UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





þ
              QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For
the quarterly period ended September 30, 2009
 o
              TRANSITION REPORT PURSUANT TO
      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 registrant as specified in its charter)





NEVADA
            
            95-3979080(State
      or Other Jurisdiction of
            
            (I.R.S.
      Employer Identification No.)Incorporation
      or Organization)





7637
Leesburg Pike


Falls
Church, Virginia 22043


(Address
of Principal Executive Offices)





(703) 635-7980


(Registrant’s
Telephone Number)





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 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. Yesþ 
Noo





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer   ̈
            Accelerated
      filer   ̈Non-accelerated
      filer  ̈
              (Do
      not check if smaller reporting company)
            Smaller
      reporting company þ





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yeso Noþ





As of
November 20, 2009 the registrant had 11,994,013 outstanding shares of common
stock, $0.001 par value per share.








CHARTWELL
INTERNATIONAL, INC.


FORM
10-Q


SEPTEMBER
30, 2009


INDEX


PAGEPart
      I. FINANCIAL INFORMATIONItem 1.
      Financial Statements
              3Consolidated
      Balance Sheets at September 30, 2009 and June 30, 2009
      (Unaudited)
              3Consolidated
      Statements of Stockholders’ Equity at September 30, 2009
      (Unaudited)
              4Consolidated
      Statements of Operations  for the three months ended September
      30, 2009 and 2008, and, from inception on March 3, 2005 to September
      30, 2009(Unaudited)
              5Consolidated Statements of Cash
      Flows  for the three months ended September 30, 2009 and 2008,
      and, from inception on March 3, 2005 to September 30, 2009
      (Unaudited)
              6Notes
      to Interim Consolidated Financial Statements
              8Item 2.
      Management’s Discussion and Analysis of Financial Conditions and Results
      of Operation
              16Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
              20Item 4T.
      Controls and Procedures
              20Part
      II. OTHER INFORMATION
              20Item 1.
      Legal Proceedings
              20Item
      1A. Risk Factors
              20Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              23Item 3.
      Defaults Upon Senior Securities
              23Item
      4. Submission of Matters to a Vote of Security Holders
              23Item
      5. Other Information
              23Item
      6. Exhibits
              23Signatures
              24Exhibit Index
              25


2





PART
1. FINANCIAL INFORMATION


Item 1.Financial
Statements


Chartwell
International, Inc.


(A
Development Stage Company)


Consolidated
Balance Sheets


(In
thousands)


(Unaudited)


September
      30,
                    
                    
                    June
      30,2009
                    
                    
                    2009AssetsCurrent
      AssetsCash
                    
                    $
                    14
                    
                    
                    $
                    19Prepaid
      expense and other
                    
                    
                    1
                    
                    
                    
                    6Total
      current assets
                    
                    
                    15
                    
                    
                    
                    25Long-term
      AssetsLand
                    
                    
                    728
                    
                    
                    
                    728Mineral
      rights
                    
                    
                    5,447
                    
                    
                    
                    5,447Investment,
      at cost
                    
                    
                    -
                    
                    
                    
                    123Other
                    
                    
                    -
                    
                    
                    
                    9Total
      long-term assets
                    
                    
                    6,175
                    
                    
                    
                    6,307Total
      Assets
                    
                    $
                    6,190
                    
                    
                    $
                    6,332Liabilities
      and Stockholders’ EquityCurrent
      LiabilitiesAccounts
      payable and accrued liabilities
                    
                    $
                    179
                    
                    
                    $
                    201Due
      to related parties
                    
                    
                    162
                    
                    
                    
                    100Notes
      payable
                    
                    
                    2,170
                    
                    
                    
                    2,137Total
      current liabilities
                    
                    
                    2,511
                    
                    
                    
                    2,438Long-term
      LiabilitiesNotes
      payable, net of current portion
                    
                    
                    2,852
                    
                    
                    
                    2,809Total
      long-term liabilities
                    
                    
                    2,852
                    
                    
                    
                    2,809Total
      Liabilities
                    
                    
                    5,363
                    
                    
                    
                    5,247Commitments
      and ContingenciesStockholders’
      EquityPreferred
      stock, $0.001 par value, 25,000 shares authorized.
                      Series A
      Preferred shares, $0.001 par value, 20 shares designated and 2 issued and
      outstanding
                    
                    
                    2,000
                    
                    
                    
                    2,000Common
      shares, $0.001 par value, 100,000 shares authorized 11,994 and 9,494
      shares issued and outstanding at September 30, 2009 and June 30,
      2009, respectively
                    
                    
                    12
                    
                    
                    
                    9Additional
      paid in capital
                    
                    
                    14,671
                    
                    
                    
                    14,637Accumulated
      deficit
                    
                    
                    (15,856
                    )
                    
                    
                    (15,561
                    )Total
      stockholders’ equity
                    
                    
                    827
                    
                    
                    
                    1,085Total
      Liabilities and Stockholder’s Equity
                    
                    $
                    6,190
                    
                    
                    $
                    6,332


See
accompanying notes to unaudited interim consolidated financial
statements


3





Chartwell
International, Inc and Subsidiaries


(A
Development Stage Company)


Consolidated
Statements of Stockholders' Equity


(in
thousands)


(Unaudited)





Preferred
                  
                  
                  Preferred
                  
                  
                  Common
                  
                  
                  Common
                  
                  
                  Additional
                  
                  
                  
                  
                  
                  TotalStock
                  
                  
                  Stock
                  
                  
                  Stock
                  
                  
                  Stock
                  
                  
                  Paid-in
                  
                  
                  Accumulated
                  
                  
                  Stockholders'Shares
                  
                  
                  $
                  
                  
                  Shares
                  
                  
                  $
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  EquityBalance,
      June 30, 2009
                  
                  
                  2
                  
                  
                  $
                  2,000
                  
                  
                  
                  9,494
                  
                  
                  $
                  9
                  
                  
                  $
                  14,637
                  
                  
                  $
                  (15,561
                  )
                  
                  $
                  1,085Common
      stock issued for cash
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2,500
                  
                  
                  
                  3
                  
                  
                  
                  34
                  
                  
                  
                  
                  
                  
                  
                  37Net
      loss for the Period ended September 30, 2009
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (295
                  )
                  
                  
                  (295
                  )Balance,
      September 30, 2009
                  
                  
                  2
                  
                  
                  $
                  2,000
                  
                  
                  
                  11,994
                  
                  
                  $
                  12
                  
                  
                  $
                  14,671
                  
                  
                  $
                  (15,856
                  )
                  
                  $
                  827





See
accompanying notes to unaudited consolidated financial
statements


4





Chartwell
International, Inc.


