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 December 31, 2009





o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 f





For
the transition period from
to





Commission
File No. 000-51342





CHARTWELL
INTERNATIONAL, INC.


(Exact
name of small business issuer as specified in its charter)





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





7637
Leesburg Pike


Falls
Church, Virginia 22043


(Address
of Principal Executive Offices)





(703) 635-7980


(Issuer’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.        
Yes         þ      
No        ̈




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
March 15, 2010 the Registrant had 11,994,013 outstanding shares of common stock,
$0.001 par value per share.








CHARTWELL
INTERNATIONAL, INC.


FORM
10-Q


DECEMBER
31, 2009


INDEX





PAGEPart
      I. FINANCIAL INFORMATIONItem
      1. Financial Statements
                      
                      
                      3Consolidated
      Balance Sheets (Unaudited) at December 31, 2009 and June 30,
      2009
                      
                      
                      3Consolidated
      Statements of Stockholders’ Equity (Deficiency) at December 31, 2009
      (Unaudited)
                      
                      
                      4Consolidated
      Statements of Operations (Unaudited) for the three and six months ended
      December 31, 2009 and 2008, and, from inception on March 3, 2005 to
      December 31, 2009
                      
                      
                      5Consolidated
      Statements of Cash Flows (Unaudited) for the six months ended December 31,
      2009 and 2008, and, from inception on March 3, 2005 to December 31,
      2009
                      
                      
                      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
                      
                      
                      21Item
      4. Controls and Procedures
                      
                      
                      21Part
      II. OTHER INFORMATION
                      
                      
                      21Item
      1. Legal Proceedings
                      
                      
                      22Item
      1A. Risk Factors
                      
                      
                      22Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                      
                      
                      25Item
      3. Defaults Upon Senior Securities
                      
                      
                      25Item
      4. Submission of Matters to a Vote of Security Holders
                      
                      
                      25Item
      5. Other Information
                      
                      
                      25Item
      6. Exhibits
                      
                      
                      25Signatures
                      
                      
                      26Exhibit
      Index
                      
                      
                      27


2





PART 1. FINANCIAL INFORMATION


Item 1.Financial
Statements


Chartwell
International, Inc.


(A
Development Stage Company)


Consolidated
Balance Sheets


(In
thousands)


December 31,
                          
                          
                          June 30,30,2009
                          
                          
                          2009(Unaudited)AssetsCurrent
      AssetsCash
                          
                          $
                          -
                          
                          
                          $
                          19Prepaid
      expense and other
                          
                          
                          1
                          
                          
                          
                          6Total
      current assets
                          
                          
                          1
                          
                          
                          
                          25Long-term
      AssetsProperty
      and equipment, net
                          
                          
                          -
                          
                          
                          
                          -Land
                          
                          
                          728
                          
                          
                          
                          728Mineral
      rights
                          
                          
                          1,000
                          
                          
                          
                          5,447Investment,
      at cost
                          
                          
                          -
                          
                          
                          
                          123Other
                          
                          
                          -
                          
                          
                          
                          9Total
      long-term assets
                          
                          
                          1,728
                          
                          
                          
                          6,307Total
      Assets
                          
                          $
                          1,729
                          
                          
                          $
                          6,332Liabilities
      and Stockholders’ Equity (Deficit)Current
      LiabilitiesAccounts
      payable and accrued liabilities
                          
                          $
                          281
                          
                          
                          $
                          201Due
      to related parties
                          
                          
                          152
                          
                          
                          
                          100Notes
      payable
                          
                          
                          3,733
                          
                          
                          
                          2,137Total
      current liabilities
                          
                          
                          4,166
                          
                          
                          
                          2,438Long-term
      LiabilitiesNotes
      payable, net of current portion
                          
                          
                          1,364
                          
                          
                          
                          2,809Total
      long-term liabilities
                          
                          
                          1,364
                          
                          
                          
                          2,809Total
      Liabilities
                          
                          
                          5,530
                          
                          
                          
                          5,247Commitments
      and ContingenciesStockholders’
      Equity (Deficit)Preferred
      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 December 31, 2009 and June 30, 2009,
      respectively
                          
