**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-KSB/A**


**Amendment
      No. 3**





(Mark
      One)





x  ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      fiscal year ended December 31, 2006





o  TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      transition period from _______ to _______


Commission
      file number 000-51720





**InferX
      Corporation**


(Name
      of
      small business issuer in its charter)





Delaware
            
            54-1614664(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer Identification No.)1600
                International Drive, Suite 110
              McLean,
                Virginia
            
            22102(Address
                of principal executive offices)
            
            (Zip
                Code)





Issuer’s
      telephone number: (703) 917-0880





Securities
      registered under Section 12(b) of the Exchange Act:





Title
                of each class
            
            Name
                of each exchange on which registeredNone





Securities
      registered under Section 12(g) of the Exchange Act:





Common
      stock, $.0001 par value


(Title
      of
      class)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
o
      No x





The
      issuer’s revenues for the most recent fiscal year, ended December 31, 2006, were
      $199,991.





The
      aggregate market value of the issuer’s voting and non-voting common equity held
      by non-affiliates, computed by reference to the price at which the common equity
      was last sold, October 26, 2006, was approximately $2,106,090.





As
      of
      April 13, 2007, there were outstanding 9,129,392 shares of the issuer’s common
      stock, $.0001 par value.





**DOCUMENTS
      INCORPORATED BY REFERENCE**


None





Transitional
      Small Business Disclosure Format (Check one): Yes o No x









Table
      of Contents




PagePART
                IItem
                1.
            
            Description
                of Business
            
            1Item
                2.
            
            Description
                of Property
            
            7Item
                3.
            
            Legal
                Proceedings
            
            7Item
                4.
            
            Submission
                of Matters To A Vote Of Security Holders
            
            77PART
                IIItem
                5.
            
            Market
                for Common Equity and Related Stockholder Matters
            
            7Item
                6.
            
            Management’s
                Discussion and Analysis
            
            8Item
                7.
            
            Financial
                Statements
            
            18Item
                8.
            
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            18Item
                8A.
            
            Controls
                and Procedures
            
            18Item
                8B.
            
            Other
                Information
            
            18PART
                IIIItem
                9.
            
            Directors,
                Executive Officers, Promoters , Control Persons and Corporate Governance;
                Compliance with Section 16 (a) of the Exchange Act
            
            19Item
                10.
            
            Executive
                Compensation
            
            21Item
                11.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            21Item
                12.
            
            Certain
                Relationships and Related Transactions, and Director
                Independence
            
            23Item
                13.
            
            Exhibits
            
            23Item
                14.
            
            Principal
                Accountant Fees and Services
            
            24





-i-


SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS





Certain
      statements in this Annual Report on Form 10-KSB, including statements under
      “Item 1. Description of Business,” and “Item 6. Management’s Discussion and
      Analysis,” contain forward-looking statements within the meaning of Section 27A
      of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
      of
      1934. Forward-looking statements include, among other things, business strategy
      and expectations concerning industry conditions, market position, future
      operations, margins, profitability, liquidity and capital resources.
      Forward-looking statements generally can be identified by the use of terminology
      such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate” or “believe”
or similar expressions or the negatives thereof. These expectations are based
      on
      management’s assumptions and current beliefs based on currently available
      information. Although we believe that the expectations reflected in such
      statements are reasonable, we can give no assurance that such expectations
      will
      be correct. You are cautioned not to place undue reliance on these
      forward-looking statements, which speak only as of the date of this annual
      report on Form 10-KSB. Our operations are subject to a number of uncertainties,
      risks and other influences, many of which are outside our control, and any
      one
      of which, or a combination of which, could cause our actual results of
      operations to differ materially from the forward-looking
      statements.





-ii-


**PART
      I**




**Item
                1.**
            **Description
                of Business**




We
      develop and market enterprise software that performs privacy preserving
      predictive analysis on computer databases. Predictive analytics is the analysis
      of historical and current information to identify trends and patterns to predict
      likely future outcomes. Our products simultaneously analyze data in multiple
      remote locations with disparate formats without the need to move the data to
      a
      central data warehouse, thereby preserving the privacy and security of the
      data.
      Our technology can be used to identify and predict risks and opportunities
      in
      near real time for many applications, including homeland security, fraud and
      intrusion detection, and customer relationship management, or CRM. For example,
      our technology could help identify high risk cargo containers, identify
      fraudulent insurance claims or identify opportunities for cross selling and
      customer retention.




Historically,
      we have derived nearly all of our sales revenues under federal government
      contracts. Under these contracts, we performed research and development that
      enabled us to retain ownership of the intellectual property, which led to the
      creation of our current products. Due to the relatively small and uncertain
      margins associated with fixed price government contracts and the inherent limit
      of the market size, in fiscal 2002 we began to develop our software as a
      commercial product, concentrating on building specific applications that we
      believed would meet the needs of potential new customers. In fiscal 2003, we
      sold two commercial software licenses. However, since fiscal 2004, all of our
      revenues have derived from government contracts. Currently, we have one contract
      with the Missile Defense Agency to develop a prototype of a specialized
      application of our software.




**Corporate
      History**




Our
      company was incorporated in Delaware in May 2005 under the name Black Nickel
      Acquisition Corp. I. From inception to October 2006, we were a “shell
      company” with no business or operations and only nominal assets. In October
      2006, we acquired and merged with InferX Corporation, a Virginia corporation
      formed in 1992 (“ ***InferX
      Virginia*** ”),
      and
      succeeded to its business as our sole line of business. In connection with
      the
      merger, we changed our name to “InferX Corporation.”




InferX
      Virginia was formed in August 2006 by the merger of the former InferX
      Corporation, a Delaware corporation (“ ***InferX
      Delaware*** ”),
      with
      and into Datamat Systems Research, Inc., a Virginia corporation and an affiliate
      of InferX Delaware through common ownership (“ ***Datamat*** ”),
      pursuant to which Datamat was the surviving corporation and changed its name
      to
“InferX Corporation.” Datamat was formed in 1992 as a professional services
      research and development firm, specializing in technology for distributed
      analysis of sensory data relating to airborne missile threats under contracts
      with the Missile Defense Agency and other Department of Defense (“ ***DoD*** ”)
      contracts. InferX Delaware was formed in 1999 to commercialize Datamat’s missile
      defense technology to build applications of real time predictive analytics.
      The
      original technology was developed in part with grants by the Missile Defense
      Agency.




**Market
      Opportunity**




We
      believe that the demand for predictive analytics technology, in general, has
      increased in the last several years. Moreover, the need for advanced predictive
      analytics to analyze data in multiple remote locations has significantly
      increased due to the heightened security concerns after the events of September
      11, 2001 and the proliferation of databases across the intelligence community
      and federal agencies. Our key executives have been working with the federal
      government for several years and have gained insight into the need for advanced
      predictive analytics software and the required capabilities of that software,
      particularly within the Department of Homeland Security (“ ***DHS*** ”).
      Prior
      to joining InferX, one of our key executives was tasked by the Office of the
      Inspector General to assess all of the analytics systems within DHS. His
      findings, some of which have been publicly released, show that there is a
      significant need for advanced predictive analytics technology that is privacy
      preserving and that analyzes data in multiple remote locations and predicts
      risks and opportunities in near real time. For example, DHS needs the ability
      to
      identify prospective terrorist threats by analyzing sensitive information
      contained in disparate databases maintained by different organizations, such
      as
      consumer and demographic information maintained by companies like Acxiom
      Corporation, consumer credit information maintained by companies like Experian
      and financial transaction information maintained by the United States Department
      of the Treasury Financial Crimes Enforcement Network (“ ***FinCEN*** ”),
      all
      without jeopardizing the secrecy of the underlying information.




-1-




In
      addition, our management has evaluated a number of activities where national
      and
      homeland security related concerns will require predictive analysis software.
      We
      believe that cargo security, particularly involving shipments through ports,
      as
      part of the international supply chain presents a need for predictive analytics
      software, with both government and private industry as potential purchasers
      of
      such software. Accordingly, we have developed a cargo security solution based
      on
      our technology that can simultaneously analyze data from manufacturers,
      distributors, shippers, port operators, customs authorities and others in the
      supply chain to identify shipments that pose a higher security risk and merit
      greater scrutiny or additional screening. We have completed and are currently
      marketing our cargo security solution.




As
      a
      result of the United States’ efforts, particularly through Customs and Border
      Protection under DHS, to secure the international supply chain and the need
      for
      the international community to adopt cargo security standards to ship cargo
      through U.S. ports, we believe that there will be a significant international
      market for our solution. The 2006 World Customs Organization exhibition focused
      on the theme “Safer Trade through Technology.” InferX management attended the
      meeting and expects to establish joint marketing arrangements with European
      companies.




We
      believe our products have a broad application in many other verticals in the
      areas of fraud detection, risk analysis and customer retention. Specific
      examples of potential uses of our products are as follows:




·
            Financial
                Services: Increase customer retention; optimization of cross selling;
                detection of money laundering; and fraud
                detection.




·
            Insurance:
                Increase customer profitability; fraud detection; optimization of
                cross
                selling; and customer compliance.




·
            Healthcare:
                Optimal treatment analysis; clinical drug trial analysis; analysis
                of
                medical images; and healthcare fraud and abuse detection.




·
            Retail:
                Promotion effectiveness analysis; product placement analysis; optimization
                of cross selling; and sales force
                optimization.




**Our
      Product O** **fferings**




*InferAgent* *®*




Our
      flagship product is InferAgent. InferAgent was originally developed to analyze
      distributed sensor data from different locations for the Missile Defense Agency,
      an agency within the DoD. Lockheed Martin has successfully used InferAgent
      to
      analyze sensor data for a classified military project for target discrimination
      and acquisition.




InferAgent
      can analyze data in multiple geographic locations, in near real time without
      ever moving the data. InferAgent uses the Internet and private Intranets to
      analyze information from multiple locations. We use encrypted pointers to the
      data, which cannot be used to expose the data they represent, to move
      information across the network, thereby preserving the security and privacy
      of
      the databases.




As
      a
      result of the analysis, InferAgent can detect and predict risks and
      opportunities for both commercial and government customers. InferAgent is a
      generic solution that analyzes data in any structured data format. Based upon
      the trends and interrelations among the data, it can identify any kind of risk
      or opportunity that is relevant to the application.




For
      example, in national and homeland security applications, InferAgent could
      identify terrorism risks in the international supply chain - this is our cargo
      security application. InferAgent can analyze order data maintained by importers,
      customer order history and other data maintained by manufacturers, shipping
      manifests maintained by shipping companies, customer information maintained
      by
      freight forwarders. By analyzing these disparate databases using our technology,
      InferAgent can detect anomalies and other predictors of increased risk that
      would help port operators identify incoming shipments that should be subjected
      to increased scrutiny.




-2-




In
      the
      financial services sector, InferAgent could identify opportunities for cross
      selling or transactions that are likely tied to money laundering, fraud or
      other
      illegal activity. InferAgent can analyze large databases of consumer credit
      history and demographic information maintained by companies like Acxiom and
      Experian together with a company’s internal customer history database to help
      the company identify products or services it does not currently offer but that
      its customers would likely be interested in buying. Analyzing consumer credit
      history and demographic information together with financial transaction
      information maintained by FinCEN could detect suspicious transactions or
      individuals who are engaging in suspicious financial transactions.




We
      believe that InferAgent has placed us at the forefront of a new category of
      technology called “privacy preserving analytics.” Members of our management have
      attended two academic conferences focused on privacy preserving analytics and
      conducted research of competing solutions on the market in development. To
      our
      knowledge, none of our competitors has a product that can simultaneously analyze
      data in multiple locations while maintaining the security and privacy of the
      underlying information. With InferAgent, privacy is preserved because the data
      is not moved.




*InferText* *TM*




Based
      on
      InferAgent’s distributed architecture, InferText is designed to analyze
      unstructured content, such as documents, email and other types of text. Unlike
      traditional, keyword search based approaches to unstructured content, InferText
      transforms unstructured content into a format that facilitates the discovery
      of
      meaningful relationships among documents. Although InferText is still in
      development, we have successfully tested its functionality. We anticipate a
      commercial release sometime in fiscal 2007.




*InferCluster* *TM*




Clustering
      refers to the partitioning of data into groups such that data within the same
      group are more similar to each other than data in different groups. Clustering
      makes it easier to recognize outliers and other anomalies in the data. We
      believe that this has become an increasingly essential data analysis task.
      InferCluster automatically identifies similarities and performs this clustering
      without the need for user intervention. For example, in the financial services
      industry, clustering could group wire transfers according to various
      characteristics - amount, country of origin, date - and by revealing anomalous
      transactions, lead to the identification of money laundering
      activity.




InferCluster
      is designed to automatically perform clustering on distributed data, which
      we
      believe no other clustering solution currently does. InferCluster uses the
      same
      distributed architecture as InferAgent. Although InferCluster is still in
      development, we have successfully tested its functionality. We anticipate a
      commercial release sometime in fiscal 2007.




-3-




*InferView* *TM*




InferView
      allows users to discover trends and patterns in a single database by creating
      a
      3-D visualization space where users can see, explore, zoom in and gain insight
      into their data. InferView predicts and visualizes likely outcomes by applying
      the same predictive analysis to a single database that InferAgent applies to
      distributed databases. We currently do not market InferView as a stand-alone
      product. Northrop Grumman successfully used InferView for diagnostics and to
      predict failures for military aircraft and to learn from historical aircraft
      failures to streamline and optimize their supply chain.




**Patents**  **and Trademarks**




We
      developed our technology primarily under Small Business Innovative Research
      contracts with the federal government. These government contracts allowed us
      to
      retain ownership of the intellectual property. Our technology is protected
      by
      the following patents:




**Patent**
            
            **Information**
            
            **Dates**
            
            **Status**InferView
            
            Full
                application
            
            Filed
                July 2003
            
            PendingUS
                Serial:
              10/617,054InferAgent
            
            Full
                application
            
            Filed
                July 2003
            
            PendingUS
                Serial:
              10/616,718A
                hybrid Bayesian decision tree for classification
            
            Full
                application
            
            Filed
                March 2003
            
            PendingUS
                Serial:
              60/556,554InferCluster
            
            Provisional
                application
            
            Filed
                September 2006
            
            FiledInferText
            
            Provisional
                application
            
            Filed
                September 2006
            
            Filed




Our
      InferView patent protects the product’s unique graphical user interface that
      helps visualize decision making models.




The
      InferAgent patent covers the architecture, algorithms and framework underlying
      InferAgent’s distributed data mining processes.




The
      hybrid Bayesian decision tree for classification patent describes our method
      for
      increasing the speed of decision making.




We
      have
      filed provisional patent applications for both InferCluster and InferText.
      Provisional patent applications allow us to obtain the earliest possible filing
      dates and give us additional time to prepare a full patent application. We
      anticipate filing full patents for both products by February 2007.




**Competition**




The
      market for our solutions is intensely competitive and is constantly changing.
      Our competitors vary in the size and scope of the products and services they
      offer. We encounter competition from a number of sources,
      including:




·
            predictive
                modeling companies;




·
            CRM
                solutions providers;




·
            business
                intelligence solutions providers;
                and




-4-




·
            software
                companies supplying modeling, rules or analytic development
                tools.




Companies
      such as SAS Institute Inc., SPSS Inc., Fair Isaac Corporation, Angoss Software
      Corp., Megaputer Intelligence, Inc. and Insightful Corporation offer stand-alone
      software systems that perform predictive analysis on single desktops and
      servers. InferAgent can operate on multiple, geographically-dispersed
      computers.




Oracle
      Corporation and Teradata (a division of NCR Corporation) provide analytical
      tools that only operate with their respective proprietary database products.
      InferAgent can operate with multiple databases, regardless of the underlying
      database format.




Companies
      such as Infoglide Software Corporation, International Business Machines
      Corporation, Knowledge Computing Corporation, Exegy, Inc. and Dulles Research,
      LLC, market software that can perform discovery over networks and distributed
      data sources. However, we believe that their software has no predictive analytic
      capabilities and generally provides only for discrete pattern matching, such
      as
      matching of names, phone numbers, IP addresses, etc.




We
      believe our products offer the following advantages compared to our
      competition:




·
            access
                and mine remote data




·
            provide
                predictive analysis where many future risks and opportunities can
                be
                identified




·
            work
                with multiple databases in different
                formats




·
            preserve
                the privacy of data




·
            maintain
                the security and ownership of data




·
            eliminate
                the need for creating data
                warehouses




·
            provide
                near real time analysis and
                prediction




We
      believe access to additional data sources beyond those in a data warehouse
      provides a better basis for more accurate analysis. Also, we believe that the
      elimination of the need for a data warehouse will result in cost and time
      savings and reduce on-going support and maintenance expenses. Accordingly,
      we
      believe using our systems can result in a significant return on
      investment.




**Sales
      and Marketing**




We
      have
      used outside consultants to assist us in developing our marketing and collateral
      material, branding and Web design and content creation. We also use outside
      consultants, to help develop market and media awareness campaigns along with
      public relations strategies. We are not substantially dependent on our
      relationship with these outside consultants to accomplish our marketing
      plans.




