##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Fiscal Year Ended March 31, 2006
 Commission File No. 0-24624
 CHINDEX INTERNATIONAL, INC.
  
 DELAWARE
    
    13-3097642(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 
   Common Stock, $.01 par value
 o þ
 o þ
 þ o
 þ
  o o þ
 o þ




---



##### 



PART I
 ITEM 1. BUSINESS
 General
  
    
    Healthcare Services division.This division operates the Companys network of
private hospitals and clinics. Beijing United Family Hospital and Clinics (BJU)
opened in 1997 and Shanghai United Family Hospital and Clinics (SHU) opened in
2004. In 2002, we opened our first satellite clinic associated with BJU in Shunyi
County outside of Beijing. In 2005 a second clinic was opened in downtown Beijing.
We have also established a satellite clinic associated with SHU. We are the only
foreign-invested, multi-facility hospital network in China. For fiscal 2006, the
Healthcare Services division accounted for 40% of the Companys revenue. (See Note
13 to the consolidated financial statements appearing elsewhere in this Annual
Report on Form 10-K.)
    
    Medical Products division.This division, formerly named the Medical Capital
Equipment division, markets, distributes and sells select medical capital
equipment, instrumentation and other medical products for use in hospitals in China
and Hong Kong on the basis of both exclusive and non-exclusive agreements with the
manufacturers of these products. We believe based on our knowledge and experience
in the Chinese healthcare system, that we are the largest independent U.S.
distributor of imported healthcare equipment in China. For fiscal 2006, the
Medical Products division accounted for 60% of our revenue. (See Note 13 to the
consolidated financial statements appearing elsewhere in this Annual Report on Form
10-K.)
 Healthcare Services Division
 United Family Hospitals and Clinics (UFH)
   -2-




---



##### 



UFH  Beijing Market  Beijing United Family Hospital and Clinics (BJU)
   UFH  Shanghai Market  Shanghai United Family Hospital and Clinics (SHU)
   -3-




---



##### 



Medical Products Division
        -4-




---



##### 



Discontinued Operations
  Competition
   Employees
  -5-




---



##### 



Internet Information and SEC Documents
  ITEM 1A. RISK FACTORS
 You should carefully consider the risks described below, together with all of the other
information included in this Annual Report on Form 10-K . The following risks and uncertainties are
not the only ones we face. However, these are the risks our management believes are material. If
any of the following risks actually materialize, our business, financial condition or results of
operations could be harmed. This report contains statements that are forward-looking. These
statements are based on current expectations and assumptions that are subject to risks and
uncertainties such as those listed below and elsewhere in this report, which, among others, should
be considered in evaluating our future performance
 Risks Related to Our Business and Financial Condition
 Our business is capital intensive and we may not be able to access the capital markets when we
would like to raise capital.
  We may not generate sufficient cash flow to fund our capital expenditures, ongoing operations and
indebtedness obligations.
  -6-




---



##### 




    
    our future operating performance;
    
    the demand for our services and products;
    
    general economic conditions and conditions affecting suppliers, customers and patients;
    
    competition; and
    
    legal and regulatory factors affecting us and our business.
  We experienced a net loss in each of fiscal 2004, fiscal 2005 and fiscal 2006 and may continue to
experience net losses. Consequently, we may not have the ability to finance future operations.
  If we fail to manage our growth or maintain adequate internal accounting, disclosure and other
controls, we would lose the ability to manage our business effectively and/or experience errors or
information lapses affecting public reporting.
   -7-




---



##### 



If we lost the services of our key personnel, then our leadership, expertise, experience, business
relationships, strategic and operational planning and other important business attributes would be
diminished.
  Our business could be adversely affected by inflation or foreign currency fluctuation.
   Risks Relating to the Healthcare Services Division
 If we do not attract and retain qualified physicians, administrators or other hospital personnel,
our hospital operations would be adversely affected.
  -8-




