UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








Form
10-Q











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


For
the quarterly period ended September 30, 2008




or





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


For
the Transition Period from  to .





Commission
File Number 000-51661















BIGSTRING
CORPORATION


(Exact
name of registrant as specified in its charter)







---







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








3 Harding Road, Suite E, Red
Bank, New Jersey07701


(Address
of principal executive offices) (Zip Code)








(732)
741-2840


(Registrant’s
telephone number, including area code)








__________________________________________________________________


(Former
name, former address and formal fiscal year, if changed since last
report)





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 whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





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





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





Number of
shares of Common Stock outstanding at November 14, 2008:





Common Stock, par
      value $0.0001 per share
            52,244,394(Class)
            (Number
      of Shares)





Index





BIGSTRING
CORPORATION





INDEX TO
FORM 10-Q








PAGEPART I.
      FINANCIAL INFORMATIONItem
      1.
            Financial Statements
            1Consolidated Balance Sheets (unaudited) as of September 30,
      2008 and December 31, 2007
            2Consolidated Statements of Operations (unaudited) for the Three
      and Nine Months Ended September 30, 2008 and 2007 and the period October
      8, 2003 (Date of Formation) through September 30,
      2008
            3Consolidated Statements of Stockholders’ Equity (unaudited) for
      the Nine Months Ended September 30, 2008 and the period October 8, 2003
      (Date of Formation) through September 30, 2008
            4Consolidated Statements of Cash Flows (unaudited) for the Nine
      Months Ended September 30, 2008 and 2007 and the period October 8, 2003
      (Date of Formation) through September 30, 2008
            6Notes to
      Unaudited Consolidated Financial Statements
            7Item
      2.
            Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
            24Item
      3.
            Quantitative and
      Qualitative Disclosures About Market
      Risk
            31Item
      4T.
            Controls and
      Procedures
            31PART
      II. OTHER INFORMATIONItem
      1.
            Legal
      Proceedings
            32Item
      1A.
            Risk
      Factors
            32Item
      2.
            Unregistered Sales of Equity
      Securities and Use of Proceeds
            32Item
      3.
            Defaults Upon Senior Securities
            32Item
      4.
            Submission of Matters to a Vote of Security
      Holders
            32Item
      5.
            Other
      Information
            32Item
      6.
            Exhibits
            32Signatures
            
            33Index
      of Exhibits
            E-1





Index


SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS




Certain information included in this
Quarterly Report on Form 10-Q 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 the company’s operations, the
competitive market in which the company operates, the efficient and
uninterrupted operation of the company’s computer and communications systems,
the company’s ability to generate a profit and execute the company’s business
plan, the retention of key personnel, the company’s ability to protect and
defend intellectual property, the effects of governmental regulation and other
risks identified in the Registrant’s filings with the Securities and Exchange
Commission (the “SEC”) from time to time, including the company’s 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 Quarterly
Report on Form 10-Q.







Index


PARTI.  FINANCIAL INFORMATION




Item
1.    Financial Statements




Certain
information and footnote disclosures required under accounting principles
generally accepted in the United States of America have been condensed or
omitted from the following consolidated financial statements pursuant to the
rules and regulations of the Securities and Exchange Commission (the
“SEC”).  It is suggested that the following consolidated financial
statements be read in conjunction with the year-end consolidated financial
statements and notes thereto included in the Annual Report on Form 10-KSB for
the year ended December 31, 2007 of BigString Corporation
(“BigString”).




The
results of operations for the three and nine months ended September 30, 2008 and
2007, respectively, are not necessarily indicative of the results of the entire
fiscal year or for any other period.













1
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


(A
DEVELOPMENT STAGE COMPANY)


(Unaudited)





September
      30, 2008
            
            
            December
      31, 2007ASSETSCurrent
      assets:Cash
      and cash equivalents
            
            $
            203,504
            
            
            $
            298,033Accounts
      receivable - net of allowance of $80 and $90
            
            
            15,419
            
            
            
            2,609Prepaid
      expenses and other current assets
            
            
            6,368
            
            
            
            8,039Total
      current assets
            
            
            225,291
            
            
            
            308,681Property
      and equipment - net
            
            
            86,076
            
            
            
            162,156Intangible
      assets - net
            
            
            870,487
            
            
            
            1,480,946Other
      assets
            
            
            193,756
            
            
            
            156,100TOTAL
      ASSETS
            
            $
            1,375,610
            
            
            $
            2,107,883LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
            
            $
            282,232
            
            
            $
            282,524Accrued
      expenses
            
            
            153,900
            
            
            
            52,642Unearned
      revenue
            
            
            7,887
            
            
            
            9,288Accrued
      interest
            
            
            43,042
            
            
            
            31,134Short-term
      debt
            
            
            248,440
            
            
            
            -Total
      current liabilities
            
            
            735,501
            
            
            
            375,588Long
      term liabilities:Long-term
      debt
            
            
            825,480
            
            
            
            207,304TOTAL
      LIABILITIES
            
            
            1,560,982
            
            
            
            582,892Stockholders'
      equity:Preferred
      stock, $.0001 par value - authorized 1,000,000 shares; outstanding 400,000
      and 400,000 shares, respectively
            
            
            40
            
            
            
            40Common
      stock, $.0001 par value - authorized 249,000,000 shares; outstanding
      52,244,394 and 50,728,237 shares, respectively
            
            
            5,224
            
            
            
            5,073Additional
      paid in capital
            
            
            12,949,215
            
            
            
            11,924,977Deficit
      accumulated during the development stage
            
            
            (13,139,850
            )
            
            
            (10,405,099
            )Total
      stockholders' equity
            
            
            (185,371
            )
            
            
            1,524,991TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            1,375,610
            
            
            $
            2,107,883





See notes
to unaudited consolidated financial statements.





2
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS


(A
DEVELOPMENT STAGE COMPANY)


(Unaudited)





PeriodOctober
      8, 2003For
      the Three Months Ended
            
            
            For
      the Nine Months Ended
            
            
            (Date
      of Formation)September
      30,
            
            
            September
      30,
            
            
            Through2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            September
      30, 2008Operating
      revenues
            
            $
            22,058
            
            
            $
            10,863
            
            
            $
            44,402
            
            
            $
            30,050
            
            
            $
            112,361Operating
      expenses:(1)Cost
      of revenues
            
            
            23,832
            
            
            
            21,874
            
            
            
            63,428
            
            
            
            90,994
            
            
            
            476,282Research
      and development
            
            
            107,333
            
            
            
            116,871
            
            
            
            362,893
            
            
            
            374,258
            
            
            
            1,957,621Sales
      and marketing
            
            
            19,112
            
            
            
            148,962
            
            
            
            161,330
            
            
            
            352,701
            
            
            
            949,838General
      and administrative
            
            
            408,486
            
            
            
            271,250
            
            
            
            1,137,938
            
            
            
            866,173
            
            
            
            3,833,324Amortization
      of intangibles
            
            
            244,053
            
            
            
            270,803
            
            
            
            724,359
            
            
            
            812,409
            
            
            
            4,244,187Impairment
      of assets
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            415,292Total
      operating expenses
            
            
            802,816
            
            
            
            829,760
            
            
            
            2,449,948
            
            
            
            2,496,535
            
            
            
            11,876,544Loss
      from operations
            
            
            (780,758
            )
            
            
            (818,897
            )
            
            
            (2,405,546
            )
            
            
            (2,466,485
            )
            
            
            (11,764,183
            )Other
      income (expense):(1)Interest
      income
            
            
            647
            
            
            
            3,785
            
            
            
            4,019
            
            
            
            13,255
            
            
            
            72,342Interest
      expense
            
            
            (22,792
            )
            
            
            (12,000
            )
            
            
            (55,665
            )
            
            
            (20,000
            )
            
            
            (86,799
            )Other,
      net
            
            
            (96,455
            )
            
            
            (75,623
            )
            
            
            (277,559
            )
            
            
            (123,833
            )
            
            
            (1,140,064
            )Total
      other income (expenses)
            
            
            (118,600
            )
            
            
            (83,838
            )
            
            
            (329,205
            )
            
            
            (130,578
            )
            
            
            (1,154,521
            )Loss
      before income tax benefit
            
            
            (899,358
            )
            
            
            (902,735
            )
            
            
            (2,734,751
            )
            
            
            (2,597,063
            )
            
            
            (12,918,704
            )Income
      tax benefit
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            258,854Net
      loss
            
            $
            (899,358
            )
            
            $
            (902,735
            )
            
            $
            (2,734,751
            )
            
            $
            (2,597,063
            )
            
            $
            (12,659,850
            )Net
      loss per common share calculation:Net
      loss
            
            $
            (899,358
            )
            
            $
            (902,735
            )
            
            $
            (2,734,751
            )
            
            $
            (2,597,063
            )Imputed
      dividend on preferred shares
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
      loss attributable to common shareholders
            
            $
            (899,358
            )
            
            $
            (902,735
            )
            
            $
            (2,734,751
            )
            
            $
            (2,597,063
            )Net
      loss per common share:Basic
      and diluted
            
            $
            (0.02
            )
            
            $
            (0.02
            )
            
            $
            (0.05
            )
            
            $
            (0.05
            )Weighted
      average common shares outstanding:Basic
      and diluted
            
            
            52,166,133
            
            
            
            47,367,125
            
            
            
            51,474,518
            
            
            
            47,255,066(1)Stock-based
      and other non-cash compensation by function above:Cost
      of revenues
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            903
            
            
            $
            5,653Research
      and development
            
            
            23,471
            
            
            
            10,905
            
            
            
            85,357
            
            
            
            32,737
            
            
            
            155,740Sales
      and marketing
            
            
            -
            
            
            
            17,627
            
            
            
            -
            
            
            
            134,786
            
            
            
            222,725General
      and administrative
            
            
            156,321
            
            
            
            126,898
            
            
            
            472,026
            
            
            
            381,116
            
            
            
            1,431,093Other,
      net
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            269,094Total
      stock-based and other non-cash compensation
            
            $
            179,792
            
            
            $
            155,430
            
            
            $
            557,383
            
            
            $
            549,542
            
            
            $
            2,084,305





See notes
to unaudited consolidated financial statements.





