##### 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, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file
    number 0-17204
      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.)633 Seventeenth Street,
    Suite 1800
    Denver, Colorado

80202(Zip Code)(Address of principal executive
    office)   (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.




---



##### 



TABLE OF
    CONTENTS
  PART IItem 1 and
    Item 2.

Business and
    Properties


4Item 1A.

Risk
    Factors


16Item 1B.

Unresolved Staff
    Comments


25Item 3.

Legal
    Proceedings


26Item 4.

Submission of
    Matters to a Vote of Security Holders


26PART IIItem 5.

Market for
    Registrants Common Equity and Related Shareholder
    Matters


26Item 6.

Selected Financial
    Data


27Item 7.

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


28Item 7A.

Quantitative and
    Qualitative Disclosure About Market Risk


39Item 8.

Financial
    Statements


40Item 9.

Changes In and
    Disagreements With Accountants on Accounting and Financial
    Disclosure


40Item 9A.

Controls and
    Procedures


40Item 9B.

Other
    Information


41PART IIIItem 10.

Directors,
    Executive Officers and Corporate Governance


41Item 11.

Executive
    Compensation


41Item 12.

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


42Item 13.

Certain
    Relationships, Related Transactions and Director
    Independence


42Item 14.

Principal
    Accountant Fees and Services


42PART IVItem 15.

Exhibits and
    Financial Statement Schedules


42Acknowledgement and Termination AgreementSubsidiaries of the RegistrantConsent of Ehrhardt Keefe Steiner & Hottman PCConsent of Netherland Sewell & 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 906




---



##### 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;
    the financing of exploration and development operations for our
    offshore Nicaragua property;
    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 abandonment of wells and the costs associated therewith;
    the availability of financing on acceptable terms;
    the impact of governmental regulation;
    the timing of engineering and environmental impact studies and
    permitting;
    title to assets and related liens and encumbrances;
    receipt of sufficient
    rights-of-way
    grants and permits to operate our business;
    the impact of cash flows on future operations;
    the impact of the adoption of Financial Accounting Standards
    Board (FASB) No. 48; and
    the impact of the adoption of FASB Staff Position
    No. EITF 00-19-2.    
    fluctuations in oil and natural gas prices and production,
    inaccurate 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, and
    changes in general economic conditions. 3




---



##### Table of Contents



PART I  ITEM 1.
    AND ITEM 2.
    BUSINESS
    AND PROPERTIES  GENERAL
  Infinity, we, us our
  PV-10 PV-10
      (720) 932-7800. Form 10-K, Form 10-Q, Form 8-K, Form 10-K.
  Infinity-Texas
       4




---



##### Table of Contents



Infinity-Wyoming
            Nicaragua
    Discontinued
    Operations
    BUSINESS
    STRATEGY
   5




---



##### Table of Contents



EXPLORATION
    AND PRODUCTION
  Properties
    Fort Worth
    Basin
    Erath and
    Hamilton Counties, Texas
    3-D
  3-D
 6




---



##### Table of Contents



Comanche
    County, Texas
    Greater
    Green River Basin
    Pipeline
    Field
      Labarge
    Field
        Northwest
    Colorado
    Sand Wash
    Prospect
   7




---



##### Table of Contents



Piceance
    Basin Prospect
    Nicaragua
  sub-phases
    Oil
    and Natural Gas Reserves
   8




---



##### Table of Contents



(PV-10
  Developed


Undeveloped


TotalNatural gas (Mcf)


3,779,185







3,779,185Crude oil (barrels)


648,462







648,462Total (Mcfe)


7,669,957







7,669,957Future net revenue before income
    taxes (in thousands)

$
32,211


$



$
32,211Present value of future net
    revenue before income taxes (in thousands)

$
21,376


$



$
21,376       Production,
    Prices and Production Costs
    2006


2005


2004Production:Natural gas (Mcf)


1,142,305



875,543



953,428Crude oil (barrels)


81,203



68,497



33,668Total (Mcfe)


1,629,524



1,286,525



1,155,436Average daily
    production:Natural gas (Mcf)


3,130



2,399



2,612Crude oil (barrels)


222



188



92Total (Mcfe)


4,464



3,525



3,164Average sales price per
    unit:Natural gas ($ per Mcf)

$
6.12


$
6.06


$
5.12Crude oil ($ per barrel)

$
64.94


$
56.74


$
41.15Total ($ per Mcfe)

$
7.53


$
7.14


$
5.42Production costs per
    Mcfe

$
3.31


$
3.44


$
2.28    9




---



##### Table of Contents



Development,
    Exploration and Acquisition Capital Expenditures
    2006


2005


2004Property acquisition costsProved

$



$
330


$
516Unproved


4,844



5,745



3,625Total property acquisition costs


4,844



6,075



4,141Development costs


892



17,099



6,156Exploration costs


24,865



17,583



5,294Asset retirement costs


77



907



93Total costs

$
30,678


$
41,664


$
15,684   Drilling
    Activity
    2006


2005


2004Gross


Net


Gross


Net


Gross


NetExploratory WellsProductive


13



13



6



5.7



3



2.9Nonproductive










1



1.0







Total


13



13



7



6.7



3



2.9Development WellsService










1



1.0







Productive


1



1



5



5.0



9



8.0Nonproductive










1



1.0







Total


1



1



7



7.0



9



8.0  10




---



##### Table of Contents



Acreage
    Data
    Developed Acreage


Undeveloped AcreageGross


Net


Gross


NetFort Worth Basin


6,000



5,000



69,000



63,000Greater Green River Basin:Wamsutter Arch


5,000



4,000



16,000



14,000Labarge


2,000



2,000



9,000



9,000Sand Wash Prospect


1,000



1,000



35,000



35,000Piceance Basin Prospect










8,000



8,000Total Onshore U.S.


