UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-KSB





(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, 2007





 ̈
            TRANSITION
      REPORT UNDER 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(Name
      of small business issuer in its charter)








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








3 Harding Road, Suite E, Red Bank, New
      Jersey
            
            07701(Address
      of principal executive offices)
            
            (Zip
      Code)





Issuer’s telephone
number:  (732)
741-2840





Securities
registered under Section 12(b) of the Exchange Act:  None





Securities
registered under Section 12(g) of the Exchange Act:





Common
      Stock, par value $0.0001(Title
      of class)


Check whether the issuer is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act.   ̈





Check whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes  x
No   ̈










Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B contained in this
form, and no disclosure will 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-KSB or any amendment to this Form
10-KSB.    ̈





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





Revenues for the year ended December
31, 2007:  $41,165.





The aggregate market value of the
shares of the Registrant’s common stock, par value $0.0001 per share, held by
non-affiliates of the Registrant, as of March 28, 2008, was
$7,207,915.





As of March 28, 2008, 51,052,681 shares
of the Registrant’s common stock were outstanding.




DOCUMENTS INCORPORATED BY
REFERENCE





Part III of this Annual Report on Form
10-KSB incorporates certain information by reference from the Registrant’s Proxy
Statement for the Annual Meeting of Stockholders scheduled to be held on May 29,
2008.  The Proxy Statement will be filed with the Securities and
Exchange Commission (the “SEC”) on or before April 29, 2008.





Transitional Small Business Disclosure
Format (check one):  Yes   ̈No  x







SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS





Certain information included in this
Annual Report on Form 10-KSB 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-KSB.





BIGSTRING CORPORATION





INDEX TO FORM
10-KSB





PART
      I
            
            
            
            PAGEItem
      1.
            
            Description of Business
            
            1Item
      2.
            
            Description of Property
            
            10Item
      3.
            
            Legal Proceedings
            
            10Item
      4.
            
            Submission of Matters to a Vote of Security
      Holders
            
            10PART
      IIItem
      5.
            
            Market for Common Equity, Related Stockholder Matters and Small
      Business Issuer Purchases of Equity Securities
            
            11Item
      6.
            
            Management’s Discussion and Analysis or Plan of
      Operation
            
            14Item
      7.
            
            Financial Statements
            
            25Item
      8.
            
            Changes In and Disagreements With Accountants on Accounting and
      Financial Disclosure
            
            25Item
      8A(T).
            
            Controls and Procedures
            
            25Item
      8B.
            
            Other Information
            
            26PART
      IIIItem
      9.*
            
            Directors, Executive Officers, Promoters, Control Persons and
      Corporate Governance; Compliance With Section 16(a) of the Exchange
      Act
            
            27Item
      10.*
            
            Executive Compensation
            
            27Item
      11.*
            
            Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
            
            27Item
      12.*
            
            Certain Relationships and Related Transactions and Director
      Independence
            
            27Item
      13.
            
            Exhibits
            
            27Item
      14.*
            
            Principal Accountant Fees and Services
            
            27Signatures
            
            28





*
            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, 2008, and is incorporated herein by
      reference.  The Proxy Statement will be filed with the SEC on or
      before April 29, 2008.


Index to Consolidated Financial Statements
            
            F-1Index to Exhibits
            
            E-1





Index


PART
I





Item
      1.
            Description of
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.  BigString Interactive is currently
BigString’s only operating subsidiary.




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
has developed an innovative messaging service that allows users to easily send,
recall, erase, self-destruct and secure email transmissions. BigString’s goal is
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




In the past several years, 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 our email services.  Advertisements are
primarily displayed to users of our free service.  Advertisements
customarily include text and banner ads


1
 Index


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 recently 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 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.





The low
average cost per lead for email marketing (6% of that for direct mail) has
created a rapidly growing service industry.  Most firms outsource
email marketing to service providers.  Our enterprise level offerings,
BigString Marketer Pro
and BigString Marketer
SMB, allow for the sending of interactive video email commercials that
can be programmed to self-destruct at a set time.  This advertising
medium permits advertisers to send video email messages and commercials to their
customers that introduce a sense of urgency and excitement by creating
time-sensitive video offers that self destruct.  Interactive
self-destructing video email commercials enable marketers to create a call for
action that generally is not possible with traditional email
marketing.  We pursue marketing affiliations where we offer unique
capabilities to existing email marketers as well as outsourced services to
advertisers seeking call to action email marketing.





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.


2
 Index


Promotion




We
promote our email 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.DailyLOL.com, www.FindItAll.com
and the OurPrisoner interactive Internet television program, which debuted in
June 2006 and concluded its six month run in December 2006.





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 Messaging and Email
Services– BigString is a web-based, POP3 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.





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.


3
 Index


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, which replaced
BigString Beta 2.0, launched in December 2006. 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
      January 2007, BigString introduced self-destructing video email that can
      be programmed to self-destruct after a specific number of viewings or a
      set time. Also in January 2007, BigString launched Chinese versions of our
      email service.




·
            In
      February 2007, BigString began offering a hosted video email marketing
      platform with interactive video email commercials that can be programmed
      to self-destruct at a set time; this advertising medium creates a sense of
      urgency through time-sensitive
offers.




·
            In
      March 2007, BigString began offering private label email services to
      clients to expand its customer base and create additional exposure for
      advertising partners.




·
            In
      June 2007, BigString launched Version 3.0 which provided users with four
      Gigabytes of storage – two GB of email and two GB of file storage, as well
      as 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.




·
            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.


4
 Index


·
            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.




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
Marketing




·
            BigString
      Marketer SMB (Small & Medium Businesses) ($499.95+ per
      year).




·
            BigString
      Marketer Pro (Enterprise level) ($20,000.00 per year + revenue
      share).




Email
Hosting




·
            BigString
      Co-branded Email (No Charge).




·
            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).




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.


5
 Index


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 Marketer SMB
provides a hosted video email marketing platform for small and medium size
businesses.  Customized video players, campaign wizards and tracking
reports deliver tools for cost effective marketing.




BigString Marketer Pro
provides an enterprise marketing software application which allows for the
sending of interactive video email commercials that can be programmed to
self-destruct at a set time.




BigString Co-branded Emailprovides 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.




BigString Private Label Email
offers web publishers and content sites all the features of BigString Co-branded Email,
in a package which is private labeled, or white labeled, and offers a revenue
share of advertising and/or premium fees generated by BigString.




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.




Following
the release of BigString Beta 2.0 in December 2006, BigString began compiling
new email and webpage metrics.  From December 31, 2006, to December
31, 2007, product usage has grown among active users as follows:




Product
            
            GrowthBigString
      Free Email
            
            
            504
            %BigString
      Premium Email
            
            
            41
            %BigString
      Business Email
            
            
            608
            %Active
      Email Accounts
            
            
            470
            %







During
2007, members accessed over 150 million pages, averaging 60 pages per sign-in
and 148 pages per unique daily sign-in.




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


6
 Index


·
            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.


7
 Index


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




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 service mark for the word “BigString,” Serial
No. 78336856; our service mark for the word “Our Prisoner,” Serial No. 78751930;
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 patent for
Universal Recallable, Erasable and Timed Delivery Email will expire 20 years
following the date our patent application was filed or on April 18,
2024.  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 26, 2008, BigString email visitors accessed
www.BigString.com from 207 countries/territories, compared to 190
countries/territories as of December 31, 2007, 111 countries/territories as of
March 31, 2007 and 60 countries/territories as of December 31,
2006.  The top five countries by visits to www.BigString.com are as
follows: United States 62%, United Kingdom 7%, Canada 6%, India 4%, and
Australia 2%, followed by Germany, Italy, Philippines, Brazil and
Malaysia.




