United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-QSB  xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended April 30, 2006  oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _______ to _______  Commission File No. 000-51342  CHARTWELL INTERNATIONAL, INC. (Exact name of small business issuer as specified in its charter)  NEVADA
95-3979080 (State or Other Jurisdiction of(I.R.S. Employer Identification No.)Incorporation or Organization)  1124 Smith Street Charleston, W.V. 25301 (Address of Principal Executive Offices)  (304) 345-8700 (Issuers Telephone Number)  Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNo [ ]  Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] Nox  As of June 6, 2006 the Registrant had 13,896,361 outstanding shares of common stock, $0.001 par value per share.  Transitional Small Business Disclosure Format (check one): Yes [ ] Nox   1    CHARTWELL INTERNATIONAL, INC.



FORM 10-QSB



APRIL 30, 2006



INDEX





PAGEPart I. FINANCIAL INFORMATION



Item 1.
Financial Statements ..............................................................................
3

Consolidated Balance Sheets at April 30, 2006 (Unaudited) and July 31, 2005............
3

Consolidated Statements of Operations (Unaudited) for the three months ended and thenine months ended April 30, 2006, and, from inception on March 3, 2005 toApril 30, 20064....................................................................................
4

Consolidated Statements of Cash Flows (Unaudited) for the nine months ended April 30,2006 and from inception on March 3, 2005 to April 30, 2006.................................
5

Notes to Interim Consolidated Financial Statements.............................................
7

Item 2.
Management's Discussion and Analysis or Financial Conditions and Results ofOperation.............................................................................................
21

Item 3.
Controls and Procedures...........................................................................
32

Part II. OTHER INFORMATION



Item 1.
Legal Proceedings.................................................................................
33

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds..............................
33

Item 3.
Defaults Upon Senior Securities..................................................................
33

Item 4.
Submission of Matters to a Vote of Security Holders..........................................
33

Item 5.
Other Information....................................................................................
34

Item 6.
Exhibits................................................................................................
36



2


PART 1. FINANCIAL INFORMATION



Item 1.Financial Statements



Chartwell International, Inc.

(A Development Stage Company)

Consolidated Balance Sheets

(In thousands)

April 30,

July 31,2006

2005(Unaudited)AssetsCurrent AssetsCash
$ 3,953

$ 7,686Accounts Receivable
8

-Deposits
525

1,425Prepaid expense and other
40

9Total current assets
4,526

9,120Long-term AssetsProperty and equipment, net
4,576

-Land
1,735

-Mineral rights
1,606

-Option on mineral rights
3,841

-Other
5

-Total long-term assets
11,763

-Total Assets
$ 16,289

$ 9,120Liabilities and Stockholders' EquityCurrent LiabilitiesAccounts payable and accrued liabilities
$ 332

$ 19Due to related parties
159

42Notes payable
466

-Total current liabilities
957

61Long-term LiabilitiesNotes payable, net of current portion
5,441

-Total long-term liabilities
5,441

-Total Liabilities
6,398

61Commitments and ContingenciesStockholders' EquityPreferred stock, $0.001 par value, 25,000 shares authorizedCommon shares, $0.001 par value, 100,000 shares authorized13,896 and 11,688 issued and outstanding at April 30,2006and July 31, 2005, respectively
14

12Additional paid in capital
13,547

10,020Accumulated deficit
(3,670)

(973)Total shareholders' equity
9,891

9,059Total Liabilities and Shareholders' Equity
$ 16,289

$ 9,120

See accompanying notes to unaudited interim consolidated financial statements





3


Chartwell International, Inc.

(A Development Stage Company)

Consolidated Statement of Operations

(In thousands, except per share data)

(Unaudited)



CumulativeFor the three

For the nine

from March 3,months ended

months ended

2005, InceptionApril 30,

April 30,

to April 30,2006

2006

2006Revenue
$ 28

$ 28

$ 28General and administrative expenses
862

2,508

2,667Loss from operations
(834)

(2,480)

(2,639)Other income (expense)Interest, net
(17)

(30)

(8)Gain on note settlement
-

35

35Finance placement fees
(155)

(222)

(1,058)Total other income (expense)
(172)

(217)

(1,031)Net loss
$ (1,006)

$ (2,697)

$ (3,670)Net loss per common share,basic and diluted
$ (0.07)

$ (0.19)

$ (0.31)Weighted average number of common shares outstanding,Basic and diluted
14,776

14,399

11,660



See accompanying notes to unaudited interim consolidated financial statements





4


Chartwell International, Inc.

(A Development Stage Company)

Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)

CumulativeFor the nine

from March 3,months ended

2005, InceptionApril 30,

to April 30,2006

2006Cash flows from operating activitiesNet loss
$ (2,697)

$ (3,670)Adjustments to reconcile net loss to net cash provided by(used in) operating activitiesDepreciation and amortization
35

35Gain on settlement of note receivable
(35)

(35)Fair value of stock options granted
12

12Fair value of common stock issued for services
813

1,254Increase (decrease) in cash from changes in assets andLiabilitiesAccounts receivable
(6)

(6)Deposits
900

(525)Prepaid and other
(31)

(40)Accounts payable and accrued liabilities
36

55Due to related parties
117

158Net cash used in operating activities
(856)

(2,762)Cash flows from investing activitiesPurchase of property and equipment
(2,951)

(2,951)Exercise of mining rights options
(102)

(102)Deposits
(1)

(1)Cash paid in acquisitions
(4,597)

(4,597)Cash received in acquisitions
82

82Net cash used in investing activities
(7,569)

(7,569)Cash flows from financing activitiesProceeds from notes receivable
635

635Payment for notes receivable
(275)

(275)Borrowings under notes payable
4,008

4,008Repayments under notes payable
(251)

(451)Issuance of common stock
850

10,642Redemption of common stock
(275)

(275)Net cash provided by financing activities
4,692

14,284Net increase (decrease) in cash
(3,733)

3,953Cash and cash equivalents, beginning of period
7,686

-Cash and cash equivalents, end of period
$ 3,953

$ 3,953



See accompanying notes to unaudited interim consolidated financial statements





5


Chartwell International, Inc.

(A Development Stage Company)

Consolidated Statement of Cash Flows (continued)

(In thousands)

(Unaudited)





CumulativeFor the nine

from March 3,months ended

2005, InceptionApril 30,

to April 30,2006

2006Supplemental disclosure of cash flow informationCash paid during the period for:Interest
$ 91

$ 510Income Taxes
$ 3

$ 3Non-Cash Investing and Financing ActivitiesCommon 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 ofE-Rail Logistics, Inc.
$ (1,803)

$ (1,803)Note payable issued in partial payment of acquisition ofCranberry Creek Railroad, Inc.
$ (500)

$ (500)



See accompanying notes to unaudited interim consolidated financial statements







6


Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements

April 30, 2006

(Unaudited)



Note 1. Basis of Presentation and Accounting Policies



Unaudited Interim Financial Information. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for the presentation of interim financial information, but do not include all the information and footnotes required by accounting principles generally accepted in the United States of America. The balance sheet as of July 31, 2005 has been derived from the audited consolidated financial statements of Chartwell International, Inc. at that date. Unless stated otherwise, references in this Form 10-QSB to we, us, or our refer to Chartwell International, Inc.



In the opinion of our management, all adjustments considered necessary for a fair presentation have been included. Operating results for nine-month and three-month periods ended April 30, 2006, and the operating results from inception on March 3, 2005 through April 30, 2006 are not necessarily indicative of the results that may be expected for the eleven month period ended June 30, 2006. Further, we have had limited operations in all reporting periods through April 30, 2006. For further information, refer to the financial statements included in our Annual Report on Form 10-KSB/A filed on December 15, 2005.



Principles of Consolidation

The consolidated financial statements include the accounts of Chartwell International, Inc., approximately eight months of operations of our wholly owned subsidiaries E-Rail Logistics, Inc. (E-Rail) and Belville Mining Company, Inc. (Belville), approximately three months of operations of our wholly owned subsidiaries Hudson Logistics, Inc. (Hudson), Cranberry Creek Railroad, Inc., (Cranberry Creek) and Middletown and New Jersey Railway Company, Inc. (MNJ). On April 1, 2006 we assigned all the assets and liabilities of E-Rail and transitioned its operations to Hudson. Inter-company accounts and transactions have been eliminated.



Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United State of America requires management to make estimates and assumptions that affect the reported amounts of asset and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ from those estimates. Areas where significant estimation is involved include, but are note limited to the valuation of stock-based compensation.



Comprehensive Income

Effective January 1, 1998, we adopted Statement of Accounting Standards No. 130, Reporting Comprehensive Income (SFAS 130). SFAS 131 established new rules for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The adoption of SFAS 130 had no affect on the accompanying financial statements, because we had and continue to have no other components of comprehensive income.





7


Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements (continued)

April 30, 2006

(Unaudited)



Note 1 - Basis of Presentation and Accounting Policies (continued)



Stock Based Compensation



On February 8, 2006 our shareholders approved a stock based compensation plan (2006 Plan) for the benefit of our employees, directors and other eligible parties. The 2006 Plan permits the granting of restricted stock and options of up to 9% of our outstanding common stock including common stock that is convertible from other securities. Effective with our current fiscal year that began on August 1, 2005, we adopted the accounting and disclosure provisions of Statement of Accounting Standards (SFAS) No. 123(R),Share-Based Payments.



