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MIDWEST HOLDING INC. FORM 10 TABLE OF CONTENTS
MIDWEST HOLDING INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Registrant's telephone number, including area code :  (402) 489-8266

        Securities to be registered pursuant to Section 12(b) of the Act:  None

        Securities to be registered pursuant to Section 12(g) of the Act:

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MIDWEST HOLDING INC.

FORM 10

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ITEM 1.    BUSINESS.

Special Note Regarding Forward-Looking Statements

        Certain statements in this Form 10 constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's expectations, estimates, projections and assumptions. In some cases, you can identify forward-looking statements by terminology including "could," "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "intend," or "continue," the negative of these terms, or other comparable terminology used in connection with any discussion of future operating results or financial performance. These statements are only predictions, and reflect our management's present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

General Information

        Midwest Holding Inc. (we, us, our, Midwest, the Company or the Registrant) was formed on October 31, 2003 for the primary purpose of becoming a financial services holding company. Midwest presently conducts its business through its wholly owned subsidiary, American Life & Security Corp. (American Life). Capital Reserve Life Insurance Company of Jefferson City, Missouri (Capital Reserve) is a dormant, wholly owned subsidiary of American Life. Midwest is a Nebraska Corporation, American Life is an Arizona corporation, and Capital Reserve is a Missouri corporation. The principal executive offices at 8101 "O" Street, Suite S111, Lincoln, Nebraska 68510. The phone number for the companies is (402) 489-8266.

Development of the Business

        From our inception through July 2006, we raised approximately $6.5 million through the sale of shares of voting common stock in several private placements. Between June 2007 and May 2009, we raised approximately $11.0 million through an intrastate public offering of voting common stock in the State of Nebraska. Each of these sales of stock was intended to provide capital for our financial services operations.

        On September 1, 2009, American Life was issued a certificate of authority to conduct life insurance business in the State of Nebraska. Initial capital and surplus contributed to American Life was approximately $3.5 million, which was increased to approximately $5.5 million on September 1, 2009. In its first four months of operation, between September 1, 2009 and December 31, 2009, American Life generated $354,352 in premium revenue. In 2010, American Life generated $1.9 million in premium revenue. For the six months ended June 30, 2011, American Life generated $1.0 million in premium revenue.

        On June 20, 2010, American Life acquired Capital Reserve in exchange for a cash payment of approximately $1.9 million. This transaction added approximately a like amount of assets to American Life. Further, with the insurance charters acquired from Capital Reserve, we obtained access to additional markets in Missouri, Kansas and Iowa.

        In connection with the acquisition of Capital Reserve, American Life also coinsured a block of life insurance business from Capital Reserve's parent corporation in a separate transaction. The purchase price for this block of business was approximately $375,000. This transaction added more than $70,000 in annual revenues to American Life's operations, as well as approximately $3.5 million of new assets to our balance sheet, while American Life assumed approximately $3.65 million in policy reserves on the block of business.

        In July 2010, we commenced the private sale of 74,159 shares of our Series A Preferred Stock to certain qualified investors in Latin America. This offering was completed in January 2011. The net

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proceeds of this sale, after expenses, were approximately $415,750. These proceeds were used to further capitalize our insurance operations, for working capital and for other general corporate purposes.

        On July 12, 2010, in order to provide additional capital to support our continued growth, we commenced an offering of up to 2,000,000 additional shares of voting common stock to existing shareholders who were residents of the State of Nebraska. This offering was completed on February 28, 2011, and a total of 1,554,326 additional shares of voting common stock were sold. The gross proceeds of this sale, after expenses, were approximately $7.7 million. These proceeds will be used to further capitalize our insurance operations, for working capital and for other general corporate purposes, including funding the acquisition of Old Reliance Insurance Company (Old Reliance) as described below.

        On November 8, 2010, the Company and American Life entered into an agreement to acquire all of the issued and outstanding capital stock of Old Reliance, an Arizona-domiciled life insurance company. The plan provided for Capital Reserve and American Life to merge into Old Reliance following the purchase, with the survivor changing its name to American Life & Security Corp. In the transaction, the sole shareholder of Old Reliance received: (i) $1,600,000 in cash, (ii) $500,000 in the form of a surplus debenture issued by American Life, and (iii) 150,000 shares of voting common stock of the Company. Old Reliance had annual premium income of approximately $1.7 million and total assets of approximately $4.0 million. The transaction including the merger, was consummated on August 3, 2011.

        The Company was a development stage company until American Life commenced its insurance operations in 2009. We have incurred significant net losses since inception. These losses have resulted primarily from costs incurred while raising capital and establishing American Life. We expect to continue to incur operating losses until we achieve a volume of in-force life insurance policies that provides premiums that are sufficient to cover our operating expenses.

American Life

General

        American Life underwrites and markets life insurance products within the State of Nebraska. After completing the merger with Old Reliance, we are licensed in fourteen states. Old Reliance had eliminated marketing in several states prior to the acquisition. Management's assessment of the activities is that the business lacked adequate profit. As such, an on-going review is underway to evaluate market potential and appropriate products; such decision is expected in early 2012. With the acquisition of Capital Reserve, we also obtained access to additional markets in Missouri, Kansas and Iowa, although our sales efforts remain focused on Nebraska at the present time. Over time, we may apply with other state insurance departments in order to obtain certificates of authority to market life insurance products in those states.

        Additionally, we intend to explore the international market for U.S. dollar denominated ordinary life policies. Management has more than 25 years' experience in this market and many overseas contacts, particularly in Latin America.

        Some of the agents who were engaged by us to sell shares of voting common stock in the 2007-09 intrastate public offering were cross-trained by American Life to act as agents for its insurance business. In retaining these agents, our goal was to identify individuals with a long-range goal to be career life insurance agents. However, the recruiting, training and hiring of captive agents (agents who sell only American Life's products) will be a continuous process for American Life going forward.

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Type of Policies

        American Life sells two insurance products, the "American Accumulator", which is a multi-benefit life insurance policy that combines cash value life insurance with a tax deferred annuity, and the "Future Cornhusker Plan", which is a single premium term life product offered for children aged three months to 15 years.

        It is anticipated that, over time, American Life will market other traditional life insurance products as well, which may include:

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Ordinary Whole Life



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Term Life (Level, Decreasing and Mortgage)



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Limited-Pay Juvenile Whole Life



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Fixed-Rate, Flexible-Premium Annuities

        American Life will, in all likelihood, offer limited pay whole life, term and decreasing term life and single and flexible premium annuities. The potential profitability of any product, including the cost involved to market and administer it, will be a significant factor in the decision to offer that product.