We
      have
      hired Jesus Mena as our Chief Strategy Officer to assist with our overall
      product and market strategy, particularly on efforts within DHS. Mr. Mena has
      over 25 years of experience in data mining and has written four books on data
      mining and homeland security, including his latest, “Homeland Security
      Techniques and Technologies.” Mr. Mena recently completed a DHS-wide audit of
      all DHS analytical and data mining systems and has detailed knowledge and
      insight into the efforts and needs of the DHS components. We believe there
      are
      considerable barriers to entry when pursuing sales within DHS. They include
      having access to the proper contracting vehicle, having facilities and people
      with the proper security clearances and having personnel with appropriate core
      knowledge in both product offerings and DHS sales procedures. However, we
      believe that the addition of Mr. Mena and our continuing work with the Missile
      Defense Agency enables us to overcome DHS barriers and affords us significant
      sales advantages.




-5-




In
      addition, we have engaged Michael D. Brown in marketing our products and
      services to senior government officials and members of Congress. Mr. Brown
      was
      formerly the Department of Homeland Security Under Secretary of Federal
      Emergency Management and Director of the Federal Emergency Management Agency.
      Mr. Brown will be working with us in the development, marketing and presentation
      of our products to potential government and commercial customers.




We
      have
      positioned InferX as a leading provider of Privacy Preserving Real-Time
      Analytics solutions. Our marketing efforts include: a series of breakfast
      briefings, with featured speakers Jesus Mena and Michael Brown, targeted to
      the
      federal sector; presentation to major publications of articles and op-ed pieces
      relating to privacy and data analytics; and participation in key trade shows,
      particularly those targeted to participants in the international supply chain,
      to showcase our products and services.




Although
      we currently have no contractual relationship, we have also recently worked
      with
      Northrop Grumman and Lockheed Martin, both of which we believe have substantial
      credibility within DHS. Both companies use our software, and we believe our
      previous work with them will allow us to explore potential business
      opportunities with them on possible future DHS contracts at a minimal cost.
      We
      also have developed a network of business development and marketing
      professionals who work directly with large systems integrators, such as
      Raytheon, General Dynamics, SAIC and others. We are planning to hold several
      focused briefings where protecting data privacy will be the key topic to respond
      to congressional interest in preserving privacy and to increase awareness by
      the
      federal sector of the benefits of our technology.




Our
      sales
      strategy is to identify potential customers by targeting entities where there
      is
      a need for advanced analyses and data privacy is a significant concern. Our
      early focus is on the following:




1.
            components
                of DHS that are analyzing intelligence, detecting terrorist activities
                and
                detecting criminal activities or
                patterns;




2.
            other
                U.S. federal government departments where focus is
                on:




·
            detecting
                fraud, waste and abuse;




·
            detecting
                criminal activities; or




·
            improving
                service or performance;




3.
            international
                supply chain participants, such as importers, sea carriers, sea ports
                and
                terminal operators; and




4.
            commercial
                enterprises that we expect would be early adopters of advanced analytics
                technologies, such as financial services and insurance
                firms.




We
      are
      building our direct sales team, which is both salary and commission based.
      We
      are also focusing on building relationships with channel partners that are
      leading systems integrators, application developers and platform partners,
      to
      generate sales to high-volume data content owners both domestically and abroad.
      The channel partners will be compensated by substantial product discounts that
      are consistent in the industry.




Through
      2007, we plan to expand our sales and marketing force to 17 employees. Beginning
      in 2007, we intend to develop our channel partner relationships.




**Customers**




Government
      contracts are currently our sole source of revenue. For the past two years,
      payments under contracts with the Missile Defense Agency have accounted for
      substantially all of our revenues from operations. We expect that government
      contracts will continue to be a significant source of our revenues for the
      foreseeable future.




-6-




**Research
      and Development**




We
      have
      developed a company wide research and development plan which focuses on
      continued development and enhancement of the features and performance of our
      current products. We also have a detailed plan for the development of new
      product offerings. Four of our six employees devote at least a portion of their
      time to research and development activities. During the last two fiscal years,
      our employees devoted approximately 25% of their time to research and
      development activities. Historically, our research and development has been
      performed pursuant to government contracts under which we retained the
      intellectual property rights to the technology.




**Employees**




We
      have
      six employees: five full-time employees, four of whom devote at least a portion
      of their time to sales and marketing, and one part-time administrative employee.
      Four of our employees are members of management. To the best of our knowledge,
      we are in compliance with local prevailing wage, contractor licensing and
      insurance regulations. None of our employees is represented by any collective
      bargaining agreement, and our relationship with our employees is
      good.




**Item
                2.**
            **Description
                of Property**




We
      lease
      approximately 4,700 square feet of office space at 1600 International Drive,
      Suite 110, McLean, Virginia pursuant to a lease which expires in November 2008.
      Our lease provides for an annual rental of approximately $101,000 which is
      subject to annual escalations of 4%. The space can house approximately 15 to
      20
      staff. We believe that our facilities are adequate for our needs and that
      additional space is readily available should we need it.




**Item
                3.**
            **Legal
                Proceedings**




We
      are
      not aware of any pending legal proceedings against us.




**Item
                4.**
            **Submission
                of Matters To A Vote Of Security
                Holders**




None.




**PART
      II**




**Item
                5.**
            **Market
                for Common Equity and Related Stockholder
                Matters**




**Market
      Information**




Our
      common stock is not presently traded on any market or securities exchange,
      and
      we have not applied for listing or quotation on any public market. We are not
      aware of any market activity in our stock since inception through the date
      of
      this filing. We anticipate seeking sponsorship for the quotation of our common
      stock on the OTC Bulletin Board upon effectiveness of the registration statement
      we originally filed with the SEC on November 24, 2006. However, we can provide
      no assurance that our shares will be listed for quotation on the OTC Bulletin
      Board, or, if quoted, that a public market will materialize.




**Holders**




As
      of
      April 13, 2007, there are 34 record holders of 9,129,392 shares of our common
      stock.




**Dividends**




We
      do not
      intend to pay cash dividends on our common stock for the foreseeable future,
      but
      currently intend to retain any future earnings to fund the development and
      growth of our business. The payment of dividends if any, on the common stock
      will rest solely within the discretion of the Board of Directors and will
      depend, among other things, upon our earnings, capital requirements, financial
      condition, and other relevant factors. We have not paid or declared any
      dividends upon our common stock since inception.




-7-




**Item
                6.**
            **Management’s
                Discussion and Analysis**




*The
      following discussion should be read in conjunction with the Financial Statements
      and the notes thereto that appear in Item 7 of this annual report on Form
      10-KSB.*




**Overview**




Our
      company was formed in May 2005 to pursue a business combination. On October
      24,
      2006, we acquired InferX Corporation, a Virginia corporation (“InferX
      Virginia”), and on October 27, 2006 we merged InferX Virginia into our company
      and changed our name to “InferX Corporation.” After the acquisition of InferX
      Virginia, we succeeded to its business as our sole line of business. InferX
      Virginia was formed in August 2006 by the merger of the former InferX
      Corporation, a Delaware corporation (“InferX Delaware”), with and into Datamat
      Systems Research, Inc., a Virginia corporation and an affiliate of InferX
      Delaware (“Datamat”), pursuant to which Datamat was the surviving corporation
      and changed its name to “InferX Corporation.”




Datamat
      was formed in 1992 as a professional services research and development firm,
      specializing in technology for distributed analysis of sensory data relating
      to
      airborne missile threats under contracts with the Missile Defense Agency and
      other DoD contracts. InferX Delaware was formed in 1999 to commercialize
      Datamat’s missile defense technology to build applications of real time
      predictive analytics. The original technology was developed in part with grants
      by the Missile Defense Agency.




Historically,
      we have derived nearly all of our sales revenues under federal government
      contracts. Under these contracts, we performed research and development that
      enabled us to retain ownership of the intellectual property, which led to the
      creation of our current products. Due to the relatively small and uncertain
      margins associated with fixed price government contracts and the inherent limit
      of the market size, in fiscal 2002 we began to develop our software as a
      commercial product, concentrating on building specific applications that we
      believed would meet the needs of potential new customers. In fiscal 2003, we
      sold two commercial licenses. However, since fiscal 2004, all of our revenues
      have derived from government contracts. Currently, we have one contract with
      the
      Missile Defense Agency to develop a prototype application of our
      software.




**Critical
      Accounting Policies**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenue and expenses during
      the reporting period. We rely on historical experience and on other assumptions
      we believe to be reasonable under the circumstances in making our judgments
      and
      estimates. Actual results could differ from those estimates. We consider our
      critical accounting policies to be those that are complex and those that require
      significant judgments and estimates, including the following: recognition of
      revenue, capitalization of software development costs and income
      taxes.




*Cash
      and Cash Equivalents*




We
      consider all highly liquid debt instruments and other short-term investments
      with a maturity of three months or less, when purchased, to be cash
      equivalents.




We
      maintain cash and cash equivalent balances at one financial institution that
      is
      insured by the Federal Deposit Insurance Corporation up to
      $100,000.




-8-




*Allowance
      for Doubtful Accounts*




We
      provide an allowance for doubtful accounts, which is based upon a review of
      outstanding receivables as well as historical collection information. Credit
      is
      granted to substantially all customers on an unsecured basis. In determining
      the
      amount of the allowance, management is required to make certain estimates and
      assumptions.




*Fixed
      Assets*




Fixed
      assets are stated at cost, less accumulated depreciation. Depreciation is
      provided using the straight-line method over the estimated useful lives of
      the
      related assets (primarily three to five years). Costs of maintenance and repairs
      are charged to expense as incurred.




*Computer
      Software Development Costs*




During
      2006 and 2005, we capitalized certain software development costs. We capitalize
      the cost of software in accordance with SFAS 86 once technological feasibility
      has been demonstrated, as we have in the past sold, leased or otherwise marketed
      our software and plan on doing so in the future. We capitalize costs incurred
      to
      develop and market our privacy preserving software during the development
      process, including payroll costs for employees who are directly associated
      with
      the development process and services performed by consultants. Amortization
      of
      such costs is based on the greater of (1) the ratio of current gross revenues
      to
      the sum of current and anticipated gross revenues, or (2) the straight-line
      method over the remaining economic life of the software, typically five years.
      It is possible that those anticipated gross revenues, the remaining economic
      life of the products, or both, may be reduced as a result of future events.
      We
      have not developed any software for internal use.




*Revenue
      Recognition*




Historically
      we have generated revenue from professional services under both fixed-price
      and
      time-and-material contracts. Since 2004, all our revenue has been generated
      under fixed-price contracts.




*Time-and-Material
      Contracts*




Time-and-material
      contracts revenue is generated as costs are generally incurred in proportion
      with contracted billing schedules and revenue is recognized as services are
      performed, with the corresponding cost of providing those services reflected
      as
      direct costs. Such method is expected to result in reasonably consistent profit
      margins over the contract term.




*Fixed-Price
      Contracts*




Revenue
      from firm-fixed-price contracts is recognized upon achievement of the milestones
      contained in the contracts in accordance with the provisions of Staff Accounting
      Bulletin 104. Revenue is not recognized until collectibility is assured, which
      does not take place until completion of the particular milestone. Costs are
      recognized as services are performed.




We
      do not
      derive revenue from projects involving multiple revenue-generating activities.
      If a contract would involve the provision of multiple service elements, total
      estimated contract revenue would be allocated to each element based on the
      fair
      value of each element.




The
      amount of revenue allocated to each element would then be limited to the amount
      that is not contingent upon the delivery of another element in the future.
      Revenue for each element would then be recognized depending upon whether the
      contract is a time-and-materials contract or a fixed-price, fixed-time
      contract.




-9-




*Stock-Based
      Compensation*




During
      the years ended December 31, 2006 and 2005, we did not issue any stock options
      or other equity based incentives. However, we intend to adopt, subject to
      stockholder approval, a qualified stock option plan that will include up to
      2,200,000 shares of our common stock.




On
      December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
      Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based
      Payment” (“SFAS 123R”). SFAS 123R requires that compensation cost related to
      share-based payment transactions be recognized in the financial statements.
      Share-based payment transactions within the scope of SFAS 123R include stock
      options, restricted stock plans, performance-based awards, stock appreciation
      rights, and employee share purchase plans. The provisions of SFAS 123R, as
      amended, are effective for small business issuers beginning as of the next
      interim period after December 15, 2005. We have adopted these provisions as
      of
      January 1, 2006, and this adoption did not have a material effect on our
      operations.




On
      January 1, 2006, we adopted the provisions of FAS No. 123R “Share-Based Payment”
(“FAS 123R”) which requires recognition of stock-based compensation expense for
      all share-based payments based on fair value. Prior to January 1, 2006, we
      measured compensation expense for all of our share-based compensation using
      the
      intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion
      No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related
      interpretations. We have provided pro forma disclosure amounts in accordance
      with FAS No. 148, “Accounting for Stock-Based Compensation - Transition and
      Disclosure - an amendment of FASB Statement No. 123” (“FAS 148”), as if the fair
      value method defined by FAS No. 123, “Accounting for Stock Based Compensation”
(“FAS 123”) had been applied to our stock-based compensation.




We
      have
      elected to use the modified-prospective approach method. Under that transition
      method, the calculated expense in 2006 is equivalent to compensation expense
      for
      all awards granted prior to, but not yet vested as of January 1, 2006, based
      on
      the grant-date fair values estimated in accordance with the original provisions
      of FAS 123. Stock-based compensation expense for all awards granted after
      January 1, 2006 is based on the grant-date fair values estimated in accordance
      with the provisions of FAS 123R. We recognize these compensation costs, net
      of
      an estimated forfeiture rate, on a pro rata basis over the requisite service
      period of each vesting tranche of each award. We consider voluntary termination
      behavior as well as trends of actual option forfeitures when estimating the
      forfeiture rate.




*Concentrations*




We
      have
      derived all of our revenue from agencies of the United States
      Government.




Financial
      instruments that potentially subject us to significant concentrations of credit
      risk consist principally of accounts receivable. To date, accounts receivable
      have been derived from contracts with agencies of the federal government.
      Accounts receivable are generally due within 30 days and no collateral is
      required.




*Derivative
      Financial Instruments*




We
      generally do not use derivative financial instruments to hedge exposures to
      cash-flow or market risks. However, certain other financial instruments, such
      as
      warrants or options to acquire common stock and the embedded conversion features
      of debt and preferred instruments that are indexed to our common stock, are
      classified as liabilities when either (a) the holder possesses rights to
      net-cash settlement or (b) physical or net share settlement is not within our
      control. In such instances, net-cash settlement is assumed for financial
      accounting and reporting, even when the terms of the underlying contracts do
      not
      provide for net-cash settlement. Such financial instruments are initially
      recorded at fair value and subsequently adjusted to fair value at the close
      of
      each reporting period. These derivative financial instruments are the Class
      A
      and Class B warrants issued in conjunction with our October 2006 private
      placement.




-10-




*Income
      Taxes*




Under
      Financial Accounting Standards Board Statement No. 109, “Accounting for Income
      Taxes,” the liability method is used in accounting for income taxes. Under this
      method, deferred tax assets and liabilities are determined based on differences
      between financial reporting and tax bases of assets and liabilities, and are
      measured using the enacted tax rates and laws that will be in effect when the
      differences are expected to reverse.




*Research
      and Development*




Research
      and development costs are expensed as incurred.




**Recent
      Issued Accounting Standards**




In
      January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation
      of Variable Interest Entities,” an interpretation of Accounting Research
      Bulletin No. 51, “Consolidated Financial Statements.” FIN 46 establishes
      accounting guidance for consolidation of variable interest entities that
      function to support the activities of the primary beneficiary. In December
      2003,
      the FASB revised FIN 46 and issued FIN 46 (revised December 2003) (“FIN 46R”).
      In addition to conforming to previously issued FASB Staff Positions, FIN No.
      46R
      deferred the implementation date for certain variable interest entities. This
      revised interpretation is effective for all entities no later than the end
      of
      the first reporting period that ends after March 15, 2004. We do not have any
      investments in or contractual relationship or other business relationship with
      a
      variable interest entity and therefore the adoption of this interpretation
      will
      not have any impact on our results of operations, financial position or cash
      flows.




On
      December 16, 2004, FASB issued SFAS No. 153, “Exchanges of Non-monetary Assets,
      an amendment of APB Opinion 29, Accounting for Non-monetary Transactions” (“SFAS
      153”). This statement amends APB Opinion 29 to eliminate the exception for
      non-monetary exchanges of similar productive assets and replaces it with a
      general exception for exchanges of non-monetary assets that do not have
      commercial substance. Under SFAS 153, if a non-monetary exchange of similar
      productive assets meets a commercial-substance criterion and fair value is
      determinable, the transaction must be accounted for at fair value resulting
      in
      recognition of any gain or loss. SFAS 153 is effective for non-monetary
      transactions in fiscal periods that begin after June 15, 2005. We do not
      anticipate that the implementation of this standard will have a material impact
      on our financial position, results of operations or cash flows.




