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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2008
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from       to
 Commission File Number 000-51342
 CHARTWELL INTERNATIONAL, INC.
  Nevada
    
    95-3979080(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)140 East Main StreetMiddletown, New York
    
    10940(Address of Principal Executive Offices)
    
    (Zip Code)
 (949) 335-5319  (Issuers telephone number)
 
  
 o
 þ o
 o
 o þ
  $537,000 September 15, 2008
 September 15, 2008 16,237,900
 o þ




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TABLE OF CONTENTS
 PagePART IITEM 1  DESCRIPTION OF BUSINESS
    
    
    3ITEM 2  DESCRIPTION OF PROPERTY
    
    
    16ITEM 3  LEGAL PROCEEDINGS
    
    
    18ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
    
    
    18PART IIITEM 5  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERMATTERS AND SMALL
BUSINESS ISSUER ;PURCHASES OF EQUITY SECURITIES
    
    
    18ITEM 6  MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OFOPERATION
    
    
    20ITEM 7  FINANCIAL STATEMENTS
    
    
    25ITEM 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL
DISCLOSURE
    
    
    25ITEM 8A  CONTROLS AND PROCEDURES
    
    
    25ITEM 8B  OTHER INFORMATION
    
    
    26PART IIIITEM 9  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
    
    
    26ITEM 10  EXECUTIVE COMPENSATION
    
    
    28ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSAND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
    
    
    30ITEM 12  CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    30ITEM 13  EXHIBITS
    
    
    31ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    33EXHIBIT 10.22EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  2




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##### Table of Contents



PART I
 
 ITEM 1  DESCRIPTION OF BUSINESS
 Overview of Business
         3




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Dividend and Change of Control
    Group Structure and Subsidiaries Activities
 
       Our Industries
 4




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Railroads, Line-Haul Operating
    AggregateMilesClassification of Railroads
    
    Number
    
    Operated
    
    Revenues and Track Miles OperatedClass I (1)
    
    
    7
    
    
    
    97,496
    
    
    Over $289.4 millionRegional (2)
    
    
    31
    
    
    
    15,641
    
    
    $40.0 to $289.4 million and/or 350 or more miles operatedLocal
    
    
    518
    
    
    
    27,109
    
    
    Less than $40.0 million  and less than 350 miles operatedTotal
    
    
    556
    
    
    
    140,246
 
 (1)
    
    Class 1 railroads include Canadian National Railway (CN), CSX, BNSF, Norfolk Southern (NS),
Kansas City Southern Railway Company (KCS), Union Pacific (UP) and Canadian Pacific Railway
(CP)(2)
    
    Includes groups of non-contiguous smaller railroads Source: Association of American
Railroads, Railroad Facts, 2005 Edition.       5




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Railroads, Line-Haul Operating  Regulatory Issues
     Coal Mining
   6




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Coal Mining  Competition
  Coal Mining  Regulatory Issues and Environmental Matters
     7




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Clean Air Act.
  Mine Health and Safety Laws.
 Surface Mining Control and Reclamation Act.
  Comprehensive Environmental Response, Compensation and Liability Act.
 Mining Permits and Approvals.
 8




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Endangered Species.
 Other Environmental Laws.
 Our Strategy
     9




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Customers
  Dividends
  Employees
   10




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Factors, Risks and Uncertainties That May Affect our Business
 With the exception of historical facts stated herein, the matters discussed in this report on
Form 10-KSB are forward looking statements that involve risks and uncertainties that could cause
actual results to differ materially from projected results. Such forward looking statements
include, but are not necessarily limited to statements regarding anticipated levels of future
revenues and earnings from the operations of Chartwell International, Inc. and its subsidiaries,
(the Company, we, us or our), projected costs and expenses related to our operations,
liquidity, capital resources, and availability of future equity capital on commercially reasonable
terms. Factors that could cause actual results to differ materially are discussed below. We
disclaim any intent or obligation to publicly update these forward looking statements, whether as
a result of new information, future events or otherwise.
 Risks Related to Our Acquisition Strategy and Operations
 We may be unable to execute our acquisition growth strategy.
 We face challenges in attracting and retaining a qualified and experienced management team.
 Integration of proposed acquisitions poses certain risks, and we do not currently have
historical experience upon which to base an evaluation of the future prospects of success.
 Additional factors may negatively impact our acquisition growth strategy.
 We may not be able to attract the required capital, through either debt or equity financings,
in order to complete strategic acquisitions or make required purchases of capital equipment needed
to conduct our operations efficiently, either of which could adversely effect our financial
condition and ability to execute on our business plan.
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There may be undisclosed liabilities in the businesses that we acquire which we fail or are
unable to discover which could have a material adverse effect on our operations and business
conditions.
 Larger competitors may compete with us for acquisition targets, making it more difficult for
us to acquire businesses that fit within our business strategy, or increasing the cost of making
such acquisitions, either of which could negatively affect our performance.
 The success of our railroad operations is dependant on our continuing relationships with Class
I carriers
 Much of the freight transported by railroads moves on railcars supplied by other independent
providers.
 We may be partially depending on government funding for our existing and future capital
projects and track rehabilitation.
 Our planned mining operations are inherently subject to conditions that could affect levels of
production and production costs at particular mines for varying lengths of time and could reduce
our profitability.
 12




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We have reclamation obligations and if we are required to honor reclamation obligations that
have been assumed by previous mine operators, we could be required to expend greater amounts than
we currently anticipate, which could affect our profitability in future periods.
 Defects in title or loss of any leasehold interests in our properties could limit our ability
to mine these properties or result in significant unanticipated costs.
 Estimates of proven and probable reserves are subject to considerable uncertainty.
 We may not be able to raise sufficient capital or generate sufficient cash flow to meet our
debt service requirements.
 Risks Related to our Industry
 Strategic growth through acquisitions is dependent on our ability to internally grow our
logistics infrastructure, and there is no historical perspective to validate our belief that we can
attain certain gross margins competitively, the failure of which would adversely affect our
financial condition.
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Rapid growth could create risks of over leverage or undercapitalization to meet our
obligations which could materially impact our financial condition and strategy.
 The rail-based logistics business is highly competitive, and we will face competition from
companies that may be better financed than we are which could impact our ability to compete for
customers and employees.
 We compete directly with other modes of transportation, including motor carriers, ships and
barges.
 Our railroad and real estate ownership are subject to significant governmental regulation and
our failure to comply with such regulations could have a material adverse effect on our operating
results, financial condition and liquidity.
 Rising fuel costs could adversely affect our business
 As part of our railroad operations, we may transport hazardous materials.
 Increased consolidation and competition within the coal industry may adversely affect our
ability to sell coal, and excess production capacity in the industry could put downward pressure on
coal prices.
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We may be unable to obtain and renew permits necessary for our operations, which would reduce
our production, cash flow and profitability.
 Judicial and administrative proceedings related to our business are routine, and penalties,
fines, or remediation orders could materially impact our cash flow or working capital from
time-to-time, which could impair our business plan objectives.
 15




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ITEM 2  DESCRIPTION OF PROPERTY
 Land and Leaseholds
   Mineral Land Rights
  
