UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549






Form
10-K




(Mark
One)


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


For
the fiscal year ended December 31, 2008




or




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


For
the Transition Period from  to .





Commission
File Number 000-51661




BIGSTRING
CORPORATION


(Exact
name of registrant as specified in its charter)





Delaware
                
                20-0297832(State
      or other jurisdiction of incorporation or organization)
                
                (I.R.S.
      Employer Identification
No.)





157
      Broad Street, Suite 109, Red Bank, New Jersey07701(Address
      of principal executive offices) (Zip Code)(732) 741-2840(Registrant’s
      telephone number, including area code)








Securities
registered pursuant to Section 12(b) of the Act:


None





Securities
registered pursuant to Section 12(g) of the Act:


Common Stock, par value
$0.0001


(Title of
class)





Indicate
by check mark if the Registrant is a well-known seasoned issuer as defined in
Rule 405 of the Securities Act. Yes  ̈No x




Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes  ̈No x




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  ̈




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  ̈




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
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large
accelerated filer  ̈Accelerated filer  ̈Non-accelerated filer  ̈Smaller reporting
company x




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




At
June 30, 2008, the aggregate market value of shares held by non-affiliates
of the Registrant (based upon the closing sale price of such shares on The
NASDAQ OTC Bulletin Board on June 30, 2008 was $5,104,854.




At
March 30, 2009, there were 52,244,394 shares of the Registrant’s common
stock outstanding.





DOCUMENTS INCORPORATED BY
REFERENCE


Part III
of this Annual Report on Form 10-K incorporates certain information by reference
from the Registrant’s Proxy Statement for the Annual Meeting of Stockholders
scheduled to be held on May 29, 2009.  The Proxy Statement will be
filed with the Securities and Exchange Commission (the “SEC”) on or before April
30, 2009.












SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS





Certain
information included in this Annual Report on Form 10-K and other filings of the
Registrant under the Securities Act of 1933, as amended (the “Securities Act”),
and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as
well as information communicated orally or in writing between the dates of such
filings, contains or may contain “forward-looking statements” within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange
Act.  Such statements are subject to certain risks, trends and
uncertainties that could cause actual results to differ materially from expected
results.  Among these risks, trends and uncertainties are the
availability of working capital to fund our operations, the competitive market
in which we operate, the efficient and uninterrupted operation of our computer
and communications systems, our ability to generate a profit and execute our
business plan, the retention of key personnel, our ability to protect and defend
our intellectual property, the effects of governmental regulation and other
risks identified in the Registrant’s filings with the SEC from time to time,
including our registration statement on Form SB-2 (Registration No. 333-143793),
filed with the SEC on June 15, 2007, and the subsequent amendments and
supplements thereto.





In some
cases, forward-looking statements can be identified by terminology such as
“may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative of such terms
or other comparable terminology.  Although the Registrant believes
that the expectations reflected in the forward-looking statements contained
herein are reasonable, the Registrant cannot guarantee future results, levels of
activity, performance or achievements.  Moreover, neither the
Registrant, nor any other person, assumes responsibility for the accuracy and
completeness of such statements.  The Registrant is under no duty to
update any of the forward-looking statements contained herein after the date of
this Annual Report on Form 10-K.





BIGSTRINGCORPORATION





INDEX TO FORM
10-K





PART I
                                                                                            PAGEItem
      1.
                                                                                            Business
                                                                                            1Item
      1A.
                                                                                            Risk Factors
                                                                                            7Item
      1B.
                                                                                            Unresolved Staff Comments
                                                                                            7Item
      2.
                                                                                            Properties
                                                                                            8Item
      3.
                                                                                            Legal Proceedings
                                                                                            8Item
      4.
                                                                                            Submission of Matters to a Vote of Security
      Holders
                                                                                            8PART IIItem
      5.
                                                                                            Market
      for Registrant’s Common Equity, Related Stockholder
      Matters and Small Business Issuer Purchases of Equity
      Securities
                                                                                            9Item
      6.
                                                                                            Selected Financial Data
                                                                                            11Item
      7.
                                                                                            Management’s Discussion and Analysis of Financial Condition and
      Results of Operation
                                                                                            11Item
      7A.
                                                                                            Quantitative and Qualitative Disclosures About Market
      Risk
                                                                                            19Item
      8.
                                                                                            Financial Statements and Supplementary Data
                                                                                            19Item
      9.
                                                                                            Changes
      In and Disagreements With Accountants on Accounting and
      Financial Disclosure
                                                                                            19Item
      9A.
                                                                                            Controls and Procedures
                                                                                            19Item
      9B.
                                                                                            Other Information
                                                                                            21PART IIIItem
      10.*
                                                                                            Directors, Executive Officers and Corporate
      Governance
                                                                                            22Item
      11.*
                                                                                            Executive Compensation
                                                                                            22Item
      12.*
                                                                                            Security
      Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
                                                                                            22Item
      13.*
                                                                                            Certain Relationships and Related Transactions and Director
      Independence
                                                                                            22Item
      14.*
                                                                                            Principal Accountant Fees and Services
                                                                                            22Item
      15.
                                                                                            Exhibits, Financial Statement Schedules
                                                                                            22Index to Consolidated Financial Statements
                                                                                            F-1Index of Exhibits
                                                                                            E-1Signatures
                                                                                            23





*
            The
      information required under this Item is contained in the Registrant’s
      Proxy Statement for the Annual Meeting of Stockholders scheduled to be
      held on May 29, 2009, and is incorporated herein by
      reference.  The Proxy Statement will be filed with the SEC on or
      before April 30, 2009.


Index


PART
I





Item1.
            Business





Background




BigString
Corporation (“BigString”) was incorporated in the State of Delaware on October
8, 2003 under the name “Recall Mail Corporation.”  The company’s name
was formally changed to “BigString Corporation” in July
2005.  BigString was formed to develop technology that would allow the
user of email services to have comprehensive control, security and privacy
relating to the email generated by the user.




BigString
Interactive, Inc. (“BigString Interactive”), incorporated in the State of New
Jersey, was formed by BigString in early 2006 to develop technology relating to
interactive web portals.




PeopleString
Corporation (“PeopleString”), incorporated in the State of Delaware, was formed
by BigString in early 2009 to launch an incentive-based social network that pays
users to receive direct mail and perform a host of internet
activities.




BigString
Interactive and PeopleString are currently BigString’s only operating
subsidiaries.




BigString
has developed an innovative messaging service that allows users to easily send,
recall, erase, self-destruct and secure email transmissions. BigString set out
to make Internet communication more efficient, reliable and valuable, while
protecting individual privacy and intellectual property.  The concept
of recallable email was conceived by one of BigString’s founders and current
President and Chief Executive Officer, Darin M. Myman.  After
inadvertently sending an email to a prospective client which contained sensitive
pricing and customer information, Mr. Myman unfortunately learned that there was
no way for him to retrieve the email before the prospective client had the
opportunity to review the contents thereof.  As a result of this
frustrating experience, Mr. Myman and certain other members of BigString’s
management team focused on developing a technology that would allow users to
have comprehensive control, security and privacy of their email.  In
March 2004, the BigString email service was introduced to the
market.




Business
Strategy





The email
industry has migrated from an advertising model to a blended model that includes
advertising and subscriptions.  Email service providers now offer
premium services and products which include, among other features, value-added
services such as advanced spam filters, advanced virus protection, additional
storage, multiple email addresses and secure email.  In addition to
our free email service product, which includes the aforementioned features plus
our proprietary features, we offer premium email services, products and
applications such as domain/vanity names, POP3 email client access (a protocol
used to retrieve email from a mail server), advanced email management and
campaign management tools, which are offered in several different packages at
various prices and may be purchased by the users of our BigString email
service.




BigString includes advertising with its
email services.  Advertisements are primarily displayed to users of
our free service.  Advertisements customarily include text and banner
ads and are paid based on a mix of impressions, clicks and
actions.  BigString currently has agreements with a number of firms
that provide advertising services.  In the future, we may add
additional types of advertisements and additional advertising service firms, as
well as direct advertisers and sponsors, as we increase the monetization of our
user base.




Certain
Internet service providers (“ISPs”), portals, social networks and content
providers have started to use email as a tool to compete against each
other.  This strategy incorporates email as part of their offering
because email is one of the most effective web applications in bringing users
back to a site, multiple times a day, day after day.  Many service
providers have recently launched beta versions.  These beta email
developments consist primarily of storage and anti-spam/anti-virus
filters.  BigString continuously strives to provide a superior user
experience with features that we believe exceed those of other
providers.




Leveraging
the ‘stickiness’ of email and the advantage it can offer an Internet property,
we introduced email hosting, private label, and co-branded solutions. These
solutions offer BigString’s unique email features under the logos and marks of
web publishers and content sites, such as search engines, social networks,
online dating sites, ISPs and social media portals. Web publishers and content
sites can further their image and differentiate their services from competitors,
while increasing incremental traffic, page views and ad revenue from their
existing members. Most agreements include a revenue share arrangement, and we
may also charge development and




1
 Index


maintenance
fees. Web publishers and content sites provide the marketing, which expands
awareness of BigString’s unique services beyond BigString’s marketing and can
help us grow more quickly.




BigString
has introduced complementary messaging services to provide a full suite of
communications tools for our members. In 2008, BigString introduced a
self-destructing instant messaging (“IM”) technology that enables users to send
instant messages that self-destruct after being sent; this service continued to
develop into a web-based, cross-platform IM application that enables users to
send self-destructing or regular IMs across AOL®’s AIM,
Yahoo®’s
Messenger, MSN®’s
Messenger and Google®’s Gtalk.
In 2008, we also released a self-destructing, SMS text messaging application;
this application was initially configured for BlackBerry® phone
users.  In 2009, we released an easy-to-use universal email tracking
service that allows users to know when their emails have been opened and
read.




Through
our wholly-owned subsidiary, BigString Interactive, we launched a new
interactive entertainment portal in June 2006, built around BigString’s
recallable, erasable and self-destructing email platform.  BigString’s
entertainment portal contains streaming audio and video
programming.




Building
on the vast popularity of the social networking sites such as Facebook®,
MySpace®,
Friendster® and
LinkedIn®,
BigString’s social networking applications allow users to easily send and
receive messages, notifications, email and videos that self-destruct on command.
These rapidly growing, adjacent markets offer BigString the opportunity to
leverage its skills in messaging and streaming audio and video to create
complementary messaging applications. Our development efforts are focused to
address security and privacy gaps in social networking messaging applications.
In 2008, we added the BuddyStumbler social network to the BigString
family.




Through
our wholly-owned subsidiary, PeopleString, we launched an incentive-based social
network in March 2009 that pays users to receive direct mail and perform a host
of internet activities.




Promotion





We
promote our messaging service and products through the Internet, including
messaging and email tag lines, organic search, paid search, banners, blogs,
social networks, video and other viral tactics, multimedia, print, and radio as
well as through alliances with marketing affiliates and programs contained on
our interactive entertainment portal, such as www.BuddyStumbler.com
www.DailyLOL.com, www.FindItAll.com and the OurPrisoner interactive Internet
television program. We also offer fee based services, such as our
self-destructible SMS text application, through online stores as a point of sale
license purchase.




Our
promotions also include email hosting, private label, and co-branded solutions.
The web publishers and content sites may offer our messaging services to their
existing registered member base as well as all future members that register. The
web publishers and content sites are responsible for marketing. BigString
receives advertising revenue associated with these marketing affiliations and
may also receive premium fees when registered members upgrade
service.  In conjunction with contracts to provide email services to
marketing affiliates, BigString may be obligated to make payments, which may
represent a portion of revenue, to its marketing affiliates.




Market
Affiliations





We enter into market affiliations with
other Internet companies regarding advertisements and other marketing promotions
which can be accessed through our website. Through these marketing affiliations,
advertisements, such as banner ads, are posted on our website and may be
accessed by our users.  In addition, advertising websites may be
accessed directly through our website.  Our marketing affiliates are
obligated to pay us a portion of the revenue they receive from advertisers as
compensation for BigString’s sale of promotional space on our
website.




We generate revenue when our users
access the advertisements or advertising websites and purchase products and
services.  In addition, we generate revenue based on the number of our
users accessing advertisements and advertisers’ websites. We also generate
revenue based upon the number of impressions per advertisement.




Products
and Services





BigString
offers a web-based, POP3/IMAP server, email service solution.  Our
patent pending technology provides a user with the ability to manage and control
content sent by email.  The user’s email executes through the
BigString server but such execution is transparent to the sender and recipients
of the email.




2
 Index




A user of
our BigString email services will have his, her or its email transposed from a
text-based message through BigString’s server, and an exact, replicated image of
the email will be instantaneously streamed to the recipient.  The
recipient never actually receives the content, but only receives images of the
content.




The user
of the BigString email service and products can transparently edit, recall,
cancel, and erase the email as well as insert or delete attachments, even after
the email has been sent out and opened.  All the subsequent changes by
the sender will be completely transparent to the recipient.  In
addition, the sender has complete control over the life and duration of the
email.  The sender can have the email self-destruct or disappear after
a defined number of views or after a certain time period.




In June
2007, BigString launched its new email service, BigString 3.0. This service
provides, at no cost to its users, advanced spam filters, virus protection and
large-storage, web-based email accounts with features similar to those offered
by AOL®,
Yahoo®,
Hotmail®,
Google®,
Verizon® and
Comcast®. In
addition to the equivalent features provided by competitors, BigString 3.0
offers erasable, recallable and self destroying applications, non-printable and
non-forwardable emails, set time or number of views (including ‘view-once’) and
masquerading to protect the sender’s privacy and security. BigString 3.0 also
allows a sender to view tracking reports that indicate when emails were opened
by the recipient, and how many times they were viewed.  Senders can
add, change and/or delete attachments before or after a recipient opened the
email.  In addition, BigString 3.0 allows senders to direct emails to
disintegrate in front of their recipient’s eyes and allows senders to create,
save and send self-destructing video email.




BigString
has continued to introduce a number of upgrades and features for our email
service while increasing penetration into global markets and expanding into
adjacent messaging markets:




·
            In
      July 2007, in response to user demand from its Version 3.0 launch,
      BigString introduced unlimited email
storage.




·
            In
      August 2007, BigString unveiled Three Layer Secure Email for sensitive
      correspondence which enables users to send encrypted, password-protected
      email with BigString’s unique auto-expiration and non-forward features.
      Also in August 2007, BigString created an email and video alliance program
      which enables users access to the hottest new videos from partners while
      providing hosted email services to
partners.




·
            In
      November 2007, BigString launched its first social networking messaging
      widget, a Facebook application that enables Facebook users to send
      messages and photos programmed to
self-destruct.




·
            In
      December 2007, BigString launched another social networking application
      for Facebook which enables Facebook users to send self-destructing
      videos.




·
            In
      January 2008, BigString launched email service for the iPhoneTM and other
      next-generation wireless devices to send self-destructing email and
      pictures. Also in January 2008, as part of our efforts to continue
      innovation of communications privacy initiatives, we released a new video
      email platform for the Chinese
market.




·
            In
      February 2008, BigString released an application that enables Facebook
      users to broadcast their original live video
  content.




·
            In
      April 2008, BigString unveiled a new, self destructing instant messaging
      technology that enables users to send instant messages that self-destruct
      after being sent.




·
            In
      May 2008, BigString entered into an international distribution agreement
      with VIP Connectz USA, Inc. (“VIP Connectz”), an international marketing
      and sales company, to offer BigString’s self-destructing email and instant
      messaging (IM) services as a private labeled solution bundled with VoIP
      service to the VIP Connectz global
network.




·
            In
      July 2008, BigString introduced a new web-based, cross-platform IM
      application that enables users to send self-destructing or regular IMs
      across AOL’s AIM, Yahoo’s Messenger, MSN’s Messenger and Google’s Gtalk.
      In July, BigString also released Spanish and Portuguese email portal with
      VIP Connectz for the Latin American markets. Additionally, in July 2008,
      BigString acquired Buddystumbler.com, an IM-based social network that
      allows users to meet people via free online chats on AOL AIM, Yahoo
      Messenger, MSN Messenger and Google
Talk.




3
 Index




·
            In
      August 2008, BigString released its self-destructing SMS text messaging
      application for BlackBerry phones.




·
            In
      January 2009, BigString released an easy-to-use universal email tracking
      service that allows users to know when their emails have been opened and
      read.




Products Offered – BigString
currently offers its consumer, business and enterprise customers the following
packages:




Email




·
            BigString
      Free Email (No Charge).




·
            BigString
      Premium Email ($29.95 per year).




·
            BigString
      Business Email ($149.95+ per year).




·
            BigString
      Mobile Email (No Charge).




Email
Hosting




·
            BigString
      Private Label Email ($5,000.00 development, $500.00 per year + revenue
      share).




·
            BigString
      Email Hosting (Enterprise level) ($11,500.00+ per
  year).




Social Network
Messaging




·
            BigString
      Exploding Messages & Pictures (No
Charge).




·
            BigString
      Exploding Video (No Charge).




Instant Messaging
(IM)




·
            BigString
      Cross-Platform, Self-Destructing IM (No
Charge).




SMS
Texting




·
            BigString
      Self-Destructing SMS Text Messaging ($29.95 per
  license).




BigString Free Email provides
all the features of BigString Version 3.0, includes unlimited GB email storage
and permits the user to send unlimited emails per month.  It is
accessed by the user through the web as web-based email, or webmail, and each
user is given one address.  Individuals can signup for multiple
“disposable” accounts.  Wizards help users import previously saved
contacts.  To personalize their email, users can create an alias,
create their own font, add signatures, add pictures to both their profile and
their contacts’ profiles, create multiple expire messages, and create custom
templates with editable fields and then access the saved templates to save time
while composing messages.




BigString Premium Email
offers all the features of the BigString Free Email account,
plus vanity domains (yourname@yourdomain.com), POP3 access using any email
client (such as Microsoft Outlook®), 30
minute video email and reduced banner advertising.




BigString Business Email
offers all the features of the BigString Premium account,
plus 10 email accounts, global filter notification and advanced email
management.  Small and medium sized businesses can customize the
number of additional addresses for an additional fee.




BigString Mobile Email
provides access to a user’s email account from the iPhoneTM and other
next-generation wireless devices.




BigString Private Label Email
offers web publishers and content sites BigString’s hosted email
platform as a value-added service for their members, and helps generate
incremental traffic, page views and ad revenue from their existing members.
The private labeled, or white labeled, solution offers a revenue share of
advertising and/or premium fees generated by BigString.




4
 Index




BigString Email Hosting
offers enterprise level firms all the features of BigString Private Label
Email, in a licensed package which can be customized to integrate with
the firms’ messaging, networking and video applications.




BigString Exploding Messages &
Pictures offers social networking members integrated self-destructing
messaging applications through their current social network.




BigString Exploding Video
offers social networking members integrated self-destructing video applications
through their current social network.




BigString Cross-Platform,
Self-Destructing IM provides users with both regular and
self-destructing, instant messaging options on a cross-platform application
across AOL’s AIM, Yahoo’s Messenger, MSN’s Messenger and Google’s
Gtalk.




BigString Self-Destructing SMS Text
Messaging provides users SMS text messages that self-destruct after a
specified time frame for use on mobile devices, such as the BlackBerry
phone.




Technical and Customer
Support – Customer support for BigString’s messaging service and products
is available in two different ways:




·
            Email
      Support.  The ability for customers to contact BigString
      support through email.




·
            Phone
      Support.  The ability for customers to contact BigString
      support via the telephone.




Historically,
the customers of BigString’s services and products have required very little
support.  BigString continuously reviews its support capabilities and
updates and enhances such capabilities to meet the needs of the users of its
products and services.  In the future, BigString may outsource the
support of its products and services to cost effective call centers or service
providers.




Also
available on the BigString website is a Frequently Asked Questions section and a
comprehensive BigString User Guide.  We believe that BigString’s
Frequently Asked Questions section and User Guide usually can resolve most of a
user’s problems.  As our business grows and we introduce new products
or enhancements to existing products, we expect our Frequently Asked Questions
section and User Guide to be updated on a continuous basis.




Interactive Entertainment
Portal – In June 2006, BigString, through its wholly-owned subsidiary,
BigString Interactive, launched a new interactive entertainment portal built
around BigString’s recallable, erasable and self-destructing email
platform.  BigString’s entertainment portal contains streaming audio
and video programming.




BigString
began its programming initiative in June 2006 with the debut of OurPrisoner,
BigString’s interactive Internet television reality program.  The
program featured a volunteer, Mr. Kieran Vogel, who allowed the Internet
audience to control every aspect of his life for six months live, on camera, 24
hours a day, seven days a week.  Most aspects of Mr. Vogel’s life in a
suburban New Jersey home were streamed in real time and
unedited.  Through BigString’s interactive media platform, viewers
voted to determine what he wore, what he ate, whom he dated, whom he talked to,
what he watched on television, what music he listened to, and much
more.  OurPrisoner concluded its six month run in December
2006.  The most popular video clips were archived on
www.OurPrisoner.com for viewing after the program ended.




In
December 2006, BigString launched a beta version of FindItAll, a video and photo
search engine which BigString had acquired in May 2006.  FindItAll, in
conjunction with the Pixsy Media Search platform, provides Internet users a
comprehensive search facility for online viral videos, television programs, news
events, movies and movie trailers, music videos and other similar
media.  FindItAll’s search function allows its users to search for
photos and videos by relevance, category, provider or freshness, with the
results provided in the form of thumbnail images.  This differs from
traditional search engines which focus entirely on relevance.  The
Pixsy Media Search platform provides FindItAll with technology that gives users
the ability to search for videos from their favorite web providers including
YouTubeTM, MetaCafe®,
Revver®,
StupidVideos.com, Addicting ClipsTM, Fandango®,
iFilm®,
Grouper®,
Reuters®,
Entertainment Weekly®,
Hollywood.com®,
MSNBC®, The New
York Times®, and
DailyLOL.




Also in
December 2006, BigString acquired DailyLOL, a viral video website that provides
humorous videos, games and pictures.  DailyLOL was launched as part of
the company’s interactive entertainment portal.




5
 Index




In June
2008, BigString sold FindItAll.com and its related assets to FindItAll, Inc., a
development stage company, and the sale of AmericanMoBlog.com and its related
assets to AmericanMoBlog, Inc., a development stage company.




In July
2008, BigString acquired Buddystumbler.com, an IM-based social network that
allows users to meet people via free online chats on AOL AIM, Yahoo Messenger,
MSN Messenger and Google Talk.




BigString
continues to apply its streaming audio and video experience and technologies
into its messaging, email and social network applications.