3
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


(A
DEVELOPMENT STAGE COMPANY)


(Unaudited)




Preferred
      Stock
                
                
                Common
      Stock
                
                
                AdditionalNo.
      of
                
                
                
                
                
                No.
      of
                
                
                
                
                
                Paid-In
                
                
                Subscription
                
                
                RetainedTotal
                
                
                Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount
                
                
                Capital
                
                
                Receivable
                
                
                EarningsBalance,
      October 8, 2003
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Issuance
      of common stock (at $.0001 per share)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                21,210,000
                
                
                
                2,121
                
                
                
                (2,121
                )
                
                
                -
                
                
                
                -Contribution
      of capital
                
                
                45,000
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                45,000
                
                
                
                -
                
                
                
                -Sale
      of common stock (at $0.25 per share)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                40,000
                
                
                
                4
                
                
                
                9,996
                
                
                
                (10,000
                )
                
                
                -Net
      loss
                
                
                (29,567
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (29,567
                )Balance,
      December 31, 2003
                
                
                15,433
                
                
                
                -
                
                
                
                -
                
                
                
                21,250,000
                
                
                
                2,125
                
                
                
                52,875
                
                
                
                (10,000
                )
                
                
                (29,567
                )Cash
      received from prior sale of common stock
                
                
                10,000
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                10,000
                
                
                
                -Sale
      of common stock (at $0.25 per share)
                
                
                217,500
                
                
                
                -
                
                
                
                -
                
                
                
                870,000
                
                
                
                87
                
                
                
                217,413
                
                
                
                -
                
                
                
                -Issuance
      of common stock for services (valued at $0.21 per share)
                
                
                39,251
                
                
                
                -
                
                
                
                -
                
                
                
                185,000
                
                
                
                19
                
                
                
                39,232
                
                
                
                -
                
                
                
                -Issuance
      of common stock for acquisition (valued at $0.24 per
share)
                
                
                4,800,000
                
                
                
                -
                
                
                
                -
                
                
                
                20,000,000
                
                
                
                2,000
                
                
                
                4,798,000
                
                
                
                -
                
                
                
                -Issuance
      of warrants for services (valued at $0.07 per share)
                
                
                3,500
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                3,500
                
                
                
                -
                
                
                
                -Net
      loss
                
                
                (729,536
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (729,536
                )Balance,
      December 31, 2004
                
                
                4,356,148
                
                
                
                -
                
                
                
                -
                
                
                
                42,305,000
                
                
                
                4,231
                
                
                
                5,111,020
                
                
                
                -
                
                
                
                (759,103
                )Sale
      of common stock (at $0.25 per share)
                
                
                230,500
                
                
                
                -
                
                
                
                -
                
                
                
                922,000
                
                
                
                92
                
                
                
                230,408
                
                
                
                -
                
                
                
                -Exercise
      of warrants (at $0.25 per share)
                
                
                11,250
                
                
                
                -
                
                
                
                -
                
                
                
                45,000
                
                
                
                4
                
                
                
                11,246
                
                
                
                -
                
                
                
                -Issuance
      of common stock for services (valued at $0.25 per share)
                
                
                12,500
                
                
                
                -
                
                
                
                -
                
                
                
                50,000
                
                
                
                5
                
                
                
                12,495
                
                
                
                -
                
                
                
                -Sale
      of common stock (at $0.16 per share)
                
                
                1,511,700
                
                
                
                -
                
                
                
                -
                
                
                
                9,448,125
                
                
                
                945
                
                
                
                1,510,755
                
                
                
                -
                
                
                
                -Issuance
      of warrants for services (valued at $0.07 per share)
                
                
                179,200
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                179,200
                
                
                
                -
                
                
                
                -Net
      loss
                
                
                (2,102,587
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (2,102,587
                )Balance,
      December 31, 2005
                
                
                4,198,711
                
                
                
                -
                
                
                
                -
                
                
                
                52,770,125
                
                
                
                5,277
                
                
                
                7,055,124
                
                
                
                -
                
                
                
                (2,861,690
                )Redemption
      of shares from stockholders (at $0.05 per share)
                
                
                (400,000
                )
                
                
                -
                
                
                
                -
                
                
                
                (8,000,000
                )
                
                
                (800
                )
                
                
                (399,200
                )
                
                
                -
                
                
                
                -Issuance
      of common stock for consulting services (valued at $0.82 per
      share)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,250,000
                
                
                
                125
                
                
                
                (125
                )
                
                
                -
                
                
                
                -Stock-based
      compensation expense
                
                
                314,250
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                314,250
                
                
                
                -
                
                
                
                -Issuance
      of warrants for consulting services (valued at $0.08, $0.18 and $0.42 per
      share)
                
                
                36,595
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                36,595
                
                
                
                -
                
                
                
                -Issuance
      of common stock for website acquisition (valued at $0.80 per
      share)
                
                
                600,000
                
                
                
                -
                
                
                
                -
                
                
                
                750,000
                
                
                
                75
                
                
                
                599,925
                
                
                
                -
                
                
                
                -Sale
      of preferred stock (at $.0001 per share)
                
                
                1,860,000
                
                
                
                400,000
                
                
                
                40
                
                
                
                -
                
                
                
                -
                
                
                
                1,859,960
                
                
                
                -
                
                
                
                -Dividends
      from allocation of proceeds for the beneficial conversion feature of
      preferred stock
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                480,000
                
                
                
                -
                
                
                
                (480,000
                )Exercise
      of warrants (at $0.16, $0.20 and $0.25 per share)
                
                
                18,000
                
                
                
                -
                
                
                
                -
                
                
                
                165,000
                
                
                
                17
                
                
                
                34,233
                
                
                
                (16,250
                )
                
                
                -Net
      loss
                
                
                (3,114,225
                )
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (3,114,225
                )Balance,
      December 31, 2006
                
                
                3,513,331
                
                
                
                400,000
                
                
                
                40
                
                
                
                46,935,125
                
                
                
                4,694
                
                
                
                9,980,762
                
                
                
                (16,250
                )
                
                
                (6,455,915
                )Cash
      received from prior exercise of warrants
                
                
                16,250
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                16,250
                
                
                
                -Issuance
      of common stock for consulting services (valued at $0.50 and $0.33 per
      share)
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                432,000
                
                
                
                43
                
                
                
                (43
                )
                
                
                -
                
                
                
                -Allocation
      to warrants from sale of convertible promissory notes and
      warrants
                
                
                31,320
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                31,320
                
                
                
                -
                
                
                
                -Beneficial
      conversion feature of promissory notes
                
                
                666,648
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                666,648
                
                
                
                -
                
                
                
                -Issuance
      of common stock for conversion of 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
                )




(Continued)






4
 Index




BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)


(A
DEVELOPMENT STAGE COMPANY)


(Unaudited)


Preferred
      Stock
              
              
              Common
      Stock
              
              
              AdditionalNo.
      of
              
              
              
              
              
              No.
      of
              
              
              
              
              
              Paid-In
              
              
              Subscription
              
              
              RetainedTotal
              
              
              Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Receivable
              
              
              EarningsBalance,
      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 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 promissory notes
              
              
              188,740
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              188,740
              
              
              
              -
              
              
              
              -Stock-based
      compensation expense
              
              
              557,383
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              557,383
              
              
              
              -
              
              
              
              -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
              
              
              (2,734,751
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,734,751
              )Balance,
      September 30, 2008
              
              $
              (185,371
              )
              
              
              400,000
              
              
              $
              40
              
              
              
              52,244,394
              
              
              $
              5,224
              
              
              $
              12,949,215
              
              
              $
              -
              
              
              $
              (13,139,850
              )








See notes
to unaudited consolidated financial statements.


5
 Index
 Index


BIGSTRING
CORPORATION AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(A
DEVELOPMENT STAGE COMPANY)


(Unaudited)


PeriodOctober
      8, 2003For
      the Nine Months Ended
            
            
            (Date
      of Formation)September
      30,
            
            
            Through2008
            
            
            2007
            
            
            September
      30, 2008Cash
      flows from operating activities:Net
      loss
            
            $
            (2,734,751
            )
            
            $
            (2,597,063
            )
            
            $
            (12,659,850
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      of property and equipment
            
            
            28,703
            
            
            
            38,889
            
            
            
            128,422Gain
      on sale of property and equipment
            
            
            (3,513
            )
            
            
            -
            
            
            
            (3,099
            )Amortization
      of intangibles
            
            
            724,359
            
            
            
            812,409
            
            
            
            4,244,188Amortization
      of other assets
            
            
            76,027
            
            
            
            26,893
            
            
            
            168,866Impairment
      of assets
            
            
            -
            
            
            
            -
            
            
            
            415,292Accretion
      for beneficial conversion feature and discount on notes
            
            
            201,532
            
            
            
            96,940
            
            
            
            461,804Stock-based
      compensation
            
            
            557,383
            
            
            
            549,542
            
            
            
            1,815,211Other
      non-cash compensation
            
            
            -
            
            
            
            -
            
            
            
            269,094Changes
      in operating assets and liabilities:(Increase)
      in accounts receivable, net
            
            
            (12,810
            )
            
            
            (218
            )
            
            
            (15,419
            )(Increase)
      in prepaid expenses and other assets
            
            
            (108,911
            )
            
            
            (218,502
            )
            
            
            (365,889
            )(Decrease)
      increase in accounts payable
            
            
            (292
            )
            
            
            181,802
            
            
            
            282,232Increase
      (decrease) in accrued expenses and other liabilities
            
            
            156,923
            
            
            
            (63,418
            )
            
            
            237,633(Decrease)
      increase in unearned revenue
            
            
            (1,401
            )
            
            
            7,226
            
            
            
            7,887Net
      cash used in operating activities
            
            
            (1,116,751
            )
            
            
            (1,165,500
            )
            
