UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
  Form 10-K
  (Mark One)
 x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
  or
   ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from  to .
 
 Commission File Number 000-51661
  BIGSTRING CORPORATION(Exact name of registrant as specified in its charter)
  Delaware

20-0297832(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)
 
 157 Broad Street, Suite 109, Red Bank, New Jersey07701
 (Address of principal executive offices) (Zip Code)
  (732) 741-284
 
  None
 
 Securities registered pursuant to Section 12(g) of the Act:
 Common Stock, par value $0.0001
 (Title of class)
 
 Indicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes  ̈No x
  Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ̈No x
  Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xNo  ̈
  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ̈
  Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer ̈Smaller reporting companyx
  Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ̈No x
  At June 30, 2009, the aggregate market value of shares held by non-affiliates of the Registrant (based upon the closing sale price of such shares on The NASDAQ OTC Bulletin Board on June 30, 2009 was $1,391,147.
  At March 29, 2010, there were 66,098,316 shares of the Registrant’s common stock outstanding.
  
  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
 Certain information included in this Annual Report on Form 10-K and other filings of the Registrant under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as information communicated orally or in writing between the dates of such filings, contains or may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.  Such statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results.  Among these risks, trends and uncertainties are the availability of working capital to fund our operations, the competitive market in which we operate, the efficient and uninterrupted operation of our computer and communications systems, our ability to generate a profit and execute our business plan, the retention of key personnel, our ability to protect and defend our intellectual property, the effects of governmental regulation and other risks identified in the Registrant’s filings with the SEC from time to time, including our registration statement on Form SB-2 (Registration No. 333-143793), filed with the SEC on June 15, 2007, and the subsequent amendments and supplements thereto.
 
 In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of such terms or other comparable terminology.  Although the Registrant believes that the expectations reflected in the forward-looking statements contained herein are reasonable, the Registrant cannot guarantee future results, levels of activity, performance or achievements.  Moreover, neither the Registrant, nor any other person, assumes responsibility for the accuracy and completeness of such statements.  The Registrant is under no duty to update any of the forward-looking statements contained herein after the date of this Annual Report on Form 10-K.
  2
   BIGSTRING CORPORATION
 
 INDEX TO FORM 10-K
  PAGEPART IItem 1.
Business


1Item 1A.
Risk Factors


7Item 1B.
Unresolved Staff Comments


7Item 2.
Properties


7Item 3.
Legal Proceedings


7Item 4.
(Removed and Reserved)


7PART IIItem 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities


8Item 6.
Selected Financial Data


10Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operation


10Item 7A.
Quantitative and Qualitative Disclosures About Market Risk


17Item 8.
Financial Statements and Supplementary Data


17Item 9.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure


18Item 9A.
Controls and Procedures


18Item 9B.
Other Information


19PART IIIItem 10.
Directors, Executive Officers and Corporate Governance


20Item 11.
Executive Compensation


22Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


27Item 13.
Certain Relationships and Related Transactions and Director Independence


29Item 14.
Principal Accountant Fees and Services


29Item 15.
Exhibits, Financial Statement Schedules


30Index to Consolidated Financial StatementsF-1Index of ExhibitsE-1Signatures


31
  3
 
 PART I
 
 Item 1.  Business
 
 Background
  BigString Corporation (“BigString” or the “Company”) was incorporated in the State of Delaware on October 8, 2003 under the name “Recall Mail Corporation.”  The Company’s name was formally changed to “BigString Corporation” in July 2005.  BigString was formed to develop technology that would allow the user of email services to have comprehensive control, security and privacy relating to the email generated by the user.
  BigString Interactive, Inc. (“BigString Interactive”), incorporated in the State of New Jersey, was formed by BigString in early 2006 to develop technology relating to interactive web portals.
  PeopleString Corporation (“PeopleString”), incorporated in the State of Delaware, was formed by BigString in early 2009 to develop technology relating to social networks. BigString currently owns less than 30% of PeopleString’s outstanding common stock.
  BigString Interactive is currently BigString’s only operating subsidiary.
  BigString has developed an innovative messaging service that allows users to easily send, recall, erase, self-destruct and secure email transmissions. BigString set out to make Internet communication more efficient, reliable and valuable, while protecting individual privacy and intellectual property.  The concept of recallable email was conceived by one of BigString’s founders and current President and Chief Executive Officer, Darin M. Myman.  After inadvertently sending an email to a prospective client which contained sensitive pricing and customer information, Mr. Myman unfortunately learned that there was no way for him to retrieve the email before the prospective client had the opportunity to review the contents thereof.  As a result of this frustrating experience, Mr. Myman and certain other members of BigString’s management team focused on developing a technology that would allow users to have comprehensive control, security and privacy of their email.  In March 2004, the BigString email service was introduced to the market.
  Business Strategy
  The email industry has migrated from an advertising model to a blended model that includes advertising, subscriptions and hosting. 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.
  1
  BigString includes advertising with its email services.  Advertisements are primarily displayed to users of our free service.  Advertisements customarily include text and banner ads and are paid based on a mix of impressions, clicks and actions.  BigString currently has agreements with a number of firms that provide advertising services.  In the future, we may add additional types of advertisements and additional advertising service firms, as well as direct advertisers and sponsors, as we increase the monetization of our user base.
  Certain Internet service providers (“ISPs”), portals, social networks and content providers use email as a tool to compete against each other.  This strategy incorporates email as part of their offering because email is one of the most effective web applications in bringing users back to a site, multiple times a day, day after day.  Many service providers have recently launched beta versions.  These beta email developments consist primarily of storage and anti-spam/anti-virus filters.  BigString continuously strives to provide a superior user experience with features that we believe exceed those of other providers.
  Leveraging the ‘stickiness’ of email and the advantage it can offer an Internet property, we introduced email hosting, private label, and co-branded solutions. These solutions offer BigString’s unique email features under the logos and marks of web publishers and content sites, such as search engines, social networks, online dating sites, ISPs and social media portals. Web publishers and content sites can further their image and differentiate their services from competitors, while increasing incremental traffic, page views and ad revenue from their existing members. Agreements may 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.
  BigString has introduced complementary messaging services to provide a full suite of communications tools for our members. In 2008, BigString introduced a self-destructing instant messaging (“IM”) technology that enables users to send instant messages that self-destruct after being sent; this service continued to develop into a web-based, cross-platform IM application that enables users to send self-destructing or regular IMs across AOL®’s AIM, Yahoo®’s Messenger, MSN®’s Messenger and Google®’s Gtalk. In 2008, we also released a self-destructing, SMS text messaging application; this application was initially configured for BlackBerry® phone users.  In 2009, we released an easy-to-use universal email tracking service that allows users to know when their emails have been opened and read.
  Building on the vast popularity of the social networking sites such as Facebook®, MySpace®, Friendster® and LinkedIn®, BigString’s social networking applications allow users to easily send and receive messages, notifications, email and videos that self-destruct on command. These rapidly growing, adjacent markets offer BigString the opportunity to leverage its skills in messaging and streaming audio and video to create complementary messaging applications. Our development efforts are focused to address security and privacy gaps in social networking messaging applications. In 2008, we added the BuddyStumbler social network to the BigString family.
  Through PeopleString, we launched an incentive-based social network in March 2009 that would allow users of social networks to earn incentives through online and offline activities by the user and his or her network. PeopleString shares revenue generated from advertising and marketing affiliations, a shopping rewards program, and offers premium services that may be purchased by users, including web development.
  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.
  In December 2009, we received a patent from the United States Patent and Trademark Office for Universal, Recallable, Erasable, Secure and Timed Delivery Email.  The issued patent may help us explore new licensing and revenue opportunities for our patented technology, as well as pursue any possible infringement.
  Promotion
 
 We promote our messaging service and products through the Internet, including messaging and email tag lines, organic search, paid search, banners, blogs, social networks, video and other viral tactics, multimedia, print, and radio as well as through alliances with marketing affiliates and programs contained on our interactive entertainment portal. We also offer fee based services, such as our self-destructible SMS text application, through online stores as a point of sale license purchase.
  Our promotions also include email hosting, private label, and co-branded solutions. The web publishers and content sites may offer our messaging services to their existing registered member base as well as all future members that register. The web publishers and content sites are responsible for marketing. BigString receives advertising revenue associated with these marketing affiliations and may also receive premium fees when registered members upgrade service.  In conjunction with contracts to provide email services to marketing affiliates, BigString may be obligated to make payments, which may represent a portion of revenue, to its marketing affiliates.
  Market Affiliations
 
 We enter into market affiliations with other Internet companies regarding advertisements and other marketing promotions which can be accessed through our website. Through these marketing affiliations, advertisements, such as banner ads, are posted on our website and may be accessed by our users.  In addition, advertising websites may be accessed directly through our website.  Our marketing affiliates are obligated to pay us a portion of the revenue they receive from advertisers as compensation for BigString’s sale of promotional space on our website.
  We generate revenue when our users access the advertisements or advertising websites and purchase products and services.  In addition, we generate revenue based on the number of our users accessing advertisements and advertisers’ websites. We also generate revenue based upon the number of impressions per advertisement.
  2
 
 Products and Services
 
 BigString offers a web-based, POP3/IMAP server, email service solution.  Our patented 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.  The sender can have the email self-destruct or disappear after a defined number of views or after a certain time period.
  BigString’s current email 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’s email service 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. It 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, it 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. Three Layer Secure Email enables users to send encrypted, password-protected email with BigString’s unique auto-expiration and non-forward features for sensitive correspondence.
  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, including email service for the iPhoneTM, self-destructing Facebook applications, self-destructing instant messaging, self-destructing SMS text messaging, and an easy-to-use universal email tracking service.
  Products Offered – BigString currently offers its consumer, business and enterprise customers the following packages:
  Email
  ·
BigString Free Email (No Charge).
  ·
BigString Premium Email ($29.95 per year).
  ·
BigString Business Email ($149.95+ per year).
  ·
BigString Mobile Email (No Charge).
  Email Hosting
  ·
BigString Private Label Email ($5,000.00 development, $500.00 per year + revenue share).
  ·
BigString Email Hosting (Enterprise level) ($11,500.00+ per year).
  Social Network Messaging
  ·
BigString Exploding Messages & Pictures (No Charge).
  ·
BigString Exploding Video (No Charge).
  Instant Messaging (IM)
  ·
BigString Cross-Platform, Self-Destructing IM (No Charge).
  3
 
 SMS Texting
  ·
BigString Self-Destructing SMS Text Messaging ($29.95 per license).
  BigString Free Email provides the features of BigString’s email service, includes unlimited GB email storage and permits the user to send unlimited emails per month.  It is accessed by the user through the web as web-based email, or webmail, and each user is given one address.  Individuals can signup for multiple “disposable” accounts.  Wizards help users import previously saved contacts.  To personalize their email, users can create an alias, create their own font, add signatures, add pictures to both their profile and their contacts’ profiles, create multiple expire messages, and create custom templates with editable fields and then access the saved templates to save time while composing messages.
  BigString Premium Email offers all the features of the BigString Free Email account, plus vanity domains (yourname@yourdomain.com), POP3 access using any email client (such as Microsoft Outlook®), 30 minute video email and reduced banner advertising.
  BigString Business Email offers all the features of the BigString Premium account, plus 10 email accounts, global filter notification and advanced email management.  Small and medium sized businesses can customize the number of additional addresses for an additional fee.
  BigString Mobile Email provides access to a user’s email account from the iPhoneTM and other next-generation wireless devices.
  BigString Private Label Email offers web publishers and content sites BigString’s hosted email platform as a value-added service for their member, and helps generate incremental traffic, page views and ad revenue from their existing members.  The private labeled, or white labeled, solution offers a revenue share of advertising and/or premium fees generated by BigString.
  BigString Email Hosting offers enterprise level firms all the features of BigString Private Label Email, in a licensed package which can be customized to integrate with the firms’ messaging, networking and video applications.
  BigString Exploding Messages & Pictures offers social networking members integrated self-destructing messaging applications through their current social network.
  BigString Exploding Video offers social networking members integrated self-destructing video applications through their current social network.
  BigString Cross-Platform, Self-Destructing IM provides users with both regular and self-destructing, instant messaging options on a cross-platform application across AOL’s AIM, Yahoo’s Messenger, MSN’s Messenger and Google’s Gtalk.
  BigString Self-Destructing SMS Text Messaging provides users SMS text messages that self-destruct after a specified time frame for use on mobile devices, such as the BlackBerry phone.
  Technical and Customer Support – Customer support for BigString’s messaging service and products is available in two different ways:
  ·
Email Support.  The ability for customers to contact BigString support through email.
  ·
Phone Support.  The ability for customers to contact BigString support via the telephone.
  Historically, the customers of BigString’s services and products have required very little support.  BigString continuously reviews its support capabilities and updates and enhances such capabilities to meet the needs of the users of its products and services.  In the future, BigString may outsource the support of its products and services to cost effective call centers or service providers.
  Also available on the BigString website is a Frequently Asked Questions section and a comprehensive BigString User Guide.  We believe that BigString’s Frequently Asked Questions section and User Guide usually can resolve most of a user’s problems.  As 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.
  4
  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.
  In June 2008, BigString sold FindItAll.com and its related assets to FindItAll, Inc., a development stage company, and sold AmericanMoBlog.com and its related assets to AmericanMoBlog, Inc., a development stage company.
  In July 2008, BigString acquired Buddystumbler.com, an IM-based social network that allows users to meet people via free online chats on AOL AIM, Yahoo Messenger, MSN Messenger and Google Talk.
  BigString continues to apply its streaming audio and video experience and technologies into its messaging, email and social network applications.
  PeopleString - In March 2009, BigString launched PeopleString, an incentive-based social network that pays users to receive regular direct mail as well as for performing a host of internet activities.  Users of PeopleString can generate income through an opt-in direct mail program and their use of email, instant messaging, video email and file storage. In addition, PeopleString’s technology allows users to generate additional income by creating a personal affiliate network by signing up friends and businesses through multiple digital bonds. The user who creates his or her own affiliate network will generate income each time any other user in the affiliate network generates income.  You can access PeopleString at http://www.PeopleString.com.
  Protection of Proprietary Rights
 
 We rely on a combination of U.S. and foreign patent, copyright, trademark and trade secret laws to establish and protect our proprietary rights.  In particular, we rely upon our patent for Universal Recallable, Erasable, Secure and Timed Delivery Email, U.S. Patent Number 7,640,307B2; our patent application for Destroyable Instant Messaging (IM), Serial No. 12/060,406; our service mark for the word “BigString,” Serial No. 78/336,856; our service mark for the word “Our Prisoner,” Serial No. 78/751,930; and the protection of 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.  The patent for Universal Recallable, Erasable and Timed Delivery Email will expire on April 18, 2024, 20 years following the date our patent application was filed. If issued by the United States Patent and Trademark Office, the patent for Destroyable Instant Messaging (IM) will expire on April 1, 2028, 20 years following the date our patent application was filed.  Our service marks will not expire provided that we continue to make routine filings to keep it current with the United States Patent and Trademark Office.
  (i)  Under the U.S. patent laws, our rights to the intellectual property which is the subject of our patent and patent application may not be infringed upon by a third party.  We may assert rights and provisional rights as to the intellectual property covered by the patent and patent application, respectively.  BigString may obtain a reasonable royalty from a third party that infringes on a claim, provided actual notice is given to the third party by BigString and with respect to the patent application, that a patent issues from the application with a substantially identical claim.
  5
  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 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 December 31, 2009, BigString visitors accessed www.BigString.com from 228 countries/territories, compared to 223, 190 and 60 countries/territories as of December 31, 2008, 2007 and 2006, respectively. The top five countries by visits to www.BigString.com are as follows: United States 54%, United Kingdom 7%, Canada 5%, Peru 3%, and Mexico 3%, followed by India, Columbia, Australia, Brazil and Germany.
  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 condition 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 employees, who also share their time and expenses with PeopleString. At December 31, 2009, we had five employees. We believe that our relationship with our employees is satisfactory.  We have not suffered any labor problems since our inception.
  Todd M. Ross and Marc W. Dutton resigned from the board of directors of BigString, effective March 12, 2009.  Darin M. Myman, Robert DeMeulemeester and Adam Kotkin are the remaining members of the board of directors.  At this time, the board of directors does not anticipate filling the vacancies in the board of directors as a result of the resignations of Mr. Ross and Mr. Dutton. Mr. Myman, Mr. DeMeulemeester and Mr. Kotkin are also key executives and directors of PeopleString.
  Advisory Board
 
 In December 2006, BigString formed an Advisory Board to advise the company on operational matters, the company’s marketing efforts and future business opportunities.  There are currently two members who serve on the Advisory Board, Sidney Braginsky, former President and Chief Operating Officer of Olympus America Inc., Melville, New York; and J. Frederic Kerrest, former Director Business Development & Alliances of Salesforce.com, Inc., San Francisco, California.
  Government Regulation
 
 We do not currently face direct regulation by any governmental agency, other than laws and regulations generally applicable to businesses.
  Due to the increasing popularity and use of the Internet, it is possible that a number of laws and regulations may be adopted in the U.S. and abroad with particular applicability to the Internet.  It is possible that governments will enact legislation that may be applicable to us in areas including network security, encryption, data and privacy protection, electronic authentication or “digital” signatures, access charges and retransmission activities.  Moreover, the applicability to the Internet of existing laws governing issues including property ownership, content, taxation, defamation and personal privacy is uncertain.
  The majority of laws that currently regulate the Internet were adopted before the widespread use and commercialization of the Internet and, as a result, do not contemplate or address the unique issues of the Internet and related technologies.  Any export or import restrictions, new legislation or regulation or governmental enforcement of existing regulations may limit the growth of the Internet, increase our cost of doing business or increase our legal exposure.  Any of these factors could have a material adverse effect on our business, financial condition and results of operations.
  Violations of local laws may be alleged or charged by state or foreign governments, and we may unintentionally violate local laws.  Local laws may be modified, or new laws enacted, in the future.  Any of these developments could have a material adverse effect on our business, results of operations and financial condition.
  6
  Item 1A.  Risk Factors
  BigString is a smaller reporting company and is therefore not required to provide this information.
  Item 1B.  Unresolved Staff Comments
  None.
  Item 2.  Properties
  We occupy space at 157 Broad Street, Suite 109, Red Bank, New Jersey 07701. Our current Red Bank offices have approximately 1,426 square feet of office space.  Our operating lease for this premise expires on March 31, 2010.  The current occupancy rate is $2,300 per month.  In addition, we also keep certain servers off-site at a facility located in Newark, New Jersey.  While we believe that the 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.  (Removed and Reserved)
  7
  PART II
  Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities
  Market Information
  Our common stock commenced quotation on the NASDAQ OTC Bulletin Board under the trading symbol “BSGC” on May 2, 2006.  The following table sets forth, for the periods indicated, the high and low sales prices for our common stock as reported on the NASDAQ OTC Bulletin Board.  This information reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
  Year Ended December 31, 2009

