**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-Q**





(Mark
      One)





xQUARTERLY
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      quarterly period ended March 31, 2008


or





oTRANSITION
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      transition period from _______ to _______





Commission
      File Number: 000-51720





**InferX
      Corporation**


(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 Drive, Suite 110
              McLean,
                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 xNo 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 o





Non-accelerated
      filer o       Smaller
      reporting company x


(Do
      not
      check if a smaller reporting company)





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





As
      of May
      16, 2008, there were outstanding 13,500,892 shares of the registrant’s common
      stock, $.0001 par value.





Table
      of Contents





PagePART
                I – FINANCIAL INFORMATIONItem
                1.
            Financial
                Statements
            1Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            23Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            29Item
                4(T)
            Controls
                and Procedures
            29PART
                II – OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            30Item
                1A.
            Risk
                Factors
            30Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            30Item
                3.
            Defaults
                Upon Senior Securities
            30Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            30Item
                5.
            Other
                Information
            30Item
                6.
            Exhibits
            30










**PART
      I**




**FINANCIAL
      INFORMATION**




**Item
                1.**
            **Financial
                Statements**




**INFERX
      CORPORATION**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**MARCH
      31, 2008 (UNAUDITED) AND DECEMBER 31, 2007 (AUDITED)**




**MARCH 31,**
            
            **DECEMBER 31,****2008**
            
            **2007****ASSETS****CURRENT
                ASSETS**Cash
            
            $
            39,943
            
            $
            1,670Prepaid
                expenses and other current assets
            
            
            7,505
            
            
            7,505**Total
                current assets**
            
            
            47,448
            
            
            9,175Fixed
                assets, net of depreciation
            
            
            40,527
            
            
            31,047**Other
                Asset**Computer
                software development costs, net of amortization
            
            
            287,155
            
            
            350,246**Total
                other asset**
            
            
            287,155
            
            
            350,246**TOTAL
                ASSETS**
            
            $
            375,130
            
            $
            390,468**LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                LIABILITIES**Accounts
                payable and accrued expenses
            
            $
            1,028,499
            
            $
            803,731Liability
                for stock to be Issued
            
            
            294,125
            
            
            15,000Current
                portion of notes payable
            
            
            13,453
            
            
            15,703**Total
                current liabilities**
            
            
            1,336,077
            
            
            834,434**Long-term
                Liabilities**Notes
                payable, net of current portion
            
            
            422,851
            
            
            350,307**TOTAL
                LIABILITIES**
            
            
            1,758,928
            
            
            1,184,741**STOCKHOLDERS'
                EQUITY (DEFICIT)**Preferred
                stock, par value $0.0001 per share, 10,000,000 shares authorized
                and no
                shares issued and outstanding
            
            
            -
            
            
            -Common
                stock, par value $0.0001 per share, 75,000,000 shares authorized
                and
                11,472,188 issued and outstanding, respectively
            
            
            1,147
            
            
            1,147Additional
                paid-in capital
            
            
            3,311,749
            
            
            3,278,517Retained
                earnings (defict)
            
            
            (4,696,694
            )
            
            (4,073,937
            )**Total
                stockholders' equity (deficit)**
            
            
            (1,383,798
            )
            
            (794,273
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
            
            $
            375,130
            
            $
            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 THREE MONTHS ENDED MARCH 31, 2008 AND 2007**





**2008**
            
            **2007****REVENUE**
            
            $
            53,261
            
            $
            100,000**COST
                OF REVENUES**Direct
                labor and other finges
            
            
            35,307
            
            
            24,329Subcontractor
            
            
            19,710
            
            
            35,111Other
                direct costs
            
            
            416
            
            
            11,250Amortization
                of computer software development costs
            
            
            63,091
            
            
            44,251**Total
                costs of revenues**
            
            
            118,524
            
            
            114,941**GROSS
                (LOSS)**
            
            
            (65,263
            )
            
            (14,941
            )**OPERATING
                EXPENSES**Indirect
                and overhead labor and fringes
            