Product Pricing

        None of the insurance products to be marketed by American Life, other than the two initial products described above, have been developed or filed with the Nebraska Department of Insurance for approval. These products will be developed with a pricing structure designed to accomplish the following primary objectives:

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Provide a competitively priced product to the insurance consumer;



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Provide sufficient gross margins to allow the insurance subsidiary to achieve operating profits comparable to the life insurance industry as a whole; and



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Provide sufficient first year and renewal commission structures necessary to attract and retain career-oriented insurance agents.

        All products will be developed by using the services of an independent qualified consulting actuary.

Underwriting Standards

        Underwriting guidelines will have a direct impact on American Life's operating results. If the underwriting standards that are established are not adequate, desired operating results will not be realized. Generally, when underwriting standards are less restrictive, more mortality claims will result and vice versa. Underwriting standards have a direct impact on the pricing structure of a product. The less restrictive the underwriting standards, the higher the product needs to be priced in order to allow for a higher incident of mortality. This higher incident of mortality is also reflected in greater policy reserves being established.

        American Life has established underwriting guidelines consistent with its product's pricing structure. American Life's consulting actuary, along with its reinsurance underwriting department, assist the insurance subsidiary in establishing its underwriting standards.

Marketing

        The products developed by American Life have been marketed initially by those agents cross-trained to market insurance products after selling shares of stock in our intrastate public offering.

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Additionally, the recruiting, hiring and training process will be continuous for American Life going forward. These captive agents will market only the life insurance subsidiary's products.

        The insurance products will be marketed using the same face-to-face marketing concept that was used by us to sell shares of stock in our intrastate public offering. The insurance agents will use our shareholder base and their referrals as potential clients for our life insurance products.

        American Life also intends to pursue the U.S. Dollar-denominated life insurance market in Latin America. Management has many years' experience in the international market. The products that will be offered are ordinary whole life that are designed specifically for that market.

        If, and when, American Life enters the interest-sensitive and universal life markets, it would not use its captive agents to market such products. Generally, these are sophisticated products which require a unique ability to market. Accordingly, if American Life chooses to enter this market, it would develop an independent agent distribution system using independent marketing agencies that have the experience and ability to market these products. However, American Life would not enter this market segment unless it could do so profitably.

Operating Results

        There are certain factors unique to the life insurance business, which may have an adverse effect on the operating results of American Life. One such factor is that the cost of putting a new policy in force is usually greater than the first year's policy premium, and, accordingly, in the early years of a new life insurance company, these initial costs and the required provisions for reserves often have an adverse effect on operating results. American Life, as is common among new or inactive life insurance companies, probably will operate at a loss for a number of years because of the substantial costs of writing new life insurance. The aggregate cost of writing new life insurance includes such significant, nonrecurring items as first year commissions (which is initially recorded to policy acquisition costs and expensed through income over the life of the policy), medical and investigation expenses and other expenses incidental to the issuance of new policies, together with the initial reserves required to be established. Accordingly, the life subsidiary may be expected to sustain losses for a number of years, during which time earnings are normally not available for dividends.

        Our operating results are reported in accordance with accounting principles generally accepted in the United States of America (GAAP) for stock life companies; although the Company's life insurance subsidiaries will also prepare financial statements in accordance with accounting practices prescribed or permitted by their respective state of domicile (statutory basis of accounting) for the purpose of reporting to insurance regulatory authorities. Under the GAAP method of reporting, certain costs, which are expensed immediately under the statutory basis of accounting, will be charged to operations over the period in which premiums are earned, thereby reducing the adverse effect of these costs on operating results. In addition, under the GAAP method of reporting, assumptions used in calculating reserves are less conservative than those used under the statutory basis, thereby further reducing adverse effects on operating results.

Administration

        The policies written or acquired by American Life have historically been administered through a contract with a third-party administrator (TPA). The TPA is a company that is not related to American Life which is in the business of performing policy administration. Such administration will be performed through a TPA until such time as it becomes practical and economical to have such work handled by an internal data processing system. Policy administration includes the issuance of policies, billing, preparation of commission and production statements, posting of premium payments and servicing of policyholders. Following the acquisition of Old Reliance, which owned a policy administration system, management gave

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notice of cancellation to American Life's TPA and intends to bring all administration in house by February 1, 2012.

Investments

        American Life has adopted an investment policy in compliance with the insurance laws of the State of Arizona. The type and amount of investments which can be made by a life insurance company domiciled in the State of Arizona are specifically controlled by applicable Arizona statutes and rules and regulations of the Arizona Department of Insurance.

        It is critical that an insurer invest its assets wisely and conservatively as investment income ultimately (as a new company grows, investment income will increase as a percent of total income due to investment of policy reserves) will be a significant component of total revenue. Accordingly, American Life has developed a conservative investment policy in an effort to minimize its investment risk. An independent professional investment advisor who specializes in the insurance industry may be retained in the future to assist American Life with its investments.

Reinsurance

        American Life reinsures with other companies (reinsurers) portions of the life insurance risks it underwrites. The primary purpose of reinsurance is to allow a company to reduce the amount of its risk on any particular policy. The effect of reinsurance is to transfer a portion of the risk to the reinsurers. However, American Life remains contingently liable for the risk in the event the reinsurers are not able to meet their obligations under the reinsurance agreements. Further, when life insurance risks are ceded to another insurer, the ceding company must pay a reinsurance premium to the reinsurance company as consideration for the risk being transferred. The payment of this reinsurance premium to the reinsurer represents a reduction of the premium income received by American Life. This reduction in premium income has a direct impact on the profitability of the ceding company (American Life).

Reserves

        American Life establishes as liabilities actuarially computed reserves to meet the obligations on the policies it writes, in accordance with the insurance laws and the regulations of the Department of Insurance for statutory accounting and GAAP for financial reporting to shareholders. These reserves are the amounts which, with additions from premiums to be received and with interest on such reserves, compounded annually at certain assumed rates, in the future are sufficient according to accepted actuarial principles to meet American Life's policy obligations as they mature. The various actuarial factors are determined from mortality tables and interest rates in effect when the policies are issued and are applied against policy in force amounts.

        American Life has retained an independent certified consulting actuary to make the computations required to establish its reserves and to perform other duties required by law by certified actuaries in the conduct of a general life insurance business.

