##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-KSB
  þ
    
    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
  Delaware
    
    54-1614664(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)1600 International Drive, Suite 110McLean, Virginia
    
    22102(Address of principal executive offices)
    
    (Zip Code)
   Title of each class
    
    Name of each exchange on which registeredNone
  
 þ o
 þ
 o þ
    DOCUMENTS INCORPORATED BY REFERENCE
 o þ




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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
    
    7PART IIItem 5.
    
    Market for Common Equity and Related Stockholder Matters
    
    7Item 6.
    
    Managements Discussion and Analysis
    
    8Item 7.
    
    Financial Statements
    
    F-1Item 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
    
    23Item 12.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    24Item 13.
    
    Exhibits
    
    25Item 14.
    
    Principal Accountant Fees and Services
    
    26




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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS




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PART I
 Item 1. Description of Business
   Corporate History
 InferX Virginia
 InferX Delaware Datamat DoD
 Market Opportunity
 DHS FinCEN
 - 1 -




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
    
    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 Offerings
 InferAgent ®
     - 2 -




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InferText TM
  InferCluster TM
   InferView TM
  - 3 -




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Patents and Trademarks
  Patent
    
    Information
    
    Dates
    
    StatusInferView
    
    Full applicationUS Serial:
10/617,054
    
    Filed July 2003
    
    PendingInferAgent
    
    Full applicationUS Serial:
10/616,718
    
    Filed July 2003
    
    PendingA hybrid Bayesian 
decision tree for 
classification
    
    Full applicationUS Serial:
60/556,554
    
    Filed March 2003
    
    PendingInferCluster
    
    Provisional
application
    
    Filed September 2006
    
    FiledInferText
    
    Provisional
application
    
    Filed September 2006
    
    Filed
     Competition
  
    
    predictive modeling companies;
    
    CRM solutions providers;
    
    business intelligence solutions providers; and
    
    software companies supplying modeling, rules or analytic development tools.
 - 4 -




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
    
    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
  Sales and Marketing
   - 5 -




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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; and4.
    
    commercial enterprises that we expect would be early adopters of advanced
analytics technologies, such as financial services and insurance firms.
   - 6 -




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Customers
  Research and Development
  Employees
  Item 2. Description of Property
  Item 3. Legal Proceedings
  Item 4. Submission of Matters To A Vote Of Security Holders
  PART II
 Item 5. Market for Common Equity and Related Stockholder Matters
 Market Information
  Holders
  - 7 -




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Dividends
  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
    Critical Accounting Policies
  Cash and Cash Equivalents
  - 8 -




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Allowance for Doubtful Accounts
  Fixed Assets
  Computer Software Development Costs
  Revenue Recognition
  Time-and-Material Contracts
  Fixed-Price Contracts
    - 9 -




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Stock-Based Compensation
     Concentrations
   - 10 -




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Derivative Financial Instruments
  Income Taxes
  Research and Development
  Recent Issued Accounting Standards
     - 11 -




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Results of Operations
 Fiscal Years Ended December 31, 2006 and 2005
   - 12 -




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Liquidity and Capital Resources
      - 13 -




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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.
  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.
   We operate in a competitive market which could constrain our future growth and profitability.
  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.
  - 14 -




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Our management controls a substantial percentage of our stock and therefore has the ability to
exercise substantial control over our affairs.
  The loss of our executive officers and certain other key personnel could hurt our business.
  We may not be able to hire and retain qualified technical personnel.
  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 may face liability claims from future customers if our software malfunctions or contains
undetected defects.
  - 15 -




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We must ensure the protection and privacy of customer data.
  We currently are dependent on contracts with the federal government for all of our revenues.
  
    
    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.
  If we fail to comply with complex procurement laws and regulations, we may be subject to civil and
criminal penalties and administrative sanctions.
   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.
  - 16 -




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Our common stock may be deemed a penny stock, which would make it more difficult for you to sell
your shares.
  We need to raise additional capital, but that capital may not be available.
    - 17 -




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Our independent registered public accounting firm has expressed substantial doubt regarding our
ability to continue as a going concern.
  Item 7. Financial Statements
  Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  Item 8A. Controls and Procedures
 Evaluation of disclosure controls and procedures.
  Changes in internal control over financial reporting.
  Item 8B. Other Information
  - 18 -




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PART III
 Item 9.
    