In
January 2007, BigString launched Chinese versions of BigString’s recallable,
erasable, and self-destructing email and video email service.  They
are available at www.BigString.cn and
www.BigString.com.cn.  This launch has opened an enormous new
market for our user-controllable email and messaging.  With the launch
of BigString in both traditional and modern Chinese, the company has opened a
significant avenue for further user growth.  BigString brings privacy
innovations which it believes are not generally available to Chinese users with
any other email service.  The recallable, erasable and
self-destructing features in the company’s regular email service are available
in the Chinese version. In January 2008, we added a new video email
platform.


8
 Index


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 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 six full-time employees, reduced from ten full-time employees as
of January 2007, and three part-time employees. As previously reported,
BigString hired a Chief Technology Officer in January 2008.  As of
March 2008, he is no longer in the employ of BigString. We believe that our
relationship with  our employees is satisfactory.  We have
not suffered any labor problems since our inception.




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.


9
 Index


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.






Item
      2.
            Description of
Property




We occupy space at 3 Harding Road,
Suite E, 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 this location. Our Red Bank offices have
approximately 2,556 square feet of office space.  Our operating lease
for this premises expires on May 31, 2008.  The current occupancy rate
is $3,780.00 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.








Item
      3.
            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.






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




None.


10
 Index


PART
II




Item
      5.
            Market
      for 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, 2007
            
            High
            
            
            LowFirst
      Quarter
            
            $
            0.75
            
            
            $
            0.25Second
      Quarter
            
            $
            0.43
            
            
            $
            0.26Third
      Quarter
            
            $
            0.27
            
            
            $
            0.13Fourth
      Quarter
            
            $
            0.32
            
            
            $
            0.06Year
      Ended December 31, 2006Second
      Quarter (Commenced May 2, 2006)
            
            $
            0.86
            
            
            $
            0.44Third
      Quarter
            
            $
            0.48
            
            
            $
            0.25Fourth
      Quarter
            
            $
            0.77
            
            
            $
            0.24







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 28, 2008, we had over twenty market makers for our
common stock, including:  Archipelago Trading Services, Inc.,
Citigroup Global Markets, Inc., D. Weckstein & Co., Inc., Domestic
Securities, Inc., E*Trade Capital Markets LLC, Hill Thompson Magid and Co.,
Inc., Hudson Securities, Inc., Knight Equity Markets, L.P., LaBranche Financial
Services, Inc., Merriman Curhan Ford & Co., Natexis Bleichroeder Inc.,
Pershing LLC, Seton Securities Group, Inc., Sterne, Agee & Leach, Inc., The
Vertical Trading Group, LLC, UBS Securities LLC, Vandham Securities Corp.,
Vfinance Investments, Inc., and Westminster Securities Corporation.




As of
March 28, 2008, the approximate number of registered holders of our common stock
was 62, and BigString is aware that the number of non-objecting beneficial
owners of our common stock is approximately 1,400.  As of March 28,
2008, the number of outstanding shares of our common stock was 51,052,681; the
number of outstanding shares of our Series A Preferred Stock was 400,000
(currently convertible into 4,500,450 shares of our common stock); and there
were 6,877,989 shares of common stock subject to outstanding warrants, and
7,750,100 shares of common stock subject to outstanding stock
options.


11
 Index


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.




Details
of Issuance of Shares of Our Common Stock in Connection With Consulting
Services




We periodically issue shares of our
common stock, warrants and stock options in lieu of cash payments to
consultants.  On May 1, 2007, BigString issued 140,000 shares of
common stock to CEOcast, Inc. in consideration for investor relations
services.  Additionally, on May 1, 2007, BigString issued 192,000
shares of common stock to Howard Greene in consideration for public relations
services provided by Greene Inc. Communications and 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.  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 Promissory Notes and Grant of Warrants to
Subscribers




On May 1,
2007, BigString entered into a subscription agreement  (the “Subscription
Agreement”), with Whalehaven Capital Fund Limited, Alpha Capital Anstalt,
Chestnut Ridge Partners LP, Iroquois Master Fund Ltd. and Penn Footwear
(collectively, the “Subscribers”), pursuant to which the Subscribers purchased
convertible promissory notes in the aggregate principal amount of $800,000,
which promissory notes are convertible into shares of BigString’s common stock,
and warrants to purchase up to 1,777,778 shares of BigString’s common
stock.  Each promissory note has a term of three years and accrues
interest at a rate of six percent annually.  The holder of a
convertible promissory note has the right from and after the issuance thereof
until such time as the convertible promissory 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 promissory note is subject to adjustment from time to
time.  Each of the warrants issued to the Subscribers have a term of
five years from May 1, 2007 and was fully vested on the date of
issuance.  The outstanding warrants are exercisable at $0.30 per
share of common stock.  The number of shares of common stock
underlying each warrant and the exercise price are subject to certain
adjustments.





BigString
also issued to Gem Funding LLC (the “Finder”) warrants to purchase an aggregate
of 213,333 shares of BigString’s common stock.  The Finder’s warrants
are similar to and carry the same rights as the warrants issued to the
Subscribers.


12
 Index


In
connection with the issuance of the convertible promissory 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 an Agreement,
Waiver and Limited Release




On
December 14, 2007, BigString issued 1,000,000 shares of common stock to the
Subscribers as consideration for entering into an Agreement, Waiver and Limited
Release between the Subscribers and BigString (the “Release Agreement”). The
market value of BigString’s common stock at November 30, 2007, the date on
which BigString agreed to issue such shares, was $0.25 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.  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.   The
number of shares of common stock underlying each warrant and the exercise price
are subject to certain adjustments.




BigString also issued to the Finder a
warrant to purchase an aggregate 373,333 shares of common stock.  The
Finder’s 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.


13
 Index


Item
      6.
            Management’s Discussion and Analysis or Plan 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, 2007 and 2006.  This information should be read in
conjunction with BigString’s audited consolidated financial statements for the
years ended December 31, 2007 and 2006, and the period October 8, 2003 (Date of
Formation) through December 31, 2007, 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, is a wholly-owned subsidiary and is currently
BigString’s only operating subsidiary.




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 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.




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


14
 Index


to easily
send and receive messages, notifications, email and videos that self-destruct on
command.





Our email development efforts in 2007
were primarily focused on introducing a number of upgrades and features to our
redesigned email system. In June 2007, BigString launched its new email service,
BigString 3.0, which replaced BigString Beta 2.0 launched in December
2006.  The December 2006 release had allowed dynamic scalability,
feature upgrades and improved user interfaces.  A few of the key
features added in 2007 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.




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 2007 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. We also developed product packages which
will help us in achieving critical mass. 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. Our email
marketing services further extend the BigString brand to marketers’ lists of
opt-in customers. Our video alliance program also helps to create brand
awareness.




To assist
our online marketing efforts, we hired an experienced online marketing firm,
CAC, Inc. and CAC Inc.’s recommended vendors, from May 2007 to October 2007.
Online marketing efforts included search engine optimization, viral video
production, copywriting, online promotions, and posts of blogs and videos to
online social networking communities. The efforts also included further
development of our marketing infrastructure base, promotions, advertising and
public relations.




We
regularly measure and optimize the cost and effectiveness of promotions,
advertising and cost per customer acquisition. After the online marketing
vendors initial projects were completed, we did not renew the contracts and
moved the majority of marketing efforts in-house


15
 Index


where we
have been able to exceed our planned acquisition rates. The following table
identifies our average cost per customer acquisition for all marketing expenses
by period:




Jan-07
              to
              Apr-07
            
            
            May-07
              to
              Oct-07
            
            
            Nov-07
              to
              Dec-07Average
      cost per customer acquisition
            
            $
            0.68
            
            
            $
            3.67
            
            
            $
            0.61






While
slightly over 50% 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.