High


LowFirst Quarter

$
0.02


$
0.01Second Quarter

$
0.03


$
0.01Third Quarter

$
0.05


$
0.02Fourth Quarter

$
0.04


$
0.02
  Year Ended December 31, 2008

High


LowFirst Quarter

$
0.27


$
0.16Second Quarter

$
0.21


$
0.11Third Quarter

$
0.18


$
0.03Fourth Quarter

$
0.07


$
0.02
 
  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 22, 2010, we had over seven market makers for our common stock, including:  Archipelago Trading Services, Inc., Domestic Securities, Inc., Hudson Securities, Inc., LaBranche Financial Services, Inc., Pershing LLC, The Vertical Trading Group, LLC and Vfinance Investments, Inc.
  As of March 22, 2010, the approximate number of registered holders of our common stock was 50, and BigString is aware that the number of non-objecting beneficial owners of our common stock is approximately 1,400.  As of March 30, 2010, the number of outstanding shares of our common stock was 66,098,316; the number of outstanding shares of our Series A Preferred Stock was 79,657 (currently convertible into 1,101,452 shares of our common stock); and there were 16,393,545 shares of common stock subject to outstanding warrants, and 6,950,100 shares of common stock subject to outstanding stock options.
  Dividends
  No dividends were declared on BigString’s common stock in the years ended December 31, 2009 and 2008, and 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.
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  Details of Issuance of Shares of Our Common Stock in Connection With Accrued Interest
  On March 2, 2009, BigString issued 525,000 shares of its common stock for accrued interest on convertible promissory notes totaling $42,000. BigString issued 187,500, 150,000 and 187,500 shares of BigString’s common stock to Alpha Capital Anstalt, Excalibur Small Cap Opportunities LP andWhalehaven Capital Fund Limited, respectively. The interest conversion price was $0.08 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.
  On May 1, 2009, BigString issued 468,750 shares of its common stock for accrued interest on convertible promissory notes totaling $37,500. BigString issued 187,500, 93,750 and 187,500 shares of BigString’s common stock to Alpha Capital Anstalt, Iroquois Master Fund Ltd. andWhalehaven Capital Fund Limited, respectively. The interest conversion price was $0.08 per share. In connection with the issuance of such shares, BigString relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) of the Securities Act.
  Details of Issuance of Shares of Our Common Stock in Connection With Conversion of Preferred Stock
  On July 1, 2009, BigString issued 4,429,522 shares of its common stock upon the conversion of 320,343 shares of BigString’s Series A Preferred Stock by The Raptor Global Portfolio LTD. The conversion was 13.83 shares of common stock per share of Series A Preferred Stock. In connection with the issuance of such shares, BigString relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) of the Securities Act.
  Details of Issuance of Shares of Our Common Stock in Connection With Conversion of Notes
  On July 15, 2009, BigString issued 1,000,000 shares of its common stock upon the conversion of convertible promissory notes totaling $15,000 by Whalehaven Capital Fund Limited. The conversion price was $0.015 per share. In connection with the issuance of such shares, 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.
  On July 27, 2009, BigString issued 500,000 shares of its common stock upon the conversion of convertible promissory notes totaling $7,500 by Alpha Capital Anstalt. The conversion price was $0.015 per share. In connection with the issuance of such shares, 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.
  On August 31, 2009, BigString issued 480,552 shares of its common stock upon the conversion of convertible promissory notes totaling $7,208 by Excalibur Small Cap Opportunities LP. The conversion price was $0.015 per share. In connection with the issuance of such shares, 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.
  On September 30, 2009, BigString issued 2,950,000 shares of its common stock upon the conversion of convertible promissory notes totaling $44,250 by Whalehaven Capital Fund Limited. The conversion price was $0.015 per share. In connection with the issuance of such shares, 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.
  On October 13, 2009, BigString issued 731,543 shares of its common stock upon the conversion of convertible promissory notes totaling $10,973 by Excalibur Small Cap Opportunities LP. The conversion price was $0.015 per share. In connection with the issuance of such shares, 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 June 23, 2009, BigString entered into a subscription arrangement with Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Special Opportunities LP (collectively, the “2009 Subscribers”), pursuant to which the 2009 Subscribers purchased convertible notes in the aggregate principal amount of $180,000, which notes are convertible into shares of BigString’s common stock, and warrants to purchase up to 6,000,000 shares of BigString’s common stock.  Each convertible note has a term of two 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 $0.015 per share, as adjusted.  The conversion price and number and kind of shares to be issued upon conversion of the convertible note are subject to adjustment from time to time. Each warrant has an exercise price of $0.015 per share of common stock, as adjusted.   The number of shares of common stock underlying each warrant and the exercise price are subject to certain adjustments.
  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.
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  Item 6. Selected Financial Data
  BigString is a smaller reporting company and is therefore not required to provide this information.
 
 Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operation
  The following discussion and analysis is intended to provide information about BigString’s financial condition and results of operations for the years ended December 31, 2009 and 2008.  This information should be read in conjunction with BigString’s audited consolidated financial statements for the years ended December 31, 2009 and 2008, and the period October 8, 2003 (Date of Formation) through December 31, 2009, including the related notes thereto, which begin on page F-2 of this report.
  Background
 
 BigString Corporation (“BigString” or the “Company”) 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 July 2004, BigString acquired Email Emissary, an Oklahoma corporation that was formed to develop similar technology.  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, Inc. (“BigString Interactive”), incorporated in the State of New Jersey on January 20, 2006, is a wholly-owned subsidiary of BigString.
  PeopleString Corporation (“PeopleString”), incorporated in the State of Delaware, was formed by BigString in early 2009 to develop technology relating to social networks. BigString currently owns less than 30% of PeopleString’s outstanding common stock
  Development Stage Company
 
 BigString is considered a development stage enterprise in accordance with the guidance contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities.”  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.
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  We serve three main email markets: free and premium fee email accounts for individuals; professional business email solutions; and email hosting, private label, and co-branded solutions for web publishers and content sites, such as search engines, social networks, online dating sites, ISPs and social media portals.  A few of the key features of our email services include:
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Self-destructing video email that can be programmed to self-destruct after a specific number of viewings or a set time;
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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;
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File storage center that allows users to store up to two GB of files on our servers;
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Unlimited email storage; and
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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.
  Our development efforts in 2008 were primarily focused on expanding recallable messaging beyond email. In April, 2008, we introduced a self-destructing IM technology, and in July, 2008, we expanded the platform to include other leading IM services, including AOL’s AIM, Yahoo’s Messenger, MSN’s Messenger and Google’s Gtalk. In August, 2008, we introduced self-destructing SMS Text Messaging with service for the BlackBerry phone market.
  In May, 2008, we entered into an international distribution agreement with VIP Connectz to offer our email and IM services as a private label service to the VIP Connectz network of members. In July, 2008, we augmented our base English and Chinese language services with Spanish and Portuguese language portals.  Also in July, 2008, we acquired Buddystumbler.com, an IM-based social network that allows members to meet people via free online chat on AOL’s AIM, Yahoo’s Messenger, MSN’s Messenger and Google’s Gtalk.
  In January 2009, we released an easy-to-use universal email tracking service that allows users to know when their emails have been opened and read.
  In March 2009, through PeopleString, we launched an incentive-based social network that pays users to receive direct mail and perform a host of internet activities.
  In April 2009, we entered into an agreement with PeopleString to license BigString’s messaging technology and share the cost of certain common services.
  In December 2009, we received a patent from the United States Patent and Trademark Office for Universal, Recallable, Erasable, Secure and Timed Delivery Email.
  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.
  Notwithstanding our progress in acquiring new members, we significantly reduced our marketing efforts from prior years 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;
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 · the acquisition cost per user for each of our email services;
  · the cost and effectiveness for each of our promotional efforts;
  · the revenue and effectiveness of advertisements we serve; and
  · the revenue, impressions, clicks and actions per user.
  Critical Accounting Policies
  Our discussion and analysis of our financial condition and results of operations are based upon BigString’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires BigString to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, BigString evaluates its estimates. Estimates are used in determining such items as accruals, stock-based compensation, income taxes and other reserves. Actual results could materially differ from those estimates.
  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 ASC 605, “Revenue Recognition.”
  Consistent with the provisions of ASC 605-45-05, 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.
  Consistent with ASC 605-50-15, BigString accounts for cash considerations given to customers, for which it does not receive a separately identifiable benefit or cannot reasonably estimate fair value, as a reduction of revenue rather than an expense. Accordingly, any corresponding distributions to customers are recorded as a reduction of gross revenue.
  BigString records its allowance for doubtful accounts based upon an assessment of various factors, including historical experience, age of the accounts receivable balances, the credit quality of customers, current economic conditions and other factors that may affect customers’ ability to pay.
  Stock-Based Compensation.    BigString accounts for stock-based compensation under ASC 718, “Compensation-Stock Compensation” (“ASC 718”). 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 ASC 718.
  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 ASC 730, “Research and Development” and ASC 985, “Software.”  . 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 ASC 360-15-35, “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.
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  Intangibles.  ASC 350, “Goodwill and Other,” 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.
  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 ASC 815-15-10, “Hedging and Derivatives-Embedded Derivatives” and related interpretations including ASC 815-40-05, “Hedging and Derivatives-Contracts in Entity’s Own Equity.”
  Results of Operations
  For the Years Ended December 31, 2009 and 2008
  Net Loss.  For the year ended December 31, 2009, net loss was $968,848, as compared to a net loss of $3,748,946 for the year ended December 31, 2008. The $2,780,098 decrease in net loss was primarily attributable to an increase in revenues of $21,505, a decrease in operating expenses of $2,817,785 and a decrease in other income (expense) of $58,837, partially offset by a reduction in income tax benefit of $118,029.
  Revenues.  For the year ended December 31, 2009, revenues were $82,700, a $21,505 increase over revenues of $61,195 earned in the year ended December 31, 2008.  Of the revenues generated for the year ended December 31, 2009, $54,733 was generated from product and service fees and $27,967 was generated from advertisers, as compared to $42,331 from product and service fees and $18,864 from advertisers for the year ended December 31, 2008.
  The 35% increase in net revenues for the year ended December 31, 2009 over the same prior year period was primarily due to increase product and service fees of $12,401. This increase was primarily due to the adoption of BigString’s private label email services by other firms. As of December 31, 2009, unearned revenue from product fees decreased to $1,649 from $7,104 at December 31, 2008.
  Advertising revenues are paid based on a mix of impressions, clicks and actions. BigString increased advertising revenues by $9,104 for the year ended December 31, 2009 over the same prior year period primarily through an advertising optimization program combined with private label email services.
  Operating Expenses.  For the year ended December 31, 2009, operating expenses were $958,265, a $2,817,785 decrease from operating expenses of $3,776,050 incurred in the year ended December 31, 2008. Operating expenses, excluding amortization, depreciation, impairment and share-based compensation expenses, for the year ended December 31, 2009, were $704,331, a $707,747 decrease from the same prior year period.
  ·
Cost of revenues: Cost of revenues for the year ended December 31, 2009 were $62,163, as compared to $89,387 for the prior year.  The $27,224 decrease in cost was primarily attributable to reduced hosting and staffing and associated overhead expenses.
  ·
Research and development: Research and development expenses for the year ended December 31, 2009 were $228,369, as compared to $486,066 for the prior year.  The $257,697 decrease in expenses was primarily attributable to reduced staffing and associated overhead expenses.
  ·
Sales and marketing: Sales and marketing expenses for the year ended December 31, 2009 were $16,708, as compared to $178,667 for the prior year.  The $161,959 decrease in expenses was primarily attributable to reduced advertising and public relations expenses.
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General and administrative: General and administrative expenses for the year ended December 31, 2009 were $651,025, as compared to $1,423,984 for the prior year.  The $772,959 decrease in expenses was primarily attributable to reduced investor relations, legal, audit, consulting, staffing and associated overhead expenses.
  ·
Amortization: Amortization expenses for the year ended December 31, 2009 were $0, as compared to $970,362 for the prior year.  The decrease in expenses was attributable to the full amortization and impairment of intangible assets.
  ·
Impairment of assets: Impairment expenses of intangible assets for the year ended December 31, 2009 were $0, as compared to $627,584 for the prior year.  The decrease in expenses was attributable to impairment expenses of $627,584 in 2008 due to continuing losses associated with the intangible assets.
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 Other income (expense).  For the year ended December 31, 2009, other expenses were $403,391, a $58,837 decrease over other expenses of $462,228 incurred in the year ended December 31, 2008.
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Interest income: Interest income for the year ended December 31, 2009 was $68, as compared to $4,266 for the prior year. The $4,198 decrease in income was primarily due to a decrease in cash balances and interest rates.
  ·
Interest expense: Interest expense for the year ended December 31, 2009 was $84,224, as compared to $81,951 for the prior year. The $2,273 increase in expense was primarily due to the partial year of interest expense on the convertible promissory notes issued in 2009.
  ·
Other, net: Other, net income for the year ended December 31, 2009 included gain on sale of investments of $40,162 and other income related to accrual releases of $86,720, as compared to $0 for the prior year.  Other, net expense related to the convertible debenture and warrant financing for the year ended December 31, 2009 was $446,117, as compared to $384,543 for the prior year. The $61,574 increase was primarily due to an increase in amortization of promissory note discount and amortization of beneficial conversion features, partially offset by the amortization of debt issue costs. Amortization is accelerated for the proportion of promissory notes which are converted in a period.
  Income Taxes.  For the year ended December 31, 2009, net income tax benefits were $310,108, as compared to $428,137 for the year ended December 31, 2008.
  ·
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, 2009, BigString accrued a net state tax benefit of $310,108 as a result of its sale of $3,849,878 of New Jersey state net operating losses. Gross sales proceeds were $346,489. For the year ended December 31, 2008, BigString recorded a net state tax benefit of $428,137 as a result of its sale of $5,007,781 of New Jersey state net operating losses and $31,780 of New Jersey state research and development credits. Gross sales proceeds were $482,480.  BigString may be able to transfer its unused New Jersey net operating losses and research and development credits in future years.
  ·
Valuation allowances for the years ending December 31, 2009 and 2008, have been applied to offset the deferred tax assets in recognition of the uncertainty that such tax benefits will be realized as BigString continues to incur losses. At December 31, 2009, BigString has available net operating loss carry forwards of approximately $13.4 million for federal income tax reporting purposes and $5.8 million for state income tax reporting purposes which expire in various years through 2029. The differences between book income and tax income primarily relates to amortization of intangible assets and other expenditures.  Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, the annual utilization of a company’s net operating loss and research credit carry forwards may be limited, and, as such, BigString may be restricted in using its net operating loss and research credit carry forwards to offset future federal income tax expense.
  For the Years Ended December 31, 2008 and 2007
  Net Loss.  For the year ended December 31, 2008, net loss was $3,748,946, as compared to a net loss of $3,949,184 for the year ended December 31, 2007. The $200,238 decrease in net loss was primarily attributable to an increase in revenues of $20,030, a decrease in Other expense of $176,702 related to reduced financing fees, and an increase in Income tax benefit of $169,283. These revenue gains and expense reductions were partially offset by a net increase in operating expenses of $165,777 primarily due to an increase in impairment charges to intangible assets.
  Revenues.  For the year ended December 31, 2008, revenues were $61,195, a $20,030 increase over revenues of $41,165 earned in the year ended December 31, 2007.  Of the revenues generated for the year ended December 31, 2008, $42,331 was generated from product and service fees and $18,864 was generated from advertisers, as compared to $23,814 from product and service fees and $17,351 from advertisers for the year ended December 31, 2007.
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  The 49% increase in net revenues for the year ended December 31, 2008 over the same prior year period was primarily due to a 78% increase in product and service fees. This increase was primarily due to the adoption of BigString’s private label email services by other firms and the introduction of new fee based services, such as SMS text services. These increases were partially offset by a 26% decrease in premium upgrades and business solutions, and the decision to stop development and sales on email marketing solutions. As of December 31, 2008, unearned revenue from product fees decreased to $7,104 from $9,288 at December 31, 2007.
  Advertising revenues are paid based on a mix of impressions, clicks and actions.  Despite industry wide rate decreases for online publishers, BigString increased advertising revenues by 9% for the year ended December 31, 2008 over the same prior year period primarily through an advertising optimization program which was implemented in July 2008 and increased advertising impressions and rates.
  Operating Expenses.  For the year ended December 31, 2008, operating expenses were $3,776,050, a $165,777 increase over operating expenses of $3,610,273 incurred in the year ended December 31, 2007. Operating expenses, excluding amortization, depreciation, impairment and share-based compensation expenses, for the year ended December 31, 2008, were $1,412,078, a $25,298 increase from the same prior year period.
  ·
Cost of revenues: Cost of revenues for the year ended December 31, 2008 were $89,387, as compared to $119,772 for the prior year.  The $30,385 decrease in cost was primarily attributable to reduced staffing and associated overhead expenses.
  ·
Research and development: Research and development expenses for the year ended December 31, 2008 were $486,066, as compared to $485,948 for the prior year.  The $118 increase in expenses was consistent with prior year period expenses.
  ·
Sales and marketing: Sales and marketing expenses for the year ended December 31, 2008 were $178,667, as compared to $390,347 for the prior year.  The $211,680 decrease in expenses was primarily attributable to reduced online marketing expenses of $203,609 and reduced advertising expenses of $53,797, partially offset by increased public relations expenses of $112,407.
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General and administrative: General and administrative expenses for the year ended December 31, 2008 were $1,423,984, as compared to $1,115,701 for the prior year.  The $308,283 increase in expenses was primarily attributable to increased stock-based compensation expense recorded net of estimated forfeitures.
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Amortization: Amortization expenses for the year ended December 31, 2008, were $970,362, as compared to $1,083,213 for the prior year.  The $112,851 decrease in expenses was primarily attributable to the 2007 impairment of the web sites FindItAll, AmericanMoBlog and DailyLOL.
  ·
Impairment of assets: Impairment expenses of intangible assets for the year ended December 31, 2008 were $627,584, as compared to $415,292 for the prior year.  The $212,292 increase in expenses was primarily attributable to increased impairment expenses. Continuing losses associated with the intangible assets indicated that impairment may exist. The recoverability test for the patent application and trademark assets indicated impairment as the weighted future net cash flows were less than the carrying value. The fair market value, based on weighted, discounted cash flows and disposition values, was not material, and an impairment loss of $520,334 for the carrying amount was recognized in 2008. In addition, in 2008, the recoverability test for the logos, websites and source codes, which primarily include the website BuddyStumbler, indicated impairment. The fair market value, based on weighted, discounted cash flows and disposition values, was not material, and an impairment loss of $107,250 for the carrying amount was recognized.
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 Other income (expense).  For the year ended December 31, 2008, other expenses were $462,228, a $176,702 decrease over other expenses of $638,930 incurred in the year ended December 31, 2007.
  ·
Interest income: Interest income for the year ended December 31, 2008 was $4,266, as compared to $14,409 for the prior year. The $10,143 decrease in income was primarily due to a decrease in cash balances and interest rates.
  ·
Interest expense: Interest expense for the year ended December 31, 2008 was $81,951, as compared to $31,134 for the prior year. The $50,817 increase in expense was primarily due to the full year of interest expense on the convertible promissory notes issued in 2007 and interest expense on the convertible promissory notes issued in 2008.
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Other, net: Other, net expenses related to the convertible debenture and warrant financing for the year ended December 31, 2008 were $384,543, as compared to $622,205 for the prior year. The $237,662 decrease was primarily due to the reduction of financing fees of $269,094, and the reduction of the amortization of beneficial conversion features of $8,115. These reductions were partially offset by increases to the amortization of the debt issue costs of $21,268 and amortization of the promissory note discount of $18,279. Amortization is accelerated for the proportion of promissory notes which are converted in a period.
  Income Taxes.  For the year ended December 31, 2008, net income tax benefits were $428,137, as compared to $258,854 for the year ended December 31, 2007.
  ·
BigString participated in the Program, which allows certain high technology and biotechnology companies to sell unused NOL carryforwards to other New Jersey corporation business taxpayers. The Program requires that the purchaser pay at least 75% of the amount of the surrendered tax benefit. For the year ended December 31, 2008, BigString recorded a net state tax benefit of $428,137 as a result of its sale of $5,007,781 of New Jersey state net operating losses and $31,780 of New Jersey state research and development credits. Gross sales proceeds were $482,480. For the year ended December 31, 2007, BigString recorded a net state tax benefit of $258,854 as a result of its sale of $2,442,561 of New Jersey state net operating losses and $74,359 of New Jersey state research and development credits. Gross sales proceeds were $294,189.
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Valuation allowances for the years ending December 31, 2008 and 2007, were applied to offset the deferred tax assets in recognition of the uncertainty that such tax benefits will be realized as BigString continued to incur losses. At December 31, 2008, BigString had available net operating loss carry forwards of approximately $12.6 million for federal income tax reporting purposes and $5.0 million for state income tax reporting purposes which expire in various years through 2028. The differences between book income and tax income primarily relates to amortization of intangible assets and other expenditures.  Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, the annual utilization of a company’s net operating loss and research credit carry forwards may be limited, and, as such, BigString may be restricted in using its net operating loss and research credit carry forwards to offset future federal income tax expense.
  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, 2009, we have expended $5,368,494 for operating and investing activities, which has been primarily funded by investments of $5,371,533 from our stockholders and convertible note holders.  For the year ended December 31, 2009, we expended $355,748 for operating and investing activities, a decrease of $484,831 from the amount expended during the year ended December 31, 2008.
  Our cash balance as of December 31, 2009 was $3,039, which was a decrease of $175,748 from our cash balance of $178,787 as of December 31, 2008. This decrease to our cash balance related to operating and investment expenses was primarily associated with the development of our products and services, marketing, and professional fees.  These cash outlays were partially offset by $180,000 raised by BigString through private placement of convertible notes and warrants on June 23, 2009, discussed below.
  Management believes its current cash balance of $47,960 at March 26, 2010 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.
  16
  On June 23, 2009, we entered into a financing arrangement pursuant to which the 2009 Subscribers purchased convertible notes in the aggregate principal amount of $180,000, which notes are convertible into shares of BigString’s common stock, and warrants to purchase up to 6,000,000 shares of BigString's common stock. Each convertible note has a term of two 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 $0.015 per share, as adjusted.  The conversion price and number and kind of shares to be issued upon conversion of the convertible note are subject to adjustment from time to time. The warrants have an exercise price of $0.015 per share, as adjusted.  The number of shares of common stock underlying each warrant and the exercise price are subject to certain adjustments.
  As described herein, BigString participated in the State of New Jersey’s Program, which allows certain high technology and biotechnology companies to sell unused NOL carryforwards and research and development credits to other New Jersey corporation business taxpayers.  On December 16, 2008, BigString received net proceeds of $428,137. On January 11, 2010, BigString received net proceeds of $310,108. BigString may also be able to transfer its unused New Jersey net operating losses and research and development credits in future years and plans to apply for participation again in 2010.
  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 in December 2009, received a patent from the United States Patent and Trademark Office for Universal, Recallable, Erasable, Secure and Timed Delivery Email.
  We have also made significant adjustments to our cost structure, and are sharing common services with PeopleString, such as rent, hosting and staffing. We reduced our operating and investing cash expenditures by $484,831, or 58%, for the year ended December 31, 2009 as compared to the prior year.
  We expect to continue development of 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 products and services.  However, if our revenue and cash balance are insufficient to fund our operations, we will seek additional funds.  There can be no assurance that such funds will be available to us or that adequate funds for our operations, whether from debt or equity financings, will be available when needed or on terms satisfactory to us.  Our failure to obtain adequate additional financing may require us to delay or curtail some or all of our business efforts and could cause us to seek bankruptcy protection. Any additional equity financing may involve substantial dilution to our then-existing stockholders.
  Our current officers and directors have not, as of the date of this filing, loaned any funds to BigString. There are no formal commitments or arrangements to advance or loan funds to BigString or repay any such advances or loans.
  Item 7A.  Quantitative and Qualitative Disclosure About Market Risk
  BigString is a smaller reporting company and is therefore not required to provide this information.
  Item 8.  Financial Statements and Supplementary Data
  The consolidated financial statements and supplementary data of BigString called for by this item are submitted under a separate section of this report.  Reference is made to the Index of Financial Statements contained on page F-1 herein.
  17
 