As part of adopting the modified prospective approach during the transitional period, the Company has implemented the modified prospective application for SFAS No. 123(R) that includes the determination of a one-time cumulative effect adjustment for the portion of stock options granted after December 15, 1994 that had not vested by July 31, 2005. No cumulative effect adjustment was required as the Company did not have any stock option grants outstanding nor did the Company have a stock based compensation plan.



Recently Issued Accounting Pronouncements

SFAS No. 123(R)

In March 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment " SFAS 123(R) amends SFAS No. 123, "Accounting for Stock-Based Compensation," and APB Opinion 25, "Accounting for Stock Issued to Employees." SFAS No.123(R) requires that the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. SFAS No. 123(R) applies toll share-based payment transactions in which an entity acquires goods or services by issuing (or offering to issue) its shares, share options, or other equity instruments (except for those held by an ESOP) or by incurring liabilities (1) in amounts based (even in part) on the price of the entity's shares or other equity instruments, or (2) that require (or may require) settlement by the issuance of an entity's shares or other equity instruments. This statement is effective (1) for public companies
qualifying as SEC small business issuers, as of the first interim period or fiscal year beginning after March 15, 2005, or (2) for all other public companies, as of the first interim period or fiscal year beginning after June 15, 2005, or (3) for all nonpublic entities, as of the first fiscal year beginning after March 15, 2005. We adopted SFAS No. 123(R) effective with our fiscal year that began on August 1, 2005.



Note 2 - Description of Business



Chartwell International, Inc. ("Chartwell" or the "Company") is a Nevada corporation formed in 1984. Our principal activity had consisted of oversight of investments, principally in College Partnership, Inc. Effective January 31, 2005, we transferred all assets and liabilities to our then wholly owned subsidiary, Kingsley Capital, Inc. ("Kingsley") and subsequently transferred all of our Kingsley stock to our shareholders on a pro-rata basis as a dividend effective March 3, 2005. We then ceased all of our former operations and began operations as a newly formed development stage entity effective March 3, 2005.



8


Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements (continued)

April 30, 2006

(Unaudited)



Note 2 - Description of Business (continued)



On September 8, 2005, we acquired E-Rail Logistics, Inc. (E-Rail), a development stage company with assets and minimal operations in the solid waste disposal industry. Because E-Rail was not deemed a business, the acquisition was treated as an acquisition of assets. The acquisition included E-Rails wholly-owned subsidiary, Belville, based in Ohio which has significant interests and rights to over 9,600 acres of land and minerals in Ohio, a portion of which we intend to permit for commercial and industrial uses. The property contains coal, clay, limestone and other minerals. We are only beginning the permitting process, and cannot estimate when operational use of the property will begin at this time. In addition to permits, the site will require significant infrastructure improvements, which we are evaluating.



On April 1, 2006, we assigned all the assets and liabilities and transitioned the operations of E-Rail to Hudson. We will surrender E-Rails charter of incorporation by June 30, 2006.



On April 26, 2006, we completed the acquisition of 100% of the outstanding common shares of Cranberry Creek Railroad, Inc. (Cranberry Creek). Cranberry Creeks primary asset is its wholly owned subsidiary Middletown and New Jersey Railway Company, Inc. (MNJ) which owns and operates a regional short-line railroad located in Middletown, New York. MNJs operations are currently limited to two customers. We are currently evaluating the required infrastructure improvements necessary to the MNJ shortline to allow us to expand our railroad operations and transportation.



Our administrative offices are based in Syosset, New York.



Note 3 - Acquisitions



E-Rail Logistics, Inc.



On September 8, 2005, we acquired E-Rail Logistics, Inc., a development stage company with assets and minimal operations in the solid waste disposal industry. The acquisition included E-Rail Logistics wholly-owned subsidiary, Belville Mining Company, Inc. based in Ohio which has significant interests and rights to over 9,600 acres of land and minerals in Ohio, a portion of which we intend to permit for certain industrial and commercial uses.



Pursuant to SEC Regulation S-X Rule 3-05 and 11-01 and ETIF 98-3:Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business, we determined that the acquisition did not constitute a business combination. E-Rail Logistics, Inc. lacked almost all the significant elements to constitute a "business" at the time of the acquisition, was in the development stage and had not commenced planned principal operations. As such, the transaction is treated as an acquisition of assets.



The purchase price included:

Cash
$2,867,0001,201,981 shares of common stock @$1.50 per share
1,803,000Assumption of debt
1,822,000Total purchase price:
$6,492,000



9


Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements (continued)

April 30, 2006

(Unaudited)



Note 3  Acquisitions (continued)



E-Rail Logistics, Inc. (continued)



The total purchase price was allocated to the assets acquired as follows:



Cash


$ 26,000Other Assets

5,000Property and Equipment


108,000Land

1,008,000Mineral Rights

1,606,000Option for Mineral Rights
3,739,000Total Assets Acquired


$ 6,492,000

On March 15, 2006, the original purchase price of $9,165,000 was reduced as part of the settlement of a lawsuit (see Note 7), involving a claim by a former member or creditor of E-Rail. The reduced purchase price included the return of some property and equipment acquired and its associated debt and the reduction of common shares issued to selling shareholders partially offset by additional cash payments.



Determination of the purchase price of the acquisition and corresponding allocation of the purchase price to the net assets included the following:



Fair value of our common stock issued was determined by our Board of Directors based on market conditions, including an independent assessment by a reputable firm specializing in such matters.



Accounts payable and accrued liabilities assumed were recorded at the carrying value at the date of the acquisition, which our management believes, reflected the fair value.



Promissory notes assumed in the acquisition were valued at the present value of the minimum payments required to be paid under the notes at 11% which our management believes fairly reflect our current accessible borrowing rate based on recent proposals for debt financing.



Cash, other assets, and property and equipment were recorded at the carrying value at the date of the acquisition, which our management believes reflected the fair value.



Our management believes that at the date of the acquisition the book value of the land, mineral rights and mineral rights under option as reported by the acquired company does not reflect fair value. To establish fair value, we received an independent appraisal of the land and a portion of the mineral rights owned prior to the close of the transaction. Additionally, we conducted a reserve analysis and obtained a lease proposal to mine the minerals under option. Our management determined the fair value of the land, mineral rights and mineral rights under option based on the appraisal, analysis and proposal, and allocated the excess purchase price to the land, mineral rights and mineral rights under option on a pro-rata basis. As a result of the purchase price reduction that occurred on March 15, 2006, the net reduction after accounting for the reduction of property and equipment and its associated debt
was applied on a pro-rata basis to the mineral rights and mineral rights under option.





10


Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements (continued)

April 30, 2006

(Unaudited)



Note 3  Acquisitions (continued)



E-Rail Logistics, Inc. (continued)



Following an analysis of other contracts and rights acquired, our management determined that there was no additional value that should be allocated from the excess purchase price to those other contracts and rights.



Cranberry Creek Railroad, Inc.



On April 26, 2006, we completed the acquisition of 100% of the outstanding common shares of Cranberry Creek. Cranberry Creeks primary asset is its wholly owned subsidiary Middletown and New Jersey Railway Company, Inc. (MNJ) which owns and operates a regional short-line railroad located in Middletown, New York. The acquisition price of $2,230,000 includes 1,730,000 paid in cash and a convertible note payable of $500,000 (see Note 4). We completed the purchase of the first 66 2/3% of Cranberry Creeks outstanding common shares on February 10, 2006 and we have used this date for the purposes of valuation and the commencement of the inclusion of the results of operations in Chartwell. MNJ consists of approximately 18 miles of rail track that run from Middletown, New York south to the New Jersey state border and several parcels of land in Orange County, New York for a total of
approximately 138 acres. The MNJ interchanges with Norfolk Southern Corporations railroad at its northern end.



The table below presents the balances of each major asset and liability caption of Cranberry Creek of the acquisition date. We determined the allocation of the purchase price of Cranberry based on the following:



Cash, accounts receivable and accounts payable and accrued liabilities were recorded at the carrying value at the date of the acquisition, which our management believes reflected the fair value.



Our management believes that at the date of the acquisition the book value of the land, property and equipment as reported by Cranberry Creek does not reflect fair value. To establish fair value, we received an independent appraisal of the land, property and equipment based on the closing date or our acquisition. Our management determined the fair value of the land, property and equipment based on the appraisal and allocated the excess purchase price to the land, property and equipment on a pro-rate basis.



February 10, 2006Cash


$ 56,000Accounts receivable

2,000Land


726,000Property and equipment

1,524,000Accounts payable and accrued liabilities
(78,000)Purchase price


$ 2,230,000



11


Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements (continued)

April 30, 2006

(Unaudited)



Note 3  Acquisitions (continued)



Cranberry Creek Railroad, Inc. (continued)



We have included consolidated pro-forma balance sheets at April 30, 2006 and consolidated pro-forma statements of operations for the three and nine months ended April 30, 2006 to reflect the acquisition of Cranberry Creek as if it had been included in Chartwells operations from the beginning of the periods presented.



