##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM
10-QSB/A
 Amendment
No. 1
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from       to
 Commission file number 0-51720
 InferX Corporation
  Delaware
(State or other jurisdiction of incorporation or organization)
    
    54-1614664
(I.R.S. Employer Identification No.)
 
 
 þ o
 o þ
  o þ




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InferX Corporation
 Quarterly Report on Form 10-QSB
 for the Quarterly Period Ended
 March 31, 2007
 - INDEX -
 PagePART I- FINANCIAL INFORMATION:Item 1. Financial Statements:Report of Independent Registered Public Accounting Firm
    
    
    1Condensed Consolidated Balance Sheet as of March 31, 2007 (Unaudited)
    
    
    2Condensed Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006 (Unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the three months endedMarch 31, 2007 and 2006 (Unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    5Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    25Item 3. Controls and Procedures
    
    
    30PART II  OTHER INFORMATION:Item 1. Legal Proceedings
    
    
    31Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3. Defaults Upon Senior Securities
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    31




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##### 



PART I
 FINANCIAL INFORMATION
 Item 1.
Financial Statements.
 Report of Independent Registered Public Accounting Firm
 
       
 1




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 2007
 RESTATEDASSETSCURRENT ASSETSCash
    
    $
    2,065Prepaid expenses and other current assets
    
    
    7,505Total current assets
    
    
    9,570Fixed assets, net of depreciation
    
    
    40,723Other AssetComputer software development costs, net of amortization
    
    
    362,211Total other asset
    
    
    362,211TOTAL ASSETS
    
    $
    412,504LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIESAccounts payable and accrued expenses
    
    $
    318,507Derivative liability
    
    
    645,549Current portion of notes payable
    
    
    16,980Total current liabilities
    
    
    981,036Long-term LiabilitiesNotes payable, net of current portion
    
    
    361,752TOTAL LIABILITIES
    
    
    1,342,788STOCKHOLDERS 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 issued and outstanding
    
    
    913Additional paid-in capital
    
    
    1,846,575Retained earnings (defict)
    
    
    (2,777,772
    )Total stockholders equity (deficit)
    
    
    (930,284
    )TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
    
    $
    412,504
  2




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
 2007
    
    
    2006REVENUE
    
    $
    100,000
    
    
    $
    49,997COST OF REVENUESDirect labor and other finges
    
    
    24,329
    
    
    
    21,875Subcontractor
    
    
    35,111
    
    
    
    12,478Other direct costs
    
    
    11,250
    
    
    
    20,831Amortization of computer software development costs
    
    
    44,251
    
    
    
    44,251Total costs of revenues
    
    
    114,941
    
    
    
    99,435GROSS PROFIT (LOSS)
    
    
    (14,941
    )
    
    
    (49,438
    )OPERATING EXPENSESIndirect and overhead labor and fringes
    
    
    149,884
    
    
    
    37,485Professional fees
    
    
    76,174
    
    
    
    99,000Travel related costs
    
    
    7,208
    
    
    
    4,825Rent
    
    
    26,609
    
    
    
    25,326General and administrative
    
    
    14,257
    
    
    
    17,105Depreciation and impairment
    
    
    15,361
    
    
    
    3,772Total operating expenses
    
    
    289,493
    
    
    
    187,513NET LOSS FROM OPERATIONS BEFORE OTHER EXPENSE AND
PROVISION FOR INCOME TAXES
    
    
    (304,434
    )
    
    
    (236,951
    )OTHER EXPENSEInterest expense, net of interest income
    
    
    5,685
    
    
    
    5,785NET LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES
    
    
    (310,119
    )
    
    
    (242,736
    )Provision for income taxes
    
    
    
    
    
    
    NET (LOSS) APPLICABLE TO SHARES
    
    $
    (310,119
    )
    
    $
    (242,736
    )NET (LOSS) PER BASIC AND DILUTED SHARES
    
    $
    (0.03
    )
    
    $
    (0.05
    )WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
    
    
    9,129,392
    
    
    
    5,350,000
  3




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
 2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net (loss)
    
    $
    (310,119
    )
    
    $
    (242,736
    )Adjustments to reconcile net (loss)
to net cash provided by (used in) operating activities:Stock issued for services
    
    
    
    
    
    
    22,500Impairment loss
    
    
    10,473
    
    
    
    Amortization of computer software development costs
    
    
    44,251
    
    
    
    44,251Depreciation
    
    
    4,888
    
    
    