 Our Reserves
  16




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Total
    
    
    
    
    
    
    
    
    
    Sulfur
    
    AsUnassigned
    
    
    
    
    
    
    
    
    
    Content
    
    ReceivedRecoverable
    
    Mining
    
    (lbs/million
    
    BTU/lbReserves (2)
    
    Method
    
    BTUs)
    
    (1)Mineral
    
    Proven
    
    Probable
    
    Total
    
    Surface
    
    Underground
    
    < 1.2
    
    1.2 - 2.5
    
    >2.5Coal
    
    
    4.095
    
    
    
    21.665
    
    
    
    25.760
    
    
    
    6.260
    
    
    
    19.500
    
    
    
    0.167
    
    
    
    8.468
    
    
    
    17.125
    
    
    
    10,500-11,200Clay
    
    
    2.238
    
    
    
    0.499
    
    
    
    2.737
    
    
    
    2.737
    
    
    
    
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aLimestone
    
    
    1.620
    
    
    
    0.759
    
    
    
    2.379
    
    
    
    2.379
    
    
    
    
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
 
 (1)
    
    As received BTU/lb. includes the weight of moisture in the coal on an as sold basis. These
were calculated by averaging the values obtained from the drill holes.(2)
    
    Unassigned reserves will require significant capital expenditure to mine the reserves.     Southern Ohio Mine
   17




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ITEM 3  LEGAL PROCEEDINGS
    
 ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 Market Information
   Year Ended June 30, 2008
    
    High
    
    LowFirst Quarter (September 30, 2007)
    
    $
    0.75
    
    
    $
    0.30Second Quarter (December 31, 2007)
    
    $
    0.37
    
    
    $
    0.03Third Quarter (March 31, 2008)
    
    $
    0.25
    
    
    $
    0.05Fourth Quarter (June 30, 2008)
    
    $
    0.30
    
    
    $
    0.13
 Year Ended June 30, 2007
    
    High
    
    LowFirst Quarter (September 30, 2006)
    
    $
    2.70
    
    
    $
    0.75Second Quarter (December 31, 2006)
    
    $
    1.50
    
    
    $
    0.75Third Quarter (March 31, 2007)
    
    $
    1.40
    
    
    $
    0.85Fourth Quarter (June 30, 2007)
    
    $
    1.00
    
    
    $
    0.75
  Stockholders
 18




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Dividends
  Recent Sales of Unregistered Securities
   Securities Authorized for Issuance under Equity Compensation Plans
  Equity Compensation Plan Information
 Number ofsecuritiesremainingavailable forfuture issuanceNumber of securities
    
    
    
    
    
    under equityto be issued upon
    
    Weighted-average
    
    compensationexercise of
    
    exercise price of
    
    plans (excludingoutstanding options,
    
    outstanding
    
    securitieswarrants
    
    options, warrants
    
    reflected inPlan Category
    
    and rights(1)
    
    and rights
    
    column (a))Equity compensation
plans approved by
security holders(2)
    
    
    
    
    
    
    850,000
    
    
    $
    2.62
    
    
    
    000,000Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    N/ATotal
    
    
    
    
    
    
    850,000
    
    
    $
    2.62
    
    
    
    000,000
 
 (1)
    
    Number of shares is subject to adjustment in the future for changes in capitalization
resulting from stock splits, stock dividends and similar events.(2)
    
    Consists of our 2006 Equity Incentive Plan. This Plan authorizes us to grant options to
purchase up to 9% of the sum of the number of outstanding shares of our common stock and the
number shares attributed to convertible securities during the term of our Plan.  19




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ITEM 6  MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
   Background and Corporate History
       20




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Critical Accounting Policies
  Revenue Recognition.
 Stock Based Compensation .
  21




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Impairment of Long-Term Assets.
 Results of Operations
 Comparison for the year ended June 30, 2008 and 2007
  Revenues
  Cost of Revenues
  Gross Profit
  General and Administrative Expenses
  22




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
    
    salaries and employee expenses of $849,000
    
    engineering and other consulting services of $141,000
    
    rents, utilities, telephone and office related expenses of $142,000
    
    repairs and maintenance of $69,000
    
    professional fees of $405,000
    
    investment and management consulting fees of $120,000
    
    travel expenses of $66,000
    
    depreciation and amortization expense of $218,000.
  
    
    salaries and employee expenses of $1,438,000
    
    engineering and other consulting services of $719,000
    
    rents, utilities, telephone and office related expenses of $250,000
    
    repairs and maintenance of $83,000
    
    professional fees of $582,000
    
    investment and management consulting fees of $130,000
    
    travel expenses of $195,000
    
    depreciation and amortization expense of $309,000.
 Other Income and Expenses
  Income Tax Provision
  Liquidity and Capital Resources
    23




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Capital Expenditures
    Payments Due by PeriodContract Obligations
    
    
    
    
    
    Less than
    
    
    
    
    
    
    
    
    
    
    More thanAt June 30, 2007
    
    Total
    
    
    1 Year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsLong Term Debt
    
    $
    6,271,000
    
    
    $
    2,007,000
    
    
    $
    
    
    
    $
    3,780,000
    
    
    $
    484,000Lease Obligations
    
    
    65,000
    
    
    
    56,000
    
    
    
    9,000
    
    
    
    
    
    
    
    Total Contractual Obligations
    
    $
    6,336,000
    
    
    $
    2,063,000
    
    
    $
    9,000
    
    
    $
    3,780,000
    
    
    $
    484,000
  24




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Off-Balance Sheet Transactions
  
 ITEM 7  FINANCIAL STATEMENTS
  
 ITEM 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8A  CONTROLS AND PROCEDURES
   Managements Report on Internal Control over Financial Reporting
 Internal Control 
Integrated Framework
   25




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Changes in Internal Control over Financial Reporting
  
 ITEM 8B  OTHER INFORMATION
   
 PART III
 
 ITEM 9  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
 Directors and Executive Officers
  Person
    
    Age
    
    PositionImre Eszenyi
    
    
    40
    
    
    Chairman of the Board, Acting President and Vice PresidentPaul Biberkraut
    
    
    47
    
    
    Chief Financial and Administrative Officer and SecretaryCharles Srebnik
    
    
    74
    
    
    Director, Chairman of the Audit CommitteeDavid Adams
    
    
    50
    
    
    Director, Assistant Secretary
  26




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Audit Committee
  Audit Committee Financial Expert
  Compliance with Section 16(a) of the Securities Exchange Act of 1934
  Code of Ethics
 www.chartwellinternational.com.
 27




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ITEM 10  EXECUTIVE COMPENSATION
 Summary Compensation
  Summary Compensation Table
 NON-EQUITY
    
    NON-INCENTI-
    
    QUALIFIEDVE
    
    DEFERRED
    
    ALLPLAN
    
    COMPENSA-
    
    OTHERSTOCK
    
    OPTION
    
    COMPEN-
    
    TION
    
    COMPENS-NAME AND
    
    
    
    
    
    SALARY
    
    BONUS
    
    AWARDS (4)
    
    AWARDS (4)
    
    SATION
    
    EARNINGS
    
    ATION
    
    TOTALPRINCIPAL
    
    YEAR
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)POSITION (a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)
    