 Item 9.  Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
  None.
 
 Item 9A.   Controls and Procedures
  (a) Evaluation of disclosure controls and procedures.
  Management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
  Based on management’s evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2009, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
  (b) Changes in internal control over financial reporting.
  We review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
  There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
  (c) Management’s report on internal control over financial reporting.
  Management is responsible for establishing and maintaining adequate control over financial reporting for BigString.  Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.  Internal controls over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of BigString; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of BigString are being made only in accordance with authorizations of management and directors of BigString; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of BigString’s assets that could have a material effect on the financial statements.
  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
  Management, with the participation of our principal executive officer and principal financial and accounting officer, conducted an evaluation of the effectiveness of BigString’s internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2009.
  18
  This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K. There have been no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
 
 Item 9B.Other Information
  None.
  19
  PART III
 
 
 Item 10.   Directors, Executive Officers and Corporate Governance
  Directors
 
 Each director serves for a term set to expire at the next annual meeting of stockholders of BigString. The name, age, principal occupation or employment and biographical information of each member of the Board of Directors of BigString who served as of December 31, 2009 are set forth below:
 
 Name and Address

Age

Principal Occupation or EmploymentDarin M. Myman

45

President and Chief Executive Officer of BigStringRobert S. DeMeulemeester

43

Executive Vice President, Chief Financial Officer and Treasurer of BigStringAdam M. Kotkin

30

Chief Operating Officer and Secretary of BigString
 
 There are no family relationships among BigString’s directors and executive officers. None of the directors of BigString is a director of any company registered pursuant to Section 12 of the Exchange Act, or subject to the requirements of Section 15(d) of the Exchange Act, or any company registered as an investment company under the Investment Company Act of 1940, as amended.
 
 Biographical Information
 
 Darin M. Mymanis a co-founder of BigString and has served as the President and Chief Executive Officer of BigString since its inception on October 8, 2003. He also has served as a member of BigString’s Board of Directors since BigString’s inception. Mr. Myman is also a co-founder of PeopleString and has served as the President and Chief Executive Officer of PeopleString since its inception on January 2, 2009. He also has served as a member of PeopleString’s Board of Directors since PeopleString’s inception. From November 2001 until October 2003, Mr. Myman was a self-employed Internet marketing and business consultant and, from March 2001 until November 2001, he served as Executive Vice President of InsuranceGenie.com. Prior to his employment by InsuranceGenie.com, Mr. Myman was a co-founder and Chief Executive Officer of LiveInsurance.com, the first online insurance brokerage agency, from March 1999 until December 2000. Prior to co-founding LiveInsurance.com, he served as a Vice President of the online brokerage services unit of Westminster Securities Corporation from January 1995 until March 1999.
 
 Robert S. DeMeulemeesterhas served asExecutive Vice President, Chief Financial Officer and Treasurer of BigString since September 2006. He also has served as a member of BigString’s Board of Directors since May 30, 2007. Mr. DeMeulemeester is also a co-founder of PeopleString and has served as the Executive Vice President, Chief Financial Officer and Treasurer of PeopleString since its inception on January 2, 2009. He also has served as a member of PeopleString’s Board of Directors since PeopleString’s inception. Prior to joining BigString, from January 1998 to January 2006, Mr. DeMeulemeester served as managing director and treasurer of Securities Industry Automation Corporation (“SIAC”), a New York based provider of automated information and communication systems that supports the NYSE Group, the American Stock Exchange and related affiliates. Mr. DeMeulemeester also served as managing director, CFO and controller of Sector, Inc., a New York based provider of connectivity solutions, managed services and market data content for the financial services industry and a subsidiary of SIAC. Prior to his employment with SIAC and Sector, Inc., Mr. DeMeulemeester was employed at Honeywell International Inc., located in Teterboro, NJ, Pacific Bell, located in San Francisco, CA, and Accenture, located in New York, NY. Mr. DeMeulemeester earned his MBA in 1993 at Columbia Business School, Columbia University and his BS in Industrial Engineering at Lehigh University in 1989.
  20
 
 Adam M. Kotkinis a co-founder of BigString and has served as the Chief Operating Officer of BigString since its inception on October 8, 2003, and as Secretary since August 17, 2005. He also has served as a member of BigString’s Board of Directors since June 29, 2005. Mr. Kotkin is also a co-founder of PeopleString and has served as the Chief Operating Officer of PeopleString since its inception on January 2, 2009. He also has served as a member of PeopleString’s Board of Directors since PeopleString’s inception. Prior to joining BigString, from June 2002 until December 2003, Mr. Kotkin was a paralegal in the law firm of Swidler, Berlin, Shereff & Friedman, LLP. From April 2001 until August 2001, he served as a business manager for InsuranceGenie.com. Prior thereto, Mr. Kotkin served as business developer and sales manager at LiveInsurance.com from March 1999 until December 2000. Mr. Kotkin graduated with distinction from New York University with a BA in Economics.
 
 Executive Officers
 
 The name, age, current position and biographical information of each executive officer of BigString are set forth below:
 
 Name

Age

PositionDarin M. Myman

45

President and Chief Executive OfficerRobert S. DeMeulemeester

43

Executive Vice President, Chief Financial Officer and TreasurerAdam M. Kotkin

30

Chief Operating Officer and Secretary
 
 For the biographical information for the above listed executive officers, see “Directors.”
 
 Section 16 Compliance
 
 Section 16(a) of the Exchange Act requires BigString’s executive officers and directors, and persons who own more than ten percent of a registered class of BigString’s equity securities, to file reports of ownership and changes of ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission. Executive officers, directors and greater than ten percent stockholders are required by Securities and Exchange Commission regulation to furnish BigString with copies of all Forms 3, 4 and 5 they file.
 
 BigString believes that all filings required to be made by its executive officers and directors pursuant to Section 16(a) of the Exchange Act have been filed within the time periods prescribed.
 
 Chief Executive and Senior Financial Officer Code of Ethics
 
 The chief executive and senior financial officers of BigString are held to the highest standards of honest and ethical conduct when conducting the affairs of BigString. All such individuals must act ethically at all times in accordance with the policies contained in BigString’s Chief Executive and Senior Financial Officer Code of Ethics. Copies of the Chief Executive and Senior Financial Officer Code of Ethics will be furnished without charge upon written request received from any stockholder of record. Requests should be directed to BigString Corporation, 157 Broad Street, Suite 109, Red Bank, New Jersey 07701, Attention: Secretary.
 
 Audit Committee
 
 The Audit Committee of the Board is responsible for developing and monitoring the audit of BigString. The Audit Committee selects the outside auditor and meets with the Board to discuss the results of the annual audit and any related matters. The Audit Committee also receives and reviews the reports and findings and any other information presented to members of the Audit Committee by the officers of BigString regarding financial reporting policies and practices.
  21
 
 For the year ended December 31, 2009, the Audit Committee consisted of directors Robert S. DeMeulemeester and Adam M. Kotkin. Mr. DeMeulemeester served as the Chair of the Audit Committee. Mr. DeMeulemeester and Mr. Kotkin did not qualify as an independent director under NASDAQ’s definition of “independent director” in fiscal 2009. In addition, the Board has determined that Mr. DeMeulemeester qualifies as a financial expert under the rules of the Securities and Exchange Commission. The Audit Committee selected the accounting firm of Madsen & Associates CPAs, Inc. to act as BigString’s independent public accounting firm for the year ended December 31, 2009 and audit the financial statements of BigString for such year. The Audit Committee met five times during 2009, with all members attending such meeting.
 
 Item 11.  Executive Compensation
 
 EXECUTIVE COMPENSATION
 
 The following table sets forth information concerning the annual and long-term compensation of the Named Executive Officers (as defined below) for services in all capacities to BigString for the years ended December 31, 2009 and 2008. The Named Executive Officers are (1) Darin M. Myman, President and Chief Executive Officer, (2) Robert S. DeMeulemeester, Executive Vice President, Chief Financial Officer and Treasurer, and (3) Adam M. Kotkin, Chief Operating Officer and Secretary (the “Named Executive Officers”).
 2009 SUMMARY COMPENSATION TABLE
 Name and Principal

Position

Year

Salary

($)


Bonus

($)


Stock

Awards

($)


Option

Awards

($) (1)


Non-Equity

Incentive Plan

Compensation

($)


Nonqualified

Deferred

Compensation

Earnings

($)


All Other

Compensation

($)


Total

($)Darin M. Myman,

2009

$
57,056


$
---


$
---


$
13,927


$
---


$
---


$
9,733
(2)

$
80,716President and Chief

Executive Officer

2008

$
126,000


$
---


$
---


$
21,632


$
---


$
---


$
14,919
(2)

$
162,551Robert S.

2009

$
13,050


$
---


$
---


$
14,201


$
---


$
---


$
---


$
27,251DeMeulemeester,

Executive Vice

President, Chief

Financial Officer and

Treasurer

2008

$
137,400


$
---


$
---


$
67,593


$
---


$
---


$
---


$
204,993Adam M. Kotkin,

2009

$
53,450


$
---


$
---


$
13,927


$
---


$
---


$
9,803
(3)

$
77,180Chief Operating

Officer and

Secretary

2008

$
87,800


$
---


$
---


$
110,551


$
---


$
---


$
16,339
(3)

$
214,690
 ________________________________
 
 (1)
The amounts in this column reflect the dollar amount recognized for financial statement reporting purposes for the years ended December 31, 2009 and 2008 in accordance with ASC 718, of stock option awards pursuant to the Equity Incentive Plan (as defined below). The fair value of each option award is estimated on the date of grant using the Black-Scholes model.  Assumptions used in the calculation of these amounts are included in the footnotes to BigString’s audited financial statements furnished herewith.
 
 (2)
Represents amounts reimbursed for automobile expenses paid by Mr. Myman in 2009 and 2008 which relate to BigString’s promotional vehicle. Mr. Myman primarily uses the vehicle for advertising and promotional purposes on behalf of BigString.
 
 (3)
Represents amounts reimbursed for automobile expenses.
 
 22
 
 Chief Financial Officer - Employment Agreement
 
 Mr. DeMeulemeester and BigString entered into a letter agreement, effective September 18, 2006 (the “Letter Agreement”), pursuant to which BigString has employed Mr. DeMeulemeester as Executive Vice President, Chief Financial Officer and Treasurer of BigString, on an “at will” basis, whereby either BigString or Mr. DeMeulemeester can terminate his employment at any time for any reason or no reason. Pursuant to the terms of the Letter Agreement, BigString will pay Mr. DeMeulemeester an annual base salary of $130,000, which base salary will increase to $200,000 in the event BigString participates in one or more offerings of its securities and BigString receives, in the aggregate, more than $2,000,000 in net proceeds from such offering(s). At such time, Mr. DeMeulemeester will receive a lump sum payment, subject to any withholding required by law, equal to the difference between (a) the total amount of base salary paid to him up until the date of the increase to his base salary and (b) the total amount of base salary that would have been paid to him up until the date of the increase to his base salary, if his base salary was $200,000 as of September 18, 2006.
 
 Mr. DeMeulemeester is also entitled to benefits afforded to all full-time employees of BigString, including medical and dental, as applicable. Moreover, Mr. DeMeulemeester may be eligible for certain bonuses in connection with his performance, to be determined and awarded in the sole discretion of BigString’s Board of Directors and Compensation Committee.
 
 In connection with BigString’s employment of Mr. DeMeulemeester, BigString granted him an incentive stock option to purchase 1,800,000 shares of BigString’s common stock, par value $.0001 per share (“Common Stock”). See “Outstanding Equity Awards at Fiscal Year-End.” The incentive stock option was granted under the BigString Corporation 2006 Equity Incentive Plan (the “Equity Incentive Plan”). When vested, 400,000 shares of Common Stock subject to the incentive stock option will be eligible for purchase at $0.24, the per share price equal to the Fair Market Value (as such term is defined in the Equity Incentive Plan) of one share of Common Stock on date of grant; 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 $0.90 per share; and 400,000 shares of Common Stock will be eligible for purchase at $1.25 per share. The incentive stock options will vest quarterly over a three year period in order of exercise price, with the shares with the lower exercise price vesting first. As provided for in the Equity Incentive Plan, the incentive stock options will fully vest in connection with a Change of Control (as such term is defined therein).
 
 In the event Mr. DeMeulemeester’s employment is terminated by BigString for any reason other than Cause (as defined in the Letter Agreement) after BigString is in receipt of more than $2,000,000 in net proceeds as a result of one or more offerings of its securities, or if Mr. DeMeulemeester’s employment is terminated by BigString or a successor entity for any reason other than Cause after or in connection with a Change of Control (as defined in the Equity Incentive Plan), Mr. DeMeulemeester will receive a lump sum payment equal to two months of his base salary, subject to any withholding required by law, within three days of the date his employment is terminated.
 
 No other officer or employee of BigString has an employment agreement with BigString. At the discretion of our Board of Directors, BigString may in the future enter into employment agreements with one or more of its officers or other employees.
 
 
 2006 Equity Incentive Plan
 
 Pursuant to the Equity Incentive Plan, which was approved by the stockholders of BigString at its 2006 annual meeting of stockholders, options to purchase up to 15,000,000 shares of Common Stock may be granted to employees and directors of BigString who are in a position to make significant contributions to the success of BigString. As of December 31, 2009, stock options to purchase 8,575,000 shares of Common Stock were outstanding under the Equity Incentive Plan.
 
 Securities Authorized for Issuance under Equity Compensation Plans
 
 The number of stock options outstanding under the Equity Incentive Plan, the weighted-average exercise price of outstanding stock options, and the number of securities remaining available for issuance as of December 31, 2009 were as follows:
  23
 
 2009 EQUITY COMPENSATION PLAN TABLE
 
 Plan category

Number of securities

to be issued upon

exercise of

outstanding options,

warrants and rights

(a)


Weighted average

exercise price of

outstanding options,

warrants and rights

(b)


Number of securities

remaining available for

future issuance under

equity compensation

plans (excluding

securities reflected in

column (a))

(c)Equity compensation plans

approved by security holders (1)


8,575,000
(2)

$
0.33



6,425,000Equity compensation plans not

approved by security holders


16,968,645
(3)

$
0.15



---Total


25,543,645


$
0.21



6,425,000
 ________________________________
 
 (1)
BigString currently has no equity compensation plan other than the Equity Incentive Plan described herein.  With the exception of a non-qualified stock option to purchase 575,100shares of Common Stock issued to Mr. Kieran Vogel in connection with his participation in BigString’s OurPrisoner program, all outstanding stock options have been granted under the Equity Incentive Plan.
 
 (2)
Represents options to purchase Common Stock outstanding at December 31, 2009 issued under the Equity Incentive Plan.  See discussion above for additional information.
 
 (3)
Includes warrants to purchase 16,393,545shares of Common Stock which were issued and outstanding as of December 31, 2009 and 575,100 shares of Common Stock subject to an outstanding non-qualified stock option issued to Kieran Vogel in connection with his participation in BigString’s OurPrisoner program.
 
 Equity Compensation Arrangements Not Approved by Stockholders
 
 Warrant Grants During the Year Ended December 31, 2009
 
 On June 23, 2009, BigString entered into a subscription agreement with Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Special Opportunities LP (collectively, the “2009 Subscribers”), pursuant to which the 2009 Subscribers purchased convertible promissory notes in the aggregate principal amount of $180,000, which promissory notes are convertible into shares of BigString’s Common Stock, and warrants to purchase up to 6,000,000 shares of BigString’s Common Stock. Each promissory note has a term of two (2) years and accrues interest at a rate of 6% 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 $0.015 per share (as adjusted). The conversion price and number and kind of shares to be issued upon conversion of the convertible promissory note are subject to adjustment from time to time. Each of the warrants issued to the 2009 Subscribers has a term of five (5) years from June 23, 2009 and was fully vested on the date of issuance. The outstanding warrants are exercisable at $0.015 per share of common stock, as adjusted. The number of shares of Common Stock underlying each warrant and the exercise price are subject to certain adjustments.
 
