Index


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 March 31, 2011




or




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





For the Transition Period from     to .





Commission File Number 000-51661




BIGSTRING CORPORATION


(Exact name of registrant as specified in its charter)




Delaware

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

(I.R.S. Employer Identification No.)
 
 157 Broad Street, Suite 109, Red Bank, New Jersey 07701(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 has submitted and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  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 May 23, 2011:




Common Stock, par value $0.0001 per share

137,027,690(Class)

(Number of Shares)




Index





BIGSTRING CORPORATION


FORM 10-Q


MARCH 31, 2011





INDEX TO FORM 10-Q





PAGEPART I. FINANCIAL INFORMATIONItem 1.
Financial Statements
1Consolidated Balance Sheets (unaudited) at March 31, 2011 and December 31, 2010
2Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011
3Consolidated Statements of Stockholders’ Equity (Deficiency) (unaudited) for the Period Ended March 31, 2011
4Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011
5Notes to Unaudited Consolidated Financial Statements
6Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
24Item 3.
Quantitative and Qualitative Disclosures About Market Risk
29Item 4.
Controls and Procedures
29PART II. OTHER INFORMATIONItem 1.
Legal Proceedings
30Item 1A.
Risk Factors
30Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
30Item 3.
Defaults Upon Senior Securities
30Item 4.
(Removed and Reserved)
30Item 5.
Other Information
30Item 6.
Exhibits
30Signatures
31Index of Exhibits
E-1
 
 i
 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. Forward-looking statements in this Quarterly Report on Form 10-Q, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results.  Among these risks, trends and uncertainties are the availability of working capital to fund our operations, the competitive market in which we operate, the efficient and uninterrupted operation of our computer and communications systems, our ability to generate a profit and execute our business plan, the retention of key personnel, our ability to protect and defend our intellectual property, the effects of governmental regulation and other risks identified in the Registrant’s filings with the Securities and Exchange Commission  from time to time.




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





PART I.  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-K for the year ended December 31, 2010 of BigString Corporation (“BigString” or the “Company”).




The results of operations for the three months ended March 31, 2011 and 2010 are not necessarily indicative of the results of the entire fiscal year or for any other period.














1
 Index





BIGSTRING CORPORATION AND SUBSIDIARY


CONSOLIDATED BALANCE SHEETS


(A DEVELOPMENT STAGE COMPANY)


(Unaudited)





March 31, 2011


December 31, 2010ASSETSCurrent assets:Cash and cash equivalents

$
744,376


$
15,225Accounts receivable - net of allowance of $35 and $25, respectively


3,234



1,888Prepaid expenses and other current assets


5,762



11,842Total current assets


753,372



28,955Property and equipment - net


9,474



13,731Other assets


3,000



3,000TOTAL ASSETS

$
765,846


$
45,686LIABILITIES AND STOCKHOLDERS' DEFICIENCYCurrent liabilities:Accounts payable

$
273,337


$
192,826Accrued expenses


429,738



262,119Unearned revenue


482



1,303Accrued interest


38,265



86,234Short-term debt


-



928,646Total current liabilities


741,822



1,471,128Long term liabilities:Long-term debt


103,235



-TOTAL LIABILITIES


845,057



1,471,128Stockholders' deficiency:Preferred stock, $0.0001 par value - authorized 1,000,000 shares; issued and outstanding 79,657 and 79,657 shares, respectively


8



8Common stock, $0.0001 par value - authorized 249,000,000 shares; issued and outstanding 137,027,690 and 98,640,640 shares, respectively


13,703



9,864Additional paid in capital


14,596,798



14,228,180Deficit accumulated during the development stage


(14,689,720
)


(15,663,494
)Total stockholders' deficiency


(79,211
)


(1,425,442
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY

$
765,846


$
45,686





See notes to unaudited consolidated financial statements.






2
 Index









BIGSTRING CORPORATION AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF OPERATIONS


(A DEVELOPMENT STAGE COMPANY)


(Unaudited)





PeriodOctober 8, 2003For the Three Months Ended


(Date of Formation)March 31,


Through2011


2010


March 31, 2011Operating revenues

$
17,287


$
16,082


$
298,342Operating expenses:Cost of revenues


14,003



13,624



625,029Research, development, sales, general and administrative


283,199



32,693



8,482,077Amortization of intangibles and impairment of assets


-



-



5,533,067Total operating expenses


297,202



46,317



14,640,173Loss from operations


(279,915
)


(30,235
)


(14,341,831
)Other income (expense):Interest income


19



19



72,721Interest benefit (expense)


(97,911
)


(21,301
)


(387,900
)Other, net


1,351,581



(113,407
)


(549,809
)Total other income (expense)


1,253,689



(134,689
)


(864,988
)Earnings (loss) before benefit from income taxes


973,774



(164,924
)


(15,206,819
)Benefit from income taxes


-



-



997,099Net earnings (loss)

$
973,774


$
(164,924
)

$
(14,209,720
)Net earnings (loss) per common share:Basic

$
0.01


$
(0.00
)Diluted

$
0.01


$
(0.00
)Weighted average common shares outstanding:Basic


121,377,161



64,160,328Diluted


171,950,397



64,160,328





See notes to unaudited consolidated financial statements.






3
 Index


BIGSTRING CORPORATION AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)


(A DEVELOPMENT STAGE COMPANY)


(Unaudited)




Preferred Stock


Common Stock


AdditionalNo. of





No. of





Paid-In


SubscriptionTotal


Shares


Amount


Shares


Amount


Capital


Receivable


DeficitBalance, October 8, 2003

$
-



-


$
-



-


$
-


$
-


$
-


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


-



-



-



21,210,000



2,121



(2,121
)


-



-Contribution of capital


45,000



-



-



-



-



45,000



-



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


-



-



-



40,000



4



9,996



(10,000
)


-Net loss


(29,567
)


-



-



-



-



-



-



(29,567
)Balance, December 31, 2003


15,433



-



-



21,250,000



2,125



52,875



(10,000
)


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


10,000



-



-



-



-



-



10,000



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


217,500



-



-



870,000



87



217,413



-



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


39,251



-



-



185,000



19



39,232



-



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


4,800,000



-



-



20,000,000



2,000



4,798,000



-



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


3,500



-



-



-



-



3,500



-



-Net loss


(729,536
)


-



-



-



-



-



-



(729,536
)Balance, December 31, 2004


4,356,148



-



-



42,305,000



4,231



5,111,020



-



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


230,500



-



-



922,000



92



230,408



-



-Exercise of warrants (at $0.25 per share)


11,250



-



-



45,000



4



11,246



-



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


12,500



-



-



50,000



5



12,495



-



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


1,511,700



-



-



9,448,125



945



1,510,755



-



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


179,200



-



-



-



-



179,200



-



-Net loss


(2,102,587
)


-



-



-



-



-



-



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


4,198,711



-



-



52,770,125



5,277



7,055,124



-



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


(400,000
)


-



-



(8,000,000
)


(800
)


(399,200
)


-



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


-



-



-



1,250,000



125



(125
)


-



-Stock-based compensation expense


314,250



-



-



-



-



314,250



-



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


36,595



-



-



-



-



36,595



-



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


600,000



-



-



750,000



75



599,925



-



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


1,860,000



400,000



40



-



-



1,859,960



-



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


-



-



-



-



-



480,000



-



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


18,000



-



-



165,000



17



34,233



(16,250
)


-Net loss


(3,114,225
)


-



-



-



-



-



-



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


3,513,331



400,000



40



46,935,125



4,694



9,980,762



(16,250
)


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


16,250



-



-



-



-



-



16,250



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


-



-



-



432,000



43



(43
)


-



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


31,320



-



-



-



-



31,320



-



-Beneficial conversion feature of convertible promissory notes


666,648



-



-



-



-



666,648



-



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


155,000



-



-



861,111



86



154,914



-



-Stock-based compensation expense


672,532



-



-



-



-



672,532



-



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


19,094



-



-



-







19,094



-



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


250,000



-



-



1,000,000



100



249,900



-



-Exercise of warrants (at $0.10 per share)


150,000



-



-



1,500,001



150



149,850



-



-Net loss


(3,949,184
)


-



-



-



-



-



-



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


1,524,991



400,000



40



50,728,237



5,073



11,924,977



-



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


21,333



-



-



213,333



21



21,312



-



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


20,000



-



-



111,111



11



19,989



-



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


76,176



-



-



-



-



76,176



-



-Beneficial conversion feature of convertible promissory notes


188,740



-



-



-



-



188,740



-



-Stock-based compensation expense


727,800



-



-



-



-



727,800



-



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


43,757



-



-



291,713



29



43,728



-



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


117,000



-



-



900,000



90



116,910



-



-Net loss


(3,748,946
)


-



-



-



-



-



-



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


(1,029,149
)