14,000



12,000



137,000



129,000Offshore Nicaragua










1,389,000



1,389,000Total


14,000



12,000



1,526,000



1,518,000     Customers
    and Markets
        Competition
      
    Acquisition of desirable producing properties or new leases for
    future exploration;
    Marketing our oil and natural gas production; and 11




---



##### Table of Contents




    Seeking to acquire the services, equipment, labor and materials
    necessary to explore, operate and develop those properties.    Delivery
    Commitments
      Government
    Regulation of the Oil and Gas Industry
  General
  and/or
      Federal
    Regulation of the Sale of Oil and Gas
   12




---



##### Table of Contents



636-A, 636-D
  Regulation
    of Operations
         13




---



##### Table of Contents



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;
    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.
 14




---



##### Table of Contents



clean-up
  Superfund.
  Abandonment and Remediation
    Requirements.
  Potentially
    Material Costs Associated with Environmental Regulation of Our
    Oil and Natural Gas Operations
  (ii) clean-up
   15




---



##### Table of Contents



Title
    to Properties
  rights-of-way
  Operating
    Hazards and Insurance
    Employees
    ITEM 1A.
    RISK
    FACTORS  We
    have a history of losses and we may be unable to achieve
    long-term profitability.
   16




---



##### Table of Contents




    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;
    weather conditions; and
    actions of federal, state, local and foreign authorities.    
    impairing our financial condition, cash flows and liquidity; 17




---



##### Table of Contents




    limiting our ability to finance planned capital expenditures;
    reducing our revenue, operating income and profitability; and
    reducing the carrying value of our oil and natural gas
    properties.      Prices
    may be affected by regional factors.
    Forward
    sales and hedging transactions may limit our potential gains or
    expose us to losses.
    
    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.  Exploration
    and development of our oil and gas projects will require large
    amounts of capital which we may not be able to
    obtain.
   18




---



##### Table of Contents




    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 new credit
    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;
    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 19




---



##### Table of Contents




    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.     20




---



##### 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;
    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 21




---



##### Table of Contents




    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.
    Exploratory
    drilling is an uncertain process with many risks.
    
    unexpected drilling conditions; 22




---



##### Table of Contents




    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 adequately 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.
        
    land use restrictions;
    drilling bonds and other financial responsibility requirements;
    spacing of wells;
    emissions into the air;
    unitization and pooling of properties; 23




---



##### Table of Contents




    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;
    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.   24




---



##### Table of Contents



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 explore, operate and
    develop those properties.    We may
    have difficulty managing growth in our business.
    We
    depend on key personnel.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS   25




---



##### Table of Contents



ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   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, 2005

$
13.79


$
7.68June 30, 2005


10.52



7.52September 30, 2005


8.97



7.21December 31, 2005


8.39



6.23March 31, 2006

$
9.40


$
6.85June 30, 2006


8.45



6.03September 30, 2006


7.04



3.87December 31, 2006


4.00



3.20   Approximate
    Number of Holders of Common Stock
    Dividends
   26




---



##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA  two-for-one
  As of or for the Years Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share amounts)Statement of Operations
    DataRevenue:Oil and gas sales


12,292



9,192



6,267



6,589



2,368Costs and expenses:Oil and gas production expense


4,583



3,548



1,914



2,162



1,583Production taxes


806



877



722



759



238General and administrative expenses


3,619



3,002



2,748



2,839



2,183Depreciation, depletion and
    amortization


7,936



6,183



3,740



1,642



286Ceiling write-down of oil and gas
    properties


37,800



13,450



4,100



2,975



54,744



27,060



13,224



10,377



4,290Operating loss


(42,452
)


(17,868
)


(6,957
)


(3,788
)


(1,922
)Other income (expense):Financing costs


(31,598
)


(4,531
)


(2,983
)


(7,451
)


(490
)Change in derivative fair value


14,727



2,908











Other, net


535



(424
)


104



114



87Net loss from continuing operations
    before income taxes


(58,788
)


(19,915
)


(9,836
)


(11,125
)


(2,325
)Income tax benefit


















985Net loss from continuing operations


(58,788
)


(19,915
)


(9,836
)


(11,125
)


(1,340
)Income from discontinued
    operations, net of tax


12,750



6,338



5,203



1,200



(217
)Gain on sale of discontinued
    operations, net of tax


33,351















Net loss

$
(12,687
)

$
(13,577
)

$
(4,633
)

$
(9,925
)

$
(1,557
)Basic and diluted income (loss) per
    common shareContinuing operations


(3.90
)


(1.54
)


(1.04
)

$
(1.38
)


(.19
)Discontinued operations


3.06



.49



.55



.15



(.03
)Net loss

$
(0.84
)

$
(1.05
)

$
(0.49
)

$
(1.23
)

$
(0.22
)Statement of Cash Flows
    DataNet cash provided by (used in):Operating activities

$
14,917


$
9,650


$
5,463


$
2,845


$
136Investing activities


18,020



(42,454
)


(9,942
)


(6,902
)


(16,218
)Financing activities


(40,007
)


37,694



6,804



3,917



16,283 27




---



##### Table of Contents



As of or for the Years  Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share amounts)Balance Sheet DataCash and cash equivalents

$
872


$
6,204


$
2,208


$
537


$
722Accounts receivable, net of
    allowance


1,511



2,004



793



675



567Net property and equipment


94



2,236



2,306



2,891



1,946Net oil and gas properties


51,384



66,548



44,352



36,262



32,284Net intangible assets


59



2,321



1,263



3,693



4,963Total assets


56,304



94,284



62,467



55,266



53,130Note payable and current portion of
    long-term debt


48



288



124



171



721Accounts payable


7,832



4,269



3,491



2,257



2,122Accrued liabilities


2,775



5,378



4,056



747



759Long-term debt, net of current
    portion






39,874



21,282



24,706



21,246Derivative liabilities


5,895



9,837











Stockholders equity


37,617



30,217



28,822



22,911



22,810   ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  Form 10-K.
         28




