##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended December 31, 2006
 o
    
    TRANSITION 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.
  NEVADA
    
    95-3979080(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 177
Madison Avenue, 2 nd Floor
Morristown, New Jersey 07960  (Address of Principal Executive Offices)
 (973) 400-7010  (Issuers Telephone Number)
 þ o
 o þ
  o þ




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PAGEPart I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Consolidated Balance Sheets at December 31, 2006 (Unaudited) and June 30, 2006
    
    
    3Consolidated Statements of Operations (Unaudited) for the three months and six months ended December 31, 2006 and January 31, 2006, and, from inception on March 3, 2005 to December 31, 2006
    
    
    4Consolidated Statements of Cash Flows (Unaudited) for the six months ended December 31, 2006 and January 31, 2006, and, from inception on March 3, 2005 to December 31, 2006
    
    
    5Notes to Interim Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Conditions and Results of Operation
    
    
    20Item 3.
    
    Controls and Procedures
    
    
    36Signatures
    
    
    37Exhibits
    
    
    38EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  2




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##### Table of Contents



PART 1. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Chartwell International, Inc.
(A Development Stage Company)
 
 Consolidated Balance Sheets
 (In thousands)
 December 31,
    
    
    June 30,2006
    
    
    2006(Unaudited)AssetsCurrent AssetsCash
    
    $
    403
    
    
    $
    3,018Accounts receivable
    
    
    227
    
    
    
    25Deposits
    
    
    554
    
    
    
    533Prepaid expense and other
    
    
    60
    
    
    
    38Total current assets
    
    
    1,244
    
    
    
    3,614Long-term AssetsProperty and equipment, net
    
    
    5,158
    
    
    
    4,573Land
    
    
    1,735
    
    
    
    1,735Mineral rights
    
    
    5,447
    
    
    
    5,447Capacity and loading rights, net
    
    
    1,458
    
    
    
    Other
    
    
    295
    
    
    
    19Total long-term assets
    
    
    14,093
    
    
    
    11,774Total Assets
    
    $
    15,337
    
    
    $
    15,388Liabilities and Stockholders EquityCurrent LiabilitiesAccounts payable and accrued liabilities
    
    $
    792
    
    
    $
    191Due to related parties
    
    
    100
    
    
    
    21Notes payable
    
    
    281
    
    
    
    310Total current liabilities
    
    
    1,173
    
    
    
    522Long-term LiabilitiesNotes payable, net of current portion
    
    
    6,219
    
    
    
    5,557Total long-term liabilities
    
    
    6,219
    
    
    
    5,557Total Liabilities
    
    
    7,392
    
    
    
    6,079Commitments and ContingenciesStockholders EquityPreferred stock, $0.001 par value, 25,000 shares authorized
Common shares, $0.001 par value, 100,000 shares authorized
14,041 shares and 13,896 issued and outstanding at
December 31, 2006 and June 30, 2006, respectively
    
    
    14
    
    
    
    14Additional paid in capital
    
    
    13,954
    
    
    
    13,566Accumulated deficit
    
    
    (6,023
    )
    
    
    (4,271
    )Total stockholders equity
    
    
    7,945
    
    
    
    9,309Total Liabilities and Stockholders Equity
    
    $
    15,337
    
    
    $
    15,388
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Chartwell International, Inc.
(A Development Stage Company)
 
 Consolidated Statement of Operations
 (In thousands, except per share data)
 (Unaudited)
 CumulativeFor the three
    
    
    For the three
    
    
    For the six
    
    
    For the six
    
    
    from March 3,months ended
    
    
    months ended
    
    
    months ended
    
    
    months ended
    
    
    2005, InceptionDecember 31,
    
    
    January 31,
    
    
    December 31,
    
    
    January 31,
    
    
    to December2006
    
    
    2006
    
    
    2006
    
    
    2006
    
    
    31, 2006Revenues
    
    $
    1,623
    
    
    $
    
    
    
    $
    3,172
    
    
    $
    
    
    
    $
    3,223Cost of revenues
    
    
    1,554
    
    
    
    
    
    
    
    3,022
    
    
    
    
    
    
    
    3,022Gross profit
    
    
    69
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    201General and administrative expenses
    
    
    901
    
    
    
    579
    
    
    
    1,704
    
    
    
    1,646
    
    
    
    4,916Loss from operations
    
    
    (832
    )
    
    
    (579
    )
    
    
    (1,554
    )
    
    
    (1,646
    )
    
    
    (4,715
    )Other income (expense)Interest, net
    
    
    (175
    )
    
    
    (34
    )
    
    
    (294
    )
    
    
    (47
    )
    
    
    (420
    )Gain on sale of property and
equipment
    
    
    42
    
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    102Gains on notes settlements
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    35
    
    
    
