Note 11. Consolidation and Deconsolidation of Hot Dot

In August 2011, the Company acquired a controlling interest ownership of Hot Dot, Inc., a company organized to develop, manufacture, and market the Alert Patch. During the third quarter of 2011, Hot Dot purchased certain assets of IonX Capital Holding Inc. The consideration paid by Hot Dot was $1.05 million in cash. The purchase price was primarily allocated to a patent asset for a thermochromatic patch for monitoring and detecting body temperature. This patent asset is being amortized over fifteen years, its estimated useful life. On September 12, 2012, Hot Dot repurchased 1,000,000 shares of Hot Dot stock from Midwest for a purchase price of $750,000. As a result of the stock repurchase by Hot Dot, Midwest ceased to have a controlling financial interest in Hot Dot and subsequently deconsolidated Hot Dot on the effective date of the stock repurchase. Hot Dot is a development stage company that has not conducted operations apart from raising capital.

The following table summarizes the cash impact of the deconsolidation of Hot Dot at the date of deconsolidation:

Investments, available for sale, equity securities	$	39,735
Notes receivable		75,000
Intangible asset		989,900
Property and equipment		54,750
Gain on deconsolidation		278,513
Equity investment in Hot Dot at deconsolidation date		(570,190	)
Change in noncontrolling interest		(3,175,575	)
Other liabilities		(15,000	)
	$	(2,322,867	)

Midwest determined that the fair value of Hot Dot on the date of deconsolidation approximated carrying value as Hot Dot has no active trading. The fair value for Hot Dot was determined through the use of unobservable assumptions about market participants. Hot Dot is regularly bringing in new investors at or above the prices paid by the Company. Accordingly, the Company has asserted that a willing market participant would purchase the security for the same price as the Company paid until such time as the development stage company commences operations. Midwest determined the deconsolidation date fair value of its remaining 16.45% interest in Hot Dot to be $570,190. As a result of the deconsolidation, Midwest recognized a gain of $278,513 recorded in realized gain on deconsolidation of Hot Dot, Inc. on the consolidated statements of comprehensive income for the year ended December 31, 2012. The results of Hot Dot have been reflected in Midwest's consolidated financial statements up to the date of the stock repurchase by Hot Dot. Subsequent to the deconsolidation of Hot Dot, the company accounts for its investment in Hot Dot using the equity method.

The following pro forma information presents the combined results of the Company as though Hot Dot was accounted for as an equity method investment by the Company and not consolidated into the Company's financial statements since the Company's purchase of the investment during the third quarter of 2011.

	Year Ended
	December 31, 2012
Premiums	$	4,208,659
Other income		719,486
Expenses		(6,730,258	)
Net loss		(1,802,113	)
Less: Loss attributable to noncontrolling interests		(24,091	)
Net loss attributable to Midwest Holding Inc.		(1,778,022	)
Net loss attributable to Midwest Holding Inc. per common share	$	(0.20	)