**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





(Mark
      One)





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





For
      the
      quarterly period ended June 30, 2008





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





For
      the
      transition period from _______ to _______





Commission
      file number 000-51720




**InferX
                  Corporation**(Exact
                  name of registrant as specified in its charter)Delaware
              
              
              
              54-1614664(State
                  or other jurisdiction of incorporation or
                  organization)
              
              
              
              (I.R.S.
                  Employer Identification No.)1600
                  International DriveSuite
                  110McLean,
                  Virginia
              
              
              
              22102(Address
                  of principal executive offices)
              
              
              
              (Zip
                  Code)(703)
                  917-0880(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 x  No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of *“large
      accelerated filer,”*  *“accelerated
      filer”* and *“smaller
      reporting company”* in Rule
      12b-2 of the Exchange Act.




Large
              accelerated filer o
            Accelerated
              filer oNon-accelerated
                filer o
              (Do
                  not check if a smaller reporting company)
            Smaller
              reporting company x




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




As
      of August
      12, 2008 ,
      there
      were 13,530,892 outstanding shares of the registrant’s common stock, $.0001 par
      value.









**InferX
      Corporation**


**Quarterly
      Report on Form 10-Q**


**for
      the Quarterly Period Ended**


**June
      30, 2008**




**-
      INDEX -**




Page**PART
              I-
              FINANCIAL INFORMATION:**Item
                1. Financial Statements:Condensed
                Consolidated Balance Sheets as of June 30, 2008 (Unaudited) and December
                31, 2007 (Audited)
            
            1Condensed
                Consolidated Statements of Operations for the six and three months
                ended
                June
                30, 2008 and 2007 (Unaudited)
            
            2Condensed
                Consolidated Statements of Cash Flows for the six months ended June
                30, 2008 and 2007 (Unaudited)
            
            3Notes
                to Condensed Consolidated Financial Statements (Unaudited)
            
            4Item
                2. Management’s Discussion and Analysis or Plan of
                Operation
            
            23Item
                3.Quantitative
                and Qualitative Disclosures About Market Risk
            
            30Item
                4T.Controls and Procedures
            
            30**PART
                II - OTHER INFORMATION:**Item
                1. Legal Proceedings
            
            31Item
                1A. Risk Factors
            
            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




i




**PART
      I — FINANCIAL INFORMATION**




**Item
      1. Financial Statements.**


**INFERX
                  CORPORATION****(FORMERLY
                  BLACK NICKEL ACQUISITION CORP. I)****CONDENSED
                  CONSOLIDATED BALANCE SHEETS****JUNE
                  30, 2008 (UNAUDITED) AND DECEMBER 31. 2007
                  (AUDITED)**
  **JUNE
                  30,**
              
              **DECEMBER
                  31,****2008**
              
              **2007****ASSETS****CURRENT
                  ASSETS**Cash
              
              $
              1,807
              
              $
              1,670Prepaid
                  expenses and other current assets
              
              
              7,505
              
              
              7,505**Total
                  current assets**
              
              
              9,312
              
              
              9,175Fixed
                  assets, net of depreciation
              
              
              35,878
              
              
              31,047**Other
                  Asset**Computer
                  software development costs, net of amortization
              
              
              224,064
              
              
              350,246**Total
                  other asset**
              
              
              224,064
              
              
              350,246**TOTAL
                  ASSETS**
              
              $
              269,254
              
              $
              390,468**LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                  LIABILITIES**Accounts
                  payable and accrued expenses
              
              $
              1,177,278
              
              
              803,731Liability
                  for stock to be issued
              
              
              -
              
              
              15,000Current
                  portion of notes payable, net of debt discount of $18,755
              
              
              36,826
              
              
              15,703**Total
                  current liabilities**
              
              
              1,214,104
              
              
              834,434**Long-term
                  Liabilities**Notes
                  payable, net of current portion
              
              
              423,360
              
              
              350,307**TOTAL
                  LIABILITIES**
              
              
              1,637,463
              
              
              1,184,741**STOCKHOLDERS'
                  EQUITY (DEFICIT)**Preferred
                  stock, par value $0.0001 per share, 10,000,000 shares authorized
                  andno
                  shares issued and outstanding
              
              
              -
              
              
              -Common
                  stock, par value $0.0001 per share, 75,000,000 shares authorized
                  and13,530,892
                  issued and outstanding
              
              
              1,353
              
              
              1,147Additional
                  paid-in capital
              
              
              3,712,380
              
              
              3,278,517Retained
                  earnings (deficit)
              
              
              (5,081,943
              )
              
              (4,073,937
              )**Total
                  stockholders' equity (deficit)**
              
              
              (1,368,210
              )
              
              (794,273
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
              
              $
              269,254
              
              $
              390,468
  The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.
  1
 **INFERX
                    CORPORATION****(FORMERLY
                    BLACK NICKEL ACQUISITION CORP. I)****CONDENSED
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                    (UNAUDITED)****FOR
                    THE SIX AND THREE MONTHS ENDED JUNE 30, 2008 AND
                    2007**
 **SIX
                    MONTHS ENDED**
                
                **THREE
                    MONTHS ENDED****JUNE
                    30,**
                
                **JUNE
                    30,****2008**
                
                **2007**
                
                **2008**
                
                **2007****REVENUE**
                
                $
                80,934
                
                $
                200,000
                
                $
                27,673
                
                $
                100,000**COST
                    OF REVENUES**Direct
                    labor and other fringes
                
                
                43,261
                
                
                43,430
                
                
                7,954
                
                
                19,101Subcontractor
                
                
                19,710
                
                
                58,036
                
                
                -
                
                
                22,925Other
                    direct costs
                
                
                416
                
                
                11,250
                
                
                -
                
                
                -Amortization
                    of computer software development costs
                
                
                126,182
                
                
                88,502
                
                
                63,091
                
                
                44,251**Total
                    costs of revenues**
                
                
                189,569
                
                
                201,218
                
                
                71,045
                
                
                86,277**GROSS
                    PROFIT (LOSS)**
                
                
                (108,635
                )
                
                (1,218
                )
                
                (43,372
                )
                
                13,723**OPERATING
                    EXPENSES**Indirect
                    and overhead labor and fringes
                
                
                356,754
                
                
                334,029
                
                
                112,692
                
                
                184,145Professional
                    fees
                
                
                157,443
                
                
                193,469
                
                
                61,134
                
                
                117,295Travel
                    related costs
                
                
                18,166
                
                
                16,439
                
                
                10,422
                
                
                9,231Rent
                
                
                68,652
                
                
                53,219
                
                
                40,989
                
                
                26,610General
                    and administrative
                
                
                41,051
                
                
                36,613
                
                
                18,371
                
                
                22,356Registration
                    penalty
                
                
                -
                
                
                89,468
                
                
                -
                
                
                -Stock
                    issued for services
                
                
                116,625
                
                
                -
                
                
                -Stock
                    based compensation
                
                
                33,232
                
                
                -
                
                
                -Depreciation
                    and impairment
                
                
                10,148
                
                
                20,344
                
                
                4,650
                
                
                4,983**Total
                    operating expenses**
                
                
                802,071
                
                
                743,581
                
                
                248,258
                
                
                364,620**NET
                        LOSS FROM OPERATIONS BEFORE OTHER EXPENSE AND****PROVISION
                        FOR INCOME TAXES**
                