12


Chartwell International, Inc.(A Development Stage Company)Pro-forma Consolidated Balance SheetsApril 30, 2006(in thousands)(Unaudited)AcquisitionChartwell (1)
Cranberry (2)
Adjustments(4)
Pro-FormaASSETSCurrent assetsCash
$ 3,953
$       -
$       -
$ 3,953Accounts receivable
8
-
-
8Deposit
525
-
-
525Other
40
-
-
40Total current assets
4,526
-
-
4,526Long-term assetsProperty and equipment, net
4,576
-
-
4,576Land
1,735
-
-
1,735Mineral rights
1,606
-
-
1,606Option on mineral rights
3,841
-
-
3,841Other
5
-
-
5Total long-term assets
11,763
-
-
11,763Total Assets
$ 16,289
$       -
$       -
$ 16,289LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesAccounts payable and accrued expenses
$      332
$      8
$      22
$      362Due to related parties
159
-
-
159Notes payable
466
-
-
466Total current liabilities
957
8
22
987Long-term liabilitiesNotes payable, net of current portion
5,441
-
-
5,441Total long-term liabilities
5,441
-
-
5,441Total liabilities
6,398
8
22
6,428Stockholders' equityPreferred stock, $0.001 par value,25,000 shares authorized
-
-
-
-Common stock, $0.001 par value100,000 authorized, 13,896 sharesissued and outstanding
14
-
-
14Additional paid in capital
13,547
-
-
13,547Accumulated deficit
(3,670)
(8)
(22)
(3,700)Total shareholders' equity
9,891
(8)
(22)
9,861Total liabilities and stockholders' equity
$ 16,289
$       -
$       -
$ 16,289





13


Chartwell International, Inc.(A Development Stage Company)Pro-forma Consolidated Statement of OperationsFor the Three Months Ended April 30, 2006(in thousands, except per share data)(Unaudited)AcquisitionChartwell (1)
Cranberry (3)
Adjustments (4)
Pro-FormaRevenue
$ 28
$ 2
$ -
$ 30General and administrative expenses
862
5
-
867Loss from operations
(834)
(3)
-
(837)Other income (expense)Interest, net
(17)
-
(2)
(19)Finance placement fee
(155)
-
-
(155)Total other income (expense)
(172)
-
(2)
(174)Loss before income taxes
(1,006)
(3)
(2)
(1,011)Income taxes
-
-
-
-Net loss
$ (1,006)
$ (3)
$ (2)
$ (1,011)Net loss per share, basic and diluted
$ (0.07)
$ (3.00)
n/a
$ (0.07)Weighted average number of common shares outstandingbasic and diluted
14,776
1
(1)
14,776





14


Chartwell International, Inc.(A Development Stage Company)Pro-forma Consolidated Statement of OperationsFor the Nine Months Ended April 30, 2006(in thousands, except per share data)(Unaudited)AcquisitionChartwell (1)
Cranberry (5)
Adjustments (4)
Pro-FormaRevenue
$ 28
$ 66
$ -
$ 94General and administrative expenses
2,508
85
-
2,593Loss from operations
(2,480)
(18)
-
(2,498)Other income (expense)Interest, net
(30)
-
(22)
(52)Gain on note settlement
35
-
-
35Finance placement fee
(222)
-
-
(222)Total other income (expense)
(217)
-
(22)
(239)Loss before income taxes
(2,697)
(18)
(22)
(2,737)Income taxes
-
-
-
-Net loss
$ (2,697)
$ (18)
$ (22)
$ (2,737)Net loss per share, basic and diluted
$ (0.19)
$ (18.08)
n/a
$ (0.19)Weighted average number of common shares outstandingbasic and diluted
14,339
1
(1)
14,339Notes:

(1) Chartwell International, Inc.s (Chartwell) consolidated balance sheet reflects balances as of April 30, 2006 and consolidated statements of operations from three and nine months ended April 30, 2006.

(2) Cranberry Creek Railroad, Inc.s (Cranberry) balance sheet reflects accumulated deficit upon its acquisition by Chartwell on February 10, 2006.

(3) The results of operations for Cranberry from February 10, 2006 to April 30, 2006 are included in Chartwell's

consolidated results. The results of operations from February 1-9, 2006 have been estimated and are based on

25% of Cranberry's statement of operations from January 1, 2006 to February 9, 2006.

(4) On February 10, 2006 Chartwell's acquisition of Cranberry included an 8% convertible promissory note of

$500,000. The interest on the convertible promissory note has been reflected as if it existed for the three

months and the nine months ended April 30, 2006

(5) Cranberry's statement of operations reflect an estimate of the five months ended December 31, 2005

based on 5/12th of the statement of operations for the year ended December 31, 2005 adjusted for non-recurring

expenses and the statement of operations from January 1, 2006 to February 9, 2006. Financial statements

for the five months ended December 31, 2005 were not available nor feasible to create. In the opinion of management the adjustments are necessary to a fair statement to the result of the interim period presented herein.








15


Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements (continued)

April 30, 2006

(Unaudited)



Note 4  Notes Payable



On September 8, 2005, in connection with our acquisition of E-Rail, we assumed five promissory notes with a face value of $1,823,000 bearing interest at rates between 5.5% to 6.5% per annum secured by land and equipment owned by our Belville subsidiary and payable over two to five years in monthly installments of principal and interest. The promissory notes were recorded with a value of $1,636,000 which our management believes fairly represents the present value of minimum payments required to be paid under the notes with an interest rate of 11% per annum based on our current accessible borrowing rate based on recent proposal for debt financing on comparable assets. As of April 30, 2006 the outstanding balances were $1,399,000 of which $466,000 are due in one year or less.



On September 8, 2005, in connection with our acquisition of E-Rail, we assumed a note payable with a balance of $369,395 bearing interest at a rate of 11% per annum secured by equipment owned by our E-Rail Equipment subsidiary and payable in 31 monthly installments of principal and interest of $13,750. On April 24, 2006, in connection with the E-Rail purchase price reduction (see Note 3) on March 15, 2006, the note holder agreed to extinguish the remaining note payable in exchange for equipment secured by the note. At April 30, 2006, there was no outstanding balance on the note payable.



On February 15, 2006, we issued a $500,000 convertible note payable to a selling shareholder of Cranberry Creek in connection with our acquisition. The note bears interest at the rate of 8% per annum, is due on February 15, 2008, interest is payable quarterly, and the principal balance plus any accrued interest can be converted into our common stock at rate of $3.165 per share at any time. At April 30, 2006, the balance of the note payable plus accrued interest was $500,000 and there was $8,000 of accrued interest.



On March 15, 2006, we issued a $1,000,000 convertible note payable to an accredited private investor. The note bears interest at the rate of 6% per annum, is due on March 15, 2009, interest accrues until the note is repaid or converted, and the principal balance plus any accrued interest can be converted into our common stock at rate of $2.00 per share at any time. At April 30, 2006, the balance of the note payable plus accrued interest was $1,008,000.



On April 30, 2006, we issued a $3,000,000 secured convertible note payable to an accredited foreign private investor. The note bears interest at the rate of 10% per annum, is due on April 30, 2012, interest is payable monthly, is secured by our railway flatbed cars, and the principal balance plus any accrued interest can be converted into our common stock at rare of $2.30 per share at any time. At April 30, 2006, the balance of the note payable was $3,000,000 and there was no accrued interest.



Note 5  Equity



Common Stock Transactions

On September 2, 2005, we issued 300,000 shares of common stock in exchange for a note receivable with a value of $325,000



On September 8, 2005, we issued 3,100,000 shares of common stock in connection with our acquisition of E-Rail (see Note 3) valued at $1.50 per share or $4,650,000. On March 15, 2005, we cancelled 1,898,019 shares of common stock issued above in connection with reduction of the acquisition of E-Rail



16


Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements (continued)

April 30, 2006

(Unaudited)



Note 5  Equity (continued)



Common Stock Transactions (continued)



valued at $2,847,000. Our management valued the shares of common stock based on recent subscriptions of shares of common stock through private placements at $1.50 cash per share.



On September 14, 2005, we issued 300,000 shares of common stock to four members of our Board of Directors in exchange for services valued at $1.50 per share or $300,000. Our management valued the shares of common stock based on recent subscriptions of shares of common stock through private placements at $1.50 cash per share.



On September 19, 2005, we issued 217,014 shares of common stock in exchange for cash totaling $326,000 pursuant to a private placement subscription.



On September 19, 2005, we issued 100,000 shares of common stock in exchange for cash totaling $175,000 pursuant to a private placement subscription.



On September 30, 2005, we issued 155,000 shares of common stock in exchange for services related to the acquisition of E-Rail Logistics valued at $1.50 per share or $232,000. Our management valued the shares of common stock based on recent subscriptions of shares of common stock through private placements at $1.50 cash per share.



On October 12, 2005, we issued 4,375 shares of common stock in exchange for consulting services valued at $1.50 per share or $7,000. Our management valued the shares of common stock based on recent subscriptions of shares of common stock through private placements at $1.50 cash per share.



On October 30, 2005, we issued 10,850 shares of common stock in exchange for private placement commissions valued at $1.50 per share or $16,000. Our management valued the shares of common stock based on recent subscriptions of shares of common stock through private placements at $1.50 cash per share.



