SEC Comment Letter for Bigstring CORP (CIK 0001335282) — Sep 27, 2005
Bigstring CORP (CIK 0001335282)
Date: Sept. 27, 2005 · CIK: 0001335282 · Accession: 0000000000-05-050002
AI Filing Summary & Sentiment
File numbers found in text: 333-127099
Show Raw Text
<DOCUMENT>
<TYPE>LETTER
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
Mail Stop 4561
September 27, 2005
Darin M. Myman
Bigstring, Inc.
2150 Highway 35
Suite 250
Sea Girt, New Jersey 08750
Re: Bigstring, Inc.
Form SB-2
Filed on August 29, 2005
File No. 333-127099
Dear Mr. Myman:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General Comments
1. We note your use of the term "Company" throughout the
prospectus.
Since this term is vague and abstract, please revise to use your
actual company name or a shortened version of it throughout your
document.
2. Please provide us with copies of any graphics, maps,
photographs,
and related captions or other artwork including logos that you
intend
to use in the prospectus.
3. Please provide us with highlighted copies of any study or
report
that you cite or on which you rely. For example, we note on page
25
that you refer to statistics obtained from Jupiter Communications
and
International Data Corp. Confirm with us that the industry
reports
or studies that you rely on were not prepared for you and that you
did not compensate the party that prepared these reports or
studies.
Alternatively, if the reports were prepared for you, please file
the
experts` consents as Exhibits.
4. Please avoid vague assertions that are in the nature of
"puffing."
The basis for comparative factual assertions and for management`s
belief in qualitative statements must be clear from the text of
the
registration statement or provided to us. Revise the disclosure
throughout the document to disclose the measurements you are using
to
support your statements, or advise us as necessary. In providing
support, clearly mark the location of the information you believe
is
supportive of the statement referenced. We note, for example, and
without limitation:
* "we believe that our BigString email service is currently the
only
email service that is recallable and cancelable." (page 3)
* "the premium email service products market is a rapidly growing
segment of the overall email service market. (page 23)
* "we expect to attract a large number of customers who will want
to
try our unique BigString email service products." (page 23)
* "we believe we will generate significant advertising revenue."
(page 23)
* "over 80% of all small and medium-sized business had Internet
connectivity, and almost 100% of business with over 20 employees
had
Internet connectivity" (page 26)
Please revise or advise as appropriate.
Facing Page
5. We note that your securities will be sold on a continuous
basis.
As a result, please add a Rule 415 box to the facing page of your
registration statement noting that the securities being registered
on
your Form SB-2 are being offered on a delayed or continuous basis.
Refer to the Division of Corporation Finance Manual of Publicly
Available Telephone Interpretations, Section D, paragraph 36.
Prospectus Cover Page
6. You state that "the selling stockholders will offer their
shares
of common stock covered by this prospectus at a price of $0.48 per
share until the earlier of (1) ninety days following the date of
this
prospectus, and (2) the inclusion of [your] common stock on the
Nasdaq Over-the-Counter Bulletin Board Trading System." If you
fail
to have your securities quoted on the Bulletin Board, please tell
us
why you do not believe that allowing selling securityholders to
resell your common stock at any price after 90 days does not
constitute a delayed offering. Please be aware that, in order to
register a delayed offering, the company must be S-3 eligible.
Alternatively, please revise to disclose that selling
securityholders
must resell their securities at a fixed price unless and until a
market for your common stock develops and thereafter at market
prices.
7. Please revise to highlight the cross-reference to the "Risk
Factors" section so that it is visually distinctive from the
surrounding text. We refer to Item 501(a)(5) of Regulation S-B.
Prospectus Summary
8. Please revise the summary so that it provides a balanced
overview
of the company, its operations and the proposed offering. We
note,
for example, that you have highlighted the features of your email
services that you believe provide you with a competitive advantage
as
well as the cash raised in private offerings, but have not
included
an overview of your financial condition and history of net losses.
Please revise accordingly.