                
                (910,706
                )
                
                (744,799
                )
                
                (291,630
                )
                
                (350,897
                )**OTHER
                    EXPENSE**Interest
                    expense, net of interest income
                
                
                97,300
                
                
                7,068
                
                
                93,619
                
                
                1,383**NET
                    LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME
                    TAXES**
                
                
                (1,008,006
                )
                
                (751,867
                )
                
                (385,249
                )
                
                (352,280
                )Provision
                    for income taxes
                
                
                -
                
                
                -
                
                
                -
                
                
                -**NET
                    (LOSS) APPLICABLE TO SHARES**
                
                $
                (1,008,006
                )
                $
                (751,867
                )
                $
                (385,249
                )
                $
                (352,280
                )**NET
                    (LOSS) PER BASIC AND DILUTED SHARES**
                
                $
                (0.08
                )
                $
                (0.08
                )
                $
                (0.03
                )
                $
                (0.03
                )**WEIGHTED
                        AVERAGE NUMBER OF****SHARES
                        OUTSTANDING**
                
                
                12,252,686
                
                
                9,768,593
                
                
                13,033,183
                
                
                10,400,770
  The
                    accompanying notes are an integral part of these condensed consolidated
                    financial statements.
  2
 **INFERX
                    CORPORATION****(FORMERLY
                    BLACK NICKEL ACQUISITION CORP. I)****CONDENSED
                    CONSOLIDATED STATEMENTS OF CASH FLOW
                    (UNAUDITED)****FOR
                    THE SIX MONTHS ENDED JUNE 30, 2008 AND
                    2007**
  **2008**
              
              **2007****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  (loss)
              
              $
              (1,008,006
              )
              $
              (751,867
              )**Adjustments
                  to reconcile net (loss)****to
                  net cash (used in) operating activities:**Stock
                  issued for services
              
              
              116,625
              
              
              -Beneficial
                  conversion feature
              
              
              86,253
              
              
              -Stock
                  based compensation
              
              
              33,231
              
              
              -Amortization
                  of debt discount
              
              
              1,705
              
              
              -Impairment
                  loss
              
              
              -
              
              
              10,473Amortization
                  of computer software development costs
              
              
              126,182
              
              
              88,502Depreciation
              
              
              10,148
              
              
              9,871**Change
                  in assets and liabilities**Decrease
                  in accounts receivable
              
              
              -
              
              
              50,000Increase
                  in accounts payable and accrued expenses
              
              
              373,547
              
              
              282,152**Total
                  adjustments**
              
              
              747,691
              
              
              440,998**Net
                  cash (used in) operating activities**
              
              
              (260,315
              )
              
              (310,869
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Capital
                  expenditures
              
              
              (14,978
              )
              
              (18,323
              )Computer
                  software development costs
              
              
              -
              
              
              (111,562
              )**Net
                  cash (used in) investing activities**
              
              
              (14,978
              )
              
              (129,885
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Increase
                  (decrease) in cash overdraft
              
              
              -
              
              
              -Issuance
                  of stock for cash
              
              
              -
              
              
              406,378Contributions
                  of capital
              
              
              -
              
              
              -Borrowings
                  of promissory notes
              
              
              282,500
              
              
              -(Repayment)
                  of notes payable
              
              
              (7,070
              )
              
              (8,411
              )**Net
                  cash provided by financing activities**
              
              
              275,430
              
              
              397,967**NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
              
              
              137
              
              
              (42,787
              )**CASH
                  AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
              
              
              1,670
              
              
              79,554**CASH
                  AND CASH EQUIVALENTS - END OF PERIOD**
              
              $
              1,807
              
              $
              36,767**SUPPLEMENTAL
                  INFORMATION OF CASH FLOW ACTIVITY**Cash
                  paid during the year for interest
              
              $
              9,342
              
              $
              7,296**SUPPLEMENTAL
                  INFORMATION ON NONCASH ACTIVITY**Issuance
                  of warrants with convertible notes
              
              $
              20,460
              
              $
              -Conversion
                  of notes payable to stock
              
              $
              162,500
              
              $
              -Stock
                  issued for compensation
              
              $
              15,000Stock
                  issued for services
              
              $
              116,625
              
              $
              -Derivative
                  liability converted to additional paid in capital and retained
                  earnings
              
              $
              -
              
              $
              1,031,703The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.
  3




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKL ACQUISITION CORP. I)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2008 AND 2007 (UNAUDITED)**


NOTE
      1-  ORGANIZATION
      AND BASIS OF PRESENTATION




The
      unaudited condensed consolidated financial statements included herein have
      been
      prepared, without audit, pursuant to the rules and regulations of the Securities
      and Exchange Commission (“SEC”). The condensed consolidated financial statements
      and notes are presented as permitted on Form 10-Q 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,
      2007 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
      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.




4




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKL ACQUISITION CORP. I)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS **(CONTINUED)****
 **JUNE
        30, 2008 AND 2007 (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
      Concern**




As
      shown
      in the accompanying condensed consolidated financial statements the Company
      has
      incurred a loss of $1,008,006 and $751,867 for the six months ended June 30,
      2008 and 2007, respectively, and has a working capital deficiency of $1,204,792
      as of June 30, 2008. 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.




5




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKL ACQUISITION CORP. I)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2008 AND 2007 (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 POLICIES




**Principles
      of Consolidation**




The
      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 Estimates**




The
      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 Equivalents**




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




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





6


**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKL ACQUISITION CORP. I)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2008 AND 2007 (UNAUDITED)**




NOTE
      2-  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




**Allowance
      for Doubtful Accounts**




The
      Company provides an allowance for doubtful accounts, which is based upon a
      review of outstanding receivables as well as historical collection information.
      Credit is granted to substantially all customers on an unsecured basis. In
      determining the amount of the allowance, management is required to make certain
      estimates and assumptions. Management has determined that as of June 30, 2008,
      an allowance of $2,364 is required.




**Fixed
      Assets**




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




**Computer
      Software Development Costs**




During
      2008 and 2007, 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. The Company commencing January 1, 2008, placed
      an
      additional $226,084 of software development from prior years into service,
      which
      is being amortized over a three year period.




For
      the
      six months ended June 30, 2008 and 2007, the Company recognized $126,182 and
      $88,502 of amortization expense on its capitalized software costs, respectively.