    74Finance placement fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    (1,059
    )Total other income (expense)
    
    
    (133
    )
    
    
    1
    
    
    
    (192
    )
    
    
    (45
    )
    
    
    (1,303
    )Loss before income tax provision
    
    
    (965
    )
    
    
    (578
    )
    
    
    (1,746
    )
    
    
    (1,691
    )
    
    
    (6,018
    )Income tax provision
    
    
    5
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    5Net loss
    
    $
    (970
    )
    
    $
    (578
    )
    
    $
    (1,751
    )
    
    $
    (1,691
    )
    
    $
    (6,023
    )Net loss per common share,basic and diluted
    
    $
    (0.07
    )
    
    $
    (0.04
    )
    
    $
    (0.13
    )
    
    $
    (0.11
    )
    
    $
    (0.48
    )Weighted average number of
common shares outstanding,basic and diluted
    
    
    13,997
    
    
    
    15,676
    
    
    
    13,947
    
    
    
    14,869
    
    
    
    12,494
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Chartwell International, Inc.
(A Development Stage Company)
 
 Consolidated Statement of Cash Flows
 (In thousands)
 (Unaudited)
 CumulativeFor the six
    
    
    For the six
    
    
    from March 3,months ended
    
    
    months ended
    
    
    2005, InceptionDecember 31,
    
    
    January 31,
    
    
    to December 31,2006
    
    
    2006
    
    
    2006Cash flows from operating activitiesNet loss
    
    $
    (1,751
    )
    
    $
    (1,690
    )
    
    $
    (6,023
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activitiesDepreciation and amortization
    
    
    123
    
    
    
    13
    
    
    
    173Gain on sale of property and equipment
    
    
    (102
    )
    
    
    
    
    
    
    (102
    )Gain on settlement of note receivable
    
    
    
    
    
    
    (35
    )
    
    
    (35
    )Gain on settlement of note payable
    
    
    
    
    
    
    
    
    
    
    (39
    )Fair value of stock options granted
    
    
    67
    
    
    
    
    
    
    
    99Fair value of common stock issued for services
    
    
    30
    
    
    
    743
    
    
    
    1,283Increase (decrease) in cash from changes in assets
and liabilitiesAccounts receivable
    
    
    (202
    )
    
    
    
    
    
    
    (225
    )Deposits
    
    
    (21
    )
    
    
    882
    
    
    
    (554
    )Prepaid and other
    
    
    (21
    )
    
    
    (4
    )
    
    
    (59
    )Accounts payable and accrued liabilities
    
    
    704
    
    
    
    433
    
    
    
    694Due to related parties
    
    
    79
    
    
    
    50
    
    
    
    100Net cash (used in) provided by operating activities
    
    
    (1,094
    )
    
    
    392
    
    
    
    (4,688
    )Cash flows from investing activitiesPurchase of property and equipment
    
    
    (678
    )
    
    
    (1,429
    )
    
    
    (3,642
    )Purchase of capacity and loading rights
    
    
    (1,509
    )
    
    
    
    
    
    
    (1,509
    )Proceeds on sale of property and equipment
    
    
    122
    
    
    
    
    
    
    
    122Exercise of mining rights options
    
    
    
    
    
    
    
    
    
    
    (102
    )Deposits
    
    
    (276
    )
    
    
    (1
    )
    
    
    (290
    )Cash paid in acquisitions
    
    
    
    
    
    
    (2,288
    )
    
    
    (4,597
    )Cash received in acquisitions
    
    
    
    
    
    
    26
    
    
    
    82Net cash used in investing activities
    
    
    (2,341
    )
    
    
    (3,692
    )
    
    
    (9,936
    )Cash flows from financing activitiesProceeds from notes receivable
    
    
    
    
    
    
    
    
    
    
    635Payment for notes receivable
    
    
    
    
    
    
    (275
    )
    
    
    (275
    )Borrowings under notes payable
    
    
    707
    
    
    
    
    
    
    
    4,707Repayments under notes payable
    
    
    (178
    )
    
    
    (44
    )
    
    
    (698
    )Issuance of common stock
    
    
    291
    
    
    
    500
    
    
    
    10,933Redemption of common stock
    
    
    
    
    
    
    
    
    
    
    (275
    )Net cash provided by financing activities
    
    
    820
    
    
    
    181
    
    
    
    15,027Net increase (decrease) in cash
    
    
    (2,615
    )
    
    
    (3,119
    )
    
    
    403Cash and cash equivalents, beginning of period
    
    
    3,018
    
    
    
    7,686
    
    
    
    Cash and cash equivalents, end of period
    
    $
    403
    
    
    $
    4,567
    
    
    $
    403
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Chartwell International, Inc.
(A Development Stage Company)
Consolidated Statement of Cash Flows (continued)
(In thousands)
(Unaudited)
 CumulativeFor the six
    
    
    For the six
    
    
    from March 3,months ended
    
    
    months ended
    
    
    2005, InceptionDecember 31,
    
    
    January 31,
    
    
    to December 31,2006
    
    
    2006
    
    
    2006Supplemental disclosure of cash flow informationCash paid during the period for:Interest
    
    $
    210
    
    
    $
    115
    
    
    $
    753Income Taxes
    
    $
    9
    
    
    $
    
    
    
    $
    17Non-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 of
E-Rail Logistics, Inc.
    