                          
                          12
                          
                          
                          
                          9Additional
      paid in capital
                          
                          
                          14,671
                          
                          
                          
                          14,637Accumulated
      deficit
                          
                          
                          (20,484
                          )
                          
                          
                          (15,561
                          )Total
      stockholders’ equity (deficit)
                          
                          
                          (3,801
                          )
                          
                          
                          1,085Total
      Liabilities and Stockholder’s Equity (Deficit)
                          
                          $
                          1,729
                          
                          
                          $
                          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 (Deficit)


(in
thousands)


(Unaudited)





Preferred
                      
                      
                      Preferred
                      
                      
                      Common
                      
                      
                      Common
                      
                      
                      Additional
                      
                      
                      
                      
                      
                      Total
                        Stockholders'Stock
                      
                      
                      Stock
                      
                      
                      Stock
                      
                      
                      Stock
                      
                      
                      Paid-in
                      
                      
                      Accumulated
                      
                      
                      EquityShares
                      
                      
                      $
                      
                      
                      Shares
                      
                      
                      $
                      
                      
                      Capital
                      
                      
                      Deficit
                      
                      
                      (Deficit)Balance,
      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 December 31, 2009
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (4,923
                      )
                      
                      
                      (4,923
                      )Balance,
      December 31, 2009
                      
                      
                      2
                      
                      
                      $
                      2,000
                      
                      
                      
                      11,994
                      
                      
                      $
                      12
                      
                      
                      $
                      14,671
                      
                      
                      $
                      (20,484
                      )
                      
                      $
                      (3,801
                      )





(See
accompanying notes to 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
                    
                    
                    For the six
                    
                    
                    For the six
                    
                    
                    from March 3,months ended
                    
                    
                    months ended
                    
                    
                    months ended
                    
                    
                    months ended
                    
                    
                    2005, InceptionDecember 31,
                    
                    
                    December 31,
                    
                    
                    December 31,
                    
                    
                    December 31,
                    
                    
                    to December2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008
                    
                    
                    31, 2009Revenues
                    
                    $
                    -
                    
                    
                    $
                    36
                    
                    
                    $
                    -
                    
                    
                    $
                    94
                    
                    
                    $
                    10,041Cost
      of revenues
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    9,221Gross
      profit (loss)
                    
                    
                    -
                    
                    
                    
                    36
                    
                    
                    
                    -
                    
                    
                    
                    94
                    
                    
                    
                    820General
      and administrative expenses
                    
                    
                    105
                    
                    
                    
                    201
                    
                    
                    
                    202
                    
                    
                    
                    487
                    
                    
                    
                    10.645Impairments
      to asset value
                    
                    
                    4.447
                    
                    
                    
                    470
                    
                    
                    
                    4,570
                    
                    
                    
                    470
                    
                    
                    
                    7,596Loss
      (gain) on sale of property and equipment
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    430Loss(gain)
      on sale of capacity and loading rights
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (147
                    )Finance
      placement fees
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    216
                    
                    
                    
                    1,336Loss
      from operations
                    
                    
                    (4,552
                    )
                    
                    
                    (635
                    )
                    
                    
                    (4,772
                    )
                    
                    
                    (1,079
                    )
                    
                    
                    (19,040
                    )Other
      income (expense)Interest,
      net
                    
                    
                    (76
                    )
                    
                    
                    (110
                    )
                    
                    
                    (151
                    )
                    
                    
                    (224
                    )
                    
                    
                    (1,698
                    )Gains
      on notes settlements
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    254Total
      other income (expense)
                    
                    
                    (76
                    )
                    
                    
                    (110
                    )
                    
                    
                    (151
                    )
                    
                    
                    (224
                    )
                    
                    
                    (1,444
                    )Loss
      before income tax provision
                    
                    
                    (4,628
                    )
                    
                    
                    (745
                    )
                    
                    
                    (4,923
                    )
                    
                    
                    (1,303
                    )
                    
                    
                    (20,484
                    )Income
      tax provision
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Net
      loss
                    