7




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKL ACQUISITION CORP. I)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2008 AND 2007 (UNAUDITED)**


NOTE
      2-  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




**Recoverability
      of Long-Lived Assets**




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




**Revenue
      Recognition**




The
      Company generates revenue from professional services rendered to customers
      as
      well as from application management support contracts with governmental units.
      The Company’s revenue is generated under time-and-material contracts and
      fixed-price contracts.




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




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




***Fixed-Price
      Contracts***




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




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




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




8




**INFERX
      CORPORATION**


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


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


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**




NOTE
      2-  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




**Stock-Based
      Compensation**




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




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





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




The
      Company’s options issued in January 2008 were considered stock based
      compensation (see Note 7).




9




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKL ACQUISITION CORP. I)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2008 AND 2007 (UNAUDITED)**


NOTE
      2-  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




**Concentrations**




The
      Company has derived all of its revenue for the six months ended June 30, 2008
      and June 30, 2007 from one customer.




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




**Segment
      Reporting**




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




**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
      Instruments**




The
      Company reviews the terms of convertible debt and equity securities for
      indications requiring bifurcation, and separate accounting, for the embedded
      conversion feature. Generally, embedded conversion features, where the ability
      to physical or net-share settle the conversion option is not within the control
      of the Company, are bifurcated and accounted for as a derivative financial
      instrument. 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.




10


**INFERX
      CORPORATION**


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


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


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**




NOTE
      2-  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




**Income
      Taxes**




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




**Uncertainty
      in Income Taxes**




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 has adopted FIN 48 for 2007, and they evaluate their tax positions
      on
      an annual basis, and have determined that as of June 30, 2008, no additional
      accrual for income taxes is necessary.




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




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




11




**INFERX
      CORPORATION**


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


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


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**


NOTE
      2-  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




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


**Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****2008**
              
              **2007**Net
                  (loss)
              
              $
              (1,008,006
              )
              $
              (751,867
              )Weighted-average
                  common sharesoutstanding
                  :Basic
              
              
              12,252,686
              
              
              9,768,593Warrants
              
              
              5,358,784
              
              
              -Options
              
              
              140,000
              
              
              -Diluted
              
              
              17,751,470
              
              
              9,768,593Basic
                  net (loss) per share
              
              $
              (0.08
              )
              $
              (0.08
              )Diluted
                  net (loss) per share
              
              $
              (0.08
              )
              $
              (0.08
              )




**Research
      and Development**




Research
      and development costs are expensed as incurred. In addition, research and
      development costs of $23,807 and $32,356 have been included in indirect labor
      and $0 and $101,466 have been included in direct labor and subcontractor costs
      for the six months ended June 30, 2008 and 2007, respectively.




**Recent
      Issued Accounting Standards**




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 condensed consolidated financial statements.




12




**INFERX
      CORPORATION**


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


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


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**


NOTE
      2-  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




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




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
      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. Application
      of
      EITF 00-19-02 resulted in an adjustment in January 2007 reclassifying the
      derivative liability to additional paid-in capital and retained earnings. The
      adjustment reduced the derivative liability by $1,031,703 and increased
      additional paid-in capital by $547,086 and increased retained earnings by
      $484,617 which was the cumulative-effect adjustment resulting from the adoption
      of this standard.




In
      December 2007, the FASB issued SFAS No. 160, *“Noncontrolling
      Interests in Consolidated Financial Statements, an amendment of Accounting
      Research Bulletin No 51”* (SFAS
      160). SFAS 160 establishes accounting and reporting standards for ownership
      interests in subsidiaries held by parties other than the parent, changes in
      a
      parent’s ownership of a noncontrolling interest, calculation and disclosure of
      the consolidated net income attributable to the parent and the noncontrolling
      interest, changes in a parent’s ownership interest while the parent retains its
      controlling financial interest and fair value measurement of any retained
      noncontrolling equity investment. SFAS 160 is effective for financial statements
      issued for fiscal years beginning after December 15, 2008, and interim periods
      within those fiscal years. Early adoption is prohibited. Management is
      determining the impact that the adoption of SFAS No. 160 will have on the
      Company’s condensed consolidated financial position, results of operations or
      cash flows.





In
      December 2007, the FASB issued SFAS 141R, *Business Combinations* ( *“SFAS
      141R”* ),
      which
      replaces FASB SFAS 141, *Business Combinations.* This
      Statement retains the fundamental requirements in SFAS 141 that the acquisition
      method of accounting be used for all business combinations and for an acquirer
      to be identified for each business combination. SFAS 141R defines the acquirer
      as the entity that obtains control of one or more businesses in the business
      combination and establishes the acquisition date as the date that the acquirer
      achieves control.  SFAS 141R will require an entity to record
      separately from the business combination the direct costs, where previously
      these costs were included in the total allocated cost of the
      acquisition.  SFAS 141R will require an entity to recognize the assets
      acquired, liabilities assumed, and any non-controlling interest in the acquired
      at the acquisition date, at their fair values as of that date.  This
      compares to the cost allocation method previously required by SFAS No.
      141.




13




**INFERX
      CORPORATION**


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


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


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





NOTE
      2-  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




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




SFAS
      141R
      will require an entity to recognize as an asset or liability at fair value
      for
      certain contingencies, either contractual or non-contractual, if certain
      criteria are met.  Finally, SFAS 141R will require an entity to
      recognize contingent consideration at the date of acquisition, based on the
      fair
      value at that date.  This Statement will be effective for business
      combinations completed on or after the first annual reporting period beginning
      on or after December 15, 2008.  Early adoption of this standard is not
      permitted and the standards are to be applied prospectively
      only.  Upon adoption of this standard, there would be no impact to the
      Company’s results of operations and financial condition for acquisitions
      previously completed.  The adoption of SFAS No. 141R is not expected
      to have a material effect on the Company’s condensed consolidated financial
      position, results of operations or cash flows.





In
      December 2007, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 110, “ *Use
      of a Simplified Method in Developing Expected Term of Share
      Options* ”
      ( *“SAB
      110”* ).
      SAB
      110 expenses the current view of the staff that it will accept a company’s
      election to use the simplified method discussed in Staff Accounting Bulletin
      No.
      107, “ *Share
      Based Payment* ”,
      ( *“SAB
      107”* ),
      for
      estimating the expected term of *“plain
      vanilla”* share
      options regardless of whether the company has sufficient information to make
      more refined estimates. SAB 110 became effective for the Company on January
      1,
      2008. The adoption of SAB 110 is not expected to have a material impact on
      the
      Company’s financial position.