PeopleString - In March 2009,
BigString launched PeopleString, an incentive-based social network that pays
users to receive regular direct mail as well as for performing a host of
internet activities.  Users of PeopleString can generate income
through an opt-in direct mail program and their use of email, instant messaging,
video email and file storage. In addition, PeopleString’s technology allows
users to generate additional income by creating a personal affiliate network by
signing up friends and businesses through multiple digital bonds. The user who
creates his or her own affiliate network will generate income each time any
other user in the affiliate network generates income.  You can access
PeopleString at http://www.PeopleString.com.




Protection
of Proprietary Rights





We rely
on a combination of U.S. and foreign patent, copyright, trademark and trade
secret laws to establish and protect our proprietary rights.  In
particular, we rely upon our patent application for Universal Recallable,
Erasable, Secure and Timed Delivery Email, Serial No. 10/827,199; our patent
application for Destroyable Instant Messaging (IM), Serial No. 12/060,406; our
service mark for the word “BigString,” Serial No. 78/336,856; our service mark
for the word “Our Prisoner,” Serial No. 78/751,930; and the protection to our
proprietary information afforded by the Lanham Act of 1946, 15 U.S.C. §§
1051-1127; the Economic Espionage Act of 1996, 18 U.S.C. §1832; the Uniform
Trade Secrets Act; as well as by common-law.  If issued by the United
States Patent and Trademark Office, the patents for Universal Recallable,
Erasable and Timed Delivery Email and Destroyable Instant Messaging (IM) will
expire 20 years following the dates our patent applications were filed or on
April 18, 2024 and April 1, 2028, respectively.  Our service mark will
not expire provided that we continue to make routine filings to keep it current
with the United States Patent and Trademark Office.




Under the
U.S. patent laws, our rights to the intellectual property which is the subject
of our patent application may not be infringed upon by a third
party.  As we have applied for a patent, we may assert provisional
rights as to the intellectual property covered thereby.  BigString may
obtain a reasonable royalty from a third party that infringes on an application
claim, provided actual notice is given to the third party by BigString and a
patent issues from the application with a substantially identical
claim.




Market





We
currently market to Internet users who seek to utilize the Internet as their
source for email and messaging services.  Generally, our products and
services can be readily accessed through the Internet and thus from virtually
anywhere where the Internet is accessible.  Email users can access
BigString’s English language site, www.BigString.com, on a global basis, 24
hours a day.  As of March 25, 2009, BigString visitors accessed
www.BigString.com from 227 countries/territories, compared to 223, 190 and 60
countries/territories as of December 31, 2008, 2007 and 2006, respectively. The
top five countries by visits to www.BigString.com are as follows: United States
57%, United Kingdom 9%, Canada 5%, India 2%, and Peru 2%, followed by Mexico,
Australia, Columbia, Germany and Brazil.




Competition





We have
existing competitors for our businesses that have greater financial, personnel
and other resources, longer operating histories, more technological expertise,
more recognizable names and more established relationships in industries that we
currently serve or may serve in the future.  Increased competition,
our inability to compete successfully against current or future competitors,
pricing pressures or loss of market share could result in increased costs and
reduced operating margins, which could harm our business, operating results,
financial condition and future prospects.  Many of these firms are
well established, have reputations for success and have significantly greater
financial, marketing, distribution, personnel, and other resources than
us.  Further, we may experience price




6
 Index


competition,
and this competition may adversely affect our financial position and results of
operations or adversely affect our revenues and profitability.




The
markets for our services are highly competitive.  With limited
barriers to entry we believe the competitive landscape will continue to increase
both from new entrants to the market as well as from existing
players.  We remain focused on delivering better, more advanced and
innovative services than our competitors.




Employees





We
currently have four full-time employees, reduced from five full-time employees
as of December 2007. We believe that our relationship with our employees is
satisfactory.  We have not suffered any labor problems since our
inception.




Todd M.
Ross and Marc W. Dutton resigned from the board of directors of BigString,
effective March 12, 2009.  Darin M. Myman, Adam Kotkin and Robert
DeMeulemeester are the remaining members of the board of
directors.  At this time, the board of directors does not anticipate
filling the vacancies in the board of directors as a result of the resignations
of Mr. Ross and Mr. Dutton.




Advisory
Board





In
December 2006, BigString formed an Advisory Board to advise the company on
operational matters, the company’s marketing efforts and future business
opportunities.  There are currently two members who serve on the
Advisory Board, Sidney Braginsky, former President and Chief Operating Officer
of Olympus America Inc., Melville, New York; and J. Frederic Kerrest, former
Director Business Development & Alliances of Salesforce.com, Inc., San
Francisco, California.




Government
Regulation





We do not
currently face direct regulation by any governmental agency, other than laws and
regulations generally applicable to businesses.




Due to
the increasing popularity and use of the Internet, it is possible that a number
of laws and regulations may be adopted in the U.S. and abroad with particular
applicability to the Internet.  It is possible that governments will
enact legislation that may be applicable to us in areas including network
security, encryption, data and privacy protection, electronic authentication or
“digital” signatures, access charges and retransmission
activities.  Moreover, the applicability to the Internet of existing
laws governing issues including property ownership, content, taxation,
defamation and personal privacy is uncertain.




The
majority of laws that currently regulate the Internet were adopted before the
widespread use and commercialization of the Internet and, as a result, do not
contemplate or address the unique issues of the Internet and related
technologies.  Any export or import restrictions, new legislation or
regulation or governmental enforcement of existing regulations may limit the
growth of the Internet, increase our cost of doing business or increase our
legal exposure.  Any of these factors could have a material adverse
effect on our business, financial condition and results of
operations.




Violations
of local laws may be alleged or charged by state or foreign governments, and we
may unintentionally violate local laws.  Local laws may be modified,
or new laws enacted, in the future.  Any of these developments could
have a material adverse effect on our business, results of operations and
financial condition.






Item1A.
            Risk
      Factors




BigString
is a smaller reporting company and is therefore not required to provide this
information.






Item1B.
            Unresolved Staff
      Comments




None.


7
 Index




Item2.
            Properties




We occupy
space at 157 Broad Street, Suite 109, Red Bank, New Jersey 07701.  As
part of our efforts to reduce expenses, we did not renew the lease for
additional space which had been previously occupied by us at 3 Harding Road,
Suite E, Red Bank, New Jersey 07701. Our current Red Bank offices have
approximately 1,426 square feet of office space.  Our operating lease
for this premise expires on March 31, 2010.  The current occupancy
rate is $2,300 per month.  In addition, we also keep certain servers
off-site at a facility located in Newark, New Jersey.  While we
believe that are offices are adequate to meet our current requirements, we
continue to evaluate facility needs and requirements for the
future.






Item3.
            Legal
      Proceedings




We are
not a party to, and none of our property is the subject of, any pending legal
proceedings. To our knowledge, no governmental authority is contemplating any
such proceedings.






Item4.
            Submission of Matters
      to a Vote of Security
Holders




None.




8
 Index




PART
II




Item5.
              Market for
      Registrant’s Common Equity, Related Stockholder Matters and Small Business
      Issuer Purchases of Equity
Securities




Market
Information




Our
common stock commenced quotation on the NASDAQ OTC Bulletin Board under the
trading symbol “BSGC” on May 2, 2006.  The following table sets forth,
for the periods indicated, the high and low sales prices for our common stock as
reported on the NASDAQ OTC Bulletin Board.  This information reflects
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.




Year
      Ended December 31, 2008
                  
                  High
                  
                  
                  LowFirst
      Quarter
                  
                  $
                  0.27
                  
                  
                  $
                  0.16Second
      Quarter
                  
                  $
                  0.21
                  
                  
                  $
                  0.11Third
      Quarter
                  
                  $
                  0.18
                  
                  
                  $
                  0.03Fourth
      Quarter
                  
                  $
                  0.07
                  
                  
                  $
                  0.02Year
      Ended December 31, 2007First
      Quarter
                  
                  $
                  0.75
                  
                  
                  $
                  0.25Second
      Quarter
                  
                  $
                  0.43
                  
                  
                  $
                  0.26Third
      Quarter
                  
                  $
                  0.27
                  
                  
                  $
                  0.13Fourth
      Quarter
                  
                  $
                  0.32
                  
                  
                  $
                  0.06







The
NASDAQ OTC Bulletin Board is generally considered to be a less active and
efficient market than the NASDAQ Global Market, the NASDAQ Capital Market or any
national exchange and will not provide investors with the liquidity that the
NASDAQ Global Market, the NASDAQ Capital Market or a national exchange would
offer.  As of March 25, 2009, we had over fifteen market makers for
our common stock, including:  Archipelago Trading Services, Inc.,
Automated Trading Desk Financial Services, LLC, D. Weckstein & Co., Inc.,
Domestic Securities, Inc., Finance 500, Inc., Hudson Securities, Inc., Knight
Equity Markets, L.P., LaBranche Financial Services, Inc., Murphy & Durieu,
Natexis Bleichroeder Inc., Pershing LLC, The Vertical Trading Group, LLC, UBS
Securities LLC, Vandham Securities Corp. and Vfinance Investments,
Inc.




As of
March 27, 2009, the approximate number of registered holders of our common stock
was 60, and BigString is aware that the number of non-objecting beneficial
owners of our common stock is approximately 1,400.  As of March 27,
2009, the number of outstanding shares of our common stock was 52,244,394; the
number of outstanding shares of our Series A Preferred Stock was 400,000
(currently convertible into 4,673,989 shares of our common stock); and there
were 10,393,545 shares of common stock subject to outstanding warrants, and
9,550,100 shares of common stock subject to outstanding stock
options.




Dividends




It is
anticipated that cash dividends will not be declared on BigString’s common stock
in the foreseeable future.  Our dividend policy is subject to the
discretion of our board of directors and depends upon a number of factors,
including operating results, financial condition and general business
conditions.  Holders of common stock are entitled to receive dividends
as, if and when declared by our board of directors out of funds legally
available therefor.  We may pay cash dividends if net income available
to stockholders fully funds the proposed dividends, and the expected rate of
earnings retention is consistent with capital needs, asset quality and overall
financial condition.




9
 Index





Details
of Issuance of Shares of Our Common Stock in Connection With Exercise of
Warrants




On
January 3, 2008, BigString issued 213,333 shares of its common stock upon the
exercise of warrants by GEM Funding LLC for $21,333. The exercise price was
$0.10 per share. In connection with the issuance of the common stock, BigString
relied on an exemption from registration for a private transaction not involving
a public distribution provided by Section 4(2) of the Securities
Act.




Details
of Issuance of Shares of Our Common Stock in Connection With Conversion of
Notes




On
February 8, 2008, BigString issued 111,111 shares of its common stock upon the
conversion of convertible promissory notes totaling $20,000 by Penn Footwear.
The conversion price was $0.18 per share. In connection with the issuance of the
common stock, BigString relied on an exemption from registration for a private
transaction not involving a public distribution provided by Section 4(2) of the
Securities Act.




Details
of Issuance of Convertible Notes and Grant of Warrants to
Subscribers




On
February 29, 2008, BigString entered into a subscription arrangement with
Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Small Cap
Opportunities LP (collectively, the “2008 Subscribers”), Pursuant to which the
2008 Subscribers purchased convertible notes in the aggregate principal amount
of $700,000, which notes are convertible into shares of BigString’s common
stock, and warrants to purchase up to 2,333,333 shares of BigString’s common
stock.  Each convertible note has a term of three years and accrues
interest at a rate of six percent annually.  The holder of a
convertible note has the right from and after the issuance thereof until such
time as the convertible note is fully paid, to convert any outstanding and
unpaid principal portion thereof into shares of common stock at a conversion
price of $0.15 per share, as adjusted.  The conversion price and
number and kind of shares to be issued upon conversion of the convertible note
are subject to adjustment from time to time. Each warrant has an exercise price
of $0.15 per share of common stock, as adjusted.   The number of
shares of common stock underlying each warrant and the exercise price are
subject to certain adjustments.




BigString
also issued to a warrant to purchase an aggregate 373,333 shares of common stock
to the finder in the offering of the convertible notes.  This warrant
is similar to and carries the same rights as the warrants issued to the 2008
Subscribers.




In
connection with the issuance of the convertible notes and warrants to purchase
common stock, BigString relied on an exemption from registration for a private
transaction not involving a public distribution provided by Section 4(2) of the
Securities Act.




Details
of Issuance of Shares of Our Common Stock in Connection With Accrued
Interest




On May 1,
2008, BigString issued 291,713 shares of its common stock for accrued interest
on convertible promissory notes totaling $43,757. BigString issued 100,000,
28,893, 50,000, 12,820 and 100,000 shares of BigString’s common stock to Alpha
Capital Anstalt, Chestnut Ridge Partners LP, Iroquois Master Fund Ltd., Penn
Footwear and Whalehaven Capital Fund Limited, respectively. The interest
conversion price was $0.15 per share. In connection with the issuance of the
common stock, BigString relied on an exemption from registration for a private
transaction not involving a public distribution provided by Section 4(2) of the
Securities Act.




Details
of Issuance of Shares of Our Common Stock in Connection With an
Acquisition




On July
9, 2008, BigString issued 900,000 shares of common stock for the acquisition of
certain assets. The market value of BigString’s common stock at July 9, 2008 was
$0.13 per share.  In connection with the issuance of the common stock,
BigString relied on an exemption from registration for a private transaction not
involving a public distribution provided by Section 4(2) of the Securities
Act.




Details
of Issuance of Convertible Notes and Grant of Warrants




On August
25, 2008, BigString closed on a financing with Dwight Lane Capital, LLC, a
limited liability company in which Todd M. Ross, a former director of BigString,
has an interest, and Marc W. Dutton, a former director of
BigString.  In connection with such financing, BigString issued
non-negotiable convertible promissory


10
 Index


notes
(the “Notes”) in the aggregate principal amount of $250,000, which Notes are
convertible under certain circumstances into shares of BigString’s common
stock.  BigString also issued common stock purchase
warrants  to purchase up to an aggregate 800,000 shares of common
stock.   Each Note has a term of five months from the date of
issuance and accrued interest at a rate of 12% annually.  The
aggregate principal amount of the Notes and accrued interest thereon were to be
paid in-full at maturity, unless sooner paid by
BigString.    All amounts due under the Notes were paid by
BigString in December 2008, including accrued interest of $9,328, and, as a
result, the Notes were cancelled.





Each
warrant has a term of ten years from the date of issuance and was fully vested
on such date.  The warrants are exercisable at $0.08 per share of
common stock underlying such Warrants.  The number of shares of Common
Stock underlying each Warrant and the exercise price are subject to certain
customary adjustments as described therein.




In
connection with the issuance of the convertible notes and warrants to purchase
common stock, BigString relied on an exemption from registration for a private
transaction not involving a public distribution provided by Section 4(2) of the
Securities Act.






Item6.
              Selected Financial
      Data




BigString
is a smaller reporting company and is therefore not required to provide this
information.






Item7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation




The
following discussion and analysis is intended to provide information about
BigString’s financial condition and results of operations for the years ended
December 31, 2008 and 2007.  This information should be read in
conjunction with BigString’s audited consolidated financial statements for the
years ended December 31, 2008 and 2007, and the period October 8, 2003 (Date of
Formation) through December 31, 2008, including the related notes thereto, which
begin on page F-2 of this report.




Background





BigString
was incorporated in the State of Delaware on October 8, 2003 under the name
“Recall Mail Corporation.”  The company’s name was formally changed to
BigString Corporation in July 2005.  BigString was formed, together
with Email Emissary, incorporated in the State of Oklahoma on August 7, 2003, to
develop technology that would allow the user of email services to have
comprehensive control, security and privacy relating to the email generated by
the user.  Email Emissary was later acquired by BigString in July
2004.  In September 2006, all of Email Emissary’s assets, including
its pending patent application, were transferred to BigString. Email Emissary
was dissolved on May 17, 2007. BigString Interactive, incorporated in the State
of New Jersey on January 20, 2006, and PeopleString, incorporated in the State
of Delaware on January 2, 2009, are wholly-owned subsidiaries of
BigString.




Development
Stage Company





BigString
is considered a development stage enterprise as defined in the Financial
Accounting Standards Board (the “FASB”) Statement No. 7, “Accounting and
Reporting for Development Stage Companies.”  BigString has limited
revenue to date, continues to raise capital and there is no assurance that
ultimately BigString will achieve a profitable level of operations.




Overview





BigString
is a technology firm with a global client base, focused on providing a superior
online communications experience for its users. BigString’s goal is to make
Internet communication more efficient, reliable and valuable, while protecting
individual privacy and intellectual property.  Our innovations in
recallable, erasable




11
 Index


email
provide a new level of privacy and security for those who wish to protect their
proprietary information and manage their digital rights.




We serve
four main email markets: free and premium fee email accounts for individuals;
professional business email solutions; email marketing services; and email
hosting, private label, and co-branded solutions for web publishers and content
sites, such as search engines, social networks, online dating sites, ISPs and
social media portals.  A few of the key features of our email services
include:




·
            Self-destructing
      video email that can be programmed to self-destruct after a specific
      number of viewings or a set time;




·
            New
      tracking tools to enable the sender to know when and how many times their
      email has been opened and if it has been
  forwarded;




·
            File
      storage center that allows users to store up to two GB of files on our
      servers;




·
            Unlimited
      email storage; and




·
            Three
      Layer Secure Email for sensitive correspondence that enables users to send
      encrypted, password-protected email with BigString’s unique
      auto-expiration and non-forward
features.




We
continue to build messaging and streaming audio and video products and services
focused on security and privacy for Internet communications. In 2007, we
released our first social networking applications which address the need for
protecting privacy on social network sites, such as Facebook®,
MySpace®,
Friendster® and
LinkedIn®. These
applications allow users to easily send and receive messages, notifications,
email and videos that self-destruct on command.




Our
development efforts in 2008 were primarily focused on expanding recallable
messaging beyond email. In April, 2008, we introduced a self-destructing IM
technology, and in July, 2008, expanded the platform to include other leading IM
services, including AOL’s AIM, Yahoo’s Messenger, MSN’s Messenger and Google’s
Gtalk. In August, 2008, we introduced self-destructing SMS Text Messaging with
service for the BlackBerry phone market.




In May,
2008, we entered into an international distribution agreement with VIP Connectz
to offer our email and IM services as a private label service to the VIP
Connectz network of members. In July, 2008, we augmented our base English and
Chinese language services with Spanish and Portuguese language
portals.  And also in July, 2008, we acquired Buddystumbler.com, an
IM-based social network that allows members to meet people via free online chat
on AOL’s AIM, Yahoo’s Messenger, MSN’s Messenger and Google’s
Gtalk.




In
January 2009, we released an easy-to-use universal email tracking service that
allows users to know when their emails have been opened and read.




In March
2009, through our wholly-owned subsidiary, PeopleString, we launched an
incentive-based social network that pays users to receive direct mail and
perform a host of internet activities.




In order
for us to grow our business and increase our revenue, it is critical for us to
attract and retain new customers.  For us to increase our revenue, we
need to establish a large customer base.  A large customer base of our
free email services provides us with more opportunities to sell our premium
services, which could result in increased revenue.  In addition, a
large customer base may allow us to increase our advertising rates and attract
other Internet based advertising and marketing firms to advertise and form
marketing affiliations with us, which could result in increased advertising and
product fee revenues.




Our
marketing efforts in 2008 focused on increasing brand awareness and consumer
adoption of our email product. Our promotions included email tag lines, organic
search, paid search, banners, blogs, social networks, video and other viral
tactics, multimedia, print, and radio. Our email hosting, private label, and
co-branded solutions were developed for web publishers and content sites that
are responsible for marketing to their many existing and new members. We
regularly measure and optimize the cost and effectiveness of promotions,
advertising and cost per customer acquisition.




While
slightly over 85% of our members arrived through viral marketing efforts, our
marketing promotions and product packages helped us attract visitors from over
200 countries and territories. Notwithstanding our progress in acquiring new
members, we significantly reduced our marketing efforts from our marketing plan
due to financial constraints. We also reduced expenses in other areas, such as
rent and headcount, to better position the company financially.




12
 Index




Certain
criteria we review to measure our performance are set forth below:




·
            the
      number of first time and repeat users of our email
    services;




·
            the
      number of pages of our website viewed by a
user;




·
            the
      number of free and/or paid accounts for each
  service;




·
            the
      number of users of our free email services who purchase one of our premium
      product packages;




·
            the
      length of time between the activation of a free account and the conversion
      to a paid account;




·
            the
      retention rate of customers, including the number of account closures and
      the number of refund requests;




·
            the
      acquisition cost per user for each of our email
  services;




·
            the
      cost and effectiveness for each of our promotional
  efforts;




·
            the
      revenue and effectiveness of advertisements we serve;
  and




·
            the
      revenue, impressions, clicks and actions per
  user.




Critical
Accounting Policies





Our
discussion and analysis of our financial condition and results of operations are
based upon BigString’s consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America.  The preparation of these consolidated
financial statements requires BigString to make estimates and judgments that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period.  On an on-going basis, BigString evaluates its
estimates, including those related to intangible assets, income taxes and
contingencies and litigation.  BigString bases its estimates on
historical expenses and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources.  Actual results may differ from
these estimates under different assumptions or conditions.




BigString
believes the following critical accounting policies affect its more significant
judgments and estimates used in the preparation of its consolidated financial
statements.




Revenue
Recognition.  BigString derives revenue from online services,
electronic commerce, advertising and data network services.  BigString
also derives revenue from marketing affiliations.  BigString
recognizes revenue in accordance with the guidance contained in the SEC Staff
Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition in Financial
Statements.”




Consistent
with the provisions of the FASB Emerging Issues Task Force (“EITF”) Issue No.
99-19, “Reporting Revenue Gross As A Principal Versus Net As An Agent,”
BigString generally recognizes revenue associated with its advertising and
marketing affiliation programs on a gross basis due primarily to the following
factors:  BigString is the primary obligor; has general inventory
risk; has latitude in establishing prices; has discretion in supplier selection;
performs part of the service; and determines specifications.  In
connection with contracts to provide email services to marketing affiliates,
BigString may be obligated to make payments, which may represent a portion of
revenue, to its marketing affiliates.




Consistent
with EITF Issue No. 01-9, “Accounting for Considerations Given by a Vendor to a
Customer (Including the Reseller of the Vendor’s Product),” BigString accounts
for cash considerations given to customers, for which it does not receive a
separately identifiable benefit or cannot reasonable estimate fair value, as a
reduction of revenue rather than an expense.  Accordingly,
corresponding distributions to active users and distributions of referral fees
are recorded as a reduction of gross revenue.




