**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





(Mark
                One)**R**
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the quarterly period ended March 31, 2007****OR****£**
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the transition period from January 1, 2007 to March 31,
                2007**





**Commission
      file number: 1-31949**





**INX
      Inc.**


(Exact
      name of Registrant as specified in its charter)





**Delaware**
            **76-0515249**(State
                of incorporation)
            (I.R.S.
                Employer Identification Number)





**6401
      Southwest Freeway**


**Houston,
      Texas 77074**


(Address
      of principal executive offices)


(Zip
      code)





**(713)
      795-2000**


Registrant’s
      telephone number including area code





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes R No £





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):


Large
                Accelerated Filer £
            Accelerated
                Filer £
            Non-accelerated
                Filer R




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes £ No R





The
      Registrant has 6,801,990 shares of common stock outstanding as of April 20,
      2007.










**INX
      Inc. and Subsidiary**


**FORM
      10-Q for the Quarter Ended March 31, 2007**





**INDEX**





Part
                I. Financial InformationItem
                1. Financial Statements (Unaudited):Condensed
                Consolidated Statements of Operations for the three months ended
                March 31,
                2007 and 2006Condensed
                Consolidated Balance Sheets at March 31, 2007 and December 31,
                2006Condensed
                Consolidated Statement of Stockholders’ Equity for the three months ended
                March 31, 2007Condensed
                Consolidated Statements of Cash Flows for the three months ended
                March 31,
                2007 and 2006Notes
                to Condensed Consolidated Financial StatementsItem
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of OperationsItem
                3. Quantitative and Qualitative Disclosures about Market
                RiskItem
                4. Controls and ProceduresPart
                II. Other InformationItem
                1. Legal ProceedingsItem
                5. Other InformationItem
                6. ExhibitsSignature








2


**PART
      I. FINANCIAL INFORMATION**





**Item
      1. Financial Statements (Unaudited):**





INX
      INC.
      AND SUBSIDIARY





CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS


(In
      thousands, except share and per share amounts)


(Unaudited)





**Three
                months ended**
              **March
                31,****2007**
            
            **2006**Revenue:Products
            
            $
            39,550
            
            $
            22,311Services
            
            
            6,093
            
            
            3,965Total
                revenue
            
            
            45,643
            
            
            26,276Cost
                of products and services:Products
            
            
            32,332
            
            
            17,893Services
            
            
            4,804
            
            
            2,976Total
                cost of products and services
            
            
            37,136
            
            
            20,869Gross
                profit
            
            
            8,507
            
            
            5,407Selling,
                general and administrative expenses
            
            
            8,172
            
            
            5,845Operating
                income (loss)
            
            
            335
            
            
            (438
            )Interest
                and other income (expense), net
            
            
            (24
            )
            
            (85
            )Income
                (loss) from continuing operations before income taxes
            
            
            311
            
            
            (523
            )Income
                tax expense
            
            
            7
            
            
            1Net
                income (loss) from continuing operations
            
            
            304
            
            
            (524
            )Income
                (loss) from discontinued operations, net of income taxes
            
            
            62
            
            
            (4
            )Net
                income (loss)
            
            $
            366
            
            $
            (528
            )Net
                income (loss) per share:Basic:Income
                (loss) from continuing operations
            
            $
            0.04
            
            $
            (0.09
            )Income
                (loss) from discontinued operations, net of income taxes
            
            
            0.01
            
            
            —Net
                income (loss) per share
            
            $
            0.05
            
            $
            (0.09
            )Diluted:Income
                (loss) from continuing operations
            
            $
            0.04
            
            $
            (0.09
            )Income
                (loss) from discontinued operations, net of income taxes
            
            
            0.01
            
            
            —Net
                income (loss) per share
            
            $
            0.05
            
            $
            (0.09
            )Shares
                used in computing net income (loss) per share:Basic
            
            
            6,662,839
            
            
            6,047,840Diluted
            
            
            7,729,681
            
            
            6,047,840





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements





3


INX
      INC.
      AND SUBSIDIARY





CONDENSED
      CONSOLIDATED BALANCE SHEETS


(In
      thousands, except share and par value amounts)





**March
                31,**
              **2007**
            
            **December
                31,**
              **2006****(Unaudited)****ASSETS**Current
                Assets:Cash
                and cash equivalents
            
            $
            1,915
            
            $
            1,795Accounts
                receivable, net of allowance of $225 and $299
            
            
            39,248
            
            
            42,424Inventory
            
            
            1,989
            
            
            1,157Other
                current assets
            
            
            1,818
            
            
            2,086Total
                current assets
            
            
            44,970
            
            
            47,462Property
                and equipment, net of accumulated depreciation of $2,717 and
                $2,414
            
            
            4,108
            
            
            3,854Goodwill
            
            
            11,416
            
            
            10,891Intangible
                and other assets, net of accumulated amortization of $1,314 and
                $1,264
            
            
            258
            
            
            313Total
                assets
            
            $
            60,752
            
            $
            62,520**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                Liabilities:Notes
                payable and current portion of long-term debt
            
            $
            1,013
            
            $
            4,609Accounts
                payable
            
            
            30,193
            
            
            28,798Accrued
                expenses
            
            
            4,694
            
            
            5,038Other
                current liabilities
            
            
            1,284
            
            
            1,385Total
                current liabilities
            
            
            37,184
            
            
            39,830Other
                long-term liabilities
            
            
            145
            
            
            306Commitments
                and contingenciesStockholders’
                Equity:Preferred
                stock, $.01 par value, 5,000,000 shares authorized, no shares
                issued
            
            
            —
            
            
            —Common
                stock, $.01 par value, 15,000,000 shares authorized, 6,755,625 and
                6,603,070 shares issued
            
            
            68
            
            
            66Additional
                paid-in capital
            
            
            31,006
            
            
            30,598Common
                stock issuable
            
            
            263
            
            
            —Retained
                deficit
            
            
            (7,914
            )
            
            (8,280
            )Total
                stockholders’ equity
            
            
            23,423
            
            
            22,384Total
                liabilities and stockholders’ equity
            
            $
            60,752
            
            $
            62,520





The
      accompanying notes are an integral part of these condensed consolidated
      financial statements





4


INX
      INC.
      AND SUBSIDIARY





CONDENSED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY


(In
      thousands, except share amounts)


(Unaudited)