            
            (5,013,628
            )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 notes and warrants
            
            
            950,000
            
            
            
            800,000
            
            
            
            1,750,000Proceeds
      from issuance of preferred stock, net
            
            
            -
            
            
            
            -
            
            
            
            1,860,000Proceeds
      from exercise of common stock warrants and issuance of common
      stock
            
            
            21,333
            
            
            
            16,250
            
            
            
            2,231,533Payments
      for redemption of common stock
            
            
            -
            
            
            
            -
            
            
            
            (400,000
            )Net
      cash provided by financing activities
            
            
            971,333
            
            
            
            816,250
            
            
            
            5,441,533Net
      (decrease) increase in cash
            
            
            (94,529
            )
            
            
            (349,250
            )
            
            
            203,504Cash
      and cash equivalents - beginning of period
            
            
            298,033
            
            
            
            517,074
            
            
            
            -Cash
      and cash equivalents - end of period
            
            $
            203,504
            
            
            $
            167,824
            
            
            $
            203,504Supplementary
      information:Cash
      paid during the periods for: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
            
            $
            20,000
            
            
            $
            -
            
            
            $
            175,000Common
      stock issued for services
            
            $
            256,251
            
            
            $
            455,249
            
            
            $
            1,076,445Common
      stock options issued for services
            
            
            267,310
            
            
            
            60,471
            
            
            
            440,547Common
      stock warrants issued for services
            
            
            33,822
            
            
            
            33,822
            
            
            
            298,219Total
      stock-based compensation:
            
            
            557,383
            
            
            
            549,542
            
            
            
            1,815,211Issue
      of warrants, net
            
            
            -
            
            
            
            -
            
            
            
            19,094Issuance
      of common stock for waiver and release
            
            
            -
            
            
            
            -
            
            
            
            250,000Total
      other non-cash compensation
            
            
            -
            
            
            
            -
            
            
            
            269,094Total
      stock-based and other non-cash compensation
            
            $
            557,383
            
            
            $
            549,542
            
            
            $
            2,084,305





See notes
to unaudited consolidated financial statements.


6
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


FOR THE THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 AND THE PERIOD
OCTOBER 8, 2003 (DATE OF FORMATION) THROUGH SEPTEMBER 30,
2008






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






BASIS OF
PRESENTATION




The
consolidated balance sheet as of September 30, 2008, and the consolidated
statements of operations, stockholders’ equity and cash flows for the periods
presented herein have been prepared by BigString and are unaudited.  In the
opinion of management, all adjustments (consisting solely of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, changes in stockholders' equity and cash flows for all periods
presented have been made.  The information for the consolidated balance
sheet as of December 31, 2007 was derived from audited financial
statements.  The results of operations for the three and nine months
ended September 30, 2008 are not necessarily indicative of the results to be
expected for the year ending December 31, 2008.




These
Notes to Unaudited Consolidated Financial Statements should be read in
conjunction with the consolidated financial statements and related notes
included in BigString’s 2007 Annual Report on Form 10-KSB filed with the SEC on
March 31, 2008.






ORGANIZATION




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




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




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




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






PRINCIPLES OF
CONSOLIDATION




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






USE OF
ESTIMATES




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






RECLASSIFICATIONS




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




7
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


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 September 30, 2008 and December 31, 2007, cash
equivalents approximated $202,000 and $296,000, respectively.






CERTAIN RISKS AND
CONCENTRATION




Financial
instruments which potentially subject BigString to concentrations of credit risk
consist principally of temporary cash investments.  BigString places
its temporary cash investments with established financial
institutions.




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




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






REVENUE
RECOGNITION




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




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




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




BigString
records its allowance for doubtful accounts based upon an assessment of various
factors, including historical experience, age of the accounts receivable
balances, the credit quality of customers, current economic conditions and other
factors that may affect customers’ ability to pay.  Allowances at
September 30, 2008 and December 31, 2007 were $80 and $90,
respectively.






DEPRECIATION




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






RESEARCH AND
DEVELOPMENT




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




All
research and development for the three and nine months ended September 30, 2008
and 2007 was performed internally for the benefit of
BigString.  BigString does not perform such activities for
others.




8
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


EVALUATION OF LONG-LIVED
ASSETS




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






INTANGIBLES




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






DEFERRED FINANCING
COSTS




Debt
issue costs were deferred and amortized in other income (expense) over the
term of the related debt. BigString issued notes in August 2008, February 2008
and May 2007 and incurred issuance costs of $18,977, $91,706 and $248,939,
respectively, which are being amortized over the term of the notes. Amortization
expense related to these costs is included in other, net in the consolidated
statements of operations and was $28,591 and $17,459 for the three months ended
September 30, 2008 and 2007, respectively.  Amortization expense was
$76,027, $26,893 and $168,866 for the nine months ended September 30, 2008 and
2007 and the period October 8, 2003 (Date of Formation) through September 30,
2008, respectively.






INCOME
TAXES




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




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






EARNINGS (LOSS) PER COMMON
SHARE




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






STOCK-BASED
COMPENSATION




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




BigString
issues shares of common stock to non-employees as stock-based
compensation.  BigString accounts for the services using the fair
market value of the consideration issued, generally measured at the closing
price of BigString’s common stock on the date of the agreement.  For
the three months ended September 30, 2008 and 2007, BigString recorded
compensation expense of $85,417 and $123,999, respectively, in connection with
the issuance of shares of common stock to non-employees.  For the nine
months ended September 30, 2008 and 2007 and the period October 8,




9
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


2003
(Date of Formation) through September 30, 2008, BigString recorded compensation
expense of $256,251, $455,249 and $1,076,445, respectively, in connection with
the issuance of shares of common stock to non-employees. For the period October
8, 2003 (Date of Formation) through September 30, 2008, BigString also recorded
$250,000 other non-cash compensation expense for shares of common stock issued
to non-employees.




BigString
issues stock purchase warrants to non-employees as stock-based
compensation.  The fair value of each stock purchase warrant is
estimated on the date of grant using the Black-Scholes option-pricing
model.  For the three months ended September 30, 2008 and 2007,
BigString recorded compensation expenses of $11,274 and $11,274, respectively,
associated with issuances of stock purchase warrants.  For the nine
months ended September 30, 2008 and 2007 and the period October 8, 2003 (Date of
Formation) through September 30, 2008, BigString recorded compensation expense
of $33,822, $33,822 and $298,219, respectively, in connection with the issuance
of stock purchase warrants for services. For the period October 8, 2003 (Date of
Formation) through September 30, 2008, BigString also recorded $19,094 other
non-cash compensation expense, net for the cancellation and issue of
warrants.




BigString
has one stock-based compensation plan under which incentive and nonqualified
stock options or rights to purchase stock may be granted to employees, directors
and other eligible participants. BigString has also granted nonqualified stock
options to one non-employee vendor. The fair value of each stock option is
estimated on the date of grant using the Black-Scholes option-pricing
model.  For the three months ended September 30, 2008 and 2007,
BigString recorded compensation expense of $83,101 and $20,157,
respectively.  For the nine months ended September 30, 2008 and 2007
and the period October 8, 2003 (Date of Formation) through September 30, 2008,
BigString recorded compensation expense of $267,310, $60,471 and $440,547,
respectively.  BigString did not grant stock options prior to
2006.






BUSINESS
COMBINATIONS




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






ACCOUNTING FOR
DERIVATIVES




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






FAIR VALUE OF FINANCIAL
INSTRUMENTS




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






BENEFICIAL CONVERSION
FEATURE




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






NEW FINANCIAL ACCOUNTING
STANDARDS




In
October 2008, the FASB issued FASB Staff Position (“FSP”) SFAS 157-3,
Determining the Fair Value of a Financial Asset When The Market for That Asset
Is Not Active(“FSP 157-3”), to
clarify how an entity would determine fair value in an inactive market.
FSP 157-3 is effective immediately and applies to BigString’s
September 30, 2008 financial statements. The application of the provisions
of FSP 157-3 did not materially impact BigString’s consolidated financial
position, cash flows and results of operations.




In June
2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities” (“FSP EITF 03-6-1”), which requires entities to apply the
two-class method of computing basic and diluted earnings per share for
participating securities




10
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


that
include awards that accrue cash dividends (whether paid or unpaid) any time
common shareholders receive dividends and those dividends do not need to be
returned to the entity if the employee forfeits the award. FSP EITF 03-6-1
will be effective for BigString on January 1, 2009 and will require
retroactive disclosure. BigString is currently evaluating the impact of adopting
FSP EITF 03-6-1 on its consolidated financial position, cash flows and
results of operations.




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




In May
2008, the FASB issued FSP Accounting Principles Board Opinion (“APB”)
No. 14-1, “Accounting for Convertible Debt Instruments That May Be Settled
in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”),
which requires the issuer of certain convertible debt instruments that may be
settled in cash (or other assets) on conversion to separately account for the
liability (debt) and equity (conversion option) components of the instrument in
a manner that reflects the issuer’s nonconvertible debt borrowing rate. FSP APB
14-1 will be effective for BigString on January 1, 2009 and will require
retroactive disclosure. BigString is currently evaluating the impact of adopting
FSP APB 14-1 on its consolidated financial position, cash flows and results of
operations.




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




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






NOTE
2. GOING CONCERN




For the
nine months ended September 30, 2008, BigString’s consolidated financial
statements reflect a net loss of $2,734,751, net cash used in operations of
$1,116,751, a working capital deficit of $510,210, a stockholders’ deficit
accumulated during the development stage of $13,139,850 and a cumulative net
loss of $12,659,850.  These matters raise doubt about the ability of
BigString to continue as a going concern.  BigString’s consolidated
financial statements do not include any adjustments to reflect the possible
effects on recoverability and classification of assets or the amounts and
classification of liabilities that may result from the inability to continue as
a going concern.