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.


In 2006, we formed BigString
Interactive and launched a new interactive entertainment portal.  We
began our programming initiative in June 2006 with the debut of OurPrisoner,
BigString’s interactive Internet television reality
program.  OurPrisoner concluded its six month run in December
2006.




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.  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.


16
 Index


OurPrisoner,
FindItAll and DailyLoL allowed us to develop core audio and video technology
that has been incorporated into our messaging, social networking and email
offerings.





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.


17
 Index


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).  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.




Intangible
Assets.  In June 2001, the FASB issued SFAS No. 142, “Goodwill
and other Intangible Assets.”  SFAS No. 142 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


18
 Index


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, 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 change in number of accounts, fees
and average fee per account for the year ended December 31, 2007 over the
comparable period in 2006 is as follows:




Accounts
            
            
            Fees
            
            
            Average
              Fee/
              AccountPremium
      upgrades
            
            
            19
            %
            
            
            36
            %
            
            
            14
            %Business
      solutions
            
            
            1,140
            %
            
            
            1,577
            %
            
            
            35
            %Email
      marketing
            
            
            n/a
            %
            
            
            n/a
            %
            
            
            n/a
            %Total
            
            
            43
            %
            
            
            171
            %
            
            
            90
            %







Email
marketing services were introduced in 2007 and did not have sales in the year
ended December 31, 2006. As of December 31, 2007, unearned revenue from product
fees increased to $9,288 from $4,681 at December 31, 2006.




Our
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.




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,


19
 Index


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 same prior year
      period.  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 same
      prior year period.  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 same prior year
      period.  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 same prior year
      period.  The $46,878 increase in expense 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.


20
 Index


·
            Interest
      income: Interest income for the year ended December 31, 2007, was $14,409,
      as compared to $37,350 for the same prior year period. The $22,941
      decrease was primarily due to 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 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 note,
      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.




·
            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, 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.


21
 Index


For
the Years Ended December 31, 2006 and 2005




Net Loss.  For the
year ended December 31, 2006, net loss was $3,114,225, as compared to a net loss
of $2,102,587 for the year ended December 31, 2005. The $1,011,638 increase in
net loss was primarily due to an increase in payroll expenses of approximately
$530,000 relating to the development of email products and our interactive
entertainment portal, and an increase of approximately $441,000 in professional
fees relating to consulting and legal expenses.




Revenues.  For the
year ended December 31, 2006, revenues were $14,286, a $7,539 increase over
revenues of $6,747 earned in the year ended December 31, 2005.  Of the
revenues generated for the year ended December 31, 2006, $7,599 was generated
from product and service fees and $6,687 was generated from advertisers, as
compared to $6,419 from product and service fees and $328 from advertisers for
the year ended December 31, 2005.




During
the year ended December 31, 2006, BigString offered two products for purchase:
premium upgrades for individual accounts and professional business email
solutions. Pre-paid purchases are deferred and recognized as revenues as the
services are performed. The change in number of accounts, fees and average fee
per account for the year ended December 31, 2006 over the comparable period in
2005 is as follows:




Accounts
            
            
            Fees
            
            
            Average
      Fee/ AccountPremium
      upgrades
            
            
            64
            %
            
            
            68
            %
            
            
            3
            %Business
      solutions
            
            
            150
            %
            
            
            72
            %
            
            
            (31
            )
      %Total
            
            
            67
            %
            
            
            66
            %
            
            
            (0
            )
      %







As of
December 31, 2006, unearned revenue from product fees decreased to $4,681 from
$5,064 at December 31, 2005.




Expenses.  For the
year ended December 31, 2006, total expenses were $3,165,861, a $1,040,014
increase over total expenses of $2,125,847 incurred in the year ended December
31, 2005, primarily due to increased development and administrative costs,
professional fees and amortization expenses.  This increase in
expenses over the same prior year period was primarily attributable to an
increase in payroll by approximately $530,000, relating to full-year average
staffing of twelve employees in 2006 compared to full-year average staffing of
four employees in 2005 as we completed the development of our email upgrade to
BigString Beta 2.0, completed our infrastructure buildout, and launched our
interactive entertainment portal.  Consulting fees increased by
approximately $343,000, relating to the operation of our business and our
interactive entertainment portal, including the OurPrisoner interactive Internet
television reality program.  Legal expenses increased approximately
$150,000, relating to the registration of our common stock for certain of our
stockholders, corporate governance, asset acquisitions, private placements of
securities and compliance with federal and state securities
laws.  Amortization expense increased approximately $76,300, relating
to the amortization of the intangible assets (logos, websites and source codes)
acquired by BigString through its acquisitions of FindItAll, AmericanMoBlog and
DailyLOL in 2006.  Increases in co-location hosting, rent and
depreciation expenses were offset by decreases in corporate finance and
accounting fees.  Marketing and sales expenses for the years ended
December 31, 2006 and 2005 were


22
 Index


approximately
flat, with a decrease in advertising expense of approximately $119,000 offset by
marketing expense increases for the operation of our interactive entertainment
portal and public relations.




Interest
Income.  For the year ended December 31, 2006, interest income
was $37,350, a $20,837 increase over interest income of $16,513 for the year
ended December 2005.  This increase in interest income was primarily
due to the increase in BigString’s average cash balance resulting from a private
placement conducted by BigString in May 2006.




Income Taxes.  No
tax provision has been recorded for 2006 and 2005 as a result of our accumulated
operating losses. Valuation allowances for the years ending December 31, 2006
and 2005, 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.




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, 2007, we have expended $4,172,167 for operating and investing
activities, which has been primarily funded by investments of $4,470,200 from
our stockholders and convertible note holders.  For the year ended
December 31, 2007, we expended $1,185,291 for operating and investing
activities, a decrease of $596,492 from the amount expended during the year
ended December 31, 2006.




Our cash
balance as of December 31, 2007 was $298,033, which was a decrease of $219,041
from our cash balance of $517,074 as of December 31, 2006.  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 $966,250 raised by BigString through exercise of warrants and private
placement of convertible notes and warrants.




Management
believes its current cash balance of $656,669 at March 24, 2008 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 May 1,
2007, we entered into a financing arrangement with Whalehaven Capital Fund
Limited, Alpha Capital Anstalt, Chestnut Ridge Partners, LP, Iroquois Master
Fund Ltd. and Penn Footwear, (collectively, the “Subscribers”), pursuant to
which these Subscribers purchased convertible notes in the aggregate principal
amount of $800,000, which notes are convertible into shares of our common stock,
and warrants to purchase up to 1,777,779 shares of our common
stock.  Each convertible note has a term of three years and accrues
interest at a rate of six percent


23
 Index


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 our 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.




In November 2007, BigString repriced
warrants to purchase 1,713,334 shares of common stock previously issued to the
Subscribers, which warrants were subsequently exercised by the Subscribers at
the reduced exercise price.  The exercise price of the repriced
warrants was reduced from $0.30 per shares 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, which resulted in
1,500,001 shares of 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, which resulted in 213,333 shares of
common stock being issued to the holder thereof and $21,333 in gross proceeds to
BigString.


As
described herein, BigString participated in the State of New Jersey’s
Corporation Business Tax Benefit Certificate Transfer 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, BigString received net proceeds of $258,854. BigString may
also be able to transfer its unused New Jersey net operating losses in future
years and plans to participate again in 2008.




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.  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.




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. As discussed
under Results of Operations, we have reduced operating expenses, excluding
amortization, depreciation, impairment and share-based compensation expenses, by
$213,631 for the year ended December 31, 2007 as compared to the same prior year
period. We


24
 Index


also
reduced our operating and investing cash expenditures over these comparable
periods by $596,492, or 33%.