                    $
                    (4,628
                    )
                    
                    $
                    (745
                    )
                    
                    $
                    (4,923
                    )
                    
                    $
                    (1,303
                    )
                    
                    $
                    (20,484
                    )Net
      loss per common share,basic
      and diluted
                    
                    $
                    (0.39
                    )
                    
                    $
                    (0.09
                    )
                    
                    $
                    (0.43
                    )
                    
                    $
                    (0.17
                    )
                    
                    $
                    (2.72
                    )Weighted
      average number of common shares outstanding,basic
      and diluted
                    
                    
                    11,994
                    
                    
                    
                    8,144
                    
                    
                    
                    11,339
                    
                    
                    
                    7,888
                    
                    
                    
                    7,521





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 six
                
                
                For the six
                
                
                from March 3,months ended
                
                
                months ended
                
                
                2005, InceptionDecember 31,
                
                
                December 31,
                
                
                to December 31,2009
                
                
                2008
                
                
                2009Cash
      flows from operating activitiesNet
      loss
                
                $
                (4,923
                )
                
                $
                (1,303
                )
                
                $
                (20,48462
                )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activitiesDepreciation
      and amortization
                
                
                —
                
                
                
                16
                
                
                
                597Impairment
      of asset value
                
                
                4,570
                
                
                
                470
                
                
                
                7,597Loss 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
                
                
                —
                
                
                
                12
                
                
                
                455Fair
      value of common stock issued for services
                
                
                —
                
                
                
                291
                
                
                
                2,109Increase
      (decrease) in cash from changes in assets and
    liabilitiesAccounts
      receivable
                
                
                —
                
                
                
                9
                
                
                
                2Deposits
                
                
                —
                
                
                
                391
                
                
                
                —Prepaid
      and other
                
                
                5
                
                
                
                (5
                )
                
                
                (1
                )Accounts
      payable and accrued liabilities
                
                
                231
                
                
                
                193
                
                
                
                1,097Due
      to related parties
                
                
                52
                
                
                
                60
                
                
                
                152Net
      cash (used in)provided by operating activities
                
                
                (65
                )
                
                
                134
                
                
                
                (8,447
                )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
                
                
                —
                
                
                
                (319
                )
                
                
                (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
                
                
                
                (315
                )
                
                
                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 six
                  
                  
                  For the six
                  
                  
                  from March 3,months ended
                  
                  
                  months ended
                  
                  
                  2005, InceptionDecember 31,
                  
                  
                  December 31,
                  
                  
                  to December 31,2009
                  
                  
                  2008
                  
                  
                  2009Netdecrease in
      cash
                  
                  
                  (19
                  )
                  
                  
                  (181
                  )
                  
                  
                  —Cash
      and cash equivalents, beginning of period
                  
                  
                  19
                  
                  
                  
                  182
                  
                  
                  
                  —Cash
      and cash equivalents, end of period
                  
                  $
                  —
                  
                  
                  $
                  1
                  
                  
                  $
                  —Supplemental
      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
                  
                  $
                  (151
                  )
                  
                  $
                  (125
                  )
                  
                  $
                  (855
                  )


See
accompanying notes to unaudited interim consolidated financial
statements


7


Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements


December
31, 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 and six month
periods ended December 31, 2009 and the operating results from inception on
March 3, 2005 through December 31, 2009 are not necessarily indicative of
the results that may be expected for the year ended 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 December 31,
2009 through the date of this report, which represents the date the consolidated
financial statements were issued. During this period we are disclosing material
recognizable subsequent events as discussed in Note 7.





Principles
of Consolidation





The
consolidated financial statements as of December 31, 2009 and for the three and
six months ended December 31, 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 and six months ended December 31, 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,





8





Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements (Continued)


December
31, 2009


(Unaudited)





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





Impairment
of Long-Term Assets (continued)





2009,
September 30, 2009 and December 31, 2009 our management identified certain
railroad equipment assets, and, land, mineral rights and related infrastructure
associated with our MNJ and Belville subsidiaries 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 $7,597,000 ($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, $123,000 at September 30, 2009 and $4,447,000 at December 31,
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.