Competition

        The life insurance industry is fiercely competitive. Many of the life insurance companies authorized to do business in states that we will conduct business in are well-established companies with fine reputations, offering a broader line of insurance policies, having larger selling organizations, and possessing greater financial resources than American Life. American Life is not rated by industry analysts at the present time and likely will not be rated for a period of three to five years. This will have a negative impact on American Life's ability to compete with rated insurance companies. There is also considerable competition among insurance companies in obtaining qualified sales agents, which might require the Company to pay higher commissions to attract such agents.

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Possible Acquisition of Other Companies

        Subject to the regulation and supervision of the Arizona Department of Insurance and other regulators, we may acquire one or more life insurance or insurance-related companies in the future. Our acquisition strategy, should this avenue be pursued, will be to identify one or more established insurance companies which have developed viable marketing networks for their products and which are or could be managed from a Lincoln, Nebraska administrative office. In selecting target insurance companies which constitute suitable acquisition candidates, we will consider factors such as, but not limited to, the target company's financial statements and operating history (including surplus adequacy and underwriting standards); the price and features of insurance products sold and the markets serviced; the competency and loyalty of its agents; certain income tax considerations; and the purchase price therefore.

        We also may seek to acquire insurance-related companies such as: (i) third-party administrators; (ii) existing marketing agencies; (iii) actuarial services companies; (iv) reinsurance brokerage companies and (v) life and health insurance data processing services.

        The primary reasons we may acquire an existing life insurance company or insurance-related company are: (i) the placement of administrative, accounting and data processing systems that would allow the company to expand; (ii) provide additional revenue streams to us through additional marketing expansion or ancillary services; and (iii) provide additional profits through more effective cost management of an existing company as many companies within the insurance industry have excessive administrative cost levels relative to premium income.

        Management believed Capital Reserve constituted a suitable acquisition candidate under the above criteria. On August 4, 2011, the Company acquired Old Reliance Life Insurance Company, an Arizona domiciled life insurer and simultaneously merged American Life with and into it, changing the survivors name to American Life and Security Corporation. This acquisition added 14 new states, annual premium income of approximately $1.7 million, and total assets of approximately $4.0 million. No additional acquisition agreements have been signed as of December 12, 2011. However, we will continue to evaluate and consider appropriate acquisition candidates.

Prior Acquisitions and Investments

        In 2006, we acquired 1,627,500 shares of Western States Alliance Corporation (Western States) for $0.46 a share for an aggregate investment of $748,650. This investment gave us majority ownership of Western States. Western States was subsequently dissolved, with the majority of its assets transferred to us, effective December 31, 2009.

        In 2005, we acquired 1,410,000 shares of capital stock of Security Capital Corporation (Security Capital), an Arkansas corporation formerly known as Arkansas Security Capital Corporation, for $0.10 per share, or $141,000 in the aggregate. At the time, such shares constituted 47% of the outstanding capital stock of Security Capital. Starting in 2007, Security Capital began issuing additional capital stock, reducing our ownership to approximately 40%. In 2010, we acquired additional shares bringing our ownership to over 60%.

        In July 2009, we acquired 350,000 shares of capital stock of First Wyoming Capital Corporation (First Wyoming) for $0.10 per share for an aggregate investment of $35,000 and funding of $20,000 of pre-incorporation expenses. First Wyoming's insurance subsidiary received its Certificate of Authority to operate in Wyoming July 1, 2011. As of June 30, 2011, our ownership constituted approximately 12.8% of the issued and outstanding capital stock of First Wyoming.

        In April 2010, we acquired 340,000 shares of capital stock of Rocky Mountain Capital Corporation, a Colorado corporation (Rocky Mountain) for $0.10 per share for an aggregate investment of $34,000.

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As of June 30, 2011, our ownership constituted approximately 11.07% of the issued and outstanding capital stock of Rocky Mountain.

        In April 2010, we acquired 600,000 shares of non-voting capital stock of Northstar Financial Corp. (Northstar) for $0.10 per share for an aggregate investment of $60,000. As of June 30, 2011, our ownership constituted approximately 25.8% of all issued and outstanding capital stock of Northstar.

        In June 2010, we acquired 366,500 shares of capital stock of Great Plains Financial Corporation, a South Dakota corporation (Great Plains), for $1.65 per share for an aggregate investment of $604,725. Great Plains has a life insurance subsidiary licensed to do business in South Dakota. As of June 30, 2011, our ownership constituted approximately 9.0% of the issued and outstanding capital stock of Great Plains.

        In September 2011, we acquired 797,500 shares of non-voting capital stock of Pacific Northwest Capital Corp., an Idaho corporation (Pacific Northwest), for $0.10 per share for an aggregate investment of $79,750. On the date of the investment, our initial ownership constituted approximately 33.2% of the issued and outstanding capital stock

Certain Relationships and Affiliations with Similar Businesses

        The Company and certain of its directors and officers have current or past relationships and affiliations with businesses that operate, or once operated, in the life insurance industry and that have conducted public and private stock offerings in connection with their operations. Additional information on these relationships and affiliations, organized by company, is as follows:

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Northstar.   Northstar was incorporated in Minnesota in April 2010 with the purpose of organizing a life insurance subsidiary in that state and becoming an insurance holding company. We invested approximately $60,000 in the organizational financing of Northstar in exchange for 600,000 shares of non-voting capital stock. As of June 30, 2011, our ownership constitutes approximately 25.8% of all issued and outstanding capital stock of Northstar. In addition, Rick Meyer, Chairman of our Board of Directors, is Chairman, Chief Executive Officer and a member of the original Board of Directors of Northstar. Rick Meyer owns 200,000 shares of Northstar's voting capital stock. Mark A. Oliver, our Secretary/Treasurer and a member of our Board of Directors, is President, Chief Operating Officer, Treasurer, Chief Financial Officer and a member of the original Board of Directors of Northstar. Mr. Oliver owns 140,000 shares of non-voting capital stock of Northstar. Travis Meyer, our president and a member of our Board of Directors, owns 150,000 shares of non-voting capital stock. Milton Tenopir, a member of our Board of Directors, is a member of the Board of Directors of Northstar and owns 50,000 shares of voting capital stock. Other of our present and former directors also own capital stock of Northstar. As of June 30, 2011, Northstar is a development stage company that has not conducted operations apart from raising capital through a $1.0 million private placement of securities. It commenced a $10 million intrastate offering in May 2011.