(A
Development Stage Company)


Consolidated
Statement of Operations


(In
thousands, except per share data)


(Unaudited)


CumulativeFor
      the three
                  
                  
                  For
      the three
                  
                  
                  from
      March 3,months
      ended
                  
                  
                  months
      ended
                  
                  
                  2005,
      InceptionSeptember
      30,
                  
                  
                  September
      30,
                  
                  
                  to
      September2009
                  
                  
                  2008
                  
                  
                  30, 2009Revenues
                  
                  $
                  —
                  
                  
                  $
                  58
                  
                  
                  $
                  10,041Cost
      of revenues
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  9,221Gross
      profit
                  
                  
                  —
                  
                  
                  
                  58
                  
                  
                  
                  820General
      and administrative expenses
                  
                  
                  220
                  
                  
                  
                  286
                  
                  
                  
                  13,688Loss on
      sale of property and equipment
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  430(Gain)
      on sale of capacity and loading rights
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (147
                  )Finance
      placement fees
                  
                  
                  —
                  
                  
                  
                  215
                  
                  
                  
                  1,336Loss
      from operations
                  
                  
                  (220
                  )
                  
                  
                  (443
                  )
                  
                  
                  (14,4875
                  )Other
      income (expense)Interest,
      net
                  
                  
                  (75
                  )
                  
                  
                  (114
                  )
                  
                  
                  (1,623
                  )Gains
      on notes settlements
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  254Total
      other income (expense)
                  
                  
                  (75
                  )
                  
                  
                  (114
                  )
                  
                  
                  (1,369
                  )Loss
      before income tax provision
                  
                  
                  (295
                  )
                  
                  
                  (557
                  )
                  
                  
                  (15,856
                  )Income
      tax provision
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Net
      loss
                  
                  $
                  (295
                  )
                  
                  $
                  (557
                  )
                  
                  $
                  (15,856
                  )Net
      loss per common share,basic
      and diluted
                  
                  $
                  (0.03
                  )
                  
                  $
                  (0.07
                  )
                  
                  $
                  (2.18
                  )Weighted
      average number of common shares outstanding,basic
      and diluted
                  
                  
                  10,684
                  
                  
                  
                  7,633
                  
                  
                  
                  7,275


See
accompanying notes to unaudited interim consolidated financial
statements


5


Chartwell
International, Inc.


(A
Development Stage Company)


Consolidated
Statement of Cash Flows


(In
thousands)


(Unaudited)


CumulativeFor
      the three
                
                
                For
      the three
                
                
                from
      March 3,months
      ended
                
                
                months
      ended
                
                
                2005,
      InceptionSeptember
      30,
                
                
                September
      30,
                
                
                to
      September 30,2009
                
                
                2008
                
                
                2009Cash
      flows from operating activitiesNet
      loss
                
                $
                (295
                )
                
                $
                (557
                )
                
                $
                (15,8562
                )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activitiesDepreciation
      and amortization
                
                
                —
                
                
                
                8
                
                
                
                597Impairment
      of asset value
                
                
                123
                
                
                
                —
                
                
                
                3,150Loss on
      sale of property and equipment
                
                
                —
                
                
                
                —
                
                
                
                430Gain
      on sale of capacity and loading rights
                
                
                —
                
                
                
                —
                
                
                
                (147
                )Gain
      on settlement of note receivable
                
                
                —
                
                
                
                —
                
                
                
                (35
                )Gain
      on settlement of note payable
                
                
                —
                
                
                
                —
                
                
                
                (219
                )Stock
      compensation
                
                
                —
                
                
                
                6
                
                
                
                455Fair
      value of common stock issued for services
                
                
                —
                
                
                
                291
                
                
                
                2,109Increase
      (decrease) in cash from changes in assets and
    liabilitiesAccounts
      receivable
                
                
                —
                
                
                
                8
                
                
                
                2Deposits
                
                
                —
                
                
                
                391
                
                
                
                —Prepaid
      and other
                
                
                5
                
                
                
                (19
                )
                
                
                (1
                )Accounts
      payable and accrued liabilities
                
                
                54
                
                
                
                69
                
                
                
                920Due
      to related parties
                
                
                62
                
                
                
                26
                
                
                
                162Net
      cash (used in) provided by operating activities
                
                
                (51
                )
                
                
                223
                
                
                
                (8,433
                )Cash
      flows from investing activitiesPurchase
      of property and equipment
                
                
                —
                
                
                
                —
                
                
                
                (3,794
                )Purchase
      of capacity and loading rights
                
                
                —
                
                
                
                —
                
                
                
                (1,509
                )Proceeds
      on sale of property and equipment
                
                
                —
                
                
                
                —
                
                
                
                2,310Proceeds
      on sale of capacity and loading rights
                
                
                —
                
                
                
                —
                
                
                
                1,455Exercise
      of mining rights options
                
                
                —
                
                
                
                —
                
                
                
                (103
                )Deposits
                
                
                9
                
                
                
                —
                
                
                
                (100
                )Investment
      in affiliate
                
                
                —
                
                
                
                —
                
                
                
                (123
                )Cash
      paid in acquisitions
                
                
                —
                
                
                
                —
                
                
                
                (4,597
                )Cash
      received in acquisitions
                
                
                —
                
                
                
                —
                
                
                
                82Net
      cash provided by (used in) investing activities
                
                
                9
                
                
                
                —
                
                
                
                (6,379
                )Cash
      flows from financing activitiesProceeds
      from notes receivable
                
                
                —
                
                
                
                —
                
                
                
                635Payment
      for notes receivable
                
                
                —
                
                
                
                —
                
                
                
                (275
                )Borrowings
      under notes payable
                
                
                —
                
                
                
                —
                
                
                
                5,375Repayments
      under notes payable
                
                
                —
                
                
                
                (318
                )
                
                
                (3,100
                )Issuance
      of common stock
                
                
                37
                
                
                
                —
                
                
                
                10,962Short
      swing sale profit on common stock
                
                
                —
                
                
                
                4
                
                
                
                4Issuance
      of preferred stock
                
                
                —
                
                
                
                —
                
                
                
                1,500Redemption
      of common stock
                
                
                —
                
                
                
                —
                
                
                
                (275
                )Net
      cash provided by (used in) financing activities
                
                
                37
                
                
                
                (314
                )
                
                
                14,826


See
accompanying notes to unaudited interim consolidated financial
statements


6


Chartwell
International, Inc.


(A
Development Stage Company)


Consolidated
Statement of Cash Flows (continued)


(In
thousands)


(Unaudited)


CumulativeFor
      the three
                
                
                For
      the three
                
                
                from
      March 3,months
      ended
                
                
                months
      ended
                
                
                2005,
      InceptionSeptember
      30,
                
                
                September
      30,
                
                
                to
      September 30,2009
                
                
                2008
                
                
                2009Net
      (decrease) increase in cash
                
                
                (5
                )
                
                
                (91
                )
                
                
                14Cash
      and cash equivalents, beginning of period
                
                
                19
                
                
                
                182
                
                
                
                —Cash
      and cash equivalents, end of period
                
                $
                14
                
                
                $
                91
                
                
                $
                14Supplemental
      disclosure of cash flow informationCash
      paid during the period for:Interest
                
                $
                —
                
                
                $
                100
                
                
                $
                1,297Income
      taxes
                
                $
                —
                
                
                $
                —
                
                
                $
                —Non-Cash
      Investing and Financing ActivitiesNotes
      payable assumed by purchaser on sale of equipment
                
                $
                —
                
                
                $
                —
                
                
                $
                337Deposits
      applied to accounts payable
                
                $
                —
                
                
                $
                —
                
                
                $
                (105
                )Preferred
      stock issued in exchange for redemption Of common stock
                
                $
                —
                
                
                $
                —
                
                
                $
                (500
                )Common
      stock issued in partial payment of note receivable
                
                $
                —
                
                
                $
                —
                
                
                $
                (325
                )Software
      acquired under capital lease
                
                $
                —
                
                
                $
                —
                
                
                $
                (27
                )Common
      stock issued in partial payment of acquisition of E-Rail Logistics,
      Inc.
                
                $
                —
                
                
                $
                —
                
                
                $
                (1,803
                )Note
      payable issued in partial payment of acquisition of Cranberry Creek
      Railroad, Inc.
                
                $
                —
                
                
                $
                —
                
                
                $
                (500
                )Interest
      accrued to notes payable
                
                $
                (75
                )
                
                $
                (14
                )
                
                $
                (855
                )


See
accompanying notes to unaudited interim consolidated financial
statements


7


Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements


September
30, 2009


(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 (“SEC”) 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 June 30, 2009 has
been derived from the audited consolidated financial statements of Chartwell
International, Inc. at that date. Unless stated otherwise, references in this
Form 10-Q 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 the three-month period
ended September 30, 2009 and the operating results from inception on
March 3, 2005 through September 30, 2009 are not necessarily indicative of
the results that may be expected for the year ending June 30, 2010.
Further, we have had limited operations in all reporting periods through March
31, 2009. We have had no active operations since April 1, 2009 For further
information, refer to the financial statements included in our Annual Report on
Form 10-K filed on October 15, 2009.