On November 30, 2005, we redeemed and subsequently cancelled 300,000 shares of common stock for $275,000 in cash.



On January 16, 2006, we issued 25,000 shares of common stock to an employee in exchange for services valued at $1.50 per share or $37,000. Our management valued the shares of common stock based on recent subscriptions of shares of common stock through private placements at $1.50 cash per share.



On February 15, 2006, we issued 15,000 shares of common stock to a director in exchange for services valued at $1.50 per share or $22,000. Our management valued the shares of common stock based on recent subscriptions of shares of common stock through private placements at $1.50 cash per share.



On March 8, 2006, we issued 10,000 shares of common stock to a director in exchange for services valued at $1.50 per share or $15,000. Our management valued the shares of common stock based on recent subscriptions of shares of common stock through private placements at $1.50 cash per share.





17


Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements (continued)

April 30, 2006

(Unaudited)



Note 5  Equity (continued)



Common Stock Transactions (continued)



On March 15, 2006, we issued 32,500 shares of common stock for consulting services in connection with the reduction of the E-Rail acquisition purchase price value at $1.50 per share or $49,000.



On March 20, 2006, we issued 130,000 shares of common stock in exchange for cash totaling $351,000 pursuant to a private placement subscription.



On March 20, 2006, we issued 6,500 shares of common stock in exchange for private placement commissions valued at $2.70 per share or approximately $18,000.



Stock Options



The Companys 2006 Equity Incentive Plan (2006 Plan) was approved by shareholders on February 8, 2006, and permits the granting of up to 9% of the Companys outstanding shares of common stock or 1,250,672 shares to employees and directors. Stock option awards are granted with an exercise price that is generally equal to or greater than the market price of the Companys common stock on the date of the grant. The options vest generally over a range of two to four years and expire five years after the grant date. Stock options under the 2006 Plan provide for accelerated vesting if there is a change in control (as defined by the 2006 Plan).



The fair value of each stock option granted is estimated on the date of the grant using the Black-Scholes option pricing model and factors in an estimated forfeiture based on management assessment of historical employee termination experience as well as estimates of future terminations where historical information is limited. The Black-Scholes option-pricing model has assumptions for risk free interest rates, dividends, stock volatility and expected life of an option grant. The risk free interest rate is based the U.S. Treasury Bill rate with a maturity based on the expected life of the options and on the closest day to an individual stock option grant. Dividend rates are based on the Companys dividend history. The stock volatility factor is based on up to the past three years of market prices of the Companys common stock. The expected life of an option grant is based on its vesting period.
The fair value of each option grant is recognized as compensation expense over the expected life of the option on a straight line basis.



During the nine-month period ended April 30, 2006, we granted to employees 150,000 stock options to purchase shares of common stock with exercise prices of $3.00. Management estimated that 30% of stock options issued during the nine months ended April 30, 2006 will be forfeited annually. The options vest over two years and expire five years after the grant date. We record expenses on a straight line basis over the vesting term of the stock options based on fair value using the Black-Scholes option pricing model. For stock options issued during the nine-month period ended April 30, 2006 the fair value was estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions:



Risk free interest rate
4.60%Dividends
-Volatility factor
104%Expected life
2 yearsAnnual forfeiture rate
30%

18



Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements (continued)

April 30, 2006

(Unaudited)



Note 5  Equity (continued)



Stock Options (continued)

The following table summarizes information about stock option transactions for the period shown:



All Options
Nine Month Period Ended

April 30, 2006Weighted Average

Exercise PriceOutstanding at beginning of period

$ Options granted
150,000
$3.00Options forfeited

Options expired

Options exercised

Outstanding at end of period
150,000
$3.00Exercisable at end of period

$ 

Non-vested Options
Nine Month Period Ended

April 30, 2006Weighted Average Exercise PriceNon-vested at beginning of period

$ Options granted
150,000
$3.00Options forfeited

Options expired

Options vested

Non-vested at end of period
150,000
$ 3.00

The weighted average grant-date fair value of options granted during the nine-month period ended April 30, 2006 was $1.00 per share.



The weighted average remaining contractual lives of the options outstanding and options exercisable at April 30, 2006, were 1.8 years and 0.0 years respectively.



We recorded $12,000 of compensation expense for employee stock options during the nine-month period ending April 30, 2006. At April 30, 2006 there was a total of $137,000 of unrecognized compensation costs related to non-vested share-based compensation arrangements under the 2006 Plan. The cost is expected to be recognized over a weighted average period of 1.8 years. The total fair value of shares vested during the nine-month period ended April 30, 2006 was approximately $0.





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Chartwell International, Inc.

Notes to Interim Consolidated Financial Statements (continued)

April 30, 2006

(Unaudited)



Note 6  Related Party Transactions



We issued 155,000 shares valued at $232,000 to Orchestra Finance, LLP (Orchestra), a company controlled by an officer and director of ours in connection with the acquisition of E-Rail and Belville. Subsequently, we paid $16,000 in cash and issued 49,850 shares of common stock valued at $83,000 to Orchestra for consulting and financing placement fees. Additionally, on March 15, 2006, we entered into a two-year agreement with Orchestra, whereby Orchestra would provide management and financial advisory services to us for a monthly fee of $10,000 retroactive to January 1, 2006. As of April 30, 2006, we reported $90,000 due to Orchestra for consulting and financing placement fees



We paid $342,000 in cash for legal services to a law firm, during the nine months ended April 30, 2006, of which a director of ours is a shareholder. In addition, we reported $49,000 due to this same firm for legal services at April 30, 2006.



We acquired software and assumed the corresponding lease of $27,000 during the nine months ended April 30, 2006 from an entity controlled by a former officer of one of our subsidiaries.



Prior to the acquisition of E-Rail, E-Rail purchased 220 open top containers for $550,000 consisting of $130,000 cash and a finance obligation of $420,000 to The Corona Group. The proprietor of The Corona Group was a business associate of a former officer of one of our subsidiaries and such proprietor is a shareholder of ours. We assumed the remaining finance obligation totaling $369,000 in connection with the acquisition of E-Rail. On April 26, 2006, The Corona Group agreed to reacquire the 220 open top containers and extinguish the remaining obligation that was assumed by E-Rail.



We also reimburse officers and directors for approved business expenses incurred in the ordinary course of business and in accordance with our expense reimbursement policy.



Note 7  Contingencies and Commitments



Legal Proceedings

On or about February 3, 2006, we were sued by Starbank Group, LLC (Starbank) in connection with assets we acquired as part of our acquisition of E-Rail. This case was pending in The Supreme Court of the State of New York, County of New York, pursuant to a complaint filed on January 24, 2006. The parties to the case include Starbank, Chartwell, E-Rail, Rail Waste Holdings, LLC (RWH), Imre Eszenyi, Andrew Kaufman, Richard Kessler and Christopher Davino. Starbank alleges that we induced Kaufman, Kessler and Davino to fraudulently sell assets of RWH to us through our E-Rail Acquisition. Further, Starbank claims we intentionally interfered with an alleged employment relationship between Kaufman, Kessler, Davino and RWH. Starbank was seeking damages in excess of $1,000,000. On March 15, 2006, all parties settled the lawsuit whereby Chartwell paid the sum of $485,000 to Starbank and the
selling shareholders of E-Rail agreed to a reduction in the purchase price to Chartwell for the E-Rail acquisition (see Note 3).



Note 8 - Subsequent Events



On May 11, 2006, we changed our fiscal year-end from July 31 to June 30. The first reporting period that will be reported with a June year-end will be the period of August 1, 2005 to June 30, 2006.



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Item 2. Managements Discussion and Analysis or Financial Condition and Results of Operations



The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this quarterly report. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking
statements.



Financial Condition as of April 30, 2006.



Effective January 31, 2005, we transferred all of our assets, liabilities and operations to Kingsley, our wholly owned subsidiary at that time, and issued a promissory note to Kingsley for $200,000. On March 3, 2005, we completed a spin-off of Kingsley by distribution of Kingsley common stock as a dividend to our shareholders on a pro-rata basis. As such, our inception of operations as a development stage company commenced on March 3, 2005.



We reported total current assets of $4,526,000 at April 30, 2006 consisting of cash of $3,953,000, a deposit for the purchase of retrofitted railcars totaling $525,000, and other deposits and other assets totaling $48,000. Total current liabilities reported of $957,000 consisted of trade payables of $332,000 amounts due to related parties of $159,000, and current maturities on long-term notes payable assumed in the acquisition of E-Rail Logistics, Inc. (E-Rail) of $466,000. The Company had working capital of $3,569,000 at April 30, 2006.



We reported long-term assets including property and equipment, land, mineral rights and an option on mineral rights totaling $11,763,000 and long term obligations totaling $5,441,000 consisting of convertibles notes payable of $4,507,000 and notes payable assumed as part of our acquisition of E-Rail $934,000.



Stockholders' Equity increased from $9,059,000 at July 31, 2005 to $9,891,000 at April 30, 2006. This increase is primarily due to: 1) 541,875 shares of common stock issued for services and compensation totaling approximately $813,000, 2) 464,364 shares of common stock issued for cash of approximately $850,000, 3) 300,000 shares issued in partial payment of the note receivable of approximately $325,000, and 4) 1,201,981 shares of common stock issued totaling $1,803,000 in connection with the acquisition of E-Rail. These increases were partially offset by net losses of approximately $2,697,000 and the redemption of 300,000 shares of common stock for $275,000.