    $
    
    
    
    $
    (4,650
    )
    
    $
    (1,803
    )Note payable issued in partial payment of acquisition of
Cranberry Creek Railroad, Inc.
    
    $
    
    
    
    $
    
    
    
    $
    (500
    )Interest accrued to notes payable
    
    $
    (103
    )
    
    $
    
    
    
    $
    (179
    )
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Chartwell International, Inc.
 
 Notes to Interim Consolidated Financial Statements
 December 31, 2006
 (Unaudited)
 Note 1. Basis of Presentation and Accounting Policies
   Principles of Consolidation
  Use of Estimates
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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 1. Basis of Presentation and Accounting Policies (continued)
 Revenue Recognition
  Comprehensive Income
  Stock Based Compensation
   8




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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 1. Basis of Presentation and Accounting Policies (continued)
 Recently Issued Accounting Pronouncements
 SFAS No. 123(R)
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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 2. Description of Business
      10




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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 2. Description of Business (continued)
       11




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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 3. Acquisitions
 E-Rail Logistics, Inc.
  Determining Whether a
Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business
  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
  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
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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 3. Acquisitions (continued)
 E-Rail Logistics, Inc. (continued)
     13




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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 3. Acquisitions (continued)
 Cranberry Creek Railroad, Inc.
     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
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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 4. Capacity and Loading Rights
   Note 5. Notes Payable
    15




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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 5. Notes Payable (continued)
       16




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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 6. Equity
 Common Stock Transactions
  Stock Options
    17




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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
September 30, 2006
(Unaudited)
 Note 6  Equity (continued)
 Stock Options (continued)
  Six-month period endedDecember 31, 2006Weighted AverageAll Options
    
    Shares
    
    Exercise PriceOutstanding at beginning of period
    
    
    350,000
    
    
    $
    2.83Options granted
    
    
    
    
    
    
    Options forfeited
    
    
    
    
    
    
    Options expired
    
    
    
    
    
    
    Options exercised
    
    
    
    
    
    
    Outstanding at end of period
    
    
    350,000
    
    
    $
    2.83Exercisable at end of period
    
    
    
    
    
    $
    
 Six-month period endedDecember 31, 2006Weighted AverageNon-vested Options
    
    Shares
    
    Exercise PriceNon-vested at beginning of period
    
    
    350,000
    
    
    $
    2.83Options granted
    
    
    
    
    
    
    Options forfeited
    
    
    
    
    
    
    Options expired
    
    
    
    
    
    
    Options vested
    
    
    
    
    
    
    Non-vested at end of period
    
    
    350,000
    
    
    $
    2.83
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Chartwell International, Inc.
Notes to Interim Consolidated Financial Statements (continued)
December 31, 2006
(Unaudited)
 Note 7. Related Party Transactions
    Note 8. Contingencies and Commitments
 Legal Proceedings
  19




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   Background and Corporate History
    20




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Recent Developments
 Hudson Logistics, Inc.
   Greater Ohio Resources, Inc.
  Middletown and New Jersey Railroad Company, Inc.
  Critical Accounting Policies and Estimates
  Revenue Recognition.
 Stock Based Compensation .
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Impairment of Long-Term Assets.
 Results of Operations
 Comparison of the Three Months Ended December 31, 2006 and January 31, 2006
  Revenues
  Cost of Revenues
  23




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Gross Profit
  General and Administrative Expenses
  
    
    salaries and employee expenses of $363,000
    
    engineering and other consulting services of $48,000
    
    rents, utilities, telephone and office related expenses of $69,000
    
    professional fees of $146,000
    
    investment and management consulting fees of $30,000
    
    travel expenses of $43,000
    
    depreciation and amortization expense of $84,000.
  
    
    salaries and employee expenses of $206,000
    
    rents, utilities, telephone and office related expenses of $54,000
    
    professional fees of $202,000
    
    travel expenses of $26,000
    
    depreciation and amortization expense of $10,000
  Other Income and Expenses
  Comparison of the Six Months Ended December 31, 2006 and January 31, 2006
  24