            
            244,062
            
            
            149,884Professional
                fees
            
            
            96,309
            
            
            76,174Travel
                related costs
            
            
            7,744
            
            
            7,208Rent
            
            
            27,663
            
            
            26,609General
                and administrative
            
            
            22,680
            
            
            14,257Registration
                penalty
            
            
            -
            
            
            89,468Stock
                issued for services
            
            
            116,625
            
            
            -Stock
                based compensation
            
            
            33,232
            
            
            -Depreciation
                and impairment
            
            
            5,498
            
            
            15,361**Total
                operating expenses**
            
            
            553,813
            
            
            378,961**NET
                LOSS FROM OPERATIONS BEFORE OTHER EXPENSE AND****PROVISION
                FOR INCOME TAXES**
            
            
            (619,076
            )
            
            (393,902
            )**OTHER
                EXPENSE**Interest
                expense, net of interest income
            
            
            3,681
            
            
            5,685**NET
                LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME
                TAXES**
            
            
            (622,757
            )
            
            (399,587
            )Provision
                for income taxes
            
            
            -
            
            
            -**NET
                (LOSS) APPLICABLE TO SHARES**
            
            $
            (622,757
            )
            $
            (399,587
            )**NET
                (LOSS) PER BASIC AND DILUTED SHARES**
            
            $
            (0.05
            )
            $
            (0.04
            )**WEIGHTED
                AVERAGE NUMBER OF****SHARES
                OUTSTANDING (DATAMAT)**
            
            
            11,472,188
            
            
            9,129,392




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 THREE MONTHS ENDED MARCH 31, 2008 AND 2007**





**2008**
            
            **2007****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                (loss)
            
            $
            (622,757
            )
            $
            (399,587
            )**Adjustments
                to reconcile net (loss)****to net cash (used in) operating activities:**Stock
                issued for services
            
            
            116,625
            
            
            -Stock
                based compensation
            
            
            33,232
            
            
            -Impairment
                loss
            
            
            -
            
            
            10,473Amortization
                of computer software development costs
            
            
            63,091
            
            
            44,251Depreciation
            
            
            5,498
            
            
            4,888**Change
                in assets and liabilities**Decrease
                in accounts receivable
            
            
            -
            
            
            50,000Increase
                in accounts payable and accrued expenses
            
            
            224,768
            
            
            189,123Increase
                in accrued registration penalty
            
            
            -
            
            
            89,468**Total
                adjustments**
            
            
            443,214
            
            
            388,203**Net
                cash (used in) operating activities**
            
            
            (179,543
            )
            
            (11,384
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Capital
                expenditures
            
            
            (14,978
            )
            
            (16,413
            )Computer
                software development costs
            
            
            -
            
            
            (45,496
            )**Net
                cash (used in) investing activities**
            
            
            (14,978
            )
            
            (61,909
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Borrowings
                of promissory notes
            
            
            237,500
            
            
            -(Repayment)
                of notes payable
            
            
            (4,706
            )
            
            (4,196
            )**Net
                cash (used in) financing activities**
            
            
            232,794
            
            
            (4,196
            )**NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
            
            
            38,273
            
            
            (77,489
            )**CASH
                AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
            
            
            1,670
            
            
            79,554**CASH
                AND CASH EQUIVALENTS - END OF PERIOD**
            
            $
            39,943
            
            $
            2,065**SUPPLEMENTAL
                INFORMATION OF CASH FLOW ACTIVITY**Cash
                paid during the year for interest
            
            $
            3,148
            
            $
            27,596Cash
                paid during the year for income taxes
            
            $
            -
            
            $
            -**SUPPLEMENTAL
                INFORMATION OF NONCASH ACTIVITY**Conversion
                of notes payable to liability for stock to be issued
            
            $
            162,500
            
            $
            -Derivative
                liability converted to retained earnings and additional paid in
                capital
            
            $
            -
            
            $
            1,031,703




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


–
3
–




**INFERX
      CORPORATION**


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


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 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 NICKEL ACQUISITION CORP. I)**