In
      May
      2005, FASB issued FASB Statement No. 154, “Accounting Changes and Error
      Corrections (“SFAS 154”). SFAS 154 replaces Accounting Principles Board Opinion
      No. 20, “Accounting Changes” and FASB Statement No. 3, “Reporting Accounting
      Changes in Interim Financial Statements,” and requires the direct effects of
      accounting principle changes to be retrospectively applied. The existing
      guidance with respect to accounting estimate changes and corrections of errors
      is carried forward in SFAS 154. SFAS 154 is effective for accounting changes
      and
      corrections of errors made in fiscal years beginning after December 15, 2005.
      We
      do not expect the adoption of SFAS 154 to have a material effect on our
      financial statements.




In
      February 2006, the FASB issued Statement of Financial Accounting Standard No.
      155, “Accounting for Certain Hybrid Instruments” (“SFAS 155”). FASB 155 allows
      financial instruments that have embedded derivatives to be accounted for as
      a
      whole (eliminating the need to bifurcate the derivative from its host) if the
      holder elects to account for the whole instrument on a fair value basis. This
      statement is effective for all financial instruments acquired or issued after
      the beginning of an entity’s first fiscal year that begins after September 15,
      2006. We will evaluate the impact of SFAS 155 on our consolidated financial
      statements.




In
      September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
      standard defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosure about fair
      value measurements. This statement is effective for financial statements issued
      for fiscal years beginning after November 15, 2007. Early adoption is
      encouraged. The adoption of SFAS 157 is not expected to have a material impact
      on the consolidated financial statements.




-11-




In
      September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
      87, 88, 106 and 132(R)” (“SFAS 158”). SFAS 158 requires an employer to recognize
      the over-funded or under-funded status of a defined benefit postretirement
      plan
      (other than a multiemployer plan) as an asset or liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income. SFAS 158 also requires
      the
      measurement of defined benefit plan assets and obligations as of the date of
      the
      employer’s fiscal year-end statement of financial position (with limited
      exceptions). Management does not expect adoption of SFAS 158 to have a material
      impact on our consolidated financial statements.




In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities - Including an amendment of FASB Statement
      No.
      115”, (“FAS 159”) which permits entities to choose to measure many financial
      instruments and certain other items at fair value at specified election dates.
      A
      business entity is required to report unrealized gains and losses on items
      for
      which the fair value option has been elected in earnings at each subsequent
      reporting date. This statement is expected to expand the use of fair value
      measurement. FAS 159 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007, and interim periods within those fiscal
      years.




In
      July
      2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for
      Uncertainty in Income Taxes.” This interpretation requires recognition and
      measurement of uncertain income tax positions using a “more-likely-than-not”
approach. FIN No. 48 is effective for fiscal years beginning after December
      15,
      2006. Management is still evaluating what effect this will have on our
      consolidated financial statements.




In
      September 2006, the SEC issued SAB 108, “Considering the Effects of Prior Year
      Misstatements when Quantifying Misstatements in Current Year Financial
      Statements.”




This
      SAB
      provides guidance on the consideration of the effects of prior year
      misstatements in quantifying current year misstatements for the purpose of
      a
      materiality assessment. SAB 108 establishes an approach that requires
      quantification of financial statement errors based on the effects of each of our
      financial statements and the related financial statement disclosures. SAB 108
      permits existing public companies to record the cumulative effect of initially
      applying this approach in the first year ending after November 15, 2006 by
      recording the necessary correcting adjustments to the carrying values of assets
      and liabilities as of the beginning of that year with the offsetting adjustment
      recorded to the opening balance of retained earnings. Additionally, the use
      of
      the cumulative effect transition method requires detailed disclosure of the
      nature and amount of each individual error being corrected through the
      cumulative adjustment and how and when it arose. We do not anticipate that
      SAB
      108 will have a material impact on our consolidated financial
      statements.




In
      December 2006, the FASB Staff issued FSP EITF - 00-19-2, “Accounting for
      Registration Payment Arrangements” (“EITF 00-19-2”). EITF 00-19-2 addresses an
      issuer’s accounting for registration payment arrangements. EITF 00-19-2
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      SFAS No. 5, Accounting for Contingencies. EITF 00-19-2 is effective for
      financial statements issued for fiscal years beginning after December 15, 2006,
      and interim periods within those fiscal years. We believe that EITF 00-19-2
      will
      have an impact on our consolidated financial statements as it relates to the
      Class A and Class B warrants entered into in connection with our 2006 private
      placement resulting in a cumulative-effect adjustment reclassifying the
      derivative liability to additional paid-in capital and retained earnings.




**Results
      of Operations**




**Fiscal
      Years Ended December 31, 2006 and 2005**




Revenue
      for the year ended December 31, 2006 was approximately $200,000, a decrease
      of
      approximately $25,000, or 11% from approximately $225,000 for the same period
      in
      2005. This was a result of a decision by management to reduce reliance on
      general Federal Government professional services contracts and to concentrate
      on
      Federal Government contracts within our core competency and further development
      and sales of our software for use in the commercial sector.




-12-




Direct
      costs for the year ended December 31, 2006 were approximately $282,000 compared
      to approximately $209,000 for the same period in 2005, an increase of
      approximately $73,000 or 35%. Direct costs before capitalization of labor costs
      were approximately $317,000 in 2006 and $233,000 in 2005, representing
      capitalized labor of approximately $35,000 and $24,000 in 2006 and 2005,
      respectively. This increase in direct costs in 2006 compared to 2005 of
      approximately $84,000 or 36% resulted primarily from an increase in subcontract
      labor of approximately $50,000 in 2006 and reductions in salary accepted by
      key
      direct employees in 2005 of approximately $35,000 when compared to 2006.
      Accordingly, our gross margin declined in the year ended December 31, 2006
      to
      (41%) from 7% for the same period in 2005.




Operating
      expenses, which include indirect labor, professional fees, advertising,
      consulting and general and administrative, increased approximately $563,000
      from
      approximately $527,000 for the year ended December 31, 2005 to approximately
      $1,090,000 for the same period in 2006. This represents an increase of 107%.
      The
      increase is the result of the following: an increase in indirect and overhead
      labor and fringes of approximately $352,000, resulting from costs related to
      an
      increase in staffing in 2006 of approximately $125,000 and reductions in
      salaries and fringes accepted by key employees in 2005 of approximately
      $240,000; an increase in professional services of approximately $263,000,
      consisting of non-cash charges of approximately $199,000 for stock issued to
      consultants for services and an increase in accounting costs of approximately
      $64,000 related to our becoming a public company; and a reduction in advertising
      and marketing of approximately $69,000, which reflects reduced reliance on
      outside consults for branding and advertising.




**Liquidity
      and Capital Resources**




We
      had
      cash of approximately $80,000 at December 31, 2006 and a working capital deficit
      of approximately ($1,041,000). During the year ended December 31, 2006 we used
      approximately $788,000 from our operations. Operations were funded primarily
      from the net sales of equity of approximately $1,017,000.




In
      October 2006, we completed a private placement in which the investors paid
      $.50
      per share of common stock, and also received one five-year warrant with an
      exercise price of $.50 and one five-year warrant with an exercise price of
      $.62.
      We sold 2,329,392 units in the private placement (including $362,196 in
      cancellation of indebtedness and accrued interest under outstanding bridge
      loans), resulting in gross cash proceeds of approximately $802,500. In April
      2007, we and holders of our Class A warrants agreed to reduce the exercise
      price
      of 80% of the Class A warrants to $.25 per share for a period of two weeks.
      We
      received approximately $407,000 from the exercise of 1,629,513
      warrants.




We
      have
      entered in to employment contracts that range in length from three to five
      years
      with five employees. The contracts call for total annual compensation in the
      amount of $670,000.




We
      will
      need to generate significant additional revenue to support our projected
      increases in staffing and other operating expenses, which we cannot give any
      assurance we will be able to accomplish. We are currently expending
      approximately $125,000 per month to support our operations, and under our
      projected growth plan, we would be expending approximately $250,000 per month
      by
      the end of fiscal 2007. Along with revenues from our existing contracts, we
      believe our existing capital is sufficient to fund our operations only through
      the third quarter of 2007. If we are unable to generate increased revenue,
      it
      will be necessary for us to significantly reduce expenses or raise additional
      capital to stay in business. In addition to the warrant exercise above, we
      estimate that we will require approximately $500,000 in additional capital
      to
      sustain our operations at their current level through fiscal 2007 and that
      we
      will require as much as $3,000,000 in additional revenues or $1,500,000 in
      additional funding to achieve our projected growth plan.




Although
      we believe the additional capital we will require will be provided either
      through the exercise of warrants and/or increased revenue, we cannot assure
      you
      that the warrants will be exercised or that we can generate sufficient revenue
      to maintain projected operating levels. Accordingly, we may need to try to
      secure additional equity or debt financing which we cannot assure you would
      be
      available to us at prices that would be acceptable. Our failure to generate
      such
      revenue, reduce expenses or obtain necessary financing could impair our ability
      to stay in business and raises substantial doubt about our ability to remain
      as
      a going concern.




-13-




**RISK
      FACTORS**




*Investing
      in our securities involves a high degree of risk. Before investing in our
      securities, you should carefully consider the risks and uncertainties described
      below and the other information in this filing before deciding to purchase
      our
      common stock. If any of these risks or uncertainties actually occurs, our
      business, financial condition or future operating results could be materially
      harmed. In that case, the price of our common stock could decline and you could
      lose part or all of your investment.*




**Risks
      Related to Our Operating Results and Business**




**The
      likelihood of successfully implementing our business plan cannot be predicted
      from our limited operating history.**




Although
      our predecessor entity commenced operations in January 1992, we entered our
      current business based on software product sales in April 2000 and achieved
      our
      first sale in 2003. Since then, our software product sales have totaled less
      than $1,000,000. Therefore, there is limited historical basis on which to
      determine whether we will be successful in implementing our business
      plan.




**The
      market for our products and services is new and evolving and a viable market
      may
      never develop or may take longer to develop than we
      anticipate.**




Our
      software and services represent what we believe is a novel entry in an emerging
      market, and we do not know the extent to which our targeted customers will
      want
      to purchase them. The development of a viable market for our products may be
      impacted by many factors which are out of our control, including customer
      reluctance to try new products and services and the existence and emergence
      of
      products and services marketed by better-known competitors.




If
      a
      viable market fails to develop or develops more slowly than we anticipate,
      we
      may be unable to recover the losses we will have incurred to develop our
      products and services and may be unable to achieve profitability.




**We
      operate in a competitive market which could constrain our future growth and
      profitability.**




We
      operate in a competitive environment, competing for customers with software
      companies, consulting firms and others. Many of our competitors offer
      complimentary products and/or services that we do not offer. Moreover, some
      of
      our competitors are much larger than we are, have proven products and services
      and may have the marketing and sales capabilities to commercialize competing
      products and services more effectively than we can.




**The
      industry in which we operate is characterized by rapid technological changes,
      and our continued success will depend upon our ability to react to such
      changes.**




The
      markets for our products and services are characterized by rapidly changing
      technology. The introduction of products or services embodying new technology
      can render our existing products and services obsolete and unmarketable and
      can
      exert price pressures on existing products and services. It is critical to
      our
      success for us to be able to anticipate changes in technology and to
      successfully develop and introduce new, enhanced and competitive products and
      services on a timely basis. We cannot assure you that we will successfully
      develop new products or services or introduce new applications for existing
      products and services, that new products and applications will achieve market
      acceptance or that the introduction of new products, services or technological
      developments by others will not render our products and services obsolete.
      Our
      inability to develop products and services that are competitive in technology
      and price and meet customer needs could have a material adverse effect on our
      business, financial condition or results of operations.




-14-




**Our
      management controls a substantial percentage of our stock and therefore has
      the
      ability to exercise substantial control over our affairs.**




As
      of the
      date of this filing, our directors and executive officers beneficially owned
      4,917,212 shares, or approximately 53.9%, of our outstanding common stock in
      the
      aggregate. Because of the large percentage of stock held by our directors and
      executive officers, these persons could influence the outcome of any matter
      submitted to a vote of our stockholders.




**The
      loss of our executive officers and certain other key personnel could hurt our
      business.**




Our
      success wholly depends upon the personal efforts and abilities of our officers
      and other key personnel, B.K. Gogia, Jerzy Bala and Jesus Mena. The loss of
      or
      unavailability of the services of any one of these individuals would have a
      material adverse effect on our business prospects and/or potential earning
      capacity.




**We
      may not be able to hire and retain qualified technical
      personnel.**




Competition
      for qualified personnel in the computer software industry is intense, and we
      may
      not be successful in attracting and retaining such personnel. Failure to attract
      qualified personnel could harm the proposed growth of our business. In addition,
      companies in our industry whose employees accept positions with competitors
      frequently claim that the competitors have engaged in unfair hiring practices.
      We may receive such notices in the future as we seek to hire qualified personnel
      and such notices may result in material litigation and related disruption to
      our
      operations.




**We
      may not be able to protect important intellectual property, and we could incur
      substantial costs defending against claims that our products infringe on the
      proprietary rights of others.**




We
      currently have three patent applications pending and we have filed two
      provisional patents recently. While we believe that we have a proprietary
      position in component technologies for our products, our ability to compete
      effectively will depend, in part, on our ability to protect our proprietary
      technologies, processes and designs, to secure patents for the applications
      we
      have pending and to protect those patents that we may secure. We do not know
      whether any of our pending patent applications will be issued or, if issued,
      that the claims allowed are or will be sufficiently broad to protect our
      technology or processes. Even if all of our patent applications are issued
      and
      are sufficiently broad, our patents may be challenged or
      invalidated.




We
      could
      incur substantial costs in prosecuting or defending patent infringement suits
      or
      otherwise protecting our intellectual property rights. While we have attempted
      to safeguard and maintain our proprietary rights, we do not know whether we
      have
      been or will be completely successful in doing so.




**We
      may face liability claims from future customers if our software malfunctions
      or
      contains undetected defects.**




Our
      products have in the past contained, and may in the future contain, undetected
      or unresolved errors when first introduced, as new versions are released, or
      otherwise. Despite extensive testing, errors, defects or failures may be found
      in our current or future products or enhancements after they have been installed
      by customers. If this happens, we may experience delay in or loss of market
      acceptance and sales, diversion of development resources, injury to our
      reputation or increased service costs, any of which could have a material
      adverse effect on our business, financial condition and results of operations.
      Moreover, because our products are designed to provide critical data analysis
      services, we may receive significant liability claims. Although we intend to
      obtain product liability insurance covering certain damages arising from
      implementation and use of our products, our insurance may not cover all claims
      sought against us. Liability claims could require us to spend significant time
      and money in litigation or to pay significant damages. As a result, any such
      claims, whether or not successful, could seriously damage our reputation and
      business.




-15-




**We
      must ensure the protection and privacy of customer data.**




We
      rely
      on complex encryption algorithms and technology to secure customer data. We
      believe our products protect the security and privacy of customer data by
      transmitting encrypted pointers to customer data, rather than the data itself,
      across the Internet and existing dedicated transmission lines. However, if
      customer data is misappropriated or unintentionally disclosed as a result of
      an
      actual or perceived failure of our software, our reputation, and ultimately
      our
      business, would be seriously harmed, and we could face liability
      claims.




**We
      currently are dependent on contracts with the federal government for all of
      our
      revenues.**




Revenues
      derived from federal government contracts accounted for all of our revenues
      since fiscal 2004. We expect that government contracts will continue to be
      a
      significant source of our revenues for the foreseeable future. Our business
      generated from government contracts may be adversely affected if:




·
            levels
                of government expenditures and authorizations for national and homeland
                security related programs decrease, remain constant or shift to programs
                in areas where we do not provide products and
                services;




·
            we
                are prevented from entering into new government contracts or extending
                existing government contracts based on violations or suspected violations
                of procurement laws or regulations;




·
            we
                are not granted security clearances that are required to sell our
                products
                or services or such security clearances are revoked;
                or




·
            our
                reputation or relationship with government agencies is
                impaired.




Most
      of
      our contracts with the government, including our current contract with the
      Missile Defense Agency, contain standard provisions that provide for termination
      at the convenience of the government pursuant to which we are entitled to
      recover costs incurred, settlement expenses, and profit on work completed prior
      to termination.




**If
      we fail to comply with complex procurement laws and regulations, we may be
      subject to civil and criminal penalties and administrative
      sanctions.**




We
      must
      comply with laws and regulations relating to the formation, administration
      and
      performance of government contracts. These laws and regulations affect how
      we do
      business with government agencies and may impose added costs on our business.
      For example, we are subject to the Federal Acquisition Regulations, which
      comprehensively regulate the formation, administration and performance of
      federal government contracts, and to the Truth in Negotiations Act, which
      requires certification and disclosure of cost and pricing data in connection
      with contract negotiations.




If
      a
      government review or investigation uncovers improper or illegal activities,
      we
      may be subject to civil and criminal penalties and administrative sanctions,
      including termination of contracts, forfeiture of profits, suspension of
      payments, fines and suspension or debarment from doing business with government
      agencies, which could materially and adversely affect our business, financial
      condition and results of operations. In addition, a government may reform its
      procurement practices or adopt new contracting rules and regulations that could
      be costly to satisfy or that could impair our ability to obtain new
      contracts.