In
accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards
CodificationTM (“ASC”) Topic 855, Subsequent Events,or ASC
855, we evaluated all events or transactions that occurred after September 30,
2009 through the date of this report, which represents the date the consolidated
financial statements were issued. During this period we did not have any
material recognizable subsequent events.





Principles
of Consolidation





The
consolidated financial statements as of September 30, 2009 and for the three
months ended September 30, 2009 include the accounts of Chartwell International,
Inc., and the operations of our wholly-owned subsidiary, Belville Mining
Company, Inc. (“Belville”). The consolidated financial statements for the three
months ended September 30, 2008 include the accounts of Chartwell International,
Inc. and the operations of our wholly-owned subsidiaries Belville, Greater Ohio
Resources, Inc. (“Greater Ohio”), Greater Hudson Resources, Inc. (“Greater
Hudson”), and Middletown and New Jersey Railway Company, Inc. (“MNJ”).
Inter-company accounts and transactions have been eliminated. The corporate
charters of Greater Hudson and Greater Ohio were surrendered on May 12, 2009 and
May 19, 2009, respectively. MNJ ceased operations on March 31, 2009. On June 15,
2009 we assigned all the remaining assets and liabilities of MNJ to Chartwell
International, Inc. We surrendered the corporate charter of MNJ on October 5,
2009.





Use
of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets 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 not
limited to evaluations of long-term assets and the valuation of stock-based
compensation.





Revenue
Recognition





We
generated limited revenue from rail transportation until March 31, 2009 and we
recognized revenue on the completion of transportation across our short line
railroad. Our credit terms were generally 15 to 30 days. We did not
maintain a reserve for rail transportation revenue as we had one customer and we
had not incurred any losses since we began generating revenue in
February 2006.





Impairment
of Long-Term Assets





We assess
the recoverability of long-lived assets at least annually or whenever adverse
events or changes in circumstances indicate that impairment may have occurred in
accordance with FASB ASC Topic 360-10, Property, Plant, and Equipment,
Impairment or Disposal of Long-Lived Assets, or ASC 360-10. In the event
that facts and circumstances indicate that the carrying value of long-term
assets may be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset’s carrying amount to
determine if a write-down to market value or discounted cash flow value is
required. The write-down, if any, would be charged to operations in the period
that impairment was identified. During the quarters ended December 31,
2007, March 31, 2008, December 31, 2008, June 30, 2009 and September 30, 2009
our management identified certain railroad equipment assets, and, land and
related infrastructure associated with our MNJ and Belville subsidiaries that
were not being used in current operations and evaluated the market value
of these
assets. We determined the value of these assets had been impaired in comparison
to prices for similar assets and we recorded write-downs totaling $3,150,000
($894,000 at December 31, 2007, $1,361,000 at March 31, 2008, $470,000 at
December 31, 2008, $302,000 at June 30, 2009 and $123,000 at September 30, 2009)
based on our estimates of their market value. These write-downs were included in
general and administrative expenses on the Consolidated Statement of
Operations.


8





Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements (Continued)


September
30, 2009


(Unaudited)





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





Stock
Based Compensation





FASB ASC
Topic 718 Compensation — Stock
Compensation,or ASC 718,requires companies to
estimate the fair value of share-based payment awards on the date of grant using
an option-pricing model. On February 8, 2006 our shareholders approved a
stock based compensation plan (the “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.





Newly
Adopted Accounting Standards





In July
2009, the FASB issued ASC Topic 105, Generally Accepted Accounting
Principles, or ASC 105, (formerly FASB Statement No. 168 FASB Accounting Standards
CodificationTMand the Hierarchy of Generally
Accepted Accounting Principles).ASC 105 establishes the FASB Accounting Standards
CodificationTM(Codification) as the single source of authoritative U.S. generally
accepted accounting principles (U.S. GAAP) recognized by the FASB to be applied
by nongovernmental entities. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. ASC 105 and the Codification were effective for financial
statements issued for interim and annual periods ending after September 15,
2009. As ASC 105 is not intended to change or alter existing GAAP, the adoption
on July 1, 2009, did not have a material impact on the Company’s consolidated
financial statements. The Company adjusted historical GAAP references in this
first quarter 2010 Form 10-Q to reflect accounting guidance references included
in the Codification.


9


Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements (Continued)


September
30, 2009


(Unaudited)





Note
2. Description of Business





We are a
multi-industry holding company that was formed as a Nevada corporation in 1984.
We, through our wholly-owned subsidiary, are owners of land and mineral rights.
Our primarily focus until January 24, 2008 was on the transportation and
disposal of non-hazardous solid waste as well as the transportation of other
commodities. Subsequent to January 24, 2008 and until March 31, 2009 we
were providing limited rail-based transportation of commodities through our MNJ
subsidiary. We had, until January 24, 2008, been pursuing a growth strategy
through acquisitions of assets, properties and access rights that can be
combined and strategic relationships with those companies that focus on waste by
rail services, rail transportation logistics, and disposal options, including
landfill management. We are currently re-evaluating our strategy and we are
focusing on evaluating the best business approach to monetizing some land,
mineral and mineral rights assets that we acquired to generate liquidity to fund
future business activity.





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 one
of our directors 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 the same
director 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 rail-based transportation and
solid waste management industries. Most of our activities during the period from
March 3, 2005 to March 31, 2009 were dedicated to seeking acquisition
targets with viable on-going operations, or acquisition of assets, properties
and access rights that could be most synergistically combined and 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 transportation and 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 South-Central Ohio, a portion of
which land we intended to permit for solid waste landfill and other industrial
uses. The property principally contains coal, clay and limestone. We are only
beginning the permitting process, and cannot estimate at this time when
operational use of the property will begin. 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 one of our direct subsidiaries.





On
April 1, 2006, in an effort to better streamline operations, E-Rail
assigned all of its assets and liabilities to Hudson. We surrendered the
corporate charter of E-Rail on August 2, 2006.





On
April 26, 2006, we completed the acquisition of Cranberry Creek, including
its wholly-owned subsidiary, MNJ, that owns and operates a regional short-line
railroad in Middletown, New York. MNJ owned and operated a regional short-line
railroad headquartered and based in Middletown, New York. MNJ’s operations were
limited and we had begun capital improvements and were 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.





On
May 12, 2006, in an effort to further simplify our corporate structure, we
assigned all the assets and liabilities of Cranberry Creek to MNJ. We
surrendered the corporate charter of Cranberry Creek on November 15,
2006.


10


Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements (Continued)


September
30, 2009


(Unaudited)





Note
2. Description of Business (continued)





On
August 29, 2006, our wholly-owned subsidiaries, Hudson and HLL completed
the acquisition of certain agreements from Steel Wheels Transport, LLC and Team
G Loading, LLC, that they respectively held with New York and Greenwood Lake
Railway Company, Inc. (“Greenwood”). One agreement was a Facility Capacity
Agreement, which granted Hudson the right to utilize a guaranteed amount of
capacity at Greenwood’s railroad at Dundee Yard in Passaic, New Jersey. The
other agreement was a Railroad Car Loading Agreement, which granted HLL the
exclusive right to perform loading of bulk materials primarily consisting of
construction and demolition debris to railcars at Greenwood’s railroad at Dundee
Yard. As consideration for the assignment and assumption of these agreements
Hudson and HLL paid an aggregate of $1,475,000 and agreed to either payoff or
assume certain equipment loans and leases. We acquired the Facility Capacity
Agreement and Railroad Car Loading agreements as part of our strategy to offer
rail-based solid waste transportation and disposal services. Our initial plans
for this location were to operate as a transload facility to attract truckers
hauling construction and demolition debris to our site, where we loaded the
debris onto railway cars and ship the debris to landfill sites in Ohio owned and
operated by third party providers. We began transload activities on this site on
September 11, 2006.