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


**MARCH
      31, 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 ownership and 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 consolidated financial statements the Company has incurred
      a
      loss of $622,757 and $399,587 for the three months ended March 31, 2008 and
      March 31, 2007, respectively, and has a working capital deficiency of $1,288,629
      as of March 31, 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. The Company expects the negative cash flow from operations to continue
      its trend through the next six months until proposals that are in process become
      executed agreements and revenue is recognized from these agreements. 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
      sales personnel, along with 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 NICKEL ACQUISITION CORP. I)**


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


**MARCH
      31, 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 NICKEL ACQUISITION CORP. I)**


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


**MARCH
      31, 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 March 31, 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, 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
      three months ended March 31, 2008 and 2007, the Company recognized $63,091
      and
      $44,251 of amortization expense on its capitalized software costs, respectively.





–
7
–





**INFERX
      CORPORATION**


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


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


**MARCH
      31, 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 collectability 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 NICKEL ACQUISITION CORP. I)**


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


**MARCH
      31, 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 NICKEL ACQUISITION CORP. I)**


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


**MARCH
      31, 2008 AND 2007 (UNAUDITED)**




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




**Concentrations**




The
      Company has derived all of its revenue for the three months ended March 31,
      2008
      and March 31, 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 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 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 NICKEL ACQUISITION CORP. I)**


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


**MARCH
      31, 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 has determined that as of March 31, 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)**


**MARCH
      31, 2008 AND 2007 (UNAUDITED)**




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




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




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





**March
                31,**
            
            **March
                31,****2008**
            
            **2007**Net
                (loss)
            
            $
            (622,757
            )
            $
            (399,587
            )Weighted-average
                common sharesoutstanding :Basic
            
            
            11,472,188
            
            
            9,129,392Warrants
            
            
            4,908,784
            
            
            4,658,784Options
            
            
            370,000
            
            
            -Diluted
            
            
            16,750,972
            
            
            13,788,176Basic
                net (loss) per share
            
            $
            (0.05
            )
            $
            (0.04
            )Diluted
                net (loss) per share
            
            
            (0.05
            )
            $
            (0.04
            )




**Research
      and Development**




Research
      and development costs are expensed as incurred. The Company incurred no research
      and development costs during the three months ended March 31, 2008. During
      the
      period ending March 31, 2007, $2,121 of research and development costs were
      included in indirect labor.




**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.




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.





–
12
–





**INFERX
      CORPORATION**


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


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


**MARCH
      31, 2008 AND 2007 (UNAUDITED)**




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




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




In
      December 2006, the FASB Staff issued FSP EITF - 00-19-2, “Accounting for
      Registration Payment Arrangements” (“EITF 00-19-2”). EITF 00-19-2 addresses an
      issuer’s accounting for registration payment arrangements. EITF 00-19-2
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      SFAS No. 5, Accounting for Contingencies. EITF 00-19-2 is effective for
      financial statements issued for fiscal years beginning after December 15, 2006,
      and interim periods within those fiscal years. 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 t he
      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)**


**MARCH
      31, 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.





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 March 31, 2008 and December 31, 2007,
      respectively.




**Estimated Useful**
            
            **March 31,**
            
            **December 31,****Lives (Years)**
            
            **2008**
            
            **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
            
            
            
            
            
            (141,190
            )
            
            (135,692
            )Total,
                net
            
            
            
            
            $
            40,527
            
            $
            31,047




Depreciation
      expense was $5,498 and $4,888 for the three months ended March 31, 2008 and
      2007, respectively.





–
14
–





**INFERX
      CORPORATION**


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


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


**MARCH
      31, 2008 AND 2007 (UNAUDITED)**




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




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




**Estimated Useful**
            
            **March 31,**
            
            **December 31,****Lives (Years)**
            
            **2008**
            
            **2007**Computer
                software development costs
            
            
            5
            
            $
            986,724
            
            $
            986,724Less:
                Accumulated amortization Total, net
            
            
            
            
            
            (699,569
            )
            
            (636,478
            )$
            287,155
            
            $
            350,246




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




Amortization
      expense was $63,091 and $44,251 for the three months ended March 31, 2008.and
      2007, respectively.