In
      March
      2008, the FASB Task Force approved confirming changes for Issue No. 98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features or
      Contingently Adjustable Conversion Ratios” to reflect more clearly the consensus
      on EITH 00-27, “Application of Issue No. 98-5 to Certain Convertible
      Instruments”, and the issuance of FASB Statement No. 150, “Accounting for
      Certain Financial Instruments with Characteristics of Both Liabilities and
      Equity”. In addition, the Task Force decided to provide transition guidance for
      those conforming changes as outlined in EITF 08-4, “Transition Guidance for
      Conforming Changes to Issue 98-5”. Management used the EITF 00-27 and EITF 98-5
      guidance to determine beneficial conversion options and accounting fro
      convertible debt instruments and convertible stock (collectively, convertible
      instruments) with nondetachable conversion options that are
      in-the-money.





Other
      accounting standards that have been issued or proposed by the FASB or other
      standards-setting bodies that do not require adoption until a future date and
      are not expected to have a material impact on the condensed consolidated
      financial statements upon adoption.




NOTE
      3-  FIXED
      ASSETS




Fixed
      assets consist of the following as of June 30, 2008 and December 31, 2007,
      respectively:


**Estimated
                      Useful**
                    **Lives
                      (Years)**
              
              **June
                      30,**
                    **2008**
              
              **December
                      31,**
                    **2007**Computer
                  equipment
              
              
              5
              
              $
              107,065
              
              $
              92,087Office
                  machinery and equipment
              
              
              3
              
              
              15,638
              
              
              15,638Furniture
                  and fixtures
              
              
              5
              
              
              538
              
              
              538Automobile
              
              
              5
              
              
              58,476
              
              
              58,476181,717
              
              
              166,739Less:
                  Accumulated depreciation
              
              
              
              
              
              (145,839
              )
              
              (135,692
              )Total,
                  net
              
              
              
              
              $
              35,878
              
              $
              31,047




Depreciation
      expense was $10,148 and $9,871 for the six months ended June 30, 2008 and 2007,
      respectively.





14




**INFERX
      CORPORATION**


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


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


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**




NOTE
      4-  COMPUTER
      SOFTWARE DEVELOPMENT COSTS




Computer
      software development costs consist of the following as of June 30, 2008 and
      December 31, 2007, respectively:


**Estimated
                      Useful**
                    **Lives
                      (Years)**
              
              **June
                      30,**
                    **2008**
              
              **December
                      31,**
                    **2007**Computer
                  software development costs
              
              
              5
              
              $
              986,724
              
              $
              986,724Less:
                  Accumulated amortization
              
              
              
              
              
              (762,660
              )
              
              (636,478
              )Total,
                  net
              
              
              
              
              $
              224,064
              
              $
              350,246


Amortization
      expense was $126,182 and $88,502 for the six months ended June 30, 2008 and
      2007, 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 June 30, 2011 is as follows:


Period
                  ended June 30:2009
              
              $
              121,4952010
              
              
              75,3612011
              
              
              27,208$
              224,064


NOTE
      5-  NOTES
      PAYABLE




***SBA
      Loan***




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




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




15




**INFERX
      CORPORATION**


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


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


**JUNE
      30, 2008 AND 2007 (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
      June 30, 2008, the Company has an outstanding principal balance of $355,941.
      Interest expense on the SBA loan for the six months ended June 30, 2008 and
      2007
      were $6,704 and $7,296, respectively.




***Automobile
      Loan***




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




As
      of
      June 30, 2008, the outstanding principal balance of the Auto Note was
      $3,000.




***Convertible
      Notes***





The
      Company has entered into six convertible notes:





·
            Convertible
                note dated March 6, 2008 in the amount of $75,000, with a term of
                2 years,
                with interest calculated at 9.9% per annum. The note is convertible
                at 50%
                of the closing bid price of the common stock on the date of conversion.
                The Company has accrued interest for the period ended June 30, 2008
                in the
                amount of $2,380. In accordance withEITF
                98-5 and EITF 00-27,
                the Company recorded a beneficial conversion feature of $75,000 based
                on
                the difference in the intrinsic value of the conversion
                option;





·
            Convertible
                note dated March 7, 2008 in the amount of $62,500, with a term of
                2 years,
                with interest calculated at 9.9% per annum. The note was convertible
                at
                50% of the closing bid price of the common stock on the date of
                conversion, and was converted the same day the note was executed
                for a
                conversion price of $.135 or 462,963 shares. This note was converted
                immediately and the shares were issued in April 2008, and there was
                no
                beneficial conversion feature associated with this
                note;





16




**INFERX
      CORPORATION**


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


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


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**


NOTE
      5-  NOTE
      PAYABLE (CONTINUED)




***Convertible
      Notes*** *(continued)*





·
            Convertible
                note dated March 10, 2008 in the amount of $100,000, with a term
                of 2
                years, with interest calculated at 9.9% per annum. The note was
                convertible at 50% of the closing bid price of the common stock on
                the
                date of conversion, and was converted the same day the note was executed
                for a conversion price of $.135 or 740,741 shares. This note was
                converted
                immediately and shares were issued in April 2008 and there was no
                beneficial conversion feature associated to this
                note.





·
            Convertible
                note dated June 1, 2008 in the amount of $25,000, with a term of
                1 year,
                with interest calculated at 9.9% per annum. The note is convertible
                into a
                fixed price of $0.10 per share of common stock on the outstanding
                principal and accrued interest on the date of conversion. The note
                holder
                also received a warrant agreement exercisable over five years to
                purchase
                common stock at $0.05 per share for 250,000 warrants. There will
                also be
                warrants issued for accrued interest should the interest be converted.
                The
                Company has accrued interest for the period ended June 30, 2008 in
                the
                amount of $203;





·
            Convertible
                note dated June 21, 2008 in the amount of $10,000, with a term of
                1 year,
                with interest calculated at 9.9% per annum. The note is convertible
                into a
                fixed price of $0.10 per share of common stock on the outstanding
                principal and accrued interest on the date of conversion. The note
                holder
                also received a warrant agreement exercisable over five years to
                purchase
                common stock at $0.05 per share for 100,000 warrants. There will
                also be
                warrants issued for accrued interest should the interest be converted..
                The Company has accrued interest for the period ended June 30, 2008
                in the
                amount of $2;





·
            Convertible
                note dated June 21, 2008 in the amount of $10,000, with a term of
                1 year,
                with interest calculated at 9.9% per annum. The note is convertible
                into a
                fixed price of $0.10 per share of common stock on the outstanding
                principal and accrued interest on the date of conversion. The note
                holder
                also received a warrant agreement exercisable over five years to
                purchase
                common stock at $0.05 per share for 100,000 warrants. There will
                also be
                warrants issued for accrued interest should the interest be converted..
                The Company has accrued interest for the period ended June 30, 2008
                in the
                amount of $27.





The
      convertible notes issued in June 2008, were issued with warrants and each
      instrument was valued according to the provisions of APB 14. The value of the
      warrants are reflected as additional paid in capital with a value of $20,460,
      with a corresponding debt discount in the same amount. The discount is being
      amortized over the life of the convertible notes of 1 year. Amortization of
      the
      discount for the six months ended June 30, 2008 is $1,705, with a remaining
      debt
      discount as of June 30, 2008 of $18,755. In addition, the Company calculated
      a
      beneficial conversion feature of $11,253 on the $45,000 in convertible notes
      in
      accordance with the provisions of EITF 98-5 and EITF
      00-27.