BigString
records its allowance for doubtful accounts based upon an assessment of various
factors, including historical experience, age of the accounts receivable
balances, the credit quality of customers, current economic conditions and other
factors that may affect customers’ ability to pay.




Stock-Based
Compensation.    Effective January 1, 2006, BigString
accounts for stock-based compensation under Statement of Financial Accounting
Standards (“SFAS”) No. 123(R), “Share-Based Payment.”  BigString
adopted SFAS No. 123(R) using the modified prospective method.  Under
this method, SFAS No. 123(R) applies to new awards and to awards modified,
repurchased, or cancelled after the required effective date of SFAS No.
123(R).




13
 Index


Additionally,
compensation costs for the portion of the awards outstanding as of the required
effective date of SFAS No. 123(R), for which the requisite service has not been
rendered, are being recognized as the requisite service is rendered after the
required effective date of SFAS No. 123(R).  The compensation cost for
the portion of awards is based on the grant-date fair value of those awards as
calculated for either recognition or pro forma disclosures under SFAS No. 123,
“Accounting for Stock Based Compensation.”  Changes to the grant-date
fair value of equity awards granted before the required effective date of SFAS
No. 123(R) are precluded.  The compensation cost for those earlier
awards is attributed to periods beginning on or after the required effective
date of SFAS No. 123(R) using the attribution method that was used under SFAS
No. 123, except that the method of recognizing forfeitures only as they occur
was not continued.




BigString
has one stock-based compensation plan under which incentive and nonqualified
stock options or rights to purchase stock may be granted to employees, directors
and other eligible participants. BigString issues shares of its common stock,
warrants to purchase common stock and non-qualified stock options to
non-employees as stock-based compensation.  BigString accounts for the
services using the fair market value of the consideration issued.




Research and
Development.  BigString accounts for research and development
costs in accordance with accounting pronouncements, including SFAS No. 2
“Accounting for Research and Development Costs,” and SFAS No. 86, “Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed.”  BigString has determined that technological feasibility
for its software products is reached shortly before the products are
released.  Research and development costs incurred between the
establishment of technological feasibility and product release have not been
material and have accordingly been expensed when incurred.




Evaluation of Long-Lived
Assets.  BigString reviews property and equipment and
finite-lived intangible assets for impairment whenever events or changes in
circumstances indicate the carrying value may not be recoverable.  In
accordance with the guidance provided in SFAS No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets,” if the carrying value of the
long-lived asset exceeds the estimated future undiscounted cash flows to be
generated by such asset, the asset would be adjusted to its fair value and an
impairment loss would be charged to operations in the period identified. Should
the impairment loss be significant, the charge to operations could have a
material adverse effect on BigString’s results of operations and financial
condition.




Intangibles.  SFAS
No. 142, “Goodwill and other Intangible Assets” specifies the financial
accounting and reporting for acquired goodwill and other indefinite life
intangible assets. Goodwill and other indefinite-lived intangible assets are no
longer amortized, but are reviewed for impairment at least
annually.  The valuation of intangible assets has been determined by
management after considering a number of factors.




Accounting for
Derivatives.  BigString evaluates its options, warrants or
other contracts to determine if those contracts or embedded components of those
contracts qualify as derivatives to be separately accounted for under SFAS No.
133, “Accounting for Derivative Instruments and Hedging Activities” and related
interpretations including EITF 00-19, “Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock.”




Results
of Operations




For
the Years Ended December 31, 2008 and 2007




Net Loss.  For the
year ended December 31, 2008, net loss was $3,748,946, as compared to a net loss
of $3,949,184 for the year ended December 31, 2007. The $200,238 decrease in net
loss was primarily attributable to an increase in revenues of $20,030, a
decrease in Other expense of $176,702 related to reduced financing fees, and an
increase in Income tax benefit of $169,283. These revenue gains and expense
reductions were partially offset by a net increase in operating expenses of
$165,777 primarily due to an increase in impairment charges to intangible
assets.




Revenues.  For the
year ended December 31, 2008, revenues were $61,195, a $20,030 increase over
revenues of $41,165 earned in the year ended December 31, 2007.  Of
the revenues generated for the year ended December 31, 2008, $42,331 was
generated from product and service fees and $18,864 was generated from
advertisers, as compared to $23,814 from product and service fees and $17,351
from advertisers for the year ended December 31, 2007.




14
 Index




The 49%
increase in net revenues for the year ended December 31, 2008 over the same
prior year period was primarily due to increase product and service fees of 78%.
This increase was primarily due to the adoption of BigString’s private label
email services by other firms and the introduction of new fee based services,
such as SMS text services. These increases were partially offset by a 26%
decrease in premium upgrades and business solutions, and the decision to stop
development and sales on email marketing solutions. As of December 31, 2008,
unearned revenue from product fees decreased to $7,104 from $9,288 at December
31, 2007.




Advertising
revenues are paid based on a mix of impressions, clicks and
actions.  Despite industry wide rate decreases for online publishers,
BigString increased advertising revenues by 9% for the year ended December 31,
2008 over the same prior year period primarily through an advertising
optimization program which was implemented in July 2008 and increased
advertising impressions and rates.




Operating
Expenses.  For the year ended December 31, 2008, operating
expenses were $3,776,050, a $165,777 increase over operating expenses of
$3,610,273 incurred in the year ended December 31, 2007. Operating expenses,
excluding amortization, depreciation, impairment and share-based compensation
expenses, for the year ended December 31, 2008, were $1,412,078, a $25,298
increase from the same prior year period.




·
            Cost
      of revenues: Cost of revenues for the year ended December 31, 2008 were
      $89,387, as compared to $119,772 for the prior year.  The
      $30,385 decrease in cost was primarily attributable to reduced staffing
      and associated overhead expenses.




·
            Research
      and development: Research and development expenses for the year ended
      December 31, 2008 were $486,066, as compared to $485,948 for the same
      prior year period.  The $118 increase in expenses was consistent
      with prior year period expenses.




·
            Sales
      and marketing: Sales and marketing expenses for the year ended December
      31, 2008 were $178,667, as compared to $390,347 for the prior
      year.  The $211,680 decrease in expenses was primarily
      attributable to reduced online marketing expenses of $203,609 and reduced
      advertising expenses of $53,797, partially offset by increased public
      relations expenses of $112,407.




·
            General
      and administrative: General and administrative expenses for the year ended
      December 31, 2008 were $1,423,984, as compared to $1,115,701 for the prior
      year.  The $308,283 increase in expenses was primarily
      attributable to increased stock-based compensation expense recorded net of
      estimated forfeitures.




·
            Amortization:
      Amortization expenses for the year ended December 31, 2008, were $970,362,
      as compared to $1,083,213 for the prior year.  The $112,851
      decrease in expenses was primarily attributable to the 2007 impairment of
      the web sites FindItAll, AmericanMoBlog and
  DailyLOL.




·
            Impairment
      of assets: Impairment expenses of intangible assets for the year ended
      December 31, 2008 were $627,584, as compared to $415,292 for the prior
      year.  The $212,292 increase in expenses was primarily
      attributable to increased impairment expenses. Continuing losses
      associated with the intangible assets indicated that impairment may exist.
      The recoverability test for the patent application and trademark assets
      indicated impairment as the weighted future net cash flows were less than
      the carrying value. The fair market value, based on weighted, discounted
      cash flows and disposition values, was not material, and an impairment
      loss of $520,334 for the carrying amount was recognized in 2008. In
      addition, in 2008, the recoverability test for the logos, websites and
      source codes, which primarily include the website BuddyStumbler, indicated
      impairment. The fair market value, based on weighted, discounted cash
      flows and disposition values, was not material, and an impairment loss of
      $107,250 for the carrying amount was
recognized.




Other income
(expense).  For the year ended December 31, 2008, other
expenses were $462,228, a $176,702 decrease over other expenses of $638,930
incurred in the year ended December 31, 2007.




·
            Interest
      income: Interest income for the year ended December 31, 2008 was $4,266,
      as compared to $14,409 for the prior year. The $10,143 decrease in income
      was primarily due to a decrease in cash balances and interest
      rates.




·
            Interest
      expense: Interest expense for the year ended December 31, 2008 was
      $81,951, as compared to $31,134 for the prior year. The $50,817 increase
      in expense was primarily due to the full year of interest expense on the
      convertible promissory notes issued in 2007 and interest expense on the
      convertible promissory notes issued in
2008.




15
 Index




·
            Other,
      net: Other, net expenses related to the convertible debenture and warrant
      financing for the year ended December 31, 2008 were $384,543, as compared
      to $622,205 for the prior year. The $237,662 decrease was primarily due to
      the reduction of financing fees of $269,094, and the reduction of the
      amortization of beneficial conversion features of $8,115. These reductions
      were partially offset by increases to the amortization of the debt issue
      costs of $21,268 and amortization of the promissory note discount of
      $18,279. Amortization is accelerated for the proportion of promissory
      notes which are converted in a
period.




Income Taxes.  For
the year ended December 31, 2008, net income tax benefits were $428,137, as
compared to $258,854 for the year ended December 31, 2007.




·
            BigString
      participated in the State of New Jersey’s Corporation Business Tax Benefit
      Certificate Transfer program (the “Program”), which allows certain high
      technology and biotechnology companies to sell unused NOL carryforwards to
      other New Jersey corporation business taxpayers. The Program requires that
      the purchaser pay at least 75% of the amount of the surrendered tax
      benefit. For the year ended December 31, 2008, BigString recorded a net
      state tax benefit of $428,137 as a result of its sale of $5,007,781 of New
      Jersey state net operating losses and $31,780 of New Jersey state research
      and development credits. Gross sales proceeds were $482,480. For the year
      ended December 31, 2007, BigString recorded a net state tax benefit of
      $258,854 as a result of its sale of $2,442,561 of New Jersey state net
      operating losses and $74,359 of New Jersey state research and development
      credits. Gross sales proceeds were $294,189. BigString may be able to
      transfer its unused New Jersey net operating losses in future
      years.




·
            Valuation
      allowances for the years ending December 31, 2008 and 2007, have been
      applied to offset the deferred tax assets in recognition of the
      uncertainty that such tax benefits will be realized as BigString continues
      to incur losses. At December 31, 2008, BigString has available net
      operating loss carry forwards of approximately $12.6 million for federal
      income tax reporting purposes and $5.0 million for state income tax
      reporting purposes which expire in various years through 2028. The
      differences between book income and tax income primarily relates to
      amortization of intangible assets and other
      expenditures.  Pursuant to Section 382 of the Internal
      Revenue Code of 1986, as amended, the annual utilization of a company’s
      net operating loss and research credit carry forwards may be limited, and,
      as such, BigString may be restricted in using its net operating loss and
      research credit carry forwards to offset future federal income tax
      expense.




For
the Years Ended December 31, 2007 and 2006





Net Loss.  For the
year ended December 31, 2007, net loss was $3,949,184, as compared to a net loss
of $3,114,225 for the year ended December 31, 2006. The $834,959 increase in net
loss was primarily attributable to an impairment charge to intangible assets of
$415,292 relating to the acquired web sites AmericanMoBlog, FindItAll and
DailyLOL; a decrease in other income (expense) of $536,280 primarily related to
our convertible debt and warrant financing; and a net increase in other expenses
of $169,120. These expenses were partially offset by an income tax benefit of
$258,854 and increase in revenues of $26,879.




Revenues.  For the
year ended December 31, 2007, revenues were $41,165, a $26,879 increase over
revenues of $14,286 earned in the year ended December 31, 2006.  Of
the revenues generated for the year ended December 31, 2007, $23,814 was
generated from product and service fees and $17,351 was generated from
advertisers, as compared to $7,599 from product and service fees and $6,687 from
advertisers for the year ended December 31, 2006.




During
the year ended December 31, 2007, BigString offered three products for purchase:
premium upgrades for individual accounts; professional business email solutions;
and email marketing services. Pre-paid purchases are deferred and recognized as
revenues as the services are performed. The increase in product and service fees
was primarily due to increased business solutions. As of December 31, 2007,
unearned revenue from product fees increased to $9,288 from $4,681 at December
31, 2006.




Advertising
revenues are paid based on a mix of impressions, clicks and
actions.  On a normalized impression basis, the average revenue per
paid-impression for the year ended December 31, 2007 increased by 64% over our
baseline of January 2007.




16
 Index




Operating
Expenses.  For the year ended December 31, 2007, operating
expenses were $3,610,273, a $584,412 increase over operating expenses of
$3,025,861 incurred in the year ended December 31, 2006. Operating expenses,
excluding amortization, depreciation, impairment and share-based compensation
expenses, for the year ended December 31, 2007 were $1,386,780, a $213,631
decrease from the same prior year period.




·
            Cost
      of revenues: Cost of revenues for the year ended December 31, 2007 were
      $119,772, as compared to $218,557 for the prior year.  The
      $98,785 decrease in cost was primarily attributable to reduced staffing
      and associated overhead expenses.




·
            Research
      and development: Research and development expenses for the year ended
      December 31, 2007 were $485,948, as compared to $572,206 for the prior
      year.  The $86,258 decrease in expenses was primarily
      attributable to reduced development staffing and associated overhead
      costs.




·
            Sales
      and marketing: Sales and marketing expenses for the year ended December
      31, 2007 were $390,347, as compared to $219,304 for the prior
      year.  The $171,043 increase in expenses was primarily
      attributable to increased online marketing expenses of $203,282 and
      increased advertising expenses of $48,937, partially offset by reduced
      public relations expenses of
$48,391.




·
            General
      and administrative: General and administrative expenses for the year ended
      December 31, 2007 were $1,115,701, as compared to $979,459 for the same
      prior year period.  The $136,242 increase in expenses was
      primarily attributable to increased investor relations and full-year
      amortization of stock-based business consulting
  fees.




·
            Amortization:
      Amortization expenses for the year ended December 31, 2007 were
      $1,083,213, as compared to $1,036,335 for the prior year.  The
      $46,878 increase in expenses was primarily attributable to the full-year
      amortization of intangible assets related to the 2006 website acquisitions
      of FindItAll, AmericanMoBlog and
DailyLOL.




·
            Impairment
      of assets: Impairment expenses of intangible assets for the year ended
      December 31, 2007 were $415,292. Continuing losses associated with the
      intangible assets indicated that impairment may exist. The recoverability
      test for the patent application and trademark assets indicated that the
      assets were not impaired; in addition, evaluations of fair market value
      and weighted, discounted cash flows were greater than the carrying value.
      The second group of assets included logos, websites and source codes for
      the web sites FindItAll, AmericanMoBlog and DailyLOL that were acquired in
      2006. The recoverability test for these assets indicated impairment as the
      weighted future net cash flows were less than the carrying value. The fair
      market value, based on weighted, discounted cash flows and disposition
      values, was not material, and an impairment loss of $415,292 for the
      carrying amount was recognized in
2007.




Other income
(expense).  For the year ended December 31, 2007, other
expenses were $638,930, a $536,280 increase over other expenses of $102,650
incurred in the year ended December 31, 2006.




·
            Interest
      income: Interest income for the year ended December 31, 2007 was $14,409,
      as compared to $37,350 for the prior year. The $22,941 decrease in income
      was primarily due to a reduction in cash
  balances.




·
            Interest
      expense: Interest expense for the year ended December 31, 2007 was
      $31,134, as compared to $0 for the same prior year period. The expense is
      the accrued interest on convertible promissory
  notes.




·
            Other,
      net: Other, net expenses for the year ended December 31, 2007, were
      $622,205, as compared to $140,000 for the same prior year period. The
      $482,205 increase in expenses was primarily due to the convertible
      debenture and warrant financing, including increased other financing fees
      of $129,094, amortization of debt issue costs of $92,839, amortization of
      promissory note discount of $11,664 and amortization of beneficial
      conversion features of $248,608. For the year ending December 31, 2007,
      debt issue costs were $248,939, and are being amortized over the term of
      the notes, which is three years. Amortization is accelerated for the
      proportion of promissory notes which are converted in a period. Other
      financing expenses include $250,000 of stock-based other non-cash
      compensation for the fair market value of common stock issued for a waiver
      and release related to the debt
financing.




Income Taxes.  For
the year ended December 31, 2007, net income tax benefits were $258,854, as
compared to $0 for the year ended December 31, 2006.




17
 Index




·
            BigString
      participated in the State of New Jersey’s Program, which allows certain
      high technology and biotechnology companies to sell unused NOL
      carryforwards to other New Jersey corporation business taxpayers. The
      Program requires that the purchaser pay at least 75% of the amount of the
      surrendered tax benefit. For the year ended December 31, 2007, BigString
      recorded a net state tax benefit of $258,854 as a result of its sale of
      $2,442,561 of New Jersey state net operating losses and $74,359 of New
      Jersey state research and development credits. Gross sales proceeds were
      $294,189. Since New Jersey law provides that net operating losses can be
      carried over for up to seven years, BigString may be able to transfer its
      unused New Jersey net operating losses in future years. Valuation
      allowances for the years ending December 31, 2007 and 2006, have been
      applied to offset the deferred tax assets in recognition of the
      uncertainty that such tax benefits will be realized as BigString continues
      to incur losses.




·
            At
      December 31, 2007, BigString has available net operating loss carry
      forwards of approximately $8.2 million for federal income tax reporting
      purposes and $5.7 million for state income tax reporting purposes which
      expire in various years through 2027. The differences between book income
      and tax income primarily relates to amortization of intangible assets and
      other expenditures.  Pursuant to Section 382 of the
      Internal Revenue Code of 1986, as amended, the annual utilization of a
      company’s net operating loss and research credit carry forwards may be
      limited, and, as such, BigString may be restricted in using its net
      operating loss and research credit carry forwards to offset future federal
      income tax expense.




Liquidity
and Capital Resources





Our
operating and capital requirements have exceeded our cash flow from operations
as we have been building our business.  Since inception through
December 31, 2008, we have expended $5,012,746 for operating and investing
activities, which has been primarily funded by investments of $5,191,533 from
our stockholders and convertible note holders.  For the year ended
December 31, 2008, we expended $840,579 for operating and investing activities,
a decrease of $344,712 from the amount expended during the year ended December
31, 2007.




Our cash
balance as of December 31, 2008 was $178,787, which was a decrease of $119,246
from our cash balance of $298,033 as of December 31, 2007. This decrease to our
cash balance related to operating and investment expenses primarily associated
with the development of our products and services, marketing, and professional
fees.  These cash outlays were partially offset by $721,333 raised by
BigString through exercise of warrants and private placement of convertible
notes and warrants.




Management
believes its current cash balance of $35,736 at March 26, 2009 is not sufficient
to fund the minimum level of operations for the next twelve months.




Our
consolidated financial statements beginning on page F-2 have been prepared
assuming we will continue as a going concern.  As more fully explained
in Note 2 to our consolidated financial statements, we have a working capital
deficit and have incurred losses since operations commenced.  Our
continued existence is dependent upon our ability to obtain needed working
capital through additional equity and/or debt financing and revenue to cover
expenses as we continue to incur losses.  These uncertainties raise
substantial doubt about our ability to continue as a going
concern.  Our consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties should we
be unable to continue as a going concern.




On
February 29, 2008, we entered into a financing arrangement with Whalehaven
Capital Fund Limited, Alpha Capital Anstalt and Excalibur Small Cap
Opportunities LP, (collectively, the “2008 Subscribers”), pursuant to which the
2008 Subscribers purchased convertible notes in the aggregate principal amount
of $700,000, which notes are convertible into shares of BigString’s common
stock, and warrants to purchase up to 2,333,333 shares of BigString's common
stock. Each convertible note has a term of three years and accrues interest at a
rate of six percent annually.  The holder of a convertible note shall
have the right from and after the issuance thereof until such time as the
convertible note is fully paid, to convert any outstanding and unpaid principal
portion thereof into shares of common stock at a conversion price of $0.15 per
share, as adjusted.  The conversion price and number and kind of
shares to be issued upon conversion of the convertible note are subject to
adjustment from time to time. The warrants have an exercise price of $0.15 per
share, as adjusted.  The number of shares of common stock underlying
each warrant and the exercise price are subject to certain
adjustments.




On August
25, 2008, BigString closed on a financing with Dwight Lane Capital, LLC, a
limited liability company in which Todd M. Ross, a former director of BigString,
has an interest, and Marc W. Dutton, a former




18
 Index


director
of BigString. In connection with such financing, BigString issued Notes in the
aggregate principal amount of $250,000 and common stock purchase warrants to
purchase up to an aggregate 800,000 shares of BigString's common stock. Each
Note had a term of five months and accrued interest at a rate of 12% annually.
The warrants have an exercise price of $0.08 per share. In December 2008, the
all amounts due under the Notes were paid by BigString, including accrued
interest of $9,328, and, as a result, the Notes were cancelled.




As
described herein, BigString participated in the State of New Jersey’s Program,
which allows certain high technology and biotechnology companies to sell unused
NOL carryforwards to other New Jersey corporation business
taxpayers.  On December 19, 2007 and December 16, 2008, BigString
received net proceeds of $258,854 and $428,137, respectively. BigString may also
be able to transfer its unused New Jersey net operating losses in future years
and plans to again participate in 2009.




If the
revenue from our operations are not adequate to allow us to pay the principal
and interest on the outstanding convertible notes, and the convertible notes are
not converted into shares of common stock, we will seek additional equity
financing and/or debt financing.  It is also possible that we will
seek to borrow money from traditional lending institutions, such as
banks.




We have
completed significant development of our email and messaging services and have
made adjustments to our cost structure, such as the elimination of expenses
associated with the production of OurPrisoner and the reduction of a portion of
compensation costs associated with development.  We have also reduced
general expenses such as rent and other discretionary expenses. We also reduced
our operating and investing cash expenditures by $344,712, or 29%, for the year
ended December 31, 2008 as compared to the prior year.




We expect
to continue development on our messaging, email and related service offerings.
We expect to continue development on our social network platform. We also expect
sales, marketing and advertising expenses and cost of revenues to increase as we
promote and grow our products and services.  However, if our revenue
and cash balance are insufficient to fund the continued growth of our business,
we will seek additional funds.  There can be no assurance that such
funds will be available to us or that adequate funds for our operations, whether
from debt or equity financings, will be available when needed or on terms
satisfactory to us.  Our failure to obtain adequate additional
financing may require us to delay or curtail some or all of our business efforts
and could cause us to seek bankruptcy protection. Any additional equity
financing may involve substantial dilution to our then-existing
stockholders.




Our
current officers and directors have not, as of the date of this filing, loaned
any funds to BigString. There are no formal commitments or arrangements to
advance or loan funds to BigString or repay any such advances or
loans.






Item7A.
            Quantitative and
      Qualitative Disclosure About Market
Risk




BigString
is a smaller reporting company and is therefore not required to provide this
information.