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
Codificationand the Hierarchy of Generally
Accepted Accounting Principles).ASC 105 establishes the FASB Accounting Standards
Codification(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)


December
31, 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.





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.





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 December 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)


December
31, 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 transportation 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 to 12
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 and
attempting to renegotiate the repayment terms.  On November 6 and 12,
2009 we received notices of default on the notes. We have been unable to cure
the defaults. We continue to accrue interest based on the existing interest
rates. As of December 31, 2009 the outstanding balances including accrued
interest were $1,063,000 of which $583,000 are due in one year or
less.


11


Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements (Continued)


December
31, 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
December 31, 2009, the balance of the note payable plus accrued interest was
$576,000 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. On November 20, 2009 we
received a notice of default on the note and we have not been able to cure the
default. At December 31, 2009, the balance of the note payable plus accrued
interest was $1,043,000 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. On November 24, 2009 we received a notice of
default on the note and we have not been able to cure the default. At December
31, 2009, the balance of the note payable plus accrued interest was $1,531,000
and reported in current 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 December 31, 2009, the balance of the notes payable plus accrued
interest was $311,000 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 December 31, 2009, the balance of the note payable plus accrued interest was
$572,000 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)


December
31, 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
$38,000.





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 1,130,433 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 six-month periods ended December 31, 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:





Six-month period endedAll Options
                
                December 31, 2009Weighted AverageShares
                
                Exercise PriceOutstanding
      at beginning of period
                
                
                425,000
                
                
                $
                5.22Options
      granted
                
                
                —
                
                
                
                —Options
      forfeited
                
                
                425,000
                
                
                
                5.22Options
      expired
                
                
                —
                
                
                
                —Options
      exercised
                
                
                —
                
                
                
                —Outstanding
      at end of period
                
                
                —
                
                
                $
                —Exercisable
      at end of period
                
                
                —
                
                
                $
                —


13





Chartwell
International, Inc.


Notes
to Interim Consolidated Financial Statements (Continued)


December
31, 2009


(Unaudited)





Note
4. Equity (continued)





Stock
Options (continued)





Six-month period endedDecember 31, 2009Weighted AverageNon-vested Options
                            
                            Shares
                            
                            ExercisePriceNon-vested
      at beginning of period
                            
                            
                            —
                            
                            
                            $
                            —Options
      granted
                            
                            
                            —
                            
                            
                            
                            —Options
      forfeited
                            
                            
                            —
                            
                            
                            
                            —Options
      expired
                            
                            
                            —
                            
                            
                            
                            —Options
      vested
                            
                            
                            —
                            
                            
                            
                            —Non-vested
      at end of period
                            
                            
                            —
                            
                            
                            $
                            —





Six-month period endedDecember 31, 2008Weighted AverageAll Options
                            
                            Shares
                            
                            ExercisePriceOutstanding
      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
                            
                            
                            408,333
                            
                            
                            $
                            5.22





Six-month period endedDecember 31, 2008Weighted AverageNon-vested Options
                            
                            Shares
                            
                            ExercisePriceNon-vested
      at beginning of period
                            
                            
                            16,667
                            
                            
                            $
                            5.40Options
      granted
                            
                            
                            —
                            
                            
                            
                            —Options
      forfeited
                            
                            
                            —
                            
                            
                            
                            —Options
      expired
                            
                            
                            —
                            
                            
                            
                            —Options
      vested
                            
                            
                            —
                            
                            
                            
                            —Non-vested
      at end of period
                            
                            
                            16,667
                            
                            
                            $
                            5.40





We
recorded $0 and $12,000 of compensation expense for employee and non-employee
stock options during the six-month periods ending December 31, 2009 and 2008,
respectively. At December 31, 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)


December
31, 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. The agreement with Orchestra has not been renewed after December 31,
2009. 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.  Beginning on September 24, 2009,
Orchestra has made a series of advances to us totaling $51,000 as a demand notes
payable bearing interest at the rate of 6% per annum. As of December 31, 2009 we
reported $152,000 due to Orchestra in the current liabilities section of the
Consolidated Balance Sheet





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 six months ended
December 31, 2009, at which a director of ours is a shareholder. On November 30,
2009, the law firm shareholder resigned as a director of our
company.