On
January 24, 2008, our wholly-owned subsidiaries Hudson and HLL entered into
an Amended and Restated Purchase Agreement with Perry New Jersey, LLC for the
sale of substantially all of their assets to Perry New Jersey I, LLC for cash
consideration of $1,700,000, subject to a $803,594 holdback, and assumption by
Perry of certain debts and leases of Hudson and HLL. This transaction closed on
January 24, 2008. As a result of the asset sale we no longer had rail-based
solid waste transportations operations. We assigned remaining assets and
liabilities of Hudson and HLL to Chartwell International, Inc. and surrendered
the corporate charters of HLL and Hudson on May 30, 2008 and September 19, 2008,
respectively.





On March
31, 2009 we and our wholly-owned subsidiary, MNJ, entered into a definitive
Agreement for Sale and Purchase of Business Assets with Middletown & New
Jersey Railroad, LLC, a Delaware limited liability company
(“Buyer”).  Under the terms of the agreement, we agreed to sell
substantially all of MNJ’s assets used in connection with operating our railroad
freight transportation business serving central Orange County in Middletown, New
York. The purchase price was $386,900 and the assumption by Buyer of certain
liabilities.  On April 6, 2009, we and MNJ consummated the sale. The
purchase price was deposited into an escrow account subject to the following
release conditions: (a) $356,900 to be released to us upon our providing Buyer
with a title report and title insurance, and (b) $30,000 to be released to us
upon resolution of certain real property matters. Between March 31, 2009 and
April 6, 2009 we did not have any operations in MNJ. Based on this transaction
we no longer had any active operations in rail transportation. We in the process
of selling off the remaining MNJ land holdings that were not connected with
MNJ’s rail transportation business. We anticipate that substantially all of our
MNJ land holdings will be sold within the next 6 months.





Effective
April 1, 2009, in our efforts to reduce operating costs, the limited operations
of our subsidiaries Greater Hudson Resources, Inc. and Greater Ohio Resources,
Inc. were terminated, all the assets and liabilities of both entities were
assigned to Chartwell International, Inc., and their corporate charters were
surrendered on May 12, 2009 and May 19, 2009, respectively.





On June
15, 2009 we assigned all the remaining assets and liabilities of MNJ to
Chartwell International, Inc. We surrendered the corporate charter of MNJ on
October 5, 2009.





Our
executive offices are based in Falls Church, Virginia.





Note
3. 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 0% to 6.5% per annum secured by land 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 $1,638,000 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 then current accessible borrowing rate based on proposals for debt
financing on comparable assets. On June 8, 2006, we negotiated an early payoff
of one of the notes that resulted in gain on the settlement of the note of
$39,000. During the year ended June 30, 2007 we either paid off or renegotiated
the repayment terms of the notes and have determined that the remaining face
value fairly represents the present value of minimum future payments based on
the borrowing rates that we recently received from new debt assumed. We
suspended making payments against the remaining notes in February 2008 while we
are in the process of restructuring certain of the terms with the note holders.
On November 6, 2009 we were served with a notice of default on two of the notes.
We continue to accrue interest based on the existing interest rates. As of
September 30, 2009 the outstanding balances including accrued interest were
$1,055,000 of which $575,000 are due in one year or less.


11





Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements (Continued)


September
30, 2008


(Unaudited)





Note
3. Notes Payable (continued)





On
February 15, 2006, we issued a $500,000 convertible promissory 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, was due on February 15, 2008,
interest is payable quarterly, and the principal balance plus any accrued
interest can be converted into shares of our common stock at a rate of $3.165
per share at any time. The conversion rights have expired. With the written
consent of the note holder, we did not pay off the note payable on its due date.
To date, we have attempted and continue to negotiate with the note holder to
extend and restructure the note payable beyond its original due date. However,
we are in default of the note and the note holder filed a lawsuit against us in
Orange County, New York on August 20, 2009. We have continued to accrue interest
on the note payable at the original note interest rate. At September 30, 2009,
the balance of the note payable plus accrued interest was $566,000 and reported
in current liabilities in the consolidated balance sheet.





On March
15, 2006, we issued a $1,000,000 convertible promissory note payable to an
accredited private investor. The note bore interest at the rate of 6% per annum,
was due on March 15, 2009, interest accrued until the note is repaid or
converted, and the principal balance plus any accrued interest could be
converted into shares of our common stock at a rate of $2.00 per share at any
time. On June 10, 2008 we agreed to renegotiate the note whereby accrued
interest and principal totaling $174,000 was forgiven, the note became secured
by substantially all of our assets subject to the existing lien priorities of
other secured lenders and the conversion feature was eliminated. The interest
rate, interest accrual provision and due date remain unchanged. On April 6,
2009, we agreed to extend the note until July 15, 2009 for an extension fee of
$1,000 with other conditions remaining the same. We are currently in discussions
with the note holder to extend the due date and we are continuing to accrue
interest. At September 30, 2009, the balance of the note payable plus accrued
interest was $1,029,000 and reported in current liabilities in the consolidated
balance sheet.





On April
30, 2006, we issued a $3,000,000 secured convertible promissory 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 shares of our common stock at a rate of $2.30 per share at
any time subject to a maximum of 5% of our outstanding common stock at the time
of the conversion. In June 2008, we agreed to increase the collateral securing
the note to include substantially all of our assets subject to the existing lien
priorities of other secured lenders in exchange for delays in interest payments.
We further agreed to make principal reductions as collateral was sold. In April
2008 we paid a principal repayment of $134,000. On July 24, 2008 we made
interest and principals payments totaling $315,000. On January 1, 2009, the
investor agreed to extend past due and upcoming interest payments in exchange
for 600,000 shares of our restricted common stock valued at $60,000. On January
31, 2009 we made a principal repayment of $1,100,000. On June 9, 2009 we made a
principal payment of $300,000. At September 30, 2009, the balance of the note
payable plus accrued interest was $1,499,000 and reported in the long-term
liabilities in the consolidated balance sheet.





On
October 23, 2006, we issued five convertible notes payable totaling
$250,000 to accredited foreign private investors. The notes bears interest at
the rate of 7.75% per annum, are due on May 23, 2012, interest accrues until the
notes are repaid or converted, and the principal balances plus any accrued
interest can be converted into our common stock at rate of $6.00 per share at
any time. At September 30, 2009, the balance of the notes payable plus accrued
interest was $307,000 and reported in the long-term liabilities in the
consolidated balance sheet.





On
March 5, 2007, we issued a convertible note payable totaling $500,000 to an
accredited foreign private investor. The note bears interest at the rate of
5.00% per annum, is due on May 23, 2012, interest accrues until the notes
are repaid or converted, and the principal balance plus any accrued interest can
be converted into our common stock at the rate of $5.00 per share at any time.
At September 30, 2009, the balance of the note payable plus accrued
interest was $566,000 and reported in the long-term liabilities in the
consolidated balance sheet.





Note
4. Equity





Common
Stock Transactions





On
December 31, 2007 we issued 5,000 shares of common stock to a consultant in
exchange for services valued at $0.08 per share or $400. Our management valued
the shares of common stock at the closing stock market price on the date of the
transaction.