**$.01
                par value**
              **Common
                Stock**
            
            **Additional**
              **Paid-In**
            
            **Common**
              **Stock**
            
            **Retained****Shares**
            
            **Amount**
            
            **Capital**
            
            **Issuable**
            
            **Deficit**
            
            **Total**Balance
                at December 31, 2006
            
            
            6,603,070
            
            $
            66
            
            $
            30,598
            
            $
            —
            
            $
            (8,280
            )
            $
            22,384Exercise
                of common stock options
            
            
            152,555
            
            
            2
            
            
            251
            
            
            —
            
            
            —
            
            
            253Issuable
                shares for Datatran acquisition
            
            
            —
            
            
            —
            
            
            —
            
            
            263
            
            
            —
            
            
            263Share-based
                compensation expense related to employee stock options
            
            
            —
            
            
            —
            
            
            109
            
            
            —
            
            
            —
            
            
            109Share-based
                compensation expense related to employee restricted stock
                grants
            
            
            —
            
            
            —
            
            
            8
            
            
            —
            
            
            —
            
            
            8Issuance
                of warrants
            
            
            —
            
            
            —
            
            
            40
            
            
            —
            
            
            —
            
            
            40Net
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            366
            
            
            366Balance
                at March 31, 2007
            
            
            6,755,625
            
            $
            68
            
            $
            31,006
            
            $
            263
            
            $
            (7,914
            )
            $
            23,423





The
      accompanying notes are an integral part of this condensed consolidated financial
      statement





5




INX
      INC.
      AND SUBSIDIARY





CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(In
      thousands)


(Unaudited)





**Three
                months ended**
              **March
                31,****2007**
            
            **2006**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income (loss)
            
            $
            366
            
            $
            (528
            )Adjustments
                to reconcile net income (loss) to net cash provided by (used in)
                operating
                activities:Net
                (income) loss from discontinued operations
            
            
            (62
            )
            
            4Depreciation
                and amortization
            
            
            370
            
            
            274Share-based
                compensation expense
            
            
            125
            
            
            58Issuance
                of warrants
            
            
            40
            
            
            —Loss
                on retirement of assets
            
            
            5
            
            
            2Bad
                debt expense
            
            
            (10
            )
            
            19Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            3,186
            
            
            (2,441
            )Inventory
                (net of effect of acquisition)
            
            
            (832
            )
            
            (1,156
            )Accounts
                payable
            
            
            1,395
            
            
            5,845Other
                assets and liabilities
            
            
            (612
            )
            
            417Net
                cash provided by continuing operations
            
            
            3,971
            
            
            2,494Net
                operating activities of discontinued operations
            
            
            62
            
            
            (310
            )Net
                cash provided by operating activities
            
            
            4,033
            
            
            2,184CASH
                FLOWS FROM INVESTING ACTIVITIES:Acquisition
                of Datatran Network Systems
            
            
            —
            
            
            (1,000
            )Transaction
                costs paid for acquisitions
            
            
            —
            
            
            (29
            )Capital
                expenditures (net of effect of acquisitions)
            
            
            (579
            )
            
            (351
            )Net
                cash used in investing activities of continuing operations
            
            
            (579
            )
            
            (1,380
            )Net
                investing activities of discontinued operations
            
            
            9
            
            
            1,117Net
                cash used in investing activities
            
            
            (570
            )
            
            (263
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Exercise
                of stock options
            
            
            253
            
            
            256Net
                payments of short-term interest bearing credit facilities
            
            
            (3,485
            )
            
            (1,742
            )Payments
                on notes payable
            
            
            (111
            )
            
            (116
            )Net
                cash used in financing activities of continuing operations
            
            
            (3,343
            )
            
            (1,602
            )Net
                financing activities of discontinued operations
            
            
            —
            
            
            (1
            )Net
                cash used in financing activities
            
            
            (3,343
            )
            
            (1,603
            )NET
                INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            120
            
            
            318CASH
                AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
            
            
            1,795
            
            
            2,597CASH
                AND CASH EQUIVALENTS AT END OF PERIOD
            
            $
            1,915
            
            $
            2,915SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Cash
                paid for interest
            
            $
            88
            
            $
            74Cash
                paid for income taxes
            
            $
            8
            
            $
            1SUPPLEMENTAL
                NONCASH INVESTING AND FINANCING ACTIVITIES:Acquisition
                of Datatran Network Systems:Fair
                value of assets acquired
            
            $
            525
            
            $
            1,544Additional
                purchase price payable
            
            
            (250
            )
            
            —Transaction
                costs accrued
            
            
            (12
            )
            
            —Common
                stock issuable
            
            
            (263
            )
            
            (515
            )Issuance
                of warrants in connection with sale of Stratasoft, Inc.
            
            
            —
            
            
            128




The
      accompanying notes are an integral part of these condensed consolidated
      financial statements








6






**INX
      INC. AND SUBSIDIARY**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(In
      thousands, except share and per share amounts)**





**1. Description
      of Business**





INX
      Inc.
      (“INX” or the “Company”) is a provider of Internet Protocol (“IP”)
      communications solutions for enterprise-class organizations based primarily
      on
      Cisco System, Inc. (“Cisco”) technology. These solutions include design,
      implementation and support of LAN/WAN routing and switching, IP telephony,
      voice
      over IP (“VoIP”), network security, network storage and wireless networks.





**2. Basis
      of Presentation**





The
      accompanying unaudited financial data as of March 31, 2007 and for the
      three-month period ended March 31, 2007 has been prepared by the Company
      pursuant to the rules and regulations of the Securities and Exchange Commission.
      Certain information and footnote disclosures normally included in financial
      statements prepared in accordance with accounting principles generally accepted
      in the United States have been condensed or omitted pursuant to such rules
      and
      regulations. The December 31, 2006 Condensed Consolidated Balance Sheet was
      derived from audited financial statements, but does not include all disclosures
      required by accounting principles generally accepted in the United States.
      However, the Company believes the disclosures are adequate to make the
      information presented not misleading. These Condensed Consolidated Financial
      Statements should be read in conjunction with the Consolidated Financial
      Statements and the notes thereto, included in the Company’s Annual Report on
      Form 10-K for the year ended December 31, 2006 (“Annual Report”).