400,000



40



52,244,394



5,224



13,119,632



-



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


215,708



-



-



-



-



215,708



-



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


79,500



-



-



993,750



100



79,400



-



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


34,992



-



-



-



-



34,992



-



-Beneficial conversion feature of convertible promissory notes


168,000



-



-



-



-



168,000



-



-Issuance of common stock for conversion of preferred stock


-



(320,343
)


(32
)


4,429,522



443



(411
)


-



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


84,932



-



-



5,662,095



566



84,366



-



-Net loss


(968,848
)


-



-



-



-



-



-



(968,848
)Balance, December 31, 2009


(1,414,865
)


79,657



8



63,329,761



6,333



13,701,687



-



(15,122,893
)Stock-based compensation expense


361



-



-



-



-



361



-



-Issuance of common stock for accrued interest (at $0.015 per share)


71,171



-



-



4,744,715



474



70,697



-



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


458,492



-



-



30,566,164



3,057



455,435



-



-Net loss


(540,601
)


-



-



-



-



-



-



(540,601
)Balance, December 31, 2010


(1,425,442
)


79,657



8



98,640,640



9,864



14,228,180



-



(15,663,494
)Issuance of common stock for accrued interest (at $0.015 per share)


36,730



-



-



2,448,642



245



36,485



-



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


539,076



-



-



35,938,408



3,594



535,482



-



-Deferred financing


(203,349
)


-



-



-



-



(203,349
)


-



-Net earnings


973,774



-



-



-



-



-



-



973,774Balance, March 31, 2011

$
(79,211
)


79,657


$
8



137,027,690


$
13,703


$
14,596,798


$
-


$
(14,689,720
)




See notes to unaudited consolidated financial statements.






4
 Index




BIGSTRING CORPORATION AND SUBSIDIARY


CONSOLIDATED STATEMENTS OF CASH FLOWS


(A DEVELOPMENT STAGE COMPANY)


(Unaudited)


PeriodOctober 8, 2003For the Three Months Ended


(Date of Formation)March 31,


Through2011


2010


March 31, 2011Cash flows from operating activities:Net income (loss)

$
973,774


$
(164,924
)

$
(14,209,720
)Adjustments to reconcile net income (loss) to net cash (used in) generated by operating activities:Depreciation and amortization of property and equipment, intangible and other assets


4,257



7,480



4,689,645Impairment of assets


-



-



1,042,876Gain on sale of property and equipment


-



-



2,472Gain on sale of investments


(1,408,827
)


-



(1,448,989
)Accretion for beneficial conversion feature, note discount, note cost amortization and deferred financing


160,316



113,407



1,679,194Stock-based compensation


-



120



2,201,697Other non-cash compensation


-



-



269,094Changes in operating assets and liabilities:(Increase) decrease in accounts receivable, net


(1,346
)


2,398



(3,234
)Decrease (increase) in prepaid expenses and other assets


6,080



310,521



(8,762
)Increase (decrease) in accounts payable


80,511



(30,566
)


273,337Increase (decrease) in accrued expenses and other liabilities


156,380



(199,311
)


310,163(Decrease) increase in unearned revenue


(821
)


283



482Net cash (used in) provided by operating activities


(29,676
)


39,408



(5,201,745
)Cash flows from investing activities:Purchase of property and equipment


-



-



(262,290
)Sale of property and equipment


-



-



50,889Proceeds from sale of marketable securities


758,827



-



798,989Acquisitions


-



-



(13,000
)Net cash provided by investing activities


758,827



-



574,588Cash flows from financing activities:Proceeds from issuance of convertible notes and warrants


-



-



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


-



-



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


-



-



2,231,533Payments for redemption of notes


-



-



(250,000
)Payments for redemption of common stock


-



-



(400,000
)Net cash provided by financing activities


-



-



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


729,151



39,408



744,376Cash and cash equivalents - beginning of period


15,225



3,039



-Cash and cash equivalents - end of period

$
744,376


$
42,447


$
744,376Supplementary information:Cash paid during the periods for:Interest

$
-


$
-


$
9,328Income taxes

$
-


$
-


$
-Acquisitions

$
-


$
-


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

$
-


$
-


$
2,790Fair value of liabilities assumed


-



-



(5,857
)Intangibles


-



-



5,533,067Common stock issued to effect acquisition

$
-


$
-


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

$
539,076


$
-


$
1,257,500Issuance of common stock for accrued interest

$
36,730


$
41,528


$
231,157Exchange of assets for elimination of common stock warrants and deferred financing

$
650,000


$
-


$
650,000Stock-based compensation: Common stock

$
-


$
-


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


-



120



601,416Stock-based compensation: Common stock warrants


-



-



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


-



-



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


-



-



250,000





See notes to unaudited consolidated financial statements.




5
 Index




BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 AND THE PERIOD


OCTOBER 8, 2003 (DATE OF FORMATION) THROUGH MARCH 31, 2011




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




BASIS OF PRESENTATION




The consolidated balance sheet as of March 31, 2011, 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, 2010 was derived from audited financial statements.  The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected for the year ending December 31, 2011.




These Notes to Unaudited Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and related notes included in BigString’s 2010 annual report on Form 10-K for the year ended December 31, 2010.




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.




PeopleString Corporation (“PeopleString”), incorporated in the state of Delaware, was formed by BigString in early 2009 to develop technology relating to social networks. BigString currently owns less than 20% of PeopleString’s outstanding common stock.




BigString is considered a development stage enterprise in accordance with the guidance contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915, “Development Stage Entities.”  BigString has limited revenue to date, continues to raise capital and there is no assurance that BigString will ultimately achieve a profitable level of operations.




PRINCIPLES OF CONSOLIDATION




The consolidated financial statements include the accounts of BigString and its subsidiary, BigString Interactive, which is a wholly-owned subsidiary. All intercompany transactions and balances have been eliminated.




RECENT ACCOUNTING PRONOUNCEMENTS




The Company’s significant accounting policies are summarized in Note 1 of the Company’s annual report on Form 10-K for the year ended December 31, 2010.  There were no significant changes to these accounting policies during the three months ended March 31, 2011 and the Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.




NOTE 2. 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. For the three months ended March 31, 2010, 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.




6
 Index


BIGSTRING CORPORATION AND SUBSIDIARY


NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




NOTE 3. FAIR VALUE MEASUREMENTS




The Company utilizes the accounting guidance for fair value measurements and disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis or on a nonrecurring basis during the reporting period. The fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability. The accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.  These tiers are defined as follows:




Level 1 - Observable inputs such as quoted market prices in active markets.




Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable.




Level 3- Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.




As of March 31, 2011 and December 31, 2010, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of cash and cash equivalents and investments. The fair value of the cash and cash equivalents is determined based on quoted market prices in public markets and is categorized as Level 1. The fair value of BigString’s investment in PeopleString is determined based on quoted market prices in public markets and is categorized as Level 1, and was previously determined based on the most recent private placement per share purchase price for PeopleString’s common stock and was categorized as Level 2. The Company does not have any financial assets measured at fair value on a recurring basis as Level 3 and there were no transfers in or out of Level 3 during the three months ended March 31, 2011 and the year ended December 31, 2010.




The following table sets forth by level, within the fair value hierarchy, the Company’s financial assets accounted for at fair value on a recurring basis as of March 31, 2011 and December 31, 2010:




Assets at Fair Value at Period End, UsingQuoted Prices in Active Markets for Identical Assets


Significant Other Observable Inputs


Significant Unobservable InputsAssets:

Total


(Level 1)


(Level 2)


(Level 3)March 31, 2011Cash and cash equivalents

$
744,376


$
744,376


$
-


$
-Investments


3,981,640



3,981,640



-



-$
4,726,016


$
4,726,016


$
-


$
-December 31, 2010Cash and cash equivalents

$
15,225


$
15,225


$
-


$
-Investments


1,250,000



-



1,250,000



-$
1,265,225


$
15,225


$
1,250,000


$
-




There were no financial assets accounted for at fair value on a nonrecurring basis at March 31, 2011 and December 31, 2010.




The Company has other financial instruments, such as receivables, accounts payable and other liabilities which have been excluded from the table above. Due to the short-term nature of these instruments, the carrying value of receivables, accounts payable and other liabilities approximate their fair values. The Company did not have any other financial instruments within the scope of the fair value disclosure requirements as of March 31, 2011 and December 31, 2010.




NOTE 4. ACQUISITIONS




On July 9, 2008, BigString completed the acquisition of the website, BuddyStumbler, pursuant to an asset purchase agreement. BigString issued 900,000 shares of its common stock to the sellers. The market value of BigString’s common stock on July 9, 2008 was $0.13 per share. The purchase price of $117,000 has been allocated to intangible assets based on estimated fair value. The acquisition includes right, title and interest in domain names, customer and member lists and source code. The results of operations of the assets acquired were not material.