---



##### Table of Contents



2006


2005


2004Production:Natural gas (MMcf)


1,142.3



875.5



953.4Oil (thousands of barrels)


81.2



68.5



33.7Total (MMcfe)


1,629.5



1,286.5



1,155.4Financial Data (in
    thousands):Total revenue

$
12,292


$
9,192


$
6,267Production expenses


4,583



3,548



1,914Production taxes


806



877



722Financial Data per
    Mcfe:Total revenue

$
7.54


$
7.14


$
5.42Production expenses


2.81



2.76



1.66Production taxes


.50



0.68



0.63     2007
    Operational and Financial Objectives
        
    The availability of the capital resources required to fund the
    activity; 29




---



##### Table of Contents




    The availability of third party contractors for drilling rigs
    and completion services (although the Company has one rig under
    contract and operating in Texas); and
    The approval by regulatory agencies of applications for permits
    to conduct exploration activities in a timely manner.  Corporate
    Activities
  2-D
  Results
    of operations for the year ended December 31, 2006 compared
    to the year ended December 31, 2005
    Net
    Loss
    Revenue
    Production
    Expenses
    Production
    Taxes
    General
    and Administrative Expenses
   30




---



##### Table of Contents



Depreciation,
    Depletion, Amortization and Accretion
    Ceiling
    Write Down
    Other
    Income (Expense)
    Income
    Tax
    Discontinued
    Operations
   31




---



##### Table of Contents



Results
    of operations for the year ended December 31, 2005 compared
    to the year ended December 31, 2004
  Net
    Loss
    Revenue
    Production
    Expenses
    Production
    Taxes
    General
    and Administrative Expenses
    Depreciation,
    Depletion, Amortization and Accretion
    Ceiling
    Write Down
   32




---



##### Table of Contents



Other
    Income (Expense)
    Income
    Tax
    Discontinued
    Operations
    Off
    Balance Sheet Arrangements
    Liquidity
    and Capital Resources
           33




---



##### Table of Contents



2006


2005


2004(In millions)Net cash provided by (used in):Operating activities


13



8



3Investing activities


(5
)


(4
)


2Financing activities






(4
)


1           Outlook
    for 2007
     34




---



##### Table of Contents



Critical
    Estimates
    Reserve
    Estimates
  units-of-production
 35




---



##### Table of Contents



Unproved
    Properties
    Fair
    Value of Derivatives
        Asset
    Retirement Obligations
    Valuation
    of Tax Asset
   36




---



##### Table of Contents



Critical
    Policies
    Oil and
    Gas Properties, Depreciation and Full Cost Ceiling
    Test
      Regulation S-X Rule 4-10.
     37




---



##### Table of Contents



Contractual
    Obligations
    Payments Due by PeriodTotal


2007


2008 and 2009


2010 and 2011


Thereafter(In thousands)Asset retirement obligations(a)

$
1,602


$
466


$
289


$
453


$
394Capital lease


48



48











Operating leases


655



198



396



61



Gas gathering commitments(b)


4,793



560



1,839



1,916



478Non-current production and
    property taxes


535







535







Total contractual obligations

$
7,633


$
1,272


$
3,059


$
2,430


$
872     (a)
    
    The table above reflects the Companys 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.(b)
    
    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 and
    transportation contract related to the Companys Pipeline
    field. While Infinity-Wyoming has failed to deliver the volumes
    required under the terms of the contract, the pipeline operators
    have also not provided the compression and gathering
    capabilities they were required to provide under the contract.
    Management is currently negotiating revised volume commitments
    under a lengthened contract with the third-party gatherer and
    processor. See Note 8 of Notes to Consolidated Financial
    Statements.  Recently
    Issued Accounting Pronouncements
  Accounting for Uncertainty in
    Income Taxes  an Interpretation of FASB Statement
    No. 109. Accounting for Income Taxes.
  Fair Value Measurements.
  00-19-2, Accounting for Registration Payment Arrangements
 38




---



##### Table of Contents



Accounting for Contingencies. Accounting for Derivative Instruments and Hedging
    Activities Accounting for Certain
    Financial Instruments with Characteristics of both Liabilities
    and Equity Guarantors Accounting and Disclosure Requirements for
    Guarantees, Including Indirect Guarantees of Indebtedness of
    Others 00-19-2 00-19-2
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK        Terms of Arrangements