 Additional Outstanding Warrants at December 31, 2009
 
 On September 23, 2005, BigString granted two warrants to Shefts Associates, Inc. as payment for consulting services. 1,196,707 shares of Common Stock remain available for purchase under one warrant at a per share purchase price of $0.16 and 1,146,838 shares of Common Stock remain available for purchase under one warrant at a per share purchase price of $0.20. Each of these warrants is set to expire on September 23, 2010.
  24
 
 On May 2, 2006, BigString granted two warrants to Lifeline Industries, Inc. as payment for consulting services. 225,000 shares of Common Stock remain available for purchase under one warrant at a per share purchase price of $0.48 and 225,000 shares of Common Stock remain available for purchase under one warrant at a per share purchase price of $1.00. Each of these warrants is set to expire on May 2, 2011.
 
 On May 19, 2006, BigString granted a warrant to each of Witches Rock Portfolio Ltd., The Tudor BVI Global Portfolio Ltd., and Tudor Proprietary Trading, L.L.C. as part of an investment. An aggregate of 1,000,000 shares of Common Stock remain available for purchase under each warrant at a per share purchase price of $1.25. Each of these warrants is set to expire on May 19, 2016.
 
 On July 11, 2006, BigString issued a non-qualified stock option to purchase 575,100 shares of Common Stock to Kiernan Vogel in connection with his participation in BigString’s OurPrisoner program. The non-qualified stock option has a term of five years from July 11, 2006 and an exercise price of $0.32 per share.
 
 On December 1, 2006, BigString granted a warrant to each of two consultants as payment for advisory services. 100,000 shares of Common Stock in the aggregate remain available for purchase under each warrant at a per share purchase price of $0.50. Each of these warrants is set to expire on December 1, 2011.
 
 On May 1, 2007, BigString entered into a subscription agreement with Whalehaven Capital Fund Limited, Alpha Capital Anstalt, Chesnut Ridge Partners LP, Iroquois Master Fund Ltd and Penn Footwear (collectively the "2007 Subscribers"), pursuant to which the 2007 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 (3) years and accrues interest at a rate of 6% 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 are subject to adjustment from time to time. Each of the warrants issued to the 2007 Subscribers has 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 (as adjusted). The number of shares of Common Stock underlying each warrant and the exercise price are subject to certain adjustments.
 
 BigString also issued to Gem Funding LLC warrants to purchase an aggregate of 213,333 shares of BigString’s Common Stock, which are similar to and carry the same rights as the warrants issued to the 2007 Subscribers.
 
 On February 29, 2008, BigString entered into a subscription agreement 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 promissory notes in the aggregate principal amount of $700,000, which promissory 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 promissory note has a term of three (3) years and accrues interest at a rate of 6% 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 are subject to adjustment from time to time. Each of the warrants issued to the 2008 Subscribers has a term of five (5) years from February 29, 2008 and was fully vested on the date of issuance. The outstanding warrants are exercisable at $0.15 per share of common stock, as adjusted. The number of shares of Common Stock underlying each warrant and the exercise price are subject to certain adjustments.
 
 BigString also issued to Gem Funding LLC warrants to purchase an aggregate of 373,333 shares of BigString’s Common Stock, which are similar to and carry the same rights as the warrants issued to the 2008 Subscribers.
 
 On August 25, 2008, BigString entered into a financing arrangement with Dwight Lane Capital, LLC, a limited liability company in which Todd M. Ross, a former director of BigString, has an interest, and Marc W. Dutton, a former director of BigString. In connection with such financing, BigString issued promissory notes in the aggregate principal amount of $250,000 and Common Stock purchase warrants to purchase up to an aggregate 800,000 shares of BigString's Common Stock. Each note has a term of five months and accrued interest at a rate of 12% annually. The warrants have an exercise price of $0.08 per share.
  25
 
 Outstanding Equity Awards at Fiscal Year End
 
 The following table provides information about all equity compensation awards held by the Named Executive Officers at December 31, 2009:
  
 Outstanding Equity Awards

for Year Ended December 31, 2009Name

Date of

Grant

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable


Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable


Equity

Incentive Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)


Option

Exercise

Price

($)

Option

Expiration

DateDarin M.Myman,

President and

Chief Executive

Officer

4/11/08


500,000



--



--


$
0.21

4/11/13Robert S.

4/11/08


500,000



--



--


$
0.21

4/11/13DeMeulemeester,

11/14/07


500,000



--



--


$
0.18

11/14/17Executive Vice

9/18/06


400,000



--



--


$
0.24

9/18/16President, Chief

9/18/06


600,000



--



--


$
0.50

9/18/16Financial Officer

9/18/06


400,000



--



--


$
0.90

9/18/16and Treasurer

9/18/06


400,000



--



--


$
1.25

9/18/16Adam M. Kotkin,

4/11/08


500,000



--



--


$
0.21

4/13/13Chief Operating

11/14/07


400,000



--



--


$
0.18

11/14/17Officer andSecretary

7/11/06


1,250,000



--



--


$
0.32

7/11/11
 
 Risk Management
  The Board of Directors does not believe that BigString’s executive compensation program gives rise to any risks that are reasonably likely to have a material adverse effect on BigString.  Executive officers are compensated on a salary basis and have not been awarded any bonuses or other compensation in 2009 and 2008 that might encourage the taking of unnecessary or excessive risks that threaten the long-term value of BigString.  The Board has sought to align the interests of the executive officers with the long-term interests of BigString and its stockholders though grants of stock options under the Equity Incentive Plan, thereby giving the executive officers additional motivation to protect the long-term value of BigString.
  DIRECTOR COMPENSATION
 
 The following table sets forth information concerning the compensation of the directors of BigString for the year ended December 31, 2009.
  26
 
 2009 Director Compensation Table
 
 Name

Fees

Earned or

Paid in

Cash

($)(1)

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan

Compensation

($)

Nonqualified

Deferred

Compensation

Earnings

($)

All Other

Compensation

($)

Total

($)Darin M. Myman

$
--


$
--


$
--


$
--


$
--


$
--


$
--Robert S. DeMeulemeester

$
--


$
--


$
--


$
--


$
--


$
--


$
--Adam M. Kotkin

$
--


$
--


$
--


$
--


$
--


$
--


$
--
 ________________________
 
 (1)
BigString does not currently pay its directors any retainer or other fees for service on the Board or any committee thereof.
 
 
 BigString did not have non-employee directors as of December 31, 2009.
  Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  Principal Stockholders and Security Ownership of Management
 
 The following table sets forth information as of March 30, 2010 with respect to the beneficial ownership (as defined in Rule 13d-3 of the Exchange Act) of BigString’s Common Stock by (1) each director of BigString, (2) the Named Executive Officers of BigString, (3) each person or group of persons known by BigString to be the beneficial owner of greater than 5% of BigString’s outstanding Common Stock, and (4) all directors and officers of BigString as a group:
 
 Beneficial Ownership of Common

StockName of Beneficial Owner – Directors, Officers and

5% Stockholders

No. of Shares (1)

Percent of

ClassDarin M. Myman (2)(3)(4)(5)


9,500,000



14.26
%Robert S. DeMeulemeester (2)(3)(6)(7)


2,842,300



4.13
%Adam M. Kotkin (2)(3)(8)(9)


2,872,500



4.21
%Alpha Capital Anstalt (10)


43,395,834



40.00
%Excalibur Special Opportunities LP (11)


18,501,888



22.11
%Iroquois Master Fund Ltd. (12)


9,164,583



12.21
%Whalehaven Capital Fund Limited (13)


43,395,834



40.00
%Jo Myman (2)(14)


9,500,000



14.26
%All Directors and Executive Officers as a Group

(3 persons) (5)(7)(9)


15,214,800



21.27
%
 ________________________________
  27
 
 (1)
In accordance with Rule 13d-3 of the Exchange Act, a person is deemed to be the beneficial owner, for purposes of this table, of any shares of BigString’s Common Stock if he or she has voting or investment power with respect to such security. This includes shares (a) subject to options exercisable within sixty (60) days, and (b)(1) owned by a spouse, (2) owned by other immediate family members, or (3) held in trust or held in retirement accounts or funds for the benefit of the named individuals, over which shares the person named in the table may possess voting and/or investment power.
 
 (2)
This executive officer and/or director, or spouse of an executive officer and/or director, maintains a mailing address at 157 Broad Street, Suite 109, Red Bank, New Jersey 07701.
 
 (3)
Such person currently serves as a director of BigString.
 
 (4)
Mr. Myman serves as the President and Chief Executive Officer of BigString.
 
 (5)
Includes 100,000 shares of Common Stock registered in the name of Mr. Myman’s wife, Jo Myman, and 900,000 shares of Common Stock held by Mr. Myman for the benefit of Mr. and Mrs. Myman’s children under the Uniform Transfers to Minors Act. Mr. Myman disclaims any beneficial interest in the shares held by his wife and the shares held by him as custodian for his children. Includes 500,000 shares of Common Stock subject to currently exercisable stock options.
 
 (6)
Mr. DeMeulemeester serves as Executive Vice President, Chief Financial Officer and Treasurer of BigString.
 
 (7)
Includes options to purchase 2,800,000 shares of Common Stock.
 
 (8)
Mr. Kotkin serves as Chief Operating Officer and Secretary of BigString.
 
 (9)
Includes options to purchase 2,150,000 shares of Common Stock.
 
 (10)
Includes 38,333,334 shares of common stock issuable upon the conversion of issued and outstanding convertible notes. Also includes 4,062,500 shares of common stock issuable upon the exercise of issued and exercisable warrants. Konrad Ackerman has voting and investment control over shares held by Alpha Capital Anstalt. Mr. Ackerman disclaims beneficial ownership of such shares. Alpha Capital Anstalt maintains a mailing address at Pradafant 7, 9490 Furstentums, Vaduz, Lichtenstein.
 
 (11)
Includes 15,333,333 shares of common stock issuable upon the conversion of issued and outstanding convertible notes. Also includes 2,250,000 shares of common stock issuable upon the exercise of issued and exercisable warrants. William Hechter has voting and investment control over shares held by Excalibur Special Opportunities LP. Mr. Hechter disclaims beneficial ownership of such shares. Excalibur Special Opportunities LP maintains a mailing address at P.O. Box 10337, Pacific Centre, 2200-609 Grandville Street, Vancouver, BC V7Y-1H2, Canada.
 
 (12)
Includes 8,333,333 shares of common stock issuable upon the conversion of issued and outstanding convertible notes. Also includes 625,000 shares of common stock issuable upon the exercise of issued and exercisable warrants. Joshua Silverman has voting and investment control over shares held by Iroquois Master Fund Ltd. Mr. Silverman disclaims beneficial ownership of such shares. Iroquois Master Fund Ltd. maintains a mailing address at Iroquois Master Fund Ltd. c/o Iroquois Capital Management, LLC, 641 Lexington Avenue, New York, NY 10022.
 
 (13)
Includes 38,333,334 shares of common stock issuable upon the conversion of issued and outstanding convertible notes. Also includes 4,062,500 shares of common stock issuable upon the exercise of issued and exercisable warrants. Michael Finkelstein has voting and investment control over shares held by Whalehaven Capital Fund Limited. Mr. Finkelstein disclaims beneficial ownership of such shares. Whalehaven Capital Fund Limited maintains a mailing address at Whalehaven Capital Fund c/o FWS Capital Ltd., 3rd Fl., 14-Par-Laville Road, Hamilton, Bermuda HM08.
 
 (14)
Includes  8,000,000 shares of Common Stock registered in the name of her husband, Darin M. Myman, and  900,000 shares of Common Stock held by Mr. Myman for the benefit of Mr. and Mrs. Myman’s children under the Uniform Transfers to Minors Act, as to which shares Mrs. Myman disclaims any beneficial ownership.
 
 28
  Change in Control
  Management believes that a change in control of BigString may occur in the future in the event one or more of Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Special Opportunities LP converts and exercises all or substantially all of the convertible notes and warrants to purchase shares of BigString’s Common Stock held by it or them.
  Item 13.  Certain Relationships and Related Transactions and Director Independence
  Related Party Transactions
 
 On August 25, 2008, BigString closed on a financing with Dwight Lane Capital, LLC, a limited liability company in which Todd M. Ross, a former director of BigString, has an interest, and Marc W. Dutton, a former director of BigString. In connection with such financing, BigString issued promissory notes in the aggregate principal amount of $250,000 and Common Stock purchase warrants to purchase up to an aggregate 800,000 shares of BigString's common stock. Each note had a term of five months and accrued interest at a rate of 12% annually. The warrants have an exercise price of $0.08 per share. In December 2008, all amounts due under the notes were paid by BigString, including accrued interest of $9,328, and, as a result, the notes were cancelled.
 On December 29, 2008, BigString signed an agreement with Digital BobKat, LLC, a limited liability company in which Robert S. DeMeulemeester, an officer and director of BigString, has an interest, to provide business consulting services.  Expenses for the years ended December 31, 2009 and 2008 were $30,000 and $12,000, respectively.
  Meetings and Committees of the Board of Directors
 
 The Board of Directors of BigString conducts business through meetings of the Board or by unanimous written consents of the Board. The Board of Directors for 2009 consisted of: Robert S. DeMeulemeester, Adam M. Kotkin and Darin M. Myman following the election of directors at the 2008 annual meeting of stockholders. BigString did not hold an annual meeting in 2009. None of Mr. DeMeulemeester, Mr. Kotkin or Mr. Myman qualifies as an independent director in accordance with NASDAQ’s definition of “independent director” and the rules and regulations of the Securities and Exchange Commission. During 2009, the Board did not hold a meeting, and the Board acted by unanimous written consent on four(4)occasions.
 
 Item 14.  Principal Accounting Fees and Services.
  Audit Fees
 
 BigString incurred fees of approximately $10,000 in 2009 to Madsen & Associates CPAs, Inc., $9,000 in 2009 to Wiener, Goodman & Company, P.C. and $31,000 in 2008 to Wiener, Goodman & Company, P.C. for audit services, which included work related to the audits rendered for the years ended December 31, 2009 and 2008, and the period commencing October 8, 2003 (Date of Formation) through December 31, 2009, respectively.
 
 Audit Related Fees
 
 As of December 31, 2009, BigString has not paid any fees associated with audit related services to Madsen & Associates CPAs, Inc., Wiener, Goodman & Company, P.C., or any other accounting firm.
 
 Tax Fees
 
 As of December 31, 2009, BigString has not paid any fees associated with tax compliance, tax advice or tax planning to Madsen & Associates CPAs, Inc. or Wiener, Goodman & Company, P.C. BigString incurred fees of approximately $1,000 in 2009 and $4,000 in 2008 to independent Certified Public Accountants.
 
 All Other Fees
 
 As of December 31, 2009, BigString has not paid any fees associated with non-audit services to Madsen & Associates CPAs, Inc., Wiener, Goodman & Company, P.C., or any other accounting firm.
  29
 
 Policy on Pre-Approval of Audit and Permissible Non-Audit Services
 
 The Audit Committee is responsible for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In accordance with its Charter, the Audit Committee approves, in advance, all audit and permissible non-audit services to be performed by the independent registered public accounting firm. Such approval process ensures that the independent registered public accounting firm does not provide any non-audit services to BigString that are prohibited by law or regulation.
 
 Item 15.  Exhibits and Financial Statement Schedules.
  (a)           Exhibits
 
 Reference is made to the Index of Exhibits beginning on page E-1 herein.
 
 (b)           Financial Statements
 
 Reference is made to the Index to Consolidated Financial Statements on page F-1.
  30
 
   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, 2010
By:
/s/ Darin M. MymanDarin M. MymanPresident and Chief Executive Officer
 
 KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Darin M. Myman and Adam M. Kotkin and each of them, his true and lawful attorneys-in-fact and agents for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents may lawfully do or cause to be done by virtue hereof.
  In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed by the following persons in the capacities and on the dates stated.
 
 Signatures

Title
Date/s/ Darin M. Myman

President and Chief Executive Officer and Director
March 31, 2010Darin M. Myman

(Principal Executive Officer)/s/ Robert DeMeulemeester

Executive Vice President, Chief Financial Officer and Treasurer
March 31, 2010Robert DeMeulemeester

and Director (Principal Financial and Accounting Officer)/s/ Adam M. KotkinAdam M. Kotkin

Chief Operating Officer and Director
March 31, 2010
 
 31
   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
  BIGSTRING CORPORATION AND SUBSIDIARY
 (A Development Stage Company)
  Report of Independent Registered Public Accounting Firm
F-2Consolidated Balance Sheets at December 31, 2009 and 2008
F-4Consolidated Statement of Operations for the years ended December 31, 2009 and 2008, and the period October 8, 2003 (Date of Formation) through December 31, 2009
F-5Consolidated Statement of Stockholders’ Equity (Deficiency) for the years ended December 31, 2009 and 2008, and the period October 8, 2003 (Date of Formation) through December 31, 2009
F-6Consolidated Statement of Cash Flows for the years ended December 31, 2009 and 2008, and the period October 8, 2003 (Date of Formation) through December 31, 2009
F-7Notes to Consolidated Financial Statements
F-8
  F-1
  Madsen & Associates, CPA's Inc.
 684 East Vine Street
 Murray, UT 84107
  
 
 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 sheet of BigString Corporation and Subsidiary (collectively, the “Company”) (a development stage company) as of December 31, 2009, and the related consolidated statements of operations, stockholders’ deficiency and cash flows for the year ended and for the period October 8, 2003 (Date of Formation) through December 31, 2009.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.  The financial statements of BigString Corporation and Subsidiary as of December 31, 2008, were audited by other auditors whose report, dated March 30, 2009, expressed an unqualified opinion with an explanatory paragraph on these statements.
 
 We conducted our audit 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 financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 audit provides a reasonable basis for our opinion.
 