On August
11, 2008 we issued 287,500 shares of common stock to an officer and two
directors in exchange for services valued at $0.26 per share or $74,750, and we
issued 830,769 common shares to Orchestra for services valued $0.26 per share or
$215,000. Our management valued the shares of common stock at the closing stock
market price on the date of the transaction.




12




Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements (Continued)


September
30, 2009


(Unaudited)





Note
4. Equity (continued)





Common
Stock Transactions (continued)





On
September 2 and 3, 2008, our principal shareholder, Orchestra, involuntary sold
29,500 common shares as result of a broker margin call. On September 23, 2008,
Orchestra remitted $4,000 to us which represented the profit on the short swing
sale or our common stock.





On
January 1, 2009 we issued 750,000 shares of common stock to an officer and an
employee in exchange for services valued at $0.10 per share or $75,000, and we
issued 600,000 shares of common stock to an accredited foreign private investor
valued at $0.10 per share or $60,000 as a financing fee for agreeing to defer
accrued and outstanding interest payments on a promissory note due to the
investor. Our management valued the shares of common stock at the closing stock
market price on the date of the transaction.





On
February 19, 2009 our shareholders approved a one-for-two reverse stock split of
our common stock that became effective on April 8, 2009. The effect of the
reverse split has been reflected in our financial statements
retroactively.





On August
7 and 21, 2009 we issued a total of 2,500,000 shares of common stock to
accredited private investors for cash at $0.015 per share or
$37,500.





Stock
Options





Our 2006
Equity Incentive Plan (the “2006 Plan”) was approved by shareholders on
February 8, 2006, and permits the granting of up to 9% of our outstanding
shares of common stock and the number of common shares issuable from convertible
securities or 1,130,247 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 or the most recent
direct issuance of our common stock for cash closest to the date of the option
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 on 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 requisite service period on a straight line
basis.





During
the three-month periods ended September 30, 2009 and 2008 we did not grant any
stock options to our employees or directors.





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


Three-month
      period endedAll
      Options
                
                September
      30, 2009Weighted
      AverageShares
                
                
                Exercise PriceOutstanding
      at beginning of period
                
                
                425,000
                
                
                $
                5.22Options
      granted
                
                
                —
                
                
                
                —Options
      forfeited
                
                
                —
                
                
                
                —Options
      expired
                
                
                —
                
                
                
                —Options
      exercised
                
                
                —
                
                
                
                —Outstanding
      at end of period
                
                
                425,000
                
                
                $
                5.22Exercisable
      at end of period
                
                
                425,0007
                
                
                $
                5.22


13


Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements (Continued)


September
30, 2009


(Unaudited)





Note
4. Equity (continued)





Stock
Options (continued)





Three-month period endedNon-vested Options
                          
                          September 30, 2009Weighted AverageShares
                          
                          
                          Exercise PriceNon-vested
      at beginning of period
                          
                          
                          —
                          
                          
                          $
                          —Options
      granted
                          
                          
                          —
                          
                          
                          
                          —Options
      forfeited
                          
                          
                          —
                          
                          
                          
                          —Options
      expired
                          
                          
                          —
                          
                          
                          
                          —Options
      vested
                          
                          
                          —
                          
                          
                          
                          —Non-vested
      at end of period
                          
                          
                          —
                          
                          
                          $
                          —





Three-month period endedAll Options
                        
                        September 30, 2008Weighted AverageShares
                        
                        
                        Exercise PriceOutstanding
      at beginning of period
                        
                        
                        425,000
                        
                        
                        $
                        5.22Options
      granted
                        
                        
                        —
                        
                        
                        
                        —Options
      forfeited
                        
                        
                        —
                        
                        
                        
                        —Options
      expired
                        
                        
                        —
                        
                        
                        
                        —Options
      exercised
                        
                        
                        —
                        
                        
                        
                        —Outstanding
      at end of period
                        
                        
                        425,000
                        
                        
                        $
                        5.22Exercisable
      at end of period
                        
                        
                        408,334
                        
                        
                        $
                        5.22





Three-month period endedNon-vested Options
                        
                        September 30, 2008Weighted AverageShares
                        
                        
                        Exercise PriceNon-vested
      at beginning of period
                        
                        
                        16,666
                        
                        
                        $
                        5.40Options
      granted
                        
                        
                        —
                        
                        
                        
                        —Options
      forfeited
                        
                        
                        —
                        
                        
                        
                        —Options
      expired
                        
                        
                        —
                        
                        
                        
                        —Options
      vested
                        
                        
                        —
                        
                        
                        
                        —Non-vested
      at end of period
                        
                        
                        16,666
                        
                        
                        $
                        5.40





The
weighted average remaining contractual lives of the options outstanding and
options exercisable at September 30, 2009, were 2.2 years and
2.2 years, respectively.





We
recorded $0 and $6,000 of compensation expense for employee and non-employee
stock options during the three-month period ending September 30, 2009 and 2008,
respectively. At September 30, 2009 there was no unrecognized compensation costs
related to non-vested share-based compensation arrangements under the 2006
Plan.




14




Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements (Continued)


September
30, 2009


(Unaudited)





Note
5. Related Party Transactions





On March
15, 2006, we entered into a two-year agreement with Orchestra Finance, LLP
(“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 January 1, 2008, we extended the agreement on a month-to-month basis. On
August 11, 2008, we renewed the agreement for two years retroactive to January
1, 2008. On August 11, 2008, we issued 830,769 common shares valued at $215,000
for finance placement fees to Orchestra related to services for equity, debt,
acquisition and divestiture transactions. On September 24, 2009, Orchestra
advanced us $30,000 as a demand note payable bearing interest at the rate of 6%
per annum. As of September 30, 2009 we reported $78,000 due to
Orchestra.





On
September 2 and 3, 2008, our principal shareholder, Orchestra, involuntary sold
59,000 common shares as result of a broker margin call. On September 23, 2008,
Orchestra remitted $4,000 to us which represented the profit on the short swing
sale or our common stock.





We paid
$0 in cash for legal services to a law firm, during the three months ended
September 30, 2009, at which a director of ours is a shareholder. As of
September 30, 2009, we reported $84,000 due to this same firm for legal
services.





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





Note
6. Contingencies and Commitments





Legal Proceedings





On August
20, 2009, Lucy Rasmussen filed a lawsuit against the Company for non-payment of
a $500,000 note payable that was due on February 15, 2008. The Company had been
and will continue to attempt to negotiate a reasonable settlement, including an
extension to this note. This note plus accrued interest is included in current
liabilities in the accompanying Consolidated Balance Sheet.





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 except as set forth above, 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.




15




Item
2. Management’s
Discussion and Analysis of 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 and in conjunction with our 2009 annual report on Form 10-K. This report
contains forward-looking statements. Forward-looking statements are statements
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. Our future
results may differ from those currently anticipated, depending on a variety of
factors including those described under “Risk Factors” and our filings with the
Securities & Exchange Commission. We disclaim any obligation to update
forward-looking statements





We are a
multi-industry holding company that is currently in the development stage. We,
through our wholly-owned subsidiary, are owners of land and mineral rights. Our
primarily focus until January 24, 2008 was on the transportation and disposal of
non-hazardous solid waste as well as the transportation of other commodities.
Subsequent to January 24, 2008 and until March 31, 2009 we were providing
limited rail-based transportation of commodities through our MNJ subsidiary. We
had, until January 24, 2008, been pursuing a growth strategy through
acquisitions of assets, properties and access rights that can be combined and
strategic relationships with those companies that focus on waste by rail
services, rail transportation logistics, and disposal options, including
landfill management. We are currently re-evaluating our strategy and we are
focusing on evaluating the best business approach to monetizing some land,
mineral and mineral rights assets that we acquired to generate liquidity to fund
future business activity.