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 and is in default. 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.





Note
7. Subsequent Events





On February 5, 2010, our chief
financial and administrative officer and secretary to the board of directors
resigned. Due to the departure of our chief financial and administrative officer
and our inadequate financial resources we will not be able to file the required
periodic reports on a timely basis with the Securities and Exchange
Commission.


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





Overview





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 December 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 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 - 12
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.





On
November 13, 2009 we signed a letter of intent with Energy Resources Holdings,
LLC (“ERH”) whereby we would acquire ERH in exchange for an issuance of our
common shares that would represent between 85% and 90% of the our common stock
on a fully diluted basis in a reverse merger transaction. The letter of intent
includes a provision to spin-off of any remaining assets of BMC and MNJ as well
as the assumption or elimination of any remaining liabilities. Although we are
currently negotiating the terms of definitive agreements which include an
agreement and plan of merger, there are no assurances that we can successfully
complete the reverse merger and other related transactions.





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.


17





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 1,130,433 shares to
employees and directors. Stock option awards are granted with an exercise price
that is generally equal to or greater than the market price of our common stock
on the date of the grant. The options vest generally over a range of two to four
years and expire five years after the grant date. Stock options under the 2006
Plan provide for accelerated vesting if there is a change in control (as defined
by the 2006 Plan).





The fair
value of each stock option granted is estimated on the date of the grant using
the Black-Scholes option pricing model and factors in an estimated forfeiture
based on management assessment of historical employee termination experience as
well as estimates of future terminations where historical information is
limited. The Black-Scholes option pricing model has assumptions for risk free
interest rates, dividends, stock volatility and expected life of an option
grant. The risk free interest rate is based the U.S. Treasury Bill rate with a
maturity based on the expected life of the options and on the closest day to an
individual stock option grant. Dividend rates are based on our dividend history.
The stock volatility factor is based on up to the past three years of market
prices of our common stock. The expected life of an option grant is based on its
vesting period. The fair value of each option grant is recognized as
compensation expense over the 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, September 30, 2009 and
December 31, 2009 our management identified certain railroad equipment assets,
and, land, mineral rights 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 $7,597,000 ($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, $123,000 at September 30, 2009 and $4,447,000 at December 31, 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 December 31, 2009 and December 31, 2008





We
reported a net loss for the three months ended December 31, 2009 of $4,628,000
or $0.39 per share on a basic and diluted basis as compared to a loss of
$745,000 or $0.09 per share on a basic and diluted basis for the three months
ended December 31, 2008. The increase in the loss was primarily due to the
impairment in the value of our mineral rights of $4,447,000 and partially offset
by the cessation of operations at our MNJ unit and a reduction in corporate
overhead.





Revenues





We had no
revenues for the three months ended December 31, 2009 as we had no active
operations. We recorded revenue of $36,000 consisting primarily of rail
transportation income from MNJ during the three-month period ended December 31,
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 December 31, 2009 as we had no
active operations.  We had no cost of revenue for the three months
ended December 31, 2008 as there was no cost of revenue associated with our rail
transportation income.


18





Gross
Profit (Loss)





We
incurred no gross profit for the three months ended December 31, 2009 as we had
no active operations. We had a gross profit of $36,000 for the three months
ended December 31, 2008 from our rail transportation operations for which there
were no cost of revenue.