**Risks
      Related to Our Common Stock**




**Currently,
      there is no liquid trading market for our common stock, which may adversely
      impact your ability to sell your shares and the price you
      receive.**




There
      is
      currently no liquid trading market for our common stock and such a market may
      not develop or be sustained. We currently plan to have our common stock quoted
      on the OTC Bulletin Board upon the effectiveness of a registration statement
      we
      have filed with the SEC. To initiate the quotation of our common stock, a market
      maker must file a Form 211 to allow the market maker to make a market in our
      common stock. At the date of this prospectus, we have contacted a market maker
      to file a Form 211 and initiate making a market. However, we cannot assure
      you
      that the market maker we have contacted, or any other market maker, will file
      a
      Form 211 or that any filed Form 211 will be accepted by the OTC Bulletin Board.
      Accordingly, we cannot assure you that our common stock will be listed for
      quotation on the OTC Bulletin Board or, if quoted, that a public market will
      materialize. Furthermore, the OTC Bulletin Board is not a listing service or
      exchange, but is instead a dealer quotation service for subscribing
      members.




-16-




If
      our
      common stock is not quoted on the OTC Bulletin Board or if a public market
      for
      our common stock does not develop, then you may not be able to resell the shares
      of our common stock that you have purchased and you may lose all of your
      investment. If we establish a trading market for our common stock, the market
      price of our common stock may be significantly affected by factors such as
      actual or anticipated fluctuations in our operating results, general market
      conditions and other factors. In addition, the stock market has from time to
      time experienced significant price and volume fluctuations that have
      particularly affected the market prices for the shares of developmental stage
      companies, which may materially adversely effect the market price of our common
      stock.




Furthermore,
      for companies whose securities are quoted on the OTC Bulletin Board, it is
      more
      difficult (1) to obtain accurate quotations, (2) to obtain coverage for
      significant news events because major wire services generally do not publish
      press releases about such companies, and (3) to obtain needed
      capital.




**Our
      common stock may be deemed a “penny stock,” which would make it more difficult
      for you to sell your shares.**




Our
      common stock may be subject to the “penny stock” rules adopted under Section
      15(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
      The penny stock rules apply to companies whose common stock is not listed on
      the
      NASDAQ Stock Market or another national securities exchange and trades at less
      than $5.00 per share or that have tangible net worth of less than $5,000,000
      ($2,000,000 if the company has been operating for three or more years). These
      rules require, among other things, that brokers who trade penny stock to persons
      other than “established customers” complete certain documentation, make
      suitability inquiries of investors and provide investors with certain
      information concerning trading in the security, including a risk disclosure
      document and quote information under certain circumstances. Many brokers have
      decided not to trade penny stocks because of the requirements of the penny
      stock
      rules and, as a result, the number of broker-dealers willing to act as market
      makers in such securities is limited. If we remain subject to the penny stock
      rules for any significant period, it could have an adverse effect on the market,
      if any, for our common stock. If our common stock is subject to the penny stock
      rules, you will find it more difficult to dispose of the shares of our common
      stock that you have purchased.




**We
      need to raise additional capital, but that capital may not be
      available.**




Our
      existing capital is insufficient to fund our operations beyond the third quarter
      of 2007. We believe the anticipated revenues from our current contract with
      the
      Missile Defense Agency will enable us to meet our financial obligations as
      they
      become due. However, we are not generating sufficient revenues to increase
      our
      working capital or to carry out our proposed business objectives and continue
      to
      operate as a going concern beyond the near term, and we need to obtain
      additional financing or reduce our expenses by curtailing our
      operations.




We
      cannot
      assure you that we will be successful or that our operations will generate
      sufficient revenues, if any, to meet the expenses of our operations. Although
      we
      are seeking additional financing, such financing may not be available or, if
      available, may not be available on satisfactory terms. Additionally, the nature
      of our business activities may require the availability of additional funds
      in
      the future due to more rapid growth than is forecast, and thus, we may need
      additional capital or credit lines to continue that rate of business growth.
      We
      may encounter difficulty in obtaining these funds and/or credit lines. Moreover,
      even if additional financing or credit lines were to become available, it is
      possible that the cost of such funds or credit would be high and possibly
      prohibitive.




If
      we
      were to decide to obtain such additional funds by equity financing in one or
      more private or public offerings, current stockholders would experience a
      corresponding decrease in their percentage ownership.




-17-




**Our
      independent registered public accounting firm has expressed substantial doubt
      regarding our ability to continue as a going concern.**




Our
      audited financial statements for the years ended December 31, 2006 and 2005
      have
      been prepared under the assumption that we will continue as a going concern.
      Our
      independent registered public accounting firm has issued its report dated
      February 16, 2007 in connection with the audit of our financial statements
      for
      the years ended December 31, 2006 and 2005 that included an explanatory
      paragraph describing the existence of conditions that raise substantial doubt
      about our ability to continue as a going concern due to our having sustained
      operating losses and capital deficits from operations. The fact that we have
      received this “going concern opinion” from our independent registered public
      accounting firm will likely make it more difficult for us to raise capital
      on
      favorable terms and could hinder, to some extent, our operations. Additionally,
      if we are not able to continue as a going concern, it is likely that
      stockholders will lose all of their investment. Our financial statements do
      not
      include any adjustments that might result from the outcome of this
      uncertainty.




**Item
                7.**
            **Financial
                Statements**




The
      information that appears following Item 14 of this report and is incorporated
      herein by reference.




**Item
                8.**
            **Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure**




None.




**Item
                8A.**
            **Controls
                and Procedures**




**Evaluation
      of disclosure controls and procedures.**




Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, has evaluated the effectiveness of our disclosure controls
      and procedures as of December 31, 2006. Based on this evaluation, our Chief
      Executive Officer and Chief Financial Officer concluded that our disclosure
      controls and procedures are effective.




**Changes
      in internal control over financial reporting.**




During
      the last fiscal quarter, there was no change in our internal control over
      financial reporting that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.




**Item
                8B.**
            **Other
                Information**




None.




-18-




**PART
      III**




**Item
                9.**
            **Directors,
                Executive Officers, Promoters , Control Persons and Corporate Governance;
                Compliance with Section 16 (a) of the Exchange
                Act**




The
      following table sets forth the name, age, position and term of directorship,
      as
      applicable, of each of our directors and executive officers. Directors are
      elected annually. Officers are selected by the Board of Directors and serve
      at
      the pleasure of the Board.




**Name
                and Position**
            
            **Age**
            
            **Director
                Since**B.K.
                Gogia
              President,
                Chief Executive Officer and
              Chairman
                of the Board of Directors
            
            55
            
            2006Dr.
                Jerzy W. Bala
              Chief
                Technical Officer and
              a
                Director
            
            47
            
            2006Scott
                B. Parliament
              Chief
                Financial Officer, Vice President of Business Development and Marketing
                and
              a
                Director
            
            49
            
            2006Jesus
                Mena
              Chief
                Strategy Officer
            
            60
            
            -




**Management
      Biographies**




***B.K.
      Gogia*** - Mr.
      Gogia has been President, Chief Executive Officer and a director of InferX
      since
      our acquisition of InferX Virginia in October 2006. Mr. Gogia was the founder
      of
      and had been President, CEO and Director of InferX Virginia since its inception
      in 1992. Prior to the formation of InferX Virginia, Mr. Gogia was Technical
      Director/Software Manager with Science Applications International Corporation
      (SAIC), and held senior technical positions with L3 Corporation and Lockheed
      Martin Corporation. Mr. Gogia began his career as a systems engineer and
      software developer with Data General Corporation in the field of compilers
      and
      operating systems.




Mr.
      Gogia
      holds a Bachelors degree from the University of Delhi, India; a Masters degree
      with a major in Computer Science from New York Institute of Technology; and
      a
      postgraduate management degree with a major in Marketing from the Institute
      of
      Marketing & Management. In 2004, Mr. Gogia was chosen to participate in a
      Mindshare program for CEOs of the most promising technology companies in the
      Greater Washington area.




***Jerzy
      W. Bala, Ph.D.*** - Dr.
      Jerzy Bala has been Chief Technical Officer and a director of InferX since
      our
      acquisition of InferX Virginia in October 2006. Dr. Bala had been employed
      by
      InferX Virginia since 1994 as Chief Scientist and was appointed Chief Technical
      Officer of InferX Virginia in May 2006 and a director in September 2006. Dr.
      Bala defines short and long term technology directions for the products,
      business cases for new markets, oversees research and development of future
      products and existing products, and manages intellectual property for
      InferX.




From
      May
      2002 to October 2002, Dr. Bala consulted with Mitre Corporation, a federally
      funded research and development corporation (FFRDC) in its Data Exploitation
      and
      Information Management Group in development of data mining techniques for
      network intrusion detection sponsored by the National Security Agency; and
      subsequent development of data exploitation techniques for command and control
      in simulations in operations other than war for the U.S. Marine
      Corps.




-19-




From
      September 1998 to May 2000, Dr. Bala served as Visiting Research Professor
      with
      the School of Information Technology, George Mason University, and was the
      recipient of a Fellowship in Computational Science and Engineering - National
      Science Foundation New Technologies Program in the Division of Advanced
      Scientific Computing.




Dr.
      Bala
      holds a Ph.D. in Computer Science from George Mason University, an MSc in
      Computer Engineering and a BSc in Electrical Engineering from AGH University
      of
      Science and Technology in Poland. Dr. Bala’s Doctoral Dissertation Thesis was in
“Learning to Recognize Visual Concepts,” with his Advisor, Professor Ryszard
      Michalski, a cofounder of Machine Learning as a discipline.




Dr.
      Bala
      has over 70 peer reviewed publications in conference proceedings and journals
      and other numerous technical papers to its credit.




***Scott
      B. Parliament*** - Mr.
      Parliament has been Chief Financial Officer and a director of InferX since
      our
      acquisition of InferX Virginia in October 2006 and is now serving as Vice
      President of Business Development and Marketing as well. Mr. Parliament had
      been
      Chief Financial Officer of InferX Virginia since April 2005 and a director
      since
      September 2006. From April 2003 to December 2004, he was Chief Financial Officer
      of Securit-e-doc, Inc., a security and communications software company. From
      2000 to April 2003, he was a Principal of KAM Strategic Advisors, a financial
      and management consulting firm. Mr. Parliament was also Chief Financial Officer
      for BioShield Technologies, Inc. (NASDAQ: BSTI) in 2000. Mr. Parliament’s
      experience in business development and marketing includes serving as head of
      marketing at Securit-e-doc, Inc. and Head of Retail Partnerships (business
      development) for Consumer Financial Network, a wholly owned subsidiary of IXL
      (NASDAQ: IIXL), from 1999 to 2000, and Chief Operating Officer, Director and
      Chief Financial Executive for Innovo Group, Inc. (NASDAQ: INNO) from 1996 to
      1998. He is a CPA and spent ten years from 1980 to 1989 with BDO Seidman, one
      of
      the major international accounting firms where he specialized in business
      development and marketing focused on small market business expansion. Mr.
      Parliament has a BS in Accountancy from Ferris State University.




***Jesus
      Mena*** - Mr.
      Mena has been the Chief Strategy Officer of InferX since our acquisition of
      InferX Virginia in October 2006 and had been the Chief Strategy Office of InferX
      Virginia since August 2006. From November 2005 to August 2006 he was a data
      mining consultant to the Department of Homeland Security, Office of Inspector
      General, where he was the technical lead consultant on the first department
      wide
      audit of all data mining and advanced analytical systems. He held the same
      positions with the Sandia National Laboratories from April 2003 to November
      2004, the National Counterterrorist Center from May to July 2004, and the
      General Accountability Office in April to June 2004. Mr. Mena is a world
      renowned expert in analytics and data mining, and has published several books,
      including Homeland Security Techniques and Technologies (2005), Investigative
      Data Mining for Security and Criminal Detection (2003), Web Mining for Profit
      (2002), and Data Mining Your Website (2001). From April 2000 to February 2002,
      Mr. Mena was the CEO of WebMiner, Inc., a company in the business of Internet
      marketing. Prior to this Mr. Mena spent approximately twenty years with the
      Internal Revenue Service where he was the lead data miner and artificial
      intelligence specialist. Mr. Mena has a BA in Communications from the University
      of Texas, El Paso.




There
      are
      no family relationships among the officers and directors.




**Audit,
      Nominating and Compensation Committees**




Our
      Board
      of Directors does not have standing audit, nominating or compensation
      committees, and our Board of Directors performs the functions that would
      otherwise be delegated to such committees. We have not obtained directors and
      officers insurance required by the quality of independent directors who we
      seek
      to have join our Board of Directors. We are in the process of pricing directors
      and officers insurance. Accordingly, we anticipate that our Board of Directors
      will be able to attract qualified independent directors to serve on the Board
      and ultimately form standing audit, nominating and compensation
      committees.




-20-




**Item
                10.**
            **Executive
                Compensation**




Compensation
      paid to B.K. Gogia, our President and Chief Executive Officer, is set forth
      in
      the Summary Compensation Table below. No other executive officer’s compensation
      exceeded $100,000 in the fiscal year ended December 31, 2006.




**SUMMARY
      COMPENSATION TABLE**


**Name
                  and Principal Position**
              
              **Year**
              
              **Salary ($)**
              
              **Bonus ($)**
              
              **Stock**
                **Awards**
                **($)**
              
              **Option**
                **Awards**
                **($)**
              
              **Non-Equity**
                **Incentive
                  Plan**
                **Compensation**
                **($)**
              
              **Nonqualified**
                **Deferred**
                **Compensation**
                **Earnings**
                **($)**
              
              **All
                  Other**
                **Compensation**
                **($)**
              
              **Total**
                **($)**B.K.
                  Gogia
              
              
              2006
              
              $
              82,500
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              23,100
              (1)
              $
              105,600President
                  and Chief
              
              
              2005
              
              $
              24,311
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              23,254
              (1)
              $
              47,565ExecutiveOfficer
                  (PEO)
              
              
              2004
              
              $
              55,370
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              $
              25,166
              (1)
              $
              80,536




(1)
            Consists
                of an automobile allowance in the amounts of $9,073, $8,998 and $8,998,
                and life insurance premiums for which we are not the beneficiary
                in the
                amounts of $14,027, $14,256 and $16,168, for the years ended December
                31,
                2006, 2005 and 2004, respectively.




In
      May
      2006, we entered into employment agreements with our four executive officers:
      B.K. Gogia, Dr. Jerzy W. Bala, Scott B. Parliament and Jesus Mena. The
      employment agreements with Dr. Bala, Mr. Parliament and Mr. Mena each have
      a
      term of three years, and Mr. Gogia’s agreement has a term of five years. Each of
      these employment agreements are terminable by the company during the term with
      or without cause. The employment agreements are terminable by the executives
      for
“good reason”, including a material breach of the employment agreement not cured
      within 15 days. Upon termination for “good reason” by the executive or by the
      company without cause, Mr. Parliament and Mr. Mena would receive a six month
      severance payment, Dr. Bala’s severance payment would be for nine months and Mr.
      Gogia’s severance payment would be the greater of two years or the remaining
      term of his employment agreement. For the fiscal year ended December 31, 2006,
      the annualized salaries under their employment agreements were $180,000 for
      Mr.
      Gogia, $150,000 for Mr. Parliament, $140,000 for Dr. Bala and $100,000 for
      Mr.
      Mena, although the amounts actually paid to each of them was less than these
      amounts due to agreed upon salary reductions and the fact that salaries were
      lower prior to entering into new employment agreements in May 2006. In addition,
      under their employment agreements each of the employees is eligible for a bonus
      upon achieving objectives determined by management for each executive for
      achieving certain performance targets. For the fiscal year ended December 31,
      2006, each executive agreed that no performance targets would be set and no
      bonuses would be paid.




We
      have a
      401(k) plan for which we provide no matching funds. We intend to adopt, subject
      to stockholder approval, a qualified stock option plan that will include up
      to
      2,200,000 shares of our common stock. No other retirement, pension, or profit
      sharing exist.




The
      tables entitled “OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END” and “DIRECTOR
      COMPENSATION” and the respective discussions related to those tables have been
      omitted because no compensation required to be reported in those tables was
      awarded to, earned by or paid to any of the named executive officers or
      directors in any of the covered fiscal years.




**Item
                11.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters**




The
      following table sets forth, as of January 31, 2007, certain information
      concerning the beneficial ownership of common stock by (i) each person known
      by
      the company to be the owner of more than 5% of the outstanding common stock,
      (ii) each director, (iii) each Named Executive Officer, and (iv) all directors
      and executive officers as a group. In general, “beneficial ownership” includes
      those shares a director or executive officer has the power to vote or the power
      to transfer, and stock options and other rights to acquire common stock that
      are
      exercisable currently or become exercisable within 60 days. Except as indicated
      otherwise, the persons named in the table below have sole voting and investment
      power with respect to all shares shown as beneficially owned by them. The
      calculation of the percentage owned is based on 9,129,392 shares outstanding
      (plus, with respect only to each holder of securities that are exercisable
      for
      or convertible into common stock within 60 days, shares underlying such
      securities). The address of each of the directors and executive officers listed
      below is c/o InferX Corporation, 1600 International Drive, Suite 110, McLean,
      Virginia 22102 unless otherwise indicated.