---



##### 



Our business is heavily regulated and failure to comply with those regulations could result in
penalties, loss of licensure, additional compliance costs or other adverse consequences.
  Our operations could be adversely affected by the high cost of malpractice insurance.
  We depend on information systems, which if not implemented and maintained could adversely affect
our operations.
  .
 -9-




---



##### 



Our operations face competition that could adversely affect our results of operations.
  Expansion of healthcare services to reach the Chinese population depends to some extent on the
development of an insurance product which is not now available.
  Our loan from the International Finance Corporation (IFC) places restrictions on the conduct of our
healthcare services business.
    Risks relating to our Medical Products division
 We depend on our relations with suppliers and would be adversely affected by the termination of
arrangements with, or shortage or loss of any significant product line from them.
  -10-




---



##### 



Our sales of medical products depend to some extent on our suppliers continuing to improve their
products and introduce new models. If a supplier fails to upgrade its product line as quickly as
competitive manufacturers have done this could adversely impact our revenues.
  Timing of revenues and fluctuations in financial performance vary significantly from quarter to
quarter and are not necessarily indicative of our performance over longer periods.
  -11-




---



##### 



We have not been able to arrange financings, from third party banks or governments, for our
customers in every year. Future periodic financings arranged on behalf of our customers cannot be
assured. The absence of these financings could result in lower sales.
   We may be subject to product liability claims and product recalls, and in the future we may not be
able to obtain insurance against these claims at a reasonable cost or at all.
   -12-




---



##### 




    
    product seizures;
    
    voluntary or mandatory recalls;
    
    voluntary or mandatory patient or physician notification; and
    
    restrictions on or prohibitions against marketing the products.
 We face competition that may adversely impact us, which impact may be increased as a result of
Chinas inclusion in the World Trade Organization.
   If we are not able to hire and retain qualified sales representatives and service specialists, then
our marketing competitiveness, selling capabilities and related growth efforts will be impaired.
  We must maintain a significant investment in merchandise and parts inventories, which are costly
and, if not properly managed, would result in an inability to provide timely marketing and delivery
and could result in financial or operating imbalances and problems with liquidity and capital
resources.
  -13-




---



##### 



If we do not maintain good relations with foreign trade corporations, our ability to import
products may be adversely affected.
  Our dependence on sub-distributors and dealers could be detrimental to our financial condition if
those sub-distributors or dealers do not sell our products.
  If the Chinese Government tightens controls on purchases of medical equipment our sales could be
adversely affected.
  Risks Relating to Doing Business in China
  -14-




---



##### 



The economic policies of the Chinese government and economic growth of China could adversely affect
us.
  The Chinese legal system is relatively new and may not provide protections to us or our investors.
   The conversion of Renminbi into foreign currency is regulated, which regulations could adversely
affect us.
  -15-




---



##### 



The SARS outbreak or similar outbreak, such as Avian flu, could further adversely affect our
operations.
  The Chinese Government could change its policies toward, or even nationalize, private enterprise,
which could harm our operations.
   Risks Related to our Corporate Structure
 Control by insiders and their ownership of shares having disproportionate voting rights could have
a depressive effect on the price of common stock, impede a change in control and impede management
replacement.
  -16-




---



##### 



Our unissued preferred stock could be issued to impede a change in control.
  ITEM 1B. UNRESOLVED STAFF COMMENTS
  -17-




---



##### 



ITEM 2. PROPERTIES
      ITEM 3. LEGAL PROCEEDINGS
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Part II
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER REPURCHASES
OF EQUITY SECURITIES
  High
    
    LowYear Ended March 31, 2005:First Quarter
    
    $
    14.00
    
    
    $
    9.05Second Quarter
    
    
    10.20
    
    
    
    6.21Third Quarter
    
    
    11.37
    
    
    
    7.40Fourth Quarter
    
    
    10.24
    
    
    
    6.15Year Ended March 31, 2006:First Quarter
    
    
    6.43
    
    
    
    4.44Second Quarter
    
    
    4.88
    
    
    