We expect
to continue development on our messaging, email and related service offerings.
We also expect sales, marketing and advertising expenses and cost of revenues to
increase as we promote and grow our offerings.  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
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.







Item
      7.
              Financial
  Statements


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.




Item
    8.
            Changes
      In and Disagreements With Accountants on Accounting andFinancial
      Disclosure





None.




Item
    8A(T).
            Controls and
Procedures




As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), as of the end of the period covered by this Annual Report
on Form 10-KSB, we have carried out an evaluation of the effectiveness of the
design and operation of BigString’s disclosure controls and procedures. This
evaluation was carried out under the supervision and with the participation of
BigString’s management, including BigString’s principal executive officer and
principal financial and accounting officer. Based upon that evaluation,
BigString’s principal executive officer and BigString’s principal financial and
accounting officer concluded that BigString’s disclosure controls and procedures
are effective as at the end of the period covered by this report.




Disclosure
controls and procedures and other procedures that are designed to ensure that
information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported, within the time
period specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Exchange Act is accumulated and communicated to management, including our
president


25
 Index


and chief
executive officer and chief financial and accounting officer as appropriate, to
allow timely decisions regarding required disclosure.




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 generally accepted accounting
principles.  Internal controls over financial reporting includes those
policies and procedures that: (i) pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of BigString; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with 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 (iii) 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, 2007.




This
Annual Report on Form 10-KSB 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-KSB. 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.




Item
      8B.
            Other
      Information





None.


26
 Index


PART
III








Item
      9.
            Directors, Executive Officers, Promoters, Control Persons and
      Corporate Governance Compliance With Section 16(a) of the Exchange
      Act





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, 2008, under the captions “Election of Directors,” “Section
16(a) Beneficial Ownership Reporting Compliance” and “Executive Officers” and is
incorporated herein by reference.





Item
      10.
            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,
2008, under the captions “Executive Compensation” and “Director Compensation”
and is incorporated herein by reference.





Item
      11.
            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, 2008, 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.





Item
      12.
            CertainRelationships 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, 2008, under the caption “Certain
Relationships and Related Transactions” and “Director Independence” and is
incorporated herein by reference.





Item
      13.
            Exhibits





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





Item
      14.
            PrincipalAccountant 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, 2008, under the caption “Principal
Accountant Fees and Services” and is incorporated herein by
reference.


27
 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, 2008
            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-KSB, 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 Director (Principal Executive
      Officer)
              
              March
      31, 2008Darin
      M. Myman/s/ Robert DeMeulemeester
              
              Executive
      Vice President, Chief Financial Officer and Treasurer and Director
      (Principal Financial and Accounting Officer)
              
              March
      31, 2008Robert
      DeMeulemeester/s/ Adam M. Kotkin
              
              Chief
      Operating Officer and Director
              
              March
      31, 2008Adam
      M. Kotkin/s/ Marc W. Dutton
              
              Director
              
              March
      31, 2008Marc
      W. Dutton/s/ Todd M. Ross
              
              Director
              
              March
      31, 2008Todd M. Ross/s/
      Lee Rosenberg
              
              Director
              
              March
      31, 2008Lee
      Rosenberg


28
 Index


INDEX
TO 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, 2007 and 2006
            F-3Consolidated
      Statements of Operations for the years ended December 31, 2007 and 2006,
      and the period October 8, 2003 (Date of Formation) through December 31,
      2007
            F-4Consolidated
      Statements of Stockholders’ Equity for the years ended December 31, 2007
      and 2006, and the period October 8, 2003 (Date of Formation) through
      December 31, 2007
            F-5Consolidated
      Statements of Cash Flows for the years ended December 31, 2007 and
      2006,and the period October 8, 2003 (Date of Formation) through December
      31, 2007
            F-6Notes
      to Consolidated Financial Statements
            F-7


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, 2007 and 2006, and
the related consolidated statements of operations, stockholders’ equity and cash
flows for the years ended December 31, 2007 and 2006, and for the period October
8, 2003 (Date of Formation) through December 31, 2007.  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, 2007 and
2006, and the results of its operations and its cash flows for the years ended
December 31, 2007 and 2006, and for the period October 8, 2003 (Date of
Formation) through December 31, 2007, 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 28,
2008


F-2
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS


(A
DEVELOPMENT STAGE COMPANY)





December
      31,2007
            
            
            2006ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            298,033
            
            
            $
            517,074Accounts
      receivable - net of allowance of $90 and $0
            
            
            2,609
            
            
            
            1,736Prepaid
      expenses and other current assets
            
            
            8,039
            
            
            
            4,625Total
      current assets
            
            
            308,681
            
            
            
            523,435Property
      and equipment - net
            
            
            162,156
            
            
            
            214,612Intangible
      assets - net
            
            
            1,480,946
            
            
            
            2,979,451Other
      assets
            
            
            156,100
            
            
            
            8,872TOTAL
      ASSETS
            
            $
            2,107,883
            
            
            $
            3,726,370LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            282,524
            
            
            $
            83,179Accrued
      expenses
            
            
            52,642
            
            
            
            125,179Unearned
      revenue
            
            
            9,288
            
            
            
            4,681Accrued
      interest
            
            
            31,134
            
            
            
            -Total
      current liabilities
            
            
            375,588
            
            
            
            213,039Long
      term liabilities:Long-term
      debt
            
            
            207,304
            
            
            
            -TOTAL
      LIABILITIES
            
            
            582,892
            
            
            
            213,039Stockholders'
      equity: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
      50,728,237 and 46,935,125 shares, respectively
            
            
            5,073
            
            
            
            4,694Additional
      paid in capital
            
            
            11,924,977
            
            
            
            9,980,762Subscription
      receivable
            
            
            -
            
            
            
            (16,250
            )Deficit
      accumulated during the development stage
            
            
            (10,405,099
            )
            
            
            (6,455,915
            )Total
      stockholders' equity
            
            
            1,524,991
            
            
            
            3,513,331TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            2,107,883
            
            
            $
            3,726,370







See notes
to consolidated financial statements.




F-3
 Index





BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(A
DEVELOPMENT STAGE COMPANY)





PeriodOctober
      8, 2003(Date
      ofFor
      the Years Ended
                  
                  
                  Formation)December
      31,
                  
                  
                  Through2007
                  
                  
                  2006
                  
                  
                  December
      31, 2007Operating
      revenues
                  
                  $
                  41,165
                  
                  
                  $
                  14,286
                  
                  
                  $
                  67,959Operating
      expenses:(1)Cost
      of revenues
                  
                  
                  119,772
                  
                  
                  
                  218,557
                  
                  
                  
                  412,854Research
      and development
                  
                  
                  485,948
                  
                  
                  
                  572,206
                  
                  
                  
                  1,594,728Sales
      and marketing
                  
                  
                  390,347
                  
                  
                  
                  219,304
                  
                  
                  
                  788,508General
      and administrative
                  
                  
                  1,115,701
                  
                  
                  
                  979,459
                  
                  
                  
                  2,695,386Amortization
      of intangibles
                  
                  
                  1,083,213
                  
                  
                  
                  1,036,335
                  
                  
                  
                  3,519,828Impairment
      of assets
                  
                  
                  415,292
                  
                  
                  
                  -
                  
                  
                  
                  415,292Total
      operating expenses
                  
                  
                  3,610,273
                  
                  
                  
                  3,025,861
                  
                  
                  
                  9,426,596Loss
      from operations
                  
                  
                  (3,569,108
                  )
                  
                  
                  (3,011,575
                  )
                  