Bbls per Day


NYMEX Floor Price


NYMEX Ceiling PriceJuly 1, 2006 
    March 31, 2007


50


$
55.00


$
77.00January 1, 2007 
    June 30, 2007


50


$
57.50


$
77.50April 1, 2007 
    September 30, 2007


50


$
60.00


$
85.50July 1, 2007 
    December 31, 2007


50


$
62.50


$
87.00October 1, 2007 
    March 31, 2008


50


$
62.00


$
85.60     Terms of Arrangements

MMBtu per Day


WAHA Floor Price


WAHA Ceiling PriceJanuary 1, 2007 
    March 31, 2007


1,000


$
7.50


$
12.00January 1, 2007 
    June 30, 2007


1,000


$
6.00


$
10.55April 1, 2007 
    September 30, 2007


1,000


$
6.50


$
10.20  39




---



##### Table of Contents



Terms of Arrangements

Bbls per Day


NYMEX Swap PriceApril 1, 2008 
    December 31, 2008


65


$
57.40January 1, 2009 
    December 31, 2009


55


$
57.95January 1, 2010 
    December 31, 2010


50


$
58.90     MMBtuTerms of Arrangements

per Day


WAHA Swap PriceOctober 1, 2007 
    December 31, 2007


1,000


$
6.915January 1, 2008 
    December 31, 2008


800


$
7.235January 1, 2009 
    December 31, 2009


500


$
7.170January 1, 2010 
    December 31, 2010


500


$
6.865     MMBtu


CIGTerms of Arrangements

per Day


Swap PriceFebruary 1, 2007 
    December 31, 2007


600


$
5.200January 1, 2008 
    December 31, 2008


400


$
6.475January 1, 2009 
    December 31, 2009


400


$
6.810January 1, 2010 
    December 31, 2010


300


$
6.565   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
   40




---



##### Table of Contents




    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.      Report of
    Independent Registered Public Accounting Firm
  Form 10-K
  Changes
    in Internal Control over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10:
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11:
    EXECUTIVE
    COMPENSATION  Form 10-K.
 41




---



##### Table of Contents



ITEM 12:
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Form 10-K.
  ITEM 13:
    CERTAIN
    RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE  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
    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); 2006
    Equity Incentive Plan(13)10
.2

First Additional Closing Agreement
    dated September 7, 2005(14)10
.3

Purchase Agreement between
    Infinity Energy Resources, Inc. and Q Consolidated Oil Well
    Services, LLC dated December 1, 2006(15) 42




---



##### Table of Contents



ExhibitNumber

Description of Exhibits10
.4

Loan Agreement between Infinity
    Energy Resources, Inc., Infinity Oil and Gas of Texas, Inc. and
    Infinity Oil & Gas of Wyoming, Inc. and Amegy Bank N.A.,
    dated effective as of January 9, 2007(16)10
.5

Revolving Promissory Note between
    Infinity Energy Resources, Inc. and Amegy Bank N.A., dated
    January 9, 2007(16)10
.6

Form of Change in Control
    Agreement(17)10
.7

Waiver and Amendment Agreement,
    dated August 9, 2006(17)10
.8

October 2006 Waiver and Amendment
    Agreement, dated October 2, 2006(18)10
.9

Acknowledgement and Termination
    Agreement between Infinity Energy Resources, Inc., Consolidated
    Oil Well Services, Inc. and Stephen D. Stanfield, dated December
    15, 2006(19)21


Subsidiaries of the Registrant23
.1

Consent of Ehrhardt Keefe
    Steiner & Hottman PC23
.2

Consent of Netherland
    Sewell & 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.(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 Proxy Statement on
    Schedule 14A, filed on May 2, 2006.(14)
    
    Incorporated by reference to our Current Report on
    Form 8-K,
    filed on September 8, 2005.(15)
    
    Incorporated by reference to our Current Report on
    Form 8-K,
    filed on December 6, 2006.(16)
    
    Incorporated by reference to our Current Report on
    Form 8-K
    filed on January 17, 2007.(17)
    
    Incorporated by reference to our Quarterly Report on
    Form 10-Q,
    filed on August 10, 2006.(18)
    
    Incorporated by reference to our Current Report on
    Form 8-K,
    filed on October 3, 2006.(19)
    
    Filed herewith. 43




---



##### Table of Contents



SIGNATURES
      By:
    /s/  STANTON
    E. ROSS   Chief Executive Officer
      Signature

Capacity

Date/s/  STANTON
    E. ROSSStanton
    E. Ross

Chief Executive Officer
    (Principal Executive Officer) and Director

March 12, 2007/s/  TIMOTHY
    A. FICKERTimothy
    A. Ficker

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

March 12, 2007/s/  JAMES
    A. TUELLJames
    A. Tuell

President, Chief Operating Officer
    and Director

March 12, 2007/s/  ELLIOT
    M. KAPLANElliot
    M. Kaplan

Director

March 12, 2007/s/  ROBERT
    O. LORENZRobert
    O. Lorenz

Director

March 12, 2007/s/  LEROY
    C. RICHIELeroy
    C. Richie

Director

March 12, 2007  44




---



##### 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-7  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
  Internal Control-Integrated Framework
        Internal Control-Integrated Framework Internal Control-Integrated Framework
    /s/  Ehrhardt
    Keefe Steiner & Hottman
    PC
  March 9, 2007
 Denver, Colorado
 F-2




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  December 31,2006


2005(In thousands, except share and per share data)ASSETSCurrent assets:Cash and cash equivalents

$
872


$
6,204Accounts receivable


1,511



2,004Prepaid expenses and other


719



133Prepaid severance taxes


609



Current assets of discontinued
    operations






5,224Total current assets


3,711



13,565Property and equipment, at cost,
    net of accumulated depreciation


94



2,236Oil and gas properties, using full
    cost accounting, net of accumulated depreciation, depletion,
    amortization and ceiling write-down:Proved


24,581



43,699Unproved


26,803



22,849Intangible assets, at cost, less
    accumulated amortization


59



2,321Other assets, net


1,056



168Long term assets of discontinued
    operations






9,446Total assets

$
56,304


$
94,284LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Note payable and current portion
    of long-term debt

$
48


$
288Accounts payable


7,832



4,269Accrued liabilities


2,775



5,378Current portion of asset
    retirement obligations


466



284Current liabilities of
    discontinued operations






1,702Total current liabilities


11,121



11,921Long-term liabilities:Production taxes payable


535



401Asset retirement obligations, less
    current portion


1,136



1,129Accrued interest






905Derivative liabilities


5,895



9,837Long-term debt, less current
    portion






39,874Total liabilities


18,687



64,067Commitments and contingencies
    (Note 8)Stockholders equity:Preferred stock, par value $.0001,
    authorized 10,000,000 shares, issued and outstanding -0-
    (2006) and -0- (2005) shares