We are currently a development stage company focused on the natural resources and rail-based transportation industries, including related infrastructures, and evaluate opportunities for expansion within those industries through acquisition or other strategic relationships.



We are currently seeking to initiate operations in rail-based transportation and logistics for commodities and minerals, principally through our recently acquired short-line railroad, the Middletown and New Jersey Railway Company, Inc. The Company believes that with increased gas prices, rail transportation will become a more economically viable alternative for the transportation of commercial product and other materials. Additionally, the increased demand for rail transportation coupled with historical lack of substantial investment of rail transportation infrastructure and the resurgence of government incentives to improve railroad infrastructure will result in substantial growth in rail-based logistics and transloading



21


businesses.

Plan of Operation



Background



We were formed in 1984 and until early 2005 our principal activity consisted of the oversight of investments, principally in College Partnership, Inc. On January 31, 2005, we transferred all assets and liabilities to our then wholly owned subsidiary, Kingsley Capital, Inc. and subsequently transferred all of our Kingsley stock to our then existing shareholders as a dividend effective March 3, 2005 effecting a spin-off of Kingsley Capital. On March 23, 2005, in two separate but concurrent transactions, we issued 25,838,433 pre-split shares of our common stock to Imre Eszenyi in a private transaction for $200,000, which proceeds were used to pay off the promissory note issued previously to Kingsley Capital, and we issued an additional 19,161,567 pre-split shares of our common stock to Imre Eszenyi in a private transaction for $250,000.



Since March 3, 2005 and following the discontinuation of our former operations and business, we changed our focus and strategic direction and pursued operations as a development stage company in the natural resources and rail-based transportation industries. Most of our activities during the period from March 3, 2005 to April 30, 2006 were dedicated to seeking acquisition targets with viable on-going operations, or acquisition of assets, properties and access rights that would allow us to begin operations.



On September 8, 2005, we acquired E-Rail, a development stage company with assets and minimal operations in the solid waste disposal industry. Because E-Rail was not deemed a business, the acquisition was treated as an acquisition of assets. The acquisition included E-Rails wholly-owned subsidiary, Belville Mining Company, Inc. (Belville) based in Ohio which has significant interests and rights to over 9,600 acres of land and minerals in Ohio, a portion of which we intend to permit for certain industrial uses. The property contains coal, clay, limestone and other minerals. We are only beginning the permitting process, and cannot estimate when operational use of the property will begin at this time. In addition to permits, the site will require significant infrastructure improvements, which we are evaluating. Subsequent to the acquisition, E-Rail assigned the Belville shares to Chartwell
so that it is functioning as a direct subsidiary of the Company.



On April 1, 2006, in an effort to better streamline operations, E-Rail assigned all of its assets and liabilities to Hudson Logistics, Inc. (Hudson), a wholly owned subsidiary of the Company.

On April 26, 2006, the Company completed its acquisition of Cranberry Creek Railroad, Inc., a New Jersey corporation including its wholly-owned subsidiary, Middletown & New Jersey Railway Company, Inc. that owns and operates a regional short-line railroad in Middletown, New York (MNJ). MNJ owns and operates a regional short-line railroad based out of Middletown, New York. MNJs current operations are limited and we have begun capital improvements and are considering operational infrastructure alternatives to both increase the volume of activity on the railroad as well as integrating the railroad with our other developing operations.



Founded in 1947, MNJ, headquarted in Middletown, New York has historically been an integral part of the growth of Orange County. MNJ and its predecessors transported milk, milk products, livestock, feed and coal. As recently as in the mid 1980s, MNJ serviced a chemical and a fertilizer plant on its short-line. The business is currently serving Genpak, a plastic packaging company and Orange & Rockland Utilities.



We have included consolidated pro-forma balance sheets at April 30, 2006 and consolidated pro-forma statements of operations for the three and nine months ended April 30, 2006 to reflect the acquisition of Cranberry Creek as if it had been included in Chartwells operations from the beginning of the periods presented. Please refer to Note 3  Acquisitions.





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Cash and Cash Equivalents



As of April 30, 2006, we had cash and cash equivalents of $3,953,000. We anticipate that a substantial portion shall be used as working capital and to execute our acquisition strategy and business plan. As such, we further anticipate that we will have to raise additional capital through asset based lines of credit or additional debt or equity financings to fund our operations and acquisitions during the next 6 to 12 months.



Even though we intend to obtain all the necessary permits to operate on our recently acquired Ohio properties, there are no guarantees that it will be successful. If we are not successful, that may have a material adverse effect on how soon we will be able to generate revenue and cash flow from on-going operations. Additionally, we intend to make infrastructure improvements to MNJ to facilitate the expansion of our rail transportation operations. We have been approved for grants from the New York State Department of Transportation and we are currently requesting additional grants. The level of infrastructure spending is dependent on our success at receiving grants and there is no guarantee as to the level of approved grants that we may ultimately receive. Any such shortfall in projected revenues or limitations of grants may cause us to seek additional financing at an earlier date. There are no
assurances that such financing will be available, or be available on terms acceptable to us.



Developments



Bellville Mining Company, Inc.



We plan to apply for all necessary permits to utilize portions of our Ohio properties for certain commercial and industrial uses. This application process could take up to one year for approval. While we intend to aggressively pursue our application, there are no guarantees we will be successful.



Middletown and New Jersey Railroad Company, Inc. (MNJ)



According to the Association of American Railroads (AAR), there are 556 railroads in the United States operating over 140,246 miles of track. The AAR segments U.S. railroads into one of three categories based on the amount of revenues and track miles. Class I railroads, those with over $289.4 million in revenues, represent over 92% of total rail revenues. Regional and local railroads operate approximately 42,000 miles of track in the United States. The primary function of these smaller railroads is to provide feeder traffic to the Class I carriers. Regional and local railroads combined account for approximately 8% of total rail revenues.



The following table shows the breakdown of U.S. railroads by classification.



Classification of Railroads
Number
Aggregate Miles 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.

The railroad industry in the United States has undergone significant change since the passage of the Staggers Rail Act of 1980, which deregulated the pricing and types of services provided by railroads. Following the passage of the Staggers Act, Class I railroads in the United States took steps to improve



23


profitability and recapture market share lost to other modes of transportation, primarily trucks. In furtherance of that goal, Class I railroads focused their management and capital resources on their long-haul core systems, and some of them sold branch lines to smaller and more cost-efficient rail operators willing to commit the resources necessary to meet the needs of the customers located on these lines. Divestiture of branch lines enabled Class I carriers to minimize incremental capital expenditures, concentrate traffic density, improve operating efficiency, and avoid traffic losses associated with rail line abandonment.



Although the acquisition market is competitive in the railroad industry, we believe we will continue to find opportunities to acquire rail properties from Class I railroads, industrial companies, and independent local and regional railroads.



We have begun and are planning to make significant infrastructure improvements to increase traffic on MNJs railroad. We anticipate that the infrastructure improvements will allow us to attract new customers and expand the level of service that we provide to existing customers. We plan to partner with local, state and federal government agencies to attract rail-served commerce to the Orange County, New York region where MNJ is located.



We are focusing our business development efforts in intermodal services. Intermodal transportation is the movement of freight via trailer or container using two or more modes of transportation, which nearly always include a rail and truck segment.



MNJ is the only rail carrier directly serving customers from their Middletown, New York locations; however, MNJ may compete directly with other modes of transportation, principally truck carriers. Competition is based primarily upon the rate charged and the transit time required, as well as the quality and reliability of the service provided. Most of the freight railroads handle is transferred either to or from other railroads prior to reaching its final destination. As a result, to the extent other rail carriers are involved in transporting a shipment, we cannot necessarily control the cost and quality of such service. To the extent highway competition is involved, the effectiveness of that competition is affected by government policy with respect to fuel and other taxes, highway tolls, and permissible truck sizes and weights.



The railroad industry in the U.S. is dominated by seven Class I carriers that have substantial market control and negotiating leverage. 100% of our total carloads from Middletown were interchanged with Norfolk Southern Corp. A decision by Norfolk Southern Corp. to cease certain freight movements from Middletown could have a material adverse effect on our operating results, financial condition and liquidity.



Our ability to generate revenue from on-going operations depends significantly on being able to develop properties we own, and properties we may lease. Development of the property and infrastructure for rail transportation will require significant capital expenditures, and effective execution on these developments, and corresponding development of customers with volume, will be essential to our success. Delays in permitting owned or leased properties, delays in infrastructure development, or delays in our ability to create a customer base with volumes needed will significantly impact our working capital and intermediate financing needs.



We purchased rail cars and containers, and through our wholly owned subsidiary, Hudson, we have agreements with intermodal and maintenance facilities to support our operations. We anticipate that we will continue to enter into similar arrangements to facilitate the transportation of commodities and bulk materials.



Critical Accounting Policies



Our Financial Statements are based on the selection and application of significant accounting policies, which require our management to make estimates and assumptions that affect the amounts reported in the Balance Sheets and the Statements of Operations. We believe that the following are the most critical



24


areas that may affect our financial condition and results of operations.