                  
                  (9,358,637
                  )Other
      income (expense):(1)Interest
      income
                  
                  
                  14,409
                  
                  
                  
                  37,350
                  
                  
                  
                  68,323Interest
      expense
                  
                  
                  (31,134
                  )
                  
                  
                  -
                  
                  
                  
                  (31,134
                  )Other,
      net
                  
                  
                  (622,205
                  )
                  
                  
                  (140,000
                  )
                  
                  
                  (862,505
                  )Total
      other income (expenses)
                  
                  
                  (638,930
                  )
                  
                  
                  (102,650
                  )
                  
                  
                  (825,316
                  )Loss
      before income tax benefit
                  
                  
                  (4,208,038
                  )
                  
                  
                  (3,114,225
                  )
                  
                  
                  (10,183,953
                  )Income
      tax benefit
                  
                  
                  258,854
                  
                  
                  
                  -
                  
                  
                  
                  258,854Net
      loss
                  
                  $
                  (3,949,184
                  )
                  
                  $
                  (3,114,225
                  )
                  
                  $
                  (9,925,099
                  )Net
      loss per common share calculation:Net
      loss
                  
                  $
                  (3,949,184
                  )
                  
                  $
                  (3,114,225
                  )Imputed
      dividend on preferred shares
                  
                  
                  -
                  
                  
                  
                  (480,000
                  )Net
      loss attributable to common shareholders
                  
                  $
                  (3,949,184
                  )
                  
                  $
                  (3,594,225
                  )Net
      loss per common share:Basic
      and diluted
                  
                  $
                  (0.08
                  )
                  
                  $
                  (0.07
                  )Weighted
      average common shares outstanding:Basic
      and diluted
                  
                  
                  47,503,890
                  
                  
                  
                  49,363,673(1)Stock-based
      and other non-cash compensation by function above:Cost
      of revenues
                  
                  $
                  903
                  
                  
                  $
                  4,750
                  
                  
                  $
                  5,653Research
      and development
                  
                  
                  47,421
                  
                  
                  
                  22,962
                  
                  
                  
                  70,383Sales
      and marketing
                  
                  
                  134,786
                  
                  
                  
                  48,688
                  
                  
                  
                  222,725General
      and administrative
                  
                  
                  489,422
                  
                  
                  
                  274,445
                  
                  
                  
                  959,067Other,
      net
                  
                  
                  269,094
                  
                  
                  
                  -
                  
                  
                  
                  269,094Total
      stock-based and other non-cash compensation
                  
                  $
                  941,626
                  
                  
                  $
                  350,845
                  
                  
                  $
                  1,526,922


See notes
to consolidated financial statements.




F-4
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


(A
DEVELOPMENT STAGE COMPANY)





Preferred
      Stock
              
              
              Common
      Stock
              
              
              AdditionalNo.
      of
              
              
              
              
              
              No.
      of
              
              
              
              
              
              Paid-In
              
              
              Subscription
              
              
              RetainedTotal
              
              
              Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Receivable
              
              
              EarningsBalance,
      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
              
              
              
              -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
              )





See notes
to consolidated financial statements.




F-5
 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,
            
            
            Through2007
            
            
            2006
            
            
            December
      31, 2007Cash
      flows from operating activities:Net
      loss
            
            $
            (3,949,184
            )
            
            $
            (3,114,225
            )
            
            $
            (9,925,099
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      of property and equipment
            
            
            52,456
            
            
            
            38,270
            
            
            
            100,133Amortization
      of intangibles
            
            
            1,083,213
            
            
            
            1,036,335
            
            
            
            3,519,829Amortization
      of other assets
            
            
            92,839
            
            
            
            -
            
            
            
            92,839Impairment
      of assets
            
            
            415,292
            
            
            
            -
            
            
            
            415,292Accretion
      for beneficial conversion feature and discount on notes
            
            
            260,272
            
            
            
            -
            
            
            
            260,272Stock-based
      compensation
            
            
            672,532
            
            
            
            350,845
            
            
            
            1,257,828Other
      non-cash compensation
            
            
            269,094
            
            
            
            -
            
            
            
            269,094Changes
      in operating assets and liabilities:(Increase)
      in accounts receivable, net
            
            
            (873
            )
            
            
            (947
            )
            
            
            (2,609
            )(Increase)
      decrease in prepaid expenses and other assets
            
            
            (243,481
            )
            
            
            17,063
            
            
            
            (256,978
            )Increase
      in accounts payable
            
            
            199,345
            
            
            
            12,761
            
            
            
            282,524(Decrease)
      increase in accrued expenses and other liabilities
            
            
            (41,403
            )
            
            
            69,920
            
            
            
            80,710Increase
      (decrease) in unearned revenue
            
            
            4,607
            
            
            
            (383
            )
            
            
            9,288Net
      cash used in operating activities
            
            
            (1,185,291
            )
            
            
            (1,590,361
            )
            
            
            (3,896,877
            )Cash
      flows from investing activities:Purchase
      of property and equipment
            
            
            -
            
            
            
            (178,422
            )
            
            
            (262,290
            )Acquisitions
            
            
            -
            
            
            
            (13,000
            )
            
            
            (13,000
            )Net
      cash used in investing activities
            
            
            -
            
            
            
            (191,422
            )
            
            
            (275,290
            )Cash
      flows from financing activities:Proceeds
      from issuance of convertible notes and warrants
            
            
            800,000
            
            
            
            -
            
            
            
            800,000Proceeds
      from issuance of preferred stock, net
            
            
            -
            
            
            
            1,860,000
            
            
            
            1,860,000Proceeds
      from the exercise of common stock warrants and issuance of common
      stock
            
            
            166,250
            
            
            
            18,000
            
            
            
            2,210,200Payments
      for redemption of common stock
            
            
            -
            
            
            
            (400,000
            )
            
            
            (400,000
            )Net
      cash provided by financing activities
            
            
            966,250
            
            
            
            1,478,000
            
            
            
            4,470,200Net
      (decrease) increase in cash
            
            
            (219,041
            )
            
            
            (303,783
            )
            
            
            298,033Cash
      and cash equivalents - beginning of period
            
            
            517,074
            
            
            
            820,857
            
            
            
            -Cash
      and cash equivalents - end of period
            
            $
            298,033
            
            
            $
            517,074
            
            
            $
            298,033Supplementary
      information:Cash
      paid during the periods for:Acquisitions
            
            $
            -
            
            
            $
            13,000
            
            
            $
            13,000Details
      of acquisitions:Fair
      value of assets acquired
            
            $
            -
            
            
            $
            -
            
            
            $
            2,790Fair
      value of liabilities assumed
            
            
            -
            
            
            
            -
            
            
            
            (5,857
            )Intangibles
            
            
            -
            
            
            
            613,000
            
            
            
            5,416,067Common
      stock issued to effect acquisition
            
            $
            -
            
            
            $
            600,000
            
            
            $
            5,400,000Non-cash
      transactions during the periods for:Conversion
      of promissory notes
            
            $
            155,000
            
            
            $
            -
            
            
            $
            155,000Common
      stock issued for services
            
            $
            540,666
            
            
            $
            227,777
            
            
            $
            820,194Common
      stock options issued for services
            
            
            86,764
            
            
            
            86,473
            
            
            
            173,237Common
      stock warrants issued for services
            
            
            45,102
            
            
            
            36,595
            
            
            
            264,397Total
      stock-based compensation:
            
            
            672,532
            
            
            
            350,845
            
            
            
            1,257,828Issue
      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
            
            $
            941,626
            
            
            $
            350,845
            
            
            $
            1,526,922




See notes
to consolidated financial statements.