Common stock, par value $.0001,
    authorized 75,000,000 shares, issued and outstanding
    17,866,157 (2006) and 13,501,988 (2005) shares


2



1Additional
    paid-in-capital


78,303



58,335Accumulated other comprehensive
    income


118



Accumulated deficit


(40,806
)


(28,119
)Total stockholders equity


37,617



30,217Total liabilities and
    stockholders equity

$
56,304


$
94,284    F-3




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
  For the Years Ended December 31,2006


2005


2004(In thousands, except per share data)Revenue:Oil and gas sales

$
12,292


$
9,192


$
6,267Operating expenses:Oil and gas production expenses


4,583



3,548



1,914Oil and gas production taxes


806



877



722General and administrative expenses


3,619



3,002



2,748Depreciation, depletion,
    amortization and accretion


7,936



6,183



3,740Ceiling write-down of oil and gas
    properties


37,800



13,450



4,10054,744



27,060



13,224Operating loss


(42,452
)


(17,868
)


(6,957
)Other income (expense):Financing costs:Interest expense


(3,147
)


(2,454
)


(971
)Amortization of loan discount and
    costs


(1,290
)


(1,066
)


(1,656
)Early extinguishment of debt


(27,161
)


(1,011
)


(356
)Change in derivative fair value


14,727



2,908



Other


535



(424
)


104Total other expense


(16,336
)


(2,047
)


(2,879
)Net loss from continuing operations


(58,788
)


(19,915
)


(9,836
)Income from discontinued operations


12,750



6,338



5,203Gain on sale of discontinued
    operations, net of tax


33,351







Net loss

$
(12,687
)

$
(13,577
)

$
(4,633
)Basic and diluted net loss per
    share:Net loss from continuing operations

$
(3.90
)

$
(1.54
)

$
(1.04
)Income from discontinued operations


0.85



0.49



0.55Gain on sale of discontinued
    operations


2.21







Net loss

$
(.84
)

$
(1.05
)

$
(0.49
)Weighted average shares
    outstanding (basic and diluted)


15,085



12,936



9,495    F-4




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CHANGES IN
    STOCKHOLDERS EQUITY
 For the years ended December 31, 2006, 2005 and 2004
  AccumulatedAdditional





OtherCommon Stock


Paid-In


Accumulated


Comprehensive


StockholdersShares


Amount


Capital


Deficit


Income (Loss)


Equity(In thousands, except share data)Balance, January 1, 2004


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
)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
)






30,217Issuance of common stock upon
    conversion of senior secured notes and settlement of accrued
    interest


4,214,419



1



18,216











18,217Issuance of common stock upon the
    exercise of options


144,750







694











694Stock-based compensation










687











687Reclassification of non-employee
    warrants from derivative liabilities










341











341Other


5,000







30











30Comprehensive loss:Net loss














(12,687
)


(12,687
)


(12,687
)Reclassifications, net of income
    tax expense


















(29
)


(29
)Unrealized gain on effective
    commodity derivative instruments


















147



147Comprehensive loss

















$
(12,569
)Balance, December 31, 2006


17,866,157


$
2


$
78,303


$
(40,806
)

$
118


$
37,617    F-5




---



##### Table of Contents



INFINITY
    ENERGY RESOURCES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Years Ended December 31,2006


2005


2004(In thousands)Cash flows from operating
    activities:Net loss

$
(12,687
)

$
(13,577
)

$
(4,633
)Adjustments to reconcile net loss
    to net cash provided by operating activities:Depreciation, depletion,
    amortization, accretion and ceiling write-down


47,091



20,901



9,298Amortization of loan discount and
    costs


1,290



1,066



1,741Non-cash early extinguishment of
    loan cost


27,161



1,052



356Current interest expense settled by
    stock issuance, net of amounts capitalized


1,079







Interest expense added to principal


1,357







Non-cash stock-based compensation
    expense


717







Change in fair value of derivative
    liabilities


(14,727
)


(2,908
)


Gain on sale of discontinued
    operations


(33,851
)






Impairment of note receivable and
    other






530



(Gain) loss on sales of other assets


(255
)


96



(2,824
)Unrealized (gain) loss on commodity
    derivative instruments


(272
)


28



Change in operating assets and
    liabilities:(Increase) decrease in accounts
    receivable


247



(1,273
)


(1,687
)(Increase) decrease in inventories


(197
)


(167
)


65(Increase) decrease in prepaid
    expenses and other


(574
)


232



(89
)Increase in accounts payable


1,046



1,034



1,526Increase (decrease) in accrued
    liabilities


(2,508
)


2,636



1,710Net cash provided by operating
    activities


14,917



9,650



5,463Cash flows from investing
    activities:Capital expenditures 
    exploration and production


(25,555
)


(39,271
)


(11,714
)Capital expenditures 
    oilfield services


(5,569
)


(4,190
)


(1,149
)Acquisitions 
    exploration and production






(330
)


(516
)Acquisitions  oilfield
    services, net of cash acquired










(1,189
)Proceeds from sale of discontinued
    operations, net of transaction costs


49,744







Proceeds from sale of fixed
    assets  exploration and production and other


280



133



156Proceeds from sale of fixed
    assets  oilfield services


8



31



4,654Increase in other assets


(888
)


(31
)


(200
)Proceeds from note receivable






1,204



16Net cash provided by (used in)
    investing activities


18,020



(42,454
)


(9,942
)Cash flows from financing
    activities:Proceeds from notes payable






434



295Proceeds from borrowings on
    long-term debt


8,000



45,000



5,845Proceeds from issuance of common
    stock


694



4,707



9,666Debt and equity issuance costs


(372
)