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First Wyoming.   First Wyoming was incorporated in Wyoming in July 2009 for the purpose of organizing a life insurance subsidiary in that state and becoming an insurance holding company. We invested approximately $35,000 in the organizational financing of First Wyoming and funded an additional $20,000 of pre-incorporation expenses in exchange for 350,000 shares of capital stock. John Perkins, our former Secretary and compliance officer and a current member of our Board of Directors, serves as Chairman of the Board of First Wyoming. Les Meyer, a member of our Board of Directors, serves as Secretary and a member of the Board of Directors. Mark Oliver, our Secretary/Treasurer and a Director, serves as First Wyoming's Treasurer and a member of its Board of Directors. Great American Marketing, Inc., a corporation owned by Travis Meyer, our President and a member of our Board of Directors, had a consulting agreement with First Wyoming that terminated on June 30, 2010. He owns 25,000 shares of

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capital stock of First Wyoming. First Wyoming has raised approximately $4 million of an anticipated $7.5 million offering and received its certificate of authority in July 2011.

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Rocky Mountain.   Rocky Mountain was incorporated in Colorado in March 2010 with the purpose of organizing a life insurance subsidiary in that state and becoming an insurance holding company. We invested approximately $34,000 in the organizational financing of Rocky Mountain in exchange for 340,000 shares of capital stock. In addition, Les Meyer, a member of our Board of Directors, is President, Chief Executive Officer and a member of the original Board of Directors of Rocky Mountain. Les Meyer owns 352,000 shares of capital stock of Rocky Mountain. Rick Meyer, Chairman of our Board of Directors, is Chairman and a member of the original Board of Directors of Rocky Mountain. Rick Meyer owns 130,000 shares of capital stock of Rocky Mountain. Mark A. Oliver, our Treasurer and a member of our Board of Directors, is Secretary/Treasurer and a member of the original Board of Directors of Rocky Mountain. Mr. Oliver owns 130,000 shares of capital stock of Rocky Mountain. John R. Perkins, a member of our Board of Directors, is a member of the original Board of Directors of Rocky Mountain and owns 140,000 shares of capital stock. Travis Meyer, our President and a member of our Board of Directors, owns 130,000 shares of capital stock of Rocky Mountain. Other of our present and former directors also own capital stock of Rocky Mountain. As of June 30, 2011, Rocky Mountain is a development stage company that has not conducted operations apart from commencing a $1.0 million private placement of securities. It commenced a $7.5 million public intrastate offering in May, 2011.



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Great Plains.   We acquired a minority interest in Great Plains in June 2010. Prior to that time, Great Plains raised over $7.5 million through private placements of stock and a registered public offering in South Dakota and established a regulated life insurance subsidiary in that state. Scott Engebritson, a former officer and Board member of the Company, serves as Chairman of the Board and President of Great Plains. In June 2011, Jack Osborne, Milt Tenopir, Travis Meyer, Mark Oliver and Rick Meyer were elected to the Great Plains Board of Directors.



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Pacific Northwest.   Pacific Northwest was incorporated in Idaho in October 2010 with the purpose of organizing a life insurance subsidiary in that state and becoming an insurance holding company. We invested approximately $79,750 in the organizational financing of Pacific Northwest in exchange for 797,500 shares of non-voting capital stock. In addition, Travis Meyer, our President and a member of our Board of Directors, is President, Chief Executive Officer, Co-Chairman and a member of the original Board of Directors of Pacific Northwest. Travis Meyer owns 200,000 shares of non-voting capital stock of Pacific Northwest. Rick Meyer, Chairman of our Board of Directors, is Co-Chairman and a member of the original Board of Directors of Pacific Northwest. Rick Meyer owns 200,000 shares of capital stock of Pacific Northwest. Mark A. Oliver, our Treasurer and a member of our Board of Directors, is Treasurer and a member of the original Board of Directors of Pacific Northwest. Mr. Oliver owns 200,000 shares of non-voting capital stock of Pacific Northwest. Todd C. Boeve, an employee of ours, is Secretary and a member of the original Board of Directors of Pacific Northwest. Mr. Boeve owns 50,000 shares of capital stock of Pacific Northwest.

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Regulation

        American Life, as well as any other life insurance subsidiary that we may acquire or form, is (or will be) subject to the regulation and supervision of the Arizona Department of Insurance and/or other state insurance regulators. Such regulation is primarily for the benefit of policyholders rather than shareholders. These regulators possess broad administrative powers. These powers include the authority to grant and revoke licenses to transact business, to approve the form of insurance contracts, to regulate capital requirements, to regulate the character of permitted investments, and to require deposits for the protection of investments. Arizona insurance law requires the filing of a detailed annual report with the Department of Insurance, as do other states' laws. Thus, the business and financial accounts of American Life will be subject to examination by the Department of Insurance, as well as insurance departments of any other states in which it may do business.

        There can be no assurance that American Life, Capital Reserve, or any other life insurance subsidiary that we may acquire or form will be able to satisfy the regulatory requirements of the Arizona or Missouri Department of Insurance or a similar department in any other state in which it may wish to transact business.

        As the holder of a controlling interest in an Arizona insurance company, the Company also is subject to regulation as an insurance holding company system under Arizona law. The provisions of this law generally provide for restrictions on a change in control of the insurance holding company, require the filing of certain reports with the Department of Insurance, and limit the amount of dividends which may be received by the holding company from American Life.

        On July 21, 2010, President Obama signed into law financial regulatory reform legislation, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Reform Act"). The Reform Act reshapes financial regulations in the United States by creating new regulators, regulating new markets and firms, and providing new enforcement powers to regulators. Virtually all major areas of the Reform Act will be subject to regulatory interpretation and implementation rules requiring rulemaking that may take several years to complete. Although the ultimate outcome of the regulatory rulemaking proceedings cannot be predicted with certainty, we do not believe that the provisions of the Reform Act will have a material impact on our consolidated financial results or financial condition.

Employees and Agents

        As of June 30, 2011, we have 11 full-time employees and 4 part-time employees, as well as 21 insurance agents who operate as independent contractors.

ITEM 1A.    RISK FACTORS.

        An investment in our voting common stock involves a high degree of risk. Investors should carefully consider the risks described below and the other information in this Form 10 before investing in our voting common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed.

Risks Related to Our Business

The Company has a limited operating history and owns a limited amount of assets.