    (g)
    
    (h)
    
    (i)
    
    (j)Imre Eszenyi,
    
    
    2008
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-Chairman of the
Board, Acting
President and
Vice President
(1)
    
    
    2007
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-Paul Biberkraut,
    
    
    2008
    
    
    $
    104,788
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    104,788Chief Financial
and
Administrative
Officer and
Secretary
    
    
    2007
    
    
    $
    183,462
    
    
    $
    10,000
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    194,074Thomas Winant,
    
    
    2008
    
    
    $
    109,897
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    1,308
    
    
    $
    111,205Vice President
of Sales and
Operations (2)
    
    
    2007
    
    
    $
    120,000
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    76,560
    
    
    $
    196,560
 
 (1)
    
    Mr. Eszenyi does not have an employment engagement and does not receive compensation for
his duties as acting president. Aggregate number of stock awards outstanding as of June
30, 2008 is 75,000.(2)
    
    Mr. Winants employment with Chartwell was terminated on January 31, 2008. All other
compensation consists of commission. Employment Agreements
  Outstanding Equity Awards at Fiscal Year-End
 28




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OPTION AWARDS
    
    
    
    
    
    
    
    
    
    STOCK AWARDSEQUITYINCENTIVEEQUITY
    
    PLANINCENTIVE
    
    AWARDS:PLAN
    
    MARKET OREQUITY
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AWARDS:
    
    PAYOUTINCENTIVE PLAN
    
    
    
    
    
    
    
    
    
    NUMBER
    
    MARKET
    
    NUMBER OF
    
    VALUE OFAWARDS:
    
    
    
    
    
    
    
    
    
    OF
    
    VALUE OF
    
    UNEARNED
    
    UNEARNEDNUMBER OF
    
    NUMBER OF
    
    NUMBER OF
    
    
    
    
    
    
    
    
    
    SHARES
    
    SHARES
    
    SHARES,
    
    SHARES,SECURITIES
    
    SECURITIES
    
    SECURITIES
    
    
    
    
    
    
    
    
    
    OR UNITS
    
    OR UNITS
    
    UNITS OR
    
    UNITS ORUNDERLYING
    
    UNDERLYING
    
    UNDERLYING
    
    
    
    
    
    
    
    
    
    OF STOCK
    
    OF STOCK
    
    OTHER
    
    OTHERUNEXERCISED
    
    UNEXERCISED
    
    UNEXERCISED
    
    OPTION
    
    OPTION
    
    THAT
    
    THAT
    
    RIGHTS THAT
    
    RIGHTS THATOPTIONS (#)
    
    OPTIONS (#)
    
    UNEARNED
    
    EXERCISE
    
    EXPIRATION
    
    HAVE NOT
    
    HAVE NOT
    
    HAVE NOT
    
    HAVE NOTNAME
    
    EXERCISABLE
    
    UNEXERCISEABLE
    
    OPTIONS (#)
    
    PRICE ($)
    
    DATE
    
    VESTED (#)
    
    VESTED ($)
    
    VESTED (#)
    
    VESTED ($)(a)
    
    (b)
    
    (c)
    
    (d)
    
    (e)
    
    (f)
    
    (g)
    
    (h)
    
    (i)
    
    (j)Imre Eszenyi
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Paul Biberkraut (1)
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    $
    3.00
    
    
    
    02/15/11
    
    
    
    25,000
    
    
    $
    3,750
    
    
    
    
    
    
    
    Thomas Winant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    The 150,000 common stock options were granted under our 2006 Equity Incentive Plan and
are fully vested. The 25,000 common shares were granted under our 2006 Equity Incentive
Plan and vests at earlier of certain liquidity events in our common stock or January 1,
2009. Compensation of Directors
    CHANGE INPENSION VALUEANDFEES
    
    
    
    
    
    
    
    
    
    NON-EQUITY
    
    NONQUALIFIEDEARNED
    
    
    
    
    
    
    
    
    
    INCENTIVE
    
    DEFERREDOR PAID
    
    STOCK
    
    OPTION
    
    PLAN
    
    COMPENSATION
    
    ALL OTHERIN CASH
    
    AWARDS
    
    AWARDS
    
    COMPENSATION
    
    EARNINGS
    
    COMPENSATION
    
    TOTALNAME
    
    ($)
    
    (1) ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)
    
    ($)(a)
    
    (b)
    
    (c)
    
    (d)
    
    
    
    
    
    (f)
    
    (g)
    
    (h)David Adams
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Charles Srebnik
    
    $
    12,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,000
 
 (1)
    
    The assumptions underlying the valuation of stock awards can be found in Note 9 of our Notes
to Consolidated Financials that begin on page 43 of this document.
The aggregate number of stock awards outstanding at June 30, 2008 for Mr. Adams is 75,000 and for
Mr. Srebnik, 125,000.  29




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##### Table of Contents



ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Amount and Natureof Beneficial
    
    Percentage ofName and Address
    
    
    
    
    
    Ownership of
    
    Common Stockof Beneficial Owner
    
    Title of Class
    
    Common Stock(1)
    
    Outstanding(1)Imre Eszenyi(2) (3)
    
    Common
    (3)
    
    
    6,216,870
    
    
    
    38.29
    %Paul Biberkraut(2)
    
    Common
    (4)
    
    
    325,000
    
    
    
    1.98
    %David Adams(2)
    
    Common
    (5)
    
    
    378,750
    
    
    
    2.33
    %Charles Srebnik(2)
    
    Common
    (6)
    
    
    450,000
    
    
    
    2.77
    %Orchestra Finance, LLP, No. 7 Inverness Gardens, London,
UK W8 4RN
    
    Common
    
    
    
    5,901,370
    
    
    
    36.34
    %International Kapitalanagegesellsc haft m.b.H acting on
behalf of Fund Merlin Master Funds INKA
Georg-Glock-Strasse 14 40474 Dusseldorf, Germany
    
    Common
    (7)
    
    
    2,200,000
    
    
    
    12.91
    %Fonditel Velociraptor, FL Pedro Teixeira Street, 8, 3rd
Floor 28020 Madrid, Spain
    
    Common
    (8)
    
    
    1,500,000
    
    
    
    9.24
    %Gerlach & Company c/o Citibank 333 West 34th Street, 3rd
Floor New York, NY 10001
    
    Common
    
    
    
    850,000
    
    
    
    5.23
    %Faisal A. Alhegelan c/o Hogan & hartson L.L.P. 555
Thirteenth Street, NW Washington, DC 20004
    
    Common
    (9)
    
    
    852,490
    
    
    
    5.25
    %All Executive Officers and Directors as a Group (4 persons)
    
    Common
    (3)(4)(5)
    
    
    7,370,620
    
    
    
    45.39
    %
 
 (1)
    
    Based upon information furnished to us by the directors and executive officers or obtained
from our stock transfer books showing 16,237,900 shares of common stock outstanding as of
September 15, 2008. We are informed that these persons hold the sole voting and dispository
power with respect to the common stock except as noted herein. For purposes of computing
beneficial ownership and the percentage of outstanding common stock held by each person or
group of persons named above as of September 15, 2008, any security which such person or group
of persons has the right to acquire within 60 days after such date is deemed to be outstanding
for the purpose of computing beneficial ownership and the percentage ownership of such person
or persons, but is not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.(2)
    