Background
and Corporate History





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. (“Kingsley”), 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 sold 25,838,433 pre-split shares of our common stock to one of
our Directors in a private transaction for $200,000, which proceeds were used to
pay off the promissory note issued previously to Kingsley Capital, and our
controlling affiliates sold an additional 19,161,567 pre-split shares of our
common stock to one of our Directors 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 rail-based transportation and solid waste
management industries. Most of our activities during the period from March 3,
2005 to September 30, 2008 were dedicated to seeking acquisition targets with
viable on-going operations, or acquisition of assets, properties and access
rights that could be most synergistically combined and allow us to begin
operations.





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
transportation and 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
South-Central Ohio, a portion of which land we intended to permit for solid
waste landfill and other industrial uses. The property principally contains
coal, clay and limestone. We were only beginning the permitting process, and
could not estimate when operational use of the property would begin. In addition
to permits, the site will require significant infrastructure improvements, which
we were evaluating. Subsequent to the acquisition, E-Rail assigned the Belville
shares to Chartwell so that Belville is functioning as one of our direct
subsidiaries.





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”). We surrendered
the corporate charter of E-Rail on August 2, 2006.





On April
26, 2006, we completed the acquisition of Cranberry Creek Railroad, Inc.
(“Cranberry Creek”), a New Jersey corporation including its wholly-owned
subsidiary, Middletown and New Jersey Railway Company, Inc. (“MNJ”), that owns
and operates a regional short-line railroad in Middletown, New York. MNJ owned
and operates a regional short-line railroad headquartered and based in
Middletown, New York. MNJ’s operations were limited and we had begun capital
improvements and were 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.





On May
12, 2006, in an effort to further simplify our corporate structure, we assigned
all the assets and liabilities of Cranberry Creek to MNJ. We surrendered the
corporate charter of Cranberry Creek on November 15, 2006.




16




On August
29, 2006, our wholly-owned subsidiaries, Hudson and Hudson Logistics Loading,
Inc. (“HLL”) completed the acquisition of certain agreements from Steel Wheels
Transport, LLC and Team G Loading, LLC, that they respectively held with New
York and Greenwood Lake Railway Company, Inc. (“Greenwood”). One agreement was a
Facility Capacity Agreement, which granted Hudson the right to utilize a
guaranteed amount of capacity at Greenwood’s railroad at Dundee Yard in Passaic,
New Jersey. The other agreement was a Railroad Car Loading Agreement, which
granted HLL the exclusive right to perform loading of bulk materials primarily
consisting of construction and demolition debris to railcars at Greenwood’s
railroad at Dundee Yard. As consideration for the assignment and assumption of
these agreements Hudson and HLL paid an aggregate of $1,475,000. Additionally,
we incurred approximately $34,000 in legal fees bringing our capitalized cost of
these agreements to $1,509,000. We further agreed to either pay off or assume
certain equipment loans and leases.





We
acquired the Capacity and Loading agreements as part of our strategy to offer
rail-based solid waste transportation and disposal services. Our initial plans
for this location were to operate as a transload facility to attract truckers
hauling construction and demolition debris to our site, where we then load the
debris onto railway cars and ship the debris to landfill sites in Ohio owned and
operated by third party providers. We began transload activities on this site on
September 11, 2006.





On
January 24, 2008, our wholly-owned subsidiaries Hudson and HLL entered into an
Amended and Restated Purchase Agreement with Perry New Jersey, LLC for the sale
of substantially all of their assets to Perry New Jersey I, LLC for cash
consideration of $1,700,000, subject to a $803,594 holdback, and assumption by
Perry of certain debts and leases of Hudson and HLL. This transaction closed on
January 24, 2008. As a result of the asset sale we no longer had rail-based
solid waste transportations operations. We assigned remaining assets and
liabilities of Hudson and HLL to Chartwell International, Inc. and surrendered
the corporate charters of HLL and Hudson on May 30, 2008 and September 19, 2008,
respectively.





On March
31, 2009 we and our wholly-owned subsidiary, MNJ, entered into a definitive
Agreement for Sale and Purchase of Business Assets with Middletown & New
Jersey Railroad, LLC, a Delaware limited liability company (“Buyer”). Under the
terms of the agreement, we agreed to sell substantially all of MNJ’s assets used
in connection with operating our railroad freight transportation business
serving central Orange County in Middletown, New York. The purchase price was
$386,900 and the assumption by Buyer of certain liabilities. On April 6, 2009,
we and MNJ consummated the sale. The purchase price was deposited into an escrow
account subject to the following release conditions: (a) $356,900 to be released
to us upon our providing Buyer with a title report and title insurance, and (b)
$30,000 to be released to us upon resolution of certain real property matters.
Between March 31, 2009 and April 6, 2009 we did not have any operations in MNJ.
Based on this transaction we no longer had any active operations in rail
transportation. We in the process of selling off the remaining MNJ land holdings
that were not connected with MNJ’s rail transportation business. We anticipate
that substantially all of our MNJ land holdings will be sold within the next 6
months.





Effective
April 1, 2009, in our efforts to reduce operating costs, the limited operations
of our subsidiaries Greater Hudson Resources, Inc. and Greater Ohio Resources,
Inc. were terminated, all the assets and liabilities of both entities were
assigned to Chartwell International, Inc., and their corporate charters were
surrendered on May 12, 2009 and May 19, 2009, respectively.





On June
15, 2009 we assigned all the remaining assets and liabilities of MNJ to
Chartwell International, Inc. We surrendered the corporate charter of MNJ on
October 5, 2009.





We are
considering all available options to best address our immediate needs, including
less desirable options like the sale of certain assets at discounted values,
bankruptcy proceedings or voluntary dissolution.





Critical
Accounting Policies and Estimates





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





Revenue Recognition. We
generated limited revenue from rail transportation until March 31, 2009 and we
recognized revenue on the completion of transportation across our short line
railroad. Our credit terms were generally 15 to 30 days. We did not maintain a
reserve for rail transportation revenue as we had one customer and we had not
incurred any losses since we began generating revenue in February
2006.





Stock Based Compensation. FASB ASC
Topic 718 Compensation — Stock
Compensation,or ASC 718,requires companies to
estimate the fair value of share-based payment awards on the date of grant using
an option-pricing model. 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 and the number of shares of
common stock issuable from convertible securities, or 1,130,247 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).




17




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 requisite service life on a straight line
basis.





Impairment of Long-Term
Assets. We assess the recoverability of long-lived assets at least
annually or whenever adverse events or changes in circumstances indicate that
impairment may have occurred in accordance with FASB ASC Topic 360-10, Property, Plant, and Equipment,
Impairment or Disposal of Long-Lived Assets, or ASC 360-10. In the event
that facts and circumstances indicate that the carrying value of long-term
assets may be impaired, an evaluation of recoverability would be performed. If
an evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the asset’s carrying amount to
determine if a write-down to market value or discounted cash flow value is
required. The write-down, if any, would be charged to operations in the period
that impairment was identified. During the quarters ended December 31, 2007,
March 31, 2008, December 31, 2008, June 30, 2009 and September 30, 2009 our
management identified certain railroad equipment assets, and, land and related
infrastructure associated with our MNJ and Belville subsidiaries that were not
being used in current operations and evaluated the market value of these assets.
We determined the value of these assets had been impaired in comparison to
prices for similar assets and we recorded write-downs totaling $3,150,000
($894,000 at December 31, 2007, $1,361,000 at March 31, 2008, $470,000 at
December 31, 2008, $302,000 at June 30, 2009 and $123,000 at September 30, 2009)
based on our estimates of their market value. These write-downs were included in
general and administrative expenses on the Consolidated Statement of
Operations.