In
      the
      opinion of management, all adjustments (which include normal recurring
      adjustments, except as disclosed herein) necessary to present a fair
      presentation of financial position as of March 31, 2007, results of operations
      for the three months ended March 31, 2007 and 2006, cash flows for the three
      months ended March 31, 2007 and 2006, and stockholders’ equity for the three
      months ended March 31, 2007, have been included. The results of the interim
      periods are not necessarily indicative of results for the full year or any
      future period.





**3. Adoption
      of FASB Interpretation No. 48**





Effective
      January 1, 2007, the Company adopted FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
      No. 109” (“FIN 48”). FIN 48 clarifies the accounting for
      uncertainty in income taxes recognized in an enterprise’s financial statements
      and prescribes a recognition threshold and measurement attribute for financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. This Interpretation also provides related guidance on
      derecognition, classification, interest and penalties, and accounting in interim
      periods and disclosure. The adoption of FIN 48 did not have a material impact
      on
      the Condensed Consolidated Financial Statements for the three-month period
      ended
      March 31, 2007.





The
      Company and its subsidiary file income tax returns in the U.S. federal
      jurisdiction and several states. With few exceptions, the Company is no longer
      subject to U.S. federal or state and local income tax examinations by tax
      authorities for years before 2003. The Company is currently not undergoing
      an
      income tax examination in any jurisdiction. The Company has no unrecognized
      tax
      benefits not recorded as of January 1, 2007, the date of adoption of FIN 48.





The
      Company records interest accrued on unrecognized tax benefits in interest
      expense and penalties in selling, general and administrative expense. There
      were
      no interest or penalties recorded for unrecognized tax benefits in the
      three-month period ended March 31, 2007. There were no interest or penalties
      accrued in the Condensed Consolidated Balance Sheets at March 31, 2007 or
      December 31, 2006.




**4.
      Recent Accounting Pronouncements**





In
      September 2006, the FASB issued Statement
      of Financial Accounting Standards No. 157,
      “Fair Value Measurements” (“SFAS 157”). SFAS 157 clarifies the definition of
      fair value, establishes a framework for measuring fair value, and expands the
      disclosures on fair value measurements. SFAS No. 157 is effective for
      fiscal years beginning after November 15, 2007. The adoption of
      SFAS 157 is not expected to have a material impact on the Company’s
      consolidated financial statements.





7




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities ”
(“SFAS
      159”). SFAS 159 permits entities to choose to measure many financial instruments
      and certain other items at fair value that are not currently required to be
      measured at fair value. It also establishes presentation and disclosure
      requirements designed to facilitate comparisons between entities that choose
      different measurement attributes for similar types of assets and liabilities.
      SFAS 159 does not: (a) affect any existing accounting literature that
      requires certain assets and liabilities to be carried at fair value;
      (b) establish requirements for recognizing and measuring dividend income,
      interest income, or interest expense; or (c) eliminate disclosure
      requirements included in other accounting standards. SFAS 159 is effective
      as of
      the beginning of the first fiscal year that begins after November 15, 2007.The
      adoption of SFAS 159 is not expected to have a material impact on the
      Company’s consolidated financial statements.








**5.
      Acquisitions**





***Datatran
      Network Systems***





Under
      an
      Asset Purchase Agreement dated February 3, 2006, the Company purchased the
      assets and operations of Datatran Network Systems (“DNS”). DNS is a specialized
      provider of network solutions serving the Southern California market. DNS
      designs, implements and supports solutions based on Cisco technologies with
      a
      primary focus on IP Telephony. The Company completed the acquisition
      simultaneously with the execution of the Asset Purchase Agreement.





The
      consideration paid at closing pursuant to the Asset Purchase Agreement was
      $1,000 in cash, including $100 placed in escrow under holdback provisions
      defined in the Asset Purchase Agreement and 71,003 shares of the Company’s
      common stock valued at $500. Legal and other costs of $47 were paid in
      connection with the transaction, of which $32 was paid in cash and $15 was
      paid
      through the issuance of 2,105 shares of common stock.





Additional
      purchase price consideration valued at $500 and recorded as goodwill will be
      paid to DNS in May 2007 for achievement of certain operating profit milestones
      during the twelve-month period ending February 28, 2007. The consideration
      will
      consist of a cash payment of $250 and issuance of 25,253 shares of the Company’s
      common stock with a value of $250. The additional shares have not been issued
      at
      March 31, 2007, and are classified as Common Stock Issuable in the March 31,
      2007 balance sheet. The calculation of the number of shares of Company’s common
      stock issuable was determined by dividing $250 by $9.90, the average closing
      price per share for the common stock as reported by NASDAQ for the five
      consecutive trading days prior to March 1, 2007. Additionally, cash and stock
      valued at $25 will be paid to the broker of the transaction.





***Network
      Architects, Corp.***





Effective
      May 26, 2005, the Company acquired the operations and certain assets of
      Network Architects, Corp. (“Network Architects”), a data network and IP
      telephony systems design, installation and support business with branches in
      Albuquerque, New Mexico and El Paso, Texas. Under the terms of the Asset
      Purchase Agreement, the Company will issue Network Architects a maximum of
      75,000 shares of common stock as additional purchase price consideration
      following each of the twelve-month periods ending May 31, 2007 and 2008 if
      operating profit during such periods exceeds $660 and $726, respectively. If
      operating profit is less than the applicable milestone for any of the two years,
      the number of shares of common stock issuable by the Company will be equal
      to
      75,000 multiplied by the percentage of actual operating profit during the period
      as compared to the applicable milestone. Additional purchase price
      consideration, if any, will be recorded as goodwill.





**6.
      Discontinued Operations**





On
      November 3, 2005, the Company’s Board of Directors approved a plan to sell
      its Stratasoft and Valerent subsidiaries. Under a Stock Purchase Agreement
      (“Agreement”) dated January 26, 2006, INX sold all outstanding shares of
      Stratasoft’s common stock for a pretax gain on disposal of $302. Key terms of
      the sale are summarized as follows:





• All
      outstanding Stratasoft common stock was sold for a purchase price of $3,000,
      which has been or is subject to reduction as follows:





8


• $800
      placed in escrow, which is available to satisfy indemnified losses, if any,
      as
      defined in the Agreement. Funds placed in escrow are excluded from the estimated
      gain stated above. Approximately $533 in indemnified losses have been paid
      or
      presented for payment as of March 31, 2007.





• $221
      representing a preliminary net working capital adjustment, as defined. The
      final
      working capital adjustment recorded during June 2006 resulted in the further
      reduction of the sale proceeds of $40.