    The address for Messrs. Eszenyi, Biberkraut, Adams, and Srebnik is 140 East Main Street,
Middletown, NY 10940(3)
    
    Includes 5,901,370 shares owned by Orchestra Finance, LLP, of which Mr. Eszenyi is the
managing partner. Mr. Eszenyi disclaims beneficial ownership over these shares.(4)
    
    Includes 150,000 shares of common stock issuable upon the exercise of options held by Mr.
Biberkraut which are exercisable within 60 days of this table.(5)
    
    Includes 100,000 shares owned by Weintraub Genshlea Chediak, a law firm of which Mr. Adams is
a shareholder, and disclaims beneficial ownership.(6)
    
    Includes 100,000 shares owned by Mr. Srebniks spouse, of which Mr. Srebnik disclaims
beneficial ownership.(7)
    
    Includes 800,000 shares INKA has the right to acquire within 60 days upon conversion of 1,950
shares of our Series A Preferred Stock.(8)
    
    Includes 500,000 shares held in the name of Eurovalor Estados Unidos, FI based on our
knowledge that the two entities are controlled or are under the common direction of the same
principals.(9)
    
    Includes approximately 752,490 shares Mr. Alhegelan has the right to acquire within 60 days
pursuant to conversion rights that are part of a convertible promissory note issued to Mr.
Alhegelan. 
 ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 30




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##### Table of Contents



ITEM 13  EXHIBITS
 Exhibit Number
    
    Name3.1
    (1)
    
    Amended and Restated Articles of Incorporation3.2
    (1)
    
    Amended and Restated By-laws4.1
    (16)
    
    Certificate of Designation of Series A Preferred Stock10.2
    (2)
    
    Purchase and Sale Agreement with Railway & Industrial Services, Inc.10.3
    (3)
    
    Securities Purchase Agreement10.4
    (4)
    
    Letter of Understanding with Rail Waste Holdings, LLC10.5
    (5)
    
    Share Purchase Agreement10.6
    (6)
    
    Agreement and Plan of Merger with E-Rail Logistics, Inc.10.7
    (7)
    
    Settlement Agreement with Minerva Enterprises, Inc. et al.10.8
    (8)
    
    Contract of Sale of Stock with the Estate of Pierre T. Rasmussen for Acquisition
of Cranberry Creek Railroad, Inc.10.9
    (9)
    
    Asset Purchase Agreement with the Estate of Emily Lucy C. Burch.10.10
    (10)
    
    Settlement Agreement with Starbank Group LLC et al.10.11
    (10)
    
    Settlement Agreement with RWH and Christopher Davino.10.12
    (10)
    
    Management Advisory Agreement with Orchestra Finance LLP.10.13
    (11)
    
    Note Purchase Agreement with Chris Gordon.10.14
    (12)
    
    Note Purchase Agreement with Faisal A. Alhegelan.10.15
    (13)
    
    Assignment, Assumption and Novation Agreement.10.16
    (15)
    
    Lease Agreement with TOA Reinsurance Company of America.
 31




---



##### Table of Contents



Exhibit Number
    
    Name10.17(15)
    
    Redemption and Stock Purchase Agreement between Thomas J. Belville, Robert E.
Belville, E-Rail Logistics, Inc. and Belville Mining Company.10.18(15)
    
    Amendment to Redemption and Stock Purchase Agreement between Thomas J. Belville,
Robert E. Belville, E-Rail Logistics, Inc. and Belville Mining Company.10.19(17)
    
    Consulting Agreement with Entitlement Solutions, Inc.10.20(18)
    
    Purchase Agreement with Perry New Jersey I, LLC10.21(19)
    
    Settlement Agreement with Hudson Logistics, Inc., Hudson Logistics Loading, Inc.,
Imre Eszenyi, Raymond Kalafsky, Northern & Bergen Railroad, LLC, and New York &
Greenwood Lake Railway10.22
    
    Termination and Release Agreement with Railway & Industrial Services, Inc.14.1(14)
    
    Code of Ethics21
    
    Middletown and New Jersey Railway Company, Inc., a New York corporation; Hudson
Logistics, Inc., a Delaware corporation; Hudson Logistics Loading, Inc., a
Delaware corporation; Greater Hudson Resources, Inc., a Delaware corporation;
Belville Mining Company, Inc., an Ohio corporation; Greater Ohio Resources, Inc.,
an Ohio corporation.23.1
    
    Consent of Urish Popeck & Co., LLC31.1
    
    Rule 13(a)  14(a)/15(d)  14(a) Certification (Principal Executive Officer)31.2
    
    Rule 13(a)  14(a)/15(d)  14(a) Certification (Principal Financial Officer)32
    
    Section 1350 Certifications
 Footnotes to Exhibits Index
 (1)
    
    Incorporated by reference to Form 8-K dated June 27, 2005.(2)
    
    Incorporated by reference to Form 8-K dated July 11, 2005.(3)
    
    Incorporated by reference to Form 8-K dated July 8, 2005.(4)
    
    Incorporated by reference to Form 8-K dated April 20, 2005.(5)
    
    Incorporated by reference to Form 8-K dated March 23, 2005.(6)
    
    Incorporated by reference to Form 8-K dated September 8, 2005.(7)
    
    Incorporated by reference to Form 8-K dated November 16, 2005.(8)
    
    Incorporated by reference to Form 8-K dated December 30, 2005.(9)
    
    Incorporated by reference to Form 8-K dated December 30, 2005.(10)
    
    Incorporated by reference to Form 8-K dated March 15, 2006.(11)
    
    Incorporated by reference to Form 8-K dated March 15, 2006.(12)
    
    Incorporated by reference to Form 8-K dated April 26, 2006.(13)
    
    Incorporated by reference to Form 8-K dated August 24, 2006.(14)
    
    Incorporated by reference to Form 8-K dated November 21, 2006.
 32




---



##### Table of Contents



(15)
    
    Incorporated by reference to Form 10-KSB dated September 27, 2006.(16)
    
    Incorporated by reference to Form 8-K dated March 8, 2007.(17)
    
    Incorporated by reference to Form 8-K dated March 26, 2007.(18)
    
    Incorporated by reference to Form 8-K dated December 27, 2007.(19)
    
    Incorporated by reference to Form 8-K dated January 30, 2008.
 
 ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES.
  June 30,2008
    
    
    2007Audit Fees
    
    $
    125,000
    
    
    $
    140,000Audit  Related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    41,000
    
    
    
    47,000All Other Fees
    
    
    
    
    
    
    Total
    
    $
    166,000
    
    
    $
    187,000
    33




---



##### Table of Contents



SIGNATURES
  CHARTWELL INTERNATIONAL, INC.
 Dated: September 17, 2008
    
    /s/ Imre EszenyiBy: Imre EszenyiIts: Acting President (Principal Executive Officer)
and Chairman of the BoardDated: September 17, 2008
    
    /s/ Paul BiberkrautBy: Paul BiberkrautIts: Chief Financial and Administrative Officer(Principal Financial Officer and Principal Accounting Officer)
  Signature
    
    Capacity
    
    Date/s/ Imre Eszenyi

        Imre Eszenyi
    
    Director
    
    September 17, 2008/s/ David C. Adams

        David C. Adams
    
    Director
    
    September 17, 2008/s/ Charles Srebnik

        Charles Srebnik
    
    Director
    
    September 17, 2008
 34




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##### Table of Contents



PageIndependent Registered Public Accounting Firms Report
    
    
    36Financial StatementsConsolidated Balance Sheets
    
    
    37Consolidated Statements of Operations
    
    
    38Consolidated Statements of Stockholders Equity
    
    
    39Consolidated Statements of Cash Flows
    
    
    40Notes to Consolidated Financial Statements
    
    
    42
 35




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Pittsburgh, Pennsylvania
    
    /s/ Urish Popeck & Co., LLCAugust 22, 2008
    
    URISH POPECK & CO., LLC
 36




---



##### Table of Contents



Chartwell International, Inc. and Subsidiaries
(A Development Stage Company)
 
 Consolidated Balance Sheets
  June 30,
    
    
    June 30,2008
    
    
    2007AssetsCurrent assetsCash and cash equivalents (Note 1)
    
    $
    182
    
    
    $
    704Restricted cash( Note 2 and 6)
    
    
    
    
    
    
    279Accounts receivable, net of allowance for uncollectible accounts of $0 (2008) and $58 (2007)
(Notes 1, 6 and 7)
    
    
    19
    
    
    
    507Deposits (Note 3)
    
    
    391
    
    
    
    536Prepaid expense and other
    
    
    19
    
    
    
    47Total current assets
    
    
    611
    
    
    
    2,073Long-term assets(Notes 1, 7)Property and equipment, net (Note 4)
    
    
    2,125
    
    
    
    5,178Land
    
    
    1,192
    
    
    
    1,681Mineral rights
    
    
    5,447
    
    
    
    5,447Capacity and loading rights (Note 5)
    
    
    
    
    
    
    1,383Investment, at cost
    
    
    123
    
    
    
    100Other
    
    
    9
    
    
    
    121Total long-term assets
    
    
    8,896
    
    
    
    13,910Total assets
    
    $
    9,507
    
    
    $
    15,983Liabilities and Stockholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    $
    345
    
    
    $
    1,403Due to related parties
    
    
    19
    
    
    
    14Notes payable (Note 7)
    
    
    2,007
    
    
    
    773Total current liabilities
    
    
    2,371
    
    
    
    2,190Long-term liabilitiesNotes payable, net of current portion (Note 7)
    
    
    4,264
    
    
    
    6,078Total long-term liabilities
    
    
    4,264
    
    
    
    6,078Total liabilities
    
    
    6,635
    
    
    
    8,268Commitments and Contingencies(Notes 3,6,7 and 10)Stockholders Equity(Note 9)Preferred stock, $0.001 par value, 25,000 shares authorized
Series A Preferred shares, $0.001 par value, 20 shares designated and 1.95 issued and outstanding
    
    
    2,000
    
    
    
    2,000Common shares, $0.001 par value, 100,000 shares authorized 14,051 and 14,041 issued and
outstanding at June 30, 2008 and 2007, respectively
    
    
    14
    
    
    
    14Additional paid in capital
    
    
    14,182
    
    
    
    13,972Accumulated deficit
    
    
    (13,324
    )
    
    
    (8,271
    )Total stockholders equity
    
    
    2,872
    
    
    
    7,715Total liabilities and stockholders equity
    
    $
    9,507
    
    
    $
    15,983
  37




---



##### Table of Contents



Chartwell International, Inc. and Subsidiaries
(A Development Stage Company)
 
 Consolidated Statements of Operations
  CumulativeFor the
    
    
    For the
    
    
    from March 3,year ended
    
    
    year ended
    
    
    2005, InceptionJune 30,
    
    
    June 30,
    
    
    to June 30,2008
    
    
    2007
    
    
    2008Revenue
    
    $
    2,543
    
    
    $
    7,306
    
    
    $
    9,900Cost of revenue
    
    
    2,397
    
    
    
    6,824
    
    
    
    9,221Gross profit
    
    
    146
    
    
    
    482
    
    
    
    679General and administrative expenses
    
    
    4,596
    
    
    
    4,062
    
    
    
    11,869(Loss) gain on sale of property and equipment
    
    
    458
    
    
    
    (134
    )
    
    
    324(Loss) gain on sale of capacity and loading rights
    
    
    (147
    )
    
    
    
    
    
    
    (147
    )Loss from operations
    
    
    (4,761
    )
    
    
    (3,446
    )
    
    
    (11,367
    )Other income (expense)
Interest, net (Notes 6 and 7)
    
    
    (471
    )
    
    
    (554
    )
    
    
    (1,153
    )Gains on notes settlements
    
    
    179
    
    
    
    
    
    
    
    254Finance placement fees
    
    
    
    
    
    
    
    
    
    
    (1,058
    )Total other income (expense)
    
    
    (292
    )
    
    
    (554
    )
    
    
    (1,957
    )Loss before income tax provision
    
    
    (5,053
    )
    
    
    (4,000
    )
    
    
    (13,324
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (5,053
    )
    
    $
    (4,000
    )
    
    $
    (13,324
    )Net loss per common share,basic and diluted
    
    $
    (0.36
    )
    
    $
    (0.29
    )
    
    $
    (1.01
    )Weighted average number of common shares outstanding,basic and diluted
    
    
    14,046
    
    
    
    13,986
    
    
    
    13,190
  38




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##### Table of Contents



Chartwell International, Inc and Subsidiaries
(A Development Stage Company)
 
 Consolidated Statements of Stockholders Equity
  Preferrred
    
    
    Preferred
    
    
    Common
    
    
    Common
    
    
    Additional
    
    
    
    
    
    
    TotalStock
    
    
    Stock
    
    
    Stock
    
    
    Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    $
    
    
    Shares
    
    
    $
    
    
    Capital
    
    
    Deficit
    
    
    EquityBalance, March 3, 2005
    
    
    
    
    
    $
    
    
    
    
    2,416
    
    
    $
    2
    
    
    $
    (202
    )
    
    $
    
    
    
    $
    (200
    )Common stock issued for cash
    
    
    
    
    
    
    
    
    
    
    8,978
    
    
    
    9
    
    
    
    9,782
    
    
    
    
    
    
    
    9,791Common stock issued for services
    
    
    
    
    
    
    
    
    
    
    294
    
    
    
    1
    
    
    
    440
    
    
    
    
    
    
    
    441Net loss from March 3, 2005, Inception to July 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (973
    )
    
    
    (973
    )Balance, July 31, 2005
    
    
    
    
    
    
    
    
    
    
    11,688
    
    
    
    12
    
    
    
    10,020
    
    
    
    (973
    )
    
    
    9,059Common stock issued for cash
    
    
    
    
    
    
    
    
    
    
    464
    
    
    
    
    
    
    
    850
    
    
    
    
    
    
    