As
      of
      June 30, 2008, the repayment schedule of the Notes Payable for the next five
      years and in the aggregate is:


2009
                  (net of discount of $18,755)
              
              
              
              
              $
              36,8262010
              
              
              84,0002011
              
              
              9,6002012
              
              
              10,2002013
              
              
              10,800Thereafter
              
              
              
              
              
              308,760460,186Less:
                  current portion
              
              
              
              
              
              (36,826
              )Long-term
                  portion
              
              
              
              
              $
              423,360





17


**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2008 AND 2007 (UNAUDITED)**




NOTE
      6-  STOCKHOLDERS’
      EQUITY (DEFICIT)




***Preferred
      Stock***




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




***Common
      Stock***




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




The
      Company as of June 30, 2008 has 13,530,892 shares of common stock issued and
      outstanding.





During
      the six months ending June 30, 2008 the Company issued 462,963 and 740,741
      shares of common stock in convertible note transactions of $62,500 and $100,000,
      respectively (see Note 5). These shares of stock were issued in April
      2008.





The
      Company issued 475,000 shares of common stock to three convertible note holders
      valued at $64,125 for entering into the March 6, 7 and 10 convertible note
      agreements. The Company also issued 350,000 shares of common stock for services
      rendered in the six months ended June 30, 2008 valued at $52,500. The combined
      $116,625 is reflected as stock issued for services in the condensed consolidated
      statements of operations for the six months ended June 30, 2008. These shares
      of
      stock were issued in April 2008.




The
      Company has also recorded a $15,000 consulting fee in 2007 for the issuance
      of
      30,000 shares of stock. The fees were earned in 2007 and the shares of stock
      were issued in April 2008.





***Warrants***




The
      Company in the private placement granted 2,329,392 Class A and 2,329,392 Class
      B
      warrants. In April 2007, 1,629,513 of the Class A warrants were exercised into
      common shares. In November 2007, an additional 444,879 of the Class A warrants
      were exercised into common shares. The Company granted additional Class A
      warrants to the warrant holders that exercised during April and November 2007.
      The additional Class A warrants of 2,074,392 were issued in November 2007 and
      are reflected herein. The Company also issued 250,000 warrants in September
      2007
      for investor relation services and 450,000 warrants in connection with the
      convertible notes issued in June 2008. The following is a breakdown of the
      warrants:


**Exercise**
              
              **Date****Warrants**
              
              **Price**
              
              **Issued**
              
              **Term**255,000
              
              $
              0.50
              
              
              10/24/2006
              
              
              5
                  years2,329,392
              
              $
              0.625
              
              
              10/24/2006
              
              
              5
                  years250,000
              
              $
              0.50
              
              
              9/1/2007
              
              
              5
                  years2,074,392
              
              $
              0.50
              
              
              11/30/2007
              
              
              3.9
                  years250,000
              
              $
              0.05
              
              
              6/1/2008
              
              
              5
                  years200,000
              
              $
              0.05
              
              
              6/21/2008
              
              
              5
                  years5,358,784


18





**INFERX
      CORPORATION**


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


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


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





NOTE
      6-  STOCKHOLDERS’
      EQUITY (DEFICIT) (CONTINUED)




The
      Class
      A Warrants and Class B Warrants in the private placement as well as the
      consultant warrants were valued utilizing the Black - Scholes method as
      follows:


**Class
                  A**
              
              **Class
                  B**
              
              **Consultant**
              
              **Conv
                  Notes**Stock
                  Price
              
              $
              .50
              
              $
              .50
              
              $
              .50
              
              $
              .10Strike
                  Price
              
              $
              .50
              
              $
              .62
              
              $
              .50
              
              $
              .05Expected
                  Life of Warrant
              
              
              5
                  yrs.
              
              
              5
                  yrs.
              
              
              5
                  yrs.
              
              
              5
                  yrs.Annualized
                  Volatility
              
              
              50
              %
              
              50
              %
              
              50
              %
              
              100
              %Discount
                  Rate
              
              
              3.50
              %
              
              3.50
              %
              
              3.50
              %
              
              3.00
              %Annual
                  Rate of Quarterly Dividends
              
              
              None
              
              
              None
              
              
              None
              
              
              NoneCall
                  Option Value
              
              $
              .237
              
              $
              .206
              
              $
              .378
              
              $
              .0834




***Options***




Prior
      to
      October 2007, there were no options outstanding, or granted. In October 2007,
      the Company’s Board of Directors and Shareholders approved the adoption of an
      option plan for a total of 2,200,000 shares and issued 440,000 options in
      October 2007 and January 2008 that vest over a three-year period of time with
      a
      strike price of $0.50 per share, with 140,834 of these options vesting in 2007
      and an additional 155,000 shares that vested during the six months ended June
      30, 2008. During this period, options for 300,000 shares were terminated under
      the terms of the option plan, of which 1622,917 were already vested. The Company
      has 140,000 options remaining at June 30, 2008.




These
      options were valued as follows for the six months ending:





**June 2008**Stock Price
            
            $
            0.03/$0.55Strike
                Price
            
            $
            .50Expected
                Life of Option
            
            
            1
                yr.Annualized
                Volatility
            
            
            100
            %Discount
                Rate
            
            
            3.00
            %Annual
                Rate of Quarterly Dividends
            
            
            NoneCall
                Option Value
            
            $
            .124/$.217




The
      value
      attributable to these options for the six months ended June 30, 2008 and 2007
      is
      $33,231 and $0 respectively and is reflected in the condensed consolidated
      statements of operations as stock based compensation.





NOTE
      7-  COMMITMENTS




**Rental**




The
      Company leases office space under an operating lease that has initial or
      remaining non-cancelable lease terms and expires in November 2008. The lease
      agreement provides for an annual 4% escalation of the base rent. As of June
      30,
      2008, the following presents the approximate future minimum lease payments
      required under this lease:


**For
                      the Periods Ended****June
                      30,**2009
              
              $
              45,655




Rent
      expense for the six months ended June 30, 2008 and 2007 was $68,652 and $53,219,
      respectively.




19


**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2008 AND 2007 (UNAUDITED)**




NOTE
      7-  COMMITMENTS (CONTINUED)




**Consulting
      Agreements**




During
      the six months ended June 30, 2008, the Company did not enter into any
      consulting agreements. In 2007, 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 six months ended June 30, 2008 and 2007.





