortization and ceiling write-down


(31,785
)


(12,418
)Net capitalized costs

$
66,548


$
44,387   Costs
    Not Being Amortized
    Year Ended
    December 31,

(In thousands)2005

$
12,8792004


2,6012003


1,745Prior


5,624Total costs not being amortized

$
22,849    F-27




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##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Oil
    and Gas Operations
    For the Years Ended
    December 312005


2004


2003(In thousands)Revenue

$
9,192


$
6,268


$
6,589Production costs and taxes


(4,425
)


(2,636
)


(2,920
)Depreciation, depletion,
    amortization and accretion


(6,033
)


(3,578
)


(1,467
)Ceiling write-down


(13,450
)


(4,100
)


(2,975
)Results of operations from
    producing activities (excluding corporate overhead and interest
    costs)

$
(14,716
)

$
(4,046
)

$
(773
)Depletion per Mcf equivalent

$
4.60


$
3.06


$
0.92   Standardized
    Measure of Discounted Future Net Cash Flows Relating to Proved
    Oil and Gas Reserves (Unaudited)
  Disclosures about Oil and Gas
    Producing Activities.
  For the Years Ended
    December 312005


2004


2003(In thousands)Future cash inflows

$
141,982


$
56,585


$
51,592Future production costs


(49,010
)


(18,552
)


(16,205
)Future development costs


(16,785
)


(3,450
)


(2,913
)Future income tax expense


(656
)


(400
)


(2,765
)Future net cash flows


75,531



34,183



29,70910% annual discount for estimated
    timing on cash flows


(32,014
)


(10,471
)


(8,887
)Standardized measure of discounted
    future cash flows

$
43,517


$
23,712


$
20,822     For the Years Ended
    December 312005


2004


2003Weighted average gas price per Mcf

$
8.21


$
6.07


$
6.06Weighted average oil price per
    barrel

$
60.74


$
40.25


$
31.34    F-28




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##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     For the Years Ended
    December 312005


2004


2003Beginning of period

$
23,712


$
20,822


$
55,053Extensions, discoveries and other
    additions


12,328



2,912



9,004Purchases of reserves in place


442



2,840



Net change in sales and transfer
    prices, net of production costs


(1,305
)


(4,118
)


76,823Revision of previous quantity
    estimates


12,809



241



(170,455
)Development costs incurred during
    the period


1,525



5,023



976Sales of oil and gas, net of
    production costs and taxes


(4,767
)


(3,632
)


(3,679
)Changes in future development costs


402



(3,026
)


13,144Net change in income taxes


(156
)


1,817



26,834Changes in production rates and
    other


(3,875
)


(1,462
)


4,719Accretion of discount


2,402



2,295



8,403End of period

$
43,517


$
23,712


$
20,822     Note 18  Quarterly
    Consolidated Financial Information (Unaudited)
    QuarterFirst


Second


Third


Fourth(In thousands, except per share
    amounts)2005Total revenue

$
5,515


$
7,651


$
8,805


$
8,804Gross profit

$
2,903


$
3,924


$
4,439


$
4,315Net income (loss)

$
(9,463
)

$
4,356


$
646


$
(9,116
)Earnings (loss) per share

$
(0.81
)

$
0.33


$
0.05


$
(0.68
)Earnings (loss) per diluted share

$
(0.81
)

$
0.31


$
0.00


$
(0.68
)2004Total revenue

$
3,567


$
5,045


$
6,606


$
5,770Gross profit

$
1,628


$
2,518


$
3,542


$
2,774Net (loss) income

$
(1,765
)

$
(1,102
)

$
3,121


$
(4,887
)(Loss) earning per share

$
(0.19
)

$
(0.12
)

$
0.33


$
(0.49
)(Loss) earning per diluted share

$
(0.19
)

$
(0.12
)

$
0.29


$
(0.49
)  F-29




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##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      F-30




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description of
    Exhibits21


Subsidiaries of the Registrant23
.1

Consent of Ehrhardt Keefe
    Steiner & Hottman PC23
.2

Consent of Netherland Sewell and
    Associates, Inc.31
.1

Certification of Chief Executive
    Officer of Periodic Report Pursuant to Rule 13a14(a) and
    Rule 15d-14(a)
    (Section 302 of the Sarbanes-Oxley act of 2002)31
.2

Certification of Chief Financial
    Officer of Periodic Report Pursuant to Rule 13a14(a) and
    Rule 15d-14(a)
    (Section 302 of the Sarbanes-Oxley act of 2002)32
.1

Certification of Chief Executive
    Officer Pursuant to 18 U.S.C. Section 1350
    (Section 906 of the Sarbanes-Oxley Act of 2002)32
.2

Certification of Chief Financial
    Officer Pursuant to 18 U.S.C. Section 1350
    (Section 906 of the Sarbanes-Oxley Act of 2002)99
.1

Calculation of the Maximum
    Notes Balance at December 31, 2005 under the Senior
    Secured Notes Facility Dated January 13, 2005