7
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




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, Inc. (“Email Emissary”). BigString purchased 100% of Email Emissary’s stock in exchange 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. Email Emissary was dissolved on May 17, 2007.




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




As of December 31, 2008, each of the intangible assets had been fully amortized and/or impaired.




NOTE 5. PROPERTY AND EQUIPMENT




Property and equipment consist of the following:




March 31, 2011


December 31, 2010Computer equipment and internal software

$
159,313


$
159,313Furniture and fixtures


5,721



5,721165,034



165,034Less accumulated depreciation


155,560



151,303$
9,474


$
13,731




Depreciation expense for the three months ended March 31, 2011 and 2010, and for the period October 8, 2003 (Date of Formation) through March 31, 2011, was $4,257, $7,480 and $199,867, respectively.




NOTE 6. GOODWILL AND OTHER INTANGIBLES




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




Other intangible assets consist of the following:




March 31, 2011


December 31, 2010Patent application and trademark

$
4,803,067


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


730,000



730,0005,533,067



5,533,067Impairment


(1,042,876
)


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



4,490,191Accumulated amortization


4,490,191



4,490,191$
-


$
-




8
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




Amortization expense was $0, $0 and $4,490,191 for the three months ended March 31, 2011 and 2010, and for the period October 8, 2003 (Date of Formation) through March 31, 2011, 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.




Estimated remaining amortization expenses for intangible assets for the next five years is zero.




NOTE 7. INVESTMENTS




Equity Investment:




BigString owned 18% of PeopleString’s outstanding common stock at March 31, 2011, which had a fair market value of $3,981,640 based on the closing price of PeopleString common stock at such date. A consolidated balance sheet for PeopleString is as follows:




March 31, 2011


December 31, 2010Assets

$
437,916


$
613,236Liabilities


298,653



312,641Stockholders' equity


139,263



300,595Total liabilities and stockholders' equity

$
437,916


$
613,236




For the three months ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2010, BigString recorded losses of $0, $0 and $500, respectively, on the deconsolidation of its prior subsidiary, PeopleString. The loss is limited to BigString’s investment in PeopleString as BigString has no obligation to fund additional investments, and at March 31, 2011, the historical cost value of equity investments was $0.




Cost Method Investment:




In April 2009, BigString sold 15,000,000 shares of common stock in FindItAll, Inc. for $40,000 in a private transaction. The remaining $3,000 investment in FindItAll, Inc. continues to be held at cost in other assets on BigString’s consolidated balance sheets.




NOTE 8. OTHER INCOME (EXPENSE)




Other income (expense) consists of interest income, interest expense, and other, net. The components of other, net consist of gain on investments, other income, expenses related to the convertible debenture financings, preferred stock financing, warrant and common stock financings and loss (gain) on investments and are as follows:




PeriodOctober 8, 2003Three months ended


(Date of Formation)March 31,


Through2011


2010


March 31, 2011Gain on sale of investments

$
1,408,827


$
-


$
1,448,989Other income


-



-



86,720Amortization of debt issue costs


(6,080
)


(26,112
)


(392,012
)Amortization of promissory note discount


(5,415
)


(12,378
)


(141,274
)Amortization of beneficial conversion feature


(17,551
)


(74,917
)


(1,014,638
)Amortization of deferred financing


(28,200
)


-



(28,200
)Other financing expenses


-



-



(509,394
)$
1,351,581


$
(113,407
)

$
(549,809
)




9
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




For the three months ended March 31, 2011, gain on sale of investment contains $18,826 from the sale of PeopleString common shares in January 2011, $740,000 from the sale of PeopleString common shares in March 2011, and $650,000 from the issuance of PeopleString common shares as part of an Agreement and Release as discussed in Note 10.




Other income contains the reversals of $66,079 of public relations expense and $20,641 of investor relations expense.




Debt issue costs for the June 2009, August 2008, February 2008 and May 2007 financings were $33,552, $18,977, $91,706 and $248,939, respectively, and are being amortized over the term of each note, which is 24, 5, 36 and 36 months, respectively. Amortization is accelerated for the proportion of promissory notes which are converted in a period.




Deferred financing costs were $65,000, $250,000 and $22,500 for the June 2009, February 2008 and May 2007 financings, respectively, and are being amortized over the incremental term of each note for the parties in the Agreement and Release.




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 9. INCOME TAXES




BigString applies the provisions of the ASC 740, “Income Taxes.”  A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Valuation allowances as of March 31, 2011 have been applied to offset the deferred tax assets in recognition of the uncertainty that such tax benefits will be realized as BigString may continue to incur losses.




Components of deferred income tax assets are as follows:




March 31, 2011Tax EffectDeferred tax assets - currentBenefit due to loss carryforward

$
4,973,402Valuation allowance


(4,973,402
)$
-




The Company files income tax returns in all jurisdictions in which it has reason to believe it is subject to tax. The Company is subject to examination by various taxing jurisdictions. To date, there have been no examinations. Nonetheless, any tax jurisdiction may contend that a filing position claimed by the Company regarding one or more of its transactions is contrary to that jurisdiction’s laws or regulations. Significant judgment is required in determining the worldwide provisions for income taxes. In the ordinary course of business of a global business, the ultimate tax outcome is uncertain for many transactions. It is the Company’s policy to establish provisions for taxes that may become payable in future years as a result of an examination by tax authorities. The Company establishes the provisions based upon management’s assessment of exposure associated with permanent tax differences and tax credits applied to temporary difference adjustments. The tax provisions are analyzed periodically (at least quarterly) and adjustments are made as events occur that warrant adjustments to those provisions.




BigString has participated in the state of New Jersey’s Corporation Business Tax Benefit Certificate Transfer program (the “Program”), which allows certain high technology and biotechnology companies to sell unused net operating loss (“NOL”) carryforwards to other New Jersey corporation business taxpayers. The Program requires that the purchaser pay at least 75% of the amount of the surrendered tax benefit. For the year ended December 31, 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011, BigString recorded a net state tax benefit of $0 and $997,099, respectively, as a result of its sale of New Jersey state net operating losses and New Jersey state research and development credits. Since New Jersey law provides that net operating losses can be carried over for up to seven years, BigString may be able to transfer its unused New Jersey net operating losses in future years.




10
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




At December 31, 2010, BigString has available NOL carry forwards of approximately $13.3 million for federal income tax reporting purposes and $1.9 million for state income tax reporting purposes which expire in various years through 2030. The differences between book income and tax income primarily relates to amortization of intangible assets and other expenditures. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, the annual utilization of a company’s NOL and research credit carry forwards may be limited, and, as such, BigString’s NOL carry forwards available to offset future federal taxable income may be limited. Similarly, BigString may be restricted in using its research credit carry forwards to offset future federal income tax expense.




NOTE 10. DEBT




On June 23, 2009, BigString entered into a Subscription Agreement with Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Special Opportunities LP (collectively, the “2009 Subscribers”), pursuant to which the 2009 Subscribers purchased convertible notes in the aggregate principal amount of $180,000, which notes are convertible into shares of BigString’s common stock, and warrants to purchase up to 6,000,000 shares of BigString's common stock, resulting in net proceeds of approximately $146,500 after transaction fees of approximately $33,500. Proceeds from the financing have been used to support ongoing operations and the advancement of BigString’s technology, and fund the marketing and the development of its business.  BigString accounted for the convertible notes under ASC 815-15-10, and related interpretations including ASC 815-40-05. Approximately $35,000 of the proceeds was allocated to the warrants based on fair value, and included as additional paid in capital. Due to the beneficial conversion feature of the convertible notes, $168,000 was included as additional paid in capital based on the conversion discount.




Each convertible note has a term of two years and accrues interest at a rate of 6% annually. The holder of a convertible note shall have the right from and after the issuance thereof until such time as the convertible note is fully paid, to convert any outstanding and unpaid principal portion thereof into shares of common stock at a conversion price of $0.015 per share, as adjusted. The conversion price and number and kind of shares to be issued upon conversion of the convertible notes are subject to adjustment from time to time. The warrants have an exercise price of $0.015 per share, as adjusted. The number of shares of common stock underlying each warrant and the exercise price are subject to certain adjustments.




On January 31, 2011, BigString entered into a separate Agreement and Release with each of Alpha Capital Anstalt and Whalehaven Capital Fund Limited which extended the terms of the June 23, 2009 convertible notes and other convertible notes issued by BigString to each of them by two years.  As a result, the term of the June 23, 2009 convertible notes has been extended to June 23, 2013.  The Agreement and Releases are discussed in greater detail below in this Note 10.
 
 At March 31, 2011, the outstanding aggregate principal amount of the June 23, 2009 convertible notes was $75,000.




In connection with the June 23, 2009 financing, BigString paid Whalehaven Capital Fund Limited $6,000, Alpha Capital Anstalt $6,000 and Excalibur Special Opportunities LP $2,400 for finder’s fees.