Item8.
            Financial Statements
      and Supplementary Data




The
consolidated financial statements and supplementary data of BigString called for
by this item are submitted under a separate section of this
report.  Reference is made to the Index of Financial Statements
contained on page F-1 herein.






Item9.
            Changes In and
      Disagreements With Accountants on Accounting and Financial
      Disclosure




None.






Item9A.
            Controls and
      Procedures




(a)
Evaluation of disclosure controls and procedures.




19
 Index




Management,
with the participation of our chief executive officer and chief financial
officer, evaluated the effectiveness of our disclosure controls and procedures
pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating
the disclosure controls and procedures, management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives. In addition,
the design of disclosure controls and procedures must reflect the fact that
there are resource constraints and that management is required to apply its
judgment in evaluating the benefits of possible controls and procedures relative
to their costs.




Based
on management’s evaluation, our chief executive officer and chief financial
officer concluded that, as of December 31, 2008, our disclosure controls
and procedures are designed at a reasonable assurance level and are effective to
provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms, and that such information is accumulated and communicated to our
management, including our chief executive officer and chief financial officer,
as appropriate, to allow timely decisions regarding required
disclosure.




(b)
Changes in internal control over financial reporting.




We review
our system of internal control over financial reporting and make changes to our
processes and systems to improve controls and increase efficiency, while
ensuring that we maintain an effective internal control environment. Changes may
include such activities as implementing new, more efficient systems,
consolidating activities, and migrating processes.




There
were no changes in our internal control over financial reporting that occurred
during the period covered by this Annual Report on Form 10-K that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.




(c)
Management’s report on internal control over financial reporting.




Management
is responsible for establishing and maintaining adequate control over financial
reporting for BigString.  Internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. generally accepted accounting
principles.  Internal controls over financial reporting includes those
policies and procedures that: (1) pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of BigString; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted accounting principles, and
that receipts and expenditures of BigString are being made only in accordance
with authorizations of management and directors of BigString; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of BigString’s assets that
could have a material effect on the financial statements.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluations of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.




Management,
with the participation of our principal executive officer and principal
financial and accounting officer, conducted an evaluation of the effectiveness
of BigString’s internal control over financial reporting based on the framework
in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, management concluded that
our internal control over financial reporting was effective as of
December 31, 2008.




This
Annual Report on Form 10-K does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the SEC that permit us to
provide only management’s report in this Annual Report on Form 10-K. There have
been no changes in our internal controls over financial reporting that occurred
during our most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.




20
 Index




Item9B.
            Other
      Information




None.




21
 Index


PART
III







Item10.
            Directors, Executive
      Officers and Corporate
Governance




The
information required under this Item with respect to BigString’s directors and
executive officers is contained in BigString’s Proxy Statement for the Annual
Meeting of Stockholders scheduled to be held on May 29, 2009, under the captions
“Election of Directors,” “Section 16(a) Beneficial Ownership Reporting
Compliance” and “Executive Officers” and is incorporated herein by
reference.






Item11.
            Executive
      Compensation




The
information required under this Item with respect to executive compensation is
contained in BigString’s Proxy Statement for the Annual Meeting of Stockholders
scheduled to be held on May 29, 2009, under the captions “Executive
Compensation” and “Director Compensation” and is incorporated herein by
reference.






Item12.
            Security Ownership of
      Certain Beneficial Owners and Management and Related Stockholder
      Matters






The
information required by Items 201(d) and 403 of Regulation S-B is contained in
BigString’s Proxy Statement for the Annual Meeting of Stockholders scheduled to
be held on May 29, 2009, under the captions “Securities Authorized for Issuance
under Equity Compensation Plan” and “Principal Stockholders and Security
Ownership of Management” and is incorporated herein by reference.






Item13.
            Certain Relationships
      and Related Transactions and Director
  Independence




The
information required by this item is contained in BigString’s Proxy Statement
for the Annual Meeting of Stockholders scheduled to be held on May 29, 2009,
under the caption “Certain Relationships and Related Transactions” and “Director
Independence” and is incorporated herein by reference.






Item14.
            Principal Accountant
      Fees and Services




The
information required by this item is contained in BigString’s Proxy Statement
for the Annual Meeting of Stockholders scheduled to be held on May 29, 2009,
under the caption “Principal Accountant Fees and Services” and is incorporated
herein by reference.






Item15.
            Exhibits




Reference
is made to the Index of Exhibits beginning on page E-1 herein.




22
 Index





SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




BIGSTRING
      CORPORATIONDate:  March
      31, 2009
              By:
              /s/ Darin M. MymanDarin
      M. MymanPresident
      and Chief Executive Officer







KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Darin M. Myman and Adam M. Kotkin and each of them, his
true and lawful attorneys-in-fact and agents for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this Annual
Report on Form 10-K, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue
hereof.




In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed by the following persons in the capacities and
on the dates stated.





Signatures
                        
                        Title
                        
                        Date/s/
      Darin M. Myman
                        
                        President
      and Chief Executive Officer and
                        
                        March
      31, 2009Darin
      M. Myman
                        
                        Director
      (Principal Executive Officer)/s/
      Robert DeMeulemeester
                        
                        Executive
      Vice President, Chief Financial Officer
                        
                        March
      31, 2009Robert
      DeMeulemeester
                        
                        and
      Treasurer and Director (Principal Financial and Accounting
      Officer)/s/
      Adam M. Kotkin
                        
                        Chief
      Operating Officer and Director
                        
                        March
      31, 2009Adam
      M. Kotkin


23
 Index




INDEXTO CONSOLIDATED FINANCIAL STATEMENTS




BIGSTRING
CORPORATION AND SUBSIDIARIES


(A
Development Stage Company)






Report
      of Independent Registered Public Accounting Firm
                            F-2Consolidated
      Balance Sheets at December 31, 2008 and 2007
                            F-3Consolidated
      Statements of Operations for the years ended December 31, 2008 and 2007,
      and the period October 8, 2003 (Date of Formation) through December 31,
      2008
                            F-4Consolidated
      Statements of Stockholders’ Equity (Deficiency) for the years ended
      December 31, 2008 and 2007, and the period October 8, 2003 (Date of
      Formation) through December 31, 2008
                            F-5Consolidated
      Statements of Cash Flows for the years ended December 31, 2008 and 2007,
      and the period October 8, 2003 (Date of Formation) through December 31,
      2008
                            F-7Notes
      to Consolidated Financial Statements
                            F-8


F-1
 Index




[LETTERHEAD
OF WIENER, GOODMAN & COMPANY, P.C.]




REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Stockholders of


BigString
Corporation


Red Bank,
New Jersey





We have
audited the accompanying consolidated balance sheets of BigString Corporation
(formerly Recall Mail Corporation) and subsidiaries (collectively, the
“Company”) (a development stage company) as of December 31, 2008 and 2007, and
the related consolidated statements of operations, stockholders’ equity
(deficiency) and cash flows for the years ended December 31, 2008 and 2007, and
for the period October 8, 2003 (Date of Formation) through December 31,
2008.  These consolidated financial statements are the responsibility
of the Company’s management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.





In our
opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2008 and
2007, and the results of its operations and its cash flows for the years ended
December 31, 2008 and 2007, and for the period October 8, 2003 (Date of
Formation) through December 31, 2008, in conformity with accounting principles
generally accepted in the United States of America.





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern.  As more fully explained in
Note 2 to the Company’s consolidated financial statements, the Company has a
working capital deficit and has incurred losses since operations
commenced.  The Company’s continued existence is dependent upon its
ability to obtain needed working capital through additional equity and/or debt
financing and revenue to cover expenses as the Company continues to incur
losses.  These uncertainties raise substantial doubt about the
Company’s ability to continue as a going concern.  The Company’s
financial statements do not include any adjustments that might result from the
outcome of these uncertainties should the Company be unable to continue as a
going concern.




/s/
Wiener, Goodman & Company, P.C.




WIENER,
GOODMAN & COMPANY, P.C.


Eatontown,
New Jersey





March 30,
2009




F-2
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(A
DEVELOPMENT STAGE COMPANY)





December 31,2008
                  
                  
                  2007ASSETSCurrent
      assets:Cash
      and cash equivalents
                  
                  $
                  178,787
                  
                  
                  $
                  298,033Accounts
      receivable - net of allowance of $660 and $90
                  
                  
                  15,115
                  
                  
                  
                  2,609Prepaid
      expenses and other current assets
                  
                  
                  17,922
                  
                  
                  
                  8,039Total
      current assets
                  
                  
                  211,824
                  
                  
                  
                  308,681Property
      and equipment - net
                  
                  
                  74,737
                  
                  
                  
                  162,156Intangible
      assets - net
                  
                  
                  -
                  
                  
                  
                  1,480,946Other
      assets
                  
                  
                  155,677
                  
                  
                  
                  156,100TOTAL
      ASSETS
                  
                  $
                  442,238
                  
                  
                  $
                  2,107,883LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIENCY)Current
      liabilities:Accounts
      payable
                  
                  $
                  294,521
                  
                  
                  $
                  282,524Accrued
      expenses
                  
                  
                  216,938
                  
                  
                  
                  52,642Unearned
      revenue
                  
                  
                  7,104
                  
                  
                  
                  9,288Accrued
      interest
                  
                  
                  60,000
                  
                  
                  
                  31,134Total
      current liabilities
                  
                  
                  578,563
                  
                  
                  
                  375,588Long
      term liabilities:Long-term
      debt
                  
                  
                  892,824
                  
                  
                  
                  207,304TOTAL
      LIABILITIES
                  
                  
                  1,471,387
                  
                  
                  
                  582,892Stockholders’
      equity (deficiency):Preferred
      stock, $.0001 par value - authorized 1,000,000 shares; outstanding 400,000
      and 400,000 shares, respectively
                  
                  
                  40
                  
                  
                  
                  40Common
      stock, $.0001 par value - authorized 249,000,000 shares; outstanding
      52,244,394 and 50,728,237 shares, respectively
                  
                  
                  5,224
                  
                  
                  
                  5,073Additional
      paid in capital
                  
                  
                  13,119,632
                  
                  
                  
                  11,924,977Deficit
      accumulated during the development stage
                  
                  
                  (14,154,045
                  )
                  
                  
                  (10,405,099
                  )Total
      stockholders' equity (deficiency)
                  
                  
                  (1,029,149
                  )
                  
                  
                  1,524,991TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
                  
                  $
                  442,238
                  
                  
                  $
                  2,107,883




See notes
to consolidated financial statements.




F-3
 Index





BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(A
DEVELOPMENT STAGE COMPANY)





PeriodOctober 8,
      2003For
      the Years Ended
                    
                    
                    (Date
      of Formation)December
      31,
                    
                    
                    Through2008
                    
                    
                    2007
                    
                    
                    December 31,
      2008Operating
      revenues
                    
                    $
                    61,195
                    
                    
                    $
                    41,165
                    
                    
                    $
                    129,154Operating
      expenses:(1)Cost
      of revenues
                    
                    
                    89,387
                    
                    
                    
                    119,772
                    
                    
                    
                    502,241Research
      and development
                    
                    
                    486,066
                    
                    
                    
                    485,948
                    
                    
                    
                    2,080,794Sales
      and marketing
                    
                    
                    178,667
                    
                    
                    
                    390,347
                    
                    
                    
                    967,175General
      and administrative
                    
                    
                    1,423,984
                    
                    
                    
                    1,115,701
                    
                    
                    
                    4,119,370Amortization
      of intangibles
                    
                    
                    970,362
                    
                    
                    
                    1,083,213
                    
                    
                    
                    4,490,190Impairment
      of assets
                    
                    
                    627,584
                    
                    
                    
                    415,292
                    
                    
                    
                    1,042,876Total
      operating expenses
                    
                    
                    3,776,050
                    
                    
                    
                    3,610,273
                    
                    
                    
                    13,202,646Loss
      from operations
                    
                    
                    (3,714,855
                    )
                    
                    
                    (3,569,108
                    )
                    
                    
                    (13,073,492
                    )Other
      income (expense):(1)Interest
      income
                    
                    
                    4,266
                    
                    
                    
                    14,409
                    
                    
                    
                    72,589Interest
      expense
                    
                    
                    (81,951
                    )
                    
                    
                    (31,134
                    )
                    
                    
                    (113,085
                    )Other,
      net
                    
                    
                    (384,543
                    )
                    
                    
                    (622,205
                    )
                    
                    
                    (1,247,048
                    )Total
      other income (expenses)
                    
                    
                    (462,228
                    )
                    
                    
                    (638,930
                    )
                    
                    
                    (1,287,544
                    )Loss
      before income tax benefit
                    
                    
                    (4,177,083
                    )
                    
                    
                    (4,208,038
                    )
                    
                    
                    (14,361,036
                    )Income
      tax benefit
                    
                    
                    428,137
                    
                    
                    
                    258,854
                    
                    
                    
                    686,991Net
      loss
                    
                    $
                    (3,748,946
                    )
                    
                    $
                    (3,949,184
                    )
                    
                    $
                    (13,674,045
                    )Net
      loss per common share:Basic
      and diluted
                    
                    $
                    (0.07
                    )
                    
                    $
                    (0.08
                    )Weighted
      average common shares outstanding:Basic
      and diluted
                    
                    
                    51,668,038
                    
                    
                    
                    47,503,890(1)Stock-based
      and other non-cash compensation by function above:Cost
      of revenues
                    
                    $
                    -
                    
                    
                    $
                    903
                    
                    
                    $
                    5,653Research
      and development
                    
                    
                    120,590
                    
                    
                    
                    47,421
                    
                    
                    
                    190,973Sales
      and marketing
                    
                    
                    -
                    
                    
                    
                    134,786
                    
                    
                    
                    222,725General
      and administrative
                    
                    
                    607,210
                    
                    
                    
                    489,422
                    
                    
                    
                    1,566,277Other,
      net
                    
                    
                    -
                    
                    
                    
                    269,094
                    
                    
                    
                    269,094Total
      stock-based and other non-cash compensation
                    
                    $
                    727,800
                    
                    
                    $
                    941,626
                    
                    
                    $
                    2,254,722





See notes
to consolidated financial statements.




F-4
 Index





BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)


(A
DEVELOPMENT STAGE COMPANY)





Preferred
      Stock
                                            
                                            
                                            Common
      Stock
                                            
                                            
                                            AdditionalNo.
      of
                                            
                                            
                                            
                                            
                                            
                                            No.
      of
                                            
                                            
                                            
                                            
                                            
                                            Paid-In
                                            
                                            
                                            SubscriptionTotal
                                            
                                            
                                            Shares
                                            
                                            
                                            Amount
                                            
                                            
                                            Shares
                                            
                                            
                                            Amount
                                            
                                            
                                            Capital
                                            
                                            
                                            Receivable
                                            
                                            
                                            DeficitBalance,
      October 8, 2003
                                            
                                            $
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            -Issuance
      of common stock (at $.0001 per share)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            21,210,000
                                            
                                            
                                            
                                            2,121
                                            
                                            
                                            
                                            (2,121
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Contribution
      of capital
                                            
                                            
                                            45,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            45,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Sale
      of common stock (at $0.25 per share)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            40,000
                                            
                                            
                                            
                                            4
                                            
                                            
                                            
                                            9,996
                                            
                                            
                                            
                                            (10,000
                                            )
                                            
                                            
                                            -Net
      loss
                                            
                                            
                                            (29,567
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (29,567
                                            )Balance,
      December 31, 2003
                                            
                                            
                                            15,433
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            21,250,000
                                            
                                            
                                            
                                            2,125
                                            
                                            
                                            
                                            52,875
                                            
                                            
                                            
                                            (10,000
                                            )
                                            
                                            
                                            (29,567
                                            )Cash
      received from prior sale of common stock
                                            
                                            
                                            10,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            10,000
                                            
                                            
                                            
                                            -Sale
      of common stock (at $0.25 per share)
                                            
                                            
                                            217,500
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            870,000
                                            
                                            
                                            
                                            87
                                            
                                            
                                            
                                            217,413
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of common stock for services (valued at $0.21 per share)
                                            
                                            
                                            39,251
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            185,000
                                            
                                            
                                            
                                            19
                                            
                                            
                                            
                                            39,232
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of common stock for acquisition (valued at $0.24 per
share)
                                            
                                            
                                            4,800,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            20,000,000
                                            
                                            
                                            
                                            2,000
                                            
                                            
                                            
                                            4,798,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of warrants for services (valued at $0.07 per share)
                                            
                                            
                                            3,500
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            3,500
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Net
      loss
                                            
                                            
                                            (729,536
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (729,536
                                            )Balance,
      December 31, 2004
                                            
                                            
                                            4,356,148
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            42,305,000
                                            
                                            
                                            
                                            4,231
                                            
                                            
                                            
                                            5,111,020
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (759,103
                                            )Sale
      of common stock (at $0.25 per share)
                                            
                                            
                                            230,500
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            922,000
                                            
                                            
                                            
                                            92
                                            
                                            
                                            
                                            230,408
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Exercise
      of warrants (at $0.25 per share)
                                            
                                            
                                            11,250
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            45,000
                                            
                                            
                                            
                                            4
                                            
                                            
                                            
                                            11,246
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of common stock for services (valued at $0.25 per share)
                                            
                                            
                                            12,500
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            50,000
                                            
                                            
                                            
                                            5
                                            
                                            
                                            
                                            12,495
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Sale
      of common stock (at $0.16 per share)
                                            
                                            
                                            1,511,700
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            9,448,125
                                            
                                            
                                            
                                            945
                                            
                                            
                                            
                                            1,510,755
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of warrants for services (valued at $0.07 per share)
                                            
                                            
                                            179,200
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            179,200
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Net
      loss
                                            
                                            
                                            (2,102,587
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (2,102,587
                                            )Balance,
      December 31, 2005
                                            
                                            
                                            4,198,711
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            52,770,125
                                            
                                            
                                            
                                            5,277
                                            
                                            
                                            
                                            7,055,124
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (2,861,690
                                            )Redemption
      of shares from stockholders (at $0.05 per share)
                                            
                                            
                                            (400,000
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (8,000,000
                                            )
                                            
                                            
                                            (800
                                            )
                                            
                                            
                                            (399,200
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of common stock for consulting services (valued at $0.82 per
      share)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,250,000
                                            
                                            
                                            
                                            125
                                            
                                            
                                            
                                            (125
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Stock-based
      compensation expense
                                            
                                            
                                            314,250
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            314,250
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of warrants for consulting services (valued at $0.08, $0.18 and $0.42 per
      share)
                                            
                                            
                                            36,595
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            36,595
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of common stock for website acquisition (valued at $0.80 per
      share)
                                            
                                            
                                            600,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            750,000
                                            
                                            
                                            
                                            75
                                            
                                            
                                            
                                            599,925
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Sale
      of preferred stock (at $.0001 per share)
                                            
                                            
                                            1,860,000
                                            
                                            
                                            
                                            400,000
                                            
                                            
                                            
                                            40
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,859,960
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Dividends
      from allocation of proceeds for the beneficial conversion feature of
      preferred stock
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            480,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (480,000
                                            )Exercise
      of warrants (at $0.16, $0.20 and $0.25 per share)
                                            
                                            
                                            18,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            165,000
                                            
                                            
                                            
                                            17
                                            
                                            
                                            
                                            34,233
                                            
                                            
                                            
                                            (16,250
                                            )
                                            
                                            
                                            -Net
      loss
                                            
                                            
                                            (3,114,225
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (3,114,225
                                            )Balance,
      December 31, 2006
                                            
                                            
                                            3,513,331
                                            
                                            
                                            
                                            400,000
                                            
                                            
                                            
                                            40
                                            
                                            
                                            
                                            46,935,125
                                            
                                            
                                            
                                            4,694
                                            
                                            
                                            
                                            9,980,762
                                            
                                            
                                            
                                            (16,250
                                            )
                                            
                                            
                                            (6,455,915
                                            )Cash
      received from prior exercise of warrants
                                            
                                            
                                            16,250
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            16,250
                                            
                                            
                                            
                                            -  F-5
  Issuance
      of common stock for consulting services (valued at $0.50 and $0.33 per
      share)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            432,000
                                            
                                            
                                            
                                            43
                                            
                                            
                                            
                                            (43
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Allocation
      to warrants from sale of convertible promissory notes and
      warrants
                                            
                                            
                                            31,320
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            31,320
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Beneficial
      conversion feature of convertible promissory notes
                                            
                                            
                                            666,648
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            666,648
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of common stock for conversion of convertible promissory notes (at $0.18
      per share)
                                            
                                            
                                            155,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            861,111
                                            
                                            
                                            
                                            86
                                            
                                            
                                            
                                            154,914
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Stock-based
      compensation expense
                                            
                                            
                                            672,532
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            672,532
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of warrants, net (valued at $0.10 per share)
                                            
                                            
                                            19,094
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            19,094
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of common stock for waiver and release (valued at $0.25 per
      share)
                                            
                                            
                                            250,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,000,000
                                            
                                            
                                            
                                            100
                                            
                                            
                                            
                                            249,900
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Exercise
      of warrants (at $0.10 per share)
                                            
                                            
                                            150,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,500,001
                                            
                                            
                                            
                                            150
                                            
                                            
                                            
                                            149,850
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Net
      loss
                                            
                                            
                                            (3,949,184
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (3,949,184
                                            )Balance,
      December 31, 2007
                                            
                                            
                                            1,524,991
                                            
                                            
                                            
                                            400,000
                                            
                                            
                                            
                                            40
                                            
                                            
                                            
                                            50,728,237
                                            
                                            
                                            
                                            5,073
                                            
                                            
                                            
                                            11,924,977
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (10,405,099
                                            )Exercise
      of warrants (at $0.10 per share)
                                            
                                            
                                            21,333
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            213,333
                                            
                                            
                                            
                                            21
                                            
                                            
                                            
                                            21,312
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of common stock for conversion of convertible promissory notes (at $0.18
      per share)
                                            
                                            
                                            20,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            111,111
                                            
                                            
                                            
                                            11
                                            
                                            
                                            
                                            19,989
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Allocation
      to warrants from sale of convertible promissory notes and
      warrants
                                            
                                            
                                            76,176
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            76,176
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Beneficial
      conversion feature of convertible promissory notes
                                            
                                            
                                            188,740
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            188,740
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Stock-based
      compensation expense
                                            
                                            
                                            727,800
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            727,800
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of common stock for accrued interest (at $0.15 per share)
                                            
                                            
                                            43,757
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            291,713
                                            
                                            
                                            
                                            29
                                            
                                            
                                            
                                            43,728
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Issuance
      of common stock for website acquisition (valued at $0.13 per
      share)
                                            
                                            
                                            117,000
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            900,000
                                            
                                            
                                            
                                            90
                                            
                                            
                                            
                                            116,910
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Net
      loss
                                            
                                            
                                            (3,748,946
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (3,
      748,946
                                            )Balance,
      December 31, 2008
                                            
                                            $
                                            (1,029,149
                                            )
                                            
                                            
                                            400,000
                                            
                                            
                                            $
                                            40
                                            
                                            
                                            
                                            52,244,394
                                            
                                            
                                            $
                                            5,224
                                            
                                            
                                            $
                                            13,119,632
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            $
                                            (14,154,045
                                            )





See notes
to consolidated financial statements.