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




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






NOTE
3. ACQUISITIONS




On July
9, 2008, BigString completed the acquisition of the website, BuddyStumbler,
pursuant to an asset purchase agreement.  BigString issued 900,000
shares to the sellers. The market value of BigString’s common stock on July 9,
2008 was $0.13 per share. The purchase price of $117,000 has been allocated to
intangible assets based on estimated




11
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


fair
value.  The acquisition includes right, title and interest in domain
names, customer and member lists and source code.




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




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





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




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




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




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




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






NOTE
4. PROPERTY AND EQUIPMENT




Property
and equipment consist of the following:




September
      30, 2008
            
            
            December
      31, 2007Computer
      equipment and internal software
            
            $
            186,609
            
            
            $
            255,171Furniture
      and fixtures
            
            
            5,849
            
            
            
            5,969192,458
            
            
            
            261,140Less
      accumulated depreciation
            
            
            106,382
            
            
            
            98,984$
            86,076
            
            
            $
            162,156





Depreciation
expense for the three months ended September 30, 2008 and 2007 was $9,539 and
$12,963, respectively. For the nine months ended September 30, 2008 and 2007 and
the period October 8, 2003 (Date of Formation) through September 30, 2008,
depreciation expense was $28,703, $38,889 and $128,422,
respectively.






NOTE
5. GOODWILL AND OTHER INTANGIBLES




Other
intangibles consist of a 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:




12
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS







September
      30, 2008
            
            
            December
      31, 2007Patent
      application and trademark
            
            $
            4,803,067
            
            
            $
            4,803,067Logos,
      websites and source codes
            
            
            311,608
            
            
            
            197,7085,114,675
            
            
            
            5,000,775Accumulated
      amortization
            
            
            4,244,188
            
            
            
            3,519,829$
            870,487
            
            
            $
            1,480,946





Amortization
expense for the three months ended September 30, 2008 and 2007 was $244,053 and
$270,803, respectively.  For the nine months ended September 30, 2008
and 2007 and the period October 8, 2003 (Date of Formation) through September
30, 2008, amortization expense was $724,359, $812,409 and $4,244,188,
respectively.




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




Continuing
losses associated with the assets indicated that impairment may exist. The most
recent recoverability test for the patent application and trademark assets
indicated that the assets were not impaired. In addition, evaluations of fair
market value and weighted, discounted cash flows were greater than the carrying
value.




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. Accordingly,
BigString recorded a receivable and recorded a gain on sale of intangible assets
of $3,100. Fair market value was determined using the cost method of investment
because BigString has determined that this is a passive investment in a
non-marketable equity and BigString does not have significant influence over the
company.




Estimated
remaining amortization expenses for intangible assets are shown for the
remainder of 2008 and the next five years, as applicable, as
follows:




EstimatedYears
      Ending
            
            AmortizationDecember
      31,
            
            Expense2008
            
            $
            246,0052009
            
            
            543,7332010
            
            
            23,4002011
            
            
            23,4002012
            
            
            23,4002013
            
            
            13,650$
            873,588









NOTE
6. OTHER INCOME (EXPENSE)




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




Interest
income was $647 and $3,785 for the three months ended September 30, 2008 and
2007, respectively. Interest income was $4,019, $13,255 and $72,342 for the nine
months ended September 30, 2008 and 2007 and the period October 8, 2003 (Date of
Formation) through September 30, 2008, respectively.




Interest
expense consists of interest on convertible debt, generally payable on each
anniversary date of the promissory notes, and is included in accrued interest.
Interest expense was $22,792 and $12,000 for the three months ended September
30, 2008 and 2007, respectively. Interest expense was $55,665, $20,000 and
$86,799 for the nine months




13
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


ended
September 30, 2008 and 2007 and the period October 8, 2003 (Date of Formation)
through September 30, 2008, respectively.




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




PeriodOctober
      8, 2003For
      the Three Months Ended
            
            
            For
      the Nine Months Ended
            
            
            (Date
      of Formation)September
      30,
            
            
            September
      30,
            
            
            Through2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            September
      30, 2008Amortization
      of debt issue costs
            
            $
            28,591
            
            
            $
            17,459
            
            
            $
            76,027
            
            
            $
            26,893
            
            
            $
            168,866Amortization
      of promissory note discount
            
            
            8,388
            
            
            
            2,610
            
            
            
            21,555
            
            
            
            4,350
            
            
            
            33,219Amortization
      of beneficial conversion feature
            
            
            59,476
            
            
            
            55,554
            
            
            
            179,977
            
            
            
            92,590
            
            
            
            428,585Other
      financing expenses
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            509,394$
            96,455
            
            
            $
            75,623
            
            
            $
            277,559
            
            
            $
            123,833
            
            
            $
            1,140,064







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




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






NOTE
7. INCOME TAXES




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




BigString
participated in the State of New Jersey’s Economic Development Authority
Technology Business Tax 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 period October 8, 2003 (Date of
Formation) through September 30, 2008, BigString recorded a net state tax
benefit of $258,854 as a result of its sale of $2,442,561 of New Jersey State
NOLs and $74,359 of New Jersey state research and development credits. Gross
sales proceeds were $294,189. Since New Jersey law provides that NOLs can be
carried over for up to seven years, BigString may be able to transfer its unused
New Jersey state NOLs in future years.




The tax
effects of temporary differences that give rise to significant portions of
deferred tax assets include NOL carry forwards and research and development
credits. A valuation allowance is provided when it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Valuation
allowances for the three and nine months ending September 30, 2008 and 2007, and
for the period October 8, 2003 (Date of Formation) through September 30, 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
September 30, 2008, BigString has available NOL carry forwards of approximately
$8.9 million for federal income tax reporting purposes and $6.4 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 NOL and research credit carryforwards may be limited,
and, as such, BigString’s NOL carryforwards available to offset future federal
taxable income may be limited. Similarly, BigString may be restricted in using
its research credit carryforwards to offset future federal income tax
expense.






NOTE
8. SHORT-TERM DEBT




On August
25, 2008, BigString closed on a financing with Dwight Lane Capital, LLC, a
limited liability company in which Todd M. Ross, a director of BigString, has an
interest, and Marc W. Dutton, a director of BigString. In connection with such
financing, BigString issued promissory notes in the aggregate principal amount
of $250,000




14
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


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 accrues
interest at a rate of twelve percent (12%) annually. In the event of default,
the conversion price and number and kind of shares to be issued upon conversion
of the convertible notes are subject to adjustment. The warrants have an
exercise price of $0.08 per share.




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




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






NOTE
9. LONG-TERM DEBT




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




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




Each
convertible note has a term of three years and accrues interest at a rate of six
percent (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.
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.




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




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




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




Each
convertible note has a term of three years and accrues interest at a rate of six
percent (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




15
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


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.




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




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






NOTE
10. COMMON STOCK




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




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




During
2003, BigString concluded a private placement of BigString’s securities,
pursuant to which it sold 40,000 shares of its 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 BigString’s securities,
pursuant to which it sold 870,000 shares of its 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 its 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 2004 and 2003.




During
2005, BigString issued 50,000 shares of its 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 its common stock in consideration for
business consultant services.  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 and issued
750,000 shares of its common stock.  The market value of BigString’s
common stock at May 19, 2006 was $0.80 per share.




During
2006, BigString redeemed 2,000,000 shares of its common stock from each of two
former directors of BigString, and 2,000,000 shares of its common stock from
each of their spouses, at a purchase price of $0.05 per share.




16
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


On
February 26, 2007, BigString agreed to issue 140,000 shares of its 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 its 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 its common stock to Jonathan Bomser in
consideration for online marketing services provided by CAC, Inc.  The
market value of BigString’s common stock at May 1, 2007 was $0.33 per
share.




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




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




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




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




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






NOTE
11. PREFERRED STOCK




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




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






NOTE
12. SHARE-BASED COMPENSATION




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






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




17
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


exercise,
BigString recorded a subscription receivable of $3,750.  In connection
with the grant of these warrants, BigString recorded an expense of $3,500 which
is included in BigString’s consolidated statement of operations for the year
ended December 31, 2004.  The fair value of the warrants granted was
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used: dividend yield of 0%; expected
volatility of 47%; risk free rate of return of 5%; and expected life of 2
years.  The weighted average fair value of these warrants was $0.07
per share.




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




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




On May 2,
2006, BigString granted warrants to purchase shares of BigString’s common stock
in consideration for business consultant services to be provided by Lifeline
Industries, Inc.  A total of $135,300 of the deferred compensation in
connection with the warrants is being expensed over a period of 36
months.  For the nine months ended September 30, 2008 and 2007,
BigString expensed $33,822 and $33,822, respectively, in connection with these
services, and the balance of $26,311 of total unrecognized compensation cost is
included within paid-in-capital on BigString’s consolidated balance
sheet.  The fair value of the warrants granted was estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions used: dividend yield of 0%; expected volatility of
47%; risk free rate of return of 5%; and expected life of 2
years.  The weighted average fair value of these warrants was $0.42
and $0.18 per share.




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




As
discussed in Note 9, on May 1, 2007, BigString granted warrants to purchase up
to 1,991,112 shares of BigString's common stock to the 2007 Subscribers and the
Finder.  Each of the warrants has a term of five years from May 1,
2007 and was fully vested on the date of issuance. The warrants are exercisable
at $0.30 per share of common stock.  A total of $31,320 of the
purchase price for the convertible notes and warrants was allocated to the
warrants based on fair value.




In
November 2007, BigString repriced warrants to purchase 1,713,334 shares of
common stock previously issued to the 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




18
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


BigString’s
common stock being issued to the holder thereof and $21,333 in gross proceeds to
BigString. The fair value of the warrants deemed cancelled and deemed issued was
estimated on the date of approval by the board of directors of BigString using
the Black-Scholes option-pricing model with the following weighted average
assumptions used: dividend yield of 0% and 0%; expected volatility of 69% and
69%; risk free rate of return of 4% and 3%; and expected life of 4 and 0 years
for the deemed cancellation and deemed issue of warrants,
respectively.  The weighted average fair value of the deemed
cancellation and deemed issue of warrants was $0.11 per share and $0.12 per
share, respectively. BigString expensed the net fair value of $19,094 for the
year ended December 31, 2007.