As a result of this financing, the conversion price for the outstanding convertible notes and the exercise price underlying the warrants previously issued by BigString in February 2008 and May 2007 and the conversion price of the shares of outstanding Series A Preferred Stock were subject to adjustment under anti-dilution provisions. The 2007 Subscribers and 2008 Subscribers (as such terms are defined below) verbally agreed to waive anti-dilution provisions related to the number of shares of common stock underlying the warrants previously issued by BigString in February 2008 and May 2007.




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




BigString incurred transaction fees of approximately $19,000 in connection with the August 25, 2008 financing. BigString accounted for the convertible feature of the notes under ASC 815-15-10, and related interpretations including ASC 815-40-05. Due to the conversion rights only upon an event of default, $2,080 was included as additional paid in capital based on a weighted conversion discount. The warrants did not have a conversion discount, and accordingly, no proceeds were allocated to the warrants based on fair value, nor included as additional paid in capital.




11
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


As a result of this financing, the conversion price for the outstanding convertible notes and the exercise price and number of shares of common stock underlying the warrants previously issued by BigString in February 2008 and May 2007 and the conversion price of the shares of outstanding Series A Preferred Stock were subject to adjustment under anti-dilution provisions.




In December 2008, all amounts due under the notes issued to Dwight Lane Capital, LLC and Mr. Dutton were paid by BigString, including accrued interest of $9,328, and, as a result, the notes were cancelled.




On February 29, 2008, BigString entered into a Subscription Agreement with Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Small Cap Opportunities LP (collectively, the “2008 Subscribers”), pursuant to which the 2008 Subscribers purchased convertible notes in the aggregate principal amount of $700,000, which notes are convertible into shares of BigString’s common stock, and warrants to purchase up to 2,333,333 shares of BigString's common stock, resulting in net proceeds of approximately $608,000 after transaction fees of approximately $92,000. Proceeds from the financing have been used to support ongoing operations and the advancement of BigString’s technology, and fund the marketing and the development of its business.  BigString accounted for the convertible notes under ASC 815-15-10, and related interpretations including ASC 815-40-05. Approximately $76,200 of the proceeds was allocated to the warrants based on fair value, and included as additional paid in capital. Due to the beneficial conversion feature of the convertible notes, $186,660 was included as additional paid in capital based on the conversion discount.




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




The convertible notes issued on February 29, 2008 were scheduled to mature on February 28, 2011.  On January 31, 2011, BigString entered into a separate Agreement and Release with each of Alpha Capital Anstalt and Whalehaven Capital Fund Limited which extended the terms of the February 29, 2008 convertible notes and other convertible notes issued by BigString to each of them by two years.  As a result, the term of the February 29, 2008 convertible notes has been extended to February 28, 2013.  The Agreement and Releases are discussed in greater detail below in this Note 10.


At March 31, 2011, the outstanding aggregate principal amount of the February 29, 2008 convertible notes was $250,000.




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




As a result of this financing, the conversion price for the outstanding convertible notes and the exercise price and number of shares of common stock underlying the warrants previously issued by BigString in May 2007 and the conversion price of the shares of outstanding Series A Preferred Stock were subject to adjustment under anti-dilution provisions.




On May 1, 2007, BigString entered into a Subscription Agreement with Whalehaven Capital Fund Limited, Alpha Capital Anstalt, Chestnut Ridge Partners LP, Iroquois Master Fund Ltd. and Penn Footwear (collectively, the “2007 Subscribers”), pursuant to which the 2007 Subscribers purchased convertible notes in the aggregate principal amount of $800,000, which notes are convertible into shares of BigString’s common stock, and warrants to purchase up to 1,777,779 shares of BigString's common stock, resulting in net proceeds of approximately $551,000 after transaction fees of approximately $249,000. BigString accounted for the convertible notes under ASC 815-15-10, and related interpretations including ASC 815-40-05. Approximately $31,300 of the proceeds was allocated to the warrants based on fair value, and included as additional paid in capital. Due to the beneficial conversion feature of the convertible notes, $666,648 was included as additional paid in capital based on the conversion discount.




12
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




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




On May 1, 2010, the convertible notes issued by BigString on May 1, 2007 to each of Alpha Capital Anstalt, Iroquois Master Fund and Whalehaven Capital Fund Limited matured. On November 5, 2010, BigString received a notice of default from Iroquois Capital Management, LLC demanding immediate repayment of the entire balance of the convertible note in cash plus all accrued and unpaid interest and penalties. Subsequently, Iroquois Capital Management, LLC verbally rescinded such demand.  The convertible notes issued to each of Alpha Capital Anstalt and Whalehaven Capital Fund Limited were extended by two years pursuant to the terms of the Agreement and Release between BigString and each of them.  As a result, the term of the convertible notes issued to each of Alpha Capital Anstalt and Whalehaven Capital Fund Limited have been extended to May 1, 2012.  The term of the convertible note issued to Iroquois Capital Management, LLC was not extended.


On January 31, 2011, BigString entered into a separate Agreement and Release (each an “Agreement and Release”) with each of Alpha Capital Anstalt and Whalehaven Capital Fund Limited (collectively, the “Releasors”). As discussed above in this Note 10, each of the Releasors is the holder of convertible notes previously issued to each of them by BigString on the following dates and in the following principal amounts: May 1, 2007 in the principal amount of $250,000; February 29, 2008 in the principal amount of $250,000; and June 23, 2009 in the principal amount of $75,000 (collectively the “Notes”). Each of the Releasors is also the holder of certain warrants to acquire shares of BigString’s common stock that were previously issued to each of them by BigString on the following dates: February 29, 2008 for the right to purchase 833,333 shares (including an additional 729,167 shares as adjusted) of BigString’s common stock; and June 23, 2009 for the right to purchase 2,500,000 shares of BigString’s common stock (collectively, the “Warrants”). Pursuant to the terms of each Agreement and Release the Warrants held by each of the Releasors was cancelled and each of the Notes held by each of them was amended to extend the term by two years. In addition, the Releasors released any claims they each had or may have had against BigString through the date of their respective Agreement and Release. In consideration of the foregoing, BigString has transferred 500,000 shares of PeopleString common stock to Alpha Capital Anstalt and 1,500,000 shares of PeopleString common stock to Whalehaven Capital Fund Limited. BigString accounted for the transaction as a gain on investment, waived accrued interest expense, cancellation of warrants, deferred financing cost which will be accrued over the remaining life of the notes and interest expense.


At March 31, 2011, the outstanding aggregate principal amount of the May 1, 2007 convertible notes was $97,500.




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




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




For the three months ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011, $539,076, $0 and $1,257,500, respectively, of the convertible notes were converted resulting in 35,938,408, 0 and 73,138,889 shares, respectively, of BigString’s common stock being issued to the holders of the convertible notes. Information regarding the convertible notes outstanding at March 31, 2011 and December 31, 2010 is as follows:




13
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




March 31, 2011


December 31, 2010Convertible notes, May 1, 2007, maturing  May 1, 2010 and May 1, 2012

$
97,500


$
292,500Beneficial conversion feature


-



-Note Discount


-



-Deferred financing


(19,500
)


-78,000



292,500Convertible notes, February 29, 2008, maturing February 28, 2013

$
250,000


$
594,076Beneficial conversion feature


-



(8,801
)Note Discount


-



(3,592
)Deferred financing


(230,000
)


-20,000



581,683Convertible notes, June 23, 2009, maturing  June 23, 2013

$
75,000


$
75,000Beneficial conversion feature


(8,750
)


(17,500
)Note Discount


(1,215
)


(3,037
)Deferred financing


(59,800
)


-5,235



54,463$
103,235


$
928,646




For the three months ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011, BigString issued 2,448,642, 2,768,555 and 8,478,820 shares, respectively, of BigString’s common stock in lieu of $36,730, $41,528 and $231,156, respectively, of accrued interest. Future accrued interest payments, which may include shares of BigString’s common stock in lieu of accrued interest, on the May 1, 2007, February 29, 2008 and June 23, 2009 convertible notes are currently estimated as follows:




AccruedYears Ending

InterestDecember 31,

Payments2011

$
21,7842012


25,2212013


19,500$
66,505




Change in Control




Management believes that a change in control of BigString may occur in the future in the event that Alpha Capital Anstalt converts and exercises all or substantially all of the convertible notes of BigString’s common stock held by it.




NOTE 11. COMMON STOCK




On July 18, 2005, BigString amended its Certificate of Incorporation to, among other things, (1) change its name from Recall Mail Corporation to BigString Corporation, and (2) increase the number of shares BigString is authorized to issue from 50,000,000 shares to 250,000,000 shares, consisting of 249,000,000 shares of common stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. The board of directors has the authority, without action by the stockholders, to designate and issue the shares of preferred stock in one or more series and to designate the rights, preference and privileges of each series, any or all of which may be greater than the rights of BigString’s common stock. Currently, there are 79,657 shares of preferred stock outstanding.