    Directors, Executive Officers, Promoters , Control Persons and Corporate Governance;
Compliance with Section 16 (a) of the Exchange Act
  Name and Position
    
    Age
    
    Director SinceB.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
  Jerzy W. Bala, Ph.D.
  - 19 -




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Scott B. Parliament
 Jesus Mena
  Audit, Nominating and Compensation Committees
  - 20 -




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Item 10. Executive Compensation
  SUMMARY COMPENSATION TABLE
 NonqualifiedNon-Equity
    
    DeferredStock
    
    Option
    
    Incentive Plan
    
    Compensation
    
    All OtherAwards
    
    Awards
    
    Compensation
    
    Earnings
    
    Compensation
    
    TotalName and Principal Position
    
    Year
    
    Salary ($)
    
    Bonus ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)B.K. Gogia
    
    
    2006
    
    
    $
    82,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    23,100
    (1)
    
    $
    105,600President and Chief
    
    
    2005
    
    
    $
    24,311
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    23,254
    (1)
    
    $
    47,565Executive Officer (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.   OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
 Option Awards
    
    Stock AwardsEquityIncentiveEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity Incentive
    
    Plan Awards:Incentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Plan Awards:
    
    Market orPlan Awards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    Market
    
    Number of
    
    Payout ValueNumber of
    
    Number of
    
    Number of
    
    
    
    
    
    
    
    
    
    Number of
    
    Value of
    
    Unearned
    
    of UnearnedSecurities
    
    Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    Shares or
    
    Shares or
    
    Shares, Units
    
    Shares, UnitsUnderlying
    
    Underlying
    
    Underlying
    
    
    
    
    
    
    
    
    
    Units of
    
    Units of
    
    or Other
    
    or OtherUnexercised
    
    Unexercised
    
    Unexercised
    
    Option
    
    
    
    
    
    Stock That
    
    Stock That
    
    Rights That
    
    Rights ThatOptions
    
    Options
    
    Unearned
    
    Exercise
    
    Option
    
    Have Not
    
    Have Not
    
    Have Not
    
    Have Not(#)
    
    (#)
    
    Options
    
    Price
    
    Expiration
    
    Vested
    
    Vested
    
    Vested
    
    VestedName
    
    Exercisable
    
    Unexercisable
    
    (#)
    
    ($)
    
    Date
    
    (#)
    
    ($)
    
    (#)
    
    ($)B.K. Gogia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 - 21 -




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DIRECTOR COMPENSATION TABLE
 Changein PensionValue andNonqualifiedNon-Equity
    
    DeferredFees Earned or
    
    
    
    
    
    
    
    
    
    Incentive Plan
    
    Compensation
    
    All OtherPaid in Cash
    
    Stock Awards
    
    Option Awards
    
    Compensation
    
    Earnings
    
    Compensation
    
    TotalName
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)B.K. Gogia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jerzy W. Bala
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Scott B. Parliament
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 - 22 -




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Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Percentage ofAmount and Nature
    
    OutstandingName and Address
    
    of Beneficial Ownership
    
    Shares OwnedB.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 Road 
Del Mar, CA 92014
    
    
    746,166
    (3)
    
    
    8.0
    %John Lemak
Sandor Capital Master Fund, L.P.
2828 Routh Street, Suite 500
Dallas, TX 75201
    
    
    944,704
    (4)
    
    
    9.9
    %Lacuna Venture Fund LLLP
c/o Lacuna Ventures
1100 Spruce Street, Suite 202
Boulder, 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 - 23 -




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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 includes 13,361 of 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. Item 12. Certain Relationships and Related Transactions, and Director Independence
 Bridge Loan
 Bridge Loan
 Registration Rights
  Transactions between Black Nickel and the Founding Stockholders
  Director Independence
  - 24 -