F-6
 Index




BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(A
DEVELOPMENT STAGE COMPANY)





PeriodOctober
      8, 2003For
      the Years Ended
                        
                        
                        (Date
      of Formation)December
      31,
                        
                        
                        Through2008
                        
                        
                        2007
                        
                        
                        December
      31, 2008Cash
      flows from operating activities:Net
      loss
                        
                        $
                        (3,748,946
                        )
                        
                        $
                        (3,949,184
                        )
                        
                        $
                        (13,674,045
                        )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization of property and equipment, intangible and other
      assets
                        
                        
                        1,122,695
                        
                        
                        
                        1,228,508
                        
                        
                        
                        4,835,496Gain
      on sale of property and equipment
                        
                        
                        (1,697
                        )
                        
                        
                        -
                        
                        
                        
                        (1,697
                        )Impairment
      of intangible assets
                        
                        
                        627,584
                        
                        
                        
                        415,292
                        
                        
                        
                        1,042,876Accretion
      for beneficial conversion feature and discount on notes
                        
                        
                        270,436
                        
                        
                        
                        260,272
                        
                        
                        
                        530,708Stock-based
      compensation
                        
                        
                        727,800
                        
                        
                        
                        672,532
                        
                        
                        
                        1,985,628Other
      non-cash compensation
                        
                        
                        -
                        
                        
                        
                        269,094
                        
                        
                        
                        269,094Changes
      in operating assets and liabilities:(Increase)
      in accounts receivable, net
                        
                        
                        (12,506
                        )
                        
                        
                        (873
                        )
                        
                        
                        (15,115
                        )(Increase)
      in prepaid expenses and other assets
                        
                        
                        (123,567
                        )
                        
                        
                        (243,481
                        )
                        
                        
                        (380,545
                        )Increase
      in accounts payable
                        
                        
                        11,997
                        
                        
                        
                        199,345
                        
                        
                        
                        294,521Increase
      (decrease) in accrued expenses and other liabilities
                        
                        
                        236,920
                        
                        
                        
                        (41,403
                        )
                        
                        
                        317,630(Decrease)
      increase in unearned revenue
                        
                        
                        (2,184
                        )
                        
                        
                        4,607
                        
                        
                        
                        7,104Net
      cash used in operating activities
                        
                        
                        (891,468
                        )
                        
                        
                        (1,185,291
                        )
                        
                        
                        (4,788,345
                        )Cash
      flows from investing activities:Purchase
      of property and equipment
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (262,290
                        )Sale
      of property and equipment
                        
                        
                        50,889
                        
                        
                        
                        -
                        
                        
                        
                        50,889Acquisitions
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (13,000
                        )Net
      cash used in investing activities
                        
                        
                        50,889
                        
                        
                        
                        -
                        
                        
                        
                        (224,401
                        )Cash
      flows from financing activities:Proceeds
      from issuance of convertible notes and warrants
                        
                        
                        950,000
                        
                        
                        
                        800,000
                        
                        
                        
                        1,750,000Proceeds
      from issuance of preferred stock, net
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,860,000Proceeds
      from the exercise of common stock warrants and issuance of common
      stock
                        
                        
                        21,333
                        
                        
                        
                        166,250
                        
                        
                        
                        2,231,533Payments
      for redemption of notes
                        
                        
                        (250,000
                        )
                        
                        
                        -
                        
                        
                        
                        (250,000
                        )Payments
      for redemption of common stock
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (400,000
                        )Net
      cash provided by financing activities
                        
                        
                        721,333
                        
                        
                        
                        966,250
                        
                        
                        
                        5,191,533Net
      (decrease) increase in cash
                        
                        
                        (119,246
                        )
                        
                        
                        (219,041
                        )
                        
                        
                        178,787Cash
      and cash equivalents - beginning of period
                        
                        
                        298,033
                        
                        
                        
                        517,074
                        
                        
                        
                        -Cash
      and cash equivalents - end of period
                        
                        $
                        178,787
                        
                        
                        $
                        298,033
                        
                        
                        $
                        178,787Supplementary
      information:Cash
      paid during the periods for:Interest
                        
                        $
                        9,328
                        
                        
                        $
                        -
                        
                        
                        $
                        9,328Acquisitions
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        13,000Details
      of acquisitions:Fair
      value of assets acquired
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        2,790Fair
      value of liabilities assumed
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (5,857
                        )Intangibles
                        
                        
                        117,000
                        
                        
                        
                        -
                        
                        
                        
                        5,533,067Common
      stock issued to effect acquisition
                        
                        $
                        117,000
                        
                        
                        $
                        -
                        
                        
                        $
                        5,517,000Non-cash
      transactions during the periods for:Conversion
      of promissory notes
                        
                        $
                        20,000
                        
                        
                        $
                        155,000
                        
                        
                        $
                        175,000Issuance
      of common stock for accrued interest
                        
                        $
                        43,757
                        
                        
                        $
                        -
                        
                        
                        $
                        43,757Common
      stock issued for services
                        
                        $
                        341,668
                        
                        
                        $
                        540,666
                        
                        
                        $
                        1,161,862Common
      stock options issued for services
                        
                        
                        341,036
                        
                        
                        
                        86,764
                        
                        
                        
                        514,273Common
      stock warrants issued for services
                        
                        
                        45,096
                        
                        
                        
                        45,102
                        
                        
                        
                        309,493Total
      stock-based compensation:
                        
                        
                        727,800
                        
                        
                        
                        672,532
                        
                        
                        
                        1,985,628Issue
      of warrants, net
                        
                        
                        -
                        
                        
                        
                        19,094
                        
                        
                        
                        19,094Issuance
      of common stock for waiver and release
                        
                        
                        -
                        
                        
                        
                        250,000
                        
                        
                        
                        250,000Total
      other non-cash compensation
                        
                        
                        -
                        
                        
                        
                        269,094
                        
                        
                        
                        269,094Total
      stock-based and other non-cash compensation
                        
                        $
                        727,800
                        
                        
                        $
                        941,626
                        
                        
                        $
                        2,254,722




See notes
to consolidated financial statements.


F-7
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




FOR THE YEARS ENDED DECEMBER
31, 2008 AND 2007 AND THE PERIOD OCTOBER 8, 2003 (DATE OF FORMATION) THROUGH
DECEMBER 31, 2008




NOTE
1.  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES




ORGANIZATION




BigString
was incorporated in the State of Delaware on October 8, 2003 under the name
“Recall Mail Corporation.”  The company’s name was formally changed to
“BigString Corporation” in July 2005.  BigString was formed to develop
technology that would allow the user of email services to have comprehensive
control, security and privacy relating to the email generated by the
user.  In March 2004, the BigString email service was introduced to
the market.




BigString
Interactive, Inc. (“BigString Interactive”), incorporated in the State of New
Jersey, was formed by BigString in early 2006 to develop technology relating to
interactive web portals.




Email
Emissary, Inc. (“Email Emissary”), incorporated in the State of Oklahoma, was
acquired by BigString in July 2004; in September 2006, all of Email Emissary’s
assets, including its pending patent application, were transferred to
BigString.  Email Emissary was dissolved on May 17, 2007.




BigString
is considered a development stage enterprise as defined in Statement of
Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting for
Development Stage Companies,” issued by the Financial Accounting Standards Board
(the “FASB”).  BigString has limited revenue to date, continues to
raise capital and there is no assurance that ultimately BigString will achieve a
profitable level of operations.




PRINCIPLES OF
CONSOLIDATION




The
consolidated financial statements include the accounts of BigString and its
subsidiaries, all of which are wholly owned subsidiaries.  All
intercompany transactions and balances have been eliminated.




USE OF
ESTIMATES




The
preparation of consolidated financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates, judgments and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.  On an on-going
basis, BigString evaluates its estimates.  Actual results could differ
from those estimates.




RECLASSIFICATIONS




Certain
reclassifications have been made to prior period balances in order to conform to
the current period’s presentation.




CASH
EQUIVALENTS




Cash
equivalents include short-term investments in United States treasury bills and
commercial paper with an original maturity of three months or less when
purchased.  At December 31, 2008 and December 31, 2007, cash
equivalents approximated $179,000 and $296,000, respectively.




CERTAIN RISKS AND
CONCENTRATION




Financial
instruments which potentially subject BigString to concentrations of credit risk
consist principally of temporary cash investments.  BigString places
its temporary cash investments with quality financial institutions and
commercial issuers of short term paper.




BigString
grants credit to customers based on an evaluation of the customer’s financial
condition, sometimes without requiring collateral. Exposure to losses on
receivables is principally dependent on each customer’s financial condition.
BigString controls its exposure to credit risk through credit approvals, credit
limits and monitoring procedures and establishes allowances for anticipated
losses.




F-8
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




REVENUE
RECOGNITION




BigString
derives revenue from online services, electronic commerce, advertising and data
network services.  BigString also derives revenue from marketing
affiliations.  BigString recognizes revenue in accordance with the
guidance contained in the Securities and Exchange Commission (“SEC”) Staff
Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition in Financial
Statements.”




Consistent
with the provisions of the FASB’s Emerging Issues Task Force (“EITF”) Issue No.
99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent,”
BigString generally recognizes revenue associated with its advertising and
marketing affiliation programs on a gross basis due primarily to the following
factors:  BigString is the primary obligor; has general inventory
risk; has latitude in establishing prices; has discretion in supplier selection;
performs part of the service; and determines specifications.  In
connection with contracts to provide email services to marketing affiliates,
BigString may be obligated to make payments, which may represent a portion of
revenue, to its marketing affiliates.




Consistent
with EITF Issue No. 01-9, “Accounting for Considerations Given by a Vendor to a
Customer (Including the Reseller of the Vendor’s Product),” BigString accounts
for cash considerations given to customers, for which it does not receive a
separately identifiable benefit or cannot reasonable estimate fair value, as a
reduction of revenue rather than an expense.  Accordingly,
corresponding distributions to active users and distributions of referral fees
are recorded as a reduction of gross revenue.




BigString
records its allowance for doubtful accounts based upon an assessment of various
factors, including historical experience, age of the accounts receivable
balances, the credit quality of customers, current economic conditions and other
factors that may affect customers’ ability to pay.  Allowances for the
years ended December 31, 2008 and 2007 were $660 and $90,
respectively.




DEPRECIATION




Property
and equipment are stated at cost less accumulated depreciation and
amortization.  Depreciation and amortization are calculated primarily
using the straight-line method over their estimated useful lives of these
assets.




RESEARCH AND
DEVELOPMENT




BigString
accounts for research and development costs in accordance with accounting
pronouncements, including SFAS No. 2, “Accounting for Research and Development
Costs,” and SFAS No. 86, “Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed.”  BigString has determined that
technological feasibility for its software products is reached shortly before
the products are released.  Research and development costs incurred
between the establishment of technological feasibility and product release have
not been material and have accordingly been expensed when incurred.




All
research and development for the years ended December 31, 2008 and 2007 was
performed internally for the benefit of BigString.  BigString does not
perform such activities for others.




EVALUATION OF LONG-LIVED
ASSETS




BigString
reviews property and equipment and finite-lived intangible assets for impairment
whenever events or changes in circumstances indicate the carrying value may not
be recoverable.  In accordance with the guidance provided in SFAS No.
144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” if the
carrying value of the long-lived asset exceeds the estimated future undiscounted
cash flows to be generated by such asset, the asset would be adjusted to its
fair value and an impairment loss would be charged to operations in the period
identified.




The
impairment analysis of finite-lived intangible assets conducted by BigString
indicated that the intangible assets were impaired as of the assessment date. As
a result, BigString recorded impairment charges of $627,584 and $415,292 for the
years ending December 31, 2008 and 2007, respectfully. See Note 5 of Notes to
Consolidated Financial Statements for the detailed information regarding the
valuation methods and key assumptions used in coming to this
determination.




F-9
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




INTANGIBLES




SFAS No.
142, “Goodwill and other Intangible Assets,” specifies the financial accounting
and reporting for acquired goodwill and other indefinite life intangible
assets.  Goodwill and other indefinite-lived intangible assets are no
longer amortized, but are reviewed for impairment at least
annually.




DEFERRED FINANCING
COSTS




Debt
issue costs were deferred and amortized in other income (expense) over the term
of the related debt. BigString issued notes in August 2008, February 2008 and
May 2007 and incurred issuance costs of $18,977, $91,706 and $248,939,
respectively, which are being amortized over the term of the notes. Amortization
expense related to these costs is included in other, net in the consolidated
statements of operations and was $114,107, $92,839 and $206,946 for the years
ended December 31, 2008 and 2007 and the period October 8, 2003 (Date of
Formation) through December 31, 2008, respectively.




INCOME
TAXES




BigString
accounts for income taxes using an asset and liability approach under which
deferred income taxes are recognized by applying enacted tax rates applicable to
future years to the differences between the financial statement carrying amounts
and the tax basis of reported assets and liabilities. A valuation allowance
reduces the deferred tax assets to the amount estimated more likely than not to
be realized.




The
principal items giving rise to deferred taxes are timing differences between
book and tax amortization of intangible assets and other
expenditures.




EARNINGS (LOSS) PER COMMON
SHARE




Basic
earnings (loss) per common share is computed by dividing net earnings (loss) by
the weighted average number of common shares outstanding during the specified
period and after preferred stock dividend requirements.  Diluted
earnings (loss) per common share is computed by dividing net earnings (loss) by
the weighted average number of common shares and potential common shares
outstanding during the specified period and after preferred stock dividend
requirements.  All potentially dilutive securities, which include
convertible notes, outstanding preferred stock, warrants and options, have been
excluded from the computation, as their effect is antidilutive.




STOCK-BASED
COMPENSATION




Effective
January 1, 2006, BigString accounts for stock-based compensation under SFAS No.
123(R), “Share-Based Payment.”  BigString adopted SFAS No. 123(R)
using the modified prospective method.  Under this method, SFAS No.
123(R) applies to new awards and to awards modified, repurchased, or cancelled
after the required effective date of SFAS No. 123(R).  Additionally,
compensation costs for the portion of the awards outstanding as of the required
effective date of SFAS No. 123(R), for which the requisite service has not been
rendered, are being recognized as the requisite service is rendered after the
required effective date of SFAS No. 123(R).  The compensation cost for
the portion of awards is based on the grant-date fair value of those awards as
calculated for either recognition or pro forma disclosures under SFAS No. 123,
“Accounting for Stock Based Compensation.”  Changes to the grant-date
fair value of equity awards granted before the required effective date of SFAS
No. 123(R) are precluded.  The compensation cost for those earlier
awards is attributed to periods beginning on or after the required effective
date of SFAS No. 123(R) using the attribution method that was used under SFAS
No. 123, except that the method of recognizing forfeitures only as they occur
was not continued.




BigString
issues shares of common stock to non-employees as stock-based
compensation.  BigString accounts for the services using the fair
market value of the consideration issued, generally measured at the closing
price of BigString’s common stock on the date of the agreement.  For
the years ended December 31, 2008 and 2007, BigString recorded compensation
expense of $341,668 and $540,666, respectively, in connection with the issuance
of these shares.  For the period October 8, 2003 (Date of Formation)
through December 31, 2008, BigString recorded compensation expense of $1,161,862
in connection with the issuance of these shares. For the year ended December 31,
2007, BigString also recorded $250,000 other non-cash compensation expense for
shares of common stock issued to non-employees.




F-10
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




BigString
issues stock purchase warrants to non-employees as stock-based
compensation.  The fair values of the stock purchase warrants are
estimated on the date of grant using the Black-Scholes option-pricing
model.  For the years ended December 31, 2008 and 2007, BigString
recorded compensation expenses of $45,096 and $45,102, respectively, associated
with issuances of stock purchase warrants.  For the period October 8,
2003 (Date of Formation) through December 31, 2008, BigString recorded
compensation expense of $309,493 in connection with the issuance of stock
purchase warrants for services. For the year ended December 31, 2007, BigString
also recorded $19,094 other non-cash compensation expense, net for the
cancellation and issue of warrants.




BigString
has one stock-based compensation plan under which incentive and nonqualified
stock options or rights to purchase stock may be granted to employees, directors
and other eligible participants.  The fair values of the stock options
are estimated on the date of grant using the Black-Scholes option-pricing
model.  For the years ended December 31, 2008 and 2007, BigString
recorded compensation expense of $341,036 and $86,764,
respectively.  For the period October 8, 2003 (Date of Formation)
through December 31, 2008, BigString recorded compensation expense of
$514,273.  BigString did not grant stock options prior to
2006.




BUSINESS
COMBINATIONS




Business
combinations which have been accounted for under the purchase method of
accounting include the results of operations of the acquired business from the
date of acquisition. Net assets of the company acquired are recorded at their
fair value at the date of acquisition.




ACCOUNTING FOR
DERIVATIVES




BigString
evaluates its options, warrants or other contracts to determine if those
contracts or embedded components of those contracts qualify as derivatives to be
separately accounted for under SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” and related interpretations including EITF
Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Company’s Own Stock.”




FAIR VALUE OF FINANCIAL
INSTRUMENTS




For
financial instruments, including cash investments, accounts receivable, accounts
payable and accrued expenses, the carry amount approximates fair value because
of the short maturities of such instruments. Convertible notes are carried at
estimated fair value less any unamortized discount.




BENEFICIAL CONVERSION
FEATURE




When debt
or equity is issued which is convertible into common stock at a discount from
the common stock market price at the date the debt or equity is issued, a
beneficial conversion feature for the difference between the closing price and
the conversion price multiplied by the number of shares issuable upon conversion
is recognized. The beneficial conversion feature is presented as a discount to
the related debt, with an offsetting amount increasing additional paid-in
capital.




NEW FINANCIAL ACCOUNTING
STANDARDS




In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
enhances existing guidance for measuring assets and liabilities using fair
value. This standard provides a single definition of fair value, together with a
framework for measuring it, and requires additional disclosure about the use of
fair value to measure assets and liabilities. In February 2008, the FASB
issued FASB Staff Position (“FSP”) SFAS 157-1, “Application of SFAS No. 157 to
SFAS No. 13 and Its Related Interpretative Accounting Pronouncements that
Address Leasing Transactions” (“FSP SFAS 157-1”) and FASB Staff Position SFAS
157-2, “Effective Date of SFAS No. 157” (“FSP SFAS 157-2”). FSP SFAS 157-1
excludes SFAS No. 13 and its related interpretive accounting pronouncements that
address leasing transactions from the requirements of SFAS No. 157, with the
exception of fair value measurements of assets and liabilities recorded as a
result of a lease transaction but measured pursuant to other pronouncements
within the scope of SFAS No. 157. FSP SFAS 157-2 delays the effective date
of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except
those that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually). FSP SFAS 157-1 and FSP SFAS 157-2
became effective for BigString upon adoption of SFAS No. 157 on January 1, 2008.
BigString will provide the additional disclosures required relating to the fair
value measurement of nonfinancial assets and nonfinancial liabilities when it
completes its implementation of SFAS No. 157 on January 1, 2009, as required,
and does not believe they will have a




F-11
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





significant
impact on its consolidated financial position, cash flows and results of
operations. In October 2008, the FASB issued FASB Staff Position
SFAS 157-3, Determining the Fair Value of a Financial Asset When The Market
for That Asset Is Not Active(“FSP 157-3”), to
clarify how an entity would determine fair value in an inactive market.
FSP 157-3 was effective immediately. The application of the provisions of
FSP 157-3 did not materially impact BigString’s consolidated financial
position, cash flows and results of operations.




In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”).  SFAS No. 162 identifies the
sources of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting
principles (GAAP) in the United States.  This Statement is effective
sixty days following the SEC’s approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.”  BigString
is currently evaluating the potential impact, if any, of the adoption of SFAS
No. 162 on its consolidated financial position, cash flows and results of
operations.




In
April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the
Useful Life of Intangible Assets” (“FSP FAS 142-3”).  In determining the
useful life of acquired intangible assets, FSP FAS 142-3 removes the requirement
to consider whether an intangible asset can be renewed without substantial cost
of material modifications to the existing terms and conditions and, instead,
requires an entity to consider its own historical experience in renewing similar
arrangements. FSP FAS 142-3 also requires expanded disclosure related to the
determination of intangible asset useful lives.  FSP FAS 142-3 is effective
for financial statements issued for fiscal years beginning after
December 15, 2008, and may impact any intangible assets BigString
acquires.




In
March 2008, the FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities - an Amendment of FASB Statement
133” (“SFAS No. 161”), which provides new disclosure requirements for an
entity’s derivative and hedging activities. SFAS No. 161 is effective for
periods beginning after November 15, 2008. BigString is currently
evaluating the impact of adopting SFAS No. 161 on its consolidated
financial position, cash flows and results of operations.




In
December 2007, the FASB issued SFAS 141(R), which replaces SFAS 141 “Business
Combinations.” This statement is intended to improve the relevance, completeness
and representational faithfulness of the information provided in financial
reports about the assets acquired and the liabilities assumed in a business
combination. This statement requires an acquiror to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. Under SFAS 141(R),
acquisition-related costs, including restructuring costs, must be recognized
separately from the acquisition and will generally be expensed as incurred. That
replaces SFAS 141’s cost-allocation process, which required the cost of an
acquisition to be allocated to the individual assets acquired and liabilities
assumed based on their estimated fair values. SFAS 141(R) shall be applied
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual report period beginning on or after
December 15, 2008. BigString will adopt SFAS No. 141(R) on January 1, 2009, as
required, and does not believe it will have a material impact on its
consolidated financial position, cash flows and results of
operations.




In
February 2007, the FASB issued SFAS No. 159 (“SFAS 159”) “The Fair Value Option
for Financial Assets and Financial Liabilities,” providing companies with an
option to report selected financial assets and liabilities at fair value. The
Standard’s objective is to reduce both complexity in accounting for financial
instruments and the volatility in earnings caused by measuring related assets
and liabilities differently. It also requires entities to display the fair value
of those assets and liabilities for which the entity has chosen to use fair
value on the face of the balance sheet.  SFAS 159 is effective for
fiscal years beginning after November 15, 2007.  SFAS No. 159 did not
have a material impact on BigString’s consolidated financial position, cash
flows and results of operations.