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




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




The
number of warrants outstanding as of January 1, 2008 and changes to such number
during the nine months ended September 30, 2008 are as follows:




WeightedWeighted
            
            
            AverageAverage
            
            
            Remaining
            
            
            AggregateExercise
            
            
            Contractual
            
            
            IntrinsicShares
            
            
            Price
            
            
            Term
            
            
            ValueWarrants
      outstanding at January 1, 2008
            
            
            4,384,656
            
            
            $
            0.50
            
            
            
            4.3
            
            
            $
            211,916Warrants
      granted
            
            
            3,506,666
            
            
            $
            0.13Warrants
      exercised
            
            
            (213,333
            )
            
            $
            0.10Warrants
      cancelled/forfeited/expired
            
            
            -
            
            
            $
            -Warrants
      outstanding at September 30, 2008
            
            
            7,677,989
            
            
            $
            0.34
            
            
            
            4.5
            
            
            $
            -Warrants
      exercisable at September 30, 2008
            
            
            7,677,989
            
            
            $
            0.34
            
            
            
            4.5
            
            
            $
            -







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 at the specified dates 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 the specified
dates.




Warrants
granted during the nine months ended September 30, 2008 and 2007 were 3,506,666
and 1,991,112, respectively.  For the period October 8, 2003 (Date of
Formation) through September 30, 2008, warrants to purchase a total of
11,364,657 shares of BigString’s common stock were granted. The weighted average
grant date fair value of warrants granted in the nine months ended September 30,
2008 and 2007 was $0.09 and $0.13 per share, respectively.




Warrants
exercised during the nine months ended September 30, 2008 and 2007 were 213,333
and 0, respectively.  Cash received during the nine months ended
September 30, 2008 and 2007 from the exercise of warrants was $21,333 and
$16,250, respectively.  For the period October 8, 2003 (Date of
Formation) through September 30, 2008, a total of 1,923,334 shares of
BigString’s common stock were purchased upon the exercise of warrants. The total
intrinsic value of warrants exercised in the nine months ended September 30,
2008 was $29,867.




During
the nine months ended September 30, 2008 and 2007, 0 and 50,000 warrants were
cancelled, forfeited or expired. During the period October 8, 2003 (Date of
Formation) through September 30, 2008, warrants to purchase a total of 50,000
shares of BigString’s common stock expired with an aggregate intrinsic value of
$26,000 at the date of expiration. In addition, for the period October 8, 2003
(Date of Formation) through September 30, 2008, warrants to purchase a total of
1,713,334 shares of common stock were cancelled and repriced with an aggregate
intrinsic value of $0 at the date of cancellation.




19
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


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 Kieran Vogel in
connection with his participation in OurPrisoner, the interactive Internet
television program on the entertainment portal operated by BigString’s
wholly-owned subsidiary, BigString Interactive. As of December 16, 2006, Mr.
Vogel completed his obligation in connection to provide his participation in the
OurPrisoner program and subsequently entered into a contractual relationship
with BigString.  The non-qualified stock option has a term of five
years from July 11, 2006 and an exercise price of $0.32 per
share.  For the year ended December 31, 2006, BigString recorded a
consulting expense of $47,775 in connection with the contractual relationship
between Mr. Vogel and BigString.




On July
11, 2006, BigString granted incentive stock options to purchase 2,620,000 shares
of 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.




For the
three months ended September 30, 2008 and 2007, BigString recorded stock-based
option compensation expense of $83,101 and $20,157, respectively.  For
the nine months ended September 30, 2008 and 2007 and the period October 8, 2003
(Date of Formation) through September 30, 2008, BigString recorded stock-based
option compensation expense of $267,310, $60,471 and $440,547,
respectively.  SFAS No. 123(R) requires forfeitures to be estimated at
the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from initial estimates. Stock-based compensation expense was
recorded net of estimated forfeitures.




The
number of stock options outstanding as of January 1, 2008 and changes to such
number during the nine months ended September 30, 2008 are as
follows:




20
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS







WeightedWeighted
            
            
            AverageAverage
            
            
            Remaining
            
            
            AggregateExercise
            
            
            Contractual
            
            
            IntrinsicShares
            
            
            Price
            
            
            Term
            
            
            ValueOptions
      outstanding at January 1, 2008
            
            
            7,150,100
            
            
            $
            0.41
            
            
            
            7.7
            
            
            $
            221,575Options
      granted
            
            
            4,380,000
            
            
            $
            0.21Options
      exercised
            
            
            -
            
            
            $
            -Options
      cancelled/forfeited/expired
            
            
            (2,165,000
            )
            
            $
            0.27Options
      outstanding at September 30, 2008
            
            
            9,365,100
            
            
            $
            0.35
            
            
            
            5.8
            
            
            $
            -Options
      exercisable at September 30, 2008
            
            
            5,871,350
            
            
            $
            0.33
            
            
            
            5.8
            
            
            $
            -







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 at the specified dates and the exercise prices for
in-the-money options) that would have been received by the option holders if all
in-the-money options had been exercised on the specified
dates.




Options
granted during the nine months ended September 30, 2008 and 2007 were 4,380,000
and 0, respectively.  For the period October 8, 2003 (Date of Formation)
through September 30, 2008, options to purchase a total of 12,050,100 shares of
BigString’s common stock were granted. The weighted average grant date fair
value of options granted in the nine months ended September 30, 2008 was $0.08
per share.




No
options were exercised, and no cash received from option exercises and purchases
of shares for the nine months ended September 30, 2008 and 2007 and the period
October 8, 2003 (Date of Formation) through September 30, 2008. The total tax
benefit attributable to options exercised in the nine months ended September 30,
2008 and 2007 and the period October 8, 2003 (Date of Formation) through
September 30, 2008 was $0.




During
the nine months ended September 30, 2008 and 2007 and the period October 8, 2003
(Date of Formation) through September 30, 2008, options to purchase a total of
2,165,000, 245,000 and 2,685,000 shares of BigString’s common stock,
respectively, were cancelled, forfeited or expired with an aggregate intrinsic
value of $0 at the date of expiration.




The fair
value of each option award is estimated on the date of grant using the
Black-Scholes valuation model, consistent with the provisions of SFAS No.
123(R), SAB No. 107 and SAB No. 110.  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:




Three
      Months Ended
            
            Nine
      months EndedSeptember
      30,
            
            September
      30,2008
            
            2007
            
            2008
            
            2007Risk-free
      interest rate
            
            
            -
            %
            
            
            -
            %
            
            
            2
            %
            
            
            -
            %Expected
      volatility
            
            
            -
            %
            
            
            -
            %
            
            
            98
            %
            
            
            -
            %Expected
      life (in years)
            
            
            -
            
            
            
            -
            
            
            
            2
            
            
            
            -Dividend
      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.




21
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


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




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






NOTE
13. COMMITMENTS AND CONTINGENCIES






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 its common stock in April, 2005 and 192,000 shares of its common stock
in February, 2007.  Public relation expenses involving Greene Inc.
Communications were $39,809 and $30,104 for the nine months ended September 30,
2008 and 2007, respectively, and $186,257 for the period October 8, 2003 (Date
of Formation) through September 30, 2008. Share-based compensation for the
period October 8, 2003 (Date of Formation) through September 30, 2008 was
$96,000.




On May 2,
2006, BigString signed a three-year business consultant services agreement with
Lifeline Industries, Inc.  In consideration for the services to be
performed under the agreement, BigString issued to Lifeline Industries, Inc. (i)
1,250,000 shares of its common stock, (ii) a fully vested, five year warrant to
purchase 225,000 shares of its common stock at a per share purchase price of
$0.48, and (iii) a fully vested, five year warrant to purchase 225,000shares of its common
stock at a per share purchase price of $1.00.  BigString incurred
corresponding non-cash expenses of $290,073, $290,071 and $935,683 for the nine
months ended September 30, 2008 and 2007, and for the period October 8, 2003
(Date of Formation) through September 30, 2008, respectively.




On
February 28, 2008, BigString signed a three month, renewable, consulting
agreement with OTC Financial Network, a division of National Financial
Communications Corp., to provide investor relations services. Expenses for the
three and nine months ended September 30, 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 three and nine months ended September 30, 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 three and nine months ended September 30, 2008
were $0 and $23,000, respectively.




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 three and nine months ended September 30, 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 three and nine months ended
September 30, 2008 were $20,000 and $20,000, respectively.






Marketing
Affiliate Commitments:




In
connection with contracts to provide email and messaging services to marketing
affiliates, BigString may be obligated to make payments, which may represent a
portion of net advertising revenues or service fees, to its marketing
affiliates.  Expenses were $1,768 for the three and nine months ended
September 30, 2008, and for the period October 8, 2003 (Date of Formation)
through September 30, 2008.






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
September 30, 2008, BigString did not have any relationships with unconsolidated
entities or financial partnerships, such as structured finance or special
purpose entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other limited
purposes.  BigString is not exposed to financing, liquidity, market or
credit risks that could arise under such relationships.




22
 Index
 BIGSTRING CORPORATION AND
SUBSIDIARIES
 NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS


NOTE
14. SUBSEQUENT EVENTS




On
October 20, 2008, BigString and VIPConnectz USA, Inc. entered into a non-binding
letter of intent, whereby BigString and VIPConnectz would combine in a strategic
business combination transaction. VIPConnectz is a marketing and technology
company that provides global Voice over Internet Protocol (VoIP) phone service
and Fantasy Sports Technology Platforms, and which has developed a globalized
approach to social networking. Previously, in May 2008,
BigString entered into an international private-label distribution
agreement for its self-destructing email and instant messaging (IM) services
with VIPConnectz and launched a Spanish and Portuguese email portal with
VIPConnectz for the Latin American markets.




The
business combination transaction contemplated in the non-binding letter of
intent was subject to several conditions, including the preparation and
execution of definitive transaction documents. In November 2008, BigString and
VIPConnectz mutually agreed to terminate the business combination transaction.
BigString and VIPConnectz plan to maintain and build on their existing strategic
business relationship.



