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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)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
 - 25 -




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Item 14. Principal Accountant Fees and Services
 Audit Fees
  Audit Related Fees
  Tax Fees
  All Other Fees
  - 26 -




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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
 - 27 -




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Report of Independent Registered Public Accounting Firm
 
       
 F-1




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INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2006
 2006ASSETSCURRENT ASSETSCash
    
    $
    79,554Accounts receivable, net
    
    
    50,000Unbilled services
    
    
    33,334Prepaid expenses and other current assets
    
    
    7,505Total current assets
    
    
    170,393Fixed assets, net of depreciation
    
    
    29,198Other AssetComputer software development costs, net of amortization
    
    
    371,439Total other asset
    
    
    371,439TOTAL ASSETS
    
    $
    571,030LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    129,384Derivative liability
    
    
    1,031,713Current portion of notes payable
    
    
    16,900Unearned revenue
    
    
    33,334Total current liabilities
    
    
    1,211,331Long-term LiabilitiesNotes payable, net of current portion
    
    
    366,028TOTAL LIABILITIES
    
    
    1,577,359STOCKHOLDERS EQUITY (DEFICIT)Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized and
no shares issued and outstanding
    
    
    Common stock, par value $0.0001 per share, 75,000,000 shares authorized and
9,129,392 shares issued and outstanding
    
    
    913Additional paid-in capital
    
    
    1,874,363Retained earnings (defict)
    
    
    (2,881,605
    )Total stockholders equity (deficit)
    
    
    (1,006,329
    )TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
    
    $
    571,030
  F-2




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INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
 2006
    
    
    2005(Restated)REVENUE
    
    $
    199,991
    
    
    $
    225,275COST OF REVENUESDirect labor and other finges
    
    
    104,782
    
    
    
    31,897Amortization of computer software development costs
    
    
    177,003
    
    
    
    177,003Total costs of revenues
    
    
    281,785
    
    
    
    208,900GROSS PROFIT
    
    
    (81,794
    )
    
    
    16,375OPERATING EXPENSESIndirect and overhead labor and fringes
    
    
    460,261
    
    
    
    108,368Professional fees
    
    
    961,205
    
    
    
    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
    
    
    
    14,770Total operating expenses
    
    
    1,685,664
    
    
    
    526,499NET LOSS FROM OPERATIONS BEFORE OTHER EXPENSE AND
PROVISION FOR INCOME TAXES
    
    
    (1,767,458
    )
    
    
    (510,124
    )OTHER EXPENSELoss on debt conversion
    
    
    
    
    
    
    38,462Loss on fair value of derivative liability
    
    
    484,616
    
    
    
    Interest expense, net of interest income
    
    
    25,334
    
    
    
    16,196NET LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME
TAXES
    
    
    (2,277,408
    )
    
    
    (564,782
    )Provision for income taxes
    
    
    
    
    
    
    NET (LOSS) APPLICABLE TO SHARES
    
    $
    (2,277,408
    )
    
    $
    (564,782
    )NET (LOSS) PER BASIC AND DILUTED SHARES
    
    $
    (0.77
    )
    
    $
    (0.11
    )WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
    
    
    2,942,269
    
    
    
    5,350,000
  F-3




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
 Additional
    
    
    RetainedPreferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    EarningsShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    (Deficit)
    
    
    TotalBalance, May 25, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of shares for cash
    
    
    
    
    
    
    
    
    
    
    1,500,000
    
    
    
    150
    
    
    
    49,850
    
    
    
    
    
    
    
    50,000Net loss for the period May 25, 2005 (inception) through
December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,833
    )
    
    
    (17,833
    )Balance, December 31, 2005
    
    
    
    
    
    
    
    
    
    
    1,500,000
    
    
    
    150
    
    
    
    49,850
    
    
    
    (17,833
    )
    
    
    32,167Net loss for the period January 1, 2006 through
October 24, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,908
    )
    
    
    (28,908
    )Redemption of shares in conjunction with reverse merger
with InferX Corporation
    
    
    
    
    
    
    
    
    
    
    (300,000
    )
    