    850Common stock issued in partial payment of notes
receivable
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    325
    
    
    
    
    
    
    
    325Common stock issued in partial payment of acquisition
    
    
    
    
    
    
    
    
    
    
    1,202
    
    
    
    1
    
    
    
    1,802
    
    
    
    
    
    
    
    1,803Common stock issued for services
    
    
    
    
    
    
    
    
    
    
    542
    
    
    
    1
    
    
    
    812
    
    
    
    
    
    
    
    813Fair value of stock options granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    
    
    
    
    32Common stock redeemed for cash
    
    
    
    
    
    
    
    
    
    
    (300
    )
    
    
    
    
    
    
    (275
    )
    
    
    
    
    
    
    (275
    )Net loss for the eleven months end June 30, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,298
    )
    
    
    (3,298
    )Balance, June 30, 2006
    
    
    
    
    
    
    
    
    
    
    13,896
    
    
    
    14
    
    
    
    13,566
    
    
    
    (4,271
    )
    
    
    9,309Common stock issued for cash
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    
    
    
    
    283
    
    
    
    
    
    
    
    283Series A Preferred stock issued for cash and common
stock redemption
    
    
    2
    
    
    
    2,000
    
    
    
    (400
    )
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    1,500Common stock issued for services
    
    
    
    
    
    
    
    
    
    
    425
    
    
    
    
    
    
    
    429
    
    
    
    
    
    
    
    429Fair value of stock options granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194
    
    
    
    
    
    
    
    194Net loss for the year end June 30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,000
    )
    
    
    (4,000
    )Balance, June 30, 2007
    
    
    2
    
    
    
    2,000
    
    
    
    14,041
    
    
    
    14
    
    
    
    13,972
    
    
    
    (8,271
    )
    
    
    7,715Common stock issued for services
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value of stock options granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    210
    
    
    
    
    
    
    
    210Net loss for the year end June 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,053
    )
    
    
    (5,053
    )Balance, June 30, 2008
    
    
    2
    
    
    $
    2,000
    
    
    
    14,051
    
    
    $
    14
    
    
    $
    14,182
    
    
    $
    (13,324
    )
    
    $
    2,872
  39




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##### Table of Contents



Chartwell International, Inc. and Subsidiaries
(A Development Stage Company)
 
 Consolidated Statements of Cash Flows
  CumulativeFor the
    
    
    For the
    
    
    from March 3,year ended
    
    
    year ended
    
    
    2005, InceptionJune 30,
    
    
    June 30,
    
    
    to June 30,2008
    
    
    2007
    
    
    2008Cash flows from operating activitiesNet loss
    
    $
    (5,053
    )
    
    $
    (4,000
    )
    
    $
    (13,324
    )Adjustments to reconcile net loss to net cash provided by (used
in) operating activitiesDepreciation and amortization
    
    
    218
    
    
    
    309
    
    
    
    576Impairment of asset value
    
    
    2,255
    
    
    
    
    
    
    
    2,255Loss (gain)on sales of property and equipment
    
    
    457
    
    
    
    (134
    )
    
    
    324Gain on sale of capacity and loading rights
    
    
    (147
    )
    
    
    
    
    
    
    (147
    )Gain on settlement of note receivable
    
    
    
    
    
    
    
    
    
    
    (35
    )Gain on settlement of note payable
    
    
    (179
    )
    
    
    
    
    
    
    (219
    )Fair value of stock options granted
    
    
    209
    
    
    
    194
    
    
    
    435Fair value of common stock issued for services
    
    
    
    
    
    
    430
    
    
    
    1,683Increase (decrease) in cash from changes in assets and liabilitiesAccounts receivable
    
    
    488
    
    
    
    (482
    )
    
    
    (17
    )Deposits
    
    
    145
    
    
    
    (2
    )
    
    
    (391
    )Prepaid and other
    
    
    28
    
    
    
    (9
    )
    
    
    (19
    )Accounts payable and accrued liabilities
    
    
    (758
    )
    
    
    1,385
    
    
    
    617Due to related parties
    
    
    5
    
    
    
    (7
    )
    
    
    19Net cash used in operating activities
    
    
    (2,332
    )
    
    
    (2,316
    )
    
    
    (8,243
    )Cash flows from investing activitiesPurchase of property and equipment
    
    
    
    
    
    
    (831
    )
    
    
    (3,794
    )Purchase of capacity and loading rights
    
    
    
    
    
    
    (1,509
    )
    
    
    (1,509
    )Proceeds on sales of property and equipment
    
    
    390
    
    
    
    229
    
    
    
    619Proceeds on sale of capacity and loading rights
    
    
    1,455
    
    
    
    
    
    
    
    1,455Exercise of mining rights options
    
    
    
    
    
    
    
    
    
    
    (102
    )Deposits
    
    
    6
    
    
    
    (101
    )
    
    
    (108
    )Investment, at cost
    
    
    (23
    )
    
    
    (100
    )
    
    
    (123
    )Restricted cash
    
    
    279
    
    
    
    (279
    )
    
    
    Cash paid in acquisitions
    
    
    
    
    
    
    
    
    
    
    (4,597
    )Cash received in acquisitions
    
    
    
    
    
    
    
    
    
    
    82Net cash provided by (used in) investing activities
    
    
    2,107
    
    
    
    (2,591
    )
    
    
    (8,077
    )Cash flows from financing activitiesProceeds from notes receivable
    
    
    
    
    
    
    
    
    
    
    635Payment for notes receivable
    
    
    
    
    
    
    
    
    
    
    (275
    )Borrowings under notes payable
    
    
    
    
    
    
    1,375
    
    
    
    5,375Repayments under notes payable
    
    
    (297
    )
    
    
    (565
    )
    
    
    (1,382
    )Issuance of common stock
    
    
    
    
    
    
    283
    
    
    
    10,924Issuance of preferred stock
    
    
    
    
    
    
    1,500
    
    
    
    1,500Redemption of common stock
    
    
    
    
    
    
    
    
    
    
    (275
    )Net cash provided by (used in) financing activities
    
    
    (297
    )
    
    
    2,593
    
    
    
    16,502Net increase (decrease) in cash
    
    
    (522
    )
    
    
    (2,314
    )
    
    
    182Cash and cash equivalents, beginning of period
    
    
    704
    
    
    
    3,018
    
    
    
    Cash and cash equivalents, end of period
    
    $
    182
    
    
    $
    704
    
    
    $
    182
  40




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##### Table of Contents



Chartwell International, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statements of Cash Flows
 CumulativeFor the
    
    
    For the
    
    
    from March 3,year ended
    
    
    year ended
    
    
    2005, InceptionJune 30,
    
    
    June 30,
    
    
    to June 30,2008
    
    
    2007
    
    
    2008Supplemental disclosure of cash flow informationCash paid during the period for:Interest
    
    $
    238
    
    
    $
    416
    
    
    $
    1,198Income taxes
    
    $
    
    
    
    $
    
    
    
    $
    Non-Cash Investing and Financing ActivitiesNotes payable assumed by purchaser on sale of equipment
    
    $
    337
    
    
    $
    
    
    
    $
    337Deposits applied to accounts payable
    
    $
    (105
    )
    
    $
    
    
    
    $
    (105
    )Preferred stock issued in exchange for redemption of common stock
    
    $
    
    
    
    $
    (500
    )
    
    $
    (500
    )Common stock issued in partial payment of note receivable
    
    $
    
    
    
    $
    (325
    )
    
    $
    (325
    )Software acquired under capital lease
    
    $
    
    
    
    $
    (27
    )
    
    $
    (27
    )Common stock issued in partial payment of acquisition of E-Rail
Logistics, Inc.
    