        The Company was formed in October 2003 and was in the development stage until the insurance operations of American Life commenced in September 2009. We have a limited operating history and, until recently, we have generated no revenues other than interest and investment income. The start-up costs we have incurred have created a history of operating losses. We have all of the risks inherent in establishing a new business, including limited capital, uncertain markets, lack of revenues and potential competition from better capitalized companies. We have no control over general economic conditions,

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competitors' products, competitive pricing, customer demand and costs of marketing or advertising to build and expand our business. Moreover, we anticipate that we will continue to incur net operating losses well into the future as we establish a revenue stream from our operating subsidiaries. There is no assurance that our activities will be successful or result in any revenues or profits to the Company and, the likelihood of any success must be considered in light of our early stage of development. These risks and our lack of substantial operating history make it difficult to predict the Company's future revenues or results of operations. As a result, our financial results may fluctuate widely and fall below our expectations or the expectations of our shareholders. This could cause the value of our voting common stock to decline.

Ownership of shares of our voting common stock involves substantial risk, and the entire value of those shares may be lost.

        Shares of our voting common stock constitute a high-risk investment in a developing business. No assurance or guaranty can be given that any of the potential benefits envisioned by our business plan will prove to be available, nor can any assurance or guaranty be given as to the actual amount of financial return, if any, which may result from ownership of our shares. The entire value of shares of our voting common stock may be lost.

Our insurance marketing efforts are key to our success.

        We market our insurance products through the services of licensed insurance agents. Many of these agents have no prior insurance product selling experience and, accordingly, this lack of experience may have a negative impact on the amount of premium volume we write. The extent of this negative impact on the premium volume written will depend primarily on our ability to timely and adequately train these agents to sell our insurance products.

Our existing insurance subsidiaries, American Life and Capital Reserve, may fail as a result of being inadequately capitalized.

        American Life was granted a certificate of authority by the Nebraska Department of Insurance based on initial capital and surplus of approximately $3.5 million, which was increased to approximately $5.5 million on September 1, 2009. Following the merger of American Life with Old Reliance, American Life had approximately $4,942,301 in capital and surplus in its Arizona domiciled company. The Arizona Department of Insurance may require American Life to add additional amounts of capital and surplus to support its business going forward, just as the Missouri Department of Insurance may require additional capitalization of Capital Reserve. Capital Reserve had capital and surplus of $1.4 million as of September 30, 2011. The amount of capital and surplus ultimately required will be based on certain "risk-based capital" standards established by statute and regulation and administered by the Arizona Department of Insurance and other regulators. The "risk-based capital" system establishes a framework for evaluating the adequacy of the minimum amount of capital and surplus, calculated in accordance with statutory accounting principles, necessary for an insurance company to support its overall business operations. It identifies insurers that may be inadequately capitalized by looking at certain inherent risks of each insurer's assets and liabilities and its mix of net premiums written. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action, including supervision, rehabilitation, or liquidation. If American Life fails to maintain required capital levels in accordance with the "risk-based capital" system, its ability to maintain the regulatory authority necessary to conduct business would be compromised.

We expect to suffer operating losses for a number of years.

        We expect to sustain losses for a number of years. American Life, as is common among new or inactive life insurance companies, likely will operate at a loss for a number of years because of the

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substantial costs of writing new life insurance. The aggregate cost of writing new life insurance includes such significant, nonrecurring items as first year commissions, medical and investigation expenses, and other expenses incidental to the issuance of new policies, together with the initial reserves required to be established. Accordingly, it is generally recognized that the cost of putting a new policy in force is substantially greater than the first year premium. As a result, a new life insurance company can be expected to sustain losses for a number of years, during which time earnings are not available for dividends. In accordance with accounting principles generally accepted in the United States of America (GAAP), these costs, which relate to the first year expenses of putting new life insurance premiums on the books of the Company, are capitalized and amortized over the life of the premiums produced.

The insurance industry is subject to numerous laws and regulations, and compliance costs and/or changes in the regulatory environment could adversely affect our business.

        We are subject to government regulation in each of the states in which we conduct business. Such regulatory authority is vested in state agencies having broad administrative power dealing with all aspects of the insurance business, including rates, policy forms, and capital adequacy, and is concerned primarily with the protection of policyholders rather than shareholders. During the past several years, increased scrutiny has been placed upon the insurance regulatory framework, and certain state legislatures have considered or enacted laws that alter, and in many cases increase, state authority to regulate insurance companies and insurance holding company systems. The National Association of Insurance Commissioners (the NAIC) and state insurance regulators are reexamining existing laws and regulations, specifically focusing on insurance company investments and solvency issues, risk-based capital guidelines, interpretations of existing laws, the development of new laws, the implementation of non-statutory guidelines and the circumstances under which dividends may be paid. Current NAIC initiatives, and other regulatory changes, could have a material adverse impact on our business. There can be no assurance that our life insurance subsidiaries or any other life insurance subsidiary that we may acquire or form will be able to satisfy the regulatory requirements of the Departments of Insurance of their respective state of domicile or a similar department in any other state in which it may wish to transact business.

        Individual state guaranty associations assess insurance companies to pay benefits to policyholders of insolvent or failed insurance companies. The impact of such assessments may be partly offset by credits against future state premium taxes. We cannot predict the amount of any future assessments, nor have we attempted to estimate the amount of assessments to be made from known insolvencies.

We operate in a highly competitive industry, and our business will suffer if we are unable to compete effectively.

        The operating results of companies in the insurance industry are subject to significant fluctuations due to competition, economic conditions, interest rates, investment performance, maintenance of insurance ratings from rating agencies such as A.M. Best and other factors. Our ability to compete with other insurance companies is dependent upon, among other things, our ability to attract and retain agents to market our insurance products, our ability to develop competitive and profitable products and our ability to obtain high ratings. In connection with the development and sale of products, we and our operating subsidiaries encounter significant competition from other insurance companies, many of whom have financial resources substantially greater than the Company, as well as competition from other investment alternatives available to our customers. We do not anticipate that American Life will be rated by industry analysts for a period of three to five years. This will have a negative impact on American Life's ability to compete with rated insurance companies. Accordingly, competition for new life insurance policies will be significant which may have a negative impact on our ability to operate profitably.

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We are highly dependent upon our key personnel, and the loss of any of our key personnel could materially and adversely affect our business.

        Our ability to operate successfully is dependent primarily upon the efforts of Travis Meyer and Mark Oliver, as well as other key personnel. The loss of the services of any of these officers and employees could have a material adverse effect on our ability to operate successfully.

Development of life insurance products involves the use of certain assumptions, and the inaccuracy of these assumptions could adversely affect our profitability.

        We must make certain assumptions as to expected mortality, lapse rates and other factors in developing the pricing and other terms of our life insurance products. These assumptions are based on industry experience and are reviewed and revised regularly so as to reflect actual experience on a current basis. However, variation of actual experience from that assumed in developing such terms may affect a product's profitability.