    
    (30
    )
    
    
    330
    
    
    
    
    
    
    
    300To reflect reverse merger with InferX Corporation
    
    
    
    
    
    
    
    
    
    
    5,350,000
    
    
    
    535
    
    
    
    1,288,075
    
    
    
    (557,456
    )
    
    
    731,154Issuance of shares to promissory note lenders
    
    
    
    
    
    
    
    
    
    
    250,000
    
    
    
    25
    
    
    
    66,225
    
    
    
    
    
    
    
    66,250Issuance of shares in the private placement, net of
$147,493 of closing costs, and $547,087 applied
to derivative liability for the proceeds of the warrants
    
    
    
    
    
    
    
    
    
    
    2,329,392
    
    
    
    233
    
    
    
    469,883
    
    
    
    
    
    
    
    470,116Net loss for InferX for the year ended December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,277,408
    )
    
    
    (2,277,408
    )
    
    
    $
    
    
    
    
    9,129,392
    
    
    $
    913
    
    
    $
    1,874,363
    
    
    $
    (2,881,605
    )
    
    $
    (1,006,329
    )
  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(Restated)CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss)
    
    $
    (2,277,408
    )
    
    $
    (564,782
    )Adjustments to reconcile net (loss)
to net cash used in operating activities:Stock issued for services
    
    
    66,250
    
    
    
    305Stock issued for services and guarantees of debt  pre-merger
    
    
    781,423
    
    
    
    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
    
    
    
    14,770Change in assets and liabilities(Increase) decrease in accounts receivable
    
    
    (25,002
    )
    
    
    48,305(Increase) in unbilled services
    
    
    (28,647
    )
    
    
    (4,687
    )Decrease in prepaid expenses and other current assets
    
    
    8,442
    
    
    
    26,158Increase (decrease) in accounts payable and accrued expenses
    
    
    (22,049
    )
    
    
    157,270Increase in unearned revenue
    
    
    28,647
    
    
    
    4,687Total adjustments
    
    
    1,489,532
    
    
    
    462,273Net 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 $147,493
    
    
    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
    )
    
    
    25,000Net cash provided by financing activities
    
    
    910,749
    
    
    
    127,414NET 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 ACTIVITYCash paid during the year for interest
    
    $
    27,596
    
    
    $
    6,791SUPPLEMENTAL INFORMATION ON NONCASH ACTIVITYConversion of notes payable to accounts payable
    
    $
    57,537
    
    
    $
    288,462Conversion of accounts payable to stock  pre-merger
    
    $
    40,248
    
    
    $
    Stock issued for services  pre-merger
    
    $
    99,000
    
    
    $
    305Stock issued for services  post-merger
    
    $
    66,250
    
    
    $
    
  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 PRESENTATIONBlack 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 ConcernAs shown in the accompanying financial statements the Company has incurred a loss of
$2,277,408 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 POLICIESPrinciples of ConsolidationThe 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 EstimatesThe 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 EquivalentsThe 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 AccountsThe 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 AssetsFixed 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 CostsDuring 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 AssetsThe 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 RecognitionThe 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 ContractsTime-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 ContractsRevenue from firm-fixed-price contracts is recognized as work is performed, with
costs and estimated profits recorded on the basis of direct and indirect costs
incurred.This method is used because reasonably dependable estimates of the revenue and costs
applicable to various stages of a contract can be made, based on historical
experience and milestones set in the contract. The Companys project delivery and
business unit finance personnel continually review labor hours incurred and estimated
total labor hours, which may result in revisions to the estimated amount of
recognized revenue for the contract. Changes in estimates are accounted for in the
period of change.If the Company does not accurately estimate the resources required or the scope of
work to be performed for a contract or if the Company does not manage the project
properly within the planned time period, then a loss may be recognized on the
contract. Losses are recorded in the period when they become known.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.Unbilled services represent services provided which are billed subsequent to the
period end in accordance with the contract terms and services rendered for which
contracts with government agencies were executed subsequent to the period end. All
such amounts are anticipated to be realized in the following period.Any unearned revenue reflects items that are unbilled by the Company with the revenue
and billing associated with the project to be incurred in the following period.
 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 CompensationOn 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 31,2005Net (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
    )
 ConcentrationsThe 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 ReportingThe 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
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 InstrumentsThe 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 InstrumentsThe 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
DECEMBER 31, 2006 AND 2005
 NOTE 2-
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Income TaxesUnder 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 StockBasic 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.The following is a reconciliation of the computation for basic and diluted EPS:
 Years EndedDecember 31,
    