Amortization
      expense anticipated through March 31, 2011 is as follows:





Period
                ended March 31:2009
            
            $
            155,2732010
            
            
            75,3612011
            
            
            56,521$
            287,155




**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)**


**MARCH
      31, 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
      March 31, 2008, the Company has an outstanding principal balance of $356,055.
      Interest expense on the SBA loan for the three months ended March 31, 2008
      and
      2007 were $3,148 and $3,658, 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
      March 31, 2008, the outstanding principal balance of the Auto Note was $5,249.





–
16
–





**INFERX
      CORPORATION**


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


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


**MARCH
      31, 2008 AND 2007 (UNAUDITED)**




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




***Convertible
      Notes***





The
      Company entered into three convertible notes:





a)
            Convertible
                note dated March 6, 2008 in the amount of $75,000, with a term of
                2 years,
                with interest calculated at 9.99% 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
                March
                31, 2008 in the amount of $532;





b)
            Convertible
                note dated March 7, 2008 in the amount of $62,500, with a term of
                2 years,
                with interest calculated at 9.99% 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 however, the shares were not issued
                until
                April 2008, thus the Company has reflected the balance in liability
                for
                stock to be issued;





c)
            Convertible
                note dated March 10, 2008 in the amount of $100,000, with a term
                of 2
                years, with interest calculated at 9.99% 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 however, the shares were not issued until April 2008,
                thus the
                Company has reflected the balance in liability for stock to be
                issued.




As
      of
      March 31, 2008, the annual repayment schedule of the Notes Payable for the
      next
      five years and in the aggregate are:




Period
                ending March 31,2009
            
            $
            13,4532010
            
            
            83,5592011
            
            
            8,9092012
            
            
            9,2712013
            
            
            9,648Thereafter
            
            
            311,464436,304Less
                : current portion
            
            
            (13,453
            )Long-term
                portion
            
            $
            422,851




–
17
–





**INFERX
      CORPORATION**


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


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


**MARCH
      31, 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 March 31, 2008 has 11,472,188 shares of common stock issued and
      outstanding. The Company has not issued any shares in the three months ended
      March 31, 2008. The Company has issued in April 2008, 1,203,704 shares of common
      stock in conversion of $162,500 in convertible notes (see Note 5), 475,000
      shares of common stock to the convertible note holders valued at $64,125 for
      entering into the note agreements, and 350,000 shares of common stock for
      services rendered in the three months ended March 31, 2008 valued at $52,500.
      The $116,625 is reflected as stock issued for services in the condensed
      consolidated statements of operations for the three months ended March 31,
      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 however the stock has
      not
      been issued until April 2008. This is also reflected as a liability for stock
      to
      be issued.




***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, 444,879 of the Class A warrants were exercised
      into common shares. The Company granted brand new Class A warrants to the
      warrant holders that exercised during 2007. The total new Class A warrants
      of
      2,074,392 were issued in November 2007 and are reflected herein. 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
                years4,908,784




–
18
–





**INFERX
      CORPORATION**


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


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


**MARCH
      31, 2008 AND 2007 (UNAUDITED)**




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




***Warrants
      (Continued)***




The
      Class
      A Warrants (old) 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**Stock
                Price
            
            $
            .50
            
            $
            .50
            
            $
            .50Strike
                Price
            
            $
            .50
            
            $
            .62
            
            $
            .50Expected
                Life of Warrant
            
            
            5
                yrs.
            
            
            5
                yrs.
            
            
            5
                yrs.Annualized
                Volatility
            
            
            50
            %
            
            50
            %
            
            100
            %Discount
                Rate
            
            
            3.50
            %
            
            3.50
            %
            
            3.00
            %Annual
                Rate of Quarterly Dividends
            
            
            None
            
            
            None
            
            
            NoneCall
                Option Value
            
            $
            .237
            
            $
            .206
            
            $
            .378





***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 290,000 options in
      October and November that vest over a three-year period of time, with 140,834
      of
      these options vesting in 2007 at a strike price of $.50 per share and an
      additional 155,000 shares that vested during the three months ended March 31,
      2008. During this period, options for 70,000 shares were terminated under the
      terms of the option plan, of which 12,917 were already vested.