**Registration
      Rights Agreement**




The
      Registration Rights Agreement dated October 23, 2006 between the Company and
      certain investors provided that the Company would accrue a penalty of 1% of
      the
      total shares of the Company’s common stock registered on Form SB-2 (the “Total
      Shares”), per month for each month beyond April 23, 2007 that Company’s
      registration statement on Form SB-2 failed to be effective up to a maximum
      of
      10% of the Total Shares or 447,340 shares of common stock. The Company has
      incurred a penalty of 268,404 shares of its common stock through September
      10,
      2007, the effective date of the Company’s registration statement. This liability
      had been accrued at a value of $.50 per share or $89,468 at June 30, 2007.
      The
      penalty shares noted above were issued in October 2007.




NOTE
      8-  PROVISION
      FOR INCOME TAXES




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




20


**INFERX
      CORPORATION**


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


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


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**


NOTE
      8-  PROVISION
      FOR INCOME TAXES (CONTINUED)




At
      June
      30, 2008, deferred tax assets consist of the following:


Net
                  operating losses
              
              $
              1,727,861Valuation
                  allowance
              
              
              (1,727,861
              )$
              -


At
      June
      30, 2008, the Company had net operating loss carryforward in the approximate
      amount of $5,081,943, available to offset future taxable income through 2028.
      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 six months ended June 30, 2008
      and 2007 is summarized below.




2008
            
            2007Federal
                statutory rate
            
            
            (34.0
            )%
            
            (34.0
            )%State
                income taxes, net of federal benefits
            
            
            6.0
            
            
            6.0Valuation
                allowance
            
            
            28.0
            
            
            28.00
            %
            
            0
            %




NOTE
      9-  DEFINED
      CONTRIBUTION PLAN




The
      Company has a retirement plan which satisfies the requirements of Section 401(k)
      of the Internal Revenue Code. This defined contribution retirement plan covers
      substantially all employees. Participants can elect to have up to the maximum
      percentage allowable of their salaries reduced and contributed to the plan.
      The
      Company may make matching contributions equal to a discretionary percentage
      of
      the participants’ elective deferrals. The Company made no such contributions for
      the six months ended June 30, 2008 and 2007, respectively.




NOTE
      10-  MAJOR
      CUSTOMER




The
      Company’s contracts with agencies of the federal government accounted for 100%
      of its revenue and accounts receivable as of and for the six months ended June
      30, 2008 and 2007, respectively.




21


**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2008 AND 2007 (UNAUDITED)**




NOTE
      11-  SUBSEQUENT
      EVENT


In
      July
      2008, the Company issued a convertible note in the amount of $5,000. The
      convertible note is convertible into a fixed price of $.10 per share of common
      stock on the outstanding principal and accrued interest on the date of
      conversion. The note holder also received a warrant agreement exercisable over
      five years to purchase common stock at $.05 per share for 50,000 warrants.
      There
      will also be warrants issued for accrued interest should the interest be
      converted **.**




22


**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-K for our fiscal year
      ended
      December 31, 2007.*





**Overview**





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




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




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




**Critical
      Accounting Policies**




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




*Principles
      of Consolidation*




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




*Use
      of Estimates*




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





23




*Cash
      and Cash Equivalents*




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




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




*Allowance
      for Doubtful Accounts*




We
      provide an allowance for doubtful accounts, which is based upon a review of
      outstanding receivables as well as historical collection information. Credit
      is
      granted to substantially all customers on an unsecured basis. In determining
      the
      amount of the allowance, management is required to make certain estimates and
      assumptions. Management has determined that as of June 30, 2008, an allowance
      of
      $2,364 is required.




*Fixed
      Assets*




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




*Computer
      Software Development Costs*




During
      2007 and 2006, we capitalized certain software development costs. We capitalize
      the cost of software in accordance with SFAS 86 once technological feasibility
      has been demonstrated, as we have in the past sold, leased or otherwise marketed
      our software, and plans on doing so in the future. We capitalize costs incurred
      to develop and market our privacy preserving software during the development
      process, including payroll costs for employees who are directly associated
      with
      the development process and services performed by consultants. Amortization
      of
      such costs is based on the greater of (1) the ratio of current gross revenues
      to
      the sum of current and anticipated gross revenues, or (2) the straight-line
      method over the remaining economic life of the software, typically five years.
      It is possible that those anticipated gross revenues, the remaining economic
      life of the products, or both, may be reduced as a result of future events.
      We
      have not developed any software for internal use. For the six months ended
      June
      30, 2008 and 2007, we recognized $126,182 and $88,502 of amortization expense
      on
      our capitalized software costs, respectively. Commencing January 1, 2008, we
      placed an additional $226,084 of software development into service, which will
      be amortized over a three year period.





*Recoverability
      of Long-Lived Assets*




We
      review
      the recoverability of our 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 our
      ability to recover the carrying value of long-lived assets from expected future
      cash flows from operations on an undiscounted basis. If such assets are
      determined to be impaired, the impairment recognized is the amount by which
      the
      carrying value of the assets exceeds the fair value of the assets. Fixed assets
      to be disposed of by sale are carried at the lower of the then current carrying
      value or fair value less estimated costs to sell.




*Revenue
      Recognition*




We
      generate revenue from professional services rendered to customers as well as
      from application management support contracts with governmental units. Our
      revenue is generated under time-and-material contracts and fixed-price
      contracts.




24





*Time-and-Material
      Contracts*




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




*Fixed-Price
      Contracts*




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




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




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




*Stock-Based
      Compensation*




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




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




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




Our
      warrants issued in the private placement in October 2006, were not stock based
      compensation. Our options issued in October 2007 were considered stock based
      compensation (see Note 7 to our consolidated financial statements). Our options
      issued in January 2008 were considered stock based compensation.





25




*Concentrations*




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




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




*Segment
      Reporting*




We
      follow
      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. We believe that there is only one operating segment.




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




The
      carrying amounts reported in the consolidated balance sheets 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 us for similar borrowings. For the warrants that
      are classified as derivatives, fair values were calculated at net present value
      using our weighted average borrowing rate for debt instruments without
      conversion features applied to total future cash flows of the
      instruments.




*Convertible
      Instruments*




We
      review
      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 our control, are bifurcated
      and accounted for as a derivative financial instrument. 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.




*Income
      Taxes*




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




*Uncertainty
      in Income Taxes*




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 has adopted FIN 48 for 2007, and they evaluate their tax
      positions on an annual basis, and has determined that as of June 30, 2008,
      no
      additional accrual for income taxes is necessary.




*(Loss)
      Per Share of Common Stock*




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




26





The
      Class
      A and Class B warrants were issued in October 2006 in the private placement
      however were not included as they would be considered anti-dilutive as we had
      a
      loss for this period.




*Research
      and Development*




Research
      and development costs are expensed as incurred. The Company did not incur any
      direct labor relating to research and development costs during the six months
      ended June 30, 2008. During the period ending June 30, 2007, $101,466 of
      research and development costs were included in direct labor. In addition,
      research and development costs of $23,807 and $32,356 have been included in
      indirect labor for the six months ended June 30, 2008 and 2007,
      respectively.