23
 Index







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




Provided
below is information about BigString Corporation’s (“BigString”) financial
condition and results of operations for the three and nine months ended
September 30, 2008 and 2007.  This information should be read in
conjunction with BigString’s consolidated financial statements for the three and
nine months ended September 30, 2008 and 2007 and the period October 8, 2003
(Date of Formation) through September 30, 2008, including the related notes
thereto, which are included on pages 1 through 23 of this report.






Background




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




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




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






Development
Stage Company




BigString
is considered a development stage enterprise as defined in Statement of
Financial Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting for
Development Stage Companies,” issued by the Financial Accounting Standards Board
(the “FASB”).  BigString has limited revenue to date and continues to
raise capital. 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
proprietary information.  BigString has developed innovative messaging
services that allow users to easily send, recall, erase, self-destruct and
secure electronic messages.




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




Building
on the 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 capabilities in messaging and streaming audio and video to create
complementary messaging applications. BigString’s development efforts are
focused to address security and privacy gaps in social networking messaging
applications.




BigString’s self-destructing, instant
messaging technology enables users to send instant messages (“IM”) that
self-destruct after being sent. BigStringIM, available as a web version or a
free plug-in for AOL’s AIMTM, prevents logging, saving or screen printing to
address security and privacy gaps in the large, growing instant messaging
market. BigString also offers a multi-platform IM integration which allows users
to sign into BigStringIM, AIMTM, YahooTM, MSNTM and Google TalkTM
concurrently.




24
 Index


BigString’s self-destructing, Short
Message Service (SMS) text messaging technology enables users to send text
messages and pictures that self-destruct after being sent. SMS Eraser, available
for BlackBerry phones, can be downloaded for a fee at www.BigString.com or one of
several third-party global BlackBerry application distributors. BigString’s
entry into the mobile phone messaging market expands the availability and use of
BigString’s proprietary self-destructing messaging platforms.




BigString also provide hosting, private
label, and co-branded solutions. Web publishers and content sites may offer
BigString’s 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.




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




BigString’s
marketing efforts focus on increasing brand awareness and consumer adoption of
its messaging products. Promotions included email tag lines, organic search,
paid search, banners, blogs, social networks, video and other viral tactics,
multimedia, print, and radio. BigString has also developed product packages
which may help BigString in achieving critical mass, including hosting, private
label, and co-branded solutions, email marketing services and a video alliance
program.




BigString
currently markets to Internet users who seek to utilize the Internet as their
source for email and messaging services.  Generally, BigString
products and services can be readily accessed through the Internet and thus from
virtually anywhere where the Internet is accessible.  Email users can
access BigString’s English language site, www.BigString.com, on a global basis,
24 hours a day.  As of September 30, 2008, BigString email visitors
accessed www.BigString.com from 218 countries/territories, compared to 190
countries/territories as of December 31, 2007, and 60 countries/territories as
of December 31, 2006.  The top five countries by visits to
www.BigString.com are as follows: United States 61%, United Kingdom 7%, Canada
5%, India 3%, and Australia 2%, followed by Germany, Italy, Philippines, Mexico
and Brazil.




Certain criteria BigString reviews to
measure its performance are set forth below:




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




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




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




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




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




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




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




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




·
            the
      revenue and effectiveness of advertisements served;
  and




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




On
October 20, 2008, BigString and VIPConnectz USA, Inc. entered into a non-binding
letter of intent, whereby BigString and VIPConnectz would combine in a strategic
business combination transaction. VIPConnectz is a marketing and technology
company that provides global Voice over Internet Protocol (VoIP) phone service
and Fantasy Sports Technology Platforms, and which has developed a globalized
approach to social networking.  Previously, in May 2008,
BigString entered into an international private-label distribution
agreement for its self-destructing email and instant messaging (IM) services
with VIPConnectz and launched a Spanish and Portuguese email portal with
VIPConnectz for the Latin American markets.  The business combination
transaction contemplated in the non-binding letter of intent was subject to
several conditions, including the preparation and execution of definitive
transaction documents. In November 2008, BigString and VIPConnectz mutually
agreed to terminate the business combination transaction. BigString and
VIPConnectz plan to maintain and build on their existing strategic business
relationship.









25
 Index






Critical
Accounting Policies




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




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




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




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




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




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




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




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




Research and
Development.  BigString accounts for research and development
costs in accordance with accounting pronouncements, including SFAS No. 2
“Accounting for Research and Development Costs,” and SFAS No. 86, “Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed.”  BigString has determined that technological feasibility
for its software products is reached shortly before the products are
released.




26
 Index


Research
and development costs incurred between the establishment of technological
feasibility and product release have not been material and have accordingly been
expensed when incurred.




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




Intangible
Assets.  In June 2001, the FASB issued SFAS No. 142, “Goodwill
and other Intangible Assets.”  SFAS No. 142 specifies the financial
accounting and reporting for acquired goodwill and other indefinite life
intangible assets. Goodwill and other indefinite-lived intangible assets are no
longer amortized, but are reviewed for impairment at least
annually.  The valuation of intangible assets has been determined by
management after considering a number of factors.




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






Results
of Operations






For
the Three and nine months ended September 30, 2008 and 2007




Net Loss.  For the
three months ended September 30, 2008, net loss was $899,358, as compared to a
net loss of $902,735 for the three months ended September 30, 2007. The $3,377
decrease in net loss was primarily attributable to a $11,195 increase in revenue
and $26,944 decrease in operating expenses, partially offset by other income
(expenses) related to interest and amortization expenses on convertible
promissory notes.




For the
nine months ended September 30, 2008, net loss was $2,734,751, as compared to a
net loss of $2,597,063 for the nine months ended September 30, 2007. The
$137,688 increase in net loss was primarily attributable to a $198,627 increase
in other income (expense) related to interest and amortization expenses on
convertible promissory notes, partially offset by a revenue increase and
operating expenses decreases.




Revenues.  For the
three months ended September 30, 2008, revenues were $22,058, a $11,195 increase
from revenues of $10,863 earned in the three months ended September 30,
2007.  Of the revenues generated for the three months ended September
30, 2008, $5,708 was generated from advertisers and $16,350 was generated from
product and service fees, as compared to $3,648 from advertisers and $7,215 from
product and service fees for the three months ended September 30,
2007.




·
            BigString’s
      advertising revenues are paid based on a mix of impressions, clicks and
      actions.  The 56% increase in advertising revenues was primarily
      attributable to increased advertising opportunity monetization related to
      a new advertising program, partially offset by a slight decrease in
      rates.




·
            BigString
      offers three products for purchase: premium upgrades for individual
      accounts; professional business email solutions; and email marketing
      services. BigString also charges development fees for its private label
      services and site management. Pre-paid purchases are deferred and
      recognized as revenues as the services are performed. The 127% increase in
      product and service fee revenues was primarily attributable to the private
      label services and site management.




For the
nine months ended September 30, 2008, revenues were $44,402, a $14,352 increase
from revenues of $30,050 earned in the nine months ended September 30,
2007.  Of the revenues generated for the nine months ended September
30, 2008, $13,968 was generated from advertisers and $30,434 was generated from
product and service fees, as compared to $12,330 from advertisers and $17,720
from product and service fees for the nine months ended September 30,
2007.




·
            The
      13% increase in advertising revenues was primarily attributable to
      increased advertising opportunity monetization related to a new
      advertising program, partially offset by a slight decrease in
      rates.




·
            The
      72% increase in product and service fee revenues was primarily
      attributable to the private label services and site
      management.




27
 Index


At September 30, 2008, unearned revenue
from product and service fees decreased to $7,887 from $9,288 at December 31,
2007.




Operating
Expenses.  For the three months ended September 30, 2008,
operating expenses were $802,816, a $26,944 decrease from operating expenses of
$829,760 incurred in the three months ended September 30, 2007. Operating
expenses, excluding amortization, depreciation and share-based compensation
expenses, for the three months ended September 30, 2008 were $369,432, a $21,132
decrease from the same prior year period.




·
            Cost
      of revenues: Cost of revenues for the three months ended September 30,
      2008 were $23,832, as compared to $21,874 for the same prior year
      period.  The $1,958 increase in cost was primarily attributable
      to an increase in marketing affiliate
expenses.




·
            Research
      and development: Research and development expenses for the three months
      ended September 30, 2008 were $107,333, as compared to $116,871 for the
      same prior year period.  The $9,538 decrease in expenses was
      primarily attributable to a decrease in development staffing and
      associated overhead costs.




·
            Sales
      and marketing: Sales and marketing expenses for the three months ended
      September 30, 2008 were $19,112, as compared to $148,962 for the same
      prior year period.  The $129,850 decrease in expenses was
      primarily attributable to a reduction in advertising and online marketing
      expenses.




·
            General
      and administrative: General and administrative expenses for the three
      months ended September 30, 2008 were $408,486, as compared to $271,250 for
      the same prior year period.  The $137,236 increase in expenses
      was primarily attributable to increased compensation expense, including
      stock option expense for employee
retention.




·
            Amortization:
      Amortization expenses for the three months ended September 30, 2008 were
      $244,053, as compared to $270,803 for the same prior year period. The
      $26,750 decrease in expense was primarily attributable to the 2007
      impairment of intangible assets related to FindItAll, AmericanMoBlog and
      DailyLOL.




For the
nine months ended September 30, 2008, operating expenses were $2,449,948, a
$46,587 decrease from operating expenses of $2,496,535 incurred in the nine
months ended September 30, 2007. Operating expenses, excluding amortization,
depreciation and share-based compensation expenses, for the nine months ended
September 30, 2008 were $1,139,503, a $43,808 increase from the same prior year
period.




·
            Cost
      of revenues: Cost of revenues for the nine months ended September 30, 2008
      were $63,428, as compared to $90,994 for the same prior year
      period.  The $27,566 decrease in cost was primarily attributable
      to a reduction in depreciation and software licensing
      expenses.