 In our opinion, the 2009 financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2009, and the results of its operations and its cash flows for the year then ended and for the period October 8, 2003 (Date of Formation) through December 31, 2009, 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 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/ Madsen & Associates, CPAs Inc.
  March 30, 2010
  F-2
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the Board of Directors and Stockholders of
 BigString Corporation
 Red Bank, New Jersey
 
 We have audited the accompanying consolidated balance sheets of BigString Corporation (formerly Recall Mail Corporation) and subsidiaries (collectively, the “Company”) (a development stage company) as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity (deficiency) and cash flows for the years ended December 31, 2008 and 2007, and for the period October 8, 2003 (Date of Formation) through December 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
 We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2008 and 2007, and the results of its operations and its cash flows for the years ended December 31, 2008 and 2007, and for the period October 8, 2003 (Date of Formation) through December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As more fully explained in Note 2 to the Company’s consolidated financial statements, the Company has a working capital deficit and has incurred losses since operations commenced. The Company’s continued existence is dependent upon its ability to obtain needed working capital through additional equity and/or debt financing and revenue to cover expenses as the Company continues to incur losses. These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of these uncertainties should the Company be unable to continue as a going concern.
   WIENER, GOODMAN & COMPANY, P.C.
 Eatontown, New Jersey
 
 March 30, 2009
  F-3
  BIGSTRING CORPORATION AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS
 (A DEVELOPMENT STAGE COMPANY)
 
 
 December 31,2009


2008ASSETSCurrent assets:Cash and cash equivalents

$
3,039


$
178,787Accounts receivable - net of allowance of $35 and $660


4,290



15,115Prepaid expenses and other current assets


315,291



17,922Total current assets


322,620



211,824Property and equipment - net


39,393



74,737Other assets


80,817



155,677TOTAL ASSETS

$
442,830


$
442,238LIABILITIES AND STOCKHOLDERS' DEFICIENCYCurrent liabilities:Accounts payable

$
231,558


$
294,521Accrued expenses


437,158



216,938Unearned revenue


1,649



7,104Accrued interest


64,724



60,000Short-term debt


504,133



-Total current liabilities


1,239,222



578,563Long term liabilities:Long-term debt


618,473



892,824TOTAL LIABILITIES


1,857,695



1,471,387Stockholders' deficiency:Preferred stock, $.0001 par value - authorized 1,000,000 shares; issued and outstanding 79,657 and 400,000 shares, respectively


8



40Common stock, $.0001 par value - authorized 249,000,000 shares; issued and outstanding 63,329,761 and 52,244,394 shares, respectively


6,333



5,224Additional paid in capital


13,701,687



13,119,632Deficit accumulated during the development stage


(15,122,893
)


(14,154,045
)Total stockholders' deficiency


(1,414,865
)


(1,029,149
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY

$
442,830


$
442,238
  See notes to consolidated financial statements.
  F-4
 
 BIGSTRING CORPORATION AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF OPERATIONS
 (A DEVELOPMENT STAGE COMPANY)
 
 PeriodOctober 8, 2003For the Years Ended


(Date of Formation)December 31,


Through2009


2008


December 31, 2009Revenues

$
82,700


$
61,195


$
211,854Operating expenses:Cost of revenues


62,163



89,387



564,404Research and development


228,369



486,066



2,309,163Sales and marketing


16,708



178,667



983,883General and administrative


651,025



1,423,984



4,770,394Amortization of intangibles


-



970,362



4,490,191Impairment of assets


-



627,584



1,042,876Total operating expenses


958,265



3,776,050



14,160,911Loss from operations


(875,565
)


(3,714,855
)


(13,949,057
)Other income (expense):Interest income


68



4,266



72,657Interest expense


(84,224
)


(81,951
)


(197,309
)Other, net


(319,235
)


(384,543
)


(1,566,283
)Total other income (expenses)


(403,391
)


(462,228
)


(1,690,935
)Loss before benefit from income taxes


(1,278,956
)


(4,177,083
)


(15,639,992
)Benefit from income taxes


310,108



428,137



997,099Net loss

$
(968,848
)

$
(3,748,946
)

$
(14,642,893
)Net loss per common share:Basic and diluted

$
(0.02
)

$
(0.07
)Weighted average common shares outstanding:Basic and diluted


56,986,811



51,668,038
  See notes to consolidated financial statements.
  F-5
 
 BIGSTRING CORPORATION AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
 (A DEVELOPMENT STAGE COMPANY)
 
 Preferred Stock


Common Stock


AdditionalNo. of





No. of





Paid-In

SubscriptionTotal


Shares


Amount


Shares


Amount


Capital

Receivable


DeficitBalance, October 8, 2003

$
-



-


$
-



-


$
-


$
-


$
-


$
-Issuance of common stock (at $.0001 per share)


-



-



-



21,210,000



2,121



(2,121
)


-



-Contribution of capital


45,000



-



-



-



-



45,000



-



-Sale of common stock (at $0.25 per share)


-



-



-



40,000



4



9,996



(10,000
)


-Net loss


(29,567
)


-



-



-



-



-



-



(29,567
)Balance, December 31, 2003


15,433



-



-



21,250,000



2,125



52,875



(10,000
)


(29,567
)Cash received from prior sale of common stock


10,000



-



-



-



-



-



10,000



-Sale of common stock (at $0.25 per share)


217,500



-



-



870,000



87



217,413



-



-Issuance of common stock for services (valued at $0.21 per share)


39,251



-



-



185,000



19



39,232



-



-Issuance of common stock for acquisition (valued at $0.24 per share)


4,800,000



-



-



20,000,000



2,000



4,798,000



-



-Issuance of warrants for services (valued at $0.07 per share)


3,500



-



-



-



-



3,500



-



-Net loss


(729,536
)


-



-



-



-



-



-



(729,536
)Balance, December 31, 2004


4,356,148



-



-



42,305,000



4,231



5,111,020



-



(759,103
)Sale of common stock (at $0.25 per share)


230,500



-



-



922,000



92



230,408



-



-Exercise of warrants (at $0.25 per share)


11,250



-



-



45,000



4



11,246



-



-Issuance of common stock for services (valued at $0.25 per share)


12,500



-



-



50,000



5



12,495



-



-Sale of common stock (at $0.16 per share)


1,511,700



-



-



9,448,125



945



1,510,755



-



-Issuance of warrants for services (valued at $0.07 per share)


179,200



-



-



-



-



179,200



-



-Net loss


(2,102,587
)


-



-



-



-



-



-



(2,102,587
)Balance, December 31, 2005


4,198,711



-



-



52,770,125



5,277



7,055,124



-



(2,861,690
)Redemption of shares from stockholders (at $0.05 per share)


(400,000
)


-



-



(8,000,000
)


(800
)


(399,200
)


-



-Issuance of common stock for consulting services (valued at $0.82 per share)


-



-



-



1,250,000



125



(125
)


-



-Stock-based compensation expense


314,250



-



-



-



-



314,250



-



-Issuance of warrants for consulting services (valued at $0.08, $0.18 and $0.42 per share)


36,595



-



-



-



-



36,595



-



-Issuance of common stock for website acquisition (valued at $0.80 per share)


600,000



-



-



750,000



75



599,925



-



-Sale of preferred stock (at $.0001 per share)


1,860,000



400,000



40



-



-



1,859,960



-



-Dividends from allocation of proceeds for the beneficial conversion feature of preferred stock


-



-



-



-



-



480,000



-



(480,000
)Exercise of warrants (at $0.16, $0.20 and $0.25 per share)


18,000



-



-



165,000



17



34,233



(16,250
)


-Net loss


(3,114,225
)


-



-



-



-



-



-



(3,114,225
)Balance, December 31, 2006


3,513,331



400,000



40



46,935,125



4,694



9,980,762



(16,250
)


(6,455,915
)Cash received from prior exercise of warrants


16,250



-



-



-



-



-



16,250



-Issuance of common stock for consulting services (valued at $0.50 and $0.33 per share)


-



-



-



432,000



43



(43
)


-



-Allocation to warrants from sale of convertible promissory notes and warrants


31,320



-



-



-



-



31,320



-



-Beneficial conversion feature of convertible promissory notes


666,648



-



-



-



-



666,648



-



-Issuance of common stock for conversion of convertible promissory notes (at $0.18 per share)


155,000



-



-



861,111



86



154,914



-



-Stock-based compensation expense


672,532



-



-



-



-



672,532



-



-Issuance of warrants, net (valued at $0.10 per share)


19,094



-



-



-







19,094



-



-Issuance of common stock for waiver and release (valued at $0.25 per share)


250,000



-



-



1,000,000



100



249,900



-



-Exercise of warrants (at $0.10 per share)


150,000



-



-



1,500,001



150



149,850



-



-Net loss


(3,949,184
)


-



-



-



-



-



-



(3,949,184
)Balance, December 31, 2007


1,524,991



400,000



40



50,728,237



5,073



11,924,977



-



(10,405,099
)Exercise of warrants (at $0.10 per share)


21,333



-



-



213,333



21



21,312



-



-Issuance of common stock for conversion of convertible promissory notes (at $0.18 per share)


20,000



-



-



111,111



11



19,989



-



-Allocation to warrants from sale of convertible promissory notes and warrants


76,176



-



-



-



-



76,176



-



-Beneficial conversion feature of convertible promissory notes


188,740



-



-



-



-



188,740



-



-Stock-based compensation expense


727,800



-



-



-



-



727,800



-



-Issuance of common stock for accrued interest (at $0.15 per share)


43,757



-



-



291,713



29



43,728



-



-Issuance of common stock for website acquisition (valued at $0.13 per share)


117,000



-



-



900,000



90



116,910



-



-Net loss


(3,748,946
)


-



-



-



-



-



-



(3, 748,946
)Balance, December 31, 2008

$
(1,029,149
)


400,000


$
40



52,244,394


$
5,224


$
13,119,632


$
-


$
(14,154,045
)Stock-based compensation expense


215,708



-



-



-



-



215,708



-



-Issuance of common stock for accrued interest (at $0.08 per share)


79,500



-



-



993,750



100



79,400



-



-Allocation to warrants from sale of convertible promissory notes and warrants


34,992



-



-



-



-



34,992



-



-Beneficial conversion feature of promissory notes


168,000



-



-



-



-



168,000



-



-Issuance of common stock for conversion of preferred stock


-



(320,343
)


(32
)


4,429,522



443



(411
)


-



-Issuance of common stock for conversion of promissory notes (at $0.015 per share)


84,932



-



-



5,662,095



566



84,366



-



-Net loss


(968,848
)


-



-



-



-



-



-



(968,848
)Balance, December 31, 2009

$
(1,414,865
)


79,657


$
8



63,329,761


$
6,333


$
13,701,687


$
-


$
(15,122,893
)
 
 See notes to consolidated financial statements.
  F-6
  BIGSTRING CORPORATION AND SUBSIDIARY
 CONSOLIDATED STATEMENT OF CASH FLOWS
 (A DEVELOPMENT STAGE COMPANY)
 
 PeriodOctober 8, 2003For the Years Ended


(Date of Formation)December 31,


Through2009


2008


December 31, 2009Cash flows from operating activities:Net loss

$
(968,848
)

$
(3,748,946
)

$
(14,642,893
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization of property and equipment, intangible and other assets


140,000



1,122,695



4,975,496Gain on sale of property and equipment


3,755



(1,697
)


2,058Impairment of assets


-



627,584



1,042,876Accretion for beneficial conversion feature and discount on notes


337,706



270,436



868,414Stock-based compensation


215,708



727,800



2,201,336Other non-cash compensation


-



-



269,094Changes in operating assets and liabilities:Decrease (increase) in accounts receivable, net


10,825



(12,506
)


(4,290
)(Increase) in prepaid expenses and other assets


(330,920
)


(123,567
)


(711,465
)(Decrease) increase in accounts payable


(62,963
)


11,997



231,558Increase in accrued expenses and other liabilities


304,444



236,920



622,074(Decrease) increase in unearned revenue


(5,455
)


(2,184
)


1,649Net cash used in operating activities


(355,748
)


(891,468
)


(5,144,093
)Cash flows from investing activities:Purchase of property and equipment


-



-



(262,290
)Sale of property and equipment


-



50,889



50,889Acquisitions


-



-



(13,000
)Net cash provided by (used in) investing activities


-



50,889



(224,401
)Cash flows from financing activities:Proceeds from issuance of convertible notes and warrants


180,000



950,000



1,930,000Proceeds from issuance of preferred stock, net


-



-



1,860,000Proceeds from exercise of common stock warrants and issuance of common stock


-



21,333



2,231,533Payments for redemption of notes


-



(250,000
)


(250,000
)Payments for redemption of common stock


-



-



(400,000
)Net cash provided by financing activities


180,000



721,333



5,371,533Net change in cash and cash equivalents


(175,748
)


(119,246
)


3,039Cash and cash equivalents - beginning of period


178,787



298,033



-Cash and cash equivalents - end of period

$
3,039


$
178,787


$
3,039Supplementary information:Cash paid during the periods for:Interest

$
-


$
9,328


$
9,328Income taxes

$
-


$
-


$
-Acquisitions

$
-


$
-


$
13,000Details of acquisitions:Fair value of assets acquired

$
-


$
-


$
2,790Fair value of liabilities assumed


-



-



(5,857
)Intangibles


-



117,000



5,533,067Common stock issued to effect acquisition

$
-


$
117,000


$
5,517,000Non-cash transactions during the periods for:Conversion of promissory notes

$
84,932


$
20,000


$
259,932Issuance of common stock for accrued interest

$
79,500


$
43,757


$
123,257Stock-based compensation: Common stock issued for services

$
113,889


$
341,668


$
1,275,751Stock-based compensation: Common stock options issued for services


86,782



341,036



601,055Stock-based compensation: Common stock warrants issued for services


15,037



45,096



324,530Other non-cash compensation: Issue of warrants, net


-



-



19,094Other non-cash compensation: Issuance of common stock for waiver and release


-



-



250,000
  See notes to consolidated financial statements.
  F-7
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 AND THE PERIOD OCTOBER 8, 2003 (DATE OF FORMATION) THROUGH DECEMBER 31, 2009
   NOTE 1.  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  ORGANIZATION
  BigString Corporation (the “Company” or “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.
  PeopleString Corporation (“PeopleString”), incorporated in the State of Delaware, was formed by BigString in early 2009 to develop technology relating to social networks. After purchases of PeopleString common stock by investors in April 2009, BigString owns less than 30% of PeopleString’s outstanding common stock.
  BigString is considered a development stage enterprise in accordance with the guidance contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities.”  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 subsidiary, BigString Interactive, which is a wholly-owned subsidiary. All intercompany transactions and balances have been eliminated.
  USE OF ESTIMATES
  The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  On an on-going basis, BigString evaluates its estimates. Estimates are used in determining such items as accruals, stock-based compensation, income taxes and other reserves. 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 AND 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, 2009 and December 31, 2008, cash equivalents approximated $3,000 and $179,000, respectively.
  CERTAIN RISKS AND CONCENTRATION
  Financial instruments which potentially subject BigString to concentrations of credit risk consist principally of temporary cash investments. BigString places its temporary cash investments with quality financial institutions and commercial issuers of short term paper.
  BigString grants credit to customers based on an evaluation of the customer’s financial condition, sometimes without requiring collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. BigString controls its exposure to credit risk through credit approvals, credit limits and monitoring procedures and establishes allowances for anticipated losses.
  F-8
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  REVENUE RECOGNITION
  BigString derives revenue from online services, electronic commerce, advertising and data network services. BigString also derives revenue from marketing affiliations. BigString recognizes revenue in accordance with the guidance contained in the ASC 605, “Revenue Recognition” (“ASC 605”).
  Consistent with the provisions of ASC 605-45-05, 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 latitude in establishing prices; has discretion in supplier selection; performs part of the service; and determines specifications.
  Consistent with ASC 605-50-15, BigString accounts for cash considerations given to customers, for which it does not receive a separately identifiable benefit or cannot reasonably estimate fair value, as a reduction of revenue rather than an expense. Accordingly, any corresponding distributions to customers 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 at December 31, 2009 and December 31, 2008 were $35 and $660, 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 ASC 730, “Research and Development” and ASC 985, “Software.”  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 ASC 360-15-35, “Impairment or Disposal of Long-Lived Assets,” if the carrying value of the long-lived asset exceeds the estimated future undiscounted cash flows to be generated by such asset, the asset would be adjusted to its fair value and an impairment loss would be charged to operations in the period identified.
  The impairment analysis of finite-lived intangible assets conducted by BigString indicated that the intangible assets were impaired as of the assessment date. As a result, BigString recorded impairment charges of $627,584 and $415,292 for the years ending December 31, 2008 and 2007, respectfully. See Note 5 of Notes to Consolidated Financial Statements for the detailed information regarding the valuation methods and key assumptions used in coming to this determination.
  INTANGIBLES
  ASC 350, “Goodwill and Other,” specifies the financial accounting and reporting for acquired goodwill and other indefinite life intangible assets. Goodwill and other indefinite-lived intangible assets are no longer amortized, but are reviewed for impairment at least annually.
  DEFERRED FINANCING COSTS
  Debt issue costs were deferred and amortized in other income (expense) over the terms of the related debts. BigString issued notes in June 2009, August 2008, February 2008 and May 2007 and incurred issuance costs of $33,552, $18,977, $91,706 and $248,939, respectively, which are being amortized over the term of the notes. Amortization expense related to these costs is included in other, net in the consolidated statements of operations and was $108,411, $114,107 and $315,357 for the years ended December 31, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, respectively.
  F-9
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  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 is tax assets, other expenditures and a net operating loss carryforward.
  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
  BigString accounts for stock-based compensation under ASC 718, “Compensation-Stock Compensation” (“ASC 718”). 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 ASC 718.
  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, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, BigString recorded compensation expense of $113,889, $341,668 and $1,275,751, respectively, in connection with the issuance of shares of common stock to non-employees. For the period October 8, 2003 (Date of Formation) through December 31, 2009, BigString also recorded $250,000 other non-cash compensation expense for shares of common stock issued to non-employees.
  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, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, BigString recorded compensation expense of $86,782, $341,036 and $601,055, respectively, in connection with the issuance of stock options. BigString did not grant stock options prior to 2006.
  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, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, BigString recorded compensation expense of $15,037, $45,096 and $324,530, respectively, in connection with the issuance of stock purchase warrants for services. For the period October 8, 2003 (Date of Formation) through December 31, 2009, BigString also recorded $19,094 other non-cash compensation expense, net for the cancellation and issue of warrants.
  BUSINESS COMBINATIONS
  During 2009, The Company adopted the revised accounting guidance related to business combinations.  This guidance requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the literature.  In accordance with this guidance, acquisition-related costs, including restructuring costs, must be recognized separately from the acquisition and will generally be expensed as incurred.  That replaces the cost-allocation process detailed in the previous accounting literature, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values.  The Company implemented this new guidance effective January 1, 2009.
  F-10
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  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 ASC 815-15-10, “Hedging and Derivatives-Embedded Derivatives” and related interpretations including ASC 815-40-05, “Hedging and Derivatives-Contracts in Entity’s Own Equity.”
  FAIR VALUE MEASUREMENTS
  The Company adopted ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), on January 1, 2008, for all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis or on a nonrecurring basis during the reporting period. While the Company adopted the provisions of ASC 820 for nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis, no such assets or liabilities existed at the balance sheet date. As permitted by ASC 820, the Company delayed implementation of this standard for all nonfinancial assets and liabilities recognized or disclosed at fair value in the financial statements on a nonrecurring basis and adopted these provisions effective January 1, 2009.
  The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.
  As of December 31, 2009, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents. The fair value of the cash and cash equivalents is determined based on quoted market prices in public markets and is categorized as Level 1. The Company does not have any financial assets measured at fair value on a recurring basis as Level 2 or Level 3 and there were no transfers in or out of Level 2 or Level 3 during the period January 1, 2008 (Date of Adoption of ASC 820) through December 31, 2009.
  The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of December 31, 2009 and 2008.
  Assets at Fair Value as of December 31,Assets:

Total


Quoted Prices in Active Markets for Identical Assets (Level 1)


Significant Other Observable Inputs (Level 2)