If we underestimate our liability for future policy benefits, our results of operations could suffer.

        The liability established for future life insurance policy benefits is based upon a number of factors, including certain assumptions. If we underestimate future policy benefits, we would incur additional expenses at the time we becomes aware of the inadequacy. As a result, our profitability could suffer.

American Life may not be able to obtain a favorable insurance rating.

        Insurance ratings have become an increasingly important factor in establishing the competitive position of insurance companies. Ratings reflect the rating agencies' opinion of an insurance company's financial strength, operating performance and ability to meet its obligations to policyholders. American Life will not receive a rating until it has maintained operations for a minimum of three to five years. There can be no assurance that American Life will be rated by a rating agency or that any rating, if and when received, will be favorable to the insurance subsidiary.

Fluctuations in interest rates could adversely affect our business and profitability.

        Interest rate fluctuations could impair the ability to pay policyholder benefits with operating and investment cash flows, cash on hand and other cash sources. Interest rate fluctuations could also have an impact on policyholder behavior. To the extent that interest rates credited are less than those generally available in the marketplace, increased policyholder lapses may be experienced. This would be mitigated in the current period by income generated by surrender charges from universal life insurance policies and annuity contracts, but would reduce our future income. Surrender charges also serve to discourage early policyholder surrenders.

Changes in the tax laws could adversely affect our business.

        Congress has from time to time considered possible legislation that would eliminate the deferral of taxation on the accretion of value within certain annuities and life insurance products. This and similar legislation, including a simplified "flat tax" income tax structure with an exemption from taxation for investment income, could adversely affect the sale of life insurance compared with other financial products if such legislation were to be enacted. There can be no assurance as to whether such legislation will be enacted or, if enacted, whether such legislation would contain provisions with possible adverse effects on any annuity and life insurance products that we and our operating subsidiaries develop.

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We may not be able to successfully execute our acquisition strategy, which could cause our business and future growth prospects to suffer.

        One component of our business plan is to pursue strategic acquisitions of companies that meet our acquisition criteria. However, suitable acquisition candidates may not be available on terms and conditions that we find acceptable. In pursuing acquisitions, we compete with other companies, many of which have greater financial and other resources than the Company. If we are unable to secure sufficient funding for potential acquisitions, it may not be able to complete strategic acquisitions that it otherwise finds desirable. Further, if we succeed in consummating strategic acquisitions, our business, financial condition and results of operations may be negatively affected because:

•

Some of the acquired businesses may not achieve anticipated revenues, earnings or cash flows;



•

We may assume liabilities that were not disclosed or exceed our estimates;



•

We may be unable to integrate acquired businesses successfully and realize anticipated economic, operational and other benefits in a timely manner;



•

Acquisitions could disrupt our on-going business, distract our management and divert our resources;



•

We may experience difficulties operating in markets in which it has no or only limited direct experience; and



•

There is the potential for loss of customers and key employees of the acquired company.

We may be required to raise additional capital through sales of our voting common stock, which could dilute the ownership interests of our existing shareholders.

        In order to continue to operate, to fund the capital and surplus required for its insurance subsidiaries and to grow in accordance with our business plan, we may require additional capital. This capital may be raised through the issuance of additional shares of our voting common stock. If additional shares are issued, the ownership interests of existing shareholders will be diluted.

Certain of our directors and officers have relationships with businesses similar to the Company's, which could present a potential conflict of interest if we were to expand into those states or if those other insurance holding companies were to offer life insurance products in our territory.

        As described in more detail in Item 1, under the heading "Certain Relationships and Affiliations with Similar Businesses," some of our officers and directors have past or present relationships with other businesses operating in the insurance industry. Should we plan to enter the life insurance markets in the states where these other businesses operate, or should those other businesses enter the life insurance markets in our territory, a potential conflict of interest could exist. We will attempt to eliminate or minimize any conflicts of interest, should they arise. We expect that these efforts will include the required recusal of interested parties from (a) any decision relating to competition in a state in which another company with whom he or she is associated is operating, (b) any other decision involving a conflict of interest with respect to such companies. However, the efforts to eliminate or minimize potential conflicts of interest may not be successful.

Shares of our voting common stock are an illiquid investment.

        There is no public market for shares of our voting common stock, and there is no assurance that one will develop. Therefore, the shares will have limited marketability for an indefinite period of time. There is not currently, and may never be, an active market in our securities, and there is no assurance that any of our securities will ever become publicly traded or that an active trading market will develop or be sustained. Consequently, shareholders may not be able to liquidate their investment in the event

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of an emergency or for any other reason. We do not meet the requirements for our stock to be quoted on the New York Stock Exchange, NASDAQ, the New York Stock Exchange Alternext Exchange (formerly, AMEX), the OTC Bulletin Board or any other exchange.

We do not intend to declare dividends on shares of our voting common stock in the foreseeable future.

        We have not paid cash dividends on our stock in the past and do not anticipate paying such dividends in the foreseeable future. We intend to retain available funds to be used in the expansion of our operations. Future dividend policy will depend on our earnings, capital requirements, financial condition and other relevant factors. Moreover, the Company is a holding company without independent operations. We expect a source of cash will be dividends on the stock of our operating subsidiaries, including American Life. The payment of dividends to the Company by our operating subsidiaries is subject to limitations imposed by applicable insurance laws. For example, with respect to American Life, "extraordinary" dividends may not be paid without permission of the Arizona Department of Insurance. An "extraordinary" dividend is defined, in general, as any dividend or distribution of cash or other property whose fair market value, compared with that of other dividends or distributions made within the preceding twelve months, exceeds the greater of (i) 10% of the policyholders surplus (total statutory capital stock and surplus) as of December 31 of the proceeding year or (ii) the statutory net gain from operations excluding realized gains on investments) of the insurer for the twelve month period ending December 31 of the preceding year. Nebraska insurance laws also require that dividends on capital stock must be paid out of surplus, which is calculated after reserving a sum equal to all liabilities of the insurance company and may include all or part of surplus arising from unrealized capital gains or revaluation of assets

Because we do not intend to pay dividends in the foreseeable future, shareholders will benefit from an investment in our voting common stock only if it appreciates in value and becomes liquid.

        Because we do not expect to pay any cash dividends in the foreseeable future, the success of any investment in our stock will depend upon any future appreciation in their value. We cannot guarantee that our stock will appreciate in value or even achieve or maintain a value equal to the price at which shares were purchased. Further, a market may never develop to sell shares of our stock even if they appreciate in value based on an increase in book value or other valuation criteria.