These
      options were valued as follows:




**December 2007**
            
            **March 2008**Stock Price
            
            $
            .50
            
            $
            .39/$.53Strike
                Price
            
            $
            .50
            
            $
            .50Expected
                Life of Option
            
            
            1
                yr.
            
            
            1
                yr.Annualized
                Volatility
            
            
            100
            %
            
            100
            %Discount
                Rate
            
            
            3.00
            %
            
            3.00
            %Annual
                Rate of Quarterly Dividends
            
            
            None
            
            
            NoneCall
                Option Value
            
            $
            .196
            
            $
            .124/$.217




The
      value
      attributable to these options for the three months ended March 31, 2008 and
      2007
      is $33,232 and $0, respectively and is reflected in the consolidated statements
      of operations as stock based compensation.





–
19
–





**INFERX
      CORPORATION**


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


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


**MARCH
      31, 2008 AND 2007 (UNAUDITED)**




**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 March
      31,
      2008, the following presents the approximate future minimum lease payments
      required under this lease:




**For
                the Period Ended**
              **March
                31,**2009
            
            $
            54,780




Rent
      expense for the three months ended March 31, 2008 and 2007 was $27,663 and
      $$26,609, respectively.




**Consulting
      Agreements**




During
      the three months ended March 31, 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 three months ended March 31, 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 had
      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 as of March 31, 2007.
      The penalty shares noted above were issued in October 2007.





–
20
–




**INFERX
        CORPORATION**
 **(FORMERLY
        BLACK NICKEL ACQUISITION CORP. I)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **MARCH
        31, 2008 AND 2007 (UNAUDITED)**





**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.





At
      March
      31, 2008, deferred tax assets consist of the following:




Net
                operating losses
            
            $
            1,579,283Valuation
                allowance
            
            
            (1,579,283
            )$
            -





At
      March
      31, 2008, the Company had a net operating loss carryforward in the amount of
      $4,644,951, 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 three months ended March 31,
      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 11-**
            **DEFINED
                CONTRIBUTION PLAN**




The
      Company has a retirement plan which satisfies the requirements of Section 401(k)
      of the Internal Revenue Code. This defined contribution retirement plan covers
      substantially all employees. Participants can elect to have up to the maximum
      percentage allowable of their salaries reduced and contributed to the plan.
      The
      Company may make matching contributions equal to a discretionary percentage
      of
      the participants’ elective deferrals. The Company made no such contributions for
      the three months ended March 31, 2008 and 2007, respectively.




–
21
–





**INFERX
      CORPORATION**


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


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


**MARCH
      31, 2008 AND 2007 (UNAUDITED)**




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




The
      Company’s contracts with agencies of the federal government accounted for 100%
      of its revenue for the three months ended March 31, 2008 and 2007,
      respectively.





–
22
–




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




*The
      following discussion should be read in conjunction with the Financial Statements
      and the notes thereto that appear in Item 1 of this Quarterly Report on Form
      10-Q, 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
      Department of Veterans Affairs.




**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 March 31, 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 three months ended
      March 31, 2008 and 2007, we recognized $63,091 and $44,251 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 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 collectability is assured, which
      does not take place until completion of the particular milestone. Costs are
      recognized as services are performed.




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




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




*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 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 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. In the notes to our consolidated financial statements, 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 for the three months ended March 31, 2008 and March
      31, 2007 from one customer. .




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




*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 March 31, 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. Ther Company incurred no
      research and development costs during the three months ended March 31, 2008.
      During the perod ending March 31, 2007, $2121 of research and development costs
      were included in direct labor. In addition, research and development costs
      of
      $32,127 and $49,366 have been included in indirect labor and $183,548 and
      $104,782 have been included in direct labor and subcontractor costs for the
      years ended March 31, 2008 and 2006, 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 our consolidated financial statements.