    
    December 31,2006
    
    
    2005Net (loss)
    
    $
    (2,277,408
    )
    
    $
    (564,782
    )Weighted-average common shares
outstanding :Basic
    
    
    2,942,269
    
    
    
    5,350,000Effect of dilutive securities-
warrants
    
    
    4,658,784
    
    
    
    Diluted
    
    
    7,601,053
    
    
    
    5,350,000Basic net (loss) per share
    
    $
    (0.77
    )
    
    $
    (0.11
    )Diluted net (loss) per share
    
    $
    (0.77
    )
    
    $
    (0.11
    )
 Research and DevelopmentResearch and development costs are expensed as incurred.
 F-14




---



##### 



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)Recent Issued Accounting StandardsIn 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
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
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.NOTE 3-
    
    FIXED ASSETSFixed assets consist of the following as of December 31, 2006:
 Estimated UsefulLives (Years)
    
    
    2006Computer 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.
 F-17




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
 NOTE 4-
    
    COMPUTER SOFTWARE DEVELOPMENT COSTSComputer software development costs consist of the following as of December 31, 2006:
 Estimated UsefulLives (Years)
    
    
    2006Computer 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




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
 NOTE 5-
    
    NOTES PAYABLESBA LoanOn 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




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
 NOTE 5-
    
    NOTE PAYABLE (CONTINUED)Automobile LoanThe 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 PayableOn 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 NotesOn 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




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, and is in process
of answering comments on this submission. 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.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 PARTIESThe 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




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
 NOTE 7-
    
    STOCKHOLDERS EQUITY (DEFICIT)Preferred StockThe 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 StockThe 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 based on the
stock price of $0.265 per share determined based on the relative fair value
calculation stipulated in APB 14 or $66,250;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




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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; andg) 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.WarrantsThe 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
    
    
    DateWarrants
    
    Price
    
    
    Issued
    
    
    Term2,329,392
    
    $
    0.50
    
    
    
    10/24/2006
    
    
    5 years2,329,392
    
    $
    0.625
    
    
    
    10/24/2006
    
    
    5 years4,658,784
 OptionsThere are no options outstanding, or granted as of December 31, 2006 and for the
years ended December 31, 2006 and 2005, respectively.NOTE 8-
    
    RELATED PARTY TRANSACTIONSThe 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.
 F-23




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
 NOTE 9-
    
    COMMITMENTSRentalThe 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 EndedDecember 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 AgreementsDuring 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.Unused Financing CommitmentIn 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.
 F-24




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
 NOTE 10-
    
    PROVISION FOR INCOME TAXESDeferred 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
    )$
    
 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
    %
 F-25




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
 NOTE 11-
    
    DEFINED CONTRIBUTION PLANThe 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 CUSTOMERThe 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.NOTE 13-
    
    RESTATEMENT OF FINANCIAL STATEMENTSThe 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 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-26




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##### 



SIGNATURES
  InferX CorporationDate:
April 16, 2007
    
    By:
    
    /s/ B.K. GogiaB.K. GogiaPresident and Chief Executive Officer
  Date:
April 16, 2007
    
    By:
    
    /s/ B.K. GogiaB.K. GogiaPresident, Chief Executive Officer andDirector(Principal Executive Officer)Date:
April 16, 2007
    
    By:
    
    /s/ Scott B. ParliamentScott B. ParliamentChief Financial Officer and Director(Principal Financial and Accounting Officer)Date:
April 16, 2007
    
    By:
    
    /s/ Jerzy W. BalaJerzy W. BalaDirector




---



##### 



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