• The
      Company indemnified the buyer for potential losses as defined in the Agreement
      to a maximum of $1,400, inclusive of amounts placed in escrow. Excess funds
      held
      in escrow will be released on January 26, 2008 unless retained in escrow
      for potential indemnified losses as allowed in the Agreement under certain
      circumstances.





• The
      Company may receive additional consideration in the form of 10% of the
      outstanding Stratasoft common stock if revenue exceeds $10,000 for any
      consecutive twelve month period within two years of closing.





• The
      Company may receive additional cash consideration if Stratasoft is sold by
      the
      buyer to another party prior to January 26, 2008, for an amount in excess
      of $15,000.





Transaction
      costs of $815 were incurred by the Company in connection with the transaction,
      including the $128 value of warrants issued to the investment banker for the
      transaction for 40,000 shares of common stock with an exercise price of
      $6 per share. The warrants expire 5 years after January 26, 2006.
      Additional transaction costs of up to $120 are payable based on the final sale
      price. Additional costs of $134 were recorded as a reduction of the gain on
      sale
      for space leased by INX that will not be subleased to Stratasoft in the
      future.





The
      sale
      of Valerent operations involved two separate transactions which were closed
      in
      October 2006. The managed services business and related inventory, property
      and
      equipment were sold to OuterNet Management, L.P. for a cash sales price of
      $185.
      The consulting business and related property and equipment were sold to Vicano
      Acquisition Corp., a company owned by Valerent’s former President and
      brother-in-law of our CEO and largest shareholder. The consulting business
      was
      sold for cash paid at closing of $50 and a $70 promissory note to be received
      in
      twenty-four monthly installments of $3 plus interest of 10%. Additional sales
      price is due to the Company if certain revenue thresholds and conditions are
      met. The Company recorded a gain of $25 on the cash component of the
      transactions and will record a gain on proceeds under the $70 promissory note
      as
      received, of which $10 was received at March 31, 2007.





The
      results of operations and gain on disposal of discontinued operations are
      summarized below:





**Three
                Months Ended**
              **March
                31,****2007**
            
            **2006**Revenues:Stratasoft
            
            $
            —
            
            $
            268Valerent
            
            
            —
            
            
            1,682Total
            
            $
            —
            
            $
            1,950Income
                (loss) from operations of discontinued subsidiaries:Stratasoft
            
            $
            12
            
            $
            (260
            )Valerent
            
            
            41
            
            
            (46
            )Total
            
            
            53
            
            
            (306
            )Gain
                on disposal of discontinued operations:Stratasoft
            
            
            —
            
            
            302Valerent
            
            
            9
            
            
            —Gain
                (loss) from discontinued operations, net of taxes
            
            $
            62
            
            $
            (4
            )





**7.
      Earnings Per Share**





Basic
      EPS
      is computed by dividing net income (loss) by the weighted-average number of
      common shares outstanding for the period. Diluted EPS is based on the
      weighted-average number of shares outstanding during each period and the assumed
      exercise of dilutive stock options and warrants less the number of treasury
      shares assumed to be purchased from the exercise proceeds using the average
      market price of the Company’s common stock for each of the periods
      presented.





9


For
      the
      three months ended March 31, 2006, INX’s potentially dilutive options of
      1,212,191 were not used in the calculation of diluted earnings since the effect
      of potentially dilutive securities in computing a loss per share was
      antidilutive. The following table presents the calculation of basic and diluted
      earnings per share:





**Three
                months ended**
              **March
                31,****2007**
            
            **2006**Numerator
                for basic earnings per share:Net
                income (loss) from continuing operations
            
            $
            304
            
            $
            (524
            )Income
                (loss) on disposal of discontinued operations, net of income
                taxes
            
            
            62
            
            
            (4
            )Net
                income (loss)
            
            $
            366
            
            $
            (528
            )Numerator
                for diluted earnings per share:Net
                income (loss) from continuing operations
            
            $
            304
            
            $
            (524
            )Income
                (loss) on disposal of discontinued operations, net of income
                taxes
            
            
            62
            
            
            (4
            )Net
                income (loss)
            
            $
            366
            
            $
            (528
            )Denominator
                for basic earnings per share — weighted-average shares
                outstanding
            
            
            6,662,839
            
            
            6,047,840Effect
                of dilutive securities — shares issuable from assumed conversion of common
                stock options, restricted stock, and warrants
            
            
            1,066,842
            
            
            —Denominator
                for diluted earnings per share — weighted-average shares
                outstanding
            
            
            7,729,681
            
            
            6,047,840





**8.
      Credit Facility**





On
      April
      30, 2007, the Company entered into a new credit facility agreement (“Credit
      Facility”) with Castle Pines Capital LLC to provide inventory financing and to
      fund working capital requirements, which increases the maximum availability
      from
      $40,000 in the prior Credit Facility to $50,000 under similar terms and
      conditions as the previous Credit Facility. The new Credit Facility is discussed
      further in Part II, Item 5.





**9.
      Share-Based Compensation**





The
      Company uses the Black-Scholes option pricing model to calculate the grant-date
      fair value of an award. The fair value of options granted during the three
      months ended March 31, 2007 and 2006 were calculated using the following
      estimated weighted average assumptions:




**Three
                Months**
              **Ended
                March 31,****2007**
            
            **2006**Expected
                volatility
            
            
            61.3
            %
            
            65.1
            %Expected
                term (in years)
            
            
            6.5
            
            
            6.5Risk-free
                interest rate
            
            
            4.5
            %
            
            4.83
            %Expected
                dividend yield
            
            
            0
            %
            
            0
            %





Expected
      volatility is based on historical volatility over the period IP communications
      solutions was the primary line of business of the Company. Beginning in 2006,
      the Company used the simplified method outlined in Securities and Exchange
      Commission Staff Accounting Bulletin No. 107 to estimate expected
      lives for options granted during the period. The risk-free interest rate is
      based on the yield on zero-coupon U.S. Treasury securities for a period that
      is
      commensurate with the expected term assumption. The Company has not historically
      issued any dividends and does not expect to in the future.