-21-




**Name
                and Address**
            
            **Amount
                and Nature**
              **of
                Beneficial Ownership**
            
            **Percentage
                of**
              **Outstanding**
              **Shares
                Owned**B.K.
                Gogia
            
            
            4,239,579
            (1)
            
            46.9
            %Jerzy
                W. Bala
            
            
            496,524
            
            
            5.4
            %Scott
                B. Parliament
            
            
            181,109
            (2)
            
            2.0
            %Jesus
                Mena
            
            
            -
            
            
            -Robert
                B. Prag
              2455
                El Amigo RoadDel
                Mar, CA 92014
            
            
            746,166
            (3)
            
            8.0
            %John
                Lemak
              Sandor
                Capital Master Fund, L.P.
              2828
                Routh Street, Suite 500Dallas,
                TX 75201
            
            
            944,704
            (4)
            
            9.9
            %Lacuna
                Venture Fund LLLP
              c/o
                Lacuna Ventures
              1100
                Spruce Street, Suite 202Boulder,
                CO 80302
            
            
            913,361
            (5)
            
            9.9
            %All
                directors and executive
              officers
                as a group (4 persons)
            
            
            4,917,212
            
            
            53.9
            %





(1)
            Includes
                177,330 shares owned directly by Mr. Gogia’s daughter, 177,330 shares
                owned directly by Mr. Gogia’s son, and 35,466 shares owned directly by Mr.
                Gogia’s spouse. Mr. Gogia disclaims beneficial ownership of all shares
                owned directly by others.




(2)
            Includes
                10,000 shares owned directly by one of Mr. Parliament’s sons, and 10,000
                shares owned directly by another of Mr. Parliament’s sons. Mr. Parliament
                disclaims beneficial ownership of all shares owned directly by
                others.




(3)
            Based
                upon information contained in the amended Schedule 13G filed by Mr.
                Prag
                on November 3, 2006. Includes 206,968 shares issuable upon the exercise
                of
                warrants that are exercisable within 60
                days.




(4)
            Based
                upon information contained in the Schedule 13G filed by Sandor Capital
                Advisors, LLC, a Texas limited liability company (“Sandor Advisors”), and
                Mr. Lemak, the principal of Sandor Advisors, on November 1, 2006.
                Includes
                189,198 shares directly owned by Mr. Lemak. Also includes 327,107
                of the
                1,020,908 shares issuable upon the exercise of warrants owned by
                Sandor
                Advisors and held by Sandor Capital Master Fund, L.P. (“Sandor Capital”)
                (713,940 shares) and Mr. Lemak (306,968 shares), in the aggregate,
                that
                are exercisable within 60 days. By their terms, the warrants held
                by
                Sandor Capital and Mr. Lemak are not exercisable to the extent that
                exercise by either of them would result in the joint beneficial ownership
                by Sandor Advisors and Mr. Lemak of greater than 9.99% of the company’s
                issued and outstanding common stock. If all of the warrants were
                exercisable in full, Sandor Advisors and Mr. Lemak would jointly
                beneficially own 1,636,505 shares of common stock, which would represent
                beneficial ownership of approximately 16.1% of the company’s issued and
                outstanding common stock. Mr. Lemak makes investment decisions on
                behalf
                of Sandor Advisors.




(5)
            Based
                upon information contained in the Schedule 13G filed by Lacuna Venture
                Fund LLLP (“Lacuna Venture Fund”), Lacuna Ventures GP LLLP (“Lacuna GP”)
                and Lacuna, LLC (“Lacuna LLC,” and, together with Lacuna Venture Fund and
                Lacuna GP, the “Lacuna Entities”) on November 3, 2006. Also includes13,361of
                the 1,800,000 shares issuable upon the exercise of warrants owned
                by the
                Lacuna Entities that are exercisable within 60 days. By their terms,
                the
                warrants held by Lacuna Venture Fund are not exercisable to the extent
                that exercise would result in the Lacuna Entities’ beneficial ownership of
                greater than 9.99% of the company’s issued and outstanding common stock.
                If all of the warrants were exercisable in full, the Lacuna Entities
                would
                beneficially own 2,700,000 shares of common stock, which would represent
                beneficial ownership of approximately 24.7% of the company’s issued and
                outstanding common stock. Rawleigh Ralls makes investment decisions
                on
                behalf of each of the Lacuna
                Entities.




-22-




**Item
                12.**
            **Certain
                Relationships and Related Transactions, and Director
                Independence**




**Bridge
      Loan**




In
      May
      2006, certain investors provided a bridge loan to InferX Virginia in the
      aggregate principal amount of $350,000 (the “ ***Bridge
      Loan*** ”).
      Robert B. Prag, John Lemak and Sandor Capital Master Fund, L.P. (“Sandor
      Capital”), who beneficially owns greater than 5% of our issued and outstanding
      shares of common stock, provided $50,000, $50,000 and $100,000, respectively,
      of
      the Bridge Loan. In consideration for the Bridge Loan, the investors received
      shares of InferX Virginia common stock convertible into an aggregate of 250,000
      shares of common stock upon the consummation of our acquisition of InferX
      Virginia. Mr. Prag was issued 35,714 of these shares, Mr. Lemak was issued
      35,714 of these shares and Sandor Capital was issued 71,429 of these shares.
      Upon the consummation of the acquisition, the entire principal amount of the
      Bridge Loan, plus interest accrued at the rate of 8% per annum, was repaid
      by
      the company, including the payment of $50,000 plus interest to Mr. Prag, $50,000
      plus interest to Mr. Lemak and $100,000 plus interest to Sandor Capital. In
      lieu
      of payment in cash upon the consummation of the acquisition, Mr. Prag purchased
      103,484 units, Mr. Lemak purchased 103,484 units and Sandor purchased 206,970
      units in the October 2006 private placement in consideration of his cancellation
      of the entire principal amount of his Bridge Loan plus accrued interest,
      totaling $51,742, $51,742 and $103,485, respectively.




**Registration
      Rights**




In
      connection with our acquisition of InferX Virginia, the October 2006 private
      placement, and certain other agreements, we have agreed to file registration
      statements under the Securities Act to register the resale of our common stock
      beneficially owned by our former directors, officers and stockholders, Paul
      T.
      Mannion Jr., Andrew Reckles and Robert B. Prag, as well as the individuals
      who
      became directors, officers and significant stockholders following the
      acquisition: B.K. Gogia, Jerzy W. Bala and Scott B. Parliament. In addition,
      if
      we fail to meet certain deadlines in filing or having the registration
      statements declared effective, some of these individuals will be entitled to
      receive additional shares of common stock as a penalty.




**Transactions
      between Black Nickel and the Founding Stockholders**




Immediately
      prior to the consummation of our acquisition of InferX Virginia, we acquired
      an
      aggregate of 300,000 shares of our common stock from Messrs. Mannion, Reckles
      and Prag for an aggregate purchase price of $300.00.




**Director
      Independence**




The
      Board
      of Directors has determined that none of its directors is an “independent
      director.”




**Item
                13.**
            **Exhibits**




3(i)
            
            Certificate
                of Incorporation, as amended on October 27, 2006 (incorporated by
                reference to Exhibit 3(i) to the registrant’s Current Report on Form 8-K,
                filed on October 30, 2006)3(ii)
            
            By-laws
                (incorporated by reference to Exhibit 3(ii) to the registrant’s
                Registration Statement on Form 10-SB, filed on January 12,
                2006)4.1
            
            Form
                of common stock certificate (incorporated by reference to Exhibit
                4.1 to
                the registrant’s Current Report on Form 8-K, filed on October 30,
                2006)




-23-




4.2
            
            Form
                of Class A warrant to purchase common stock (incorporated by reference
                to
                Exhibit 4.2 to the registrant’s Current Report on Form 8-K, filed on
                October 30, 2006)4.3
            
            Form
                of Class B warrant to purchase common stock (incorporated by reference
                to
                Exhibit 4.3 to the registrant’s Current Report on Form 8-K, filed on
                October 30, 2006)4.4
            
            Registration
                Rights Agreement (incorporated by reference to Exhibit 4.4 to the
                registrant’s Current Report on Form 8-K, filed on October 30,
                2006)10.1
            
            Lease
                of the registrant’s principal executive offices, as amended (incorporated
                by reference to Exhibit 10.1 to the registrant’s Current Report on Form
                8-K, filed on October 30, 2006)10.2
            
            Employment
                Agreement with B.K. Gogia (incorporated by reference to Exhibit 10.2
                to
                the registrant’s Current Report on Form 8-K, filed on October 30,
                2006)10.3
            
            Employment
                Agreement with J. Bala (incorporated by reference to Exhibit 10.1
                to
                Amendment No 1 to the registrant’s Current Report on Form 8-K, filed on
                November 1, 2006)10.4
            
            Employment
                Agreement with S. Parliament (incorporated by reference to Exhibit
                10.1 to
                the registrant’s Current Report on Form 8-K, filed on November 16,
                2006)10.5
            
            Employment
                Agreement with J. Mena (incorporated by reference to Exhibit 10.5
                to the
                registrant’s Current Report on Form 8-K, filed on October 30,
                2006)10.6
            
            Subscription
                Agreement (incorporated by reference to Exhibit 10.7 to the registrant’s
                Current Report on Form 8-K, filed on October 30, 2006)10.7
            
            Agreement
                and Plan of Merger by and among Black Nickel Acquisition Corp. I,
                InferX
                Acquisition Corp. and InferX Corporation, dated October 24, 2006
                (incorporated by reference to Exhibit 10.8 to the registrant’s Current
                Report on Form 8-K, filed on October 30, 2006)10.8
            
            Award/Contract
                issued by Missile Defense Agency, effective October 31, 2006 (incorporated
                by reference to Exhibit 10.8 to the registrant’s Registration Statement on
                Form SB-2, filed on November 24, 2006)31.1
            
            Certification
                of the Chief Executive Officer required by Rule 13a-14(a) or Rule
                15d-14(a)31.2
            
            Certification
                of the Chief Financial Officer required by Rule 13a-14(a) or Rule
                15d-14(a)32
            
            Certification
                of the Chief Executive Officer and the Chief Financial Officer required
                by
                Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C.
                1350






**Item
                14.**
            **Principal
                Accountant Fees and
                Services**




**Audit
      Fees**




The
      aggregate fees billed for each of the fiscal years ended December 31, 2006
      and
      2005 for professional services rendered by the principal accountant for the
      audit of our annual financial statements and reviews of the quarterly financial
      statements was $30,000 and $24,000, respectively.




**Audit
      Related Fees**




None.




-24-




**Tax
      Fees**




None.




**All
      Other Fees**




None.




-25-


**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**Page(s)**Audited
                  Consolidated Financial Statements:Report
                  of Independent Registered Public Accounting Firm
              
              F-1Consolidated
                  Balance Sheet as of December 31, 2006
              
              F-2Consolidated
                  Statements of Operations for the years ended December 31, 2006
                  and
                  2005
              
              F-3Consolidated
                  Statements of Changes in Stockholders’ Equity (Deficit)for the years ended
                  December 31, 2006 and 2005
              
              F-4Consolidated
                    Statements of Cash Flows for the years ended December 31, 2006
                    and
                    2005
              
              F-5Notes
                  to Consolidated Financial Statements
              
              F-6




-26-


**Report
      of Independent Registered Public Accounting Firm**




To
      the
      Board of Directors and Shareholders


InferX
      Corporation


(Formerly
      Black Nickel Acquisition Corp. I)





I
      have
      audited the accompanying consolidated balance sheet of InferX Corporation
      (formerly Black Nickel Acquisition Corp. I) (the "Company") as of December
      31,
      2006, and the related consolidated statements of operations, changes in
      stockholders' equity (deficit) and cash flows for the years ended December
      31,
      2006 and 2005. These consolidated financial statements are the responsibility
      of
      the Company's management. My responsibility is to express an opinion on these
      consolidated financial statements based on my audits.





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





In
      my
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of the Company as of December
      31, 2006, and their results of operations and cash flows for the years ended
      December 31, 2006 and 2005, in conformity with accounting principles generally
      accepted in the United States of America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 1 to the
      financial statements, the Company has sustained operating losses and capital
      deficits that raise substantial doubt about its ability to continue as a going
      concern. Management’s plans in regard to these matters are also described in
      Note 1. The consolidated financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.





As
      noted
      in Note 13 to the financial statements, the Company has restated its financial
      statements for the year ended December 31, 2006 to reverse the expensing of
      common stock issued as a guarantee of debt in the amount of $66,250, and
      restated the financial statements for the year ended December 31, 2005 to
      reflect a loss on debt conversion of $38,462, for the year ended December 31,
      2005, previously unrecorded. In addition, the Company removed the unearned
      revenue and unbilled receivables of equal value. These adjustments reflect
      corrections of errors.





/s/Michael
      Pollack CPA





Cherry
      Hill, New Jersey


February
      16, 2007, except for Note 13, which is dated May 24, 2007




F-1
 
  **INFERX
                    CORPORATION****(FORMERLY
                    BLACK NICKEL ACQUISITION CORP. I)****CONSOLIDATED
                    BALANCE SHEET****DECEMBER
                    31, 2006**
  **2006****RESTATED****ASSETS****CURRENT
                    ASSETS**Cash
                
                $
                79,554Accounts
                    receivable, net
                
                
                50,000Prepaid
                    expenses and other current assets
                
                
                7,505**Total
                    current assets**
                
                
                137,059Fixed
                    assets, net of depreciation
                
                
                29,198**Other
                    Asset**Computer
                    software development costs, net of amortization
                
                
                371,439**Total
                    other asset**
                
                
                371,439**TOTAL
                    ASSETS**
                
                $
                537,696**LIABILITIES
                    AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                    LIABILITIES**Accounts
                    payable and accrued expenses
                
                $
                129,394Derivative
                    liability
                
                
                1,031,703Current
                    portion of notes payable
                
                
                16,900**Total
                    current liabilities**
                
                
                1,177,997**Long-term
                    Liabilities**Notes
                    payable, net of current portion
                
                
                366,028**TOTAL
                    LIABILITIES**
                
                
                1,544,025**STOCKHOLDERS'
                    EQUITY (DEFICIT)**Preferred
                    stock, par value $0.0001 per share, 10,000,000 shares authorized
                    andno
                    shares issued and outstanding
                
                
                -Common
                    stock, par value $0.0001 per share, 75,000,000 shares authorized
                    and9,129,392
                    shares issued and outstanding
                
                
                913Additional
                    paid-in capital
                
                
                1,846,575Retained
                    earnings (defict)
                
                
                (2,853,817
                )**Total
                    stockholders' equity (deficit)**
                
                
                (1,006,329
                )**TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
                
                $
                537,696
  The
                    accompanying notes are an integral part of these consolidated
                    financial
                    statements.
  F-2
  **INFERX
                    CORPORATION****(FORMERLY
                    BLACK NICKEL ACQUISITION CORP. I)****CONSOLIDATED
                    STATEMENTS OF OPERATIONS****FOR
                    THE YEARS ENDED DECEMBER 31, 2006 AND
                    2005**
  **2006**
                
                **2005****(Restated)**
                
                **(Restated)****REVENUE**
                
                $
                199,991
                
                $
                225,275**COST
                    OF REVENUES**Direct
                    labor and other finges
                
                
                104,782
                
                
                31,897Amortization
                    of computer software development costs
                
                
                177,003
                
                
                177,003**Total
                    costs of revenues**
                
                
                281,785
                
                
                208,900**GROSS
                    PROFIT**
                
                
                (81,794
                )
                
                16,375**OPERATING
                    EXPENSES**Indirect
                    and overhead labor and fringes
                
                
                460,261
                
                
                108,368Professional
                    fees
                
                
                365,532
                
                
                102,630Advertising
                    and marketing
                
                
                58,585
                
                
                127,652Travel
                    related costs
                
                
                23,282
                
                
                31,141Rent
                
                
                104,181
                
                
                97,734General
                    and administrative
                
                
                62,860
                
                
                44,204Depreciation
                
                
                15,290
                
                
                14,770**Total
                    operating expenses**
                
                
                1,089,991
                
                
                526,499**NET
                    LOSS FROM OPERATIONS BEFORE OTHER EXPENSE AND****PROVISION
                    FOR INCOME TAXES**
                
                
                (1,171,785
                )
                
                (510,124
                )**OTHER
                    EXPENSE**Loss
                    on debt conversion
                
                
                -
                
                
                38,462Loss
                    on fair value of derivative liability
                
                
                484,616
                
                
                -Interest
                    expense, net of interest income (including $529,423 and $0 in
                    shares
                    issued for debt)
                
                
                554,757
                
                
                16,196**NET
                    LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME
                    TAXES**
                
                
                (2,211,158
                )
                
                (564,782
                )Provision
                    for income taxes
                
                
                -
                
                
                -**NET
                    (LOSS) APPLICABLE TO SHARES**
                
                $
                (2,211,158
                )
                $
                (564,782
                )**NET
                    (LOSS) PER BASIC AND DILUTED SHARES**
                
                $
                (0.75
                )
                $
                (0.11
                )**WEIGHTED
                    AVERAGE NUMBER OF****SHARES
                    OUTSTANDING**
                
                
                2,942,269
                
                
                5,350,000
  The
                    accompanying notes are an integral part of these consolidated
                    financial
                    statements.
  F-3
  **INFERX
                    CORPORATION****(FORMERLY
                    BLACK NICKEL ACQUISITION CORP. I)****CONSOLIDATED
                    STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                    (RESTATED)****FOR
                    THE YEARS ENDED DECEMBER 31, 2006 AND
                    2005**
  **Additional**
                