F-6
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






FOR THE YEARS ENDED DECEMBER
31, 2007 AND 2006 AND THE PERIOD OCTOBER 8, 2003 (DATE OF FORMATION) THROUGH
DECEMBER 31, 2007




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




BASIS OF
PRESENTATION




The
consolidated balance sheet as of December 31, 2007, and the consolidated
statements of operations, stockholders’ equity and cash flows for the periods
presented herein have been prepared by BigString Corporation
(“BigString”).  In the opinion of management, all adjustments (consisting
solely of normal recurring adjustments) necessary to present fairly the
financial position, results of operations, changes in stockholders' equity and
cash flows for all periods presented have been made.




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.  BigString Interactive is currently
BigString’s only operating subsidiary.




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,


F-7
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






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, 2007 and December 31, 2006, cash
equivalents approximated $296,000 and $510,000, 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 established financial
institutions.




Accounts
receivable are typically unsecured and are primarily derived from revenues
earned from customers in the United States, Canada, Europe and
Asia.




Unearned
revenue consists primarily of prepaid electronic commerce and subscription fees
billed and paid in advance. Under certain agreements, BigString may be obligated
to provide refunds if services are not delivered.




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


F-8
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






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, 2007 and 2006 were $90 and $0,
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, 2007 and 2006 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.




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.


F-9
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






DEFERRED FINANCING
COSTS




Costs
incurred in raising debt were deferred and amortized in other income (expense)
over the term of the related debt. BigString issued convertible notes in
May 2007 and incurred issuance costs of $248,939, which are being amortized
over the life of the notes. Amortization expense related to these costs is
included in other, net in the consolidated statements of operations and was
$92,839 in 2007.




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.




F-10
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






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, 2007 and 2006, BigString recorded compensation
expense of $540,666 and $227,777, respectively, in connection with the issuance
of these shares.  For the period October 8, 2003 (Date of Formation)
through December 31, 2007, BigString recorded compensation expense of $820,194
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.




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, 2007 and 2006, BigString
recorded compensation expenses of $45,102 and $36,595, respectively, associated
with issuances of stock purchase warrants.  For the period October 8,
2003 (Date of Formation) through December 31, 2007, BigString recorded
compensation expense of $264,397 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, 2007 and 2006, BigString
recorded compensation expense of $86,764 and $86,473,
respectively.  For the period October 8, 2003 (Date of Formation)
through December 31, 2007, BigString recorded compensation expense of
$173,237.  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


F-11
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






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 or a dividend to the related equity, with an offsetting amount
increasing additional paid-in capital.




NEW FINANCIAL ACCOUNTING
STANDARDS




In
January 2008, SAB 110 “Share-Based Payment” (“SAB 110”), was issued. 
Registrants may continue, under certain circumstances, to use the simplified
method in developing estimates of the expected term of share options as
initially allowed by SAB 107, “Share Based Payments.”  BigString does not
believe that the adoption of SAB 110 will have a material impact on its
consolidated financial position, cash flows or results of
operations.




In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities,” which permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value.  SFAS No. 159
will be effective for BigString on January 1, 2008. BigString does not believe
that the adoption of SFAS No. 159 will have a material impact on its
consolidated financial position, cash flows or results of
operations.




In
December 2006, the FASB issued a FASB Staff Position (“FSP”) EITF Issue No.
00-19-2 “Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”)
which addresses an issuer’s accounting for registration payment arrangements.
FSP EITF 00-19-2 specifies that the contingent obligation to make future
payments or otherwise transfer consideration under a registration payment
arrangement, whether issued as a separate agreement or included as a provision
of a financial instrument or other agreement, should be separately recognized
and measured in accordance with FASB Statement No. 5, “Accounting for
Contingencies.” The guidance in FSP EITF 00-19-2 amends FASB Statements No. 133,
“Accounting for Derivative Instruments and Hedging Activities,” and No. 150,
“Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity,” and FASB Interpretation No. 45, “Guarantor’s Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others,” to include scope exceptions for registration payment
arrangements. FSP EITF 00-19-2 is effective immediately for registration payment
arrangements and the financial instruments subject to those arrangements that
are entered into or modified subsequent to the date of issue of FSP EITF
00-19-2. For registration payment arrangements and financial instruments subject
to those arrangements that were entered into prior to the issuance of FSP EITF
00-19-2, this is effective for financial statements issued for fiscal years
beginning after December 15, 2006, and interim periods within those fiscal
years. The adoption of FSP EITF 00-19-2 did not have a material impact on
BigString’s consolidated financial position, cash flows or results of
operations.


F-12
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
enhances existing guidance for measuring assets and liabilities using fair
value.  The statement 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.  SFAS No. 157, as
amended by FASB SFAS No. 157-2, “Effective Date of FASB Statement No. 157,”
defers the effective date of SFAS No. 157 for nonfinancial assets and
nonfinancial liabilities to fiscal years beginning after November 15, 2008, and
interim periods within those fiscal years, provided than an entity has not yet
adopted SFAS No. 157. BigString does not believe that the adoption of SFAS No.
157 will have a material impact on its consolidated financial position, cash
flows or results of operations.




NOTE
2. GOING CONCERN




For the
year ended December 31, 2007, BigString’s consolidated financial statements
reflect a net loss of $3,949,184, net cash used in operations of $1,185,291, a
working capital deficit of $66,907, a stockholders’ deficit accumulated during
the development stage of $10,405,099 and a cumulative net loss of
$9,925,099.  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.





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
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, and accordingly,
pro forma summary results have not been included.


F-13
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






On May
19, 2006, BigString completed the acquisition of certain assets, including two
websites, from a principal of Lifeline Industries, Inc.  Lifeline
Industries, Inc. entered an agreement May 2, 2006, to provide business
consultant services to BigString for three years. 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, and accordingly,
pro forma summary results have not been included.




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.




NOTE
4. PROPERTY AND EQUIPMENT




Property
and equipment consist of the following:




Years
      endedDecember
      31,2007
            
            2006Computer
      equipment and internal software
            
            $
            255,171
            
            
            $
            253,115Furniture
      and fixtures
            
            
            5,969
            
            
            
            8,600261,140
            
            
            
            261,715Less
      accumulated depreciation
            
            
            98,984
            
            
            
            47,103$
            162,156
            
            
            $
            214,612







Depreciation
expense for the years ended December 31, 2007 and 2006, and for the period
October 8, 2003 (Date of Formation) through December 31, 2007, was $52,456,
$38,270 and $100,133, 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.


F-14
 Index




BIGSTRING
CORPORATION AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


Other
intangible assets consist of the following:




Years
      endedDecember
      31,2007
            
            
            2006Patent
      application and trademark
            
            $
            4,803,067
            
            
            $
            4,803,067Logos,
      websites and source codes
            
            
            613,000
            
            
            
            613,0005,416,067
            
            
            
            5,416,067Accumulated
      amortization
            
            
            3,519,829
            
            
            
            2,436,6161,896,238
            
            
            
            2,979,451Impairment
            
            
            415,292
            
            
            
            -$
            1,480,946
            
            
            $
            2,979,451







Amortization
expense was $1,083,213, $1,036,335 and $3,519,829 for the years ended December
31, 2007 and 2006, and for the period October 8, 2003 (Date of Formation)
through December 31, 2007, 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 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
logos, websites and source codes primarily include 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.




Estimated
amortization expenses for intangible assets for the next five years, are as
follows:




EstimatedYears
      Ending
            
            AmortizationDecember
      31,
            
            Expense2008
            
            
            $
            960,6132009
            
            
            
            520,332$
            1,480,945




Patent
application and trademark has a weighted-average useful life remaining of 0.8
years.