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




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




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




14
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




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




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




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




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




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




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




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




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




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




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




On November 30, 2007, BigString agreed to issue 1,000,000 shares of 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 upon 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, at $0.15 per share, for accrued interest on convertible promissory notes totaling $43,757.




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




On March 2, 2009, BigString issued 525,000 shares of its common, at $0.08 per share, stock for accrued interest on convertible promissory notes totaling $42,000.




On May 1, 2009, BigString issued 468,750 shares of its common stock, at $0.08 per share, for accrued interest on convertible promissory notes totaling $37,500.




15
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


On July 1, 2009, BigString issued 4,429,522 shares of its common stock upon the conversion of 320,343 shares of Series A Preferred Stock, par value $0.0001 per share.




On July 15, 2009, BigString issued 1,000,000 shares of its common stock upon the conversion of convertible promissory notes totaling $15,000. The conversion price was $0.015 per share.




On July 27, 2009, BigString issued 500,000 shares of its common stock upon the conversion of convertible promissory notes totaling $7,500. The conversion price was $0.015 per share.




On August 31, 2009, BigString issued 480,552 shares of its common stock upon the conversion of convertible promissory notes totaling $7,208. The conversion price was $0.015 per share.




On September 30, 2009, BigString issued 2,950,000 shares of its common stock upon the conversion of convertible promissory notes totaling $44,250. The conversion price was $0.015 per share.




On October 13, 2009, BigString issued 731,543 shares of its common stock upon the conversion of convertible promissory notes totaling $10,973. The conversion price was $0.015 per share.




On March 5, 2010, BigString issued 2,768,555 shares of its common stock, at $0.015 per share, for accrued interest on convertible promissory notes totaling $41,528.




On April 28, 2010, BigString issued 2,000,000 shares of its common stock upon the conversion of convertible promissory notes totaling $30,000. The conversion price was $0.015 per share.




On May 6, 2010, BigString issued 2,000,000 shares of its common stock upon the conversion of convertible promissory notes totaling $30,000. The conversion price was $0.015 per share.




On May 21, 2010, BigString issued 4,833,333 shares of its common stock upon the conversion of convertible promissory notes totaling $72,500. The conversion price was $0.015 per share.




On May 21, 2010, BigString issued 956,593 shares of its common stock, at $0.015 per share, for accrued interest on convertible promissory notes totaling $14,348.




On May 24, 2010, BigString issued 2,333,333 shares of its common stock upon the conversion of convertible promissory notes totaling $35,000. The conversion price was $0.015 per share.




On May 28, 2010, BigString issued 3,000,000 shares of its common stock upon the conversion of convertible promissory notes totaling $45,000. The conversion price was $0.015 per share.




On June 2, 2010, BigString issued 1,333,333 shares of its common stock upon the conversion of convertible promissory notes totaling $20,000. The conversion price was $0.015 per share.




On July 8, 2010, BigString issued 3,000,000 shares of its common stock upon the conversion of convertible promissory notes totaling $45,000. The conversion price was $0.015 per share.




On September 22, 2010, BigString issued 2,216,667 shares of its common stock upon the conversion of convertible promissory notes totaling $33,250. The conversion price was $0.015 per share.




On September 29, 2010, BigString issued 3,849,498 shares of its common stock upon the conversion of convertible promissory notes totaling $57,742. The conversion price was $0.015 per share.




On November 19, 2010, BigString issued 977,167 shares of its common stock, at $0.015 per share, for accrued interest on convertible promissory notes totaling $14,658.




On November 16, 2010, BigString issued 1,000,000 shares of its common stock upon the conversion of convertible promissory notes totaling $15,000. The conversion price was $0.015 per share.




On November 22, 2010, BigString issued 2,500,000 shares of its common stock upon the conversion of convertible promissory notes totaling $37,500. The conversion price was $0.015 per share.




On December 23, 2010, BigString issued 2,500,000 shares of its common stock upon the conversion of convertible promissory notes totaling $37,500. The conversion price was $0.015 per share.




On December 23, 2010, BigString issued 42,400 shares of its common stock, at $0.015 per share, for accrued interest on convertible promissory notes totaling $636.




16
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


On January 10, 2011, BigString issued 1,666,667 shares of its common stock upon the conversion of convertible promissory notes totaling $25,000. The conversion price was $0.015 per share.




On January 20, 2011, BigString issued 10,465,761 shares of its common stock upon the conversion of convertible promissory notes totaling $156,986. The conversion price was $0.015 per share.




On January 24, 2011, BigString issued 5,800,000 shares of its common stock upon the conversion of convertible promissory notes totaling $87,000. The conversion price was $0.015 per share.




On January 25, 2011, BigString issued 4,000,000 shares of its common stock upon the conversion of convertible promissory notes totaling $60,000. The conversion price was $0.015 per share.




On January 26, 2011, BigString issued 3,333,334 shares of its common stock upon the conversion of convertible promissory notes totaling $50,000. The conversion price was $0.015 per share.




On February 24, 2011, BigString issued 3,000,000 shares of its common stock upon the conversion of convertible promissory notes totaling $45,000. The conversion price was $0.015 per share.




On March 11, 2011, BigString issued 3,353,457 shares of its common stock upon the conversion of convertible promissory notes totaling $50,302. The conversion price was $0.015 per share.




On March 11, 2011, BigString issued 2,448,642 shares of its common stock, at $0.015 per share, for accrued interest on convertible promissory notes totaling $36,730.




On March 16, 2011, BigString issued 4,319,189 shares of its common stock upon the conversion of convertible promissory notes totaling $64,788. The conversion price was $0.015 per share.




NOTE 12. 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, as adjusted. BigString has registered the shares of common stock issuable upon conversion of the shares of Series A Preferred Stock and the shares of common stock underlying the warrants. In conjunction with this transaction, BigString incurred a fee of $140,000, which is included in additional paid in capital.




BigString accounted for the convertible preferred stock under ASC 815-15-10, and related interpretations including ASC 815-40-05. BigString performed calculations allocating the proceeds of the Series A Preferred Stock with detachable warrants to each respective security at its value. The value of the warrants of $400,000 was recorded as a reduction of the Series A Preferred Stock and credited to additional paid-in-capital. The recorded discount of $480,000 resulting from allocation of proceeds to the beneficial conversion feature is analogous to a dividend and is recognized as a return to the preferred stockholders at the date of issuance of the convertible preferred stock.




On July 1, 2009, BigString issued 4,429,522 shares of its common stock upon the conversion of 320,343 shares of Series A Preferred Stock, par value $0.0001 per share.




NOTE 13. SHARE-BASED COMPENSATION




Warrants:




During 2004, BigString granted warrants as payment for advisory services. The warrants provided for the purchase of 60,000 shares of BigString’s common stock at an exercise price of $0.25. Certain of these warrants were exercised in 2005, which resulted in 45,000 shares of BigString’s common stock being issued to the holders thereof. As a result of these exercises, BigString received $11,250 in gross proceeds. The remainder of these warrants was exercised in 2006, which resulted in 15,000 shares of BigString’s common stock being issued to the holder thereof. As a result of this exercise, BigString recorded a subscription receivable of $3,750. In connection with the grant of these warrants, BigString recorded an expense of $3,500 which is included in BigString’s consolidated statements 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.




17
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




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. 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. The remainder of each of these warrants expired on September 23, 2010. In connection with the grant of these warrants, BigString recorded an expense of $171,800, which is included in BigString’s consolidated statements of operations for the year ended December 31, 2005. The fair value of the warrants granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used: dividend yield of 0%; expected volatility of 47%; risk free rate of return of 5%; and expected life of 2 years. The weighted average fair value of these warrants was $0.07 per share.




On May 2, 2006, BigString granted warrants to purchase shares of BigString’s common stock in consideration for business consultant services to be provided by Lifeline Industries, Inc. A total of $135,300 of the deferred compensation in connection with the warrants has been expensed over a period of 36 months. The fair value of the warrants granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used: dividend yield of 0%; expected volatility of 47%; risk free rate of return of 5%; and expected life of 2 years. The weighted average fair value of these warrants was $0.42 and $0.18 per share.




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




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




18
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




As discussed in Note 10, on February 29, 2008, BigString granted warrants to purchase up to 2,706,666 shares of BigString's common stock to the 2008 Subscribers and Gem Funding LLC. Each of the warrants has a term of five years from February 29, 2008 and was fully vested on the date of issuance. The warrants are exercisable at $0.15 per share of common stock, as adjusted. A total of $76,176 of the purchase price for the convertible notes and warrants was allocated to the warrants based on fair value. As a result of this transaction, certain warrants to purchase shares of BigString’s common stock issued to the 2007 Subscribers and Gem Funding LLC were adjusted.




