July 28, 2014 CEOcast Weekly Newsletter

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Monday, July 28 2014 stephen_fordham@midwestexp.com Companies featured in the current edition of the newsletter: KIN, PAYM Markets ended mixed this week as positive economic news early in the week gave way to disappointing earnings news from Amazon on Friday. The Dow finished the week down 140 points or 0.8% at 16,960, leaving the index up 2.3% for the year. The Nasdaq held onto a gain of 17 points or 0.4% for the week and closed up 6.5% for the year at 4,449. The S&P 500 finished flat from the week before at 1978, up 7% for the year, and the Russell 2000 fell 7 points or 0.6% to close at 1,144 � down 1.6% since the start of 2014.

Economic news this week led off with the report of an increase in consumer prices by 0.3% in June, down from a 0.4% increase in May, once again mainly due to a jump in fuel prices. Initial unemployment claims fell to their lowest level since May 2006, dropping to 284,000 for the week ending July 19th from 303,000 the week before. Continuing claims fell to 2.5 million the week of July 12th, down from 2.508 million the week before. New home sales in June fell to 406,000 from 442,000 in May, and the surge in new home prices (5.3% y/y in June compared with 7.2% y/y in May) has continued to push sales of existing homes upward in response.

Earnings news was dominated by Friday�s unexpectedly huge loss from Amazon, which was nearly twice the Thomson Reuters consensus estimate of $0.15 per share at $0.27 per share. The net loss was $126 million total, compared to a net loss of $7 million or $0.2 per share the year before. The company also issued guidance that it could see a loss of between $410 million and $810 million in the quarter, which seemed to stun investors � shares fell by more than 9 percent in after-hours trading. PepsiCo`s net income was nearly flat at $1.98 billion or $1.29 per share in the quarter from $2.01 billion or $1.28 per share a year earlier.

Tech companies mostly reported unsurprising earnings in a part of the year that is usually fairly slow for technology sales, given the number of new product release dates that come in the fall. Apple reported earning $7.75 billion in the quarter, or $1.28 per share, up from $6.9 billion or $1.07 per share a year earlier. Microsoft, meanwhile reported a profit of $4.61 billion or $0.55 a share, compared with $4.97 billion or $0.59 per share a year ago. AT&T saw net income fall, despite rising revenues, to $3.5 billion or $0.68 per share from $3.8 billion or $0.71 a year earlier. Rival carrier Verizon`s net income came in at $4.34 billion or $1.01 per share, up from $2.25 billion or $0.78 per share a year ago.

Lockheed Martin reported a quarterly profit of $889 million, or $2.76 per share, up from $859 million or $2.64 per share. Boeing�s earnings were hurt by $425 million in pretax charges due to wiring problems in the refueling aircraft it has been developing for the Air Force. The company reported a profit of $1.65 billion for the quarter or $2.24 per share, up from $1.41 a year earlier.

The BMO Capital Markets 3rd Annual Biotech Corporate Access Day will take place on July 29th, 2014 in Boston, Massachusetts.

Price Alert: Kindred Biosciences, Inc. (NASDAQ: KIN), a bio-pharmaceutical company focused on the development of pet therapies to save and improve the lives of pets, soared this week after a Monday article highlighting the company appeared in Bloomberg`s BusinessWeek. This week�s trading more than made up for the drop last week on negative comments about the biotech sector from Fed Chair Yellen. Kindred jumped by more than 13.5% (or $2.06) in this week�s recovery compared with the Nasdaq�s 0.4%. KIN closed Friday at $17.30.

Special Situation: PayMeOn, Inc. (OTC Markets: PAYM) Some of the fastest growing, most exciting companies in the world today are those in the tech sector, and many of those revolve around the increasing monetization of social media. Currently the majority of the social media companies rely on revenue drawn from direct advertising, but a sea change in the way consumers view advertising is affecting the utility of traditional marketing. PayMeOn, Inc. plans to capitalize on the trust consumers have in their friends and family with a more targeted advertising platform for businesses. Instead of placing ads randomly in people�s social media feeds or relying on some complicated algorithm to target a social media audience, PayMeOn�s strategy directly encourages consumers to refer their friends and family to companies they like by offering them an incentive � Social Income�.