Significant Unobservable Inputs (Level 3)2009

Cash and cash equivalents

$
3,039


$
3,039


$
-


$
-2008

Cash and cash equivalents

$
178,787


$
178,787


$
-


$
-
  The Company has other financial instruments, such as receivables, accounts payable and other liabilities which have been excluded from the tables above. Due to the short-term nature of these instruments, the carrying value of receivables, accounts payable and other liabilities approximate their fair values. The Company did not have any other financial instruments within the scope of the fair value disclosure requirements as of December 31, 2009 and 2008.
  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.
  F-11
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  EQUITY METHOD INVESTMENTS
  BigString accounts for non-marketable investments using the equity method of accounting if the investment gives it the ability to exercise significant influence over, but not control of, an investee. Significant influence generally exists if there is an ownership interest representing between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are stated at initial cost and are adjusted for additional investments and their proportionate share of earnings or losses and distributions. BigString records its share of the investee’s earnings or losses in earnings (losses) from unconsolidated entities, net of income taxes, in its consolidated statement of operations. Equity investments of less than 20% are stated at cost; the cost is not adjusted for its proportionate share of the earnings or losses. BigString evaluates its equity investments for impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such investments may have experienced an other-than-temporary decline in value. When evidence of a loss in value has occurred, BigString compares fair value of the investment to its carrying value to determine whether impairment has occurred. If the estimated fair value is less than the carrying value and management considers the decline to be other than temporary, the excess of the carrying value over the estimated fair value is recognized as impairment in the consolidated financial statements.
  NEW FINANCIAL ACCOUNTING STANDARDS
  On July 1, 2009, the FASB established Accounting Standards Codification as the primary source of authoritative generally accepted accounting principles ("GAAP") recognized by the FASB to be applied by nongovernmental entities.  Although the establishment of the ASC did not change current GAAP, it did change the way we refer to GAAP throughout this document to reflect the updated referencing convention.
  During 2009, the Company adopted the revised accounting guidance related to business combinations. This guidance requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the literature. In accordance with this guidance, acquisition-related costs, including restructuring costs, must be recognized separately from the acquisition and will generally be expensed as incurred. That replaces the cost-allocation process detailed in previous accounting literature, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. The Company implemented this new guidance effective January 2, 2009.
  The Financial Accounting Standards Board has published an update to the accounting guidance on fair value measurements and disclosures as it relates to investments in certain entities that calculate net asset value per share (or its equivalent). This accounting guidance permits a reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This update also requires new disclosures, by major category of investments, about the attributes of investments included within the scope of this amendment to the Codification. The guidance in this update is effective for interim and annual periods ending after December 15, 2009. The Company does not expect the adoption of this standard to have an impact on the Company’s results of operations, financial condition or cash flows.
  NOTE 2. GOING CONCERN
  For the year ended December 31, 2009, BigString’s consolidated financial statements reflect a net loss of $968,848, net cash used in operations of $355,748, a working capital deficit of $916,602, a stockholders’ deficit accumulated during the development stage of $15,122,893 and a cumulative net loss of $14,642,893. 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.
  F-12
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 The time required for BigString to become profitable is highly uncertain, and BigString can give no assurances that it will achieve or sustain profitability or generate sufficient cash flow from operations to meet planned capital expenditures, planned marketing expenditures and working capital requirements.  If required, the ability to obtain additional financing from other sources also depends on many factors beyond BigString’s control, including the state of the capital markets and the prospects for BigString’s business.  The necessary additional financing may not be available to BigString or may be available only on terms that would result in further dilution to the current stockholders of BigString.
  NOTE 3. ACQUISITIONS
  On July 9, 2008, BigString completed the acquisition of the website, BuddyStumbler, pursuant to an asset purchase agreement. BigString issued 900,000 shares of its common stock to the sellers. The market value of BigString’s common stock on July 9, 2008 was $0.13 per share. The purchase price of $117,000 has been allocated to intangible assets based on estimated fair value. The acquisition includes right, title and interest in domain names, customer and member lists and source code. The results of operations of the assets acquired were not material.
  On December 11, 2006, BigString completed the acquisition of the website, DailyLOL, pursuant to an asset purchase agreement. The cash purchase price of $13,000 has been allocated to intangible assets based on estimated fair value. The acquisition includes right, title and interest in domain names, customer and member lists and source code. The results of operations of the assets acquired were not material.
  On May 19, 2006, BigString completed the acquisition of certain assets, including two websites, from a principal of Lifeline Industries, Inc. In consideration for the assets, BigString issued 750,000 shares of BigString’s common stock. The market value of BigString’s common stock on May 19, 2006 was $0.80 per share. In conjunction with this acquisition, BigString acquired an intangible asset for $600,000 based on estimated fair value. The acquisition included right, title and interest in domain names, customer and member lists and source code. The results of operations of the assets acquired were not material. Lifeline Industries, Inc. previously entered an agreement on May 2, 2006, to provide business consultant services to BigString for three years.
  On July 16, 2004, BigString completed the acquisition of Email Emissary. BigString purchased 100% of Email Emissary’s stock for 20,000,000 shares of BigString’s common stock. BigString acquired Email Emissary to consolidate its marketing and development operations. The purchase price of $4,800,000 was allocated to both tangible and intangible assets and liabilities based on estimated fair values. Approximately $4,803,000 of identifiable intangible assets (patent application, trademark and websites) arose from this transaction. Such intangible assets are being amortized on a straight-line basis over the estimated economic life of five years.
  This acquisition was accounted for using the purchase method of accounting, and accordingly, the results of operations of Email Emissary has been included in BigString’s consolidated financial statements from July 16, 2004, the date of closing.
  As of December 31, 2008, each of the intangible assets had been fully amortized and/or impaired.
  NOTE 4. PROPERTY AND EQUIPMENT
  Property and equipment consist of the following:
  December 31,2009


2008Computer equipment and internal software

$
159,313


$
177,326Furniture and fixtures


5,721



5,848165,034



183,174Less accumulated depreciation


125,641



108,437$
39,393


$
74,737
  Depreciation expense for the years ended December 31, 2009 and 2008, and for the period October 8, 2003 (Date of Formation) through December 31, 2009, was $31,589, $38,226 and $169,535, respectively.
  F-13
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 5. GOODWILL AND OTHER INTANGIBLES
  Other intangibles consist of patent application and trademark, logos, source codes and websites.  Amounts assigned to these intangibles have been determined by management.  Management considered a number of factors in determining the allocations, including an independent formal appraisal.  Other intangibles are being amortized over five years.
  Other intangible assets consist of the following:
  December 31,2009


2008Patent application and trademark

$
4,803,067


$
4,803,067Logos, websites and source codes


730,000



730,0005,533,067



5,533,067Impairment


(1,042,876
)


(1,042,876
)4,490,191



4,490,191Accumulated amortization


4,490,191



4,490,191$
-


$
-
  Amortization expense was $0, $970,362 and $4,490,191 for the years ended December 31, 2009 and 2008, and for the period October 8, 2003 (Date of Formation) through December 31, 2009, 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 indicate that impairments may exist.
  In 2008, the recoverability test for the patent application and trademark assets indicated impairment. The fair market value, based on weighted, discounted cash flows and disposition values, was not material, and an impairment loss of $520,334 for the carrying amount was recognized.
  In 2008, the recoverability test for the logos, websites and source codes, which primarily include the website BuddyStumbler, indicated impairment. The fair market value, based on weighted, discounted cash flows and disposition values, was not material, and an impairment loss of $107,250 for the carrying amount was recognized.
  In 2007, the recoverability test for the logos, websites and source codes, which primarily include the websites FindItAll, AmericanMoBlog and DailyLOL, indicated impairment. The fair market value, based on weighted, discounted cash flows and disposition values, was not material, and an impairment loss of $415,292 for the carrying amount was recognized.
  In June 2008, BigString entered into an asset purchase agreement to sell FindItAll and AmericanMoBlog for a nominal fee and 20,000,000 shares of common stock in FindItAll, Inc. The shares and fee were received in July 2008. Fair market value was determined using the cost method of investment because BigString has determined that this is a passive investment in a non-marketable equity and BigString does not have significant influence over the company.
  NOTE 6. INVESTMENTS
  Equity Investment:
  At March 31, 2009, BigString owned 100% of the common shares outstanding of PeopleString and the financial results of PeopleString were included in BigString’s consolidated financial statements at March 31, 2009. BigString owned 29% of PeopleString’s outstanding common stock at December 31, 2009.
  For the year ended December 31, 2009 and the period October 8, 2003 (Date of Formation) through December 31, 2009, BigString recorded a gain of $10,162 on the deconsolidation of its subsidiary PeopleString, including $9,500 as an adjustment to fair market value on the date PeopleString issued shares which reduced BigString’s ownership interest so that BigString no longer had a controlling interest in PeopleString.
  F-14
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Subsequently, because BigString had an equity investment in PeopleString and accounted for this investment under the equity method, BigString recorded a loss of $10,000 for the year ended December 31, 2009 and the period October 8, 2003 (Date of Formation) through December 31, 2009, in Other income (expense). The loss is limited to BigString’s investment in PeopleString as BigString has no obligation to fund additional investments, and at December 31, 2009, the value of equity investments was $0.
  Cost Method Investment:
  In April, 2009, BigString sold 15,000,000 shares of common stock in FindItAll, Inc. for $40,000 in a private transaction. The remaining shares of common stock in FindItAll, Inc. continue to be held at cost in Other assets on BigString’s Consolidated Balance Sheets.
  NOTE 7. OTHER INCOME (EXPENSE)
  Other income (expense) consists of interest income, interest expense, and other, net.
  Interest income was $68, $4,266 and $72,657 for the years ended December 31, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, respectively.
  Interest expense consists of interest on convertible debt, generally payable on each anniversary date of the promissory notes, and is included in accrued interest. Interest expense was $84,224, $81,951 and $197,309 for the years ended December 31, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, respectively.
  The components of other, net consist of gain on investments, other income, expenses related to the convertible debenture financing, preferred stock financing, warrant and common stock financings and loss (gain) on investments and are as follows:
  PeriodOctober 8, 2003Years ended

(Date of Formation)December 31,

Through2009

2008

December 31, 2009Gain on sale of investments

$
40,162


$
-


$
40,162Other income


86,720



-



86,720Amortization of debt issue costs


(108,411
)


(114,107
)


(315,357
)Amortization of promissory note discount


(44,816
)


(29,943
)


(86,423
)Amortization of beneficial conversion feature


(292,890
)


(240,493
)


(781,991
)Investment banking expenses


-



-



(509,394
)$
(319,235
)

$
(384,543
)

$
(1,566,283
)
  Gain on sale of investment contains the transactions as discussed in Note 6. Other income contains the reversal of $66,079 of public relations expense and $20,641 of investor relations expense.
  Debt issue costs for the June 2009, August 2008, February 2008 and May 2007 financings were $33,552, $18,977, $91,706 and $248,939, respectively, and are being amortized over the term of each note, which is 24, 5, 36 and 36 months, respectively. Amortization is accelerated for the proportion of promissory notes which are converted in a period.
  Other financing expenses include $250,000 of stock-based other non-cash compensation for the fair market value of common stock issued for a waiver and release related to the debt financing in 2007.
  NOTE 8. INCOME TAXES
  BigString applies the provisions of the ASC 740, “Income Taxes.”  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 as of December 31, 2009 have been applied to offset the deferred tax assets in recognition of the uncertainty that such tax benefits will be realized as BigString may continue to incur losses.
  Components of deferred income tax assets are as follows:
  F-15
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  December 31, 2009Tax EffectDeferred tax assets - currentBenefit due to loss carryforward

$
5,125,013Valuation allowance


(5,125,013
)$
-
 
 The Company files income tax returns in all jurisdictions in which it has reason to believe it is subject to tax. The Company is subject to examination by various taxing jurisdictions. To date, there have been no examinations. Nonetheless, any tax jurisdiction may contend that a filing position claimed by the Company regarding one or more of its transactions is contrary to that jurisdiction’s laws or regulations. Significant judgment is required in determining the worldwide provisions for income taxes. In the ordinary course of business of a global business, the ultimate tax outcome is uncertain for many transactions. It is the Company’s policy to establish provisions for taxes that may become payable in future years as a result of an examination by tax authorities. The Company establishes the provisions based upon management’s assessment of exposure associated with permanent tax differences and tax credits applied to temporary difference adjustments. The tax provisions are analyzed periodically (at least quarterly) and adjustments are made as events occur that warrant adjustments to those provisions.
  BigString has 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 net operating loss (“NOL”) carryforwards to other New Jersey corporation business taxpayers. The Program requires that the purchaser pay at least 75% of the amount of the surrendered tax benefit. For the years ended December 31, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, BigString recorded a net state tax benefit of $310,108, $428,137 and $997,099, respectively, as a result of its sale of New Jersey state net operating losses and New Jersey state research and development credits. 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.
  At December 31, 2009, BigString has available NOL carry forwards of approximately $13.4 million for federal income tax reporting purposes and $5.8 million for state income tax reporting purposes which expire in various years through 2029. 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 NOL and research credit carry forwards may be limited, and, as such, BigString’s NOL 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 9. DEBT
  On June 23, 2009, BigString entered into a financing arrangement with several accredited financing parties. Proceeds from the financing have been used to support ongoing operations and the advancement of BigString’s technology, and fund the marketing and the development of its business.
  Pursuant to the Subscription Agreement entered into by BigString with Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Special Opportunities LP (collectively, the “2009 Subscribers”), the 2009 Subscribers purchased convertible notes in the aggregate principal amount of $180,000, which notes are convertible into shares of BigString’s common stock, and warrants to purchase up to 6,000,000 shares of BigString's common stock, resulting in net proceeds of approximately $146,500 after transaction fees of approximately $33,500. BigString accounted for the convertible notes under ASC 815-15-10, and related interpretations including ASC 815-40-05. Approximately $35,000 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, $168,000 was included as additional paid in capital based on the conversion discount.
  Each convertible note has a term of two years and accrues interest at a rate of 6% annually. The holder of a convertible note shall have the right from and after the issuance thereof until such time as the convertible note is fully paid, to convert any outstanding and unpaid principal portion thereof into shares of common stock at a conversion price of $0.015 per share, as adjusted. The conversion price and number and kind of shares to be issued upon conversion of the convertible notes are subject to adjustment from time to time. The warrants have an exercise price of $0.015 per share, as adjusted. The number of shares of common stock underlying each warrant and the exercise price are subject to certain adjustments.
  In connection with the June 23, 2009 financing, BigString paid Whalehaven Capital Fund Limited $6,000, Alpha Capital Anstalt $6,000 and Excalibur Special Opportunities LP $2,400 for finder’s fees.
  F-16
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 As a result of this financing, the conversion price for the outstanding convertible notes and the exercise price underlying the warrants previously issued by BigString in February 2008 and May 2007 and the conversion price of the shares of outstanding Series A Preferred Stock were subject to adjustment under anti-dilution provisions. The 2007 Subscribers and 2008 Subscribers (as such terms are defined below) verbally agreed to waive anti-dilution provisions related to the number of shares of common stock underlying the warrants previously issued by BigString in February 2008 and May 2007.
  On August 25, 2008, BigString entered into a financing arrangement with Dwight Lane Capital, LLC, a limited liability company in which Todd M. Ross, a former director of BigString, has an interest, and Marc W. Dutton, a former director of BigString. In connection with such financing, BigString issued promissory notes in the aggregate principal amount of $250,000 and common stock purchase warrants to purchase up to an aggregate 800,000 shares of BigString's common stock. Each note had a term of five months and accrued interest at a rate of 12% annually. The warrants have an exercise price of $0.08 per share.
  BigString incurred transaction fees of approximately $19,000. BigString accounted for the convertible feature of the notes under ASC 815-15-10, and related interpretations including ASC 815-40-05. Due to the conversion rights only upon an event of default, $2,080 was included as additional paid in capital based on a weighted conversion discount. The warrants did not have a conversion discount, and accordingly, no proceeds were allocated to the warrants based on fair value, nor included as additional paid in capital.
  As a result of this financing, the conversion price for the outstanding convertible notes and the exercise price and number of shares of common stock underlying the warrants previously issued by BigString in February 2008 and May 2007 and the conversion price of the shares of outstanding Series A Preferred Stock were subject to adjustment under anti-dilution provisions.
  In December 2008, all amounts due under the notes were paid by BigString, including accrued interest of $9,328, and, as a result, the notes were cancelled.
  On February 29, 2008, BigString entered into a financing arrangement with several accredited financing parties. Proceeds from the financing have been used to support ongoing operations and the advancement of BigString’s technology, and fund the marketing and the development of its business.
  On February 29, 2008, BigString entered into a Subscription Agreement 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, resulting in net proceeds of approximately $608,000 after transaction fees of approximately $92,000. BigString accounted for the convertible notes under ASC 815-15-10, and related interpretations including ASC 815-40-05. Approximately $76,200 of the proceeds was allocated to the warrants based on fair value, and included as additional paid in capital. Due to the beneficial conversion feature of the convertible notes, $186,660 was included as additional paid in capital based on the conversion discount.
  Each convertible note has a term of three years and accrues interest at a rate of 6% annually. The holder of a convertible note shall have the right from and after the issuance thereof until such time as the convertible note is fully paid, to convert any outstanding and unpaid principal portion thereof into shares of common stock at a conversion price of $0.15 per share, as adjusted. The conversion price and number and kind of shares to be issued upon conversion of the convertible notes are subject to adjustment from time to time. The warrants have an exercise price of $0.15 per share, as adjusted. The number of shares of common stock underlying each warrant and the exercise price are subject to certain adjustments.
  In connection with the February 29, 2008 financing, BigString paid Gem Funding LLC $56,000 and issued a warrant to purchase 373,333 shares of BigString’s common stock to Gem Funding, LLC on February 29, 2008, which 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 and the exercise price and number of shares of common stock underlying the warrants previously issued by BigString in May 2007 and the conversion price of the shares of outstanding Series A Preferred Stock were subject to adjustment under anti-dilution provisions.
  F-17
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 On May 1, 2007, BigString entered into a Subscription Agreement with Whalehaven Capital Fund Limited, Alpha Capital Anstalt, Chestnut Ridge Partners LP, Iroquois Master Fund Ltd. and Penn Footwear (collectively, the “2007 Subscribers”), pursuant to which the 2007 Subscribers purchased convertible notes in the aggregate principal amount of $800,000, which notes are convertible into shares of BigString’s common stock, and warrants to purchase up to 1,777,779 shares of BigString's common stock, resulting in net proceeds of approximately $551,000 after transaction fees of approximately $249,000. BigString accounted for the convertible notes under ASC 815-15-10, and related interpretations including ASC 815-40-05. Approximately $31,300 of the proceeds was allocated to the warrants based on fair value, and included as additional paid in capital. Due to the beneficial conversion feature of the convertible notes, $666,648 was included as additional paid in capital based on the conversion discount.
  Each convertible note has a term of three years and accrues interest at a rate of 6% annually. The holder of a convertible note shall have the right from and after the issuance thereof until such time as the convertible note is fully paid, to convert any outstanding and unpaid principal portion thereof into shares of BigString’s common stock at a conversion price of $0.15 per share, as adjusted. The conversion price and number and kind of shares to be issued upon conversion of the convertible notes are subject to adjustment from time to time. The warrants have an exercise price of $0.30 per share, as adjusted. The number of shares of common stock underlying each warrant and the exercise price are subject to certain adjustments.
  In connection with the May 1, 2007 financing, BigString paid Gem Funding LLC $64,000 and issued a warrant to purchase 213,333 shares of BigString’s common stock to Gem Funding LLC on May 1, 2007, which is similar to and carries the same rights as the warrants issued to the 2007 Subscribers.
  On November 30, 2007, BigString and the 2007 Subscribers entered into an Agreement, Waiver and Limited Release. As part of the Agreement, Waiver and Limited Release, the 2007 Subscribers released BigString from liquidated damages relating to the outstanding convertible notes. At the date of the Agreement, Waiver and Limited Release, BigString had accrued $24,267 in liquidated damages. BigString also granted the 2007 Subscribers 1,000,000 restricted shares of BigString’s common stock. BigString recorded $250,000 of stock-based other non-cash compensation expense related to the debt issue.
  For the years ended December 31, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, $84,931, $20,000 and $259,931 of the convertible notes were converted resulting in 5,662,095, 111,111 and 6,634,317 shares, respectively, of BigString’s common stock being issued to the holders of the convertible notes. Information regarding the convertible notes outstanding at December 31, 2009 and December 31, 2008 is as follows:
  December 31,2009


2008Convertible note, May 1, 2007, maturing May 1, 2010

$
558,250


$
625,000Beneficial conversion feature


(51,692
)


(231,477
)Note Discount


(2,425
)


(10,873
)504,133



382,650Convertible note, February 29, 2008, maturing February 28, 2011

$
681,819


$
700,000Beneficial conversion feature


(70,705
)


(134,810
)Note Discount


(28,855
)


(55,016
)582,259



510,174Convertible note, June 23, 2009, maturing June 23, 2011

$
180,000


$
-Beneficial conversion feature


(119,000
)