(2,751
)


(320
)Repayment of notes payable


(329
)


(406
)


(664
)Repayment of long-term debt


(48,000
)


(9,290
)


(8,018
)Net cash (used in) provided by
    financing activities


(40,007
)


37,694



6,804Net (decrease) increase in cash and
    cash equivalents


(7,070
)


4,890



2,325Cash and cash equivalents,
    beginning of period


7,942



3,052



727Cash and cash equivalents, end of
    period

$
872


$
7,942


$
3,052Supplemental cash flow disclosures:Cash paid for interest, net of
    amounts capitalized

$
580


$
1,175


$
436Non-cash transactions:Non-cash costs capitalized in the
    full cost pool for oil and gas properties


2,446



764



1,070Property and equipment acquired
    through capital lease or assumption of debt






189



195Options and warrants granted in
    connection with debt, recorded as loan costs or debt discount


1,857



8,828



120Conversion of subordinated
    convertible notes and accrued interest to common stock


18,217



14,181



796Issuance of common stock to
    partially repay related party debt










500Issuance of additional notes in
    lieu of cash interest payment on 7% subordinated
    convertible notes










795    F-6




---



##### 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
    Basis
    of Presentation
      Management
    Estimates
    Cash
    and Cash Equivalents
    Derivative
    Instruments
  Accounting for Derivative Instruments and Hedging
    Activities.
   F-7




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     Oil
    and Gas Properties
        units-of-production
    Prepaid
    Severance Taxes
   F-8




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Other
    Assets, Net
    Asset
    Retirement Obligations
  Accounting for Asset Retirement
    Obligations.
  2006


2005


2004(In thousands)Asset retirement obligations at
    January 1

$
1,413


$
635


$
521Accretion expense


112



70



21Liabilities incurred


30



51



93Liabilities assumed






17



Liabilities settled






(199
)


Revision in estimates


47



839



Asset retirement obligations at
    December 31


1,602



1,413



635Less: current portion of asset
    retirement obligations


(466
)


(284
)


Asset retirement obligations at
    December 31, less current portion

$
1,136


$
1,129


$
635   Capitalized
    Interest
    Intangible
    Assets
     F-9




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Revenue
    Recognition
      Transportation
    Costs
  00-10, Accounting for Shipping and Handling Fees and Costs
  Per
    Share Information
    Stock
    Options
  Share-Based Payment Accounting for Stock Issued to
    Employees Accounting for Stock-Based
    Compensation.
  Income
    Taxes
   F-10




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Comprehensive
    Income (Loss)
    Recently
    Issued Accounting Pronouncements
  Accounting for Uncertainty in
    Income Taxes  an Interpretation of FASB Statement
    No. 109. Accounting for Income
    Taxes.
  Fair Value Measurements.
  00-19-2, Accounting for Registration Payment Arrangements Accounting for Contingencies. Accounting for
    Derivative Instruments and Hedging Activities Accounting for Certain Financial Instruments
    with Characteristics of both Liabilities and Equity Guarantors Accounting
    and Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others 00-19-2 00-19-2
  Note 2 
    Discontinued Operations
   F-11




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Note 3 
    Accrued Liabilities
    December 31,2006


2005(In thousands)Production taxes
    payable  current portion

$
692


$
516Oil and gas revenue payable to oil
    and gas property owners


742



680Current income taxes


500



Accrued interest






247Accrued drilling costs






2,918Other accrued liabilities


841



1,017$
2,775


$
5,378   Note 4 
    Debt
    December 31,2006


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

$



$
37,583Promissory note to seller (for a
    50% interest in an aircraft)






2,203Other


48



37648



40,162Less current portion


(48
)


(288
)Long-term debt

$



$
39,874   Senior
    Secured Notes Facility
     F-12




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     
    repayment or conversion of $2.5 million principal amount of
    Notes by September 15, 2006 (a total of $2,547,000 of
    principal and interest was converted into 614,500 shares of
    common stock by September 15, 2006);
    reduction of the exercise price of the outstanding Warrants from
    a weighted-average exercise price of $9.81 per share to
    $5.00 per share and increase in the number of Warrants from
    2,971,451 to 5,829,726.    
    increase in the outstanding principal Notes balance by 20%, or
    $9 million, plus an additional $1.4 million equal to
    the interest that would have been due on October 2, 2006;
    conversion of approximately $7.4 million principal amount
    of Notes by January 15, 2007, at the election of the Note
    holders (a total of $7,444,000 principal and interest was
    converted into 2,249,807 shares of common stock by
    December 14, 2006);
    Warrant holders may require the Company to redeem their Warrants
    in connection with a sale of all or substantially all of the
    Company to a non-public buyer.    EITF 96-19, Debtors Accounting for a Modification or Exchange of
    Debt Instruments
  Change in fair value of Warrants
    upon repricing

$
9,812Increase in principal resulting
    from covenant violations


9,000Write off of debt discount


6,500Write off of debt issuance costs
    and other


1,639$
26,951   paid-in-capital, paid-in-capital
  Promissory
    Note to Seller
   F-13




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   8% Convertible
    Subordinated Notes
    7% Convertible
    Subordinated Notes
    Debt
    Discount
      Note 5 
    Derivative Instruments
    Commodity
    Derivatives
   F-14