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




In
      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 Accouting 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.




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.




**Results
      of Operations and Financial Condition**




**Three
      Months Ended March 31, 2008 and 2007**




Revenue
      for the three months ended March 31, 2008 was approximately $371,000, an
      increase of approximately $171,000, or 86% from approximately $200,000 for
      the
      same period in 2006. This was a result of increased federal contracts related
      to
      the Company’s core competencies.




Direct
      costs for the year ended March 31, 2008 were $53,261 compared to $100,000 for
      the same period in 2007, an decrease of approximately $46,739 or 47%. Direct
      costs before capitalization of labor costs for the three months ended March
      31,
      2008 were approximately $118,524 in 2008 and $114, 941 during the same period
      in
      2007. The increase in direct costs resulted primarily from increases related
      to
      additional contract requirements and additional costs incurred for further
      development of the Company’s proprietary predictive analytics software
      products.




Operating
      expenses, which include indirect labor, professional fees, advertising,
      consulting and general and administrative, increased approximately $174,852
      from
      approximately $378,961 for the three months ended March 31, 2007 to
      approximately $553,813 for the same period in 2008. This represents an increase
      of approximately 46%. The increase is the result of the following: an increase
      in indirect and overhead labor and fringes of approximately $94,178 resulting
      from costs related to an increase in staffing in 2008; an increase in
      professional services of approximately $20,135, consisting primarily of
      increased legal and filing costs related to public filings; an increase in
      share
      based compensation of approximately $149,852 as a result issued under the
      Company’s option plan and stock issued for services; and increase in General and
      Administrative costs of approximately $8,423; and a decrease in depreciation
      and
      impairment of approximately $9,863 due primarily to the 2007 impairment charge
      on the Company’s InferView product.




–
28
–




**Liquidity
      and Capital Resources**




We
      had
      cash of approximately $40,000 at March 31, 2008 and a working capital deficit
      of
      approximately ($335,000). During the three months ended March 31, 2008, we
      used
      approximately $176,000 from our operations. Operations were funded primarily
      from the borrowings of promissory notes of $237,500.




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 convertible notes in the aggregate principal amount of
      $237,500. These convertible notes accrue interest at the rate of 9.99% 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.




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, we
      believe our existing capital is sufficient to fund our operations only through
      the second quarter of 2008. 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.




**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 March 31, 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.




–
29
–


**PART
      II**


**OTHER
      INFORMATION**




**Item
                1.**
            **Legal
                Proceedings**




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




**Item
                1A.**
            **Risk
                Factors**




Not
      applicable.




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




During
      the three months ended March 31, 2008, we made unregistered sales of convertible
      notes in the aggregate principal amount of $237,500 to three investors from
      March 6, 2008 through March 10, 2008. These convertible notes accrue interest
      at
      the rate of 9.99% 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. 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 principal executive officer required by Rule 13a-14(a) or
                Rule
                15d-14(a)31.2
            Certification
                of the principal financial officer required by Rule 13a-14(a) or
                Rule
                15d-14(a)32
            Certification
                of the principal executive officer and the principal financial officer
                required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C.
                1350




–
30
–


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




**InferX
                Corporation**Date:
                May 20, 2008
            By:
            /s/
              B.K.
              GogiaB.K.
                GogiaChairman
                of the Board(Principal
                Executive, Financial andAccounting
                Officer)









**InferX
        Corporation**
  **Form
        10-Q**
 **For
        the quarterly period ended March 31, 2008**
  **Exhibit
        Index**


31.1
            
            Certification
                of the principal executive officer required by Rule 13a-14(a) or
                Rule
                15d-14(a) **31.2
            
            Certification
                of the principal financial officer required by Rule 13a-14(a) or
                Rule
                15d-14(a) **32
            
            Certification
                of the principal executive officer and the principal financial officer
                required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350
                **





**
      Filed
      herewith