-Note Discount


(24,786
)


-36,214



-$
1,122,606


$
892,824
  F-18
 
 BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 For the years ended December 31, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, BigString issued 993,750, 291,713 and 1,285,463 shares, respectively, of BigString’s common stock in lieu of $79,500, $43,757 and $123,257, respectively, of accrued interest. Future accrued interest payments, which may include shares of BigString’s common stock in lieu of accrued interest, on the May 1, 2007, February 29, 2008 and June 23, 2009 convertible notes are currently estimated as follows:
  AccruedYears Ending

InterestDecember 31,

Payments2010



87,2072011



51,709$
138,916
  Change in Control
  Management believes that a change in control of BigString may occur in the future in the event one or more of Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Special Opportunities LP converts and exercises all or substantially all of the convertible notes and warrants to purchase shares of BigString’s common stock held by it or them.
 NOTE 10. COMMON STOCK
  On July 18, 2005, BigString amended its Certificate of Incorporation to, among other things, (1) change its name from Recall Mail Corporation to BigString Corporation, and (2) increase the number of shares BigString is authorized to issue from 50,000,000 shares to 250,000,000 shares, consisting of 249,000,000 shares of common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. The board of directors has the authority, without action by the stockholders, to designate and issue the shares of preferred stock in one or more series and to designate the rights, preference and privileges of each series, any or all of which may be greater than the rights of BigString’s common stock. Currently, there are 79,657 shares of preferred stock outstanding.
  In October 2003, the month of BigString’s formation, BigString issued 21,210,000 shares of its common stock to principals of BigString at no cost to such principals.
  During 2003, BigString concluded a private placement of securities, pursuant to which it sold 40,000 shares of BigString’s common stock at a per share purchase price of $0.25. BigString received $10,000 in gross proceeds as a result of this private placement.
  During 2004, BigString concluded a private placement of securities, pursuant to which it sold 870,000 shares of BigString’s common stock at a per share purchase price of $0.25. BigString received $217,500 in gross proceeds as a result of this private placement.
  During 2004, BigString issued 185,000 shares of common stock valued at $0.21 per share in consideration for consulting services provided by two marketing consultants. BigString recorded consulting expense of $39,251 in connection with the issuance of these shares. Fair market value was based on most recent private placement per share purchase price and an agreed upon per share purchase price discount.
  During 2004, BigString completed the acquisition of Email Emissary for 20,000,000 shares of BigString’s common stock for a purchase price of $4,800,000. Fair market value of $0.24 per share was based on the weighted average private placement per share purchase prices in 2003 and 2004.
  During 2005, BigString issued 50,000 shares of common stock valued at $0.25 per share for business advisory services. Fair market value was based on the concurrent private placement per share purchase price.
  For the year ended December 31, 2005, BigString concluded several private placements pursuant to which it sold 922,000 shares of its common stock at a per share purchase price of $0.25 and 9,448,125 shares of its common stock at a per share purchase price of $0.16. As a result of these private placements, BigString received $1,742,200 in gross proceeds.
  On May 2, 2006, BigString issued 1,250,000 shares of common stock in consideration for business consultant services to be provided by Lifeline Industries, Inc. The market value of BigString’s common stock at May 2, 2006 was $0.82 per share.
  On May 19, 2006, BigString completed the acquisition of certain assets, including two websites, from a principal of Lifeline Industries, Inc. In consideration for the assets, BigString issued 750,000 shares of common stock. The market value of BigString’s common stock at May 19, 2006 was $0.80 per share.
  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.
  F-19
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 On February 26, 2007, BigString agreed to issue 140,000 shares of common stock to CEOcast, Inc. in consideration for investor relations services. The market value of BigString’s common stock at February 26, 2007 was $0.50 per share.
  Additionally, on February 26, 2007, BigString agreed to issue 192,000 shares of common stock to Howard Greene in consideration for public relations services provided by Greene Inc. Communications. The market value of BigString’s common stock at February 26, 2007 was $0.50 per share.
  On May 1, 2007, BigString issued 100,000 shares of common stock to Jonathan Bomser in consideration for online marketing services provided by CAC, Inc. The market value of BigString’s common stock at May 1, 2007 was $0.33 per share.
  On November 30, 2007, BigString agreed to issue 1,000,000 shares of its common stock to the 2007 Subscribers as part of the Agreement, Waiver and Limited Release. The market value of BigString’s common stock at November 30, 2007 was $0.25 per share.
  During November and December 2007, BigString issued an aggregate 861,111 shares of common stock for the conversion of convertible promissory notes totaling $155,000. The conversion price was $0.18 per share.
  On February 8, 2008, BigString issued 111,111 shares of its common stock for the conversion of convertible promissory notes totaling $20,000. The conversion price was $0.18 per share.
  On May 1, 2008, BigString issued 291,713 shares of its common stock for accrued interest on convertible promissory notes totaling $43,757. The conversion price was $0.15 per share.
  On July 9, 2008, BigString completed the acquisition of certain assets and issued 900,000 shares of its common stock. The market value of BigString’s common stock at July 9, 2008 was $0.13 per share.
  On March 2, 2009, BigString issued 525,000 shares of its common stock for accrued interest on convertible promissory notes totaling $42,000. The conversion price was $0.08 per share.
  On May 1, 2009, BigString issued 468,750 shares of its common stock for accrued interest on convertible promissory notes totaling $37,500. The conversion price was $0.08 per share.
  On July 1, 2009, BigString issued 4,429,522 shares of its common stock for the conversion of 320,343 shares of Series A Preferred Stock, par value $0.0001 per share.
  On July 15, 2009, BigString issued 1,000,000 shares of its common stock for the conversion of convertible promissory notes totaling $15,000. The conversion price was $0.015 per share.
  On July 27, 2009, BigString issued 500,000 shares of its common stock for the conversion of convertible promissory notes totaling $7,500. The conversion price was $0.015 per share.
  On August 31, 2009, BigString issued 480,552 shares of its common stock for the conversion of convertible promissory notes totaling $7,208. The conversion price was $0.015 per share.
  On September 30, 2009, BigString issued 2,950,000 shares of its common stock for the conversion of convertible promissory notes totaling $44,250. The conversion price was $0.015 per share.
  On October 13, 2009, BigString issued 731,543 shares of its common stock for the conversion of convertible promissory notes totaling $10,973. The conversion price was $0.015 per share.
  NOTE 11. PREFERRED STOCK
  On May 19, 2006, BigString issued a total of 400,000 shares of Series A Preferred Stock, par value $0.0001 per share, and warrants to purchase 1,000,000 shares of its common stock to Witches Rock Portfolio Ltd.,The Tudor BVI Global Portfolio Ltd.andTudor Proprietary Trading, L.L.C., for an aggregate purchase price of $2,000,000. The shares of Series A Preferred Stock are convertible under certain circumstances into shares of BigString’s common stock, and have certain dividend, voting, liquidation and conversion rights.  The warrants are convertible into shares of BigString’s common stock at an exercise price per share of $1.25, as adjusted. BigString has registered the shares of common stock issuable upon conversion of the shares of Series A Preferred Stock and the shares of common stock underlying the warrants. In conjunction with this transaction, BigString incurred a fee of $140,000, which is included in additional paid in capital.
  F-20
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 BigString accounted for the convertible preferred stock under ASC 815-15-10, and related interpretations including ASC 815-40-05. BigString performed calculations allocating the proceeds of the Series A Preferred Stock with detachable warrants to each respective security at their fair values. The value of the warrants of $400,000 was recorded as a reduction of the Series A Preferred Stock and credited to additional paid-in-capital. The recorded discount of $480,000 resulting from allocation of proceeds to the beneficial conversion feature is analogous to a dividend and is recognized as a return to the preferred stockholders at the date of issuance of the convertible preferred stock.
  On July 1, 2009, BigString issued 4,429,522 shares of its common stock for the conversion of 320,343 shares of Series A Preferred Stock, par value $0.0001 per share.
  NOTE 12. SHARE-BASED COMPENSATION
  Warrants:
  During 2004, BigString granted warrants as payment for advisory services. The warrants provided for the purchase of 60,000 shares of BigString’s common stock at an exercise price of $0.25. Certain of these warrants were exercised in 2005, which resulted in 45,000 shares of BigString’s common stock being issued to the holders thereof. As a result of these exercises, BigString received $11,250 in gross proceeds. The remainder of these warrants was exercised in 2006, which resulted in 15,000 shares of BigString’s common stock being issued to the holder thereof. As a result of this exercise, BigString recorded a subscription receivable of $3,750. In connection with the grant of these warrants, BigString recorded an expense of $3,500 which is included in BigString’s consolidated statement of operations for the year ended December 31, 2004. The fair value of the warrants granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used: dividend yield of 0%; expected volatility of 47%; risk free rate of return of 5%; and expected life of 2 years. The weighted average fair value of these warrants was $0.07 per share.
  On January 1, 2005, BigString granted warrants to two consultants as payment for advisory services. Each warrant provided for the purchase of 50,000 shares of BigString’s common stock at an exercise price of $0.25 per share. One of the warrants was exercised in 2006, which resulted in 50,000 shares of BigString’s common stock being issued to the holder thereof. As a result of this exercise, BigString recorded a subscription receivable of $12,500. In addition, the other warrant providing for the purchase of 50,000 shares of BigString’s common stock expired on January 1, 2007. In connection with the grant of these warrants, BigString recorded an expense of $7,400 which is included in BigString’s consolidated statements of operations for the year ended December 31, 2005. The fair value of the warrants granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used: dividend yield of 0%; expected volatility of 47%; risk free rate of return of 5%; and expected life of 2 years. The weighted average fair value of these warrants was $0.07 per share.
  On September 23, 2005, BigString granted warrants to a consultant, as payment for advisory services. One warrant provides for the purchase of 1,246,707 shares of BigString’s common stock with a per share exercise price of $0.16, and the second warrant provides for the purchase of 1,196,838 shares of BigString’s common stock with a per share exercise price of $0.20. Each of these warrants is due to expire on September 23, 2010 and each grant is non-forfeitable. A portion of each warrant, representing 50,000 shares of common stock, was assigned to a third party. The assigned portions of the warrants were exercised in 2006, which resulted in 100,000 shares of BigString’s common stock being issued to the holder thereof. As a result of these exercises, BigString received $18,000 in gross proceeds. In connection with the grant of these warrants, BigString recorded an expense of $171,800 which is included in BigString’s consolidated statements of operations for the year ended December 31, 2005. The fair value of the warrants granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used: dividend yield of 0%; expected volatility of 47%; risk free rate of return of 5%; and expected life of 2 years. The weighted average fair value of these warrants was $0.07 per share.
  On May 2, 2006, BigString granted warrants to purchase shares of BigString’s common stock in consideration for business consultant services to be provided by Lifeline Industries, Inc. A total of $135,300 of the deferred compensation in connection with the warrants has been expensed over a period of 36 months. 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.
  F-21
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 On December 1, 2006, BigString granted warrants to two consultants, as payment for advisory services. Each warrant provides for the purchase of 50,000 shares of BigString’s common stock at an exercise price of $0.50 per share. Each of these warrants is due to expire on December 1, 2011. In connection with the grant of these warrants, BigString recorded an expense of $6,530 which is included in BigString’s consolidated statements of operations for the year ended December 31, 2006. The fair value of the warrants granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used: dividend yield of 0%; expected volatility of 47%; risk free rate of return of 4%; and expected life of 3 years. The weighted average fair value of these warrants was $0.08 per share.
  As discussed in Note 9, on May 1, 2007, BigString granted warrants to purchase up to 1,991,112 shares of BigString's common stock to the 2007 Subscribers and Gem Funding LLC. Each of the warrants has 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, as adjusted. A total of $31,320 of the purchase price for the convertible notes and warrants was allocated to the warrants based on fair value.
  In November 2007, BigString repriced warrants to purchase 1,713,334 shares of common stock previously issued to the 2007 Subscribers, which warrants were subsequently exercised by the 2007 Subscribers at the reduced exercise price. The exercise price of the repriced warrants was reduced from $0.30 per share to $0.10 per share. As a result of this repricing, the warrants with an exercise price of $0.30 per share were deemed cancelled and new warrants with an exercise price of $0.10 per share were deemed issued. In December 2007, five repriced warrants were exercised at the exercise price of $0.10 per share, which resulted in 1,500,001 shares of BigString’s common stock being issued to the holders thereof. As a result of these exercises, BigString received $150,000 in gross proceeds. In addition, one repriced warrant was exercised in January 2008 at the exercise price of $0.10 per share, which resulted in 213,333 shares of BigString’s common stock being issued to the holder thereof and $21,333 in gross proceeds to BigString. The fair value of the warrants deemed cancelled and deemed issued was estimated on the date of approval by the board of directors of BigString using the Black-Scholes option-pricing model with the following weighted average assumptions used: dividend yield of 0% and 0%; expected volatility of 69% and 69%; risk free rate of return of 4% and 3%; and expected life of 4 and 0 years for the deemed cancellation and deemed issue of warrants, respectively. The weighted average fair value of the deemed cancellation and deemed issue of warrants was $0.11 per share and $0.12 per share, respectively. BigString expensed the net fair value of $19,094 for the year ended December 31, 2007.
  As discussed in Note 9, on February 29, 2008, BigString granted warrants to purchase up to 2,706,666 shares of BigString's common stock to the 2008 Subscribers and Gem Funding LLC. Each of the warrants has a term of five years from February 29, 2008 and was fully vested on the date of issuance. The warrants are exercisable at $0.15 per share of common stock, as adjusted. A total of $76,176 of the purchase price for the convertible notes and warrants was allocated to the warrants based on fair value. As a result of this transaction, certain warrants to purchase shares of BigString’s common stock issued to the 2007 Subscribers and Gem Funding LLC were adjusted.
  As discussed in Note 9, on August 25, 2008, BigString granted warrants to purchase up to 800,000 shares of BigString's common stock to Dwight Lane Capital, LLC and Marc W. Dutton. Each of the warrants has a term of ten years from August 25, 2008 and was fully vested on the date of issuance. The warrants are exercisable at $0.08 per share of common stock. The warrants did not have a conversion discount, and accordingly, no proceeds for the convertible notes and warrants was allocated to the warrants, based on fair value, nor included as additional paid in capital. As a result of this transaction, certain warrants to purchase shares of BigString’s common stock issued to the 2007 Subscribers and 2008 Subscribers and Gem Funding LLC were adjusted.
  As discussed in Note 9, on June 23, 2009, BigString granted warrants to purchase up to 6,000,000 shares of BigString's common stock to the 2009 Subscribers. Each of the warrants has a term of five years from June 23, 2009 and was fully vested on the date of issuance. The warrants are exercisable at $0.015 per share of common stock, as adjusted. A total of $34,992 of the purchase price for the convertible notes and warrants was allocated to the warrants based on fair value. As a result of this transaction, certain warrants to purchase shares of BigString’s common stock issued to the 2007 Subscribers and 2008 Subscribers and Gem Funding LLC were adjusted.
  F-22
  Information regarding the warrants outstanding, all of which are exercisable, for 2009 and 2008 is as follows:
  WeightedWeighted


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term


ValueWarrants outstanding at January 1, 2008


4,384,656


$
0.50Warrants granted


9,206,666


$
0.10Warrants exercised


(213,333
)

$
0.10Warrants cancelled/forfeited/expired


(2,984,444
)

$
0.16Warrants outstanding at December 31, 2008


10,393,545


$
0.25



4.2


$
-Warrants granted


11,700,000


$
0.02Warrants exercised


-


$
-Warrants cancelled/forfeited/expired


(5,700,000
)

$
0.08Warrants outstanding at December 31, 2009


16,393,545


$
0.14



3.7


$
58,500Warrants exercisable at December 31, 2008


10,393,545


$
0.25



4.2


$
-Warrants exercisable at December 31, 2009


16,393,545


$
0.14



3.7


$
58,500
  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, 2008 and 2009 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, 2008 and 2009, respectively.
  Warrants granted during the years ended December 31, 2009 and 2008 were 11,700,000 and 9,206,666, respectively.  For the period October 8, 2003 (Date of Formation) through December 31, 2009, warrants to purchase a total of 28,764,657 shares of BigString’s common stock were granted. The weighted average grant date fair value of warrants granted in the years ended December 31, 2009 and 2008 was $0.02 and $0.05, respectively.
  Warrants exercised during the years ended December 31, 2009 and 2008 were 0 and 213,333, respectively.  Cash received during the years ended December 31, 2009 and 2008 from the exercise of warrants was $0 and $21,333, respectively.  For the period October 8, 2003 (Date of Formation) through December 31, 2009, a total of 1,923,334 shares of BigString’s common stock were purchased upon the exercise of warrants. The total intrinsic value of warrants exercised in the years ended December 31, 2009 and 2008 was $0 and $29,867, respectively.
  During the years ended December 31, 2009 and 2008, 5,700,000 and 2,984,444 warrants were cancelled. During the period October 8, 2003 (Date of Formation) through December 31, 2009, 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. In addition for the period October 8, 2003 (Date of Formation) through December 31, 2009, warrants to purchase a total of 10,397,778 shares of common stock were cancelled with an aggregate intrinsic value of $0 at the date of cancellation.
 