·
            Research
      and development: Research and development expenses for the nine months
      ended September 30, 2008 were $362,893, as compared to $374,258 for the
      same prior year period.  The $11,365 decrease in expenses was
      primarily attributable to a reduction in development staffing and
      associated overhead costs.




·
            Sales
      and marketing: Sales and marketing expenses for the nine months ended
      September 30, 2008 were $161,330, as compared to $352,701 for the same
      prior year period.  The $191,371 decrease in expenses was
      primarily attributable to a reduction in advertising and online marketing
      expenses, partially offset by an increase in public relations
      expenses.




·
            General
      and administrative: General and administrative expenses for the nine
      months ended September 30, 2008 were $1,137,938, as compared to $866,173
      for the same prior year period.  The $271,765 increase in
      expenses was primarily attributable to increased compensation expense,
      primarily stock option expense for employee retention, including revisions
      based on actual forfeitures of option grant estimates under SFAS No.
      123(R), partially offset by a reduction in legal and professional fees,
      staffing and associated overhead
expenses.




·
            Amortization:
      Amortization expenses for the nine months ended September 30, 2008 were
      $724,359, as compared to $812,409 for the same prior year
      period.  The $88,050 decrease in expense was primarily
      attributable to the 2007 impairment of intangible assets related to
      FindItAll, AmericanMoBlog and
DailyLOL.




Other income
(expense).  For the three months ended September 30, 2008,
other expenses were $118,600, a $34,762 increase over other expenses of $83,838
in three months ended September 30, 2007.




·
            Interest
      income: Interest income for the three months ended September 30, 2008 was
      $647, as compared to $3,785 for the same prior year period. The $3,138
      decrease was attributable to both lower rates and lower cash
      balances.




28
 Index


·
            Interest
      expense: Interest expense for the three months ended September 30, 2008
      was $22,792, as compared to $12,000 for the same prior year period.
      Interest expense consists of accrued interest on promissory
      notes.




·
            Other,
      net: Other, net expenses for the three months ended September 30, 2008
      were $96,455, as compared to $75,623 for the same prior year period. The
      $20,832 increase was primarily attributable to the August 25, 2008,
      February 29, 2008 and May 1, 2007 convertible note and warrant financings,
      including amortization of debt issue costs, amortization of promissory
      note discount and amortization of beneficial conversion features. For the
      three months ended September 30, 2008, debt issue costs were $18,977 and
      are being amortized over the term of the notes, which is five
      months.




For the
nine months ended September 30, 2008, other expenses were $329,205, a $198,627
increase over other expenses of $130,578 in nine months ended September 30,
2007.




·
            Interest
      income: Interest income for the nine months ended September 30, 2008 was
      $4,019, as compared to $13,255 for the same prior year period. The $9,236
      decrease was attributable to both lower rates and lower cash
      balances.




·
            Interest
      expense: Interest expense for the nine months ended September 30, 2008 was
      $55,665, as compared to $20,000 for the same prior year period. Interest
      expense consists of accrued interest on promissory
  notes.




·
            Other,
      net: Other, net expenses for the nine months ended September 30, 2008 were
      $277,559, as compared to $123,833 for the same prior year period. The
      $153,726 increase was primarily attributable to the August 25, 2008,
      February 29, 2008 and May 1, 2007 convertible note and warrant financings,
      including amortization of debt issue costs, amortization of promissory
      note discount and amortization of beneficial conversion features. For the
      nine months ended September 30, 2008, debt issue costs were $110,683 and
      are being amortized over the term of the notes, which are 5 and 36 months.
      Amortization is accelerated for the proportion of promissory notes which
      are converted in a period.




Income Taxes.  For
the three and nine months ended September 30, 2008 and 2007, BigString has
applied valuation allowances to offset the deferred tax assets in recognition of
the uncertainty that such tax benefits will be realized.




·
            At
      September 30, 2008, BigString has available net operating loss carry
      forwards of approximately $8.9 million for federal income tax reporting
      purposes and $6.4 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




BigString’s
operating and capital requirements have exceeded its cash flow from operations
as BigString has been building its business.  Since inception through
September 30, 2008, BigString has expended $5,238,029 for operating and
investing activities, which has been primarily funded by investments of
$5,441,533 from BigString’s stockholders and note and warrant holders. For the
nine months ended September 30, 2008, BigString expended $1,065,862 for
operating and investing activities, a decrease of $99,638 from the amount
expended during the nine months ended September 30, 2007.




BigString’s
cash balance as of September 30, 2008 was $203,504, which was a decrease of
$94,529 from the cash balance of $298,033 as of December 31, 2007. This decrease
to the cash balance was related to operating outlays of $1,116,751 primarily
associated with the development of products and services, marketing and
professional fees. These cash outflows were partially offset by $1,022,222
raised through the exercise of warrants and private placement of notes, warrants
and common stock, and the sale of property and equipment.




Management
believes BigString’s current cash balance of $123,684 at November 12, 2008 is
not sufficient to fund the minimum level of operations for the next twelve
months.




BigString’s
consolidated financial statements beginning on page 2 have been prepared
assuming BigString will continue as a going concern.  As more fully
explained in Note 2 to BigString’s consolidated financial statements, BigString
has a working capital deficit and has incurred losses since operations
commenced.  BigString’s continued existence is dependent upon its
ability to obtain needed working capital through additional equity and/or debt
financings, grants and revenue to cover expenses as BigString continues to incur
losses.  These uncertainties raise substantial doubt about BigString’s
ability to continue as a going concern.  BigString’s consolidated
financial statements do not include




29
 Index


any
adjustments that might result from the outcome of these uncertainties should
BigString be unable to continue as a going concern.




On
February 29, 2008, BigString entered into a financing arrangement with
Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Small Cap
Opportunities LP (collectively, the “2008 Subscribers”), pursuant to which the
2008 Subscribers purchased convertible notes in the aggregate principal amount
of $700,000, which notes are convertible into shares of BigString’s common
stock, and warrants to purchase up to 2,333,333 shares of BigString's common
stock. Each convertible note has a term of three years and accrues interest at a
rate of six percent (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.  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.




On August
25, 2008, BigString closed on a financing with Dwight Lane Capital, LLC, a
limited liability company in which Todd M. Ross, a director of BigString, has an
interest, and Marc W. Dutton, a director of BigString. In connection with such
financing, BigString issued promissory notes in the aggregate principal amount
of $250,000 and common stock purchase warrants to purchase up to an aggregate
800,000 shares of BigString's common stock. Each note has a term of five months
and accrues interest at a rate of twelve percent (12%) annually. In the event of
default, the conversion price and number and kind of shares to be issued upon
conversion of the convertible notes are subject to adjustment. The warrants have
an exercise price of $0.08 per share.




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




BigString
has completed significant development of its email and messaging services and
has made adjustments to its cost structure, such as the elimination of expenses
associated with the production of OurPrisoner and the reduction of a portion of
compensation costs associated with development. BigString has also reduced
general expenses such as rent and other discretionary expenses. As discussed
under Management’s Discussion and Analysis of Financial Condition and Results of
Operations, operating expenses, excluding amortization, depreciation, impairment
and share-based compensation expenses, were $1,139,503 for the nine months ended
September 30, 2008.




BigString
expects to continue development of its messaging, email and related product and
service offerings. BigString also expects sales, marketing and advertising
expenses and cost of revenues to increase as BigString promotes and grows its
product and service offerings.  However, if revenue and cash balances
are insufficient to fund the continued growth of its business, BigString will
seek additional funds.  There can be no assurance that such funds will
be available to BigString or that adequate funds for its operations, whether
from debt or equity financings, will be available when needed or on terms
satisfactory to BigString.  Failure to obtain adequate additional
financing may require BigString to delay or curtail some or all of its business
efforts and could cause BigString to seek bankruptcy protection. Any additional
equity financing may involve substantial dilution to BigString’s then-existing
stockholders.




Except
with regard to the financing with Dwight Lane Capital, LLC, a limited liability
company in which Todd M. Ross, a director of BigString, has an interest, and
Marc W. Dutton, a director of BigString, discussed above, there are no other
formal commitments or arrangements to advance or loan funds to BigString or
repay any such advances or loans by BigString’s officers or
directors.




30
 Index




Item
3.      Quantitative and Qualitative
Disclosures About Market Risk




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






Item 4T.  Controls and
Procedures




As
required by Rule 13a-15 under the Exchange Act, as of the end of the period
covered by this Quarterly Report on Form 10-Q, BigString carried out an
evaluation of the effectiveness of the design and operation of BigString’s
disclosure controls and procedures.  This evaluation was carried out
under the supervision and with the participation of BigString’s management,
including BigString’s President and Chief Executive Officer and BigString’s
Chief Financial Officer, who concluded that BigString’s disclosure controls and
procedures are effective. There has been no change in BigString’s internal
controls during the last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, BigString’s internal control over
financial reporting.




Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in BigString’s reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SEC’s rules and
forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in BigString’s reports filed under the Exchange Act is
accumulated and communicated to management, including BigString’s Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.










31
 Index


PART
II.  OTHER INFORMATION




Item
1.        Legal Proceedings
  BigString is not a party to, and none
of its property is the subject of, any pending legal proceedings. To BigString’s
knowledge, no governmental authority is contemplating any such
proceedings.
   Item
1A.     Risk Factors
  BigString is a smaller reporting
company and is therefore not required to provide this information.
   Item
2.        Unregistered
Sales of Equity Securities and Use of Proceeds
  The information required by this Item
with respect to sales of unregistered securities has been previously disclosed
by BigString in its Current Report on Form 8-K which was filed with the SEC on
August 27, 2008.
   Item
3.        Defaults Upon Senior Securities
  None.
   Item
4.        Submission of Matters to a Vote of Security Holders
  None.
   Item
5.        Other Information
  None.
   Item
6.        Exhibits
  See Index of Exhibits commencing on
page E-1.




32
 Index


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.