                **Retained****Preferred
                    Stock**
                
                **Common
                    Stock**
                
                **Paid-In**
                
                **Earnings****Shares**
                
                **Amount**
                
                **Shares**
                
                **Amount**
                
                **Capital**
                
                **(Deficit)**
                
                **Total**Balance
                    - December 31, 2004
                
                
                -
                
                $
                -
                
                
                2,538
                
                $
                2,538
                
                $
                102,957
                
                $
                (77,877
                )
                $
                27,618Issuance
                    of shares to foundersfor
                    services rendered
                
                
                -
                
                
                -
                
                
                114
                
                
                114
                
                
                191
                
                
                -
                
                
                305Issuance
                    of shares for cash
                
                
                -
                
                
                -
                
                
                19
                
                
                19
                
                
                74,981
                
                
                -
                
                
                75,000Issuance
                    of shares for conversion of notes payable
                
                
                -
                
                
                -
                
                
                72
                
                
                72
                
                
                249,928
                
                
                -
                
                
                250,000Contribution
                    of capital by shareholder
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                56,851
                
                
                -
                
                
                56,851Net
                    loss for the year, as previously reported
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (526,320
                )
                
                (526,320
                )Prior
                    period adjustment
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                38,462
                
                
                (38,462
                )
                
                -Net
                    loss for the year, as restated
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                38,462
                
                
                (564,782
                )
                
                (526,320
                )Balance
                    - December 31, 2005, as restated
                
                
                -
                
                
                -
                
                
                2,743
                
                
                2,743
                
                
                523,370
                
                
                (642,659
                )
                
                (116,546
                )Issuance
                    of shares for cash
                
                
                -
                
                
                -
                
                
                5
                
                
                5
                
                
                19,995
                
                
                -
                
                
                20,000Issuance
                    of shares for conversion of accounts payable
                
                
                -
                
                
                -
                
                
                10
                
                
                10
                
                
                40,238
                
                
                -
                
                
                40,248Issuance
                    of shares for consulting fees
                
                
                -
                
                
                -
                
                
                63
                
                
                63
                
                
                251,937
                
                
                -
                
                
                252,000Issuance
                    of shares for guarantee of promissory notes
                
                
                -
                
                
                -
                
                
                132
                
                
                132
                
                
                529,291
                
                
                -
                
                
                529,423Contribution
                    of capital by shareholder
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                6,029
                
                
                -
                
                
                6,029To
                    reflect share issuance in reverse merger, net of the2,953
                    shares cancelled)
                
                
                -
                
                
                -
                
                
                6,797,047
                
                
                (2,273
                )
                
                5,832
                
                
                -
                
                
                3,559Issuance
                    of shares in the private placement, net of$147,493
                    of closing costs, and $547,087 appliedto
                    derivative liability for the proceeds of the warrants
                
                
                -
                
                
                -
                
                
                2,329,392
                
                
                233
                
                
                469,883
                
                
                -
                
                
                470,116Net
                    loss for the year, as previously reported
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (2,277,408
                )
                
                (2,277,408
                )Prior
                    period adjustment
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                66,250
                
                
                66,250Net
                    loss for the year, as restated
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (2,211,158
                )
                
                (2,211,158
                )Balance
                    - December 31, 2006, as restated
                
                
                -
                
                $
                -
                
                
                9,129,392
                
                $
                913
                
                $
                1,846,575
                
                $
                (2,853,817
                )
                $
                (1,006,329
                )
  The
                    accompanying notes are an integral part of these consolidated
                    financial
                    statements.
  F-4
  **INFERX
                    CORPORATION****(FORMERLY
                    BLACK NICKEL ACQUISITION CORP. I)****CONSOLIDATED
                    STATEMENTS OF CASH FLOW****FOR
                    THE YEARS ENDED DECEMBER 31, 2006 AND
                    2005**
 
 **2006**
                
                **2005****CASH
                    FLOWS FROM OPERATING ACTIVITIES:**
                
                **(Restated)**
                
                **(Restated)**Net
                    (loss)
                
                $
                (2,211,158
                )
                $
                (564,782
                )**Adjustments
                    to reconcile net (loss)****to
                    net cash used in operating activities:**Stock
                    issued for services - pre-merger
                
                
                252,000
                
                
                305Stock
                    issued for guarantee of debt - pre-merger
                
                
                529,423
                
                
                -Cash
                    received in merger with Black Nickel
                
                
                3,559
                
                
                -Loss
                    on fair value of derivative liability
                
                
                484,616
                
                
                -Loss
                    on debt conversion
                
                
                -
                
                
                38,462Amortization
                    of computer software development costs
                
                
                177,003
                
                
                177,003Depreciation
                
                
                15,290
                
                
                14,770**Change
                    in assets and liabilities**(Increase)
                    decrease in accounts receivable
                
                
                (25,002
                )
                
                48,305Decrease
                    in prepaid expenses and other current assets
                
                
                8,442
                
                
                26,158Increase
                    (decrease) in accounts payable and accrued expenses
                
                
                (22,049
                )
                
                157,270**Total
                    adjustments**
                
                
                1,423,282
                
                
                462,273**Net
                    cash (used in) operating activities**
                
                
                (787,876
                )
                
                (102,509
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES:**Capital
                    expenditures
                
                
                (8,423
                )
                
                -Computer
                    software development costs
                
                
                (34,896
                )
                
                (24,905
                )**Net
                    cash (used in) investing activities**
                
                
                (43,319
                )
                
                (24,905
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES:**Increase
                    (decrease) in cash overdraft
                
                
                (12,071
                )
                
                (18,647
                )Issuance
                    of stock for cash pre-merger
                
                
                20,000
                
                
                75,000Contributions
                    of capital pre-merger
                
                
                6,029
                
                
                56,851Issuance
                    of stock and warrants in private placement, net of closing costs
                    of
                
                
                1,017,203
                
                
                -Borrowings
                    of promissory notes
                
                
                350,000
                
                
                -(Repayment)
                    of promissory notes
                
                
                (350,000
                )
                
                -(Repayment)
                    of notes payable
                
                
                (75,412
                )
                
                (10,790
                )Borrowings
                    (repayment) of note payable - related partry
                
                
                (45,000
                )
                
                25,000**Net
                    cash provided by financing activities**
                
                
                910,749
                
                
                127,414**NET
                    INCREASE IN CASH AND CASH EQUIVALENTS**
                
                
                79,554
                
                
                -**CASH
                    AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
                
                
                -
                
                
                -**CASH
                    AND CASH EQUIVALENTS - END OF PERIOD**
                
                $
                79,554
                
                $
                -**SUPPLEMENTAL
                    INFORMATION OF CASH FLOW ACTIVITY**Cash
                    paid during the year for interest
                
                $
                27,596
                
                $
                6,791**SUPPLEMENTAL
                    INFORMATION ON NONCASH ACTIVITY**Conversion
                    of notes payable to accounts payable
                
                $
                57,537
                
                $
                288,462Conversion
                    of accounts payable to stock - pre-merger
                
                $
                40,248
                
                $
                250,000Stock
                    issued for services - pre-merger
                
                $
                252,000
                
                $
                305Stock
                    issued for guaranty of debt - post-merger
                
                $
                529,423
                
                $
                -
 The
              accompanying notes are an integral part of these consolidated financial
              statements.
 
 F-5


**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2006 AND 2005**


**NOTE
      1-**  **ORGANIZATION
      AND BASIS OF PRESENTATION**




Black
      Nickel Acquisition Corp. I was incorporated in Delaware on May 26, 2005, and
      was
      formed as a vehicle to pursue a business combination. From inception through
      October 24, 2006, Black Nickel Acquisition Corp. I, was engaged in
      organizational efforts and obtaining initial financing.




On
      May
      17, 2006, Black Nickel Acquisition Corp. I entered into a letter of intent
      with
      InferX Corporation, a privately-held Virginia corporation (“InferX Virginia”),
      with respect to entering into a merger transaction relating to bridge financing
      for InferX Virginia and the acquisition of and merger with InferX Virginia.
      The
      transaction closed on October 24, 2006. Following the merger, Black Nickel
      Acquisition Corp. I effected a short-form merger of InferX Virginia with and
      into Black Nickel Acquisition Corp. I, pursuant to which the separate existence
      of InferX Virginia terminated and Black Nickel Acquisition Corp. I changed
      its
      name to InferX Corporation (“InferX” or the “Company”).




The
      transaction was recorded as a recapitalization under the purchase method of
      accounting, as InferX became the accounting acquirer. The reported amounts
      and
      disclosures contained in the consolidated financial statements are those of
      InferX Corporation, the operating company.




InferX
      was incorporated under the laws of Delaware in 1999. On December 31, 2005,
      InferX and Datamat Systems Research, Inc. (“Datamat”), a company incorporated in
      1992 under the corporate laws of the Commonwealth of Virginia executed an
      Agreement and Plan of Merger (the “Merger”). InferX and Datamat had common
      majority directors. The financial statements herein reflect the combined entity,
      and all intercompany transactions and accounts have been eliminated. As a result
      of the Merger, InferX merged with and into Datamat, the surviving entity. Upon
      completion, Datamat changed its name to InferX Corporation.




InferX
      was formed to develop and commercially market computer applications software
      systems that were initially developed by Datamat with grants from the Missile
      Defense Agency. Datamat was formed as a professional services research and
      development firm, specializing in the Department of Defense. The Company
      currently provides services and software to the United States government, and
      is
      in process of formalizing business plans that will enable them to provide
      software and services to commercial entities as well.




F-6




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2006 AND 2005**


**NOTE
      1-**  **ORGANIZATION
      AND BASIS OF PRESENTATION** **(CONTINUED)**




**Going
      Concern**




As
      shown
      in the accompanying financial statements the Company has incurred a loss of
      $2,211,158 and $564,782 for the years ended December 31, 2006 and 2005,
      respectively, and has a working capital deficiency of $1,040,938 as of December
      31, 2006. The principal reasons for the recurring losses is due to the Company’s
      changed focus on developing its products for the commercial markets as it
      transitions away from the less profitable government services market, as well
      as
      the fair value adjustment in the Company’s derivative liability. The Company
      expects the negative cash flow from operations to continue its trend through
      the
      next twelve months. These factors raise significant doubt about the ability
      of
      the Company to continue as a going concern.




Management’s
      plans to address these conditions include continued efforts to obtain government
      contracts as well as commercial contracts through expanding sources and new
      technology, and the raising of additional capital through the sale of the
      Company’s stock.




The
      Company’s long-term success is dependent upon the obtaining of sufficient
      capital to fund its operations; development of its products; and launching
      its
      products to the worldwide market. These factors will contribute to the Company’s
      obtaining sufficient sales volume to be profitable. To achieve these objectives,
      the Company may be required to raise additional capital through public or
      private financings or other arrangements.




It
      cannot
      be assured that such financings will be available on terms attractive to the
      Company, if at all. Such financings may be dilutive to existing stockholders
      and
      may contain restrictive covenants.




The
      Company is subject to certain risks common to technology-based companies in
      similar stages of development. Principal risks to the Company include
      uncertainty of growth in market acceptance for its products; history of losses
      in recent years; ability to remain competitive in response to new technologies;
      costs to defend, as well as risks of losing patent and intellectual property
      rights; reliance on limited number of suppliers; reliance on outsourced
      manufacture of its products for quality control and product availability;
      uncertainty of demand for its products in certain markets; ability to manage
      growth effectively; dependence on key members of its management; and its ability
      to obtain adequate capital to fund future operations.




The
      consolidated financial statements do not include any adjustments relating to
      the
      carrying amounts of recorded assets or the carrying amounts and classification
      of recorded liabilities that may be required should the Company be unable to
      continue as a going concern.




F-7




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2006 AND 2005**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**




**Principles
      of Consolidation**




The
      consolidated financial statements include those of the Company and its
      wholly-owned subsidiary. All intercompany accounts and transactions have been
      eliminated in consolidation.




**Use
      of Estimates**




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




**Cash
      and Cash Equivalents**




The
      Company considers all highly liquid debt instruments and other short-term
      investments with a maturity of three months or less, when purchased, to be
      cash
      equivalents.




The
      Company maintains cash and cash equivalent balances at one financial institution
      that is insured by the Federal Deposit Insurance Corporation up to $100,000.




**Allowance
      for Doubtful Accounts**




The
      Company provides an allowance for doubtful accounts, which is based upon a
      review of outstanding receivables as well as historical collection information.
      Credit is granted to substantially all customers on an unsecured basis. In
      determining the amount of the allowance, management is required to make certain
      estimates and assumptions. Management has determined that as of December 31,
      2006, an allowance of $2,364 is required.




**Fixed
      Assets**




Fixed
      assets are stated at cost, less accumulated depreciation. Depreciation is
      provided using the straight-line method over the estimated useful lives of
      the
      related assets (primarily three to five years). Costs of maintenance and repairs
      are charged to expense as incurred.




F-8




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2006 AND 2005**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Computer
      Software Development Costs**




During
      2006 and 2005, the Company capitalized certain software development costs.
      The
      Company capitalizes the cost of software in accordance with SFAS 86 once
      technological feasibility has been demonstrated, as the Company has in the
      past
      sold, leased or otherwise marketed their software, and plans on doing so in
      the
      future. The Company capitalizes costs incurred to develop and market their
      privacy preserving software during the development process, including payroll
      costs for employees who are directly associated with the development process
      and
      services performed by consultants. Amortization of such costs is based on the
      greater of (1) the ratio of current gross revenues to the sum of current and
      anticipated gross revenues, or (2) the straight-line method over the remaining
      economic life of the software, typically five years. It is possible that those
      anticipated gross revenues, the remaining economic life of the products, or
      both, may be reduced as a result of future events. The Company has not developed
      any software for internal use. For the years ended December 31, 2006 and 2005,
      the Company recognized $177,003 and $177,003 of amortization expense on its
      capitalized software costs, respectively.




**Recoverability
      of Long-Lived Assets**




The
      Company reviews the recoverability of its long-lived assets on a periodic basis
      whenever events and changes in circumstances have occurred which may indicate
      a
      possible impairment. The assessment for potential impairment is based primarily
      on the Company’s ability to recover the carrying value of its long-lived assets
      from expected future cash flows from its operations on an undiscounted basis.
      If
      such assets are determined to be impaired, the impairment recognized is the
      amount by which the carrying value of the assets exceeds the fair value of
      the
      assets. Fixed assets to be disposed of by sale are carried at the lower of
      the
      then current carrying value or fair value less estimated costs to
      sell.




**Revenue
      Recognition**




The
      Company generates revenue from professional services rendered to customers.
      The
      Company’s revenue is generated under time-and-material contracts and fixed-price
      contracts.




***Time-and-Material
      Contracts***




Time-and-material
      contracts revenue is generated whereby costs are generally incurred in
      proportion with contracted billing schedules and revenue is recognized as
      services are performed, with the corresponding cost of providing those services
      reflected as direct costs. The customers are billed in accordance with the
      contracts entered into. Such method is expected to result in reasonably
      consistent profit margins over the contract term.




F-9




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2006 AND 2005**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Revenue
      Recognition** **(Continued)**




***Fixed-Price
      Contracts***




Revenue
      from firm-fixed-price contracts is recognized upon achievement of the milestones
      contained in the contracts in accordance with the provisions of Staff Accounting
      Bulletin 104. Revenue is not recognized until collectibility is assured, which
      does not take place until completion of the particular milestone. Costs are
      recognized as services are performed.




The
      Company does not derive revenue from projects involving multiple
      revenue-generating activities. If a contract would involve the provision of
      multiple service elements, total estimated contract revenue would be allocated
      to each element based on the fair value of each element.




The
      amount of revenue allocated to each element would then be limited to the amount
      that is not contingent upon the delivery of another element in the future.
      Revenue for each element would then be recognized depending upon whether the
      contract is a time-and-materials contract or a fixed-price, fixed-time
      contract.




**Research
      and Development**




Research
      and development costs are expensed as incurred. In addition, research and
      development costs of $49,366 and $12,642 have been included in indirect labor
      and $104,782 and $31,897 has been included in direct costs for the years ended
      December 31, 2006 and 2005, respectively.




F-10




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Stock-Based
      Compensation**




On
      December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
      Statement of Financial Accounting Standards No. 123 (Revised 2004),
“ *Share-Based
      Payment* ”
(“SFAS
      123R”). SFAS 123R requires that compensation cost related to share-based payment
      transactions be recognized in the financial statements. Share-based payment
      transactions within the scope of SFAS 123R include stock options, restricted
      stock plans, performance-based awards, stock appreciation rights, and employee
      share purchase plans. The provisions of SFAS 123R, as amended, are effective
      for
      small business issuers beginning as of the next interim period after December
      15, 2005. The Company has adopted these provisions as of January 1, 2006 and
      this adoption did not have a material effect on the Company’s
      operations.