**Recent
      Issued Accounting Standards**




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




In
      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
      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. Application
      of
      EITF 00-19-02 resulted in an adjustment in January 2007 reclassifying the
      derivative liability to additional paid-in capital and retained earnings. The
      adjustment reduced the derivative liability by $1,031,703 and increased
      additional paid-in capital by $547,086 and increased retained earnings by
      $484,617 which was the cumulative-effect adjustment resulting from the adoption
      of this standard.




In
      December 2007, the FASB issued SFAS No. 160, *“Noncontrolling
      Interests in Consolidated Financial Statements, an amendment of Accounting
      Research Bulletin No 51”* (SFAS
      160). SFAS 160 establishes accounting and reporting standards for ownership
      interests in subsidiaries held by parties other than the parent, changes in
      a
      parent’s ownership of a noncontrolling interest, calculation and disclosure of
      the consolidated net income attributable to the parent and the noncontrolling
      interest, changes in a parent’s ownership interest while the parent retains its
      controlling financial interest and fair value measurement of any retained
      noncontrolling equity investment.




SFAS
      160
      is effective for financial statements issued for fiscal years beginning after
      December 15, 2008, and interim periods within those fiscal years. Early adoption
      is prohibited. Management is determining the impact that the adoption of SFAS
      No. 160 will have on our consolidated financial position, results of operations
      or cash flows.




27





In
      December 2007, the FASB issued SFAS 141R, Business Combinations ( *“SFAS
      141R”* ),
      which
      replaces FASB SFAS 141, Business Combinations. This Statement retains the
      fundamental requirements in SFAS 141 that the acquisition method of accounting
      be used for all business combinations and for an acquirer to be identified
      for
      each business combination. SFAS 141R defines the acquirer as the entity that
      obtains control of one or more businesses in the business combination and
      establishes the acquisition date as the date that the acquirer achieves control.
      SFAS 141R will require an entity to record separately from the business
      combination the direct costs, where previously these costs were included in
      the
      total allocated cost of the acquisition. SFAS 141R will require an entity to
      recognize the assets acquired, liabilities assumed, and any non-controlling
      interest in the acquired at the acquisition date, at their fair values as of
      that date. This compares to the cost allocation method previously required
      by
      SFAS No. 141.




SFAS
      141R
      will require an entity to recognize as an asset or liability at fair value
      for
      certain contingencies, either contractual or non-contractual, if certain
      criteria are met. Finally, SFAS 141R will require an entity to recognize
      contingent consideration at the date of acquisition, based on the fair value
      at
      that date. This Statement will be effective for business combinations completed
      on or after the first annual reporting period beginning on or after December
      15,
      2008. Early adoption of this standard is not permitted and the standards are
      to
      be applied prospectively only. Upon adoption of this standard, there would
      be no
      impact to our results of operations and financial condition for acquisitions
      previously completed. The adoption of SFAS No. 141R is not expected to have
      a
      material effect on our consolidated financial position, results of operations
      or
      cash flows.




In
      December 2007, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 110, *“Use
      of a Simplified Method in Developing Expected Term of Share
      Options”* ( *“SAB
      110”* ).
      SAB
      110 expresses the current view of the staff that it will accept a company's
      election to use the simplified method discussed in Staff Accounting Bulletin
      No.
      107, *“Share
      Based Payment"* ,
      ( *“SAB107”* ),
      for
      estimating the expected term of *“plain
      vanilla”* share
      options regardless of whether the company has sufficient information to make
      more refined estimates. SAB 110 became effective for us on January 1, 2008.
      The
      adoption of SAB 110 is not expected to have a material impact on our final
      position.




In
      March
      2008, the FASB Task Force approved confirming changes for Issue No. 98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features or
      Contingently Adjustable Conversion Ratios” to reflect more clearly the consensus
      on EITH 00-27, “Application of Issue No. 98-5 to Certain Convertible
      Instruments”, and the issuance of FASB Statement No. 150, “Accounting for
      Certain Financial Instruments with Characteristics of Both Liabilities and
      Equity”. In addition, the Task Force decided to provide transition guidance for
      those conforming changes as outlined in EITF 08-4, “Transition Guidance for
      Conforming Changes to Issue 98-5”. Management used the EITF 00-27 and EITF 98-5
      guidance to determine beneficial conversion options and accounting for
      convertible debt instruments and convertible stock (collectively, convertible
      instruments) with nondetachable conversion options that are
      in-the-money.





Other
      accounting standards that have been issued or proposed by the FASB or other
      standards-setting bodies that do not require adoption until a future date and
      are not expected to have a material impact on the consolidated financial
      statements upon adoption.




**Six
      Months Ended June 30, 2008 and 2007**




Revenue
      for the six months ended June 30, 2008 was $80,934, a decrease of approximately
      $119,066, or 59.53%, from approximately $200,000 for the same period in 2007.
      This was a result of a decrease in government contracts.




28




Direct
      costs were approximately $189,569 and $201,218 for the six months ended June
      30,
      2008 and 2007 respectively. This represents a decrease of approximately $11,649
      or 5.79%. The decrease in direct costs resulted primarily from decreased
      subcontractor costs of $49,160 resulting from a reduction of government
      contracts and an increase of approximately $37,681 in amortization costs from
      newly capitalized software.




Operating
      expenses which
      include indirect labor, professional fees, advertising, consulting and general
      and administrative, increased from approximately $743,581 for the six months
      ended June 30, 2007 to approximately $802,071 for the same period in 2008.
      The
      increase of approximately $58,490 or 7.87% is
      the
      result of the following: an increase in indirect and overhead labor and fringes
      of approximately $22,725 during the first half of 2008; a decrease in
      registration penalty of approximately $89,468 resulting from a prior year
      transaction which did not occur again in the current year, a decrease in
      professional services of approximately $36,026, consisting primarily of
      decreased legal costs; an increase in share based compensation of approximately
      $149,857 as a result of awards issued under the Company’s option plan and stock
      issued for services; an increase in General and Administrative costs of
      approximately $4,438; and a decrease in depreciation and impairment of
      approximately $10,196 due primarily to the 2007 impairment charge on the
      Company’s InferView product.




**Three
      Months Ended June 30, 2008 and 2007**




Revenue
      for the three months ended June 30, 2008 was $27,673, a decrease of
      approximately $72,327, or 72.33%, from approximately $100,000 for the same
      period in 2007. This was a result of a decrease in government
      contracts.




Direct
      costs for the three months ended June 30, 2008 were approximately $71,045
      compared to approximately $86,277 for the same period in 2007, a decrease of
      approximately $15,232, or 17.65%. This resulted primarily from approximately
      $11,147 in decreased direct labor and fringes and $22,925 of decreased
      subcontractor costs resulting from a reduction of government contracts and
      an
      increase of approximately $18,840 in other amortization costs from newly
      capitalized software.