    $
    
    
    
    $
    (1,803
    )
    
    $
    (1,803
    )Note payable issued in partial payment of acquisition of
Cranberry Creek Railroad, Inc.
    
    $
    
    
    
    $
    (500
    )
    
    $
    (500
    )Interest accrued to notes payable
    
    $
    (233
    )
    
    $
    (173
    )
    
    $
    (483
    )
  41




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##### Table of Contents



Note 1  Summary of Significant Accounting Policies
 Organization and Business
        42




---



##### Table of Contents



Note 1  Summary of Significant Accounting Policies (continued)
 Organization and Business (continued)
     Principles of Consolidation and Basis of Presentation
   Reclassifications
  Cash and Cash Equivalents
  43




---



##### Table of Contents



Note 1  Summary of Significant Accounting Policies (continued)
 Property and Equipment
  Mineral Mining Rights
  Impairment of Long-Term Assets
  Use of Estimates
  Revenue Recognition
  44




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##### Table of Contents



Note 1  Summary of Significant Accounting Policies (continued)
 Income Taxes
  Stock Based Compensation
 Share-Based Payments
  Earnings (Loss) Per Share
  Segment Reporting
  Comprehensive Income
  45




---



##### Table of Contents



Note 1  Summary of Significant Accounting Policies (continued)
 Customer and Vendor Concentrations
   Fair Value of Financial Instruments
  Recently Issued Accounting Pronouncements
      46




---



##### Table of Contents



Note 1  Summary of Significant Accounting Policies (continued)
 Recently Issued Accounting Pronouncements (continued)
  Note 2  Restricted Cash
  47




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##### Table of Contents



Note 3  Deposit on Railcar Purchase
  Note 4  Property and Equipment
  June 30,
    
    
    June 30,2008
    
    
    2007(in thousands)Buildings
    
    $
    138
    
    
    $
    138Railroad structures and improvements
    
    
    532
    
    
    
    1,348Leasehold improvements
    
    
    
    
    
    
    147Office furniture & equipment
    
    
    13
    
    
    
    90Computer hardware and software
    
    
    58
    
    
    
    91Railway locomotives and cars
    
    
    1,555
    
    
    
    2,762Railway equipment
    
    
    
    
    
    
    312Waste disposal equipment
    
    
    
    
    
    
    5172,296
    
    
    
    5,405Accumulated depreciation and amortization
    
    
    (171
    )
    
    
    (227
    )$
    2,125
    
    
    $
    5,178
  Note 5  Capacity and Loading Rights
   48




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##### Table of Contents



Note 6  Line of Credit
  Note 7  Notes Payable
      49




---



##### Table of Contents



Note 7  Notes Payable (continued)
        June 30, 2008
    
    
    June 30, 2007(In thousands)Total
    
    $
    6,271
    
    
    $
    6,851Less current portion
    
    
    (2,007
    )
    
    
    (773
    )Long-term
    
    $
    4,264
    
    
    $
    6,078
  Year Ending
    
    AmountJune 30,
    
    (In thousands)2009
    
    $
    2,0072010
    
    $
    2011
    
    $
    2012
    
    $
    3,7802013 and beyond
    
    $
    484$
    6,271
 50




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##### Table of Contents



Note 8  Income Taxes
  Note 9  Equity
 Authorized Capital
      Common Stock Transactions
      51




---



##### Table of Contents



Note 9  Equity (continued)
 Preferred Stock Transactions
  Stock Options
     52




---



##### Table of Contents



Note 9  Equity (continued)
 Stock Options (continued)
  Year EndedJune 30, 2008Weighted AverageAll Options
    
    
    
    
    
    Exercise PriceOutstanding at beginning of year
    
    
    950,000
    
    
    $
    2.60Options granted
    
    
    
    
    
    
    Options forfeited
    
    
    100,000
    
    
    
    2.70Options expired
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    Outstanding at end of year
    
    
    850,000
    
    
    
    2.61Exercisable at end of year
    
    
    816,667
    
    
    $
    2.61
 Year EndedJune 30, 2008Weighted AverageNon-vested Options
    
    
    
    
    
    Exercise PriceNon-vested at beginning of year
    
    
    391,666
    
    
    $
    2.66Options granted
    
    
    
    
    
    
    Options forfeited
    
    
    50,000
    
    
    
    2.70Options expired
    
    
    
    
    
    
    Options vested
    
    
    308,333
    
    
    
    2.64Non-vested at end of year
    
    
    33,333
    
    
    $
    2.70
 53




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##### Table of Contents



Note 9  Equity (continued)
 Stock Options (continued)
  Risk free interest rates
    
    
    4.60
    %Dividends
    
    
    Volatility factors
    
    
    118
    %Expected life
    
    2  yearsAnnual forfeiture rate
    
    
    30
    %
  Year EndedJune 30, 2007Weighted AverageAll Options
    
    
    
    
    
    Exercise PriceOutstanding at beginning of year
    
    
    350,000
    
    
    $
    2.83Options granted
    
    
    600,000
    
    
    
    2.50Options forfeited
    
    
    
    
    
    
    Options expired
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    Outstanding at end of year
    
    
    950,000
    
    
    
    2.62Exercisable at end of year
    
    
    558,334
    
    
    $
    2.60
 Year EndedJune 30, 2007Weighted AverageNon-vested Options
    
    
    
    
    
    Exercise PriceNon-vested at beginning of year
    
    
    350,000
    
    
    $
    2.83Options granted
    
    
    600,000
    
    
    
    2.50Options forfeited
    
    
    
    
    
    
    Options expired
    
    
    
    
    
    
    Options vested
    
    
    558,334
    
    
    
    2.60Non-vested at end of year
    
    
    391,666
    
    
    $
    2.66
    54




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##### Table of Contents



Note 9  Equity (continued)
 Stock Options (continued)
   WeightedAverage
    
    WeightedExercise
    
    AverageNumber
    
    Price
    
    Fair ValueOptions exercise price equal to stock price
    
    
    
    
    
    $
    
    
    
    $
    Options exercise price exceeds the stock price
    
    
    600,000
    
    
    $
    2.50
    
    
    $
    0.29
  WeightedAverage
    
    WeightedExercise
    
    AverageNumber
    
    Price
    
    Fair ValueOptions exercise price equal to stock price
    
    
    
    
    
    $
    
    
    
    $
    Options exercise price exceeds the stock price
    
    
    
    
    
    $
    
    
    
    $
    
   Outstanding
    
    ExercisableWeighted
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    Average
    
    
    
    
    
    AverageRange
    
    
    
    
    
    
    
    Exercise
    
    Contractual
    
    
    