On
      January 1, 2006, the Company adopted the provisions of FAS No. 123R “Share-Based
      Payment” (“FAS 123R”) which requires recognition of stock-based compensation
      expense for all share-based payments based on fair value. Prior to January
      1,
      2006, the Company measured compensation expense for all of its share-based
      compensation using the intrinsic value method prescribed by Accounting
      Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
      Employees” (“APB 25”) and related interpretations. The Company has provided pro
      forma disclosure amounts in accordance with FAS No. 148, “Accounting for
      Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
      Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS No.
      123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied to
      its stock-based compensation.




The
      Company has elected to use the modified-prospective approach method. Under
      that
      transition method, the calculated expense in 2006 is equivalent to compensation
      expense for all awards granted prior to, but not yet vested as of January 1,
      2006, based on the grant-date fair values estimated in accordance with the
      original provisions of FAS 123. Stock-based compensation expense for all awards
      granted after January 1, 2006 is based on the grant-date fair values estimated
      in accordance with the provisions of FAS 123R. The Company recognizes these
      compensation costs, net of an estimated forfeiture rate, on a pro rata basis
      over the requisite service period of each vesting tranche of each award. The
      Company considers voluntary termination behavior as well as trends of actual
      option forfeitures when estimating the forfeiture rate.




F-11




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006 AND 2005**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Stock-Based
      Compensation** **(Continued)**




The
      Company issued one warrant to purchase 50,000 shares in May 2005, with an
      expiration of 6-months. The warrant expired prior to any exercise into shares
      of
      common stock. The Company’s warrants issued in the private placement in October
      2006, were not stock based compensation and are reflected in the derivative
      liability.




**December
                31,****2005**Net
                (loss), as reported
            
            $
            (564,782
            )Add:
                Stock-based employee compensation expense included in reported net
                (loss),
                net of related tax effects
            
            
            -Less:
                Total stock-based employee compensation expense determined under
                fair
                value-based method for all awards, net of related tax
                effects
            
            
            -Pro
                forma net (loss)
            
            $
            (564,782
            )Basic
                and diluted (loss) per share:As
                reported
            
            $
            (0.11
            )Pro
                forma
            
            $
            (0.11
            )




**Concentrations**




The
      Company has derived all of its revenue from one customer.




Financial
      instruments that potentially subject the Company to significant concentrations
      of credit risk consist principally of accounts receivable and unbilled
      receivables. To date, accounts receivable and unbilled receivables have been
      derived from contracts with agencies of the federal government. Accounts
      receivable are generally due within 30 days and no collateral is
      required.




**Segment
      Reporting**




The
      Company follows the provisions of SFAS 131, “Disclosures about Segments of an
      Enterprise and Related Information.” This standard requires that companies
      disclose operating segments based on the manner in which management
      disaggregates the Company in making internal operating decisions. The Company
      believes that there is only one operating segment.




F-12




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
        31, 2006 AND 2005**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Fair
      Value of Financial Instruments (other than Derivative Financial
      Instruments)**





The
      carrying amounts reported in the consolidated balance sheet for cash and cash
      equivalents, and accounts payable approximate fair value because of the
      immediate or short-term maturity of these financial instruments. For the notes
      payable, the carrying amount reported is based upon the incremental borrowing
      rates otherwise available to the Company for similar borrowings. For the
      warrants that are classified as derivatives, fair values were calculated at
      net
      present value using the Company’s weighted average borrowing rate for debt
      instruments without conversion features applied to total future cash flows
      of
      the instruments.




**Convertible
      Instruments**




The
      Company reviews the terms of convertible debt and equity securities for
      indications requiring bifurcation, and separate accounting, for the embedded
      conversion feature. Generally, embedded conversion features, where the ability
      to physical or net-share settle the conversion option is not within the control
      of the Company, are bifurcated and accounted for as a derivative financial
      instrument. (See Derivative Financial Instruments below). Bifurcation of the
      embedded derivative instrument requires allocation of the proceeds first to
      the
      fair value of the embedded derivative instrument with the residual allocated
      to
      the debt instrument. The resulting discount to the face value of the debt
      instrument is amortized through periodic charges to interest expense using
      the
      Effective Interest Method.





**Derivative
      Financial Instruments**




The
      Company generally does not use derivative financial instruments to hedge
      exposures to cash-flow or market risks. However, certain other financial
      instruments, such as warrants or options to acquire common stock and the
      embedded conversion features of debt and preferred instruments that are indexed
      to the Company’s common stock, are classified as liabilities when either (a) the
      holder possesses rights to net-cash settlement or (b) physical or net share
      settlement is not within the control of the Company. In such instances, net-cash
      settlement is assumed for financial accounting and reporting, even when the
      terms of the underlying contracts do not provide for net-cash settlement. Such
      financial instruments are initially recorded at fair value and subsequently
      adjusted to fair value at the close of each reporting period. These derivative
      financial instruments are the Class A and Class B warrants issued in conjunction
      with the private placement. The warrants are indexed to an aggregate of
      4,658,784 shares of the Company’s common stock as of December 31, 2006 and are
      carried at fair value. The liability amounted to $1,031,703 at December 31,
      2006.




F-13




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Income
      Taxes**




Under
      Financial Accounting Standards Board Statement No. 109, “Accounting for Income
      Taxes,” the liability method is used in accounting for income taxes. Under this
      method, deferred tax assets and liabilities are determined based on differences
      between financial reporting and tax bases of assets and liabilities, and are
      measured using the enacted tax rates and laws that will be in effect when the
      differences are expected to reverse.




**(Loss)
      Per Share of Common Stock**




Basic
      net
      (loss) per common share (“EPS”) is computed using the weighted average number of
      common shares outstanding for the period. Diluted earnings per share includes
      additional dilution from common stock equivalents, such as stock issuable
      pursuant to the exercise of stock options and warrants. Common stock equivalents
      are not included in the computation of diluted earnings per share when the
      Company reports a loss because to do so would be anti-dilutive for the periods
      presented.




There
      were no options or warrants to purchase shares of common stock at December
      31,
      2005, and the Class A and Class B (2,329,392 each) were issued in October 2006
      in the private placement however were not included as they would be considered
      anti-dilutive as the Company had a loss for this period..




The
      following is a reconciliation of the computation for basic and diluted
      EPS:




**Years
                Ended****December
                31,**
            
            **December
                31,****2006**
            
            **2005**Net
                (loss)
            
            $
            (2,211,158
            )
            $
            (564,782
            )Weighted-average
                  common sharesoutstanding
                  :Basic
            
            
            2,942,269
            
            
            5,350,000Effect
                  of dilutive securities-warrants
            
            
            -
            
            
            -Diluted
            
            
            2,942,269
            
            
            5,350,000Basic
                net (loss) per share
            
            $
            (0.75
            )
            $
            (0.11
            )Diluted
                net (loss) per share
            
            $
            (0.75
            )
            $
            (0.11
            )





F-14




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Recent
      Issued Accounting Standards**




In
      January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation
      of Variable Interest Entities,” an interpretation of Accounting Research
      Bulletin No. 51, “Consolidated Financial Statements.” FIN 46 establishes
      accounting guidance for consolidation of variable interest entities that
      function to support the activities of the primary beneficiary. In December
      2003,
      the FASB revised FIN 46 and issued FIN 46 (revised December 2003) ("FIN 46R").
      In addition to conforming to previously issued FASB Staff Positions, FIN No.
      46R
      deferred the implementation date for certain variable interest entities. This
      revised interpretation is effective for all entities no later than the end
      of
      the first reporting period that ends after March 15, 2004. The Company does
      not
      have any investments in or contractual relationship or other business
      relationship with a variable interest entity and therefore the adoption of
      this
      interpretation will not have any impact on the Company’s results of operations,
      financial position or cash flows.




On
      December 16, 2004, FASB issued SFAS No. 153, “Exchanges of Non-monetary Assets,
      an amendment of APB Opinion 29, Accounting for Non-monetary Transaction” ("SFAS
      153"). This statement amends APB Opinion 29 to eliminate the exception for
      non-monetary exchanges of similar productive assets and replaces it with a
      general exception for exchanges of non-monetary assets that do not have
      commercial substance. Under SFAS 153, if a non-monetary exchange of similar
      productive assets meets a commercial-substance criterion and fair value is
      determinable, the transaction must be accounted for at fair value resulting
      in
      recognition of any gain or loss. SFAS 153 is effective for non-monetary
      transactions in fiscal periods that begin after June 15, 2005. The Company
      does
      not anticipate that the implementation of this standard will have a material
      impact on its financial position, results of operations or cash
      flows.




In
      May
      2005, the FASB issued Statement of Financial Accounting Standard No. 154, *“Accounting
      Changes and Error Corrections”* (“SFAS
      154”). SFAS 154 is a replacement of APB No. 20, *“Accounting
      Changes”* ,
      and
      SFAS No. 3, *“Reporting
      Accounting Changes in Interim Financial Statements”* .
      SFAS
      154 applies to all voluntary changes in accounting principle and changes the
      requirements for accounting and reporting of a change in accounting principle.
      This statement establishes that, unless impracticable, retrospective application
      is the required method for reporting of a change in accounting principle in
      the
      absence of explicit transition requirements specific to the newly adopted
      accounting principle. It also requires the reporting of an error correction
      which involves adjustments to previously issued financial statements similar
      to
      those generally applicable to reporting an accounting change retrospectively.
      SFAS 154 is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005.




F-15




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Recent
      Issued Accounting Standards** **(Continued)**




In
      February 2006, the FASB issued Statement of Financial Accounting Standard No.
      155, *“Accounting
      for Certain Hybrid Instruments”* (“SFAS
      155”). FASB 155 allows financial instruments that have embedded derivatives to
      be accounted for as a whole (eliminating the need to bifurcate the derivative
      from its host) if the holder elects to account for the whole instrument on
      a
      fair value basis. This statement is effective for all financial instruments
      acquired or issued after the beginning of an entity’s first fiscal year that
      begins after September 15, 2006. The Company will evaluate the impact of SFAS
      155 on its consolidated financial statements.




In
      September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
      standard defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosure about fair
      value measurements. This statement is effective for financial statements issued
      for fiscal years beginning after November 15, 2007. Early adoption is
      encouraged. The adoption of SFAS 157 is not expected to have a material impact
      on the consolidated financial statements.




In
      September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
      87, 88, 106 and 132(R)” (“SFAS 158”). SFAS 158 requires an employer to recognize
      the over-funded or under-funded status of a defined benefit postretirement
      plan
      (other than a multiemployer plan) as an asset or liability in its statement
      of
      financial position and to recognize changes in that funded status in the year
      in
      which the changes occur through comprehensive income. SFAS 158 also
      requires the measurement of defined benefit plan assets and obligations as
      of
      the date of the employer’s fiscal year-end statement of financial position (with
      limited exceptions). Management does not expect adoption of SFAS 158 to have
      a
      material impact on the Company’s consolidated financial statements.




In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities - Including an amendment of FASB Statement
      No.
      115”, (“FAS 159”) which permits entities to choose to measure many financial
      instruments and certain other items at fair value at specified election dates.
      A
      business entity is required to report unrealized gains and losses on items
      for
      which the fair value option has been elected in earnings at each subsequent
      reporting date. This statement is expected to expand the use of fair value
      measurement. FAS 159 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007, and interim periods within those fiscal
      years.




In
      July
      2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for
      Uncertainty in Income Taxes.” This interpretation requires recognition and
      measurement of uncertain income tax positions using a “more-likely-than-not”
approach. FIN No. 48 is effective for fiscal years beginning after December
      15,
      2006. Management is still evaluating what effect this will have on the Company’s
      consolidated financial statements.




F-16




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**





**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Recent
      Issued Accounting Standards** **(Continued)**




In
      September 2006, the United States Securities and Exchange Commission (“SEC”)
      issued SAB 108, “Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements.”




This
      SAB
      provides guidance on the consideration of the effects of prior year
      misstatements in quantifying current year misstatements for the purpose of
      a
      materiality assessment. SAB 108 establishes an approach that requires
      quantification of financial statement errors based on the effects of each of
      the
      company’s financial statements and the related financial statement disclosures.
      SAB 108 permits existing public companies to record the cumulative effect of
      initially applying this approach in the first year ending after November 15,
      2006 by recording the necessary correcting adjustments to the carrying values
      of
      assets and liabilities as of the beginning of that year with the offsetting
      adjustment recorded to the opening balance of retained earnings. Additionally,
      the use of the cumulative effect transition method requires detailed disclosure
      of the nature and amount of each individual error being corrected through the
      cumulative adjustment and how and when it arose. The Company does not anticipate
      that SAB 108 will have a material impact on its consolidated financial
      statements.




In
      December 2006, the FASB Staff issued FSP EITF - 00-19-2, “Accounting for
      Registration Payment Arrangements” (“EITF 00-19-2”). EITF 00-19-2 addresses an
      issuer’s accounting for registration payment arrangements. EITF 00-19-2
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      SFAS No. 5, Accounting for Contingencies. EITF 00-19-2 is effective for
      financial statements issued for fiscal years beginning after December 15, 2006,
      and interim periods within those fiscal years. The Company believes that EITF
      00-19-2 will have an impact on their consolidated financial statements as it
      relates to the Class A and Class B warrants entered into in connection with
      their private placement.




F-17




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**NOTE
      3-**  **FIXED
      ASSETS**




Fixed
      assets consist of the following as of December 31, 2006:




**Estimated
                Useful****Lives
                (Years)**
            
            **2006**Computer
                equipment
            
            
            5
            
            $
            71,004Office
                machinery and equipment
            
            
            3
            
            
            15,638Furniture
                and fixtures
            
            
            5
            
            
            538Automobile
            
            
            5
            
            
            58,476145,656Less:
                Accumulated depreciation
            
            
            
            
            
            (116,458
            )Total,
                net
            
            
            
            
            $
            29,198




Depreciation
      expense was $15,290 and $14,770 for the years ended December 31, 2006 and 2005,
      respectively.




**NOTE
      4-**  **COMPUTER
      SOFTWARE DEVELOPMENT COSTS**




Computer
      software development costs consist of the following as of December 31,
      2006:




**Estimated
                Useful****Lives
                (Years)**
            
            **2006**Computer
                software development costs
            
            
            5
            
            $
            944,816Less:
                Accumulated amortization
            
            
            
            
            
            (573,377
            )Total,
                net
            
            
            
            
            $
            371,439




Amortization
      expense was $177,003 and $177,003 for the years ended December 31, 2006 and
      2005, respectively.




Amortization
      expense anticipated through December 31, 2009 is as follows:




Year
                ended December 31:2007
            
            $
            163,1872008
            
            
            101,1672009
            
            
            107,085$
            371,439





F-18




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**NOTE
      5-**  **NOTES
      PAYABLE**




***SBA
      Loan***




On
      July
      22, 2003, the Company and the U.S. Small Business Administration (“SBA”) entered
      into a Note (the “Note”) under the SBA’s Secured Disaster Loan program in the
      amount of $377,100.




Under
      the
      Note, the Company agreed to pay principal and interest at an annual rate of
      4%
      per annum, of $1,868 every month commencing twenty-five (25) months from the
      date of the Note (commencing August 2005). The Note matures July 2033.




The
      Company must comply with the default provisions contained in the Note. The
      Company is in default under the Note if it does not make a payment under the
      Note, or if it: a) fails to comply with any provision of the Note, the Loan
      Authorization and Agreement, or other Loan documents; b) defaults on any other
      SBA loan; c) sells or otherwise transfers, or does not preserve or account
      to
      SBA’s satisfaction for, any of the collateral (as defined therein) or its
      proceeds; d) does not disclose, or anyone acting on their behalf does not
      disclose, any material fact to the SBA; e) makes, or anyone acting on their
      behalf makes, a materially false or misleading representation to the SBA; f)
      defaults on any loan or agreement with another creditor, if the SBA believes
      the
      default may materially affect the Company’s ability to pay this Note; g) fails
      to pay any taxes when due; h) becomes the subject of a proceeding under any
      bankruptcy or insolvency law; i) has a receiver or liquidator appointed for
      any
      part of their business or property; j) makes an assignment for the benefit
      of
      creditors; k) has any adverse change in financial condition or business
      operation that the SBA believes may materially affect the Company’s ability to
      pay this Note; l) dies; m) reorganizes, merges, consolidates, or otherwise
      changes ownership or business structure without the SBA’s prior written consent;
      or n) becomes the subject of a civil or criminal action that the SBA believes
      may materially affect the Company’s ability to pay this Note.




As
      of
      December 31, 2006, the Company has an outstanding principal balance of $366,431.
      Interest expense on the SBA loan for the years ended December 31, 2006 and
      2005
      were $13,202 and $16,196, respectively.




F-19




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**NOTE
      5-**  **NOTE
      PAYABLE** **(CONTINUED)**




***Automobile
      Loan***




The
      Company has a note payable with an automotive finance company in the original
      amount of $44,990 (the “Auto Note”). The Auto Note commenced in November 2003,
      and requires payments of $750 per month for a period of 60 months. The Auto
      Note
      is secured by the automobile.




As
      of
      December 31, 2006, the outstanding principal balance of the Auto Note was
      $16,497.




***Other
      Notes Payable***




On
      March
      3, 2000, the Company entered into an installment note with Tec-Masters, Inc.
      in
      the amount of $100,000. The amount was due May 1, 2000, however was extended
      with no maturity date. The $100,000 remained outstanding until December 31,
      2005
      when the Company converted this note into 28.77 shares of Datamat common stock
      (76,923 of InferX). There was no interest on this note, and was unsecured.