Consumers often ask around for a good restaurant, auto shop, or plumber even before checking reviews online. With PayMeOn, businesses will sign up for a number of referrals which it calls �Inclusions.� When someone asks a friend and they respond with a PayMeOn referral, it counts as one of those Inclusions, and individuals who refer PayMeOn clients receive a cash reward. Each referral will also include two other PayMeOn businesses in the same category and area, giving the consumer options. While the consumer is most likely to choose the business they were referred to directly, it gives the other businesses exposure and a chance to compete if the consumer wants to compare services.

If their peers had the added push of a cash bonus for each referral, consumers might see more of their friends and family respond when they post a question about, say, the best local Thai spot, and those locations listed with PayMeOn would be more likely to be referred. Rather than seeing those referrals as intrusive advertising, consumers would just appreciate the help finding what they were looking for, leading them to trust the business referenced as well as PayMeOn�s service as mere aid in the search for good businesses.

Recent polls have shown that the value of traditional marketing on social media is overestimated. Users of social media sites have found advertising to be increasingly intrusive, and the majority of users say that these aggressive marketing campaigns have little to no influence on their purchasing decisions. People are far more likely to trust a company or service provider if they are referred to it by family or friends. Nielsen polling revealed in 2012 that consumers trust in traditional advertising declined substantially between 2009 and 2012, while �92% of consumers around the world [said] they trust earned media, such as word-of-mouth or recommendations from friends and family, above all other forms of advertising � an increase of 18% since 2007.� In addition, the polling showed that the majority of consumers trusted online consumer reviews, though not by as wide a margin as direct referrals.

Trust in other consumers has fueled the incredible success of companies like Yelp and Seamless, along with the businesses that are listed with those services. Where once companies relied on print, radio and television advertising, online reviews both through websites and peer comments on social media are becoming increasingly important to businesses, large and small. A recent Forbes article described how the brand advantage once enjoyed by franchises is rapidly being eroded as more consumers are willing to try unknown restaurants due to their easy access to others� reviews. Business-grading and listing services as well as social media referrals have rapidly begun to undercut the power of traditional advertising, and given consumers the ability to rely instead on others� opinions.

Additionally, PayMeOn recently announced the acquisitions of A Better Bike, LLC and E Bikes, LLC, which together own 19.4% of Prodeco Technologies, LLC, one of the most innovative manufacturers in the growing e-bike industry. Prodeco has sold more than 10,000 bikes since its founding in 2010, and has approximately 50 employees to support its rapid sales growth. The company plans to utilize the PayMeOn social income� strategy to enhance the growth and accelerate sales of Prodeco e-bikes. This could enhance PayMeOn�s revenue stream as well as provide an additional boost to the visibility of its groundbreaking word-of-mouth strategy.

While online reviews are an important tool in deciding a company�s trustworthiness, personal recommendations will always be an individual�s preferred source of information. If a business were able to combine the viral nature of social media advertising with the trustworthiness of a family member or friend�s word, it would significantly increase the company�s return on investment. PayMeOn could end up being the next big breakthrough for businesses and consumers, perhaps redefining social media�s impact on consumption in the modern economy. PAYM is listed at $0.18 per share.

A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. THE READER SHOULD VERIFY ALL CLAIMS AND DO ITS OWN DUE DILIGENCE BEFORE INVESTING IN ANY SECURITIES MENTIONED. This publication accepts compensation from companies that it features. This newsletter should not be regarded as an independent publication. Our editors may, from time to time, acquire positions in the companies that they cover. This could represent a conflict of interest. The CEOcast newsletter shall be under no obligation to inform readers about its trading activities. CEOcast`s editors reserve the right to buy or sell shares in these companies at any time. The following companies, featured in this newsletter, have compensated CEOcast: Kindred Biosciences ten thousand dollars per month, PayMeOn LLC, seven thousand five hundred dollars per month.

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