Results
of Operations





Comparison
of the Three Months Ended September 30, 2009 and September 30, 2008





We
reported a net loss for the three months ended September 30, 2009 of $295,000 or
$0.03 per share on a basic and diluted basis as compared to a loss of $557,000
or $0.07 per share on a basic and diluted basis for the three months ended
September 30, 2008. The decrease in the loss was primarily due to cessation of
operations at our MNJ unit and a reduction in corporate overhead.





Revenues





We had no
revenues for the three months ended September 30, 2009 as we had no active
operations. We recorded revenue of $58,000 consisting primarily of rail
transportation income from MNJ during the three-month period ended September 30,
2008. The decline in our revenue during the current period was the result of the
sale of the railroad assets of MNJ on April 6, 2009.





Cost
of Revenues





We had no
cost of revenues for the three months ended September 30, 2009 as we had no
active operations. We had no cost of revenue for the three months ended
September 30, 2008 as there was no cost of revenue associated with our rail
transportation income.





Gross
Profit (Loss)





We
incurred no gross profit for the three months ended September 30, 2009 as we had
no active operations. We had a gross profit of $58,000 for the three months
ended September 30, 2008 from our rail transportation operations for which there
were no cost of revenue.





General
and Administrative Expenses





General
and administrative expenses decreased by $66,000 to $220,000 for the three-month
period ended September 30, 2009 from $286,000 for the three-month period ended
September 30, 2008. This decrease was primarily due to the sale of the
operational assets of MNJ on April 6, 2009. General and administrative expenses
during the current period other than the impairment of a minority investment in
a land development company of $123,000 consisted primarily of the
following:





•
            salaries
      and employee expenses of $20,000





•
            rents,
      utilities, telephone and office related expenses of
  $5,000




18




•
            professional
      fees of $23,000





•
            investment
      and management consulting fees of
$30,000





•
            travel
      expenses of $8,000





General
and administrative expenses during the three-month period ended September 30,
2008 consisted primarily of the following:





•
            salaries
      and employee expenses of $86,000





•
            engineering
      and other consulting services of
$4,000





•
            rents,
      utilities, telephone and office related expenses of
  $10,000





•
            professional
      fees of $56,000





•
            investment
      and management consulting fees of
$30,000





•
            travel
      expenses of $9,000





•
            depreciation
      and amortization expense of $8,000.





Loss from
operations for the three-month period ended September 30, 2008 also includes
financing fees of $215,000 for services provided in connection with equity,
debt, acquisition and divestiture transactions.





Other
Income and Expenses





Other
expenses consisting primarily of net interest expenses decreased by $39,000 to
$75,000 for the three-month period ended September 30, 2009 from $114,000 for
the three-month period ended September 30, 2008. Net interest expenses declined
due to reduction in notes payable that occurred during the fiscal year ended
June 30, 2009.





Income
Tax Provision





We have
incurred operating losses for the reporting periods. Full reserves are provided
for the related deferred tax asset.





Liquidity
and Capital Resources




At
September 30, 2009, we had working capital deficiency of $2,496,000. We recorded
a loss for the three-month period ended September 30, 2009 of $295,000 and we
have accumulated losses from inception on March 3, 2005 of $15,856,000. Given
our September 30, 2009 cash balance of $14,000 and our projected operating cash
requirements, we anticipate that our existing capital resources may not be
adequate to satisfy our cash flow requirements through December 31, 2009 and we
will be required to raise capital through debt or equity financings or sell,
dispose or liquidate certain of our assets to generate cash and reduce our short
term debt obligations. There are no assurances that any of these financing
alternatives will be available to us, or if available, on terms satisfactory to
us. If we are unable to raise additional capital or generate necessary working
capital from operations or through the sale of assets, our financial position
will be seriously and adversely affected.





The
following is a summary discussion of our cash flow as of September 30,
2009:





Cash
decreased by $5,000 for the three months ended September 30, 2009 from $19,000
at June 30, 2009 to $14,000.





We
reported cash flow used in operations of $51,000 consisting primarily of our
loss of $295,000, and partially offset by increases in accounts payable and
accrued liabilities and amounts due to related parties of $116,000 and an asset
impairment charge of $123,000.





Cash
provided by in investing activities consisted of a reduction in long-term
deposits of $9,000





Cash
provided by financing activities consisted of proceeds from the sale of common
stock of $37,000.





Our
long-term debt includes approximately $2,170,000 of principal payments and
accrued interest expenses that are due within the next year. We cannot be sure
that our future working capital or cash flows will be sufficient to meet our
debt obligations and commitments. Any insufficiency and failure by us to
renegotiate such existing debt obligations and commitments would have a negative
impact on our business and financial condition, and may result in legal claims
by our creditors. 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 sell or
liquidate 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 may be able
to foreclose on our assets or force us into bankruptcy proceedings or
involuntary receivership.




19




Off-Balance
Sheet Transactions





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.





Item
3. Quantitative and
Qualitative Disclosures About Market Risk.





Not
Applicable.





Item
4T. Controls and
Procedures.





Our management with the participation
and under the supervision of our Principal Executive Officer 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) 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 not effective as of the end
of the first quarter of fiscal 2010 and that material weaknesses exist in our
internal control structure, due in particular to the lack of appropriate
resources dedicated to external financial reporting.





There
were no changes in our internal controls over financial reporting that occurred
during the three months ended September 30, 2009 that have materially affected,
or are reasonably likely to materially affect, our internal controls over
financial reporting.





PART
II. OTHER INFORMATION





Item
1. Legal
Proceedings.





On August
20, 2009, Lucy Rasmussen filed a lawsuit against us in the Orange County
Superior Court of the State of New York, Case No. 2009-10054,
for non-payment of a $500,000 note payable that became due on February 15, 2008.
The relief sought includes note principal, note interest from February 15, 2008
forward, legal fees and other costs associated with the collection of the note.
We have been and will continue to attempt to negotiate a reasonable settlement,
including an extension to this note. This note including accrued interest is
included in Notes payable reported as a current liability on our accompanying
balance sheet.





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 except as set forth above, there are no currently
pending actions nor threatened actions that management believes would have a
significant material impact on our financial position, results of operations or
cash flows.





Item
1A. Risk
Factors.




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.





We may be unable to afford ongoing
administration and reporting. Our ability to continue administrative
functions and preparation of SEC reports, including payment of our auditors and
advisors, will be limited if we do not generate sufficient working capital
through financing activities or the sale of assets. If we are unable to pay the
expenses associated with such reporting activities, we will be at risk of losing
our OTCBB listing, and will be delinquent in our filings with the SEC. Either or
both of the forgoing adverse outcomes will have an impact on the market for our
shares, and potentially on our long term survival.





We may be unable to execute our
acquisition growth strategy. Our ability to execute our growth strategy
depends in part on our ability to identify and acquire desirable acquisition
candidates. The consolidation of our operations with the operations of acquired
companies, including the consolidation of systems, procedures, personnel and
facilities, the relocation of staff, and the achievement of anticipated cost
savings, economies of scale and other business efficiencies, may present
significant challenges to our management, particularly if several acquisitions
occur at the same time. In short, we cannot be assured that: desirable
acquisition candidates exist or will be identified, we will be able to acquire
any of the candidates identified, we will effectively consolidate companies
which are acquired and fully or timely realize the expected cost savings,
economies of scale or business efficiencies, or any acquisitions will be
profitable or accretive to our earnings.




20




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 including, our directors, senior management and other key
personnel as wells as board of director members. The loss of the services of any
of these key personnel could have a material adverse effect on our business and
financial results. Our failure to attract and retain qualified personnel could
have a material adverse effect on our business and financial
condition.




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. 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 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 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.