F-15
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






NOTE
6. OTHER INCOME (EXPENSE)




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




Interest
expense consists of interest on convertible debt payable on each anniversary
date of the promissory notes and is included in accrued interest.




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:




PeriodOctober
      8, 2003(Date
      ofYears
      ended
            
            Formation)December
      31,
            
            Through2007
            
            2006
            
            December
      31, 2007Amortization
      of debt issue costs
            
            $
            92,839
            
            
            $
            -
            
            
            $
            92,839Amortization
      of promissory note discount
            
            
            11,664
            
            
            
            -
            
            
            
            11,664Amortization
      of beneficial conversion feature
            
            
            248,608
            
            
            
            -
            
            
            
            248,608Other
      financing expenses
            
            
            269,094
            
            
            
            140,000
            
            
            
            509,394$
            622,205
            
            
            $
            140,000
            
            
            $
            862,505







For the
year ending December 31, 2007, debt issue costs were $248,939, and are being
amortized over the term of the note, 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.




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
year ended December 31, 2007 and for the period October 8, 2003 (Date of
Formation) through 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.


F-16
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






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 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, 2007 and 2006,
and for the period October 8, 2003 (Date of Formation) through December 31,
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, 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’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. LONG-TERM DEBT




On May 1,
2007, 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 marketing and
the development of its business.




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 “Subscribers”), the 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, “Accounting for Derivative Instruments and Hedging Activities,” and
related interpretations including EITF Issue No. 00-19, “Accounting for
Derivative Financial Instruments Included to, and Potentially Settled in, a
Company’s Own Stock.”  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.




As
provided for in the Subscription Agreement, the Subscribers agreed to purchase
additional convertible notes in the aggregate principal amount of $800,000 and
warrants to purchase up to 1,777,779 shares of BigString's common stock, for a
total subscription of $1,600,000, provided that we registered the shares of our
common stock underlying the additional convertible notes and warrants by
September 13, 2007 and met certain other closing conditions.  Because
we were unable to register the shares of common stock underlying the additional
convertible notes and warrants by September 13, 2007, the Subscribers did not
purchased the additional convertible notes and warrants. Effective November 13,
2007, the shares of common stock underlying the outstanding convertible notes
and warrants were registered.


F-17
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






Each
convertible note has a term of three years and accrues interest at a rate of six
percent annually. Interest is payable on each anniversary date of the agreement
in cash, or common shares at a conversion price of $0.18 per share, at the
option of the note holder. 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 $0.18 per share.  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.




BigString
paid Gem Funding LLC (the “Finder”) $64,000 and issued a warrant to purchase
213,333 shares of 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 Subscribers.




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




NOTE
9. COMMON STOCK




On July
18, 2005, BigString amended its Certificate of Incorporation to, among other
things, (i) change its name from Recall Mail Corporation to BigString
Corporation, and (ii) 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


F-18
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






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.




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 common stock to
the Subscribers of its May 1, 2007 Subscription Agreement as part of a Waiver
and Limited Release


F-19
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






agreement.
The market value of BigString’s common stock at November 30, 2007 was $0.25 per
share.




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




NOTE
10. 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 common
stock to Witches Rock Portfolio Ltd., The Tudor BVI Global Portfolio Ltd.
and Tudor 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 common stock, and have certain
dividend, voting, liquidation and conversion rights.   The
warrants are convertible into shares of common stock at an exercise price per
share of $1.25 (market price $0.80 per share).  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, “Accounting
for Derivative Instruments and Hedging Activities,” and related interpretations
including EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments
Included to, and Potentially Settled in, a Company’s Own
Stock.”  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 convertible 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
11. SHARE-BASED COMPENSATION




On
January 1, 2006, BigString adopted SFAS No. 123(R), “Share-Based Payment,”
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, “Share-Based Payment.”  SAB No. 107
expresses 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.




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


F-20
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






$0.25.  Certain
of these warrants were exercised in 2005, which resulted in 45,000 shares of
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 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 the 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 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
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
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 common stock with a per share
exercise price of $0.20.  Each of these warrants is due to expire on
September 23, 2010 and the grants are 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 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 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 will be expensed over a period of 36
months.  For the years ended December 31, 2007 and 2006, BigString
expensed $45,102 and $30,065, respectively, in connection with these services,
and the balance of $60,133 of total unrecognized compensation cost is included
within paid-in-capital on BigString’s


F-21
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






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 8, on May 1, 2007, BigString granted warrants to purchase up
to 1,991,112 shares of BigString's common stock.  Each of the warrants
issued to the Subscribers and the Finder, respectively, have a term of five
years 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.  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 Subscribers, which warrants were
subsequently exercised by the Subscribers at the reduced exercise
price.  The exercise price of the repriced warrants was reduced from
$0.30 per shares 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, which resulted in 1,500,001 shares of common stock being issued to the
holder 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, which resulted in 213,333 shares of
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 the unanimous written consent of 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 and $0.12 per share,
respectively. BigString expensed the net fair value of $19,094 for the year
ended December 31, 2007.




F-22
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






Information
regarding the warrants outstanding, all of which are exercisable, for 2007 and
2006 is as follows:




WeightedWeighted
            
            
            AverageAverage
            
            
            Remaining
            
            
            AggregateExercise
            
            
            Contractual
            
            
            IntrinsicShares
            
            
            Price
            
            
            Term
            
            
            ValueWarrants
      outstanding at December 31, 2005
            
            
            2,558,545
            
            
            $
            0.18Warrants
      granted
            
            
            1,550,000
            
            
            $
            1.05Warrants
      exercised
            
            
            (165,000
            )
            
            $
            0.21Warrants
      cancelled/forfeited/expired
            
            
            -
            
            
            $
            -Warrants
      outstanding at December 31, 2006
            
            
            3,943,545
            
            
            $
            0.52
            
            
            
            5.2
            
            
            $
            1,501,939Warrants
      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
      exercisable at December 31, 2006
            
            
            3,943,545
            
            
            $
            0.52
            
            
            
            5.2
            
            
            $
            1,501,939Warrants
      exercisable at December 31, 2007
            
            
            4,384,656
            
            
            $
            0.50
            
            
            
            4.3
            
            
            $
            211,916







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, 2006 and 2007 and the exercise 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, 2006 and 2007,
respectively.




Warrants
granted during the years ended December 31, 2007 and 2006 were 3,704,446 and
1,550,000, respectively.  For the period October 8, 2003 (Date of
Formation) through December 31, 2007, warrants to purchase a total of 7,857,991
shares of BigString’s common stock were granted. The weighted average grant date
fair value of warrants granted in the years ended December 31, 2007 and 2006 was
$0.13 and $0.17, respectively.




Warrants
exercised during the years ended December 31, 2007 and 2006 were 1,500,001 and
165,000, respectively.  Cash received during the years ended December
31, 2007 and 2006 from the exercise of warrants was $166,250 and $18,000,
respectively.  For the period October 8, 2003 (Date of Formation)
through December 31, 2007, a total of 1,710,001 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, 2007 and 2006 was $243,556
and $92,800, respectively.




During
the year ended December 31, 2007 and the period October 8, 2003 (Date of
Formation) through December 31, 2007, 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, and warrants to purchase a total of 1,713,334
shares of common stock were cancelled with an aggregate intrinsic value of $0 at
the date of cancellation.  No warrants were cancelled, forfeited or expired
during the year ended December 31, 2006.