---



##### Table of Contents



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


NYMEX


NYMEXTerm of Arrangements

per Day


Floor Price


Ceiling PriceJuly 1, 2006 
    March 31, 2007


50


$
55.00


$
77.00January 1, 2007 
    June 30, 2007


50


$
57.50


$
77.50April 1, 2007 
    September 30, 2007


50


$
60.00


$
85.50July 1, 2007 
    December 31, 2007


50


$
62.50


$
87.00October 1, 2007 
    March 31, 2008


50


$
62.00


$
85.60     MMBtu


WAHA


WAHATerm of Arrangements

per Day


Floor Price


Ceiling PriceJanuary 1, 2007 
    March 31, 2007


1,000


$
7.50


$
12.00January 1, 2007 
    June 30, 2007


1,000


$
6.00


$
10.55April 1, 2007 
    September 30, 2007


1,000


$
6.50


$
10.20       Bbls


NYMEXTerm of Arrangement

per Day


Swap PriceApril 1, 2008 
    December 31, 2008


65


$
57.40January 1, 2009 
    December 31, 2009


55


$
57.95January 1, 2010 
    December 31, 2010


50


$
58.90     MMBtu


WAHATerm of Arrangement

per Day


Swap PriceOctober 1, 2007 
    December 31, 2007


1,000


$
6.915January 1, 2008 
    December 31, 2008


800


$
7.235January 1, 2009 
    December 31, 2009


500


$
7.170January 1, 2010 
    December 31, 2010


500


$
6.865  F-15




---



##### Table of Contents



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


CIGTerm of Arrangement

per Day


Swap PriceFebruary 1, 2007 
    December 31, 2007


600


$
5.200January 1, 2008 
    December 31, 2008


400


$
6.475January 1, 2009 
    December 31, 2009


400


$
6.810January 1, 2010 
    December 31, 2010


300


$
6.565   Other
    Derivatives
  00-19
  00-19,
  Note 6 
    Stockholders Equity
  Private
    Institutional Equity Placements
    Non-Employee
    Warrants and Options
   F-16




---



##### Table of Contents



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


Weighted AverageNumber of


Exercise


Grant Date FairShares


Price per Share


Value per ShareOutstanding, January 1, 2004


2,110,150


$
8.27


$Granted


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



9.36Granted


3,351,571



5.00



3.35Outstanding, December 31, 2006


7,469,980



5.75     NumberOutstanding andExercisable at


Weighted Average


WeightedDecember 31,


Remaining


AverageRange of Exercise Prices

2006


Contractual Life


Exercise Price$5.00


5,829,726



3.4 years


$
5.00$7.13  7.34


395,754



1.2 years


$
7.18$8.75  $9.06


1,244,500



1.1 years


$
8.807,469,980   Options
    Under Employee Option Plans
   F-17




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     2006

2005

2004Expected term (in years)

5.5 - 10

10


10Expected stock price volatility

58% - 62%

67%


147
%Expected dividends






Risk-free rate

4.71% - 5.15%

4.00% - 4.13%


1.50
%Forfeiture rate

22.5%




     Weighted





WeightedAverage





AverageNumber of


Exercise


Aggregate


RemainingOptions


Price per Share


Intrinsic Value


Contractual Term(In thousands)Outstanding at January 1, 2006


1,383,250


$
6.52Granted


440,000



5.91Exercised


(144,750
)


4.79Expired


(160,000
)


5.00Forfeited


(497,500
)


6.84Outstanding at December 31,
    2006


1,021,000



6.58


$




7.0 yearsExercisable at December 31,
    2006


636,000



7.03


$




5.9 years     2006


2005


2004Weighted average grant-date fair
    value of options granted

$
3.71


$
6.00


$
4.22Total intrinsic value of options
    exercised

$
291,000


$
1,858,000


$
441,000Compensation expense recognized

$
687,000







Cash received from the exercise of
    stock options

$
694,000


$
957,000


$
428,000Stock-based compensation expense
    capitalized










Tax benefits recognized related to
    stock-based compensation










    F-18




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     2005


2004(In thousands, except share amounts)Net loss as reported

$
(13,577
)

$
(4,633
)Deduct: Total stock-based employee
    compensation expense, determined under fair value based method
    for all awards


(3,177
)


(1,703
)Pro forma net loss

$
(16,754
)

$
(6,336
)Basic and diluted loss per
    share  as reported

$
(1.05
)

$
(0.49
)Basic and diluted loss per
    share  as reported

$
(1.30
)

$
(0.67
)   Note 7 
    Income Taxes
    For the Years Ended December 31,2006


2005


2004(In thousands)Current income tax provision

$



$



$
Deferred income tax benefit


1,616



(5,464
)


(1,784
)Change in valuation allowance and
    other


(1,616
)


5,464



1,784Total income tax (provision)
    benefit

$



$



$
     For the Years Ended December 31,2006


2005


2004(In thousands)Federal income tax rate


34.0
%


34.0
%


34.0
%State income tax rate


4.5



4.5



6.0Non-deductible debt extinguishment
    expenses


(51.3
)






Non-deductible / taxable change in
    derivative fair value


46.5



(1.9
)


Non-deductible interest expense
    and debt discount


(21.4
)






Other temporary and permanent
    differences


1.0



3.6



Change in valuation allowance and
    other


(13.3
)


(40.2
)


(40.0
)Effective tax rate



%



%



%  F-19




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    December 31,2006


2005(In thousands)Deferred tax assetsAccruals and other

$
262


$
214Property and equipment


9,101



Alternative minimum tax credit
    carry-forward


500



Net operating loss carry-forward


3,541



13,635Gross deferred tax assets


13,404



13,849Deferred tax liabilitiesProperty and equipment






1,185Derivative liabilities






1,375Gross deferred tax liabilities






2,560Net deferred tax asset


13,404



11,289Less valuation allowance


(13,404
)


(11,289
)Deferred tax asset

$



$
       Note 8 
    Commitments and Contingencies
  Delivery
    Commitments
   F-20