NOTE
2. GOING CONCERN




For the
year ended December 31, 2008, BigString’s consolidated financial statements
reflect a net loss of $3,748,946, net cash used in operations of $891,468, a
working capital deficit of $366,739, a stockholders’ deficit accumulated during
the development stage of $14,154,045 and a cumulative net loss of
$13,674,045.  These matters raise doubt about the ability of BigString
to continue as a going concern.  BigString’s consolidated financial
statements do not include any adjustments to reflect the possible effects on
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the inability to continue as a going
concern.




F-12
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




The
ability of BigString to continue as a going concern is dependent on BigString’s
ability to further implement its business plan, raise capital and generate
additional revenues.  BigString can give no assurances that it will
generate sufficient cash flow from operations or obtain additional
financing.




The time
required for BigString to become profitable is highly uncertain, and BigString
can give no assurances that it will achieve or sustain profitability or generate
sufficient cash flow from operations to meet planned capital expenditures,
planned marketing expenditures and working capital requirements.  If
required, the ability to obtain additional financing from other sources also
depends on many factors beyond BigString’s control, including the state of the
capital markets and the prospects for BigString’s business.  The
necessary additional financing may not be available to BigString or may be
available only on terms that would result in further dilution to the current
stockholders of BigString.




NOTE
3. ACQUISITIONS




On July
9, 2008, BigString completed the acquisition of the website, BuddyStumbler,
pursuant to an asset purchase agreement.  BigString issued 900,000
shares to the sellers. The market value of BigString’s common stock on July 9,
2008 was $0.13 per share. The purchase price of $117,000 has been allocated to
intangible assets based on estimated fair value.  The acquisition
includes right, title and interest in domain names, customer and member lists
and source code.




A
condensed balance sheet of the major assets and liabilities associated with the
acquisition of BuddyStumbler as of the date of the acquisition is as
follows:




Intangible
      assets
                    
                    $
                    117,000Net
      assets acquired
                    
                    $
                    117,000




The
results of operations of the assets acquired were not material, and accordingly,
pro forma summary results have not been included.




On
December 11, 2006, BigString completed the acquisition of the website, DailyLOL,
pursuant to an asset purchase agreement.  The cash purchase price of
$13,000 has been allocated to intangible assets based on estimated fair
value.  The acquisition includes right, title and interest in domain
names, customer and member lists and source code. The results of operations of
the assets acquired were not material.




On May
19, 2006, BigString completed the acquisition of certain assets, including two
websites, from a principal of Lifeline Industries, Inc.  In
consideration for the assets, BigString issued 750,000 shares of BigString’s
common stock.  The market value of BigString’s common stock on May 19,
2006 was $0.80 per share.  In conjunction with this acquisition,
BigString acquired an intangible asset for $600,000 based on estimated fair
value.  The acquisition included right, title and interest in domain
names, customer and member lists and source code. The results of operations of
the assets acquired were not material. Lifeline Industries, Inc. previously
entered an agreement on May 2, 2006, to provide business consultant services to
BigString for three years.




On July
16, 2004, BigString completed the acquisition of Email
Emissary.  BigString purchased 100% of Email Emissary’s stock for
20,000,000 shares of BigString’s common stock.  BigString acquired
Email Emissary to consolidate its marketing and development
operations.  The purchase price of $4,800,000 was allocated to both
tangible and intangible assets and liabilities based on estimated fair
values.  Approximately $4,803,000 of identifiable intangible assets
(patent application, trademark and websites) arose from this
transaction.  Such intangible assets are being amortized on a
straight-line basis over the estimated economic life of five years.




This
acquisition was accounted for using the purchase method of accounting, and
accordingly, the results of operations of Email Emissary has been included in
BigString’s consolidated financial statements from July 16, 2004, the date of
closing.




F-13
 Index





BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE
4. PROPERTY AND EQUIPMENT




Property
and equipment consist of the following:




December 31,2008
                    
                    
                    2007Computer
      equipment and internal software
                    
                    $
                    177,326
                    
                    
                    $
                    255,171Furniture
      and fixtures
                    
                    
                    5,848
                    
                    
                    
                    5,969183,174
                    
                    
                    
                    261,140Less
      accumulated depreciation
                    
                    
                    108,437
                    
                    
                    
                    98,984$
                    74,737
                    
                    
                    $
                    162,156







Depreciation
expense for the years ended December 31, 2008 and 2007, and for the period
October 8, 2003 (Date of Formation) through December 31, 2008, was $38,226,
$52,456 and $138,359, respectively.




NOTE
5. GOODWILL AND OTHER INTANGIBLES




Other
intangibles consist of patent application and trademark, logos, source codes and
websites.  Amounts assigned to these intangibles have been determined
by management.  Management considered a number of factors in
determining the allocations, including an independent formal
appraisal.  Other intangibles are being amortized over five
years.




Other
intangible assets consist of the following:




December
      31,2008
                          
                          
                          2007Patent
      application and trademark
                          
                          $
                          4,803,067
                          
                          
                          $
                          4,803,067Logos,
      websites and source codes
                          
                          
                          730,000
                          
                          
                          
                          613,0005,533,067
                          
                          
                          
                          5,416,067Impairment
                          
                          
                          (1,042,876
                          )
                          
                          
                          (415,292
                          )4,490,191
                          
                          
                          
                          5,000,775Accumulated
      amortization
                          
                          
                          4,490,191
                          
                          
                          
                          3,519,829$
                          -
                          
                          
                          $
                          1,480,946




Amortization
expense was $970,362, $1,083,213 and $4,490,191 for the years ended December 31,
2008 and 2007, and for the period October 8, 2003 (Date of Formation) through
December 31, 2008, respectively.




Other
intangibles are tested annually for impairment. If events indicate that
impairment could exist, a recoverability test is performed comparing future net
cash flows from the asset to the carrying value of the asset. If the
recoverability test indicates the asset is impaired and the asset carrying
amount is greater than fair market value, an impairment charge adjusts the
carrying value to fair market value. Continuing losses associated with the
assets indicated that impairments may exist.




In 2008,
the recoverability test for the patent application and trademark assets
indicated impairment. The fair market value, based on weighted, discounted cash
flows and disposition values, was not material, and an impairment loss of
$520,334 for the carrying amount was recognized.




In 2008,
the recoverability test for the logos, websites and source codes, which
primarily include the website BuddyStumbler, indicated impairment. The fair
market value, based on weighted, discounted cash flows and disposition values,
was not material, and an impairment loss of $107,250 for the carrying amount was
recognized.




In 2007,
the recoverability test for the logos, websites and source codes, which
primarily include the websites FindItAll, AmericanMoBlog and DailyLOL, indicated
impairment. The fair market value, based on weighted, discounted cash flows and
disposition values, was not material, and an impairment loss of $415,292 for the
carrying amount was recognized.




In June
2008, BigString entered into an asset purchase agreement to sell FindItAll and
AmericanMoBlog for a nominal fee and 20,000,000 shares of common stock in
FindItAll, Inc. The shares and fee were received in July




F-14
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




2008.
Fair market value was determined using the cost method of investment because
BigString has determined that this is a passive investment in a non-marketable
equity and BigString does not have significant influence over the
company.




Estimated
remaining amortization expenses for intangible assets for the next five years is
zero. The remaining intangible asset weighted-average useful life is 0
years.




NOTE
6. OTHER INCOME (EXPENSE)




Other
income (expense) consists of interest income, interest expense, and other,
net.




Interest
income was $4,266, $14,409 and $72,589 for the years ended December 31, 2008 and
2007 and the period October 8, 2003 (Date of Formation) through December 31,
2008, respectively.




Interest
expense consists of interest on convertible debt, generally payable on each
anniversary date of the promissory notes, and is included in accrued interest.
Interest expense was $81,951, $31,134 and $113,085 for the years ended December
31, 2008 and 2007 and the period October 8, 2003 (Date of Formation) through
December 31, 2008, respectively.




The
components of other, net consist of expenses related to the convertible
debenture financing, preferred stock financing and warrant and common stock
financings and are as follows:




Years
      ended
                  
                  Period
                    October 8,
      2003
                    (Date
      of Formation)December 31,
                  
                  Through2008
                  
                  2007
                  
                  December 31,
      2007Amortization
      of debt issue costs
                  
                  $
                  114,107
                  
                  
                  $
                  92,839
                  
                  
                  $
                  206,946Amortization
      of promissory note discount
                  
                  
                  29,943
                  
                  
                  
                  11,664
                  
                  
                  
                  41,607Amortization
      of beneficial conversion feature
                  
                  
                  240,493
                  
                  
                  
                  248,608
                  
                  
                  
                  489,101Investment
      banking expenses
                  
                  
                  -
                  
                  
                  
                  269,094
                  
                  
                  
                  509,394$
                  384,543
                  
                  
                  $
                  622,205
                  
                  
                  $
                  1,247,048




Debt
issue costs for the August 2008, February 2008 and May 2007 financings were
$18,977, $91,706 and $248,939, respectively, and are being amortized over the
term of each note, which is 5, 36 and 36 months, respectively. Amortization is
accelerated for the proportion of promissory notes which are converted in a
period.




Other
financing expenses include $250,000 of stock-based other non-cash compensation
for the fair market value of common stock issued for a waiver and release
related to the debt financing in 2007.




NOTE
7. INCOME TAXES




BigString
adopted the provisions of the FASB Financial Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes” (“FIN 48”), on January 1, 2007.  As a
result of the implementation of FIN 48, BigString recognized no adjustment in
the net liability for unrecognized income tax benefits.




BigString
participated in the State of New Jersey’s Corporation Business Tax Benefit
Certificate Transfer program (the “Program”), which allows certain high
technology and biotechnology companies to sell unused NOL carryforwards to other
New Jersey corporation business taxpayers. The Program requires that the
purchaser pay at least 75% of the amount of the surrendered tax benefit. For the
years ended December 31, 2008 and 2007 and for the period October 8, 2003 (Date
of Formation) through December 31, 2008, BigString recorded a net state tax
benefit of $428,137, $258,854 and $686,991, respectively, as a result of its
sale of New Jersey state net operating losses and New Jersey state research and
development credits. For the years ended December 31, 2008 and 2007 and for the
period October 8, 2003 (Date of Formation) through December 31, 2008, proceeds
from the sale of the net operating loss were $482,480, $294,189 and $776,669,
respectively. Since New Jersey law provides that net operating losses can be
carried over for up to seven years, BigString may be able to transfer its unused
New Jersey net operating losses in future years.




The tax
effects of temporary differences that give rise to significant portions of
deferred tax assets include net operating loss carry forwards and research and
development credits. A valuation allowance is provided when it is




F-15
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





more
likely than not that some portion or all of the deferred tax assets will not be
realized. Valuation allowances for the years ending December 31, 2008 and 2007,
and for the period October 8, 2003 (Date of Formation) through December 31,
2008, have been applied to offset the deferred tax assets in recognition of the
uncertainty that such tax benefits will be realized as BigString continues to
incur losses.




At
December 31, 2008, BigString has available net operating loss carry forwards of
approximately $12.6 million for federal income tax reporting purposes and $5.0
million for state income tax reporting purposes which expire in various years
through 2028. The differences between book income and tax income primarily
relates to amortization of intangible assets and other
expenditures.  Pursuant to Section 382 of the Internal Revenue
Code of 1986, as amended, the annual utilization of a company’s net operating
loss and research credit carry forwards may be limited, and, as such,
BigString’s net operating loss carry forwards available to offset future federal
taxable income may be limited. Similarly, BigString may be restricted in using
its research credit carry forwards to offset future federal income tax
expense.




NOTE
8. SHORT-TERM DEBT




On August
25, 2008, BigString closed on a financing. Providing the financing were Dwight
Lane Capital, LLC, a limited liability company in which Todd M. Ross, a director
of BigString, has an interest, and Marc W. Dutton, a director of BigString. In
connection with such financing, BigString issued promissory notes in the
aggregate principal amount of $250,000 and common stock purchase warrants to
purchase up to an aggregate 800,000 shares of BigString's common stock. Each
note has a term of five months and accrued interest at a rate of 12% annually.
The warrants have an exercise price of $0.08 per share.




BigString
incurred transaction fees of approximately $19,000. BigString accounted for the
convertible feature of the notes under SFAS No. 133, and related interpretations
including EITF Issue No. 00-19.  Due to the conversion rights only
upon an event of default, $2,080 was included as additional paid in capital
based on a weighted conversion discount. The warrants did not have a conversion
discount, and accordingly, no proceeds were allocated to the warrants based on
fair value, and included as additional paid in capital.




The
conversion price for the outstanding convertible notes previously issued by
BigString in February 2008 and May 2007 and the conversion price of the shares
of outstanding Series A Preferred Stock would be adjusted under anti-dilution
provisions, in certain situations, such as an event of default.




In
December 2008, all amounts due under the notes were paid by BigString, including
accrued interest of $9,328, and, as a result, the notes were
cancelled.




NOTE
9. LONG-TERM DEBT




On
February 29, 2008, BigString entered into a financing arrangement with several
accredited financing parties. Proceeds from the financing will be used to
support ongoing operations and the advancement of BigString’s technology, and
fund the marketing and the development of its business.




Pursuant
to the Subscription Agreement entered into by BigString with Whalehaven Capital
Fund Limited, Alpha Capital Anstalt and Excalibur Small Cap Opportunities LP
(collectively, the “2008 Subscribers”), the 2008 Subscribers purchased
convertible notes in the aggregate principal amount of $700,000, which notes are
convertible into shares of BigString’s common stock, and warrants to purchase up
to 2,333,333 shares of BigString's common stock, resulting in net proceeds of
approximately $608,000 after transaction fees of approximately
$92,000.  BigString accounted for the convertible notes under SFAS No.
133, and related interpretations including EITF Issue No.
00-19.  Approximately $76,200 of the proceeds was allocated to the
warrants based on fair value, and included as additional paid in
capital.  Due to the beneficial conversion feature of the convertible
notes, $186,660 was included as additional paid in capital based on the
conversion discount.




Each
convertible note has a term of three years and accrues interest at a rate of 6%
annually.  The holder of a convertible note shall have the right from
and after the issuance thereof until such time as the convertible note is fully
paid, to convert any outstanding and unpaid principal portion thereof into
shares of common stock at a conversion price of $0.15 per share, as adjusted.
The conversion price and number and kind of shares to be issued upon conversion
of the convertible notes are subject to adjustment from time to time. The
warrants have an exercise price of $0.15 per share, as adjusted.  The
number of shares of common stock underlying each warrant and the exercise price
are subject to certain adjustments.




F-16
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




In
connection with the February 29, 2008 financing, BigString paid Gem Funding LLC
(the “Finder”) $56,000 and issued a warrant to purchase 373,333 shares of
BigString’s common stock to the Finder on February 29, 2008.  The
Finder's warrant is similar to and carries the same rights as the warrants
issued to the 2008 Subscribers.




As a
result of this financing, the conversion price for the outstanding convertible
notes previously issued by BigString in May 2007 was adjusted from $0.18 to
$0.15.  In addition, the conversion price of the shares of outstanding
Series A Preferred Stock was adjusted as provided for in the Certificate of
Designations with respect to same.




On May 1,
2007, BigString entered into a financing arrangement with several accredited
financing parties. Pursuant to the Subscription Agreement entered into by
BigString with Whalehaven Capital Fund Limited, Alpha Capital Anstalt, Chestnut
Ridge Partners LP, Iroquois Master Fund Ltd. and Penn Footwear (collectively,
the “2007 Subscribers”), the 2007 Subscribers purchased convertible notes in the
aggregate principal amount of $800,000, which notes are convertible into shares
of BigString’s common stock, and warrants to purchase up to 1,777,779 shares of
BigString's common stock, resulting in net proceeds of approximately $551,000
after transaction fees of approximately $249,000.  BigString accounted
for the convertible notes under SFAS No. 133, and related interpretations
including EITF Issue No. 00-19.  Approximately $31,300 of the proceeds
was allocated to the warrants based on fair value, and included as additional
paid in capital.  Due to the beneficial conversion feature of the
convertible notes, $666,648 was included as additional paid in capital based on
the conversion discount.




Each
convertible note has a term of three years and accrues interest at a rate of 6%
annually.  The holder of a convertible note shall have the right from
and after the issuance thereof until such time as the convertible note is fully
paid, to convert any outstanding and unpaid principal portion thereof into
shares of BigString’s common stock at a conversion price of $0.15 per share, as
adjusted.  The conversion price and number and kind of shares to be
issued upon conversion of the convertible notes are subject to adjustment from
time to time. The warrants have an exercise price of $0.30 per share, as
adjusted.  The number of shares of common stock underlying each
warrant and the exercise price are subject to certain adjustments.




In
connection with the May 1, 2007 financing, BigString paid the Finder $64,000 and
issued a warrant to purchase 213,333 shares of BigString’s common stock to the
Finder on May 1, 2007.  The Finder's warrant is similar to and carries
the same rights as the warrants issued to the 2007 Subscribers.




On
November 30, 2007, BigString and the 2007 Subscribers entered into an Agreement,
Waiver and Limited Release. As part of the Agreement, Waiver and Limited
Release, the 2007 Subscribers released BigString from liquidated damages
relating to the outstanding convertible notes. At the date of the Agreement,
Waiver and Limited Release, BigString had accrued $24,267 in liquidated damages.
BigString also granted the 2007 Subscribers 1,000,000 restricted shares of
BigString’s common stock. BigString recorded $250,000 of stock-based other
non-cash compensation expense related to the debt issue.




Information
regarding the convertible notes outstanding at December 31, 2008 and 2007 is as
follows:




December
      31,2008
                                    
                                    
                                    2007Convertible
      note, May 1, 2007
                                    
                                    $
                                    625,000
                                    
                                    
                                    $
                                    645,000Beneficial
      conversion feature
                                    
                                    
                                    (231,477
                                    )
                                    
                                    
                                    (418,040
                                    )Note
      Discount
                                    
                                    
                                    (10,873
                                    )
                                    
                                    
                                    (19,656
                                    )382,650
                                    
                                    
                                    
                                    207,304Convertible
      note, February 29, 2009
                                    
                                    
                                    700,000
                                    
                                    
                                    
                                    -Beneficial
      conversion feature
                                    
                                    
                                    (134,810
                                    )
                                    
                                    
                                    -Note
      Discount
                                    
                                    
                                    (55,016
                                    )
                                    
                                    
                                    -510,174
                                    
                                    
                                    
                                    -$
                                    892,824
                                    
                                    
                                    $
                                    207,304




For the
years ending December 31, 2008 and 2007, $20,000 and $155,000 of the convertible
notes dated May 1, 2007 were converted resulting in 111,111 and 861,111,
respectively, shares of BigString’s common stock being issued to the holders of
the convertible notes. For the year ending December 31, 2008, there were no
conversions of the convertible notes dated February 29, 2008.




F-17
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


For the
year ending December 31, 2008, BigString issued 291,713 shares of BigString’s
common stock in lieu of $43,757 of accrued interest. Future accrued interest
payments, which may include shares of BigString’s common stock in lieu of
accrued interest, on the May 1, 2007 and February 29, 2008 convertible notes are
currently estimated as follows:




AccruedYears
      Ending
                        
                        InterestDecember
      31,
                        
                        Payments2009
                        
                        
                        $
                        79,5002010
                        
                        
                        
                        79,5002011
                        
                        
                        
                        42,000$
                        201,000




NOTE
10. COMMON STOCK




On July
18, 2005, BigString amended its Certificate of Incorporation to, among other
things, (1) change its name from Recall Mail Corporation to BigString
Corporation, and (2) increase the number of shares BigString is authorized to
issue from 50,000,000 shares to 250,000,000 shares, consisting of 249,000,000
shares of common stock, par value $0.0001 per share, and 1,000,000 shares of
preferred stock, par value $0.0001 per share.  The board of directors
has the authority, without action by the stockholders, to designate and issue
the shares of preferred stock in one or more series and to designate the rights,
preference and privileges of each series, any or all of which may be greater
than the rights of BigString’s common stock.  Currently, there are
400,000 shares of preferred stock outstanding.




In
October 2003, the month of BigString’s formation, BigString issued 21,210,000
shares of its common stock to principals of BigString at no cost to such
principals.




During
2003, BigString concluded a private placement of securities, pursuant to which
it sold 40,000 shares of BigString’s common stock at a per share purchase price
of $0.25.  BigString received $10,000 in gross proceeds as a result of
this private placement.




During
2004, BigString concluded a private placement of securities, pursuant to which
it sold 870,000 shares of BigString’s common stock at a per share purchase price
of $0.25.  BigString received $217,500 in gross proceeds as a result
of this private placement.




During
2004, BigString issued 185,000 shares of common stock valued at $0.21 per share
in consideration for consulting services provided by two marketing
consultants.  BigString recorded consulting expense of $39,251 in
connection with the issuance of these shares. Fair market value was based on
most recent private placement per share purchase price and an agreed upon per
share purchase price discount.




During
2004, BigString completed the acquisition of Email Emissary for 20,000,000
shares of BigString’s common stock for a purchase price of $4,800,000. Fair
market value of $0.24 per share was based on the weighted average private
placement per share purchase prices in 2003 and 2004.




During
2005, BigString issued 50,000 shares of common stock valued at $0.25 per share
for business advisory services. Fair market value was based on the concurrent
private placement per share purchase price.




For the
year ended December 31, 2005, BigString concluded several private placements
pursuant to which it sold 922,000 shares of its common stock at a per share
purchase price of $0.25 and 9,448,125 shares of its common stock at a per share
purchase price of $0.16.  As a result of these private placements,
BigString received $1,742,200 in gross proceeds.




On May 2,
2006, BigString issued 1,250,000 shares of common stock in consideration for
business consultant services to be provided by Lifeline Industries,
Inc.  The market value of BigString’s common stock at May 2, 2006 was
$0.82 per share.




On May
19, 2006, BigString completed the acquisition of certain assets, including two
websites, from a principal of Lifeline Industries, Inc.  In
consideration for the assets, BigString issued 750,000 shares of common
stock.  The market value of BigString’s common stock at May 19, 2006
was $0.80 per share.




F-18
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Additionally,
in May 2006, BigString redeemed 2,000,000 shares of its common stock from each
of Charles A. Handshy, Jr. and David L. Daniels, former directors of BigString,
and 2,000,000 shares of its common stock from each of their spouses, June E.
Handshy and Deborah K. Daniels, at a purchase price of $0.05 per
share.