As discussed in Note 10, on August 25, 2008, BigString granted warrants to purchase up to 800,000 shares of BigString's common stock to Dwight Lane Capital, LLC and Marc W. Dutton. Each of the warrants has a term of ten years from August 25, 2008 and was fully vested on the date of issuance. The warrants are exercisable at $0.08 per share of common stock. The warrants did not have a conversion discount, and accordingly, no proceeds for the convertible notes and warrants was allocated to the warrants, based on fair value, nor included as additional paid in capital. As a result of this transaction, certain warrants to purchase shares of BigString’s common stock issued to the 2007 Subscribers, the 2008 Subscribers and Gem Funding LLC were adjusted.




As discussed in Note 10, on June 23, 2009, BigString granted warrants to purchase up to 6,000,000 shares of BigString's common stock to the 2009 Subscribers. Each of the warrants has a term of five years from June 23, 2009 and was fully vested on the date of issuance. The warrants are exercisable at $0.015 per share of common stock, as adjusted. A total of $34,992 of the purchase price for the convertible notes and warrants was allocated to the warrants based on fair value. As a result of this transaction, certain warrants to purchase shares of BigString’s common stock issued to the 2007 Subscribers, the 2008 Subscribers and Gem Funding LLC were adjusted.




As discussed in Note 10, on January 31, 2011, BigString entered into a separate Agreement and Release with each of the Releasors. Pursuant to the terms of each Agreement and Release, the Releasors have each agreed to forfeit the Warrants held by each of them to BigString for cancellation. Warrants to purchase 8,125,000 shares of BigString’s common stock, exercisable at $0.015 per share of common stock, were cancelled, resulting in a reduction of additional paid in capital of $203,349.




The number of warrants outstanding as of January 1, 2011 and changes to such number during the three months ended March 31, 2011 are as follows:




WeightedWeighted


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term


ValueWarrants outstanding at January 1, 2011


14,050,000


$
0.13



3.2


$
175,500Warrants granted


-


$
-Warrants exercised


-


$
-Warrants cancelled/forfeited/expired


(8,125,000
)

$
0.02Warrants outstanding at March 31, 2011


5,925,000


$
0.30



3.2


$
17,875Warrants exercisable at March 31, 2011


5,925,000


$
0.30



3.2


$
17,875




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 three months ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011, were 0, 0 and 28,764,657, respectively.




19
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




Warrants exercised during the three months ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011 were 0, 0 and 1,923,334, respectively.  Cash received during the three months ended March 31, 2011 and 2010 from the exercise of warrants was $0 and $0, respectively. The total intrinsic value of warrants exercised in the three months ended March 31, 2011 and 2010 was $0 and $0, respectively.




During the three months ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011, 8,125,000, 0 and 18,522,778 warrants were cancelled, respectively, with an aggregate intrinsic value of $121,875, $0 and $121,875, respectively, at the date of cancellation. During the three months ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011, 0, 0 and 2,393,545 warrants were forfeited or expired, respectively, with an aggregate intrinsic value of $0, $0 and $26,000, respectively, at the date of forfeit or expiration.




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 granted a non-qualified stock option to purchase 575,100 shares of BigString’s common stock to Kieran Vogel. 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 related to Mr. Vogel’s participation in BigString’s OurPrisoner program. These stock options were granted outside of the Equity Incentive Plan.




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. These options were subsequently forfeited.




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. 400,000 shares of BigString’s common stock are eligible for purchase at the per share price equal to $0.24; 600,000 shares of BigString’s common stock are eligible for purchase at $0.50 per share; 400,000 shares of BigString’s common stock are eligible for purchase at $.90 per share; and 400,000 shares of BigString’s common stock are eligible for purchase at $1.25 per share. The incentive stock option vested quarterly over a three year period.




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. These options were subsequently forfeited.




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 subsequently 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. These options were subsequently forfeited.




20
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


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




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




For the three months ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011, BigString recorded stock-based option compensation expense of $0, $120 and $601,416, respectively.  ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. Stock-based compensation expense was recorded net of estimated forfeitures.




The number of stock options outstanding as of January 1, 2011 and changes to such number during the three months ended March 31, 2011 are as follows:




WeightedWeighted


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term


ValueOptions outstanding at January 1, 2011


6,950,100


$
0.36



3.4


$
-Options granted


-


$
-Options exercised


-


$
-Options cancelled/forfeited/expired


-


$
-Options outstanding at March 31, 2011


6,950,100


$
0.36



3.2


$
-Options exercisable at March 31, 2011


6,950,100


$
0.36



3.2


$
-




The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate difference between the closing stock prices of BigString’s common stock 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 three months ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2010 were 0, 0 and 12,650,100, respectively.




No options were exercised, and no cash received from option exercises and purchases of shares for the three months ended March 31, 2011 and 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011. The total tax benefit attributable to options exercised in the period October 8, 2003 (Date of Formation) through March 31, 2011 was $0.




During the three months ended March 31, 2011 and 2010, and the period October 8, 2003 (Date of Formation) through March 31, 2011, options to purchase a total of 0, 2,200,000, and 5,700,000 shares of BigString’s common stock, respectively, were cancelled, forfeited or expired with an aggregate intrinsic value of $0, $0 and $0, respectively, at the date of expiration.




The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model, consistent with the provisions of ASC 718. Because option-pricing models require the use of subjective assumptions, changes in these assumptions can materially affect the fair value of the options. BigString has limited relevant historical information to support the expected exercise behavior because no exercises have taken place.




21
 Index


BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




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 EndedMarch 31,2011

2010Risk-free interest rate


-
%


-
%Expected volatility


-
%


-
%Expected life (in years)


-



-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. 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 14. RELATED PARTY TRANSACTIONS




On December 29, 2008, BigString signed an agreement with Digital BobKat, LLC, a limited liability company in which Robert S. DeMeulemeester, an officer and director of BigString, has an interest, to provide business consulting services, including, but not limited to, management, product development, marketing, research, advertising and general business and administrative procedures and processes. The agreement renews annually, is subject to adjustment periodically, and may be terminated at will by either party upon three days notice. Payments are due monthly and are based on fair market value of the services provided, similar to the terms of a transaction with an unrelated party. Expenses for the three months ended March 31, 2011 and 2010, and the period October 8, 2003 (Date of Formation) through March 31, 2011 were $69,310, $78,436 and $189,746, respectively.




On April 2, 2009, PeopleString entered into a verbal agreement with BigString to license BigString’s messaging technology and share the cost of certain common services. At March 31, 2011, BigString was a significant, non-majority stockholder of PeopleString’s common stock. The agreement renews annually, is subject to adjustment periodically, and may be terminated at will by either party upon three days notice. Under the agreement, BigString provides messaging services to PeopleString users. The licensing fee was based on BigString’s experience providing services to other third parties and was determined by BigString’s management. Based on volume, BigString charges PeopleString fees that are higher in aggregate than BigString charges other third parties for outsourced messaging services. BigString recorded revenue for the three months ended March 31, 2011 and 2010, and the period October 8, 2003 (Date of Formation) through March 31, 2011 of $10,500, $10,500 and $85,500, respectively.




Shared services costs are quantified based on management’s estimate of the percentage of time devoted to each company. Payments are due quarterly. In 2009, the shared services included hosting, insurance, rent, payroll and miscellaneous general and administrative expenses, and were primarily paid by BigString. In 2010, the shared services included hosting, insurance, rent and miscellaneous general and administrative expenses, and were primarily paid by PeopleString by year-end. PeopleString’s management determined, in their sole discretion, based on their subjective estimate of the amount of time devoted to each company, the amount incurred and paid for the shared services that is allocated to PeopleString. BigString recorded expense for the three months ended March 31, 2011 of $37,121 and expense reductions for the three months ended March 31, 2010 and the period October 8, 2003 (Date of Formation) through March 31, 2011 of $23,073 and $100,622, respectively.




NOTE 15. COMMITMENTS AND CONTINGENCIES




Leases:




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




MinimumYears Ending

LeaseDecember 31,

Payments2011

$
24,6902012


5,487$
30,177




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BIGSTRING CORPORATION AND SUBSIDIARY
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




Rental expense, excluding shared service costs, was $0, $6,900 and $239,640 for the three months ended March 31, 2011 and 2010, and the period October 8, 2003 (Date of Formation) through March 31, 2011, respectively.




Computer co-location, power and Internet access expense, including shared service costs, was $8,196, $5,676 and $233,145 for the three months ended March 31, 2011 and 2010, and the period October 8, 2003 (Date of Formation) through March 31, 2011, respectively.




Marketing Affiliate Commitments:




In connection with contracts to provide email services to marketing affiliates, BigString may be obligated to make payments, which may represent a portion of net advertising and/or service revenues, to its marketing affiliates.  As of the three months ended March 31, 2011 and 2010, and the period October 8, 2003 (Date of Formation) through March 31, 2011, these commitments were not material.