Our business and future growth prospects may suffer if the acquisition and merger of Old Reliance with American Life does not achieve expected results.

        Our business, financial condition and results of operations may be negatively affected if: (i) the acquired business does not achieve anticipated revenues, earnings or cash flows; (ii) we assume liabilities that were not disclosed or exceed estimates; (iii) we are unable to integrate the acquired business successfully and realize anticipated economic, operational and other benefits in a timely manner; (iv) the acquisition itself disrupts our on-going business, distracts management or diverts resources from other more beneficial uses; (v) we experience difficulties operating in markets in which we have no or only limited direct experience; or (vi) there is a loss of customers and key employees of the acquired company.

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ITEM 2.    FINANCIAL INFORMATION.

Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Form 10. In addition to historical information, this discussion and analysis may contain forward-looking statements that involve risk, uncertainties and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements.

Overview

        Midwest was formed on October 31, 2003 for the primary purpose of becoming a financial services holding company. Midwest presently conducts its business through its wholly owned subsidiary, American Life & Security Corp. (American Life).

        From our inception through July 2006, we raised approximately $6.5 million through the sale of shares of voting common stock in several private placements. Between June 2007 and May 2009, we raised approximately $11.0 million through an intrastate public offering of voting common stock in the State of Nebraska.

        On September 1, 2009, American Life was issued a certificate of authority to conduct life insurance business in the State of Nebraska. Initial capital and surplus contributed to American Life was approximately $3.5 million, which was increased to approximately $5.5 million on September 1, 2009. In its first four months of operation, between September 1, 2009 and December 31, 2009, American Life generated $354,352 in premium revenue. In 2010, American Life generated $1.9 million in premium revenue.

        On June 20, 2010, American Life acquired Capital Reserve Life Insurance Company of Jefferson City, Missouri (Capital Reserve) in exchange for a cash payment of approximately $1.9 million. This transaction added approximately $1.6 million in assets to the Company. Further, with the insurance charters acquired from Capital Reserve, we obtained access to additional markets in Missouri, Kansas and Iowa.

        In connection with the acquisition of Capital Reserve, American Life also coinsured a block of life insurance business from Capital Reserve's parent corporation in a separate transaction. The purchase price for this block of business was approximately $375,000. This transaction added more than $70,000 in annual revenues to American Life's operations, as well as approximately $3.5 million of new assets and $3.2 million of policy liabilities to our balance sheet.

        In January 2011, we completed the private sale of 74,159 shares of our Series A Preferred Stock to certain qualified investors. The net proceeds of this sale, after expenses, were approximately $415,750. These proceeds were used to further capitalize our insurance operations, for working capital and for other general corporate purposes.

        On July 12, 2010, in order to provide additional capital to support our continued growth, we commenced an offering of up to 2,000,000 additional shares of voting common stock to existing shareholders who were residents of the State of Nebraska. This offering was completed on February 28, 2011 and a total of 1,554,326 additional shares of voting common stock were sold. The gross proceeds of this sale were approximately $7.7 million. These proceeds will be used to further capitalize our insurance operations, for working capital and for other general corporate purposes, including funding the acquisition of Old Reliance Insurance Company (Old Reliance) as described below.

        On November 8, 2010, the Company and American Life entered into an agreement to acquire all of the issued and outstanding capital stock of Old Reliance. The plan is for American Life to merge into Old Reliance following the purchase, with the survivor changing its name to American

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Life & Security Corp. In the transaction, the sole shareholder of Old Reliance will receive: (i) $1,750,000 in cash, (ii) $500,000 in the form of a surplus debenture and (iii) 150,000 shares of voting common stock of the Company. Old Reliance has annual premium income of approximately $1.7 million and total assets of approximately $4.0 million. As of December 31, 2010, it had total capital and surplus of approximately $1.7 million. The transaction, including the merger, was consummated on August 3, 2011.

        The Company was a development stage company until American Life commenced its insurance operations in 2009. We have incurred significant net losses since inception. These losses have resulted primarily from costs incurred while raising capital and establishing American Life. We expect to continue to incur operating losses until we achieve a volume of in-force life insurance policies that provides premiums that are sufficient to cover its operating expenses.

Income

        Our income prior to commencing insurance operations in 2009 came from our investments, which were nominal due to the need to maintain liquidity. When American Life commenced operations in September 2009, we also began to receive premium income from sales of life insurance. Capital Reserve, acquired in 2010 had little impact on 2010 operations as it had no premium income or related expenses. Management expects the premium writings in American Life to increase substantially in the next few years, and as assets and policy reserves grow, expect investment income to grow also. An evaluation of the best use of the assets obtained in the acquisition of Capital Reserve is ongoing.

Results of Operations

Comparison of six months ended June 30, 2011 with the six months ended June 30, 2010.

        Revenue:     Total revenues were $1,122,538 for the six months ended June 30, 2011, a decrease of $3,441,840 from $4,564,378 for the six months ended June 30, 2010. The decrease reflects the realization in the 2010 period of $3,702,609 in consideration for the reinsurance assumed from Security National. The consideration for reinsurance assumed is a non-recurring revenue that was not realized in 2011. Excluding the effects of this non-recurring event, total revenues increased from $861,769 in the 2010 period to $1,122,538 in the 2011 period. Premium revenue in the six months ended June 30, 2011 was $977,096, up $107,924 from $869,172 in the six months ended June 30, 2010. In addition, realized gains (losses) on investments were $(14,127) in the 2011 period compared to $(70,203) in the 2010 period. Investment and miscellaneous income was $159,569 for the six months ended June 30, 2011 compared to $62,800 in the six months ended June 30, 2010.

        Expenses:     Total expenses were $2,818,178 for the six months ended June 30, 2011, a decrease of $2,992,306 from $5,810,484 for the six months ended June 30, 2010. The decrease reflects the significant one-time increase in benefit reserves which was required in the 2010 period as a result of the assumption of insurance from Security National. This increase in benefit reserves was a non-recurring event that was not repeated in 2011. Excluding the effects of this non-recurring event, total recurring expenses increased from $2,198,423 in the six months ended June 30, 2010 to $2,818,178 in the six months ended June 30, 2011. Death and other policy benefits decreased from $207,571 in the 2010 period to $41,320 in the 2011 period. Insurance commission expense decreased from $703,700 in the 2010 period to $546,501 in the 2011 period, while salaries and benefits increased from $491,517 in the 2010 period to $1,043,649 in the 2011 period. Further, comparing the 2010 period to the 2011 period, travel and entertainment expense increased from $47,657 to $128,720, rent expense increased from $43,748 to $46,440, and other operating expenses increased from $229,909 to $380,617, while professional and administrative fees decreased from $589,442 to $526,967.