BigString
      CorporationRegistrantDated:     November
      14, 2008
            /s/
      Darin M. MymanDarin
      M. MymanPresident
      and Chief Executive Officer(Principal
      Executive Officer)Dated:     November
      14, 2008
            /s/
      Robert S. DeMeulemeesterRobert
      S. DeMeulemeesterChief
      Financial Officer(Principal
      Financial and Accounting Officer)











33
 Index


INDEX
OF EXHIBITS




Exhibit
      No.
            Description of
      Exhibit3.1.1
            Certificate
      of Incorporation of BigString, placed into effect on October 8, 2003,
      incorporated by reference to Exhibit 3.1.1 to the Registration Statement
      on Form SB-2 (Registration No. 333-127923) filed with the SEC on August
      29, 2005.3.1.2
            Certificate
      of Amendment to the Certificate of Incorporation of BigString, placed into
      effect on July 19, 2005, incorporated by reference to Exhibit 3.1.2 to the
      Registration Statement on Form SB-2 (Registration No. 333-127923) filed
      with the SEC on August 29, 2005.3.1.3
            Certificate
      of Designations of Series A Preferred Stock, par value $0.0001 per share,
      of BigString, incorporated by reference to Exhibit 3.1.3 to the Current
      Report on Form 8-K filed with the SEC on May 22, 2006.3.2
            Amended
      and Restated By-laws of BigString, incorporated by reference to Exhibit
      3.2 to the Registration Statement on Form SB-2 (Registration No.
      333-127923) filed with the SEC on August 29, 2005.4.1
            Specimen
      certificate representing BigString’s common stock, par value $.0001 per
      share, incorporated by reference to Exhibit 4.1 to the Registration
      Statement on Form SB-2 (Registration No. 333-127923) filed with the SEC on
      August 29, 2005.4.2
            Form
      of Convertible Note, dated May 1, 2007, issued to the following persons
      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 ($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 ($75,000), incorporated by reference to Exhibit 4.2 to the Current
      Report on Form 8-K filed with the SEC on August 27,
  2008.10.1
            Registration
      Rights Agreement, dated August 10, 2005, between BigString and AJW New
      Millennium Offshore, Ltd., incorporated by reference to Exhibit 10.1 to
      the Registration Statement on Form SB-2 (Registration No. 333-127923)
      filed with the SEC on August 29, 2005.10.2
            Registration
      Rights Agreement, dated August 10, 2005, between BigString and AJW
      Partners, LLC, incorporated by reference to Exhibit 10.2 to the
      Registration Statement on Form SB-2 (Registration No. 333-127923) filed
      with the SEC on August 29, 2005.10.3
            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.





E-1
 Index





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, 2005.10.16
            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.





E-2
 Index





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. Adredge, 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 George Petrone,
      David Prado and Kim Prado, Lee Rosenberg, Todd M. Ross, Marc Sandusky,
      Adam Schaffer, H. Joseph Sgroi, Shefts Family LP, Thomas Shields, Mark
      Yuko, Bradley Zelenitz and Shefts Associates, Inc., incorporated by
      reference to Exhibit 10.24 to the Annual Report on Form 10-KSB filed with
      the SEC on March 31, 2006.10.23
            Business
      Consultant Services Agreement by and between BigString and Shefts
      Associates, Inc., incorporated by reference to Exhibit 10.30 to Amendment
      No. 1 to the Registration Statement on Form SB-2 (Registration No.
      333-127923) filed with the SEC on October 21, 2005.10.24
            Lease
      between BigString, as Tenant, and Walter Zimmerer & Son, as Landlord,
      dated May 8, 2007, for the premises located at 3 Harding Road, Suite E,
      Red Bank, New Jersey 07701, incorporated by reference to Exhibit 10.24 to
      the Registration Statement on Form SB-2 (Registration No. 333-143793)
      filed with the SEC on June 15, 2007.10.25
            Business
      Consultant Services Agreement, dated May 2, 2006, by and between BigString
      and Lifeline Industries, Inc., incorporated by reference to Exhibit 10.32
      to the Current Report on Form 8-K filed with the SEC on May 4,
      2006.10.26
            Securities
      Purchase Agreement, dated as of May 19, 2006, by and among BigString and
      Witches Rock Portfolio Ltd., The Tudor BVI Global Portfolio Ltd. and
      Tudor Proprietary Trading, L.L.C., including Schedule 1 – Schedule of
      Purchasers, and Exhibit C – Form of Warrant.  Upon the request
      of the SEC, BigString agrees to furnish copies of each of the following
      schedules and exhibits:  Schedule
      2-3.2(d) – Warrants; Schedule 2-3.3
      – Registration Rights; Schedule 2-3.7
      – Financial Statements; Schedule 2-3.10
      – Broker’s or Finder’s Fees; Schedule 2-3.11
      – Litigation; Schedule 2-3.16
      – Intellectual Property Claims Against the Company; Schedule 2-3.17
      – Subsidiaries; Schedule
      2-3.19(a) – Employee Benefit Plans; Schedule 2-3.22
      – Material Changes; Exhibit A –
      Form of Certificate of Designations of the Series A Preferred Stock; Exhibit B –
      Form of Registration Rights Agreement; Exhibit D –
      Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion, incorporated
      by reference to Exhibit 10.33 to the Current Report on Form 8-K filed with
      the SEC on May 22, 2006.10.27
            Registration
      Rights Agreement, dated as of May 19, 2006, by and among BigString and
      Witches Rock Portfolio Ltd., The Tudor BVI Global Portfolio Ltd. and
      Tudor Proprietary Trading, L.L.C., incorporated by reference to Exhibit
      10.34 to the Current Report on Form 8-K filed with the SEC on May 22,
      2006.10.28
            Asset
      Purchase Agreement, dated as of May 19, 2006, by and between BigString and
      Robb Knie.  Upon the request of the SEC, BigString agrees to
      furnish a copy of Exhibit A –
      Form of Registration Rights Agreement, and Exhibit B –
      Investor Suitability Questionnaire, incorporated by reference to Exhibit
      10.35 to the Current Report on Form 8-K filed with the SEC on May 22,
      2006.10.29
            Registration
      Rights Agreement, dated as of May 19, 2006, by and between BigString and
      Robb Knie, incorporated by reference to Exhibit 10.36 to the Current
      Report on Form 8-K filed with the SEC on May 22, 2006.10.30
            Stock
      Redemption Agreement, dated May 31, 2006, by and between BigString and
      David L. Daniels, incorporated by reference to Exhibit 10.37 to the
      Registration Statement on Form SB-2 (Registration No. 333-135837) filed
      with the SEC on July 18, 2006.10.31
            Stock
      Redemption Agreement, dated May 31, 2006, by and between BigString and
      Deborah K. Daniels, incorporated by reference to Exhibit 10.38 to the
      Registration Statement on Form SB-2 (Registration No. 333-135837) filed
      with the SEC on July 18, 2006.10.32
            Stock
      Redemption Agreement, dated May 31, 2006, by and between BigString and
      Charles A. Handshy, Jr., incorporated by reference to Exhibit 10.39 to the
      Registration Statement on Form SB-2 (Registration No. 333-135837) filed
      with the SEC on July 18, 2006.





E-3
 Index





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, 2007.10.35.2
            Form
      of Director Option Agreement (Non-employee
      Directors),  incorporated by reference to Exhibit 10.42.2 to the
      Annual Report on Form 10-KSB filed with the SEC on April 2,
      2007.10.36
            Subscription
      Agreement, dated as of April 30, 2007, by and among BigString and
      Whalehaven Capital Fund Limited, Alpha Capital Anstalt, Chestnut Ridge
      Partners LP, Iroquois Master Fund Ltd. and Penn Footwear, including Exhibit B –
      Form of Common Stock Purchase Warrant.  Upon the request of the
      Securities and Exchange Commission, BigString agrees to furnish copies of
      each of the following schedules and exhibits:  Schedule 5(a) –
      Subsidiaries; Schedule 5(d) –
      Additional Issuances/Capitalization; Schedule 5(f) –
      Conflicts; Schedule 5(q) –
      Undisclosed Liabilities; Schedule 5(v) –
      Transfer Agent; Schedule 8 –
      Finder’s Fee; Schedule 9(s) –
      Lockup Agreement Providers; Schedule
      11.1(iv) – Additional Securities to be Included in the Registration
      Statement; Exhibit A –
      Form of Convertible Note (included as Exhibit 4.2); Exhibit C –
      Form of Escrow Agreement; Exhibit D –
      Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion; Exhibit E –
      Proposed Public Announcement; and Exhibit F –
      Form of Lock-Up Agreement, incorporated by reference to Exhibit 10.43 to
      the Current Report on Form 8-K filed with the SEC on May 3,
      2007.10.37
            Agreement,
      Waiver and Limited Release, dated as of November 30, 2007, by and among
      BigString and the Releasors, incorporated by reference to Exhibit 10.37 to
      the Current Report on Form 8-K filed with the SEC on December 5,
      2007.10.38
            Subscription
      Agreement, dated as of February 29, 2008, by and among BigString and
      Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Small
      Cap Opportunities LP, including Exhibit B –
      Form of Common Stock Purchase Warrant.  Upon the request of the
      Securities and Exchange Commission, BigString agrees to furnish copies of
      each of the following schedules and exhibits:  Schedule 5(a) –
      Subsidiaries; Schedule 5(d) –
      Additional Issuances/Capitalization; Schedule 5(f) –
      Conflicts; Schedule 5(q) –
      Undisclosed Liabilities; Schedule 5(v) –
      Transfer Agent; Schedule 8 –
      Finder’s Fee; Schedule 9(s) –
      Lockup Agreement Providers; Exhibit A –
      Form of Convertible Note (included as Exhibit 4.2); Exhibit C –
      Form of Escrow Agreement; Exhibit D –
      Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion; Exhibit E –
      Proposed Public Announcement; and Exhibit F –
      Form of Lock-Up Agreement, incorporated by reference to Exhibit 10.43 to
      the Current Report on Form 8-K filed with the SEC on March 6,
      2008.31.1
            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-4