Operating
      expenses for the three months ended June 30, 2008, which include indirect labor,
      professional fees, advertising, consulting and general and administrative,
      decreased approximately $116,362 to approximately $248,258 for the period ended
      June 30, 2008 from approximately $364,620 for the same period in 2007. This
      represents a decrease of 31.91% and is primarily a result of reduced indirect
      and overhead labor and fringes of approximately $71,453 resulting from costs
      related to a decrease in staffing in 2008 and a decrease in professional
      services of approximately $56,161, consisting primarily of decreased legal
      costs.




**Liquidity
      and Capital Resources**




We
      had
      cash of approximately $1,807 at June 30, 2008 and a working capital deficit
      of
      approximately $1,204,792. During the six months ended June 30, 2008, we used
      approximately $261,000 from our operations. Operations were funded primarily
      from the borrowings of promissory notes of $282,500.




In
      October 2006, we completed a private placement in which the investors paid
      $.50
      per share of common stock, and also received one five-year warrant with an
      exercise price of $.50 and one five-year warrant with an exercise price of
      $.62.
      We sold 2,329,392 units in the private placement (including $362,196 in
      cancellation of indebtedness and accrued interest under outstanding bridge
      loans), resulting in gross cash proceeds of approximately $802,500. In April
      2007, we and holders of our Class A warrants agreed to reduce the exercise
      price
      of 80% of the Class A warrants to $.25 per share for a period of two weeks.
      We
      received approximately $407,000 from the exercise of 1,629,513 warrants. In
      November 2007, the holders of our Class A warrants exercised an additional
      444,879 warrants resulting in gross cash proceeds of approximately $222,000.





In
      March
      2008, we sold three convertible notes in the aggregate principal amount of
      $237,500. These convertible notes accrue interest at the rate of 9.9% per annum
      and are convertible into our common stock at 50% of the closing bid price of
      the
      common stock on the date of conversion.




29





In
      June
      2008, we sold convertible notes in the aggregate principal amount of $45,000.
      These convertible notes accrue interest at the rate of 9.9% per annum and are
      convertible into our common stock at a fixed price of $0.10 per share of common
      stock on the outstanding principal and accrued interest on the date of
      conversion.




We
      will
      need to generate significant additional revenue to support our projected
      increases in staffing and other operating expenses, which we cannot give any
      assurance we will be able to accomplish. We are currently expending
      approximately $200,000 per month to support our operations, and under our
      current business plan, we would be expending approximately $250,000 per month
      by
      the end of fiscal 2008. Along with revenues from our existing contracts and
      funding raised from convertible notes in June and July 2008, we believe our
      existing capital is sufficient to fund our operations only through the third
      quarter of 2008. The funding raised in June consisted of three convertible
      notes
      for $45,000 along with a fourth convertible note for $5,000 issued in early
      July
      2008. An additional round of funding was completed in July 2008 for $205,000
      in
      convertible notes with an availability to increase the funding up to a total
      of
      $250,000. These fundings are crucial to advance the company’s efforts towards a
      significantly larger funding raise to execute on the Company’s business plan. It
      is management’s goal to achieve higher valuations in the following fundings. If
      we are unable to generate increased revenue or raise additional capital, it
      will
      be necessary for us to significantly reduce expenses to stay in business.
      Although we believe the additional capital we will require will be provided
      either through the exercise of warrants, debt and/or increased revenue, we
      cannot assure you that the warrants will be exercised, we can obtain debt at
      acceptable terms or that we can generate sufficient revenue to maintain
      projected operating levels. Accordingly, we may need to secure additional equity
      or debt financing which we cannot assure you would be available to us at prices
      that would be acceptable. Our failure to generate such revenue, reduce expenses
      or obtain necessary financing could impair our ability to stay in business
      and
      raises substantial doubt about our ability to remain as a going
      concern.




The
      accompanying financial statements have been prepared assuming we will continue
      as a going concern. We have suffered recurring losses from operations and at
      June 30, 2008 had a working capital deficit of $1,204,792, and these factors
      have caused substantial doubt about our ability to continue as a going concern
      for a period of one year. The financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




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




**Not
      applicable**




**Item
      4T. Controls and Procedures.**




**Evaluation
      of disclosure controls and procedures.**




Our
      management, with the participation of our principal executive officer and
      principal financial officer, has evaluated the effectiveness of our disclosure
      controls and procedures (as such term is defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934, as amended (the *“Exchange
      Act”* ))
      as of
      June 30, 2008. Based on this evaluation, our principal executive officer and
      principal financial officer concluded that our disclosure controls and
      procedures are not effective due to the existence of material weaknesses in
      our
      internal control over financial reporting discussed in our Annual Report on
      Form
      10-K for the year ended December 31, 2007 and which remain
      unremediated.




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




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




30


**PART
      II — OTHER INFORMATION**




**Item
      1. Legal Proceedings.**




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




**Item
      1A. Risk Factors.**




Not
      Applicable.




**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**




During
      the three months ended June 30, 2008 we made unregistered sales of convertible
      notes in the aggregate principal amount of $45,000 to three investors from
      June
      1, 2008 through June 21,2008. These convertible notes accrue interest at the
      rate of 9.9% per annum and are convertible into our common stock at a fixed
      price of $0.10 per share of common stock on the outstanding principal and
      accrued interest on the date of conversion. All of the unregistered sales were
      exempt from registration pursuant to Section 4(2) of the Securities Act of
      1933,
      as amended, on the basis that all purchasers were accredited
      investors.




**Item
      3. Defaults Upon Senior Securities.**




None.




**Item
      4. Submission of Matters to a Vote of Security Holders.**




None.




**Item
      5. Other Information.**




None.




**Item
      6. Exhibits.**




31.1
            Certification
                of the Chairman of the Board required by Rule 13a-14(a) or Rule
                15d-14(a).




31.2
            Certification
                of the Principal Executive, Financial and Accounting 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**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


**INFERX
                CORPORATION**Dated:
              August
              12, 2008
            By:
            /s/
              B.K.
              GogiaB.K.
                Gogia
              Chairman
                of the Board
              (Principal
                Executive, Financial and
              Accounting
                Officer)


32




InferX
      Corporation


Quarterly
      Report on Form 10-Q


for
      the
      Quarterly Period Ended


June
      30,
      2008





**-
      EXHIBIT INDEX -**





Exhibit
              No.
            Description  31.1
            Certification
                of the Chairman of the Board required by Rule 13a-14(a) or Rule
                15d-14(a).





31.2
            Certification
                of the Principal Executive, Financial and Accounting Officer required
                by
                Rule 13a-14(a) or Rule 15d-14(a).





32.1
            Certification
                of the Chairman of the Board and Principal Executive, Financial and
                Accounting Officer required by Rule 13a-14(b) or Rule 15d-14(b) and
                18
                U.S.C. 1350.




33