On
February 26, 2007, BigString agreed to issue 140,000 shares of common stock to
CEOcast, Inc. in consideration for investor relations services.  The
market value of BigString’s common stock at February 26, 2007 was $0.50 per
share.




Additionally,
on February 26, 2007, BigString agreed to issue 192,000 shares of common stock
to Howard Greene in consideration for public relations services provided by
Greene Inc. Communications.  The market value of BigString’s common
stock at February 26, 2007 was $0.50 per share.




On May 1,
2007, BigString issued 100,000 shares of common stock to Jonathan Bomser in
consideration for online marketing services provided by CAC, Inc.  The
market value of BigString’s common stock at May 1, 2007 was $0.33 per
share.




On
November 30, 2007, BigString agreed to issue 1,000,000 shares of its common
stock to the 2007 Subscribers as part of the Agreement, Waiver and Limited
Release. The market value of BigString’s common stock at November 30, 2007 was
$0.25 per share.




During
November and December 2007, BigString issued an aggregate 861,111 shares of
common stock for the conversion of convertible promissory notes totaling
$155,000. The conversion price was $0.18 per share.




On
February 8, 2008, BigString issued 111,111 shares of its common stock for the
conversion of convertible promissory notes totaling $20,000. The conversion
price was $0.18 per share.




On May 1,
2008, BigString issued 291,713 shares of its common stock for accrued interest
on convertible promissory notes totaling $43,757. The conversion price was $0.15
per share.




On July
9, 2008, BigString completed the acquisition of certain assets and issued
900,000 shares of its common stock.  The market value of BigString’s
common stock at July 9, 2008 was $0.13 per share.




NOTE
11. PREFERRED STOCK




On May 19
2006, BigString issued a total of 400,000 shares of Series A Preferred Stock,
par value $0.0001 per share, and warrants to purchase 1,000,000 shares of its
common stock to Witches Rock Portfolio Ltd.,The Tudor BVI Global
Portfolio Ltd.andTudor
Proprietary Trading, L.L.C., for an aggregate purchase price of
$2,000,000.  The shares of Series A Preferred Stock are convertible
under certain circumstances into shares of BigString’s common stock, and have
certain dividend, voting, liquidation and conversion
rights.   The warrants are convertible into shares of BigString’s
common stock at an exercise price per share of $1.25, as
adjusted.  BigString has registered the shares of common stock
issuable upon conversion of the shares of Series A Preferred Stock and the
shares of common stock underlying the warrants.  In conjunction with
this transaction, BigString incurred a fee of $140,000, which is included in
additional paid in capital.




BigString
accounted for the convertible preferred stock under SFAS No. 133, and related
interpretations including EITF Issue No. 00-19.  BigString performed
calculations allocating the proceeds of the Series A Preferred Stock with
detachable warrants to each respective security at their fair
values.  The value of the warrants of $400,000 was recorded as a
reduction of the Series A Preferred Stock and credited to additional
paid-in-capital.  The recorded discount of $480,000 resulting from
allocation of proceeds to the beneficial conversion feature is analogous to a
dividend and is recognized as a return to the preferred stockholders at the date
of issuance of the convertible preferred stock.




NOTE
12. SHARE-BASED COMPENSATION




On
January 1, 2006, BigString adopted SFAS No. 123(R) requiring the recognition of
compensation expense in the consolidated statements of operations related to the
fair value of its employee and non-employee share-based options and
warrants.  SFAS No. 123(R) revises SFAS No. 123, “Accounting for
Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for
Stock Issued to Employees.”  SFAS No. 123(R) is supplemented by SAB
No. 107 and SAB No. 110 which express the SEC staff’s views regarding the
interaction between SFAS No. 123(R) and certain SEC positions and regulations
including the valuation of share-based payment arrangements.




F-19
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Warrants:




During
2004, BigString granted warrants as payment for advisory
services.  The warrants provided for the purchase of 60,000 shares of
BigString’s common stock at an exercise price of $0.25.  Certain of
these warrants were exercised in 2005, which resulted in 45,000 shares of
BigString’s common stock being issued to the holders thereof.  As a
result of these exercises, BigString received $11,250 in gross
proceeds.  The remainder of these warrants was exercised in 2006,
which resulted in 15,000 shares of BigString’s common stock being issued to the
holder thereof.  As a result of this exercise, BigString recorded a
subscription receivable of $3,750.  In connection with the grant of
these warrants, BigString recorded an expense of $3,500 which is included in
BigString’s consolidated statement of operations for the year ended December 31,
2004.  The fair value of the warrants granted was estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions used: dividend yield of 0%; expected volatility of
47%; risk free rate of return of 5%; and expected life of 2
years.  The weighted average fair value of these warrants was $0.07
per share.




On
January 1, 2005, BigString granted warrants to two consultants as payment for
advisory services. Each warrant provided for the purchase of 50,000 shares of
BigString’s common stock at an exercise price of $0.25 per share.  One
of the warrants was exercised in 2006, which resulted in 50,000 shares of
BigString’s common stock being issued to the holder thereof.  As a
result of this exercise, BigString recorded a subscription receivable of
$12,500.  In addition, the other warrant providing for the purchase of
50,000 shares of BigString’s common stock expired on January 1,
2007.  In connection with the grant of these warrants, BigString
recorded an expense of $7,400 which is included in BigString’s consolidated
statements of operations for the year ended December 31, 2005.  The
fair value of the warrants granted was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used: dividend yield of 0%; expected volatility of 47%; risk free
rate of return of 5%; and expected life of 2 years.  The weighted
average fair value of these warrants was $0.07 per share.




On
September 23, 2005, BigString granted warrants to a consultant, as payment for
advisory services. One warrant provides for the purchase of 1,246,707 shares of
BigString’s common stock with a per share exercise price of $0.16, and the
second warrant provides for the purchase of 1,196,838 shares of BigString’s
common stock with a per share exercise price of $0.20.  Each of these
warrants is due to expire on September 23, 2010 and each grant is
non-forfeitable.  A portion of each warrant, representing 50,000
shares of common stock, was assigned to a third party.  The assigned
portions of the warrants were exercised in 2006, which resulted in 100,000
shares of BigString’s common stock being issued to the holder
thereof.  As a result of these exercises, BigString received $18,000
in gross proceeds.  In connection with the grant of these warrants,
BigString recorded an expense of $171,800 which is included in BigString’s
consolidated statements of operations for the year ended December 31,
2005.  The fair value of the warrants granted was estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions used:  dividend yield of 0%; expected
volatility of 47%; risk free rate of return of 5%; and expected life of 2
years.  The weighted average fair value of these warrants was $0.07
per share.




On May 2,
2006, BigString granted warrants to purchase shares of BigString’s common stock
in consideration for business consultant services to be provided by Lifeline
Industries, Inc.  A total of $135,300 of the deferred compensation in
connection with the warrants is being expensed over a period of 36
months.  For the years ended December 31, 2008 and 2007, BigString
expensed $45,102 and $45,102, respectively, in connection with these services,
and the balance of $15,031 of total unrecognized compensation cost is included
within paid-in-capital on BigString’s consolidated balance sheet.  The
fair value of the warrants granted was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used: dividend yield of 0%; expected volatility of 47%; risk free
rate of return of 5%; and expected life of 2 years.  The weighted
average fair value of these warrants was $0.42 and $0.18 per share.




On
December 1, 2006, BigString granted warrants to two consultants, as payment for
advisory services.  Each warrant provides for the purchase of 50,000
shares of BigString’s common stock at an exercise price of $0.50 per
share.  Each of these warrants is due to expire on December 1,
2011.  In connection with the grant of these warrants, BigString
recorded an expense of $6,530 which is included in BigString’s consolidated
statements of operations for the year ended December 31, 2006. The fair value of
the warrants granted was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used:
dividend yield of 0%; expected volatility of 47%; risk free rate of return of
4%; and expected life of 3 years.  The weighted average fair value of
these warrants was $0.08 per share.




As
discussed in Note 9, on May 1, 2007, BigString granted warrants to purchase up
to 1,991,112 shares of BigString's common stock to the 2007 Subscribers and the
Finder.  Each of the warrants has a term of five years




F-20
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





from May
1, 2007 and was fully vested on the date of issuance. The warrants are
exercisable at $0.30 per share of common stock, as adjusted.  A total
of $31,320 of the purchase price for the convertible notes and warrants was
allocated to the warrants based on fair value.




In
November 2007, BigString repriced warrants to purchase 1,713,334 shares of
common stock previously issued to the 2007 Subscribers, which warrants were
subsequently exercised by the 2007 Subscribers at the reduced exercise
price.  The exercise price of the repriced warrants was reduced from
$0.30 per share to $0.10 per share.  As a result of this repricing,
the warrants with an exercise price of $0.30 per share were deemed cancelled and
new warrants with an exercise price of $0.10 per share were deemed
issued.  In December 2007, five repriced warrants were exercised at
the exercise price of $0.10 per share, which resulted in 1,500,001 shares of
BigString’s common stock being issued to the holders thereof.  As a
result of these exercises, BigString received $150,000 in gross proceeds. In
addition, one repriced warrant was exercised in January 2008 at the exercise
price of $0.10 per share, which resulted in 213,333 shares of BigString’s common
stock being issued to the holder thereof and $21,333 in gross proceeds to
BigString. The fair value of the warrants deemed cancelled and deemed issued was
estimated on the date of approval by the board of directors of BigString using
the Black-Scholes option-pricing model with the following weighted average
assumptions used: dividend yield of 0% and 0%; expected volatility of 69% and
69%; risk free rate of return of 4% and 3%; and expected life of 4 and 0 years
for the deemed cancellation and deemed issue of warrants,
respectively.  The weighted average fair value of the deemed
cancellation and deemed issue of warrants was $0.11 per share and $0.12 per
share, respectively. BigString expensed the net fair value of $19,094 for the
year ended December 31, 2007.




As
discussed in Note 9, on February 29, 2008, BigString granted warrants to
purchase up to 2,706,666 shares of BigString's common stock to the 2008
Subscribers and Finder.  Each of the warrants has a term of five years
from February 29, 2008 and was fully vested on the date of issuance. The
warrants are exercisable at $0.15 per share of common stock, as
adjusted.  A total of $76,176 of the purchase price for the
convertible notes and warrants was allocated to the warrants based on fair
value.




As
discussed in Note 8, on August 25, 2008, BigString granted warrants to purchase
up to 800,000 shares of BigString's common stock to Dwight Lane Capital, LLC and
Marc W. Dutton.  Each of the warrants has a term of ten years from
August 25, 2008 and was fully vested on the date of issuance. The warrants are
exercisable at $0.08 per share of common stock.  The warrants did not
have a conversion discount, and accordingly, no proceeds for the convertible
notes and warrants was allocated to the warrants, based on fair value, and
included as additional paid in capital. As a result of this transaction, certain
warrants to purchase shares of BigString’s common stock issued to the 2007
Subscribers and 2008 Subscribers and Finder were adjusted; this adjustment was
not material.




Information
regarding the warrants outstanding, all of which are exercisable, for 2008 and
2007 is as follows:




Shares
                  
                  
                  Weighted
      Average Exercise Price
                  
                  
                  Weighted
      Average Remaining Contractual Term
                  
                  
                  Aggregate
      Intrinsic ValueWarrants
      outstanding at January 1, 2007
                  
                  
                  3,943,545
                  
                  
                  $
                  0.52Warrants
      granted
                  
                  
                  3,704,446
                  
                  
                  $
                  0.21Warrants
      exercised
                  
                  
                  (1,500,001
                  )
                  
                  $
                  0.10Warrants
      cancelled/forfeited/expired
                  
                  
                  (1,763,334
                  )
                  
                  $
                  0.30Warrants
      outstanding at December 31, 2007
                  
                  
                  4,384,656
                  
                  
                  $
                  0.50
                  
                  
                  
                  4.3
                  
                  
                  $
                  211,916Warrants
      granted
                  
                  
                  9,206,666
                  
                  
                  $
                  0.10Warrants
      exercised
                  
                  
                  (213,333
                  )
                  
                  $
                  0.10Warrants
      cancelled/forfeited/expired
                  
                  
                  (2,984,444
                  )
                  
                  $
                  0.16Warrants
      outstanding at December 31, 2008
                  
                  
                  10,393,545
                  
                  
                  $
                  0.25
                  
                  
                  
                  4.2
                  
                  
                  $
                  -Warrants
      exercisable at December 31, 2007
                  
                  
                  4,384,656
                  
                  
                  $
                  0.50
                  
                  
                  
                  4.3
                  
                  
                  $
                  211,916Warrants
      exercisable at December 31, 2008
                  
                  
                  10,393,545
                  
                  
                  $
                  0.25
                  
                  
                  
                  4.2
                  
                  
                  $
                  -




The
aggregate intrinsic value in the table above represents the total pre-tax
intrinsic value (the aggregate difference between the closing stock prices of
BigString’s common stock on December 31, 2007 and 2008 and the
exercise




F-21
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




prices
for in-the-money warrants) that would have been received by the warrant holders
if all in-the-money warrants had been exercised on December 31, 2007 and 2008,
respectively.




Warrants
granted during the years ended December 31, 2008 and 2007 were 9,206,666 and
3,704,446, respectively.  For the period October 8, 2003 (Date of
Formation) through December 31, 2008, warrants to purchase a total of 17,064,657
shares of BigString’s common stock were granted. The weighted average grant date
fair value of warrants granted in the years ended December 31, 2008 and 2007 was
$0.05 and $0.13, respectively.




Warrants
exercised during the years ended December 31, 2008 and 2007 were 213,333 and
1,500,001, respectively.  Cash received during the years ended
December 31, 2008 and 2007 from the exercise of warrants was $21,333 and
$166,250, respectively.  For the period October 8, 2003 (Date of
Formation) through December 31, 2008, a total of 1,923,334 shares of BigString’s
common stock were purchased upon the exercise of warrants. The total intrinsic
value of warrants exercised in the years ended December 31, 2008 and 2007 was
$29,867 and $243,556, respectively.




During
the year ended December 31, 2007 and the period October 8, 2003 (Date of
Formation) through December 31, 2008, warrants to purchase a total of 50,000
shares of BigString’s common stock expired with an aggregate intrinsic value of
$26,000 at the date of expiration. During the years ended December 31, 2008 and
2007 and the period October 8, 2003 (Date of Formation) through December 31,
2008, warrants to purchase a total of 2,984,444, 1,713,334 and 4,697,778 shares
of common stock, respectively, were cancelled with an aggregate intrinsic value
of $0 at the date of cancellation.




Equity
Incentive Plan and Stock Options Issued to Consultant:




At the
2006 annual meeting of stockholders of BigString, the BigString Corporation 2006
Equity Incentive Plan (the “Equity Incentive Plan”) was adopted and approved by
a majority of BigString’s stockholders.  Under the Equity Incentive
Plan, incentive and nonqualified stock options and rights to purchase
BigString’s common stock may be granted to eligible
participants.  Options are generally priced to be at least 100% of the
fair market value of BigString’s common stock at the date of the
grant.  Options are generally granted for a term of five or ten
years.  Options granted under the Equity Incentive Plan generally vest
between one and five years.




On July
11, 2006, BigString approved the grant of a non-qualified stock option to
purchase 575,100 shares of BigString’s common stock to a vendor. The
non-qualified stock option has a term of five years from July 11, 2006 and an
exercise price of $0.32 per share.  For the year ended December 31,
2006, BigString recorded a consulting expense of $47,775 in connection with the
contractual relationship between Mr. Vogel and BigString.




On July
11, 2006, BigString granted incentive stock options to purchase 2,620,000 shares
of BigString’s common stock under its Equity Incentive Plan to certain of
BigString’s employees.  Incentive stock options to purchase 1,450,000
shares of BigString’s common stock were granted at an exercise price of $0.32
per underlying share with 25% vesting every three months for one year, and
incentive stock options to purchase 1,170,000 shares of BigString’s common stock
were granted at an exercise price of $0.50 per underlying share with vesting
over periods of three and four years.  In addition, non-qualified
stock options to purchase 600,000 shares of BigString’s common stock were
granted to two non-employee directors at an exercise price of $0.50 per
underlying share with vesting over a period of three years.




On
September 18, 2006, BigString granted an incentive stock option to purchase
1,800,000 shares of BigString’s common stock under its Equity Incentive Plan to
a new BigString officer. When vested, 400,000 shares of BigString’s common stock
will be eligible for purchase at the per share price equal to $0.24; 600,000
shares of BigString’s common stock will be eligible for purchase at $0.50 per
share; 400,000 shares of BigString’s common stock will be eligible for purchase
at $.90 per share; and 400,000 shares of BigString’s common stock will be
eligible for purchase at $1.25 per share. The incentive stock option vests
quarterly over a three year period, and the shares of BigString’s common stock
subject to the incentive stock option will vest in order of exercise price, with
the shares with the lower exercise price vesting first.




On
November 14, 2007, BigString granted incentive stock options to purchase
1,275,000 shares of BigString’s common stock under its Equity Incentive Plan to
certain of BigString’s employees.  Incentive stock options were
granted at an exercise price of $0.18 per underlying share with 25% vesting
every three months for one year.  In addition, non-qualified stock
options to purchase 800,000 shares of BigString’s common stock were granted to
three non-employee directors at an exercise price of $0.18 per underlying share
with 25% vesting every three months for one year.




F-22
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




On
January 14, 2008, BigString granted incentive stock options to purchase 800,000
shares of BigString’s common stock under its Equity Incentive Plan to a new
BigString employee.  Incentive stock options were granted at an
exercise price of $0.22 per underlying share with 25% vesting every three months
for one year.  These options were forfeited.




On April
11, 2008, BigString granted incentive stock options to purchase 2,580,000 shares
of BigString’s common stock under its Equity Incentive Plan to certain of
BigString’s employees.  Incentive stock options were granted at an
exercise price of $0.21 per underlying share with 25% vesting every three months
for one year.  In addition, non-qualified stock options to purchase
1,000,000 shares of BigString’s common stock were granted to two non-employee
directors at an exercise price of $0.21 per underlying share with 25% vesting
every three months for one year.




On
October 13, 2008, BigString granted incentive stock options to purchase 300,000
shares of BigString’s common stock under its Equity Incentive Plan to a
BigString employee.  Incentive stock options were granted at an
exercise price of $0.10 per underlying share with 25% vesting every three months
for one year.




On
November 17, 2008, BigString granted non-qualified stock options to purchase
300,000 shares of BigString’s common stock to a BigString vendor under a
partnering arrangement.  The stock options were granted at an exercise
price of $0.08 per underlying share with 25% vesting every three months for one
year.




For the
years ended December 31, 2008 and 2007 and the period October 8, 2003 (Date of
Formation) through December 31, 2008, BigString recorded stock-based option
compensation expense of $341,036, $86,764 and $514,273,
respectively.  SFAS No. 123(R) requires forfeitures to be estimated at
the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from initial estimates.  Stock-based compensation
expense was recorded net of estimated forfeitures.




Information
regarding the stock options outstanding during the years ended December 31, 2008
and 2007 is as follows:




Shares
                  
                  
                  Weighted
      Average Exercise Price
                  
                  
                  Weighted
      Average Remaining Contractual Term
                  
                  
                  Aggregate
      Intrinsic ValueOptions
      outstanding at January 1, 2007
                  
                  
                  5,595,100
                  
                  
                  $
                  0.50Options
      granted
                  
                  
                  2,075,000
                  
                  
                  $
                  0.18Options
      exercised
                  
                  
                  -
                  
                  
                  $
                  -Options
      cancelled/forfeited/expired
                  
                  
                  (520,000
                  )
                  
                  $
                  0.43Options
      outstanding at December 31, 2007
                  
                  
                  7,150,100
                  
                  
                  $
                  0.41
                  
                  
                  
                  7.7
                  
                  
                  $
                  221,575Options
      granted
                  
                  
                  4,980,000
                  
                  
                  $
                  0.20Options
      exercised
                  
                  
                  -
                  
                  
                  $
                  -Options
      cancelled/forfeited/expired
                  
                  
                  (2,180,000
                  )
                  
                  $
                  0.27Options
      outstanding at December 31, 2008
                  
                  
                  9,950,100
                  
                  
                  $
                  0.33
                  
                  
                  
                  5.5
                  
                  
                  $
                  -Options
      exercisable at December 31, 2007
                  
                  
                  3,012,600
                  
                  
                  $
                  0.36
                  
                  
                  
                  5.5
                  
                  
                  $
                  12,000Options
      exercisable at December 31, 2008
                  
                  
                  7,175,100
                  
                  
                  $
                  0.32
                  
                  
                  
                  5.6
                  
                  
                  $
                  -




The
aggregate intrinsic value in the table above represents the total pre-tax
intrinsic value (the aggregate difference between the closing stock prices of
BigString’s common stock on December 31, 2007 and 2008 and the exercise prices
for in-the-money options) that would have been received by the option holders if
all in-the-money warrants had been exercised on December 31, 2007 and 2008,
respectively.




Options
granted during the years ended December 31, 2008 and 2007 were 4,980,000 and
2,075,000, respectively.  For the period October 8, 2003 (Date of
Formation) through December 31, 2008, options to purchase a total of 12,650,100
shares of BigString’s common stock were granted. The weighted average grant date
fair value of options granted in the years ended December 31, 2008 and 2007 was
$0.07 and $0.05, respectively.




No
options were exercised, and no cash received from option exercises and purchases
of shares for the years ended December 31, 2008 and 2007 and the period October
8, 2003 (Date of Formation) through December 31, 2008. The




F-23
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




total tax
benefit attributable to options exercised in the years ended December 31, 2008
and 2007 and the period October 8, 2003 (Date of Formation) through December 31,
2008 was $0.




During
the years ended December 31, 2008 and 2007 and the period October 8, 2003 (Date
of Formation) through December 31, 2008, options to purchase a total of
2,180,000, 520,000 and 2,700,000 shares of BigString’s common stock were
cancelled, forfeited or expired with an aggregate intrinsic value of $0 at the
date of expiration.




The fair
value of each option award is estimated on the date of grant using the
Black-Scholes valuation model, consistent with the provisions of SFAS No. 123(R)
and SAB No. 107.  Because option-pricing models require the use of
subjective assumptions, changes in these assumptions can materially affect the
fair value of the options.  We have limited relevant historical
information to support the expected exercise behavior because our stock has been
publicly traded only since May 1, 2006.