Share-based
      compensation expense recognized under SFAS 123R for the three-month periods
      ended March 31, 2007 and 2006 was as follows:




**Three
                months ended March 31,****2007**
            
            **2006**Cost
                of products and services — services
            
            $
            12
            
            $
            14Selling,
                general and administrative expenses
            
            
            105
            
            
            44Share-based
                compensation from continuing operations before income
                taxes
            
            
            117
            
            
            58Income
                tax benefit
            
            
            —
            
            
            —Share-based
                compensation from continuing operations
            
            
            117
            
            
            58Share-based
                compensation from discontinued operations
            
            
            (8
            )
            
            2Total
                share-based compensation
            
            $
            109
            
            $
            60





10


A
      summary
      of the activity under the Company’s stock option plans for the three-month
      period ended March 31, 2007 is presented below:




**Shares**
            
            
            **Weighted**
                **Average**
                **Exercise**
                **Price**
            
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Term
                (Years)**
            
            
            **Aggregate**
              **Intrinsic**
              **Value**Options
                outstanding at December 31, 2006
            
            
            1,870,763
            
            $
            3.42Granted
            
            
            45,000
            
            $
            9.28
            
            
            
            
            $
            41Exercised
            
            
            (152,555
            )
            $
            1.64
            
            
            
            
            $
            1,221Canceled
            
            
            (33,914
            )
            $
            6.93
            
            
            
            
            $
            95Options
                outstanding March 31, 2007
            
            
            1,729,294
            
            $
            3.66
            
            
            6.57
            
            $
            11,298Options
                exercisable at March 31, 2007
            
            
            1,312,095
            
            $
            2.59
            
            
            5.78
            
            $
            9,973Options
                vested and options expected to vest at March 31, 2007
            
            
            1,651,076
            
            $
            3.54
            
            
            6.74
            
            $
            10,988





The
      total
      intrinsic value of options exercised during the three-month periods ended March
      31, 2007 and 2006 was $1,221 and $612, respectively. The total grant-date fair
      value of stock options that became fully vested during the three-month periods
      ended March 31, 2007 and 2006 was approximately $112 and $67, respectively.
      The
      weighted average grant-date fair value of options granted during the three-month
      periods ended March 31, 2007 and 2006 was $5.82 and $3.99, respectively. As
      of
      March 31, 2007, there was $1,534 of total unrecognized compensation cost, net
      of
      estimated forfeitures, related to unvested share-based awards, which is expected
      to be recognized over a weighted-average period of 2.8 years.





A
      summary
      of the status of nonvested restricted shares as of March 31, 2007 and changes
      during the three-month period ended March 31, 2007 is presented
      below:


**Nonvested
                Shares**
            
            **Shares**
            
            **Weighted**
              **Average**
              **Grant
                Date**
              **Fair
                Value**Nonvested
                at December 31, 2006
            
            
            37,194
            
            $
            7.48Granted
            
            
            3,089
            
            $
            7.77Vested
            
            
            (918
            )
            $
            7.32Forfeited
            
            
            (14,647
            )
            $
            7.51Nonvested
                at March 31, 2007
            
            
            24,718
            
            $
            7.51





As
      of
      March 31, 2007, there was $176 of total unrecognized compensation cost related
      to nonvested share-based compensation arrangements granted under the Plan,
      which
      is expected to be recognized over the weighted-average period of 4.2 years.





**10.
      Stockholders’ Equity**





In
      January
      2007, INX issued warrants to an investor relations firm under a personal
      services agreement to purchase up to 50,000 shares of common stock at an
      exercise price equal to $8.00 per share expiring January 1, 2009.
      Warrants for 25,000 shares are exercisable immediately and resulted in a
      charge to selling, general and administrative expense and a credit to additional
      paid-in capital of $40 in the three-month period ended March 31, 2007. If the
      personal services agreement is not cancelled by the Company on or before
      June 30, 2007, warrants for 25,000 shares are exercisable after
      June 30, 2007 and will result in a charge of $46 during the third quarter
      of 2007.





**11.
      Commitments and Contingencies**





*Litigation* —
On
      December 22, 2005, CenterPoint Energy Service Company filed a lawsuit in
      the District Court of Harris County, Texas styled *CenterPoint
      Energy Service Company (“CenterPoint”),*  *LLC v.
      InterNetwork Experts, Inc. (now INX, Inc.), Yellow Transportation,
      Inc.*  *and
      Cisco Systems, Inc.* claiming
      damages to product during shipment estimated to be $488 plus consequential
      damages, legal fees, court costs, and interest. On April 26, 2007 the Company
      settled its lawsuit with CenterPoint, resulting in a charge to selling, general
      and administrative expense of $50 in the three-month period ended March 31,
      2007.





INX
      is
      also party to other litigation and claims which management believes are normal
      in the course of its operations. While the results of such litigation and claims
      cannot be predicted with certainty, INX believes the final outcome of such
      matters will not have a materially adverse effect on its results of operations
      or financial position.





11


On
      January 19, 2007, the Company was notified that a customer was terminating
      a NetSurant support services contract effective February 28, 2007. Services
      revenue recorded under the NetSurant support service contract was $122 and
      $110
      for the three-month periods ended March 31, 2007 and 2006, respectively. The
      customer has agreed to a contract termination payment of at least $239, on
      which
      service revenue of $222 was recognized in the three-month period ended March
      31,
      2007 The Company continues to negotiate the final termination payment amount.
      Additional amounts, if any, would be recorded for amounts received in excess
      of
      $239 when agreed to in writing by the customer.





**Item
      2. Management’s Discussion and Analysis of Financial Condition and
      Results**  **of
      Operations**





The
      following discussion is qualified in its entirety by, and should be read in
      conjunction with, our consolidated financial statements, including the notes
      thereto included elsewhere in this Form 10-Q and our annual report on Form
      10-K
      for the fiscal year ended December 31, 2006, as previously filed with the
      Securities and Exchange Commission. Amounts are presented in thousands except
      for share and per share data.





**Special
      notice regarding forward-looking statements**





This
      quarterly report on Form 10-Q contains forward-looking statements within the
      meaning of the Private Securities Litigation Reform Act of 1995 relating to
      future events or our future financial performance including, but not limited
      to,
      statements contained in Item 2. “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations.” Readers are cautioned that any
      statement that is not a statement of historical fact including, but not limited
      to, statements which may be identified by words including, but not limited
      to,
“anticipate,” “appear,” “believe,” “could,” “estimate,” “expect,” “hope,”
“indicate,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “seek,”
“should,” “will,” “would,” and other variations or negative expressions thereof,
      are predictions or estimations and are subject to known and unknown risks and
      uncertainties. Numerous factors, including factors that we have little or no
      control over, may affect INX’s actual results and may cause actual results to
      differ materially from those expressed in the forward-looking statements
      contained herein. In evaluating such statements, readers should consider the
      various factors identified in our Annual Report on Form 10-K for our fiscal
      year
      ended December 31, 2006, as filed with the Securities and Exchange Commission
      including the matters set forth in Item 1. — “Risks Related to Our Business,”
which could cause actual events, performance or results to differ materially
      from those indicated by such statements.