    3,772Change in assets and liabilities(Increase) decrease in accounts receivable
    
    
    50,000
    
    
    
    (1
    )(Increase) in prepaid expenses and other current assets
    
    
    
    
    
    
    (67,245
    )Increase in accounts payable and accrued expenses
    
    
    189,123
    
    
    
    306,357Total adjustments
    
    
    298,735
    
    
    
    309,634Net cash provided by (used in) operating activities
    
    
    (11,384
    )
    
    
    66,898CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (16,413
    )
    
    
    Computer software development costs
    
    
    (45,496
    )
    
    
    Net cash (used in) investing activities
    
    
    (61,909
    )
    
    
    CASH FLOWS FROM FINANCING ACTIVITIES:Increase (decrease) in cash overdraft
    
    
    
    
    
    
    (12,071
    )Contributions of capital pre-merger
    
    
    
    
    
    
    3,571(Repayment) of notes payable
    
    
    (4,196
    )
    
    
    (3,808
    )Borrowings (repayment) of note payable  related partry
    
    
    
    
    
    
    (45,000
    )Net cash (used in) financing activities
    
    
    (4,196
    )
    
    
    (57,308
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (77,489
    )
    
    
    9,590CASH AND CASH EQUIVALENTS  BEGINNING OF PERIOD
    
    
    79,554
    
    
    
    CASH AND CASH EQUIVALENTS  END OF PERIOD
    
    $
    2,065
    
    
    $
    9,590SUPPLEMENTAL INFORMATION OF CASH FLOW ACTIVITYCash paid during the year for interest
    
    $
    27,596
    
    
    $
    6,791SUPPLEMENTAL INFORMATION ON NONCASH ACTIVITYStock issued for services  pre-merger
    
    $
    
    
    
    $
    22,500
  4




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 1-
    
    ORGANIZATION AND BASIS OF PRESENTATIONThe unaudited condensed financial statements included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). The condensed financial statements and notes are presented as
permitted on Form 10-QSB and do not contain information included in the Companys
annual statements and notes. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the December 31, 2006 audited financial statements and the
accompanying notes thereto. While management believes the procedures followed in
preparing these condensed consolidated financial statements are reasonable, the
accuracy of the amounts are in some respects dependent upon the facts that will
exist, and procedures that will be accomplished by the Company later in the year.These condensed unaudited condensed consolidated financial statements reflect all
adjustments, including normal recurring adjustments which, in the opinion of
management, are necessary to present fairly the consolidated operations and cash
flows for the periods presented.Black Nickel Acquisition Corp. I was incorporated in Delaware on May 26, 2005, and
was formed as a vehicle to pursue a business combination. From inception through
October 24, 2006, Black Nickel Acquisition Corp. I, was engaged in organizational
efforts and obtaining initial financing.On May 17, 2006, Black Nickel Acquisition Corp. I entered into a letter of intent
with InferX Corporation, a privately-held Virginia corporation (InferX Virginia),
with respect to entering into a merger transaction relating to bridge financing for
InferX Virginia and the acquisition of and merger with InferX Virginia. The
transaction closed on October 24, 2006. Following the merger, Black Nickel
Acquisition Corp. I effected a short-form merger of InferX Virginia with and into
Black Nickel Acquisition Corp. I, pursuant to which the separate existence of InferX
Virginia terminated and Black Nickel Acquisition Corp. I changed its name to InferX
Corporation (InferX or the Company).The transaction was recorded as a recapitalization under the purchase method of
accounting, as InferX became the accounting acquirer. The reported amounts and
disclosures contained in the consolidated financial statements are those of InferX
Corporation, the operating company.
 5




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 1-
    
    ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)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.Going ConcernAs shown in the accompanying condensed consolidated financial statements the Company
has incurred a loss of $310,119 and $242,736 for the three months ended March 31,
2007 and 2006, respectively, and has a working capital deficiency of $971,466 as of
March 31, 2007. 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.
 6




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 1-
    
    ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)Going Concern (Continued)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 condensed 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.NOTE 2-
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPrinciples of ConsolidationThe condensed 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 condensed 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.
 7




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INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 2-
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)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 March 31, 2007, 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.Computer Software Development CostsDuring 2007 and 2006, 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 three months
ended March 31, 2007 and 2006, the Company recognized $44,251 and $44,251 of
amortization expense on its capitalized software costs, respectively.
 8