---



##### Table of Contents



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

Operating Lease(In thousands)2007

$
1982008


1982009


1982010


61Total minimum lease payments

$
655     Regulations
    Environmental
    Note 9 
    Retirement Plan
    Note 10 
    Significant Customers
    Note 11 
    Fair Value of Financial Instruments
     F-21




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Note 12 
    Earnings Per Share
    Note 13 
    Subsequent Event  Credit Facility
    Note 14 
    Supplemental Oil and Gas Information
  Estimated
    Proved Oil and Gas Reserves (Unaudited)
   F-22




---



##### 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
    January 1, 2004


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



836,765Purchases of reserves in place






Revisions of previous estimates


(7,778,519
)


(111,442
)Extension, discoveries and other
    additions


1,600,803



4,342Production


(1,142,305
)


(81,203
)Proved reserves as of
    December 31, 2006


3,779,185



648,462Proved Developed Reserves as of:December 31, 2004


3,773,033



117,031December 31, 2005


5,031,235



712,094December 31, 2006


3,779,185



648,462   Costs
    Incurred in Oil and Gas Activities
    For the Years Ended December 312006


2005


2004(In thousands)Property acquisition costsProved

$



$
330


$
516Unproved


4,844



5,745



3,625Total property acquisition costs


4,844



6,075



4,141Development costs


892



17,099



6,156Exploration costs


24,865



17,583



5,294Asset retirement costs


77



907



93Total costs

$
30,678


$
41,664


$
15,684  F-23




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Aggregate
    Capitalized Costs
    December 31,2006


2005(In thousands)Proved oil and gas properties

$
101,920


$
75,484Unproved oil and gas properties


26,803



22,849Total


128,723



98,333Less accumulated depreciation,
    depletion, amortization and ceiling write-down


(77,339
)


(31,785
)Net capitalized costs

$
51,384


$
66,548   Costs
    Not Being Amortized
    Year Ended December 31,

(In thousands)2006

$
8,5572005


9,2002004


1,716Prior


7,330Total costs not being amortized

$
26,803     Standardized
    Measure of Discounted Future Net Cash Flows Relating to Proved
    Oil and Gas Reserves (Unaudited)
  Disclosures about Oil and Gas
    Producing Activities.
 F-24




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     For the Years Ended December 312006


2005


2004(In thousands)Future cash inflows

$
52,897


$
141,982


$
56,585Future production costs


(20,386
)


(49,010
)


(18,552
)Future development costs


(300
)


(16,785
)


(3,450
)Future income tax expense






(656
)


(400
)Future net cash flows


32,211



75,531



34,18310% annual discount for estimated
    timing on cash flows


(10,835
)


(32,014
)


(10,471
)Standardized measure of discounted
    future cash flows

$
21,376


$
43,517


$
23,712     For the Years Ended December 312006


2005


2004Weighted average gas price per Mcf

$
5.66


$
8.21


$
6.07Weighted average oil price per
    barrel

$
48.56


$
60.74


$
40.25     For the Years Ended December 312006


2005


2004Beginning of period

$
43,517


$
23,712


$
20,822Extensions, discoveries and other
    additions


4,788



12,328



2,912Purchases of reserves in place






442



2,840Net change in sales and transfer
    prices, net of production costs


(18,284
)


(1,305
)


(4,118
)Revision of previous quantity
    estimates


(15,735
)


12,809



241Development costs incurred during
    the period






1,525



5,023Sales of oil and gas, net of
    production costs and taxes


(6,879
)


(4,767
)


(3,632
)Changes in future development costs


15,718



402



(3,026
)Net change in income taxes


462



(156
)


1,817Changes in production rates and
    other


(6,609
)


(3,875
)


(1,462
)Accretion of discount


4,398



2,402



2,295End of period

$
21,376


$
43,517


$
23,712  F-25




---



##### Table of Contents



INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Note 15 
    Quarterly Consolidated Financial Information
    (Unaudited)
    QuarterFirst


Second


Third


Fourth(In thousands, except per share amounts)2006Total revenue

$
2,364


$
3,356


$
3,742


$
2,830Gross profit

$
1,020


$
2,184


$
2,586


$
1,113Net income (loss)

$
(11,306
)

$
2,655


$
(28,289
)

$
24,253Earnings (loss) per share from
    continuing operations

$
(1.06
)

$
(0.08
)

$
(2.15
)

$
(0.61
)Earnings (loss) per diluted share
    from continuing operations

$
(1.06
)

$
(0.08
)

$
(2.15
)

$
(0.61
)Earnings per share from
    discontinued operations

$
0.24


$
0.26


$
0.28


$
2.05Earnings per diluted share from
    discontinued operations

$
0.24


$
0.26


$
0.28


$
2.052005Total revenue

$
1,445


$
2,204


$
2,906


$
2,637Gross profit

$
837


$
993


$
1,569


$
1,368Net income (loss)

$
(9,463
)

$
4,356


$
646


$
(9,116
)Earnings (loss) per share from
    continuing operations

$
(0.89
)

$
0.19


$
(0.08
)

$
(0.81
)Earnings (loss) per diluted share
    from continuing operations

$
(0.89
)

$
0.18


$
(0.08
)

$
(0.81
)Earnings (loss) per share from
    discontinued operations

$
0.08


$
0.14


$
0.13


$
0.13Earnings (loss) per diluted share
    from discontinued operations

$
0.08


$
0.13


$
0.13


$
0.13        F-26




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description of Exhibits10
.9

Acknowledgement and Termination
    Agreement between Infinity Energy Resources, Inc., Consolidated
    Oil Well Services, Inc. and Stephen D. Stanfield, dated
    December 15, 200621


Subsidiaries of the Registrant23
.1

Consent of Ehrhardt Keefe
    Steiner & Hottman PC23
.2

Consent of Netherland
    Sewell & 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)  E-1