Other Commitments:




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






NOTE 16. SUBSEQUENT EVENTS




In April 2011, BigString sold 650,000 shares of PeopleString common stock through private transactions to accredited investors. The common stock was sold at $0.40 per share and BigString received aggregate gross proceeds of $260,000. As of April 12, 2011, BigString owned 5,475,600 shares of PeopleString common stock, approximately 15.8% of the issued and outstanding shares.







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




We have provided below information about BigString‘s financial condition and results of operations for the three months ended March 31, 2011 and 2010.  This information should be read in conjunction with BigString’s unaudited consolidated financial statements for the three months ended March 31, 2011 and 2010, and the period October 8, 2003 (Date of Formation) through March 31, 2011, including the related notes thereto, which begin on page 1 of this report. These unaudited consolidated financial statements should be read in conjunction with the year-end consolidated financial statements and notes thereto included in BigString’s annual report on Form 10-K for the year ended December 31, 2010. The following discussion and analysis contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.




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, incorporated in the state of New Jersey, was formed by BigString in early 2006 to develop technology relating to interactive web portals.




PeopleString, incorporated in the state of Delaware, was formed by BigString in early 2009 to develop technology relating to social networks. PeopleString is a separate reporting company under the Exchange Act. As of May 17, 2011, BigString owned less than 16% of PeopleString’s outstanding common stock.




Development Stage Company




BigString is considered a development stage enterprise in accordance with the guidance contained in ASC 915. 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 hosting 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 recipients’ eyes and allows senders to create, save and send self-destructing video email.




BigString also provides 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.




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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.




In March, 2009, BigString announced the launch of the PeopleString incentive-based social network that pays users to receive regular direct mail and perform internet activities, such as email, instant messaging, video mail, online file storage, search and shopping.




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 the Internet is accessible. Email users can access BigString’s English language site, www.BigString.com, on a global basis, 24 hours a day.




In December 2009, BigString received a patent from the United States Patent and Trademark Office for Universal, Recallable, Erasable, Secure and Timed Delivery Email.




Notwithstanding its progress in acquiring new members, BigString significantly reduced its marketing efforts from prior years due to financial constraints. BigString also reduced expenses in other areas, such as rent and headcount, to better position the company financially.




Certain criteria BigString reviews to measureits 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.




Critical Accounting Policies




BigString’s discussion and analysis of financial condition and results of operations are based upon BigString’s unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited 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 unaudited 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.




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




Revenue Recognition.  BigString derives revenue from online services, electronic commerce, advertising and data network services. BigString also derives revenue from marketing affiliations. BigString recognizes revenue in accordance with the guidance contained in the ASC 605, “Revenue Recognition.”




Consistent with the provisions of ASC 605-45-05, BigString generally recognizes revenue associated with its advertising and marketing affiliation programs on a gross basis due primarily to the following factors: BigString is the primary obligor; has general inventory risk; has latitude in establishing prices; has discretion in supplier selection; performs part of the service; and determines specifications.




Consistent with ASC 605-50-15, BigString accounts for cash considerations given to customers, for which it does not receive a separately identifiable benefit or cannot reasonably estimate fair value, as a reduction of revenue rather than an expense. Accordingly, any corresponding distributions to customers are recorded as a reduction of gross revenue.




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




Stock-Based Compensation. BigString accounts for stock-based compensation under ASC 718, “Compensation-Stock Compensation.” The compensation cost for the portion of awards is based on the grant-date fair value of those awards as calculated for either recognition or pro forma disclosures under ASC 718.




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




Research and Development.  BigString accounts for research and development costs in accordance with accounting pronouncements, including ASC 730, “Research and Development” and ASC 985, “Software.”  BigString has determined that technological feasibility for its software products is reached shortly before the products are released. Research and development costs incurred between the establishment of technological feasibility and product release have not been material and have accordingly been expensed when incurred.




Evaluation of Long-Lived Assets.  BigString reviews property and equipment and finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. In accordance with the guidance provided in ASC 360-15-35, “Impairment or Disposal of Long-Lived Assets,” if the carrying value of the long-lived asset exceeds the estimated future undiscounted cash flows to be generated by such asset, the asset would be adjusted to its fair value and an impairment loss would be charged to operations in the period identified.




Intangibles.  ASC 350, “Goodwill and Other,” specifies the financial accounting and reporting for acquired goodwill and other indefinite life intangible assets. Goodwill and other indefinite-lived intangible assets are no longer amortized, but are reviewed for impairment at least annually.




Accounting for Derivatives.  BigString evaluates its options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC 815-15-10, “Hedging and Derivatives-Embedded Derivatives” and related interpretations including ASC 815-40-05, “Hedging and Derivatives-Contracts in Entity’s Own Equity.”




Recent Accounting Pronouncements.BigString’s significant accounting policies are summarized in Note 1 of BigString’s annual report on Form 10-K for the year ended December 31, 2010.  There were no significant changes to these accounting policies during the three months ended March 31, 2011 and BigString does not expect that the adoption of other recent accounting pronouncements will have a material impact on its consolidated financial statements.




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Results of Operations




For the Three Months Ended March 31, 2011 and 2010




Net Loss.  For the three months ended March 31, 2011, net earnings were $973,774, as compared to a net loss of $164,924 for the three months ended March 31, 2010. The $1,138,698 increase in net earnings was primarily attributable to a $1,464,988 increase in Other, net income related to gains on sales of investments.




Revenues.  For the three months ended March 31, 2011, revenues were $17,287, a $1,205 increase from revenues of $16,082 earned in the three months ended March 31, 2010.  Of the revenues generated for the three months ended March 31, 2011, $13,122 was generated from product and service fees and $4,165 was generated from advertisers, as compared to $13,289 from product and service fees and $2,793 from advertisers for the three months ended March 31, 2010.




At March 31, 2011, unearned revenue from product and service fees decreased to $482 from $1,303 at December 31, 2010.




Operating Expenses.  For the three months ended March 31, 2011, operating expenses were $297,202, a $250,885 increase from operating expenses of $46,317 incurred in the three months ended March 31, 2010.




●
Cost of revenues: Cost of revenues for the three months ended March 31, 2011 were $14,003, as compared to $13,624 for the same prior year period.  The $379 increase in cost was primarily attributable to increased costs associated with increased revenues.




●
Research, development, sales, general and administrative: Research, development, sales, general and administrativeexpenses for the three months ended March 31, 2011 were $283,199, as compared to $32,693 for the same prior year period.  The increase in expenses was primarily attributable to increased compensation and professional fees.




Other income (expense).  For the three months ended March 31, 2011, other income was $1,253,689, a $1,388,378 increase over other expenses of $134,689 in the three months ended March 31, 2010.




●
Interest income: Interest income for the three months ended March 31, 2011 was $19, as compared to $19 for the same prior year period.




●
Interest expense: Interest expense for the three months ended March 31, 2011 was $97,911, as compared to $21,301 for the same prior year period. The $76,610 increase was primarily attributable to expenses partially offsetting gains associated with the Agreement and Release with each of Alpha Capital Anstalt and Whalehaven Capital Fund Limited.




●
Other, net: Other, net income for the three months ended March 31, 2011 was $1,351,581, as compared to expenses of $113,407 for the same prior year period. The $1,464,988 increase was primarily attributable $758,827 of gains on sales of investments and a $650,000 gain associated with the transfer of assets pursuant to the Agreement and Release with each of Alpha Capital Anstalt and Whalehaven Capital Fund Limited.




Income Taxes.  For the three months ended March 31, 2011 and 2010, BigString has applied valuation allowances to offset the deferred tax assets in recognition of the uncertainty that such tax benefits will be realized.




●
At December 31, 2010, BigString has available net operating loss carry forwards of approximately $13.3 million for federal income tax reporting purposes and $1.9 million for state income tax reporting purposes which expire in various years through 2030. 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.




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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 March 31, 2011, BigString has expended $4,627,157 for operating and investing activities, which has been primarily funded by investments of $5,371,533 from BigString’s stockholders and convertible note and warrant holders.  For the three months ended March 31, 2011, BigString generated $729,151 for operating and investing activities, an increase of $689,743 from the amount generated during the three months ended March 31, 2010.




BigString’s cash balance as of March 31, 2011 was $744,376, which was an increase of $729,151 from the cash balance of $15,225 as of December 31, 2010. This increase to the cash balance was primarily attributable to sales of investments.




As described herein, BigString participated in the state of New Jersey’s Program, which allows certain high technology and biotechnology companies to sell unused NOL carryforwards and research and development credits to other New Jersey corporation business taxpayers. On January 11, 2010, BigString received net proceeds of $310,108. BigString may also be able to transfer its unused New Jersey net operating losses and research and development credits in future years and may apply for participation again in future years.