**Results
      Of Operations**





*Period
      Comparisons.* The
      following tables set forth, for the periods indicated, certain financial data
      derived from our condensed consolidated statements of operations. Percentages
      shown in the table below are percentages of total revenue, except for the
      products and services components of gross profit, which are percentages of
      the
      respective product and service revenue.





**Three
                Months Ended March 31,****2007**
            
            **2006****Amount**
            
            **%**
            
            **Amount**
            
            %Revenue:Products
            
            $
            39,550
            
            
            86.7
            
            $
            22,311
            
            
            84.9Services
            
            
            6,093
            
            
            13.3
            
            
            3,965
            
            
            15.1Total
                revenue
            
            
            45,643
            
            
            100.0
            
            
            26,276
            
            
            100.0Gross
                profit:Products
            
            
            7,218
            
            
            18.2
            
            
            4,418
            
            
            19.8Services
            
            
            1,289
            
            
            21.2
            
            
            989
            
            
            24.9Total
                gross profit
            
            
            8,507
            
            
            18.6
            
            
            5,407
            
            
            20.6Selling,
                general and administrative expenses
            
            
            8,172
            
            
            17.9
            
            
            5,845
            
            
            22.3Operating
                income (loss)
            
            
            335
            
            
            0.7
            
            
            (438
            )
            
            (1.7
            )Interest
                and other income (expense), net
            
            
            (24
            )
            
            0.0
            
            
            (85
            )
            
            (0.3
            )Income
                tax expense
            
            
            7
            
            
            0.0
            
            
            1
            
            
            0.0Net
                income (loss) from continuing operations
            
            
            304
            
            
            0.7
            
            
            (524
            )
            
            (2.0
            )Income
                (loss) from discontinued operations, net of income taxes
            
            
            62
            
            
            0.1
            
            
            (4
            )
            
            (0.0
            )Net
                income (loss)
            
            $
            366
            
            
            0.8
            
            $
            (528
            )
            
            (2.0
            )





**Three
      Months Ended March 31, 2007 Compared To the Three Months Ended March
      31,**  **2006**





*Revenue* .
      Total
      revenue increased by $19,367, or 73.7%, to $45,643 from $26,276. Product revenue
      increased $17,239, or 77.3% to $39,550 from $22,311. The increase in product
      revenue is primarily due to sales increases in our Federal division, Pacific
      Northwest and Texas locations, and a full quarter of sales from our 2006
      acquisition in Los Angeles. Services revenue increased $2,128 or 53.7% to $6,093
      from $3,965. The increase in services revenue is due to the growth in
      installation revenue across substantially all locations and continued growth
      in
      the NetSurant® post-sale recurring support services revenue, which increased
      80.9% to $704 from $389. The NetSurant® revenue of $222 from a customer contract
      termination payment recorded in the three-month period ended March 31, 2007
      was
      excluded from the calculation of the 80.9% growth rate.






12


*Gross
      Profit* .
      Total
      gross profit increased by $3,100, or 57.3%, to $8,507 from $5,407. Gross profit
      as a percentage of sales decreased to 18.6% from 20.6%, primarily due to lower
      product and service revenue margins in 2007 and proportionately lower service
      revenues on which we obtain a higher margin compared to product revenue. Gross
      profit on the product sales component increased $2,800 or 63.4%, to $7,218
      from
      $4,418 and, as a percentage of sales, decreased to 18.2% from 19.8%. The
      decrease from the first quarter of 2006 is primarily due to proportionately
      lower Cisco rebates. Gross profit on service revenue increased $300 or 30.3%
      to
      $1,289 from $989 and gross profit as a percent of service revenue decreased
      to
      21.2% from 24.9%. The decrease in service gross margin was primarily due to
      increased personnel costs incurred during expansion into new
      markets.




*Selling,
      General and Administrative Expenses* .
      Selling,
      general and administrative expenses increased by $2,327, or 39.8% to $8,172
      from
      $5,845. As a percentage of total revenue, these expenses decreased to 17.9%
      from
      22.2%. Increased 2007 expenses were incurred for additional sales compensation
      costs on substantially higher revenues, additional sales and administrative
      personnel costs from headcount increases, and higher professional fees due
      to
      the CenterPoint litigation and increased audit and tax fees.





*Operating
      Income (Loss)* .
      Operating income increased $773 to income of $335 from a loss of $438, primarily
      due to higher sales and proportionately lower selling, general and
      administrative expenses.





*Interest
      and Other Income (Expense), Net* .
      Interest
      and other income (expense), net, changed by $61 to an expense of $24 from an
      expense of $85 due to reduced borrowings under the credit facility.





*Income
      (Loss) from Discontinued Operations, Net of Tax.* Income ** from
      discontinued operations increased by $66, to income of $62 from a loss of $4.
      Income from discontinued operations of $62 in the first quarter of 2007
      consisted of income from operations of $53 and a gain on disposal of Valerent
      of
      $9. The loss from discontinued operations of $4 in the first quarter of 2006
      consisted of a loss from operations of $306, substantially offset by the gain
      on
      disposal of Stratasoft in January 2006 of $302.





*Net
      Income (Loss)* .
      Net
      income increased $894 to net income of $366 from a net loss of $528, primarily
      due to higher sales and proportionately lower selling, general and
      administrative expenses.





*Tax
      Loss Carryforward.* Because
      of
      our prior operating losses we have accumulated a net operating loss carryforward
      for federal income tax purposes that, as of March 31, 2007, was approximately
      $2.4 million and is available to offset future federal taxable income. This
      carryforward expires during the period 2023 through 2025. In addition to
      potential expiration, there are several factors that could limit or eliminate
      our ability to use these carryforwards. For example, under Section 382 of the
      Internal Revenue Code of 1986, as amended, use of prior net operating loss
      carryforwards is limited after an ownership change. If we achieve sustained
      profitability, which may not happen, the use of net operating loss carryforwards
      would reduce our tax liability and increase our net income and available cash
      resources. When all operating loss carryforwards have been used or have expired,
      we would again be subject to increased tax expense and reduced earnings due
      to
      such tax expense. The income tax expense recorded for 2007 and 2006 represents
      minimum state income tax payments due regardless of income or loss.





