3. Fair value measurements

As of June 30, 2013 and December 31, 2012, the carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and other liabilities and dividends payable approximate their fair values due to the short term maturities of these instruments. Management considers that the carrying amounts for loans receivable and long term debt as of June 30, 2013 and December 31, 2012 approximate their fair value.

Under US GAAP, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The US GAAP guidance for fair value also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value as of June 30, 2013 and December 31, 2012:

	June 30, 2013
	Level 1		Level 2		Level 3		Total
Assets:
Recurring
Marketable securities	$	8,575,899	$	-	$	-	$	8,575,899

Nonrecurring
Investment in affiliate	$	-	$	-	$	6,854,775	$	6,854,775

	December 31, 2012
	Level 1		Level 2		Level 3		Total
Assets:
Recurring
Marketable securities	$	8,570,338	$	-	$	-	$	8,570,338

Nonrecurring
Investment in affiliate	$	-	$	-	$	6,925,346	$	6,925,346

A reconciliation of the beginning and ending balances for Level 3 investments for the six months ended June 30, 2013:

Balance as of December 31, 2012	$	6,925,346
Profit sharing and equity from earnings of OC-BVI		1,179,304
Distributions from OC-BVI		(1,249,875)
Balance as of June 30, 2013	$	6,854,775