9. On page 23 and in this section, you compare yourself to "other
leading email service providers." The term "leading" is vague and
abstract. Please revise to clarify your use of this term and
provide
us with current industry data that supports your assertions. In
providing support, clearly mark the location of the information
you
believe is supportive of the statement referenced. Your
disclosure
should clarify the extent and nature of your competition and your
relative industry position in a manner consistent with Item
101(b)((4) of Regulation S-B.
Risk Factors, page 6
General
10. We refer to the introductory paragraph on page 9 where you
indicate that you may face other risks or uncertainties currently
unknown to you or that you currently deem to be immaterial which
may
adversely affect your business. You must disclose all risks that
you
believe are material at this time. Please delete language related
to
other risks or unknown risks from your disclosure
11. Please revise to either underline or italicize your risk
factor
subheadings so that the subheadings are easily distinguished from
the
risk factor narratives.
12. Please include a risk factor related to the risk that hackers,
viruses and other potential security breaches pose to your
business.
13. On page 8, you state that "[a]lthough we believe that our
technology has been developed independently and does not infringe
on
the patents of others." Mitigating statements are not appropriate
in
the risk factor discussion. Please revise your risk factors to
remove all mitigating language.
14. Please avoid using generic conclusions such as "adversely
affected" or similar language when describing a risk`s effects.
For
example, on page 9 you state that "[i]f any of the foregoing were
to
occur, our business could be materially adversely affected."
Replace
this, and similar language, with more detailed disclosure of how
you,
your business, financial condition and results of operations would
be
affected by the facts you describe.
15. You note on page 18, that any additional equity financing may
involve substantial dilution to your then-existing stockholders.
We
also note, on page II-10, that you have a number of outstanding
warrants. Please add a risk factor noting the risk of dilution
your
shareholders face should you issue additional shares in an equity
financing or should the warrants be exercised.
16. On page 26, you note that the "markets for [your] services are
highly competitive. With limited barriers to entry [you] believe
the
competitive landscape will continue to increase both from new
entrants to the market as well as from existing players." Please
revise to add a risk factor noting the competitiveness of your
market
and limited barriers to entry.
We cannot assure you that we will become profitable since we have
a
limited operating history, insignificant revenue and plan to
increase
our expenses to develop our business, page 6
17. Please revise this risk factor to note your history of loses
and
your accumulated deficit.
We may need additional capital to fund our operations until we are
able to generate a profit, page 6
18. Please revise to note your cash balance as of the most recent
practicable date and to provide an estimate of your cash needs
during
the twelve months following the date of this prospectus.
We are dependent upon maintaining and expanding our computer...,
page
7
19. To the extent you have experienced interruptions in your
service
or system downtimes, please briefly discuss the frequency and
duration of these events.
If we were to lose the services of our key personnel, we may not
be
able to execute our business strategy which could result in the
failure of our business, page 7
20. We note on page 31, that you do not have any employment
agreements with any or your officers or employees. Please revise
this section to note this fact.
Our patent application may not be granted, page 8
21. Please briefly discuss the consequences to your ability to
offer
your services if your patent application is denied.
Misappropriation of our intellectual property could harm our
reputation, affecting our competitive position and resulting in us
having to expend money, page 8
22. We refer to your statement that, "We rely on a combination of
U.S. and foreign patents, copyrights, trademark and trade secret
laws." Please expand your disclosure to indicate the nature of
the
patents, copyrights, trademarks and trade secrets that you rely
upon,
including the foreign jurisdictions in which you operate.
23. Please advise us supplementally whether you require your
employees to enter into confidentiality or non-compete agreements
with respect to your proprietary technology. If not, please
revise
the risk factor discussion to include this.
Since there is no trading market for our common stock, you may not
be
able to resell any of the shares you purchase or may have to sell
your shares at a substantially reduced price, page 10
24. You state that you "intend to work with one or more registered
broker-dealers in order to apply for listing of [your] common
stock
on the OTC Bulletin Board." Please note that shares are not
listed
on the OTC BB, they are quoted. Please make the revisions here
and
throughout your prospectus as necessary.