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Revenues
  Cost of Revenues
  Gross Profit
  General and Administrative Expenses
  
    
    salaries and employee expenses of $612,000
    
    engineering and other consulting services of $158,000
    
    rents, utilities, telephone and office related expenses of $133,000
    
    professional fees of $310,000
    
    investment and management consulting fees of $60,000
    
    travel expenses of $100,000
    
    depreciation and amortization expense of $123,000.
  
    
    salaries and employee expenses of $316,000
    
    rents, utilities, telephone and office related expenses of $73,000
    
    professional fees of $1,104,000
    
    travel expenses of $49,000
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
    
    depreciation and amortization expense of $13,000.
  Other Income and Expenses
  Liquidity and Capital Resources
      26




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Off-Balance Sheet Transactions
  27




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Factors That May Affect Our Business, Future Operating Results and Financial Condition
  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 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.
 We may be unable to execute our acquisition growth strategy.
 We face challenges in attracting and retaining a qualified and experienced management team.
 Integration of proposed acquisitions poses certain risks, and we do not currently have
historical experience upon which to base an evaluation of the future prospects of success.
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Additional factors may negatively impact our acquisition growth strategy.
 We may not be able to attract the required capital, through either debt or equity financings,
in order to complete strategic acquisitions or make required purchases of capital equipment needed
to conduct our operations efficiently, either of which could adversely affect our financial
condition and ability to execute on our business plan.
 There may be undisclosed liabilities in the businesses that we acquire which we fail or are
unable to discover which could have a material adverse effect on our operations and business
conditions.
 Larger competitors may compete with us for acquisition targets, making it more difficult for
us to acquire businesses that fit within our business strategy, or increasing the cost of making
such acquisitions, either of which could negatively affect our performance.
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The success of our railroad operations is dependant on our continuing relationships with Class
I carriers
 Much of the freight transported by railroads moves on railcars supplied by other independent
providers.
 We may be partially depending on government funding for our existing and future capital
projects and track rehabilitation.
 Our mining operations are inherently subject to conditions that could affect levels of
production and production costs at particular mines for varying lengths of time and could reduce
our profitability.
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We have reclamation obligations and if we are required to honor reclamation obligations that
have been assumed by previous mine operators, we could be required to expend greater amounts than
we currently anticipate, which could affect our profitability in future periods.
 Defects in title or loss of any leasehold interests in our properties could limit our ability
to mine these properties or result in significant unanticipated costs.
 Estimates of proven and probable reserves are subject to considerable uncertainty.
 We may not be able to raise sufficient capital or generate sufficient cash flow to meet our
debt service requirements.
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Regulatory approval to develop or expand our landfills and transfer stations may be delayed or
denied.
 Seasonal changes may adversely affect our businesses and operations.
 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.
 Rapid growth could create risks of over leverage or undercapitalization to meet our
obligations, which could materially impact our financial condition and strategy.
 The rail-based 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.
 We compete directly with other modes of transportation, including motor carriers, ships and
barges.
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Our railroad and real estate ownership are subject to significant governmental regulation and
our failure to comply with such regulations could have a material adverse effect on our operating
results, financial condition and liquidity.
 Rising fuel costs could adversely affect our business
 As part of our railroad operations, we may transport hazardous materials.
 Increased consolidation and competition within the coal industry may adversely affect our
ability to sell coal, and excess production capacity in the industry could put downward pressure on
coal prices.
 We may be unable to obtain and renew permits necessary for our operations, which would reduce
our production, cash flow and profitability.
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Our operations may impact the environment or cause exposure to hazardous substances, and our
properties may have environmental contamination, which could result in material liabilities to us.
 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.
 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.
 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
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materially impact our cash flow in any given period.
 Various states have enacted, or are considering enacting, laws that restrict the disposal,
within the state, of solid waste generated outside the state.
 Downturns in the U.S. economy have had and may have an adverse impact on our industries and
hence our operating results.
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##### Table of Contents



Item 3. Controls and Procedures
   SIGNATURES IMMEDIATELY FOLLOW
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##### Table of Contents



SIGNATURES
  CHARTWELL INTERNATIONAL, INC.(Registrant)Date: February 8, 2007
    
    By:
    
    /s/ Imre EszenyiImre Eszenyi, Acting President
(Principal Executive Officer) and Chairman of the BoardDate: February 8, 2007
    
    By:
    
    /s/ Paul BiberkrautPaul Biberkraut, Chief Financial and Administrative
Officer (Principal Financial Officer and Principal
Accounting Officer)
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##### Table of Contents



Exhibits31.1
    
    Certificate of Principal Executive Officer pursuant to Section 302
of The Sarbanes-Oxley Act of 200231.2
    
    Certificate of Principal Financial Officer and Principal
Accounting Officer pursuant to Section 302 of The Sarbanes-Oxley
Act of 200232
    
    Certificate of Principal Executive Officer, Principal
Financial Officer and Principal Accounting Officer pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002
 38