**Liquidity
      and Capital Resources**





***Sources
      of Liquidity***





Our
      principal sources of liquidity are collections from our accounts receivable
      and
      our credit facility with Castle Pines Capital (the “Credit Facility”), which we
      believe are sufficient to meet our short-term and long-term liquidity
      requirements. We use the Credit Facility to finance the majority of our
      purchases of inventory and to provide working capital when our cash flow from
      operations is insufficient. In 2007, we experienced positive cash flow from
      operating activities of continuing operations of $3,971 and positive cash flow
      from discontinued operations of $62. During 2007, the increase in cash flow
      from
      operations approximated the decrease in our use of the Credit Facility and
      increased capital expenditures. Our working capital increased to $7,786 at
      March
      31, 2007 from $7,632 at December 31, 2006.





13




*Accounts
      Receivable.* The
      timing of our collection of accounts receivable and payments of our accounts
      payable is one of the principal influences on our cash flow from operations.
      We
      typically sell our products and services on short-term credit terms. We manage
      our credit risk by performing credit checks, obtaining letters of credit in
      certain instances, and conducting our own collection efforts. Our accounts
      receivable, net of allowance for doubtful accounts, were $39,248 and $42,424
      at
      March 31, 2007 and December 31, 2006, respectively. The decrease in accounts
      receivable was attributable to improved collection of past due accounts during
      the first quarter of 2007 compared to the fourth quarter of 2006.





*Inventory.* We
      had inventory of $1,989 and $1,157 at March 31, 2007 and December 31, 2006,
      respectively. The higher level of 2007 inventory is attributable to a large
      amount of in-transit customer orders to be recorded as revenue in the second
      quarter of 2007. We try to minimize the amount of inventory on hand to reduce
      the risk that the inventory will become obsolete or decline in value. We are
      able to do this by relying on the ready availability of products from our
      principal suppliers. As noted above, we rely principally on our Credit Facility
      to finance our inventory purchases.





*Accounts
      Payable.* We
      rely on our Credit Facility to finance a substantial portion of our trade
      accounts payable under terms ranging from 30 to 60 days. Credit Facility
      balances within the Free Finance Period defined below are non-interest bearing
      and classified as accounts payable in our balance sheet. Credit Facility
      balances outstanding beyond the Free Finance Period are interest bearing and
      classified as notes payable in our balance sheet. Our accounts payable were
      $30,193 and $28,798 at March 31, 2007 and December 31, 2006, respectively.





***Contractual
      Obligations***





Our
      contractual cash obligations with terms in excess of one year consist of a
      software license obligation and lease obligations, substantially all of which
      are for office space. We do not have any material contractual purchase
      obligations. We purchase inventory to fulfill in-hand orders from customers
      and
      we attempt to minimize the amount of inventory on hand to reduce the risk that
      the inventory will become obsolete or decline in value. We are able to do this
      by relying on the ready availability of products from our principal
      suppliers.





We
      expect
      to be able to meet our contractual cash payment obligations by their due dates
      through cash generated from operations, augmented, if needed, by borrowings
      under the Credit Facility.





*Credit
      Facility.* As
      of March 31, 2007, we had a $40,000 senior credit facility with Castle Pines
      Capital LLC (“CPC”) to provide inventory financing and to fund working capital
      requirements. On April 30, 2007, we entered into a new Credit Facility with
      CPC
      which increased the total credit facility to $50,000 under similar terms and
      conditions as the previous Credit Facility as further discussed in Part II,
      Item
      5.





As
      of
      March 31, 2007, borrowing capacity and availability were as
      follows:





Total
                Credit Facility
            
            $
            40,000Borrowing
                base limitation
            
            
            (8,946
            )Total
                borrowing capacity
            
            
            31,054Less
                interest-bearing borrowings
            
            
            (865
            )Less
                non-interest bearing advances
            
            
            (27,523
            )Total
                unused availability
            
            $
            2,666





The
      “unused availability” is the amount not borrowed, but eligible to be borrowed.
      The borrowing base restrictions generally restrict our borrowings under the
      Credit Facility to 85% of the eligible receivables, 100% of our Floorplanned
      inventory and 75% of Cisco vendor rebates receivable.





We
      use the
      Credit Facility to finance purchases of Cisco products from Cisco and from
      certain wholesale distributors. Cisco provides 60-day terms, and other wholesale
      distributors typically provide 30-day terms. Balances under the Credit Facility
      that are within those respective 60-day and 30-day periods (the “Free Finance
      Period”) do not accrue interest and are classified as accounts payable in our
      balance sheet. To the extent that we have credit availability under the Credit
      Facility, it gives us the ability to extend the payment terms past the Free
      Finance Period. Amounts extended past the Free Finance Period accrue interest
      and are classified as notes payable on our balance sheet. These extended payment
      balances under the Credit Facility accrue interest at the prime rate (8.25%
      at
      March 31, 2007) plus 0.5%.





14




As
      defined
      in the Credit Facility there are restrictive covenants measured at each quarter
      and year-end regarding minimum tangible net worth, maximum debt to tangible
      net
      worth ratio, minimum working capital and a minimum current ratio.  At
      March
      31, 2007, we were in compliance with the loan covenants and we anticipate that
      we will be able to comply with the loan covenants during the next twelve months.
      If we violate any of the loan covenants, we would be required to seek waivers
      from CPC for those non-compliance events. If CPC refused to provide waivers,
      the
      amount due under the Credit Facility could be accelerated and we could be
      required to seek other sources of financing.





*Cash
      Flows.* During
      the
      three months ended March 31, 2007, our cash increased by $120. Operating
      activities provided cash of $4,033, investing activities used $570, and
      financing activities used $3,343.





*Operating
      Activities.* Operating
      activities provided $4,033 in the three months ended March 31, 2007, as compared
      to providing cash of $2,184 in the comparable 2006 period. Operating activities
      from continuing operations provided $3,971 in the three months ended March
      31,
      2007, as compared to providing cash of $2,494 in the comparable 2006 period.
      Changes in asset and liability accounts provided $3,137 in the three months
      ended March 31, 2007. The most significant sources of working capital related
      to
      a decrease in accounts receivable of $3,186 and an increase in accounts payable
      of $1,395, partially offset by the $832 increase in inventory.