Stock Based Compensation.Our 2006 Equity Incentive Plan (2006 Plan) was approved by our shareholders on February 8, 2006 and permits the granting of up to 9% of our outstanding shares of common stock or 1,250,672 shares to employees and directors. Stock option awards are granted with an exercise price that is generally equal to or greater than the market price of our common stock on the date of the grant. The options vest generally over a range of two to four years and expire five years after the grant date. Stock options under the 2006 Plan provide for accelerated vesting if there is a change in control (as defined by the 2006 Plan).



The fair value of each stock option granted is estimated on the date of the grant using the Black-Scholes option pricing model and factors in an estimated forfeiture based on management assessment of historical employee termination experience as well as estimates of future terminations where historical information is limited. The Black-Scholes option pricing model has assumptions for risk free interest rates, dividends, stock volatility and expected life of an option grant. The risk free interest rate is based the U.S. Treasury Bill rate with a maturity based on the expected life of the options and on the closest day to an individual stock option grant. Dividend rates are based on our dividend history. The stock volatility factor is based on up to the past three years of market prices of our common stock. The expected life of an option grant is based on its vesting period. The fair value of each option
grant is recognized as compensation expense over the expected life of the option on a straight line basis.



Results of Operations



For the Three Months Ended April 30, 2006



We reported a net loss for the three months ended April 30, 2006 of $1,006,000 or $0.07 per share on a basic and diluted basis. The net loss includes the net loss of our recently acquired subsidiary, MNJ, with operations from February 10, 2006 to April 30, 2006, of $109,000.



Revenue for the three months ended April 30, 2006 of $28,000 consisted primarily of rail transportation income from MNJ.



General and administrative expenses of $862,000 for the three month period ended April 30, 2006 consisted primarily of the following:


salaries and employee expenses of $145,000
engineering and other consulting services of $106,000
equipment freight, storage and maintenance of $135,000
rents, utilities and office related expenses of $35,000
repairs and maintenance of - $51,000
professional fees of $157,000
investment and management consulting fees of $115,000
travel and entertainment expenses of $43,000
depreciation and amortization expense of $21,000.

We incurred net interest expense of $17,000 and finance placement fees of $155,000.



For the Nine months Ended April 30, 2006



We reported a net loss for the nine months ended April 30, 2006 of $2,697,000. The net loss includes approximately seven months of net losses of our subsidiaries, E-Rail, Hudson and Belville, totaling $1,045,000, and the net loss of MNJ, with operations from February 10, 2006 to April 30, 2006, of $109,000.



25


Revenue for the nine months ended April 30, 2006 of $28,000 consisted primarily of rail transportation income from MNJ.



General and administrative expenses of $2,508,000 for the nine months ended April 30, 2006 consisted primarily of the following:


salaries and employee expenses of $455,000
engineering and other consulting services of $142,000
equipment freight, storage and maintenance of $162,000
rents, utilities and office related expenses of $91,000
repairs and maintenance of $51,000
professional fees of $1,007,000
investment and management consulting fees of $356,000
travel and entertainment expenses of $93,000
depreciation and amortization expense of $35,000.

Professional fees and investment and management consulting fees include $775,000 from the issuance of 516,875 shares of common stock in the aggregate to our board members for their service on the board, and to advisors in connection with assistance and advice on financing and acquisitions.



We incurred net interest expense of $30,000, finance placement fees of $222,000, and we recorded a gain of $35,000 on the settlement of a note receivable.



Period from Inception on March 3, 2005 to April 30, 2006



We have incurred losses in each period since inception and have an accumulated deficit of $3,670,000 at April 30, 2006. We expect to continue to incur losses as a result of expenditures for general and administrative activities while we remain in a development stage.



Liquidity and Capital Resources



Cash decreased by $3,733,000 for the nine months ended April 30, 2006 from $7,686,000 to $3,953,000.



We reported cash flow used in operations of $856,000 consisting primarily of our net loss of $2,697,000 partially offset by common stock issued for services of $813,000, the application of $900,000 of prepaid deposits primarily related to railcars delivered and accepted, and an increase of $153,000 in accounts payable and accrued liabilities including amounts due to related parties.



Cash used in investing activities consisting primarily of the purchase of property and equipment of $2,951,000, primarily railcars and related equipment, and net cash paid for the acquisition of our subsidiaries totaling $4,597,000.



Cash provided by financing activities consisted of the proceeds from convertible notes payable of $4,008,000, the issuance of common stock of $850,000 and the collection of notes receivable of $635,000 partially offset by $275,000 of cash paid for the purchase of a note receivable, the redemption of 300,000 common shares for $275,000 and principal payments on notes payable of $251,000.



Our long-term debt includes approximately $466,000 of principal payments and $375,000 in accrued interest expenses that are due within the next year. The potential impact of servicing our long-term debt on short-term liquidity may be a reduction in cash available for contemplated infrastructure improvements and



26


potential acquisitions. We cannot be sure that our future working capital or cash flows will be sufficient to meet our debt obligations and commitments. Any insufficiency would have a negative impact on our business. Our ability to generate cash flow from operations sufficient to make scheduled payments on our debt as they become due will depend on our future performance and our ability to implement our business strategy successfully. Failure to pay our interest expense or make our principal payments would result in a default. A default, if not waived, could result in acceleration of our indebtedness, in which case the debt would become immediately due and payable. If this occurs, we may be forced to reduce or delay capital expenditures and implementation of our business strategy, sell assets, obtain additional equity capital or refinance or restructure all or a portion of our outstanding debt on terms that may be less
favorable to us. In the event that we are unable to do so, we may be left without sufficient liquidity and we may not be able to repay our debt and the lenders will be able to foreclose on our assets.



Related Party Transactions



We issued 155,000 shares valued at $232,000 to Orchestra Finance, LLP (Orchestra), a company controlled by an officer and director of ours in connection with the acquisition of E-Rail and Belville. Subsequently, we paid $16,000 in cash and issued 49,850 shares of common stock valued at $83,000 to Orchestra for consulting and financing placement fees. Additionally, on March 15, 2006, we entered into a two-year agreement with Orchestra, whereby Orchestra would provide management and financial advisory services to us for a monthly fee of $10,000 retroactive to January 1, 2006. As of April 30, 2006, we reported $90,000 due to Orchestra for consulting and financing placement fees



We paid $342,000 in cash for legal services to a law firm, during the nine months ended April 30, 2006, of which an officer and director of ours is a shareholder. In addition, we reported $49,000 due to this same firm for legal services at April 30, 2006.



We acquired software and assumed the corresponding lease of $27,000 during the nine months ended April 30, 2006 from an entity controlled by a former officer of one of our subsidiaries.



Prior to the acquisition of E-Rail, E-Rail purchased 220 open top containers for $550,000 consisting of $130,000 cash and a finance obligation of $420,000 to The Corona Group. The proprietor of The Corona Group was a business associate of a former officer of one of our subsidiaries and such proprietor is a shareholder of ours. We assumed the remaining finance obligation totaling $369,000 in connection with the acquisition of E-Rail. On April 26, 2006, The Corona Group agreed to reacquire the 220 open top containers and extinguish the remaining obligation that was assumed by E-Rail.



Our management is of the opinion that the terms and conditions of the foregoing transactions were no less favorable for us than could be obtained from unaffiliated third parties.



As a development stage company, we currently have limited operations, principally directed at rail-based transportation and logistics for commodities and other bulk materials.



Our management believes that we will be able to generate sufficient revenue or raise sufficient amounts of working capital through debt or equity offerings, as may be required to meet our short-term and long-term obligations. In order to execute on our business strategy, we will require additional working capital, commensurate with the operational needs of the target companies we may pursue. Such working capital will most likely be obtained through equity financings until such time as acquired operations are integrated and producing revenue in excess of operating expenses. There are no assurances that we will be able to raise the required working capital on terms favorable, or that such working capital will be available on any terms when needed.



Off-Balance Sheet Transactions



27


There are no off balance sheet items, and all transactions are in U.S. dollars, and we are not subject to currency fluctuations or similar market risks.



Factors That May Affect Our Business, Future Operating Results and Financial Condition



The risks described below are the ones we believe are the most important for you to consider, these risks are not the only ones that we face. If events anticipated by any of the following risks actually occur, our business, operating results or financial condition could suffer and the trading price of our common stock could decline.



Risks Related to Our Acquisition Strategy and Operations



Recent change of control and discontinued prior operations do not give a historical basis upon which to evaluate our current efforts, and the change in strategic direction has certain inherent risks.We recently experienced a change of control and discontinued all prior activities. As of March 2005, we had no assets and no operations. In addition, our periodic and current reports filed prior to March 2005 will contain information, which will no longer be applicable or relevant to our current and future business operations.

We have changed our business focus and we intend to acquire operations unrelated to past activities, and there are no assurances that management will be successful in acquiring a business or integrating the operations successfully, which would impair our value further.In connection with the recent change of control, we have shifted our focus towards acquisitions. On September 8, 2005, we entered into an Agreement and Plan of Merger with E-Rail Logistics, Inc. ("E-Rail"), pursuant to which we acquired E-Rail, a development stage company. Additionally, on April 26, 2006, we completed the acquisition of Cranberry Creek Railroad, Inc. whose principal asset is Middletown and New Jersey Railway Company, Inc. (MNJ), a regional railroad. Although the acquisition of these assets is part of our strategic business plan, there can be no assurance that we will be successful in
integrating the assets of E-Rail and MNJ as part of us.