 Equity Incentive Plan and Stock Options Issued to Consultant:
  At the 2006 annual meeting of stockholders of BigString, the BigString Corporation 2006 Equity Incentive Plan (the “Equity Incentive Plan”) was adopted and approved by a majority of BigString’s stockholders. Under the Equity Incentive Plan, incentive and nonqualified stock options and rights to purchase BigString’s common stock may be granted to eligible participants. Options are generally priced to be at least 100% of the fair market value of BigString’s common stock at the date of the grant. Options are generally granted for a term of five or ten years. Options granted under the Equity Incentive Plan generally vest between one and five years.
  On July 11, 2006, BigString approved the grant of a non-qualified stock option to purchase 575,100 shares of BigString’s common stock to a vendor. The non-qualified stock option has a term of five years from July 11, 2006 and an exercise price of $0.32 per share. For the year ended December 31, 2006, BigString recorded a consulting expense of $47,775 in connection with the contractual relationship between Kieran Vogel and BigString related to Mr. Vogel’s participation in BigString’s OurPrisoner program. These stock options were granted outside of the Equity Incentive Plan.
  F-23
  BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 On July 11, 2006, BigString granted incentive stock options to purchase 2,620,000 shares of BigString’s common stock under its Equity Incentive Plan to certain of BigString’s employees. Incentive stock options to purchase 1,450,000 shares of BigString’s common stock were granted at an exercise price of $0.32 per underlying share with 25% vesting every three months for one year, and incentive stock options to purchase 1,170,000 shares of BigString’s common stock were granted at an exercise price of $0.50 per underlying share with vesting over periods of three and four years. In addition, non-qualified stock options to purchase 600,000 shares of BigString’s common stock were granted to two non-employee directors at an exercise price of $0.50 per underlying share with vesting over a period of three years.
  On September 18, 2006, BigString granted an incentive stock option to purchase 1,800,000 shares of BigString’s common stock under its Equity Incentive Plan to a new BigString officer. When vested, 400,000 shares of BigString’s common stock will be eligible for purchase at the per share price equal to $0.24; 600,000 shares of BigString’s common stock will be eligible for purchase at $0.50 per share; 400,000 shares of BigString’s common stock will be eligible for purchase at $.90 per share; and 400,000 shares of BigString’s common stock will be eligible for purchase at $1.25 per share. The incentive stock option vests quarterly over a three year period, and the shares of BigString’s common stock subject to the incentive stock option will vest in order of exercise price, with the shares with the lower exercise price vesting first.
  On November 14, 2007, BigString granted incentive stock options to purchase 1,275,000 shares of BigString’s common stock under its Equity Incentive Plan to certain of BigString’s employees. Incentive stock options were granted at an exercise price of $0.18 per underlying share with 25% vesting every three months for one year. In addition, non-qualified stock options to purchase 800,000 shares of BigString’s common stock were granted to three non-employee directors at an exercise price of $0.18 per underlying share with 25% vesting every three months for one year.
  On January 14, 2008, BigString granted incentive stock options to purchase 800,000 shares of BigString’s common stock under its Equity Incentive Plan to a new BigString employee. Incentive stock options were granted at an exercise price of $0.22 per underlying share with 25% vesting every three months for one year. These options were forfeited.
  On April 11, 2008, BigString granted incentive stock options to purchase 2,580,000 shares of BigString’s common stock under its Equity Incentive Plan to certain of BigString’s employees. Incentive stock options were granted at an exercise price of $0.21 per underlying share with 25% vesting every three months for one year. In addition, non-qualified stock options to purchase 1,000,000 shares of BigString’s common stock were granted to two non-employee directors at an exercise price of $0.21 per underlying share with 25% vesting every three months for one year.
  On October 13, 2008, BigString granted incentive stock options to purchase 300,000 shares of BigString’s common stock under its Equity Incentive Plan to a BigString employee. Incentive stock options were granted at an exercise price of $0.10 per underlying share with 25% vesting every three months for one year.
  On November 17, 2008, BigString granted non-qualified stock options to purchase 300,000 shares of BigString’s common stock to a BigString vendor under a partnering arrangement. The stock options were granted at an exercise price of $0.08 per underlying share with 25% vesting every three months for one year. These stock options were granted outside of the Equity Incentive Plan.
  For the years ended December 31, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, BigString recorded stock-based option compensation expense of $86,782, $341,036 and $601,055, respectively.  ASC 718 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, 2009 and 2008 is as follows:
  F-24
  WeightedWeighted


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term


ValueOptions outstanding at January 1, 2008


7,150,100


$
0.41Options granted


4,980,000


$
0.20Options exercised


-


$
-Options cancelled/forfeited/expired


(2,180,000
)

$
0.27Options outstanding at December 31, 2008


9,950,100


$
0.33



5.5


$
-Options granted


-


$
-Options exercised


-


$
-Options cancelled/forfeited/expired


(800,000
)

$
0.31Options outstanding at December 31, 2009


9,150,100


$
0.33



4.7


$
-Options exercisable at December 31, 2008


7,175,100


$
0.32



5.6


$
-Options exercisable at December 31, 2009


9,137,600


$
0.33



4.7


$
-
  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, 2008 and 2009 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, 2008 and 2009, respectively.
  Options granted during the years ended December 31, 2009 and 2008 were 0 and 4,980,000, respectively.  For the period October 8, 2003 (Date of Formation) through December 31, 2009, options to purchase a total of 12,650,100 shares of BigString’s common stock were granted. The weighted average grant date fair value of options granted in the years ended December 31, 2009 and 2008 was $0.00 and $0.07, respectively.
  No options were exercised, and no cash received from option exercises and purchases of shares for the years ended December 31, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009. The total tax benefit attributable to options exercised in the years ended December 31, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009 was $0.
  During the years ended December 31, 2009 and 2008 and the period October 8, 2003 (Date of Formation) through December 31, 2009, options to purchase a total of 800,000, 2,180,000 and 3,500,000 shares of BigString’s common stock were cancelled, forfeited or expired with an aggregate intrinsic value of $0 at the date of expiration.
  The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model, consistent with the provisions of ASC 718. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. BigString has limited relevant historical information to support the expected exercise behavior because BigString’s common 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,

Through2009

2008

December 31, 2009Risk-free interest rate


-
%


1.79
%


3.52
%Expected volatility


-
%


99
%


67
%Expected life (in years)


-



1.5



2.0Dividend yield


-



-



-
  The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected life of the awards in effect at the time of the grant. BigString estimates the volatility of its common stock at the date of the grant based on historical volatility, expected volatility and publicly traded peer companies. The expected life of stock options granted under the Equity Incentive Plan is based on management judgment, historical experience and publicly traded peer companies. BigString has no history or expectations of paying cash dividends on its common stock.
  F-25
  NOTE 13. RELATED PARTY TRANSACTIONS
  After March 2009, BigString became a significant, non-majority stockholder of PeopleString. On April 2, 2009, PeopleString entered into a verbal agreement with BigString to license BigString’s messaging technology and share the cost of certain common services. The agreement renews annually, is subject to adjustment periodically, and may be terminated at will by either party upon three days notice. Under the agreement, BigString provides outsourced email and instant messenger services to PeopleString users. Shared services included hosting, credit card processing, insurance, rent, payroll and miscellaneous general and administrative expenses. Shared services costs are quantified based on management’s estimate of the percentage of time devoted to each company and the licensing fee is based on BigString’s experience providing services to other third parties. Payments are due quarterly. For the year ended December 31, 2009, BigString recorded $33,000 as revenue under the licensing agreement and $132,745 as expense reductions.
  On August 25, 2008, BigString entered into a financing arrangement with Dwight Lane Capital, LLC, a limited liability company in which Todd M. Ross, a former director of BigString, has an interest, and Marc W. Dutton, a former director of BigString, as discussed in Note 9.
  On December 29, 2008, BigString signed an agreement with Digital BobKat, LLC, a limited liability company in which Robert S. DeMeulemeester, an officer and director of BigString, has an interest, to provide business consulting services. Expenses for the years ended December 31, 2009 and 2008 were $30,000 and $12,000, respectively.
 NOTE 14. COMMITMENTS AND CONTINGENCIES
  Leases:
  BigString leases its facilities which requires 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,

Payments2010

$
20,919$
20,919
  Rental expense, excluding shared service costs, was $25,700, $36,400 and $220,809 for the years ended December 31, 2009 and 2008, and for the period October 8, 2003 (Date of Formation) through December 31, 2009, respectively.
  Computer co-location, power and Internet access expense, including shared service costs, was $27,745, $56,728 and $209,627 for the years ended December 31, 2009 and 2008, and for the period October 8, 2003 (Date of Formation) through December 31, 2009, 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 ($63,764) and $155,351 for the years ended December 31, 2009 and 2008, and $238,034 for the period October 8, 2003 (Date of Formation) through December 31, 2009.
  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 $128,926, $386,764 and $1,160,300 for the years ended December 31, 2009 and 2008, and for the period October 8, 2003 (Date of Formation) through December 31, 2009, respectively.
  On February 28, 2008, BigString signed a three month, renewable, consulting agreement with OTC Financial Network, a division of National Financial Communications Corp., to provide investor relations services. Expenses for the years ended December 31, 2009 and 2008 were $0 and $80,000, respectively.
  On March 18, 2008, BigString signed a month-to-month consulting agreement with Jayson Marketing Group, Inc. to provide public relations and event marketing services. Expenses for the years ended December 31, 2009 and 2008 were $0 and $39,587, respectively.
  On April 1, 2008, BigString signed an agreement with Medialink Worldwide, Inc. to provide media services. Expenses for the years ended December 31, 2009 and 2008 were $0 and $23,000, respectively.
  F-26
 
 BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  On April 2, 2008, BigString signed a one month agreement with Coburn Communications, Inc. for Bill Stanton to provide public relations and marketing services. Expenses for the years ended December 31, 2009 and 2008 were $0 and $31,000, respectively.
  On July 1, 2008, BigString signed a one month agreement with Lebed Biz, LLC to provide investor relations services. Expenses for the years ended December 31, 2009 and 2008 were $0 and $20,000, respectively.
  On November 17, 2008, BigString signed an agreement with Bruce Van Heel to provide sales consulting services. Expenses for the years ended December 31, 2009 and 2008 were $11,463 and $700, respectively.
  On December 29, 2008, BigString signed an agreement with Digital BobKat, LLC to provide business consulting services. Expenses for the years ended December 31, 2009 and 2008 were $30,000 and $12,000, respectively.
  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, 2009 and 2008, and for the period October 8, 2003 (Date of Formation) through December 31, 2009, 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, 2009, 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.
  F-27
 
 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, 2008.4.4

Non-Negotiable Convertible Promissory Note, dated August 25, 2008, issued to Dwight Lane Capital, LLC, in the amount of $175,000, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on August 27, 2008.4.5

Non-Negotiable Convertible Promissory Note, dated August 25, 2008, issued to Marc W. Dutton, in the amount of $75,000, incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the SEC on August 27, 2008.4.6

Form of Convertible Note, dated June 29, 2009, issued to the following subscribers and in the following amounts: Whalehaven Capital Fund Limited ($75,000); Alpha Capital Anstalt ($75,000); and Excalibur Special Opportunities LP ($30,000), incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on June 29, 2009.10.2

Registration Rights Agreement, dated August 10, 2005, between BigString and AJW Partners, LLC, incorporated by reference to Exhibit 10.2 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.  E-1
  10.3

Registration Rights Agreement, dated August 10, 2005, between BigString and AJW Qualified Partners, LLC, incorporated by reference to Exhibit 10.3 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.4

Registration Rights Agreement, dated June 17, 2005, between BigString and David Matthew Arledge, incorporated by reference to Exhibit 10.4 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.5

Registration Rights Agreement, dated June 17, 2005, between BigString and David A. Arledge, incorporated by reference to Exhibit 10.5 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.6

Registration Rights Agreement, dated July 31, 2005, between BigString and Jeffrey M. Barber and Jo Ann Barber, incorporated by reference to Exhibit 10.6 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.7

Registration Rights Agreement, dated June 17, 2005, between BigString and Nicholas Codispoti, incorporated by reference to Exhibit 10.7 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.8

Registration Rights Agreement, dated June 17, 2005, between BigString and Nicholas Codispoti, IRA Account, incorporated by reference to Exhibit 10.8 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.9

Registration Rights Agreement, dated June 17, 2005, between BigString and Nicholas Codispoti, President, Codispoti Foundation, incorporated by reference to Exhibit 10.9 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.10

Registration Rights Agreement, dated June 17, 2005, between BigString and Jon M. Conahan, incorporated by reference to Exhibit 10.10 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.11

Registration Rights Agreement, dated July 31, 2005, between BigString and Michael Dewhurst, incorporated by reference to Exhibit 10.11 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.12

Registration Rights Agreement, dated June 17, 2005, between BigString and Theodore Fadool, Jr., incorporated by reference to Exhibit 10.12 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 200510.13

Registration Rights Agreement, dated June 17, 2005, between BigString and Charles S. Guerrieri, incorporated by reference to Exhibit 10.13 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.14

Registration Rights Agreement, dated August 9, 2005, between BigString and James R. Kauffman and Barbara Kauffman, incorporated by reference to Exhibit 10.14 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.15

Registration Rights Agreement, dated July 31, 2005, between BigString and Joel Marcus, incorporated by reference to Exhibit 10.15 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.  E-2
  10.16

Registration Rights Agreement, dated August 10, 2005, between BigString and New Millennium Capital Partners II, LLC, incorporated by reference to Exhibit 10.16 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.17

Registration Rights Agreement, dated July 31, 2005, between BigString and Richard and Georgia Petrone, incorporated by reference to Exhibit 10.17 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.18

Registration Rights Agreement, dated July 31, 2005, between BigString and David and Kim Prado, incorporated by reference to Exhibit 10.18 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.19

Registration Rights Agreement, dated August 4, 2005, between BigString and Marc Sandusky, incorporated by reference to Exhibit 10.19 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.20

Registration Rights Agreement, dated August 6, 2005, between BigString and Shefts Family LP, incorporated by reference to Exhibit 10.20 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.21

Registration Rights Agreement, dated June 17, 2005, between BigString and Thomas Shields, incorporated by reference to Exhibit 10.21 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on August 29, 2005.10.22

Agreement, dated December 1, 2005, by and among BigString and the following selling stockholders:  AJW New Millennium Offshore, Ltd., AJW Qualified Partners, LLC, AJW Partners, LLC, David M. Arledge, David A. Arledge, Susan Baran, Jeffrey M. Barber and JoAnn Barber, Nicholas Codispoti, Nicholas Codispoti, IRA, Codispoti Foundation, Jon M. Conahan, Dean G. Corsones, Michael Dewhurst, Marc Dutton, Theodore Fadool, Jr., Howard Greene, Harvey M. Goldfarb, Charles S. Guerrieri, Brenda L. Herd and Glenn A. Herd, Herd Family Partnership, Ronald C. Herd and Michele Herd, Steven Hoffman, James R. Kaufman and Barbara Kaufman, Jeffrey Kay and Lisa Kay, Gerald Kotkin, Paul A. Levis PSP, Joel Marcus, Barbara A. Musco and Barrie E. Bazar, Craig Myman, New Millennium Capital Partners II, LLC, Alfred Pantaleone, Sara R. Pasquarello, Richard P. Petrone and Georgia Petrone, David Prado and Kim Prado, Lee Rosenberg, Todd M. Ross, Marc Sandusky, Adam Schaffer, H. Joseph Sgroi, Shefts Family LP, Thomas Shields, Mark Yuko, Bradley Zelenitz and Shefts Associates, Inc., incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-KSB filed with the SEC on March 31, 2006.10.23

Business Consultant Services Agreement by and between BigString and Shefts Associates, Inc., incorporated by reference to Exhibit 10.30 to Amendment No. 1 to the Registration Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on October 21, 2005.10.24

Lease between BigString, as Tenant, and Walter Zimmerer & Son, as Landlord, dated February 3, 2009, for the premises located at 157 Broad Street, Suite 109, Red Bank, New Jersey 07701.10.25

Business Consultant Services Agreement, dated May 2, 2006, by and between BigString and Lifeline Industries, Inc., incorporated by reference to Exhibit 10.32 to the Current Report on Form 8-K filed with the SEC on May 4, 2006.  E-3
  10.26

Securities Purchase Agreement, dated as of May 19, 2006, by and among BigString andWitches Rock Portfolio Ltd.,The Tudor BVI Global Portfolio Ltd.andTudor Proprietary Trading, L.L.C., including Schedule 1 – Schedule of Purchasers, and Exhibit C – Form of Warrant.  Upon the request of the SEC, BigString agrees to furnish copies of each of the following schedules and exhibits:  Schedule 2-3.2(d) – Warrants; Schedule 2-3.3 – Registration Rights; Schedule 2-3.7 – Financial Statements; Schedule 2-3.10 – Broker’s or Finder’s Fees; Schedule 2-3.11 – Litigation; Schedule 2-3.16 – Intellectual Property Claims Against the Company; Schedule 2-3.17 – Subsidiaries; Schedule 2-3.19(a) – Employee Benefit Plans; Schedule 2-3.22 – Material Changes; Exhibit A – Form of Certificate of Designations of the Series A Preferred Stock; Exhibit B – Form of Registration Rights Agreement; Exhibit D – Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion, incorporated by reference to Exhibit 10.33 to the Current Report on Form 8-K filed with the SEC on May 22, 2006.10.27

Registration Rights Agreement, dated as of May 19, 2006, by and among BigString andWitches Rock Portfolio Ltd.,The Tudor BVI Global Portfolio Ltd.andTudor Proprietary Trading, L.L.C., incorporated by reference to Exhibit 10.34 to the Current Report on Form 8-K filed with the SEC on May 22, 2006.10.28

Asset Purchase Agreement, dated as of May 19, 2006, by and between BigString andRobb Knie.  Upon the request of the SEC, BigString agrees to furnish a copy of Exhibit A – Form of Registration Rights Agreement, and Exhibit B – Investor Suitability Questionnaire, incorporated by reference to Exhibit 10.35 to the Current Report on Form 8-K filed with the SEC on May 22, 2006.10.29

Registration Rights Agreement, dated as of May 19, 2006, by and between BigString andRobb Knie, incorporated by reference to Exhibit 10.36 to the Current Report on Form 8-K filed with the SEC on May 22, 2006.10.30

Stock Redemption Agreement, dated May 31, 2006, by and between BigString and David L. Daniels,incorporated by reference to Exhibit 10.37 to the Registration Statement on Form SB-2 (Registration No. 333-135837) filed with the SEC on July 18, 2006.10.31

Stock Redemption Agreement, dated May 31, 2006, by and between BigString and Deborah K. Daniels,incorporated by reference to Exhibit 10.38 to the Registration Statement on Form SB-2 (Registration No. 333-135837) filed with the SEC on July 18, 2006.10.32

Stock Redemption Agreement, dated May 31, 2006, by and between BigString and Charles A. Handshy, Jr.,incorporated by reference to Exhibit 10.39 to the Registration Statement on Form SB-2 (Registration No. 333-135837) filed with the SEC on July 18, 2006.10.33

Stock Redemption Agreement, dated May 31, 2006, by and between BigString and June E. Handshy,incorporated by reference to Exhibit 10.40 to the Registration Statement on Form SB-2 (Registration No. 333-135837) filed with the SEC on July 18, 2006.10.34

Letter Agreement, dated September 18, 2006, between BigString and Robert DeMeulemeester, incorporated by reference to Exhibit 10.41 to the Current Report on Form 8-K filed with the SEC on September 21, 2006.10.35

BigString Corporation 2006 Equity Incentive Plan, incorporated by reference to Exhibit 10.42 to the Annual Report on Form 10-KSB filed with the SEC on April 2, 2007.10.35.1

Form of Incentive Option Agreement (Employees), incorporated by reference to Exhibit 10.42.1 to the Annual Report on Form 10-KSB filed with the SEC on April 2, 2007.  E-4
  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 amongBigString and Whalehaven Capital Fund Limited, Alpha Capital Anstalt, Chestnut Ridge Partners LP, Iroquois Master Fund Ltd. and Penn Footwear, includingExhibit 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; andExhibit F– Form of Lock-Up Agreement, incorporated by reference to Exhibit 10.43 to the Current Report on Form 8-K filed with the SEC on May 3, 2007.10.37

Agreement, Waiver and Limited Release, dated as of November 30, 2007, by and among BigString and the Releasors, incorporated by reference to Exhibit 10.37 to the Current Report on Form 8-K filed with the SEC on December 5, 2007.10.38

Subscription Agreement, dated as of February 29, 2008, by and among BigString andWhalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Small Cap Opportunities LP, including Exhibit B – Form of Common Stock Purchase Warrant.  Upon the request of the Securities and Exchange Commission, BigString agrees to furnish copies of each of the following schedules and exhibits:  Schedule 5(a) – Subsidiaries; Schedule 5(d) – Additional Issuances/Capitalization; Schedule 5(f) – Conflicts; Schedule 5(q) – Undisclosed Liabilities; Schedule 5(v) – Transfer Agent; Schedule 8 – Finder’s Fee; Schedule 9(s) – Lockup Agreement Providers; Exhibit A – Form of Convertible Note (included as Exhibit 4.2); Exhibit C – Form of Escrow Agreement; Exhibit D – Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion; Exhibit E – Proposed Public Announcement; and Exhibit F – Form of Lock-Up Agreement, incorporated by reference to Exhibit 10.44 to the Current Report on Form 8-K filed with the SEC on March 6, 2008.10.39

Common Stock Purchase Warrant, dated August 25, 2008, issued to Dwight Lane Capital, LLC, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on August 27, 2008,10.40

Common Stock Purchase Warrant, dated August 25, 2008, issued to Marc W. Dutton, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on August 27, 2008.10.41

Subscription Agreement, dated as of June 29, 2009, by and among BigString andWhalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Special 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 10.45 to the Current Report on Form 8-K filed with the SEC on June 29, 2009.21.1

Subsidiaries of BigString.23.1

Consent of Madsen & Associates CPAs, Inc., independent registered public accountants, as to the report relating to the consolidated financial statements of BigString.  E-5
  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.
  E-6