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INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 2-
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)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.Fixed-Price ContractsRevenue from firm-fixed-price contracts is recognized upon achievement of the
milestones contained in the contracts in accordance with the provisions of Staff
Accounting Bulletin 104. Revenue is not recognized until collectibility is assured,
which does not take place until completion of the particular milestone. Costs are
recognized as services are performed.The Company does not derive revenue from projects involving multiple
revenue-generating activities. If a contract would involve the provision of multiple
service elements, total estimated contract revenue would be allocated to each element
based on the fair value of each element.The amount of revenue allocated to each element would then be limited to the amount
that is not contingent upon the delivery of another element in the future. Revenue
for each element would then be recognized depending upon whether the contract is a
time-and-materials contract or a fixed-price, fixed-time contract.
 9




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 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.The Companys warrants issued in the private placement in October 2006, were not
stock based compensation and are reflected in the derivative liability.
 10




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 2-
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)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.Fair Value of Financial Instruments (other than Derivative Financial
Instruments)The carrying amounts reported in the condensed 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.
 11




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 2-
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)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 3,029,271 shares of the Companys common stock as of March 31, 2007 and
are carried at fair value. The liability amounted to $645,549 at March 31, 2007.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 March 31,
2006, and the Class A and Class B (2,329,392 each) were issued in October 2006 in the
private placement however were not included as they would be considered anti-dilutive
as the Company had a loss for this period.
 12




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 2-
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)The following is a reconciliation of the computation for basic and diluted EPS:
 Three Months EndedMarch 31,
    
    March 31,2007
    
    2006Net (loss)
    
    $
    (310,119
    )
    
    $
    (242,736
    )Weighted-average common shares
outstanding :Basic
    
    
    9,129,392
    
    
    
    5,350,000Effect of dilutive securities-
warrants
    
    
    
    
    
    
    Diluted
    
    
    9,129,392
    
    
    
    5,350,000Basic net (loss) per share
    
    $
    (0.03
    )
    
    $
    (0.05
    )Diluted net (loss) per share
    
    $
    (0.03
    )
    
    $
    (0.05
    )
 Research and DevelopmentResearch and development costs are expensed as incurred. In addition, research and
development costs of $2,121 and $-0- have been included in indirect labor
for the three months ended March 31, 2007 and 2006, respectively.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.
 13




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 2-
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Recent Issued Accounting Standards (Continued)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.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.
 14




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 2-
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Recent Issued Accounting Standards (Continued)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.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.
 15




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 2-
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)Recent Issued Accounting Standards (Continued)In December 2006, the FASB Staff issued FSP EITF  00-19-2, Accounting for
Registration Payment Arrangements (EITF 00-19-2). EITF 00-19-2 addresses an
issuers accounting for registration payment arrangements. EITF 00-19-2 specifies
that the contingent obligation to make future payments or otherwise transfer
consideration under a registration payment arrangement, whether issued as a separate
agreement or included as a provision of a financial instrument or other agreement,
should be separately recognized and measured in accordance with SFAS No. 5,
Accounting for Contingencies. EITF 00-19-2 is effective for financial statements
issued for fiscal years beginning after December 15, 2006, and interim periods within
those fiscal years. The Company believes that EITF 00-19-2 will have an impact on
their consolidated financial statements as it relates to the Class A and Class B
warrants entered into in connection with their private placement. The Company does
not believe that their derivative liability will be classified as anything other than
current. Management will continue to monitor the financial instruments to determine
classification.NOTE 3-
    
    FIXED ASSETSFixed assets consist of the following as of March 31, 2007:
 Estimated UsefulLives (Years)Computer equipment
    
    
    5
    
    
    $
    87,417Office machinery and equipment
    
    
    3
    
    
    
    15,638Furniture and fixtures
    
    
    5
    
    
    
    538Automobile
    
    
    5
    
    
    
    58,476162,069Less: Accumulated depreciation
    
    
    
    
    
    
    (121,346
    )Total, net
    
    
    
    
    
    $
    40,723
 Depreciation expense was $4,888 and $3,772 for the three months ended March 31,
2007 and 2006, respectively.
 16




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 4-
    
    COMPUTER SOFTWARE DEVELOPMENT COSTSComputer software development costs consist of the following as of March 31, 2007:
 Estimated UsefulLives (Years)Computer software development costs
    
    
    5
    
    
    $
    865,937Less: Accumulated amortization
    
    
    
    
    
    
    (503,726
    )Total, net
    
    
    