        Net Loss:     Our net loss was $(1,695,640) for the six months ended June 30, 2011, compared to a net loss of $(1,246,106) for the six months ended June 30, 2010. The increase in the net loss was

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primarily attributable to the fact that the overall increase in recurring expenses described above more than offset the overall increase in recurring revenue. We expect our losses to continue and increase in the future as we incur increased cost to grow our life insurance business.

Comparison of year ended December 31, 2010 with the year ended December 31, 2009.

        Revenue:     Total revenues were $5,831,841 for the year ended December 31, 2010, an increase of $5,387,563 from $444,278 for the year ended December 31, 2009. This increase is primarily attributable to the fact that American Life conducted insurance operations for a full year in 2010 and only operated for approximately four months in 2009. As a result, American Life generated premium revenue of $1,910,562 in 2010, compared to only $354,352 in 2009. In addition, realized gains (losses) on investments were $(71) in 2010, compared to $0 in 2009. Investment and miscellaneous income was $191,751 in 2010 compared to $89,926 in 2009. Consideration for the reinsurance assumed from Security National in 2010 was $3,729,599. The consideration for reinsurance assumed is a non-recurring revenue; therefore total revenues can be expected to decline in 2011, even though management expects premium income to increase.

        Expenses:     Total expenses were $8,055,046 for the year ended December 31, 2010, an increase of $6,534,403 from $1,520,643 for the year ended December 31, 2009. This increase is primarily attributable to the fact that American Life operated for a full year in 2010 and only operated for approximately four months in 2009, plus the fact that the assumption of insurance from Security National in 2010 caused a significant increase in benefit reserves which largely offset the consideration described above, as well as adding death benefits and other policy-related expenses. As a result, death and other policy benefits increased from $4,890 in 2009 to $162,099 in 2010, policyholder benefit reserves increased from $182,781 in 2009 to $4,650,227 in 2010, and insurance commission expense increased from $255,659 in 2009 to $1,251,817 in 2010. Also contributing to the overall increase in expenses between 2009 and 2010 were an increase of $304,292 in salaries and wages from $655,862 to $960,154 and an increase of $1,450,140 in other operating expenses from $634,829 to $2,084,969. Again, these increased expenses related primarily to the operation of American Life's insurance business for a full year in 2010. We expect most of these expenses to continue to increase in the future as a result of an increased payroll and other office and administrative expenses necessary for the management of the anticipated growth of our life insurance business, although management intends to pursue opportunities to forge partnerships with other companies of similar size in order to achieve better economies of scale.

        Capitalized deferred policy acquisition costs were $1,375,155 in 2010, compared to $283,370 in 2009. In accordance with accounting principles generally accepted in the United States of America (GAAP), these costs, which relate to the first year expenses of putting new life insurance premiums on the books of the Company, are capitalized and amortized over the life of the premiums produced. Amortization of such costs was $320,935 in 2010, compared to $69,992 in 2009

        Net Loss:     Our net loss was $(2,223,205) for the year ended December 31, 2010, compared to a net loss of $(1,076,365) for the year ended December 31, 2009. The increase in the net loss was primarily attributable to the increase in expenses described above. We expect our losses to continue and increase in the future as we incur increased cost to grow our life insurance business.

        One of the steps management is taking to mitigate the size of future losses is to look for opportunities for Midwest to earn revenues from complementary businesses. Currently, other than a nominal amount of investment income, Midwest has no revenue source (other than the revenues generated by American Life). Management believes there are opportunities for Midwest to generate income as a stand-alone company to add to the revenues generated by American Life and ultimately lead to profitability.

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Liquidity and Capital Resources

        Since inception, our operations have been financed primarily through the sale of voting common stock and preferred stock. As a result of delays in obtaining the Certificate of Authority for American Life, our operations have not been profitable and have generated significant operating losses since the Company was incorporated in 2003.

        In the six months ended June 30, 2011, net cash used in operating activities was $(1,628,139) compared to cash provided by operating activities of $1,922,018 in the six months ended June 30, 2010. The cash provided by operating activities in 2010 was largely due to the effects of the non-recurring transaction with Security National, and the net cash used in operating activities in the 2011 period largely reflects our operating losses. In the 2011 period, net cash used in investing activities was $(660,853) compared to $(1,151,587) in the 2010 period. In the 2011 period, net cash provided by financing activities was $2,266,788 compared to $420,288 in the 2010 period. The increase in positive cash flow from financing activities can be attributed to the proceeds of our sale of additional shares of voting common stock to existing shareholders in Nebraska in the first half of 2011.

        In 2010, net cash provided in operating activities was $667,993 compared to cash used of $(827,065) in 2009. The improvement in cash flow can be attributed to the effects of the one-time transaction with Security National as well as to the revenues generated by American Life for a full-year in 2010 compared to approximately four months in 2009. In 2010, net cash used in investing activities was $(2,501,251) compared to $(4,966,329) in 2009. In 2010, net cash provided by financing activities was $5,599,612 compared to $4,640,650 in 2009. The increase in positive cash flow from financing activities can be attributed to the proceeds of our sale of additional shares of voting common stock to existing shareholders in Nebraska as well as the sale of non-voting convertible preferred shares to foreign residents, both of which primarily occurred in the second half of 2010.

        At June 30, 2011, we had cash and cash equivalents totaling $5,228,264. We believe that our existing cash and cash equivalents will be sufficient to fund our anticipated operating expenses and capital expenditures for at least twelve months. We have based this estimate upon assumptions that may prove to be wrong and we could use our capital resources sooner than we currently expect. The growth of American Life is uncertain and will require additional capital if it continues to grow.

Off-Balance Sheet Arrangements

        We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

ITEM 3.    PROPERTIES.

        The Company and American Life currently lease office space at 8101 "O" Street, Suite S111, Lincoln, Nebraska 68510. This lease was executed August 28, 2009, amended on January 21, 2011, and expires on January 31, 2014. Rent expense for the years ended December 31, 2010 and 2009 was $93,369 and $41,762, respectively. Rent expense for the six month period ended June 30, 2011 was $43,440. Future minimum payments for the remainder of 2011, 2012, 2013 and 2014 are $50,802, $117,308, $128,240 and $10,687, respectively.

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