On January 31, 2011, BigString entered into a separate Agreement and Release with each of the Releasors, who are the holders of the Notes and the Warrants (see Note 10 to BigString’s unaudited consolidated financial statements contained herein). Pursuant to the terms of each Agreement and Release, the Releasors have each agreed to forfeit the Warrants held by each of them to BigString for cancellation and to enter into amendments to each of the Notes held by each of them whereby the term of each Note will be extended by two years. In addition, the Releasors have each agreed to release any claims they each had or may have had against BigString through the date of their respective Agreement and Release. In consideration of the foregoing, BigString has transferred 500,000 shares of PeopleString common stock to Alpha Capital Anstalt and 1,500,000 shares of PeopleString common stock to Whalehaven Capital Fund Limited.




BigString realized $18,826 from the sale of PeopleString common shares in January 2011 and $740,000 from the sale of shares of PeopleString common stock in March 2011. BigString also realized $260,000 from the sale of shares of PeopleString common stock in April 2011. As of May 17, 2011, BigString owned 5,475,600 shares of PeopleString common stock, approximately 15.8% of the issued and outstanding shares.




Management believes BigString’s current cash balance of $675,637 at May 10, 2011 is sufficient to fund the minimum level of operations for the next twelve months.




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




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




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




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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 4.Controls and Procedures




(a) Evaluation of disclosure controls and procedures.




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




Based on management’s evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2011, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.




(b) Changes in internal control over financial reporting.




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




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







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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




None.




Item 3.Defaults Upon Senior Securities




On May 1, 2010, the convertible notes issued by BigString on May 1, 2007 to each of Alpha Capital Anstalt, Iroquois Master Fund and Whalehaven Capital Fund Limited matured. On November 5, 2010, BigString received a notice of default from Iroquois Capital Management, LLC demanding immediate repayment of the entire balance of the May 1, 2007 convertible note isued to it in cash plus all accrued and unpaid interest and penalties. Iroquois Capital Management, LLC has since verbally rescinded such demand.The terms of the convertible notes issued by BigString on May 1, 2007 to Alpha Capital Anstalt and Whalehaven Capital Fund were extended to May 1, 2012 pursuant to the Agreement and Releases between BigString and each of them.




Item 4.(Removed and Reserved.)




Item 5.Other Information




None.




Item 6.Exhibits




See Index of Exhibits commencing on page E-1.






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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:              May 23, 2011
By:
/s/ Darin M. MymanDarin M. MymanPresident and Chief Executive Officer

(Principal Executive Officer)




Dated:              May 23, 2011
By:
/s/ Robert S. DeMeulemeesterRobert S. DeMeulemeesterExecutive Vice President, Chief Financial Officer, Treasurer and Secretary

(Principal Financial and Accounting Officer)








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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 $0.0001 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
Form of Convertible Note, dated June 23, 2009, issued to the following subscribers and in the following amounts: Whalehaven Capital Fund Limited ($75,000); Alpha Capital Anstalt ($75,000); and Excalibur Special Opportunities LP ($30,000), incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on June 29, 2009.4.5
Amendment No. 1, dated as of January 31, 2011, to Convertible Notes issued by BigString to each of Alpha Capital Anstalt and Whalehaven Capital Fund Limited on May 1, 2007, February 29, 2008 and June 23, 2009, incorporated by reference to Exhibits 4.1, 4.2, 4.3, 4.4, 4.5, and 4.6 to the Current Report on Form 8-K filed with the SEC on February 4, 2011.10.1
Lease between BigString, as Tenant, and Walter Zimmerer & Son, as Landlord, dated February 3, 2009, for the premises located at 157 Broad Street, Suite 109, Red Bank, New Jersey 07701, incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K filed with the SEC on March 31, 2009.




E-1
 Index
   10.2
Securities Purchase Agreement, dated as of May 19, 2006, by and amongBigString andWitches Rock Portfolio Ltd.,The Tudor BVI Global Portfolio Ltd.andTudor Proprietary Trading, L.L.C., including Schedule 1 – Schedule of Purchasers, and Exhibit C – Form of Warrant.  Upon the request of the SEC, BigString agrees to furnish copies of each of the following schedules and exhibits:Schedule 2-3.2(d)– Warrants;Schedule 2-3.3– Registration Rights;Schedule 2-3.7– Financial Statements;Schedule 2-3.10– Broker’s or Finder’s Fees;Schedule 2-3.11– Litigation;Schedule 2-3.16– Intellectual Property Claims Against the Company;Schedule 2-3.17– Subsidiaries;Schedule 2-3.19(a)– Employee Benefit Plans;Schedule 2-3.22– Material Changes;Exhibit A– Form of Certificate of Designations of the Series A Preferred Stock;Exhibit B– Form of Registration Rights Agreement;Exhibit D– Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion, incorporated by reference to Exhibit 10.33 to the Current Report on Form 8-K filed with the SEC on May 22, 2006.10.3
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. 4
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. 5
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, 2007.10.6
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, 2007.10.7
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, 2007.10.8
Subscription Agreement, dated as of April 30, 2007, by and amongBigString andWhalehaven Capital Fund Limited, Alpha Capital Anstalt, Chestnut Ridge Partners LP, Iroquois Master Fund Ltd. and Penn Footwear, includingExhibit B– Form of Common Stock Purchase Warrant.  Upon the request of the Securities and Exchange Commission, BigString agrees to furnish copies of each of the following schedules and exhibits:Schedule 5(a)– Subsidiaries;Schedule 5(d)– Additional Issuances/Capitalization;Schedule 5(f)– Conflicts;Schedule 5(q)– Undisclosed Liabilities;Schedule 5(v)– Transfer Agent;Schedule 8– Finder’s Fee;Schedule 9(s)– Lockup Agreement Providers;Schedule 11.1(iv)– Additional Securities to be Included in the Registration Statement;Exhibit A– Form of Convertible Note (included as Exhibit 4.2);Exhibit C– Form of Escrow Agreement;Exhibit D– Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion;Exhibit E– Proposed Public Announcement; andExhibit F– Form of Lock-Up Agreement, incorporated by reference to Exhibit 10.43 to the Current Report on Form 8-K filed with the SEC on May 3, 2007.10.9
Agreement, Waiver and Limited Release, dated as of November 30, 2007, by and among BigString and the Releasors, incorporated by reference to Exhibit 10.37 to the Current Report on Form 8-K filed with the SEC on December 5, 2007.  E-2
 Index
   10.10
Subscription Agreement, dated as of February 29, 2008, by and amongBigString andWhalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Small Cap Opportunities LP, includingExhibit B– Form of Common Stock Purchase Warrant.  Upon the request of the Securities and Exchange Commission, BigString agrees to furnish copies of each of the following schedules and exhibits:Schedule 5(a)– Subsidiaries;Schedule 5(d)– Additional Issuances/Capitalization;Schedule 5(f)– Conflicts;Schedule 5(q)– Undisclosed Liabilities;Schedule 5(v)– Transfer Agent;Schedule 8– Finder’s Fee;Schedule 9(s)– Lockup Agreement Providers;Exhibit A– Form of Convertible Note (included as Exhibit 4.2);Exhibit C– Form of Escrow Agreement;Exhibit D– Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion;Exhibit E– Proposed Public Announcement; andExhibit F– Form of Lock-Up Agreement, incorporated by reference to Exhibit 10.43 to the Current Report on Form 8-K filed with the SEC on March 6, 2008.10.11
Subscription Agreement, dated as of June 23, 2009, by and among BigString and Whalehaven Capital Fund Limited, Alpha Capital Anstalt and Excalibur Special Opportunities LP, including Exhibit B – Form of Common Stock Purchase Warrant. Upon the request of the Securities and Exchange Commission, BigString agrees to furnish copies of each of the following schedules and exhibits:  Schedule 5(a) – Subsidiaries; Schedule 5(d) – Additional Issuances/Capitalization; Schedule 5(f) – Conflicts; Schedule 5(q) – Undisclosed Liabilities; Schedule 5(v) – Transfer Agent; Schedule 8 – Finder’s Fee; Schedule 9(s) – Lockup Agreement Providers; Exhibit A – Form of Convertible Note (included as Exhibit 4.2); Exhibit C – Form of Escrow Agreement; Exhibit D – Form of Giordano, Halleran & Ciesla, P.C. Legal Opinion; Exhibit E – Proposed Public Announcement; and Exhibit F – Form of Lock-Up Agreement, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on June 29, 2009.10.12
Agreement and Release, dated as of January 31, 2011, by and between BigString and each of Alpha Capital Anstalt and Whalehaven Capital Fund Limited, incorporated by reference to Exhibits 10.1 and 10.2, respectively, to the Current Report on Form 8-K filed with the SEC on February 4, 2011.31.1
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.