    
    
    $
    362,211
 Amortization expense was $44,251 and $44,251 for the three months ended March
31, 2007 and 2006, respectively. At March 31, 2007, the Company wrote off net
software development costs of $10,473 relating to their Inferview product.Amortization expense anticipated through December 31, 2009 is as follows:
 Period ended March 31:2008
    
    $
    152,7142009
    
    
    145,4182010
    
    
    64,079$
    362,211
 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.
 17




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 5-
    
    NOTES PAYABLE (CONTINUED)SBA Loan (Continued)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 March 31, 2007, the Company has an outstanding principal balance of $364,485.
Interest expense on the SBA loan for the three months ended March 31, 2007 and 2006
were $3,658 and $4,049, respectively.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 March 31, 2007, the outstanding principal balance of the Auto Note was $14,247.
 18




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 5-
    
    NOTE PAYABLE (CONTINUED)As of March 31, 2007, the repayment schedule of the Notes Payable for the next five
years and in the aggregate are:
 2008
    
    $
    16,9802009
    
    
    13,5562010
    
    
    8,6452011
    
    
    8,9982012
    
    
    9,364Thereafter
    
    
    321,189378,732Less: current portion
    
    
    (16,980
    )Long-term portion
    
    $
    361,752
 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. These
balances were repaid in the three months ended March 31, 2006.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:
 19




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 7-
    
    STOCKHOLDERS EQUITY (DEFICIT) (CONTINUED)Common Stock (Continued)a) The Company issued 250,000 shares of common stock for the providing of the bridge
promissory notes to InferX in May 2006. The value of these shares was $529,423 based
on the fair value of the Companys stock when issued. The 250,000 shares represent
the conversion of the 132 shares issued pre-merger between the companies;b) The Company issued 5,350,000 shares of common stock in exchange for 100% of the
issued and outstanding shares of InferX;c) The Company issued 2,329,392 shares of common stock for gross proceeds of
$1,164,696 in the private placement that closed when the merger was completed. From
the $1,164,696, the Company repaid the bridge promissory notes plus accrued interest
in the amount of $362,196, and paid $147,493 in closing costs. Of the total proceeds,
$1,164,696, the Company allocated $547,087 of this amount to derivative liability,
which represents the value of the Class A and Class B warrants issued with the common
stock. The Company issued 2,392,392 Class A warrants and 2,329,392 Class B warrants
(see d and e below and the Warrants section of Note 7). The price for all components
were derived utilizing the relative fair value approach stipulated in APB 14;d) The Class A Warrants are exercisable at any time for shares of stock at an
exercise price of $0.50 per share with a term of five (5) years, subject to anti
dilution protection, so that any part of the 2,329,392 of the warrants shall be
callable if the underlying warrant shares are registered and the stock trades in the
open market for thirty (30) consecutive days at a closing price above $1.50 per
share. Half of the warrants shall be callable if the Company is awarded a contract
with a guaranteed minimum revenue of at least $1,000,000 with a department of the
United Sates Government (not including the Missile Defense Agency) to deploy its
existing technology for threat detection or other application. 1,629,513 of these
warrants were exercised at a price of $.25 in April 2007;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.
 20




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 7-
    
    STOCKHOLDERS EQUITY (DEFICIT) (CONTINUED)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
 As noted in d above, 1,629,513 of the Class A warrants were exercised in April 2007.The Class A Warrants and Class B Warrants were valued utilizing the Black  Scholes
method as follows:
 Class A
    
    Class BStock Price
    
    $
    .50
    
    
    $
    .50Strike Price
    
    $
    .50
    
    
    $
    .62Expected Life of Warrant
    
    5 yrs.
    
    5 yrs.Annualized Volatility
    
    
    50
    %
    
    
    50
    %Discount Rate
    
    
    3.50
    %
    
    
    3.50
    %Annual Rate of Quarterly Dividends
    
    None
    
    NoneCall Option Value
    
    $
    .237
    
    
    $
    .206
 OptionsThere are no options outstanding, or granted as of March 31, 2007.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 March 31, 2007,
there is currently no outstanding amounts due the President of the Company. There
were no other related party transactions during the three months ended March 31, 2007
and 2006, respectively.
 21




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 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 March 31,
2007, the following presents the approximate future minimum lease payments required
under this lease:
 For the Periods EndedMarch 31,2008
    