*Investing
      Activities.* Investing
      activities used $570 in the three months ended March 31, 2007, compared to
      a use
      of $263 for the comparable period in 2006. Our 2007 investing activities
      consisted primarily of $579 in capital expenditures. Our 2006 investing
      activities consisted of the purchase of Datatran, using cash of $1,029, and
      capital expenditures, which used cash of $351, less cash provided by the sale
      of
      Stratasoft stock of $1,117, net of transaction costs. Capital expenditures
      in
      both years were primarily related to purchases of computer equipment and
      software, and to a lesser degree, leasehold improvements. During the next twelve
      months, we do not expect to incur significant capital expenditures requiring
      cash, except for acquisitions, of which we cannot predict the certainty or
      magnitude.





*Financing
      Activities.* Financing
      activities used $3,343 in the three months ended March 31, 2007, as compared
      to
      using $1,602 in the comparable period in 2006. The funds used in the three
      months ended March 31, 2007 were primarily to reduce debt as were the funds
      used
      in the comparable 2006 period.





**Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk**





We
      incur
      certain market risks related to interest rate variations because we hold
      floating rate debt. Based upon the average amount of debt outstanding during
      the
      three months ended March 31, 2007, a one percent change in variable interest
      rates will not have a material impact on our financial condition.





Our
      business depends upon our ability to obtain an adequate supply of products
      and
      parts at competitive prices and on reasonable terms. Our suppliers are not
      obligated to have product on hand for timely delivery to us nor can they
      guarantee product availability in sufficient quantities to meet our demands.
      INX’s business is Cisco-centric. Any material disruption in our supply of
      products could have a material adverse effect on our financial condition and
      results of operations.





**Item
      4. Controls and Procedures**





Under
      the
      supervision and with the participation of certain members of our management,
      including our Chairman of the Board, Chief Executive Officer and Chief Financial
      Officer, we completed an evaluation of the effectiveness of the design and
      operation of our disclosure controls and procedures (as defined in Rules
      13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934, as amended
      (the
“Exchange Act”)). Based on that evaluation, we and our management have concluded
      that, our disclosure controls and procedures at March 31, 2007 were effective
      to
      ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Exchange Act is recorded, processed, summarized and
      reported within the time periods specified in the rules and forms of the SEC,
      and are designed to ensure that information required to be disclosed by us
      in
      these reports is accumulated and communicated to our management, as appropriate
      to allow timely decisions regarding required disclosures. In the first three
      months of 2007, there has been no change in our internal control over financial
      reporting that has materially affected, or is reasonably likely to affect,
      our
      internal control over financial reporting.





We
      will
      consider further actions and continue to evaluate the effectiveness of our
      disclosure controls and internal controls and procedures on an ongoing basis,
      taking corrective action as appropriate. Management does not expect that
      disclosure controls and procedures or internal controls can prevent all errors
      and all fraud. A control system, no matter how well conceived and operated,
      can
      provide only reasonable and not absolute assurance that the objectives of the
      control system are met. Further, the design of a control system must reflect
      the
      fact that there are resource constraints, and the benefits of controls must
      be
      considered relative to their costs. While management believes that its
      disclosure controls and procedures provide reasonable assurance that fraud
      can
      be detected and prevented, because of the inherent limitations in all control
      systems, no evaluation of controls can provide absolute assurance that all
      control issues and instances of fraud, if any, have been detected.





15






**PART
      II. OTHER INFORMATION**





**Item
      1. Legal Proceedings**





See
      Note
      11 to condensed consolidated financial statements in Part I, Item
      1.





**Item
      5. Other Information**





On
      April
      30, 2007, the Company entered into a new $50,000 senior credit facility with
      Castle Pines Capital LLC (“CPC”) to provide inventory financing and to fund
      working capital requirements. The new facility with CPC replaced the $40,000
      senior credit facility with CPC. The Credit Agreement dated April 30, 2007
      (“Agreement”) was filed as Exhibit 10.1 to this Form 10-Q by and among Castle
      Pines Capital LLC, INX, Inc., and Valerent, Inc. Key terms of the Agreement
      are
      summarized as follows:





·
            The
                Agreement provides a discretionary line of credit up to a maximum
                aggregate amount of $50,000 to purchase inventory from CPC approved
                vendors.


·
            The
                Agreement provides a working capital revolving line of credit under
                the
                above line of credit with an aggregate outstanding sublimit of $10
                million.


·
            The
                working capital revolving line of credit incurs interest payable
                monthly
                at the rate of prime plus .5%.


·
            The
                Agreement contains customary covenants regarding maintenance of insurance
                coverage, maintenance of and reporting collateral, and submission
                of
                financial statements. The Agreement also contains restrictive financial
                covenants measured as of the end of each calendar quarter covering
                current
                ratio, tangible net worth, minimum working capital, and total liabilities
                to tangible net worth ratio as
                defined.


·
            The
                line of credit is collaterized by substantially all assets of the
                Company.


·
            The
                term of the Agreement is for one year, with automatic renewals for
                one
                year periods, except as otherwise provided under the
                Agreement.




**Item
      6. Exhibits**





See
      exhibit list in the Index to Exhibits is incorporated herein by reference as
      the
      list of exhibits required as part of this report.








SIGNATURE





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.




INX
                  Inc.Date:
                  May 4, 2007
              By:
              /s/
                  BRIAN FONTANABrian
                  Fontana, Vice Presidentand
                  Chief Financial Officer






16





**Index
      to Exhibits**





**Exhibit**
              **No.**
            
            **Description**
            
            **Filed
                Herewith or Incorporated by Reference From:**10.1
            
            Credit
                Agreement by and among Castle Pines Capital LLC, INX, Inc., and Valerent,
                Inc. dated April 30, 2007
            
            Filed
                herewith.31.1
            
            Rule
                13a-14(a)/15d-14(a) Certification of Principal Executive
                Officer
            
            Filed
                herewith.31.2
            
            Rule
                13a-14(a)/15d-14(a) Certification of Principal Financial
                Officer
            
            Filed
                herewith.32.1
            
            Section
                1350 Certification of Principal Executive Officer
            
            Filed
                herewith.32.2
            
            Section
                1350 Certification of Principal Financial Officer
            
            Filed
                herewith.






17