We face challenges in attracting and retaining a qualified and experienced management team.Our success will depend largely on our ability to hire and retain qualified individuals to operate our business. Although we are actively pursuing additional personnel to manage MNJ and to replace former executives of E-Rail to utilize its assets following the acquisition and subsequent transfer to our Hudson subsidiary, there is no assurance that we will be successful in attracting qualified individuals. Our failure to attract and retain such personnel could have a material adverse effect on our business and financial condition.

Integration of proposed acquisitions pose certain risks, and we do not currently have historical experience upon which to base an evaluation of the future prospects of success.We have only a limited operating history upon which to base an evaluation of our business and our prospects. There can be no assurance that our recently assembled senior management team will be able to manage the business successfully and implement our operating and growth strategies effectively. Our effective integration of acquired businesses into our organization and operations is and will continue to be important to our growth and future financial performance. A part of our strategy is to achieve economies of scale and operating efficiencies by increasing our size through acquisitions. These goals may not be achieved even if we effectively combine the operations of acquired businesses with our
existing operations due to factors beyond our control, such as market position or customer base. Because of our limited operating history, there can be no assurance that our recently assembled senior management team will succeed in integrating our future acquisitions. Any difficulties we encounter in the integration process could have a material adverse effect on our business, financial condition and results of operations.



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Acceptable acquisition targets may not materialize.We expect that a substantial part of our future growth will come from acquiring collection, transfer, maintenance and loading facilities, disposal operations, and short-line railroads. There can be no assurance that we will be able to identify suitable acquisition candidates or, if such candidates are identified, to negotiate their acquisition at prices or on terms and conditions favorable to us. Additionally, we expect continued consolidation in the industry will reduce the number of qualified acquisition candidates. Our failure to implement our acquisition strategy successfully could limit our potential growth.



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.We anticipate that any future business acquisitions will be financed through cash from potential operations, borrowings, the issuance of shares of our common stock and/or seller financing. If acquisition candidates are unwilling to accept, or we are unwilling to issue, shares of our common stock as part of the consideration for such acquisitions, we may be required to use more of our available cash resources or debt, to the extent it is available, to fund such acquisitions. To the extent that cash from potential operations and debt are
insufficient to fund acquisitions, we will require additional equity and/or debt financing, the terms of which may be unfavorable or unavailable. Additionally, growth through the development or acquisition of new landfills, railroads, transfer stations and other facilities, as well as the ongoing maintenance of such landfills, railroads, transfer stations or other facilities, may require substantial capital expenditures. There can be no assurance that we will have sufficient existing capital resources or be able to raise sufficient additional capital resources on terms satisfactory to us to meet any or all of the foregoing capital requirements. For example, our wholly-owned subsidiary, Middletown and New Jersey Railroad has been approved for a federal railroad improvement grant, however, there are no assurances that we will be successful in receiving such funding if we do not meet certain state and local regulatory requirements.

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.As a successor owner to entities we acquire, we often assume prior liabilities incurred and there can be no assurances that these liabilities are properly disclosed to us. Even if we obtain legally enforceable representations, warranties, covenants and indemnities from the sellers of such businesses, we may not be successful in fully covering the liabilities. Certain environmental liabilities, even if we do not expressly assume them, may be imposed upon us under various regulatory schemes and legal theories, and as such may materially affect our ability to operate and grow our business.

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.We compete for acquisition candidates with other entities, some of which have greater financial resources than us. Increased competition for acquisition candidates may result in fewer acquisition opportunities being available to us, as well as less attractive acquisition terms, including increased purchase prices. These circumstances may increase acquisition costs to levels that are beyond our financial capability or pricing parameters or that may have an adverse effect on our results of operations and financial condition. The ability to utilize our securities as consideration for potential acquisitions may depend in
large part on the relative market price and capital appreciation prospects of the common stock compared to the equity securities of our competitors. If the market price of our common stock were to decline materially over a prolonged period of time, our acquisition program could be materially adversely affected.

The success of our railroad operations is dependant on our continuing relationships with ClassI carriers. The railroad industry in the United States is dominated by a small number of Class I



29


carriers that have substantial market control and negotiating leverage. Our ability to provide rail service to our customers in North America depends in large part upon our ability to maintain cooperative relationships with Class I carriers with respect to, among other matters, freight rates, car supply, reciprocal switching, interchange and trackage rights. In addition, loss of customers or service interruptions or delays by our Class I interchange partners relating to customers who ship over our track, may decrease our revenue. Because we depend on a Class I railroad, Norfolk Southern Corp. and other connecting carriers for our operations, our operating results, financial condition and liquidity may be adversely affected if our relationships with these carriers deteriorate.



Much of the freight transported by railroads moves on railcars supplied by other independent providers.If the number of railcars supplied by such other rail providers is insufficient, or if the cost of obtaining these railcars increases, we might not be able to obtain replacement railcars on favorable terms or at all and shippers may seek alternate forms of transportation.



We may be partially depending on government funding for our existing and future capital projects and track rehabilitation.Government funding for our projects is limited, and there is no guarantee that budget pressure at the federal, state and local level or changing governmental priorities will not eliminate future funding availability. In addition, competition for government funding from other short line railroads, Class I railroads, infrastructure and other companies is significant and the receipt of government funds is often contingent on the acceptance of contractual obligations that may not be strictly profit maximizing. In certain jurisdictions, the acceptance of government funds may impose additional legal obligations on our operations. We look to utilize the grant funds as a supplement to our normal capital programs. In return for the grants, the railroads pledge to
maintain various levels of service and maintenance on the rail lines that have been rehabilitated or constructed. We believe that the levels of service and maintenance required under the grants are not materially different from those we would otherwise provide. However, we can offer no assurance that government grants will continue to be available or that even if available, our railroads will be able to obtain them.



We may not be able to raise sufficient capital or generate sufficient cash flow to meet our debt service requirements.As of April 30, 2006, we had indebtedness of $5,907,000 of which $466,000 is due in less than one year. We cannot assure you that our future working capital or cash flows will be sufficient to meet our debt obligations and commitments. Any insufficiency would have a negative impact on our business. Our ability to generate cash flow from operations sufficient to make scheduled payments on our debt as they become due will depend on our future performance and our ability to implement our business strategy successfully. Failure to pay our interest expense or make our principal payments would result in a default. A default, if not waived, could result in acceleration of our indebtedness, in which case the debt would become immediately due and payable. If this
occurs, we may be forced to reduce or delay capital expenditures and implementation of our business strategy, sell assets, obtain additional equity capital or refinance or restructure all or a portion of our outstanding debt on terms that may be less favorable to us. In the event that we are unable to do so, we may be left without sufficient liquidity and we may not be able to repay our debt and the lenders will be able to foreclose on our assets.



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.Our growth strategy includes (i) expanding through acquisitions, and (ii) generating internal growth of its infrastructure and logistics capabilities. Our ability to execute our growth strategy will depend on a number of factors, including the success of existing and emerging competition, the availability of acquisition targets, the ability to maintain profit margins in the face of competitive pressures, the ability to



30


continue to recruit, train and retain qualified employees, the strength of demand for our services and the availability of capital to support our growth.

Rapid growth could create risks of over leverage or undercapitalization to meet our obligations, which could materially impact our financial condition and strategy.If we are able to execute our growth strategy, we may experience periods of rapid growth. Such growth, if it occurs, could place a significant strain on our management, operational, financial and other resources. Our ability to maintain and manage our growth effectively will require us to expand our management information systems capabilities and our operational and financial systems and controls. Moreover, we will need to attract, train, motivate, retain and manage additional senior managers, technical professionals and other employees, as well as integrate accounting and reporting for disclosure controls and compliance with Section 404 of the Sarbanes-Oxley Act. Any failure to expand our operational and financial
systems and controls or to recruit and integrate appropriate personnel at a pace consistent with our revenue growth could have a material adverse effect on our business, financial condition and results of operations.

The rail-based transportation, transloading and intermodal logistics businesses are 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.Certain of the markets in which we compete or will likely compete are served by one or more large, national companies, as well as by numerous regional and local companies of varying sizes and resources, some of which have accumulated substantial goodwill. Certain of our competitors may also be better capitalized, have greater name recognition or be able to provide services at a lower cost than us. Our inability to compete with governmental service providers and larger and better capitalized companies could have a material adverse effect on our business, financial condition and results of operations.

We compete directly with other modes of transportation, including motor carriers, ships and barges.Competition is based primarily upon the rate charged and the transit time required, as well as the quality and reliability of the service provided. While we must build or acquire and maintain our rail system, trucks are able to use public roadways. Any future improvements or expenditures materially increasing the quality of these alternative modes of transportation in the locations in which we operate, or legislation granting materially greater latitude for motor carriers and barges with respect to size, weight limitations, or other operating restrictions could have a material adverse effect on our results of operations and financial condition.