The
following table presents the weighted-average assumptions used to estimate the
fair values of the stock options granted in the periods presented:




Years
      Ended
                    December 31,
                  
                  
                  Period
                    October 8,
      2003
                    (Date
      of Formation)
                    Through2008
                  
                  
                  2007
                  
                  
                  December 31,
      2008Risk-free
      interest rate
                  
                  
                  1.79
                  %
                  
                  
                  3.61
                  %
                  
                  
                  3.52
                  %Expected
      volatility
                  
                  
                  99
                  %
                  
                  
                  69
                  %
                  
                  
                  67
                  %Expected
      life (in years)
                  
                  
                  1.5
                  
                  
                  
                  1.5
                  
                  
                  
                  2.0Dividend
      yield
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -




The
risk-free interest rate is based on the U.S. Treasury yield for a term
consistent with the expected life of the awards in effect at the time of the
grant.




BigString
estimates the volatility of its common stock at the date of the grant based on
historical volatility, expected volatility and publicly traded peer
companies.




The
expected life of stock options granted under the Equity Incentive Plan is based
on management judgment, historical experience and publicly traded peer
companies.




BigString
has no history or expectations of paying cash dividends on its common
stock.




NOTE
13. COMMITMENTS AND CONTINGENCIES




Leases:




BigString
leases its facilities which require BigString to pay certain executory costs
(such as insurance and maintenance). Future minimum lease payments for operating
leases are approximately as follows:




Years
      Ending December 31,
                    
                    Minimum
      Lease Payments2009
                    
                    $
                    12,247$
                    12,247




Rental
expense was $36,400, $47,720 and $195,109 for the years ended December 31, 2008
and 2007, and for the period October 8, 2003 (Date of Formation) through
December 31, 2008, respectively.




Computer
co-location, power and Internet access expense was $56,728, $55,583 and $181,882
for the years ended December 31, 2008 and 2007, and for the period October 8,
2003 (Date of Formation) through December 31, 2008, respectively.




F-24
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Consulting
Agreements:




On
January 27, 2004, BigString entered into an agreement with Greene Inc.
Communications to provide public relations services.  In consideration
for services performed, BigString agreed to issue to Howard Greene 140,000
shares of common stock in April, 2005 and 192,000 shares of common stock in
February, 2007.  Total public relation expenses, including the
services of Greene Inc. Communications, were $155,351 and $42,944 for the years
ended December 31, 2008 and 2007, and $301,799 for the period October 8, 2003
(Date of Formation) through December 31, 2008. Share-based compensation for the
year ended December 31, 2007 was $96,000.




On May 2,
2006, BigString signed a three-year business consultant services agreement with
Lifeline Industries, Inc.  In consideration for the services to be
performed under the agreement, BigString issued to Lifeline Industries, Inc. (1)
1,250,000 shares of common stock, (2) a fully vested, five year warrant to
purchase 225,000 shares of common stock at a per share purchase price of $0.48,
and (3) a fully vested, five year warrant to purchase 225,000shares of common stock
at a per share purchase price of $1.00.  BigString incurred
corresponding consulting expenses of $386,764, $386,768 and $1,031,374 for the
years ended December 31, 2008 and 2007, and for the period October 8, 2003 (Date
of Formation) through December 31, 2008, respectively.




On
February 28, 2008, BigString signed a three month, renewable, consulting
agreement with OTC Financial Network, a division of National Financial
Communications Corp., to provide investor relations services. Expenses for the
year ended December 31, 2008 were $80,000.




On March
18, 2008, BigString signed a month-to-month consulting agreement with Jayson
Marketing Group, Inc. to provide public relations and event marketing services.
Expenses for the year ended December 31, 2008 were $39,587.




On April
1, 2008, BigString signed an agreement with Medialink Worldwide, Inc. to provide
media services. Expenses for the year ended December 31, 2008 were
$23,000.




On April
2, 2008, BigString signed a one month agreement with Coburn Communications, Inc.
for Bill Stanton to provide public relations and marketing services. Expenses
for the year ended December 31, 2008 were $31,000.




On July
1, 2008, BigString signed a one month agreement with Lebed Biz, LLC to provide
investor relations services. Expenses for the year ended December 31, 2008 were
$20,000.




Marketing
Affiliate Commitments:




In
connection with contracts to provide email services to marketing affiliates,
BigString may be obligated to make payments, which may represent a portion of
net advertising revenues, to its marketing affiliates.  As of December
31, 2008 and 2007, and for the period October 8, 2003 (Date of Formation)
through December 31, 2008, these commitments were not material.




Other
Commitments:




In the
ordinary course of business, BigString may provide indemnifications to
customers, vendors, lessors, marketing affiliates, directors, officers and other
parties with respect to certain matters.  It is not possible to
determine the aggregate maximum potential loss under these indemnification
agreements due to the limited history of prior indemnification claims and unique
circumstances involved in each agreement.  Historically, BigString has
not incurred material costs as a result of obligation under these agreements and
has not accrued any liabilities related to such agreements.




As of
December 31, 2008, BigString did not have any relationships with unconsolidated
entities or financial partnerships, such as structured finance or special
purpose entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other limited
purposes.  BigString is not exposed to financing, liquidity, market or
credit risks that could arise under such relationships.




NOTE
14. SUBSEQUENT EVENTS




None.




F-25
 Index


INDEXOF EXHIBITS




Exhibit No.
                                            Description of Exhibit3.1.1
                                            Certificate
      of Incorporation of BigString, placed into effect on October 8, 2003,
      incorporated by reference to Exhibit 3.1.1 to the Registration Statement
      on Form SB-2 (Registration No. 333-127923) filed with the SEC on August
      29, 2005.3.1.2
                                            Certificate
      of Amendment to the Certificate of Incorporation of BigString, placed into
      effect on July 19, 2005, incorporated by reference to Exhibit 3.1.2 to the
      Registration Statement on Form SB-2 (Registration No. 333-127923) filed
      with the SEC on August 29, 2005.3.1.3
                                            Certificate
      of Designations of Series A Preferred Stock, par value $0.0001 per share,
      of BigString, incorporated by reference to Exhibit 3.1.3 to the Current
      Report on Form 8-K filed with the SEC on May 22, 2006.3.2
                                            Amended
      and Restated By-laws of BigString, incorporated by reference to Exhibit
      3.2 to the Registration Statement on Form SB-2 (Registration No.
      333-127923) filed with the SEC on August 29, 2005.4.1
                                            Specimen
      certificate representing BigString’s common stock, par value $.0001 per
      share, incorporated by reference to Exhibit 4.1 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.4.2
                                            Form
      of Convertible Note, dated May 1, 2007, issued to the following entities
      and in the following amounts: Whalehaven Capital Fund Limited ($250,000);
      Alpha Capital Anstalt ($250,000); Chestnut Ridge Partners LP ($125,000);
      Iroquois Master Fund Ltd. ($125,000); and Penn Footwear ($50,000),
      incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K
      filed with the SEC on May 3, 2007.4.3
                                            Form
      of Convertible Note, dated February 29, 2008, issued to the following
      subscribers and in the following amounts: Whalehaven Capital Fund Limited
      ($250,000); Alpha Capital Anstalt ($250,000); and Excalibur Small Cap
      Opportunities LP ($200,000), incorporated by reference to Exhibit 4.3 to
      the Current Report on Form 8-K filed with the SEC on March 6,
      2008.4.4
                                            Non-Negotiable
      Convertible Promissory Note, dated August 25, 2008, issued to Dwight Lane
      Capital, LLC, in the amount of $175,000, incorporated by reference to
      Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on August
      27, 2008.4.5
                                            Non-Negotiable
      Convertible Promissory Note, dated August 25, 2008, issued to Marc W.
      Dutton, in the amount of $75,000, incorporated by reference to Exhibit 4.2
      to the Current Report on Form 8-K filed with the SEC on August 27,
      2008.10.1
                                            Registration
      Rights Agreement, dated August 10, 2005, between BigString and AJW New
      Millennium Offshore, Ltd., incorporated by reference to Exhibit 10.1 to
      the Registration Statement on Form SB-2 (Registration No. 333-127923)
      filed with the SEC on August 29, 2005.10.2
                                            Registration
      Rights Agreement, dated August 10, 2005, between BigString and AJW
      Partners, LLC, incorporated by reference to Exhibit 10.2 to the
      Registration Statement on Form SB-2 (Registration No. 333-127923) filed
      with the SEC on August 29,
2005.


E-1
 Index




10.3
                                        Registration
      Rights Agreement, dated August 10, 2005, between BigString and AJW
      Qualified Partners, LLC, incorporated by reference to Exhibit 10.3 to the
      Registration Statement on Form SB-2 (Registration No. 333-127923) filed
      with the SEC on August 29, 2005.10.4
                                        Registration
      Rights Agreement, dated June 17, 2005, between BigString and David Matthew
      Arledge, incorporated by reference to Exhibit 10.4 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.10.5
                                        Registration
      Rights Agreement, dated June 17, 2005, between BigString and David A.
      Arledge, incorporated by reference to Exhibit 10.5 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.10.6
                                        Registration
      Rights Agreement, dated July 31, 2005, between BigString and Jeffrey M.
      Barber and Jo Ann Barber, incorporated by reference to Exhibit 10.6 to the
      Registration Statement on Form SB-2 (Registration No. 333-127923) filed
      with the SEC on August 29, 2005.10.7
                                        Registration
      Rights Agreement, dated June 17, 2005, between BigString and Nicholas
      Codispoti, incorporated by reference to Exhibit 10.7 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.10.8
                                        Registration
      Rights Agreement, dated June 17, 2005, between BigString and Nicholas
      Codispoti, IRA Account, incorporated by reference to Exhibit 10.8 to the
      Registration Statement on Form SB-2 (Registration No. 333-127923) filed
      with the SEC on August 29, 2005.10.9
                                        Registration
      Rights Agreement, dated June 17, 2005, between BigString and Nicholas
      Codispoti, President, Codispoti Foundation, incorporated by reference to
      Exhibit 10.9 to the Registration Statement on Form SB-2 (Registration No.
      333-127923) filed with the SEC on August 29, 2005.10.10
                                        Registration
      Rights Agreement, dated June 17, 2005, between BigString and Jon M.
      Conahan, incorporated by reference to Exhibit 10.10 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.10.11
                                        Registration
      Rights Agreement, dated July 31, 2005, between BigString and Michael
      Dewhurst, incorporated by reference to Exhibit 10.11 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.10.12
                                        Registration
      Rights Agreement, dated June 17, 2005, between BigString and Theodore
      Fadool, Jr., incorporated by reference to Exhibit 10.12 to the
      Registration Statement on Form SB-2 (Registration No. 333-127923) filed
      with the SEC on August 29, 200510.13
                                        Registration
      Rights Agreement, dated June 17, 2005, between BigString and Charles S.
      Guerrieri, incorporated by reference to Exhibit 10.13 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.10.14
                                        Registration
      Rights Agreement, dated August 9, 2005, between BigString and James R.
      Kauffman and Barbara Kauffman, incorporated by reference to Exhibit 10.14
      to the Registration Statement on Form SB-2 (Registration No. 333-127923)
      filed with the SEC on August 29, 2005.10.15
                                        Registration
      Rights Agreement, dated July 31, 2005, between BigString and Joel Marcus,
      incorporated by reference to Exhibit 10.15 to the Registration Statement
      on Form SB-2 (Registration No. 333-127923) filed with the SEC on August
      29,
2005.




E-2
 Index




10.16
                                  Registration
      Rights Agreement, dated August 10, 2005, between BigString and New
      Millennium Capital Partners II, LLC, incorporated by reference to Exhibit
      10.16 to the Registration Statement on Form SB-2 (Registration No.
      333-127923) filed with the SEC on August 29, 2005.10.17
                                  Registration
      Rights Agreement, dated July 31, 2005, between BigString and Richard and
      Georgia Petrone, incorporated by reference to Exhibit 10.17 to the
      Registration Statement on Form SB-2 (Registration No. 333-127923) filed
      with the SEC on August 29, 2005.10.18
                                  Registration
      Rights Agreement, dated July 31, 2005, between BigString and David and Kim
      Prado, incorporated by reference to Exhibit 10.18 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.10.19
                                  Registration
      Rights Agreement, dated August 4, 2005, between BigString and Marc
      Sandusky, incorporated by reference to Exhibit 10.19 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.10.20
                                  Registration
      Rights Agreement, dated August 6, 2005, between BigString and Shefts
      Family LP, incorporated by reference to Exhibit 10.20 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.10.21
                                  Registration
      Rights Agreement, dated June 17, 2005, between BigString and Thomas
      Shields, incorporated by reference to Exhibit 10.21 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.10.22
                                  Agreement,
      dated December 1, 2005, by and among BigString and the following selling
      stockholders:  AJW New Millennium Offshore, Ltd., AJW Qualified
      Partners, LLC, AJW Partners, LLC, David M. Arledge, David A. Arledge,
      Susan Baran, Jeffrey M. Barber and JoAnn Barber, Nicholas Codispoti,
      Nicholas Codispoti, IRA, Codispoti Foundation, Jon M. Conahan, Dean G.
      Corsones, Michael Dewhurst, Marc Dutton, Theodore Fadool, Jr., Howard
      Greene, Harvey M. Goldfarb, Charles S. Guerrieri, Brenda L. Herd and Glenn
      A. Herd, Herd Family Partnership, Ronald C. Herd and Michele Herd, Steven
      Hoffman, James R. Kaufman and Barbara Kaufman, Jeffrey Kay and Lisa Kay,
      Gerald Kotkin, Paul A. Levis PSP, Joel Marcus, Barbara A. Musco and Barrie
      E. Bazar, Craig Myman, New Millennium Capital Partners II, LLC, Alfred
      Pantaleone, Sara R. Pasquarello, Richard P. Petrone and Georgia Petrone,
      David Prado and Kim Prado, Lee Rosenberg, Todd M. Ross, Marc Sandusky,
      Adam Schaffer, H. Joseph Sgroi, Shefts Family LP, Thomas Shields, Mark
      Yuko, Bradley Zelenitz and Shefts Associates, Inc., incorporated by
      reference to Exhibit 10.24 to the Annual Report on Form 10-KSB filed with
      the SEC on March 31, 2006.10.23
                                  Business
      Consultant Services Agreement by and between BigString and Shefts
      Associates, Inc., incorporated by reference to Exhibit 10.30 to Amendment
      No. 1 to the Registration Statement on Form SB-2 (Registration No.
      333-127923) filed with the SEC on October 21, 2005.10.24
                                  Lease
      between BigString, as Tenant, and Walter Zimmerer & Son, as Landlord,
      dated February 3, 2009, for the premises located at 157 Broad Street,
      Suite 109, Red Bank, New Jersey 07701.10.25
                                  Business
      Consultant Services Agreement, dated May 2, 2006, by and between BigString
      and Lifeline Industries, Inc., incorporated by reference to Exhibit 10.32
      to the Current Report on Form 8-K filed with the SEC on May 4,
      2006.


E-3
 Index




10.26
                                          Securities
      Purchase Agreement, dated as of May 19, 2006, by and among BigString andWitches Rock
      Portfolio Ltd.,The Tudor BVI Global
      Portfolio Ltd.andTudor Proprietary Trading, L.L.C., including Schedule 1 – Schedule
      of Purchasers, and Exhibit C – Form of Warrant.  Upon the
      request of the SEC, BigString agrees to furnish copies of each of the
      following schedules and exhibits:  Schedule
      2-3.2(d) – Warrants; Schedule 2-3.3
      – Registration Rights; Schedule 2-3.7
      – Financial Statements; Schedule 2-3.10
      – Broker’s or Finder’s Fees; Schedule 2-3.11
      – Litigation; Schedule 2-3.16
      – Intellectual Property Claims Against the Company; Schedule 2-3.17
      – Subsidiaries; Schedule
      2-3.19(a) – Employee Benefit Plans; Schedule 2-3.22
      – Material Changes; Exhibit A –
      Form of Certificate of Designations of the Series A Preferred Stock; Exhibit B –
      Form of Registration Rights Agreement; Exhibit D –
      Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion, incorporated
      by reference to Exhibit 10.33 to the Current Report on Form 8-K filed with
      the SEC on May 22, 2006.10.27
                                          Registration
      Rights Agreement, dated as of May 19, 2006, by and among BigString and
      Witches Rock Portfolio Ltd., The Tudor BVI Global Portfolio Ltd. and
      Tudor Proprietary Trading, L.L.C., incorporated by reference to Exhibit
      10.34 to the Current Report on Form 8-K filed with the SEC on May 22,
      2006.10.28
                                          Asset Purchase Agreement,
      dated as of May 19, 2006,
      by and between BigString andRobb Knie.  Upon the
      request of the SEC, BigString agrees to furnish a copy of Exhibit A –
      Form of Registration Rights Agreement, and Exhibit B –
      Investor Suitability Questionnaire, incorporated by reference to Exhibit
      10.35 to the Current Report on Form 8-K filed with the SEC on May 22,
      2006.10.29
                                          Registration
      Rights Agreement, dated as of May 19, 2006, by and between BigString and
      Robb Knie, incorporated by reference to Exhibit 10.36 to the Current
      Report on Form 8-K filed with the SEC on May 22, 2006.10.30
                                          Stock
      Redemption Agreement, dated May 31, 2006, by and between BigString and
      David L. Daniels, incorporated by reference to Exhibit 10.37 to the
      Registration Statement on Form SB-2 (Registration No. 333-135837) filed
      with the SEC on July 18, 2006.10.31
                                          Stock
      Redemption Agreement, dated May 31, 2006, by and between BigString and
      Deborah K. Daniels, incorporated by reference to Exhibit 10.38 to the
      Registration Statement on Form SB-2 (Registration No. 333-135837) filed
      with the SEC on July 18, 2006.10.32
                                          Stock
      Redemption Agreement, dated May 31, 2006, by and between BigString and
      Charles A. Handshy, Jr., incorporated by reference to Exhibit 10.39 to the
      Registration Statement on Form SB-2 (Registration No. 333-135837) filed
      with the SEC on July 18, 2006.10.33
                                          Stock
      Redemption Agreement, dated May 31, 2006, by and between BigString and
      June E. Handshy, incorporated by reference to Exhibit 10.40 to the
      Registration Statement on Form SB-2 (Registration No. 333-135837) filed
      with the SEC on July 18, 2006.10.34
                                          Letter
      Agreement, dated September 18, 2006, between BigString and Robert
      DeMeulemeester, incorporated by reference to Exhibit 10.41 to the Current
      Report on Form 8-K filed with the SEC on September 21,
    2006.10.35
                                          BigString
      Corporation 2006 Equity Incentive Plan, incorporated by reference to
      Exhibit 10.42 to the Annual Report on Form 10-KSB filed with the SEC on
      April 2, 2007.10.35.1
                                          Form
      of Incentive Option Agreement (Employees), incorporated by reference to
      Exhibit 10.42.1 to the Annual Report on Form 10-KSB filed with the SEC on
      April 2,
2007.




E-4
 Index




10.35.2
                                              Form
      of Director Option Agreement (Non-employee
      Directors),  incorporated by reference to Exhibit 10.42.2 to the
      Annual Report on Form 10-KSB filed with the SEC on April 2,
      2007.10.36
                                              Subscription
      Agreement, dated as of April 30, 2007, by and among BigString andWhalehaven
      Capital Fund Limited, Alpha Capital Anstalt, Chestnut Ridge Partners LP,
      Iroquois Master Fund Ltd. and Penn Footwear, including Exhibit B –
      Form of Common Stock Purchase Warrant.  Upon the request of the
      Securities and Exchange Commission, BigString agrees to furnish copies of
      each of the following schedules and exhibits:  Schedule 5(a) –
      Subsidiaries; Schedule 5(d) –
      Additional Issuances/Capitalization; Schedule 5(f) –
      Conflicts; Schedule 5(q) –
      Undisclosed Liabilities; Schedule 5(v) –
      Transfer Agent; Schedule 8 –
      Finder’s Fee; Schedule 9(s) –
      Lockup Agreement Providers; Schedule
      11.1(iv) – Additional Securities to be Included in the Registration
      Statement; Exhibit A –
      Form of Convertible Note (included as Exhibit 4.2); Exhibit C –
      Form of Escrow Agreement; Exhibit D –
      Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion; Exhibit E –
      Proposed Public Announcement; and Exhibit F –
      Form of Lock-Up Agreement, incorporated by reference to Exhibit 10.43 to
      the Current Report on Form 8-K filed with the SEC on May 3,
      2007.10.37
                                              Agreement,
      Waiver and Limited Release, dated as of November 30, 2007, by and among
      BigString and the Releasors, incorporated by reference to Exhibit 10.37 to
      the Current Report on Form 8-K filed with the SEC on December 5,
      2007.10.38
                                              Subscription
      Agreement, dated as of February 29, 2008, by and among BigString andWhalehaven
      Capital Fund Limited, Alpha Capital Anstalt and Excalibur Small Cap
      Opportunities LP, including Exhibit B –
      Form of Common Stock Purchase Warrant.  Upon the request of the
      Securities and Exchange Commission, BigString agrees to furnish copies of
      each of the following schedules and exhibits:  Schedule 5(a) –
      Subsidiaries; Schedule 5(d) –
      Additional Issuances/Capitalization; Schedule 5(f) –
      Conflicts; Schedule 5(q) –
      Undisclosed Liabilities; Schedule 5(v) –
      Transfer Agent; Schedule 8 –
      Finder’s Fee; Schedule 9(s) –
      Lockup Agreement Providers; Exhibit A –
      Form of Convertible Note (included as Exhibit 4.2); Exhibit C –
      Form of Escrow Agreement; Exhibit D –
      Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion; Exhibit E –
      Proposed Public Announcement; and Exhibit F –
      Form of Lock-Up Agreement, incorporated by reference to Exhibit 10.44 to
      the Current Report on Form 8-K filed with the SEC on March 6,
      2008.10.39
                                              Common
      Stock Purchase Warrant, dated August 25, 2008, issued to Dwight Lane
      Capital, LLC, incorporated by reference to Exhibit 10.1 to the Current
      Report on Form 8-K filed with the SEC on August 27,
  2008,10.40
                                              Common
      Stock Purchase Warrant, dated August 25, 2008, issued to Marc W. Dutton,
      incorporated by reference to Exhibit 10.2 to the Current Report on Form
      8-K filed with the SEC on August 27, 2008.21.1
                                              Subsidiaries
      of BigString.23.1
                                              Consent
      of Wiener, Goodman and Company, P.C., independent registered public
      accountants, as to the report relating to the consolidated financial
      statements of BigString.24.1
                                              Powers
      of Attorney of officers and directors of BigString, included in the
      signature page to this report.31.1
                                              Section
      302 Certification of Chief Executive Officer.31.2
                                              Section
      302 Certification of Chief Financial Officer.32.1
                                              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section
    1350.




E-5
 Index





32.2
                Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section
    1350.






E-6