F-23
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






Equity
Incentive Plan and Stock Options Issued to Consultant:




At the
2006 Annual Meeting of Stockholders, the BigString Corporation 2006 Equity
Incentive Plan (the “Equity Incentive Plan”) was approved by a majority of
BigString’s stockholders.  Under the Equity Incentive Plan, incentive
and nonqualified stock options and rights to purchase 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 common stock to Kieran Vogel in connection with his
participation in OurPrisoner, the interactive Internet television program
available through the entertainment portal being operated by BigString’s
wholly-owned subsidiary, BigString Interactive. As of December 16, 2006, Mr.
Vogel completed his obligation in connection with his participation in the
OurPrisoner program and subsequently entered into a contractual relationship
with BigString.  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 common stock under its Equity Incentive Plan to certain of BigString’s
employees.  Incentive stock options to purchase 1,450,000 shares of
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 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 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 common stock under its Equity Incentive Plan to BigString’s
newly appointed Executive Vice President, Chief Financial Officer and
Treasurer.  When vested, 400,000 shares of common stock will be
eligible for purchase at the per share price equal to $0.24; 600,000 shares of
common stock will be eligible for purchase at $0.50 per share; 400,000 shares of
common stock will be eligible for purchase at $.90 per share; and 400,000 shares
of 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 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 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 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-24
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






For the
years ended December 31, 2007 and 2006 and the period October 8, 2003 (Date of
Formation) through December 31, 2007, BigString recorded stock-based option
compensation expense of $86,764, $86,473 and $173,237,
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, 2007
and 2006 is as follows:




WeightedWeighted
            
            
            AverageAverage
            
            
            Remaining
            
            
            AggregateExercise
            
            
            Contractual
            
            
            IntrinsicShares
            
            
            Price
            
            
            Term
            
            
            ValueOptions
      outstanding at December 31, 2005
            
            
            -
            
            
            $
            -Options
      granted
            
            
            5,595,100
            
            
            $
            0.50Options
      exercised
            
            
            -
            
            
            $
            -Options
      cancelled/forfeited/expired
            
            
            -
            
            
            $
            -Options
      outstanding at December 31, 2006
            
            
            5,595,100
            
            
            $
            0.50
            
            
            
            7.8
            
            
            $
            1,763,195Options
      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
      exercisable at December 31, 2006
            
            
            1,087,600
            
            
            $
            0.31
            
            
            
            5.2
            
            
            $
            501,420Options
      exercisable at December 31, 2007
            
            
            3,012,600
            
            
            $
            0.36
            
            
            
            5.5
            
            
            $
            12,000







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, 2006 and 2007 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, 2006 and 2007,
respectively.




Options
granted during the years ended December 31, 2007 and 2006 were 2,075,000 and
5,595,100, respectively.  For the period October 8, 2003 (Date of
Formation) through December 31, 2007, options to purchase a total of 7,670,100
shares of BigString’s common stock were granted. The weighted average grant date
fair value of options granted in the years ended December 31, 2007 and 2006 was
$0.05 and $0.06, respectively.




No
options were exercised, and no cash received from option exercises and purchases
of shares for the years ended December 31, 2007 and 2006 and the period October
8, 2003 (Date of Formation) through December 31, 2007. The total tax benefit
attributable to options exercised in the years ended December 31, 2007 and 2006
and the period October 8, 2003 (Date of Formation) through December 31, 2007 was
$0.




During
the year ended December 31, 2007 and the period October 8, 2003 (Date of
Formation) through December 31, 2007, options to purchase a total of 520,000
shares of BigString’s


F-25
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






common
stock expired with an aggregate intrinsic value of $0 at the date of
expiration.  No options were cancelled, forfeited or expired during the
year ended December 31, 2006.




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:




PeriodOctober
      8, 2003Years
      Ended
            
            (Date
      of Formation)December
      31,
            
            Through2007
            
            2006
            
            December
      31, 2007Risk-free
      interest rate
            
            
            3.61
            %
            
            
            5.03
            %
            
            
            4.65
            %Expected
      volatility
            
            
            69
            %
            
            
            39
            %
            
            
            47
            %Expected
      life (in years)
            
            
            1.5
            
            
            
            2.6
            
            
            
            2.3Dividend
      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
12. 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:




MinimumYears
      Ending
            
            LeaseDecember
      31,
            
            Payments2008
            
            $
            30,446$
            30,446


F-26
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






Rental
expense was $47,720, $73,535 and $158,709 for the years ended December 31, 2007
and 2006, and for the period October 8, 2003 (Date of Formation) through
December 31, 2007, respectively.




Computer
co-location, power and Internet access expense was $55,583, $68,020 and $125,154
for the years ended December 31, 2007 and 2006, and for the period October 8,
2003 (Date of Formation) through December 31, 2007, respectively.




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 $42,944 and $91,335 for the years
ended December 31, 2007 and 2006, and $146,448 for the period October 8, 2003
(Date of Formation) through December 31, 2007. Share-based compensation for the
year ended December 31, 2007 was $96,000 and includes accrued expenses of
$80,000 in the year ended December 31, 2006.




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 $386,768, $257,842 and $644,610 for the
years ended December 31, 2007 and 2006, and for the period October 8, 2003 (Date
of Formation) through December 31, 2007, respectively.




On
February 26, 2007, BigString entered into a six month agreement for consulting
services to be provided by CEOcast, Inc.  BigString agreed to issue
140,000 shares of common stock to CEOcast, Inc.  Total investor
relations expenses, including the services of CEOcast, Inc., were $128,585,
$55,999 and $184,584 for the years ended December 31, 2007 and 2006, and for the
period October 8, 2003 (Date of Formation) through December 31, 2007,
respectively, including $70,000 as share-based compensation.




On April
27, 2007, BigString entered into an agreement with CAC, Inc., effective May 1,
2007.  The minimum term of the agreement was four months and ended
September 30, 2007.  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.  Total online marketing
expenses, including the services of CAC, Inc. and CAC, Inc.’s recommended
vendors, were $203,282 for the year ended December 31, 2007 and the period
October 8, 2003 (Date of Formation) through December 31, 2007, including $33,000
as share-based compensation.




F-27
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS






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, 2007 and 2006, and for the period October 8, 2003 (Date of Formation)
through December 31, 2007, 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, 2007, 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
13. SUBSEQUENT EVENTS




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 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.




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.  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.




BigString
paid Gem Funding LLC (the “Finder”) $56,000 and issued a warrant to purchase
373,333 shares of 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 to the Subscribers was adjusted from $0.18
to $0.15. In addition, the conversion price of the outstanding Series A
Preferred Stock was adjusted as provided for in the Certificate of Designations
with respect to same.




F-28
 Index


INDEX
OF 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,
      2008.10.1
            
            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.




E-1
 Index





Exhibit
      No.
            
            Description of
      Exhibit10.2
            
            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, 2005.10.3
            
            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.




E-2
 Index





Exhibit
      No.
            
            Description of
      Exhibit10.11
            
            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, 2005.10.16
            
            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.




E-3
 Index


Exhibit
      No.
            
            Description of
      Exhibit10.20
            
            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 May 8, 2007, for the premises located at 3 Harding Road, Suite E,
      Red Bank, New Jersey 07701, incorporated by reference to Exhibit 10.24 to
      the Registration Statement on Form SB-2 (Registration No. 333-143793)
      filed with the SEC on June 15, 2007.10.25
            
            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-4
 Index




Exhibit
      No.
            
            Description of
      Exhibit10.26
            
            Securities
      Purchase 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., 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 and
      Robb 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.




E-5
 Index





Exhibit
      No.
            
            Description of
      Exhibit10.33
            
            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, 2007.10.35.2
            
            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 and
      Whalehaven 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.




E-6
 Index




Exhibit
      No.
            
            Description of
      Exhibit10.38
            
            Subscription
      Agreement, dated as of February 29, 2008, by and among BigString and
      Whalehaven 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,
      2008.21.1
            
            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
    1350.32.2
            
            Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section
    1350.






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