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.We are subject to governmental regulation by a significant number of federal, state and local regulatory authorities, including the Surface Transportation Board, the Federal Railroad Administration and state departments of transportation, with respect to our railroad operations and a variety of health, safety, labor, environmental and other matters. Some of the regulations require us to obtain and maintain various licenses, permits and other authorizations, which we may not continue to be able to do so.



Our inability to maintain landfill permits and licenses could adversely affect financial resources or require significant expenditures to comply with the regulations, either of which could materially affect gross margins and cash flow from operations.If we implement our strategy for landfill ownership and operation, it will be necessary to obtain and maintain in effect one or more licenses or permits, as well as zoning, environmental and/or other land use approvals. These licenses or permits and approvals are difficult and time-consuming to obtain and renew and are frequently subject to opposition by various elected officials or citizens' groups, whose positions may change in the future in ways that may adversely effect continuing operations or materially affect the cost of operations. The design, operation and closure of landfills are extensively regulated. These regulations
include, among others, the Subtitle D



31


Regulations. Failure to comply with these regulations could require us to undertake investigatory or remedial activities, to curtail operations or to close a landfill temporarily or permanently. Future changes to these regulations may require us to modify, supplement or replace equipment or facilities at costs that may be substantial. The failure of regulatory agencies to enforce these regulations vigorously or consistently may give an advantage to our competitors whose facilities do not comply with the Subtitle D Regulations or their state counterparts. Our financial obligations arising from any failure to comply with these regulations could have a material adverse effect on our business, financial condition and results of operations.

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.Companies in the short-line and regional railway industries are frequently subject in the normal course of business to judicial and administrative proceedings involving federal, state or local agencies or citizens' groups. Governmental agencies may seek to impose fines or penalties on us or to revoke or deny renewal of our operating permits, franchises or licenses for violations or alleged violations of environmental laws or regulations or require us to make expenditures to remediate potential environmental problems relating to waste disposed of or stored by us or our predecessors, or resulting from us or our predecessors'
transportation and collection operations. We may also be subject to actions brought by individuals or community groups in connection with the permitting, franchising or licensing of our operations, any alleged violation of such permits, franchises or licenses or other matters. Any adverse outcome in these proceedings could have a material adverse effect on our business, financial condition and results of operations and may subject us to adverse publicity.

We may be subject to liability for any environmental damage that our solid waste facilities may cause, including damage to neighboring landowners or residents, particularly as a result of the contamination of soil, groundwater or surface water, and especially drinking water, which could materially impact our cash flow in any given period.Our potential liability includes damage resulting from conditions existing prior to the acquisition of such facilities by us. We may also be subject to liability for any off-site environmental contamination caused by pollutants or hazardous substances whose transportation, treatment or disposal was arranged by us or our predecessors. Any substantial liability for environmental damage incurred by us could have a material adverse effect on our business, financial condition and results of operations. Further, CERCLA imposes joint and several
strict liability on the present owners and operators of facilities from which a release of hazardous substances into the environment has occurred, as well as any party that owned or operated the facility at the time of disposal of the hazardous substances, regardless of when the hazardous substance was first detected. CERCLA defines the term "hazardous substances" very broadly to include more than 700 substances that are specified under RCRA, have specific hazardous characteristics defined under RCRA or are regulated under any of several other statutes. Similar liability is imposed on the generators of waste that contains hazardous substances and on hazardous substance transporters that select the treatment, storage or disposal site. All such persons, who are referred to as potentially responsible parties, generally are jointly and severally strictly liable for the expense of waste site investigation, waste site cleanup costs and natural resource damages, regardless of whether they exercised due care
and complied with all relevant laws and regulations. These costs can be very substantial. Furthermore, such liability can be based on the existence of even very small amounts of hazardous substances; unlike most of the other statutes that regulate hazardous substances, CERCLA does not require any minimum volume or concentration of a hazardous substance to be present before imposing liability. It is likely that hazardous substances have in the past come to be located in landfills with which we are or will become associated. If any of our sites or operations ever experiences environmental problems, we could be subject to substantial liability, which could have a material adverse effect on our business, financial condition and results of operations.

Item 3.Controls and Procedures

Our management with the participation and under the supervision of our Principal Executive Officer

32


and Principal Financial Officer reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined by Rule 13a-15(e) or 15d-15(e)) of the Exchange Act Rule 13a-15 as of the end of the period covered by this report. Based upon their evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of such period, our disclosure controls and procedures are effective and sufficient to ensure that we record, process, summarize, and report information required to be disclosed in the reports we filed under the Exchange Act within the time periods specified in the Securities and Exchange Commission's rules and regulations.



There were no changes in our internal controls over financial reporting that occurred during the three months ended April 30, 2006 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.



PART II.
OTHER INFORMATION

Item 1.Legal Proceedings



On February 3, 2006, we were sued by Starbank Group, LLC (Starbank) in connection with assets we acquired as part of our acquisition of E-Rail Logistics. This case is pending in The Supreme Court of the State of New York, County of New York, pursuant to a complaint filed on January 24, 2006. The parties to the case include Starbank, Chartwell, E-Rail Logistics, Rail Waste Holdings, LLC (RWH), Imre Eszenyi, Andrew Kaufman, Richard Kessler and Christopher Davino. Starbank alleges that we induced Kaufman, Kessler and Davino to fraudulently sell assets of RWH to us through our E-Rail Logistics acquisition. Further, Starbank claims that we intentionally interfered with an alleged employment relationship between Kaufman, Kessler, Davino and RWH. Starbank was seeking damages in excess of $1,000,000. On March 15, 2006, all parties settled the lawsuit whereby Chartwell paid the sum of
$485,000 to Starbank and the selling shareholders of E-Rail agreed to a reduction in the purchase price to Chartwell for the E-Rail acquisition.



In the normal course of operations, we may have disagreements or disputes with employees, vendors or customers. These disputes are seen by our management as a normal part of business, and there are no pending actions currently or no threatened actions that management believes would have a significant material impact on our financial position, results of operations or cash flows.



Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

In March 2006, we issued an aggregate of 25,000 shares of common stock to Mr. Charles Srebnik, one of our directors, for audit committee services performed for the Company. The shares of common stock were issued by the Company in reliance on Section 506 of Regulation D of the Securities Act, and comparable exemptions for sales to accredited investors under state securities laws.



Item 3.Defaults Upon Senior Securities



None.

Item 4.Submission of Matters to a Vote of Security Holders



At the Annual Meeting of Shareholders held on February 8, 2006 at 45 West 44th Street, Hotel Sofitel in New York, New York, the shareholders elected the directors of the Company and approved a proposal to adopt the 2006 Equity Incentive Plan.







33


Votes



Proposal #1 Directors
For
Against
Withheld
Abstention
Broker Non-VotesImre Eszenyi
8,499,225
55
-
1,539
-Charles Srebnik
8,499,225
55
-
1,539
-David Adams
8,499,225
55
-
1,539
-Andrew Kaufman
8,315,422
5,611
-
920
178,916

Votes



Proposal #2 Adoption of the 2006 Equity Incentive Plan
For
Against
Withheld
Abstention
Broker Non-Votes8,499,225
-
-
1,131
50

Item 5.Other Information



None.



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Item 6.Exhibits



Exhibit No.
Description

10.1 (1)
Settlement Agreement with Starbank Group, et al. dated March 15, 2006

10.2 (1)
Settlement Agreement with Rail Waste Holdings, et al. dated March 15, 2006

10.3 (1)
Employment Separation Agreement with Andrew Kaufman dated March 15, 2006

10.4 (1)
Employment Separation Agreement with Richard Kessler dated March 15, 2006

10.5 (1)
Management Advisory Agreement with Orchestra Finance dated March 15, 2006

10.6 (2)
Contract of Sale of Stock with Estate of Pierre T. Rasmussen dated December 30,2005

10.7 (2)
Asset Purchase Agreement between Belville Mining Company and Estate of Emily Lucy C. Burch dated December 30, 2005

10.8 (3)
Note Purchase Agreement with Chris Gordon dated March 15, 2006

10.9 (3)
Securities Purchase Agreement dated March 15, 2006

10.10 (4)
Contract of Sales of Stock with James S. Wright dated April 26, 2006

10.11 (4)
Note Purchase Agreement with Faisal A Alhegelan dated April 30, 2006

31.1 (2)
Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002

31.2
Certificate of Principal Financial Officer and Principal Accounting Officer pursuant

32 (2)
Certificate of Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to Section 906 of The Sarbanes Oxley Act of 2002

(1)
Incorporated by reference to Form 8-K dated March 17, 2006(2)
Incorporated by reference to Form 8-K dated January 6, 2006(3)
Incorporated by reference to Form 8-K dated March 20, 2006(4)
Incorporated by reference to Form 8-K dated May 2, 2006

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SIGNATURES



In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.



CHARTWELL INTERNATIONAL, INC.

(Registrant)





Date: June 6, 2006
By:/s/ Imre EszenyiImre Eszenyi, Acting President

(Principal Executive Officer) and Chairman of the Board





Date: June 6, 2006
By:/s/ Paul BiberkrautPaul Biberkraut, Chief Financial and Administrative Officer

(Principal Financial Officer and

Principal Accounting Officer)