General
and Administrative Expenses





General
and administrative expenses increased by $3,881,000 to $4,552,000 for the
three-month period ended December 31, 2009 from $671,000 for the three-month
period ended December 31, 2008. This increase was primarily due to the
impairment in the value of mineral reserves and was partially offset by the
cessation of MNJ operations in April 2009 and other corporate overhead
reductions. The recent impairment of mineral rights was caused by a combination
of factors that in combination occurred in the past quarter including the
continual decline of demand for coal, increased difficulty in obtaining mining
permits in Ohio and the default on notes payable secured by the mineral rights
that has significantly increased the possibility of foreclosure, litigation and
involuntary liquidation of the mineral rights. General and administrative
expenses during the current period excluding the impairment in the value of
mineral rights of 4,447,000 consisted primarily of the following:





•
            salaries
      and employee expenses of $13,000





•
            rents,
      utilities, telephone and office related expenses of
  $1,000





•
            professional
      fees of $28,000





•
            investment
      and management consulting fees of
$30,000





•
            travel
      expenses of $19,000





General
and administrative expenses during the three-month period ended December 31,
2008 excluding the impairment in the value of assets of $470,000 consisted
primarily of the following:





•
            salaries
      and employee expenses of $57,000





•
            engineering
      and other consulting services of
$3,000





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





•
            professional
      fees of $39,000





•
            investment
      and management consulting fees of
$30,000





•
            travel
      expenses of $10,000





•
            Depreciation
      and amortization expense of $8,000.





Loss from
operations for the three-month period ended December 31, 2008 also includes
financing fees of $216,000 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 $34,000 to
$76,000 for the three-month period ended December 31, 2009 from $110,000 for the
three-month period ended December 31, 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.





Comparison
of the Six Months Ended December 31, 2009 and December 31, 2008





We
reported a net loss for the six months ended December 31, 2009 of $4,923,000 or
$0.43 per share on a basic and diluted basis as compared to a loss of $1,303,000
or $0.17 per share on a basic and diluted basis for the six months ended
December 31, 2008. The increase in the loss was primarily due asset impairment
charges totaling $4,570,000 and partially offset by savings from the cessation
of operations at our MNJ unit and a reduction in corporate
overhead.


19


Revenues





We had no
revenues for the six months ended December 31, 2009 as we had no active
operations. We recorded revenue of $94,000 consisting primarily of rail
transportation income from MNJ during the six-month period ended December 31,
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 six months ended December 31, 2009 as we had no active
operations.  We had no cost of revenue for the six months ended
December 31, 2008 as there was no cost of revenue associated with our rail
transportation income.





Gross
Profit (Loss)





We
incurred no gross profit for the six months ended December 31, 2009 as we had no
active operations. We had a gross profit of $94,000 for the six months ended
December 31, 2008 from our rail transportation operations for which there were
no cost of revenue.





General
and Administrative Expenses





General
and administrative expenses increased by $3,815,000 to $4,772,000 for the
three-month period ended December 31, 2009 from $957,000 for the six-month
period ended December 31, 2008. This increase was primarily due asset impairment
charges and was partially offset by the cessation of MNJ operations in April
2009 and other corporate overhead reductions. General and administrative
expenses during the current period other than the impairments of a minority
investment in a land development company of $123,000 and mineral rights of
4,447,000 consisted primarily of the following:





•
            salaries
      and employee expenses of $32,000





•
            rents,
      utilities, telephone and office related expenses of
  $6,000





•
            professional
      fees of $51,000





•
            investment
      and management consulting fees of
$60,000





•
            travel
      expenses of $28,000





General
and administrative expenses during the six-month period ended December 31, 2008
excluding the impairment in the value of assets of $470,000 consisted primarily
of the following:





•
            salaries
      and employee expenses of $143,000





•
            engineering
      and other consulting services of
$7,000





•
            rents,
      utilities, telephone and office related expenses of
  $19,000





•
            professional
      fees of $95,000





•
            investment
      and management consulting fees of
$60,000





•
            travel
      expenses of $19,000





•
            Depreciation
      and amortization expense of
$16,000.





Loss from
operations for the six-month period ended December 31, 2008 also included
financing fees of $216,000 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 $73,000 to
$151,000 for the six-month period ended December 31, 2009 from $224,000 for the
six-month period ended December 31, 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.