On
      February 15, 2000, the Company entered into an installment note with an
      individual, in the amount of $100,000. The amount had no maturity date. The
      $100,000 remained outstanding until December 31, 2005 when the Company converted
      this note into 28.77 shares of Datamat common stock (76,923 of InferX). There
      was no interest on this note, and was unsecured.




On
      February 9, 2000, the Company entered into an installment note with an
      individual, in the total amount of $25,000. The amount had no maturity date.
      The
      $25,000 remained outstanding until December 31, 2005 when the Company converted
      this note into 7.19 shares of Datamat common stock (19,231 of InferX). There
      was
      no interest on this note, and was unsecured.




On
      February 9, 2000, the Company entered into an installment note with an
      individual, in the amount of $25,000. The amount had no maturity date. The
      $25,000 remained outstanding until December 31, 2005 when the Company converted
      this note into 7.19 shares of Datamat common stock (19,231 of InferX). There
      was
      no interest on this note, and was unsecured.




***Promissory
      Notes***




On
      May
      18, 2006, the Company entered into five separate promissory notes with one
      fund,
      one trust and three individuals in the total amount of $350,000 (collectively,
      the “Promissory Notes”). The Promissory Notes were repaid On October 24, 2006
      when the Company completed their reverse merger with Black Nickel Acquisition
      Corp. I. The Promissory Notes had accrued interest at an annual rate of 8%
      per
      annum, and was paid along with the principal balance, at the closing of the
      transaction. The interest totaled $12,196.




In
      accordance with the Promissory Notes, the Company issued 250,000 shares of
      common stock (see Note 7).




F-20




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**NOTE
      5-**  **NOTE
      PAYABLE** **(CONTINUED)**




***Promissory
      Notes (Continued)***




In
      accordance with the Promissory Notes, the Company and the lenders agreed that
      upon the reverse merger with Black Nickel, the Company would file a registration
      statement with the Securities and Exchange Commission on Form SB-2. The Company
      agreed to deadlines in the actual filing of the Form SB-2 as well as the
      effectiveness of the Form SB-2. Should the Company fail to meet the requirements
      as set forth in the Promissory Notes, they would be subject to a 1% penalty
      per
      month for every month they fail to secure an effective registration. This clause
      does not state whether the penalty would be paid in the form of cash or stock
      of
      the Company. Should the penalty include an open-ended cash settlement, the
      registration rights clause may be considered a derivative as defined in Emerging
      Issues Task Force (EITF) 00-19, “Accounting for Derivative Financial Instruments
      to, and Potentially Settled in, a Company’s Own Stock.” The Company as of
      December 31, 2006 has filed a registration statement with the Securities and
      Exchange Commission on Form SB-2. There have been no amounts accrued on
      liquidated damages that are contained in the Registration Rights Agreement
      as
      the Company is in compliance with the filing. The parties have agreed to have
      the fee paid by the issuance of common stock. The Company will begin to incur
      penalties under the Registration Rights Agreement commencing April 23, 2007.




As
      of
      December 31, 2006, the repayment schedule of the Notes Payable for the next
      five
      years and in the aggregate are:




2007
            
            $
            16,9002008
            
            
            15,7242009
            
            
            8,5592010
            
            
            8,9092011
            
            
            9,271Thereafter
            
            
            323,565382,928Less:
                current portion
            
            
            (16,900
            )Long-term
                portion
            
            $
            366,028




**NOTE
      6-**  **NOTE
      PAYABLE - RELATED PARTIES**




The
      President of the Company would lend money from time to time to the Company
      to
      fund operations. These amounts bore no interest and were unsecured. As of
      December 31, 2005, the amount outstanding to the President of the Company was
      $45,000. All amounts have been repaid to the President of the Company in
      2006.




F-21




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      7-**  **STOCKHOLDERS’
      EQUITY (DEFICIT)**




***Preferred
      Stock***




The
      Company was incorporated on May 26, 2005, and the Board of Directors authorized
      10,000,000 shares of preferred stock with a par value of $0.0001. The Company
      has not issued any shares of preferred stock since inception.




***Common
      Stock***




The
      Company was incorporated on May 26, 2005, and the Board of Directors authorized
      75,000,000 shares of common stock with a par value of $0.0001.




On
      May
      26, 2005, the Company issued 1,500,000 to the founders of the Company for
      $50,000.




On
      October 24, 2006, Black Nickel Acquisition Corp. I merged with the Company.
      At
      the closing of the merger and related private placement, the following
      occurred:




a)
            The
                Company issued 250,000 shares of common stock for the providing of
                the
                bridge promissory notes to InferX in May 2006. The value of these
                shares
                was $529,423 based on the fair value of the Company’s stock when issued.
                The 250,000 shares represent the conversion of the 132 shares issued
                pre-merger between the companies;




b)
            The
                Company issued 5,350,000 shares of common stock in exchange for 100%
                of
                the issued and outstanding shares of InferX;




c)
            The
                Company issued 2,329,392 shares of common stock for gross proceeds
                of
                $1,164,696 in the private placement that closed when the merger was
                completed. From the $1,164,696, the Company repaid the bridge promissory
                notes plus accrued interest in the amount of $362,196, and paid $147,493
                in closing costs. Of the total proceeds, $1,164,696, the Company
                allocated
                $547,087 of this amount to derivative liability, which represents
                the
                value of the Class A and Class B warrants issued with the common
                stock.
                The Company issued 2,392,392 Class A warrants and 2,329,392 Class
                B
                warrants (see d and e below and the Warrants section of Note 7).
                The price
                for all components were derived utilizing the relative fair value
                approach
                stipulated in APB 14;




d)
            The
                Class A Warrants are exercisable at any time for shares of stock
                at an
                exercise price of $0.50 per share with a term of five (5) years,
                subject
                to anti dilution protection, so that any part of the 2,329,392 of
                the
                warrants shall be callable if the underlying warrant shares are registered
                and the stock trades in the open market for thirty (30) consecutive
                days
                at a closing price above $1.50 per share. Half of the warrants shall
                be
                callable if the Company is awarded a contract with a guaranteed minimum
                revenue of at least $1,000,000 with a department of the United Sates
                Government (not including the Missile Defense Agency) to deploy its
                existing technology for threat detection or other application;





F-22




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**NOTE
      7-**  **STOCKHOLDERS’
      EQUITY (DEFICIT)** **(CONTINUED)**




***Common
      Stock (Continued)***




e)
            The
                Class B Warrants are exercisable at any time for shares of stock
                at an
                exercise price of $0.62 per share with a term of five (5) years,
                subject
                to anti dilution protection, so that any part of the 2,329,392 of
                the
                warrants shall be callable by the Company if the underlying warrant
                shares
                are registered and the stock trades in the open market for thirty
                (30)
                consecutive days at a closing price above $1.86 per
                share;




f)
            The
                Company cancelled 300,000 shares of common stock in the reverse merger
                leaving 1,200,000 of the 1,500,000 previously outstanding shares
                from May
                25, 2006 with the former owners of Black Nickel Acquisition Corp.
                I;
                and




g)
            Shall
                reserve for a period of two (2) years from the closing of the Reverse
                Merger, no more than 2,200,000 shares of stock for a stock option
                plan,
                and any options granted under this plan will be subject to an exercise
                price of not less than $0.50 per share. There have been no issuance
                of
                options under this plan as of December 31,
                2006.




***Warrants***




The
      Company in the private placement granted 2,329,392 Class A and 2,329,392 Class
      B
      warrants. The following is a breakdown of the warrants:




**Exercise**
            
            **Date****Warrants**
            
            **Price**
            
            **Issued**
            
            **Term**2,329,392
            
            $
            0.50
            
            
            10/24/2006
            
            
            5
                years2,329,392
            
            $
            0.625
            
            
            10/24/2006
            
            
            5
                years4,658,784




The
      Class
      A Warrants and Class B Warrants were valued utilizing the Black - Scholes method
      as follows:




**Class
                A**
            
            **Class
                B**Stock
                Price
            
            $
            .50
            
            $
            .50Strike
                Price
            
            $
            .50
            
            $
            .62Expected
                Life of Warrant
            
            
            5
                yrs.
            
            
            5
                yrs.Annualized
                Volatility
            
            
            50
            %
            
            50
            %Discount
                Rate
            
            
            3.50
            %
            
            3.50
            %Annual
                Rate of Quarterly Dividends
            
            
            None
            
            
            NoneCall
                Option Value
            
            $
            .237
            
            $
            .206





***Options***




There
      are
      no options outstanding, or granted as of December 31, 2006 and for the years
      ended December 31, 2006 and 2005, respectively.




F-23




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**NOTE
      8-**  **RELATED
      PARTY TRANSACTIONS** ****




The
      Company was advanced amounts as equity contributions by the Company’s President
      prior to the merger with Black Nickel Acquisition Corp. I. As of December 31,
      2006, there is currently no outstanding amounts due the President of the
      Company. There were no other related party transactions during the years ended
      December 31, 2006 and 2005, respectively.




**NOTE
      9-**  **COMMITMENTS**




**Rental**




The
      Company leases office space under an operating lease that has initial or
      remaining non-cancelable lease terms and expires in November 2008. The lease
      agreement provides for an annual 4% escalation of the base rent. As of December
      31, 2006, the following presents the approximate future minimum lease payments
      required under this lease:




**For
                the Years Ended****December
                31,**2007
            
            $
            105,3572008
            
            
            100,441$
            205,798




Rent
      expense for the years ended December 31, 2006 and 2005 was $104,181 and $97,734,
      respectively.




**Consulting
      Agreements**




During
      2006 and 2005, the Company entered into consulting agreements with marketing
      and
      strategic consulting groups with terms that do not exceed one year. These
      companies are to be paid fees for the services they perform. The Company has
      included these fees in their consolidated statements of operations for the
      years
      ended December 31, 2006 and 2005.




F-24




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**




**NOTE
      9-**  **COMMITMENTS** **(CONTINUED)**




**Unused
      Financing Commitment**




In
      2005,
      the Company had available a factoring financing facility in the maximum amount
      of $3,500,000. The facility provided for an advance rate of 90% on government
      invoicing and 85% on commercial invoicing at a rate of prime plus 2.5%. The
      facility was secured by a security interest in the accounts receivables and
      the
      personal guarantee of the majority shareholder. There were no amounts
      outstanding under the facility through the termination of the agreement in
      August 2005.




**NOTE
      10-**  **PROVISION
      FOR INCOME TAXES**




Deferred
      income taxes will be determined using the liability method for the temporary
      differences between the financial reporting basis and income tax basis of the
      Company’s assets and liabilities. Deferred income taxes are measured based on
      the tax rates expected to be in effect when the temporary differences are
      included in the Company’s tax return. Deferred tax assets and liabilities are
      recognized based on anticipated future tax consequences attributable to
      differences between financial statement carrying amounts of assets and
      liabilities and their respective tax bases.




At
      December 31, 2006, deferred tax assets consist of the
      following:





Net
                operating losses
            
            $
            833,000Valuation
                allowance
            
            
            (833,000
            )$
            -




F-25


**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
        31, 2006 AND 2005**
  **NOTE
        10-**  **PROVISION
        FOR INCOME TAXES** **(CONTINUED)**


At
      December 31, 2006, the Company had net operating loss carryforward in the
      approximate amount of $2,450,000, available to offset future taxable income
      through 2026. The Company established valuation allowances equal to the full
      amount of the deferred tax assets due to the uncertainty of the utilization
      of
      the operating losses in future periods.




A
      reconciliation of the Company’s effective tax rate as a percentage of income
      before taxes and federal statutory rate for the years ended December 31, 2006
      and 2005 is summarized below.




2006
            
            2005Federal
                statutory rate
            
            
            (34.0
            )%
            
            (34.0
            )%State
                income taxes, net of federal benefits
            
            
            6.0
            
            
            6.0Valuation
                allowance
            
            
            28.0
            
            
            28.00
            %
            
            0
            %




**NOTE
      11-**  **DEFINED
      CONTRIBUTION PLAN**




The
      Company has a retirement plan which satisfies the requirements of Section 401(k)
      of the Internal Revenue Code. This defined contribution retirement plan covers
      substantially all employees. Participants can elect to have up to the maximum
      percentage allowable of their salaries reduced and contributed to the plan.
      The
      Company may make matching contributions equal to a discretionary percentage
      of
      the participants’ elective deferrals. The Company made no such contributions for
      the years ended December 31, 2006 and 2005, respectively.




**NOTE
      12-**  **MAJOR
      CUSTOMER** ****




The
      Company’s contracts with agencies of the federal government accounted for 100%
      of its revenue and accounts receivable as of and for the years ended December
      31, 2006 and 2005, respectively.




F-26




**INFERX
      CORPORATION**


**(FORMERLY
      BLACK NICKEL ACQUISITION CORP. I)**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**DECEMBER
      31, 2006 AND 2005**


**NOTE
      13-**  **RESTATEMENT
      OF FINANCIAL STATEMENTS**




The
      Company has restated its financial statements for the year ended December 31,
      2006 to reverse the expense for common stock issued for debt guarantee that
      was
      incorrectly recognized in the previously issued financial statements. These
      shares represented a conversion of previously recognized shares that were
      already valued by the Company. The reversal was in the amount of $66,250. The
      entry reduced additional paid in capital and reduced the expense.




The
      revised loss for the year ended December 31, 2006 decreased from $2,277,408
      to
      $2,211,158; the accumulated deficit at December 31, 2006 decreased from
      $2,920,067 to $2,853,817; and the weighted average loss per share for the year
      ended December 31, 2006 decreased from ($0.78) per share to ($0.75) per share.




The
      Company has restated its financial statements for the year ended December 31,
      2005 to recognize an additional $38,462 as a loss on conversion of debt to
      equity due to the conversion price being $1.30 versus $1.50, the value the
      Company received in cash. The corresponding entry increased additional paid
      in
      capital this same amount. The $1.50 price and the loss on extinguishment of
      debt
      was calculated based on the estimated fair value of the Company’s common stock
      at December 31, 2005 as determined by recent sales of the Company’s common stock
      for cash to unrelated third parties. The entry reduced additional paid in
      capital and reduced the expense.




In
      addition, the Company removed the unearned revenue and unbilled receivables
      of
      equal value due to the correction of an error in the accounting treatment for
      their government contracts. This correction reduced total and current assets
      and
      total and current liabilities by $33,334. There was no effect on total
      stockholders’ equity (deficit) or earnings (loss) per share or on the statement
      of cash flows for this correction.




The
      revised loss for the year ended December 31, 2005 increased from $526,320 to
      $564,782; the accumulated deficit at December 31, 2005 increased from $604,197
      to $642,659; and the weighted average loss per share for the year ended December
      31, 2005 decreased from $200.35 per share to $214.99 per share (pre-merger
      with
      Black Nickel Acquisition Corp. I).




F-27


**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


**I****NFER****X
                C****ORPORATION**Date:
              August 17, 2007
            By:
            /s/ B.K. GogiaB.K.
                Gogia
              President
                and Chief Executive Officer





In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.


Date:
              August 17, 2007
            By:
            /s/ B.K. GogiaB.K.
                Gogia
              President,
                Chief Executive Officer and
              Director
              (Principal
                Executive Officer)




Date:
              August 17, 2007
            By:
            /s/ Scott B. ParliamentScott
                B. Parliament
              Chief
                Financial Officer and Director
              (Principal
                Financial and Accounting Officer)




Date:
              August 17, 2007
            By:
            /s/ Jerzy W. BalaJerzy
                W. Bala
              Director




-27-


**InferX
      Corporation**




**Form
      10-KSB**


**For
      the fiscal year ended December 31, 2006**




**Exhibit
      Index**




3(i)
            
            Certificate
                of Incorporation, as amended on October 27, 2006 *3(ii)
            
            By-laws
                *4.1
            
            Form
                of common stock certificate *4.2
            
            Form
                of Class A warrant to purchase common stock *4.3
            
            Form
                of Class B warrant to purchase common stock *4.4
            
            Registration
                Rights Agreement *10.1
            
            Lease
                of the registrant’s principal executive offices, as amended
                *10.2
            
            Employment
                Agreement with B.K. Gogia *10.3
            
            Employment
                Agreement with J. Bala *10.4
            
            Employment
                Agreement with S. Parliament *10.5
            
            Employment
                Agreement with J. Mena *10.6
            
            Subscription
                Agreement *10.7
            
            Agreement
                and Plan of Merger by and among Black Nickel Acquisition Corp. I,
                InferX
                Acquisition Corp. and InferX Corporation, dated October 24, 2006
                *10.8
            
            Award/Contract
                issued by Missile Defense Agency, effective October 31, 2006
                *31.1
            
            Certification
                of the Chief Executive Officer required by Rule 13a-14(a) or Rule
                15d-14(a) **31.2
            
            Certification
                of the Chief Financial Officer required by Rule 13a-14(a) or Rule
                15d-14(a) **32
            
            Certification
                of the Chief Executive Officer and the Chief Financial Officer required
                by
                Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350
                **





*
      Previously filed


**
      Filed
      herewith




-28-