    $
    105,2972009
    
    
    73,048$
    178,345
 Rent expense for the three months ended March 31, 2007 and 2006 was $26,609 and
$25,326, respectively.Consulting AgreementsDuring 2007 and 2006, 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 condensed consolidated statements of operations for the three
months ended March 31, 2007 and 2006.Registration Rights AgreementPursuant to the Registration Rights Agreement, commencing April 23, 2007, the Company
is required to accrue a 1% fee should the registration statement fail to be
effective. The 1% fee has agreed by the parties to be paid in the form of common
stock of the Company. The fee relates to both the 250,000 shares issued to the former
promissory note holders as well as the shares issued in the private placement. No
amounts have been accrued as of March 31, 2007.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.
 22




---



##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 10-
    
    PROVISION FOR INCOME TAXES (CONTINUED)At March 31, 2007, deferred tax assets consist of the following:
 Net operating losses
    
    $
    932,280Valuation allowance
    
    
    (932,280
    )$
    
 At March 31, 2007, the Company had net operating loss carryforward in the
approximate amount of $2,742,000, available to offset future taxable income through
2027. 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 three months ended March 31, 2007 and 2006
is summarized below.
 2006
    
    2005Federal statutory rate
    
    
    (34.0
    )%
    
    
    (34.0
    )%State income taxes, net of federal benefits
    
    
    6.0
    
    
    
    6.0Valuation allowance
    
    
    28.0
    
    
    
    28.00
    %
    
    
    0
    %
 NOTE 11-
    
    DEFINED CONTRIBUTION 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
three months ended March 31, 2007 and 2006, 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 three months ended March 31,
2007 and 2006, respectively.
 23




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##### 



INFERX CORPORATION
(FORMERLY BLACK NICKEL ACQUISITION CORP. I)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2007 AND 2006 (UNAUDITED)
 NOTE 13-
    
    RESTATEMENT OF FINANCIAL STATEMENTSThe Company has restated its financial statements for the year ended December 31,
2006 to reverse the expense for common stock issued for debt guarantee that was
incorrectly recognized in the previously issued financial statements. These shares
represented a conversion of previously recognized shares that were already valued by
the Company. The reversal was in the amount of $66,250. The entry reduced additional
paid in capital and reduced the expense.The restatement decreased the accumulated deficit from $2,844,022 to $2,777,772 at
March 31, 2007. The restatement had no effect on operations for the three months
ended March 31, 2007 and 2006, respectively.
 24




---



##### 



Item 2. Managements Discussion and Analysis or Plan of Operation.
 The information set forth and discussed in this Managements Discussion and Analysis or Plan of
Operation is derived from our financial statements and the related notes, which are included. The
following information and discussion should be read in conjunction with those financial statements
and notes, as well as the information provided in our Annual Report on Form 10-KSB for our fiscal
year ended December 31, 2006.
 Overview
    Critical Accounting Policies
  Cash and Cash Equivalents
   25




---



##### 



Allowance for Doubtful Accounts
  Fixed Assets
  Computer Software Development Costs
  Revenue Recognition
  Time-and-Material Contracts
  Fixed-Price Contracts
   26




---



##### 



Stock-Based Compensation
  Share-Based Payment
   Concentrations
   27




---



##### 



Derivative Financial Instruments
  Income Taxes
  Research and Development
  Recent Issued Accounting Standards
    Accounting for Certain Hybrid Instruments
   28




---



##### 



Three Months Ended March 31, 2007 and 2006
    29




---



##### 



Liquidity and Capital Resources
     Item 3. Controls and Procedures.
   30




---



##### 



PART II  OTHER INFORMATION
 Item 1. Legal Proceedings.
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  Item 3. Defaults Upon Senior Securities.
  Item 4. Submission of Matters to a Vote of Security Holders.
  Item 5. Other Information.
  Item 6. Exhibits.
 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).32.1
    
    Certification of the Chief Executive Officer and Chief Financial Officer
required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
 31




---



##### 



SIGNATURES
  Dated:
June 13, 2007
    
    InferX CorporationBy:
    
    /s/ B.K. Gogia

B.K. GogiaPresident and Chief Executive Officer




---



##### 



InferX Corporation
 Quarterly Report on Form 10-QSB
 for the Quarterly Period Ended
 March 31, 2007
 - EXHIBIT INDEX -
 Exhibit No.
    
    Description31.1
    
    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).32.1
    
    Certification of the Chief Executive Officer and Chief Financial Officer required by Rule
13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.