20





Liquidity
and Capital Resources





At
December 31, 2009, we had working capital deficiency of $4,165,000. We recorded
a loss for the six-month period ended December 31, 2009 of $4,923,000 and we
have accumulated losses from inception on March 3, 2005 of $20,484,000.
Given our December 31, 2009 cash balance of $0 and our projected operating cash
requirements, we anticipate that our existing capital resources will not be
adequate to satisfy our cash flow requirements through March 31, 2010 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 through the sale of assets,
our financial position will be seriously and adversely affected. We are
currently in default on loans totaling $3,733,000 and we may be forced into
bankruptcy proceedings or involuntary receivership.





The
following is a summary discussion of our cash flow:





Cash
decreased by $19,000 for the six months ended December 31, 2009 from $19,000 at
June 30, 2009 to $0.





We
reported cash flow used in operations of $65,000 consisting primarily of our
loss of $4,923,000, and partially offset by increases in accounts payable and
accrued liabilities and amounts due to related parties of $283,000 and an asset
impairment charge of $4,570,000.





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 $3,733,000 of principal payments and
accrued interest expenses that are due within the next year. We are currently in
default on all these amounts. 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.





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 4.
Controls and
Procedures.





Our management with the participation
and under the supervision of our Principal Executive and Financial Officer
reviewed and evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined by Rule 240.13a-15(e) or
15d-15(e)) of the Exchange Act Rule 13a-15 as of the end of the period
covered by this report. Based upon his evaluation, our Principal Executive and
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 second 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 December 31, 2009 that have materially affected,
or are reasonably likely to materially affect, our internal controls over
financial reporting.


21





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 note payable is in default. We have been and will continue to attempt to
negotiate a reasonable settlement, including an extension to this
note.  This note included 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 pending
actions currently or no threatened actions that management believes would have a
significant material impact on our financial position, results of operations or
cash flows.





Item
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
administrative 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.




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.


22




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.




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.


23





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 December 31, 2009, we had indebtedness of $5,097,000
of which $3,733,000 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.




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.


24





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





None





Item 3. 
Defaults Upon Senior
Securities.





Convertible
Promissory Note in the principal amount of $500,000 to 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 December 31, 2009 is $576,000 and is
recoreded in the current liabilities section of our Consolidated Balance
Sheet.





Promissory
notes secured by land in connection with our acquisition of Belville: We
suspended making payments on two notes in February 2008. We received notices of
default and demand for payment on November 6 and 12, 2009 and we have been
unable to cure the default.  The outstanding unpaid principal balance
and accrued interest on the two notes as of December 31, 2009 is $1,063,000 and
is recoreded in the current liabilities section of our Consolidated Balance
Sheet.





Promissory
note secured by substantially all the assets of our company: We did not receive
an extension for repayment after the due date of July 15, 2009 and on November
20, 2009 we received a notice of default and demand for payment.  We
have been unable to cure the default. The outstanding unpaid principal balance
and accrued interest on the two notes as of December 31, 2009 is $1,043,000 and
is recoreded in the current liabilities section of our Consolidated Balance
Sheet.





Convertible
promissory note secured by substantially all the assets of our company: On
November 24, 2009 we received a notice of default and demand for
payment.  We have been unable to cure the default. The outstanding
unpaid principal balance and accrued interest on the two notes as of December
31, 2009 is $1,531,000 and is recoreded in the current liabilities section of
our Consolidated Balance Sheet.




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





None





Item
5.  Other
Information





None





Item
6.  Exhibits.





31
            
            Certificate
      of Principal Executive and Financial Officer pursuant to Section 302
      of The Sarbanes-Oxley Act of 200232
            
            Certificate
      of Principal Executive and Financial Officer pursuant to Section 906
      of The Sarbanes-Oxley Act of
2002


25





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:
      March 15, 2010
              By:
              /s/ Imre EszenyiImre
      Eszenyi, Acting President, Acting Chief
                Financial
      Officer and Chairman of the Board(Principal
      Executive and Financial
Officer)


26





Exhibit
Index





31
            
            Certificate
      of Principal Executive and Financial Officer pursuant to Section 302
      of The Sarbanes-Oxley Act of 200232
            
            Certificate
      of Principal Executive and Financial Officer pursuant to Section 906
      of The Sarbanes-Oxley Act of
2002


27