Additional factors may negatively
impact our acquisition growth strategy. Our acquisition strategy may
require spending significant amounts of capital. If we are unable to obtain
needed financing on acceptable terms, we may need to reduce the scope of our
acquisition growth strategy, which could have a material adverse effect on our
growth prospects. The intense competition among our potential competitors
pursuing the same acquisition candidates may increase purchase prices for
acquisitions and increase our capital requirements and/or prevent us from
acquiring certain acquisition candidates. If any of the aforementioned factors
force us to alter our growth strategy, our financial condition, results of
operations and growth prospects could be adversely affected.




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. 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.




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.




Our planned mining operations are
inherently subject to conditions that could affect levels of production and
production costs at particular mines for varying lengths of time and could
reduce our profitability. Although we have no currently planned coal
mining operations, planning those operations are subject to conditions or events
beyond our control that could disrupt operations, affect production and increase
the cost of mining for varying lengths of time and negatively affect our
profitability. These conditions or events include, (i) unplanned equipment
failures, which could interrupt production and require us to expend significant
sums to repair our capital equipment that we would use to remove the soil that
overlies coal deposits; (ii) geological conditions, such as variations in the
quality of the coal produced from a particular seam, variations in the thickness
of coal seams and variations in the amounts of rock and other natural materials
that overlie the coal that we are mining; (iii) unexpected delays and
difficulties in acquiring, maintaining or renewing necessary permits or mining
or surface rights; (iv) unavailability of mining equipment and supplies and
increases in the price of mining equipment and supplies; (v) shortage of
qualified labor and a significant rise in labor costs; (vi) fluctuations in the
cost of industrial supplies, including steel-based supplies, natural gas, diesel
fuel and oil; (vii) unexpected or accidental surface subsidence from underground
mining; (viii) accidental mine water discharges, fires, explosions or similar
mining accidents; (ix) regulatory issues involving the plugging of and mining
through oil and gas wells that penetrate the coal seams we mine; and (x) adverse
weather conditions and natural disasters, such as heavy rains and flooding. If
any of these conditions or events occur in the future at any of our mining
complexes, our cost of mining and any delay or halt of production either
permanently or for varying lengths of time could adversely affect our operating
results.




21




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. We are responsible under federal and state regulations for the
ultimate reclamation of the mines we operate. In some cases, the previous mine
operators have assumed these liabilities by contract and have posted bonds or
have funded escrows to secure their obligations. We estimate our future
liabilities for reclamation and other mine-closing costs from time to time based
on a variety of assumptions. If our assumptions are incorrect, we could be
required in future periods to spend more on reclamation and mine-closing
activities than we currently estimate, which could harm our profitability.
Likewise, if previous mine operators default on the unfunded portion of their
contractual obligations to pay for reclamation, we could be forced to make these
expenditures ourselves and the cost of reclamation could exceed any amount we
might recover in litigation, which would also increase our costs and reduce our
profitability.




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. We conduct some
of our mining operations on properties that we lease. A title defect or the loss
of any lease could adversely affect our ability to mine the associated reserves.
Because title to most of our leased properties and mineral rights is not usually
verified until we make a commitment to develop a property, which may not occur
until after we have obtained necessary permits and completed exploration of the
property, our right to mine some of our reserves may, in the future, be
adversely affected if defects in title or boundaries exist. In order to obtain
leases or mining contracts to conduct our mining operations on property where
these defects exist, we may in the future have to incur unanticipated costs. In
addition, we may not be able to successfully negotiate new leases or mining
contracts for properties containing additional reserves or maintain our
leasehold interests in properties where we have not commenced mining operations
during the term of the lease.





Estimates of proven and probable
reserves are subject to considerable uncertainty. Such estimates are, to
a large extent, based on interpretations of geologic data obtained from drill
holes and other sampling techniques. We use feasibility studies to derive
estimates of capital and operating costs based upon anticipated tonnage and
grades of minerals to be mined and processed, the costs of comparable
facilities, the costs of operating and processing equipment and other factors.
Actual operating costs and economic returns on projects may differ significantly
from original estimates. Further, it may take many years from the initial phase
of exploration before production is possible and, during that time, the economic
feasibility of exploiting a discovery may change.




We may not be able to raise
sufficient capital or generate sufficient cash flow to meet our debt service
requirements. As of September 30, 2009, we had indebtedness of $5,022,000
of which $2,170,000 is due in less than one year. We cannot be assured 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 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.




22




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. During the last several years, the U.S. coal industry has
experienced increased consolidation, which has contributed to the industry
becoming more competitive. According to the NMA, the top ten coal producers in
1994 accounted for approximately 45% of total domestic coal production. By 2004,
however, the top ten coal producers’ share had increased to approximately 69% of
total domestic coal production. Consequently, some of our competitors in the
domestic coal industry are major coal producers who have greater financial
resources than we do. The intense competition among coal producers may impact
our ability to retain or attract customers and may, therefore, adversely affect
our future revenue and profitability. Recent increases in coal prices could
encourage the development of expanded coal producing capacity in the United
States. Any resulting overcapacity from existing or new competitors could reduce
coal prices and, therefore, our revenue.




We may be unable to obtain and renew
permits necessary for our operations, which would reduce our production, cash
flow and profitability. Mining companies must obtain numerous permits
that strictly regulate environmental and health and safety matters in connection
with mining, including permits issued by various federal and state agencies and
regulatory bodies. We believe that we are in the process of obtaining the
necessary permits to mine our developed reserves at our mining complexes.
However, as we commence mining our undeveloped reserves, we will need to apply
for and obtain the required permits. The permitting rules are complex and change
frequently, making our ability to comply with the applicable requirements more
difficult or even impossible, thereby precluding continuing or future mining
operations. Private individuals and the public at large have certain rights to
comment on and otherwise engage in the permitting process, including through
intervention in the courts. Accordingly, the permits we need for our mining
operations may not be issued, or, if issued, may not be issued in a timely
fashion, or may involve requirements that may be changed or interpreted in a
manner which restricts our ability to conduct our mining operations or to do so
profitably. An inability to conduct our mining operations pursuant to applicable
permits would reduce our production, cash flow and profitability.





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





On August
7, 2009 and August 21, 2009, we issued 1,000,000 and 1,500,000 shares of common
stock, respectively, to accredited private investors for cash at $0.015 per
share for a total of $37,500. These unregistered shares were issued in reliance
upon Rule 506 of the Securities Act.





Item
3. Defaults Upon
Senior Securities.





We are
currently in default on a Convertible Promissory Note in the principal amount of
$500,000 issued in favor of the Estate of Pierre T. Rasmussen. The outstanding
balance of the note was due on February 15, 2008. We did not make this final
payment and on August 20, 2009, Lucy Rasmussen, the trustee, filed a lawsuit
against us in the Orange County Superior Court of the State of New York for
non-payment of the note. We are currently in negotiations to restructure the
note. The outstanding unpaid principal balance and accrued interest as of
September 30, 2009 is $566,000.





We are
currently in default on two promissory notes that we assumed as part of our
acquisition of Belville. We are currently in negotiations to restructure the
notes. The outstanding unpaid principal balances and accrued interest as of
September 30, 2009 is $575,000.




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





None





Item
5. Other
Information





None





Item
6. Exhibits.





31.1
              
              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




23




SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.





CHARTWELL
      INTERNATIONAL, INC.
                  (Registrant)Date:
      November 20, 2009
                By:
                /s/
      Imre EszenyiImre
      Eszenyi, Acting President and Chairman of
                  the
      Board(Principal
      Executive Officer)Date:
      November 20, 2009
                By:
                /s/
      Paul BiberkrautPaul
      Biberkraut, Chief Financial and
                  Administrative
      Officer(Principal
      Financial Officer and
                  Principal
      Accounting Officer)




24




Exhibit
Index





31.1
              
              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




25