    
    
    ExerciseFrom
    
    To
    
    
    
    Number
    
    Price
    
    Life
    
    Number
    
    Price$
    2.50
    
    
    $
    2.50
    
    
    
    
    
    600,000
    
    
    $
    2.50
    
    
    
    4.7
    
    
    
    400,000
    
    
    $
    2.50$
    2.70
    
    
    $
    2.70
    
    
    
    
    
    200,000
    
    
    $
    2.70
    
    
    
    4.9
    
    
    
    83,334
    
    
    $
    2.70$
    3.00
    
    
    $
    3.00
    
    
    
    
    
    150,000
    
    
    $
    3.00
    
    
    
    3.6
    
    
    
    75,000
    
    
    $
    3.00950,000
    
    
    
    
    
    
    
    
    
    
    
    558,334
  Outstanding
    
    ExercisableWeighted
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    Average
    
    
    
    
    
    AverageRange
    
    
    
    
    
    
    
    Exercise
    
    Contractual
    
    
    
    
    
    ExerciseFrom
    
    To
    
    
    
    Number
    
    Price
    
    Life
    
    Number
    
    Price$
    2.50
    
    
    $
    2.50
    
    
    
    
    
    600,000
    
    
    $
    2.50
    
    
    
    3.7
    
    
    
    600,000
    
    
    $
    2.50$
    2.70
    
    
    $
    2.70
    
    
    
    
    
    100,000
    
    
    $
    2.70
    
    
    
    2.9
    
    
    
    66,666
    
    
    $
    2.70$
    3.00
    
    
    $
    3.00
    
    
    
    
    
    150,000
    
    
    $
    3.00
    
    
    
    2.6
    
    
    
    150,000
    
    
    $
    3.00850,000
    
    
    
    
    
    
    
    
    
    
    
    816,667
  June 30,
    
    June 30,2008
    
    2007Options
    
    
    850,000
    
    
    
    950,000Convertible preferred stock
    
    
    800,000
    
    
    
    800,000Convertible notes payable
    
    
    945,655
    
    
    
    1,625,422Total
    
    
    2,595,655
    
    
    
    3,375,422
 55




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##### Table of Contents



Note 10  Commitments and Contingencies
 Leases
  Years ending June 302009
    
    $
    56,0002010
    
    
    9,000$
    65,000
  Legal Proceedings
    Note 11  Related Party Transactions
    56




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##### Table of Contents



Note 12  Subsequent Events
  57




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit Number
    
    Name3.1(1)
    
    Amended and Restated Articles of Incorporation3.2(1)
    
    Amended and Restated By-laws4.1(16)
    
    Certificate of Designation of Series A Preferred Stock10.2(2)
    
    Purchase and Sale Agreement with Railway & Industrial Services, Inc.10.3(3)
    
    Securities Purchase Agreement10.4(4)
    
    Letter of Understanding with Rail Waste Holdings, LLC10.5(5)
    
    Share Purchase Agreement10.6(6)
    
    Agreement and Plan of Merger with E-Rail Logistics, Inc.10.7(7)
    
    Settlement Agreement with Minerva Enterprises, Inc. et al.10.8(8)
    
    Contract of Sale of Stock with the Estate of Pierre T. Rasmussen for Acquisition
of Cranberry Creek Railroad, Inc.10.9(9)
    
    Asset Purchase Agreement with the Estate of Emily Lucy C. Burch.10.10(10)
    
    Settlement Agreement with Starbank Group LLC et al.10.11(10)
    
    Settlement Agreement with RWH and Christopher Davino.10.12(10)
    
    Management Advisory Agreement with Orchestra Finance LLP.10.13(11)
    
    Note Purchase Agreement with Chris Gordon.10.14(12)
    
    Note Purchase Agreement with Faisal A. Alhegelan.10.15(13)
    
    Assignment, Assumption and Novation Agreement.10.16(15)
    
    Lease Agreement with TOA Reinsurance Company of America.10.17(15)
    
    Redemption and Stock Purchase Agreement between Thomas J. Belville, Robert E.
Belville, E-Rail Logistics, Inc. and Belville Mining Company.10.18(15)
    
    Amendment to Redemption and Stock Purchase Agreement between Thomas J. Belville,
Robert E. Belville, E-Rail Logistics, Inc. and Belville Mining Company.10.19(17)
    
    Consulting Agreement with Entitlement Solutions, Inc.10.20(18)
    
    Purchase Agreement with Perry New Jersey I, LLC10.21(19)
    
    Settlement Agreement with Hudson Logistics, Inc., Hudson Logistics Loading, Inc.,
Imre Eszenyi, Raymond Kalafsky, Northern & Bergen Railroad, LLC, and New York &
Greenwood Lake Railway10.22
    
    Termination and Release Agreement with Railway & Industrial Services, Inc.14.1(14)
    
    Code of Ethics.21
    
    Middletown and New Jersey Railway Company, Inc., a New York corporation; Hudson
Logistics, Inc., a Delaware corporation; Hudson Logistics Loading, Inc., a
Delaware corporation; Greater Hudson Resources, Inc., a Delaware corporation;
Belville Mining Company, Inc., an Ohio corporation; Greater Ohio Resources, Inc.,
an Ohio corporation.
 58




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##### Table of Contents



Exhibit Number
    
    Name23.1
    
    Consent of Urish Popeck & Co., LLC31.1
    
    Rule 13(a)  14(a)/15(d)  14(a) Certification (Principal Executive Officer)31.2
    
    Rule 13(a)  14(a)/15(d)  14(a) Certification (Principal Financial Officer)32
    
    Section 1350 Certifications
 Footnotes to Exhibits Index(1)
    
    Incorporated by reference to Form 8-K dated June 27, 2005.(2)
    
    Incorporated by reference to Form 8-K dated July 11, 2005.(3)
    
    Incorporated by reference to Form 8-K dated July 8, 2005.(4)
    
    Incorporated by reference to Form 8-K dated April 20, 2005.(5)
    
    Incorporated by reference to Form 8-K dated March 23, 2005.(6)
    
    Incorporated by reference to Form 8-K dated September 8, 2005.(7)
    
    Incorporated by reference to Form 8-K dated November 16, 2005.(8)
    
    Incorporated by reference to Form 8-K dated December 30, 2005.(9)
    
    Incorporated by reference to Form 8-K dated December 30, 2005.(10)
    
    Incorporated by reference to Form 8-K dated March 15, 2006.(11)
    
    Incorporated by reference to Form 8-K dated March 15, 2006.(12)
    
    Incorporated by reference to Form 8-K dated April 26, 2006.(13)
    
    Incorporated by reference to Form 8-K dated August 24, 2006.(14)
    
    Incorporated by reference to Form 8-K dated November 21, 2006.(15)
    
    Incorporated by reference to Form 10-KSB dated September 27, 2006.(16)
    
    Incorporated by reference to Form 8-K dated March 8, 2007.(17)
    
    Incorporated by reference to Form 8-K dated March 26, 2007.(18)
    
    Incorporated by reference to Form 8-K dated December 27, 2007.(19)
    
    Incorporated by reference to Form 8-K dated January 30, 2008. 59