Our common stock may be considered a "penny stock" and may be
difficult to sell, page 10
25. Please expand your discussion of what constitutes a "penny
stock"
to include that penny stocks are generally not traded on a
national
stock exchange or on NASDAQ and are securities issued by companies
that have minimal net tangible assets and short corporate
histories
as well as minimal revenues.
Insiders have substantial control over us, and they could delay or
prevent a change in our corporate control even if our other
stockholders wanted it to occur, page 10
26. Please disclose the aggregate insider ownership of your common
stock assuming all shares are resold pursuant to this registration
statement. In addition, please clarify whether the percentage
ownership listed here includes the shares of common stock held by
spouses of management which are included in the beneficial
ownership
table.
Special Note Regarding Forward-Looking Statements, page 12
27. Refer to the last two sentences of the final paragraph under
this
heading. Because the company is responsible for all statements in
the registration statement, it is not appropriate to disclaim
responsibility for the accuracy and completeness of forward-
looking
statements. In addition, the last sentence is inconsistent with
your
undertaking to update the prospectus as required by section
10(a)(3),
to reflect any fundamental change, and to reflect any material
change
in the plan of distribution. Please revise your document to
remove
these disclaimers.
Market for Common Stock, page 13
28. We note that at the time of this filing there was no public
trading market for your common stock. As a result, please
indicate
the amount of common stock that is subject to outstanding options
or
warrants to purchase, or securities convertible into your common
stock; or that could be sold pursuant to Rule 144. Refer to Item
201(a)(2) of Regulation S-B.
Management`s Discussion and Analysis or Plan of Operation, page 15
29. Please revise to identify and discuss key performance
indicators,
including non-financial performance indicators, that management
uses
to manage and assess the business and that would be material to
investors. Examples may include, but are not limited to, the
number
of users of your email services, the number of paying customers at
each level of usage and your user retention rate. Refer to SEC
Release 33-8350.
Critical Accounting Policies, page 15
30. We note that you refer to the notes to the consolidated
financial
statements for the disclosure regarding your critical accounting
policies. Please revise this section to include a more detailed
discussion of your accounting policies subject to significant
estimate and judgment such as measurement of stock compensation
and
valuation of intangible assets. Refer to the guidance in FR-72.
Please note this disclosure should supplement, but not duplicate,
the
description of accounting policies in the notes to the
consolidated
financial statements.
Plan of Operation, page 15
31. Please provide additional details about your Plan of Operation
during the next twelve months, including any estimates of
expenditures needed to achieve your business plan, any milestones
during this period as well as your specific plans regarding the
cash
received in private offerings. Your bullet points on page 16 do
not
provide meaningful disclosure to investors regarding how you
intend
to increase sales and increase your presence and promote your
brand
within your industry.
32. In the first paragraph, on page 16, you state that you
"continued
to create a presence in the market for your BigString email."
Please
revise to note how you created a presence in the market. To the
extent this is based on any specific metrics, including number of
users, please revise to include this.
33. In the third paragraph, on page 16, you state that you
anticipate
increasing the size of your sales force. Please revise to note
the
estimated change in the size of your sales force and your
estimated
change in the number of employees in the other areas of your
company.
Results of Operations, page 17
34. You note that for the Six Months Ended June 30, 2005 and for
the
year ended December 31, 2004, expenses increased primarily due to
increased development and administrative costs and professional
fees.
Please revise to provide more detail as to the reason for the
increase in development and administrative costs and professional
fees and to disclose what specific costs are included under these
headings.
35. Where you discuss revenues, please revise to disclose the
portion
of your revenues generated from users of your services and the
portion of your revenues generated from advertisers.
Liquidity and Capital Resources, page 18
36. Please revise your discussion to note the material changes in
your balance sheet balances and the underlying drivers impacting
these balances as of the Six Months Ended June 30, 2005 and as of
the
year-ended December 31, 2004. For instance, but without
limitation,
please note the $953,700 increase in the Subscription Payable
balance
as of June 30, 2005 and the underlying drivers impacting this
balance.
37. If material, disclose any known trends, events or
uncertainties
that have, or are reasonably likely to have, a material impact on
your short-term or long-term liquidity. R