    3.30Third Quarter
    
    
    7.75
    
    
    
    3.11Fourth Quarter
    
    
    9.06
    
    
    
    4.33
  -18-




---



##### 



(c)Number ofSecuritiesRemaining Availablefor(a)
    
    
    
    
    
    Future IssuanceNumber of
    
(b)
    
    UnderSecurities to Be
    
    Weighted Average
    
    EquityIssued Upon
    
    Exercise
    
    CompensationExercise of
    
    Price of Outstanding
    
    Plans (excludingOutstanding
    
    Options, Warrants
    
    securitiesOptions,
    
    and
    
    reflected in columnPlan Category
    
    Warrants and Rights
    
    Rights
    
    (a)Equity Compensation Plans
Approved By Security Holders1994 Stock Option Plan
    
    
    891,024
    
    
    $
    5.22
    
    
    
    02004 Stock Incentive Plan
    
    
    424,718
    
    
    
    6.19
    
    
    
    75,282Equity Compensation Plans Not
Approved By Security Holders
    
    None
    
    None
    
    NoneTotal
    
    
    1,315,742
    
    
    
    
    
    
    
    75,282
  -19-




---



##### 



PART II
 ITEM 6. SELECTED FINANCIAL DATA *
 Three months ended
    
    Year endedYear ended March 31,
    
    March 31,
    
    
    December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002
    
    2002
    
    2001(unaudited)(in thousands, except for per share data)Statement of Operations DataNet sales
    
    $
    90,836
    
    
    $
    83,159
    
    
    $
    75,419
    
    
    $
    19,418
    
    
    $
    13,827
    
    
    $
    62,501
    
    
    $
    51,828Percent increase over
prior period
    
    
    9
    %
    
    
    10
    %
    
    
    21
    %
    
    
    40
    %
    
    
    42
    %
    
    
    21
    %
    
    
    22
    %Net income (loss) from
continuing operations
    
    
    167
    
    
    
    (3,924
    )
    
    
    (854
    )
    
    
    303
    
    
    
    (37
    )
    
    
    1,100
    
    
    
    444Net income (loss) from
continuing operations per
share-basic
    
    
    .03
    
    
    
    (.74
    )
    
    
    (.23
    )
    
    
    .08
    
    
    
    (.01
    )
    
    
    .30
    
    
    
    .12Net income (loss) from
continuing operations per
share-diluted
    
    
    .02
    
    
    
    (.74
    )
    
    
    (.23
    )
    
    
    .08
    
    
    
    (.01
    )
    
    
    .29
    
    
    
    .12Market closing price per
share  end of year
    
    
    9.06
    
    
    
    6.18
    
    
    
    10.09
    
    
    
    2.00
    
    
    
    2.78
    
    
    
    1.86
    
    
    
    3.18Book value per share at
end of period
    
    
    3.37
    
    
    
    3.84
    
    
    
    3.89
    
    
    
    3.79
    
    
    
    3.65
    
    
    
    3.77
    
    
    
    3.71Cash dividends declared
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00Balance Sheet Data (at end of period):Total assets
    
    $
    57,046
    
    
    $
    57,288
    
    
    $
    47,851
    
    
    $
    42,340
    
    
    $
    32,859
    
    
    $
    43,126
    
    
    $
    33,369Long term liabilities
    
    
    8,660
    
    
    
    2,873
    
    
    
    125
    
    
    
    3,734
    
    
    
    0
    
    
    
    3,609
    
    
    
    0Total stockholders equity
    
    
    22,638
    
    
    
    24,963
    
    
    
    17,198
    
    
    
    14,044
    
    
    
    13,497
    
    
    
    13,968
    
    
    
    13,611
 Three months ended
    
    Year endedYear ended March 31,
    
    March 31,
    
    December 31,2006
    
    2005
    
    2004
    
    2003
    
    2002
    
    2002
    
    2001(unaudited)Segment information:Healthcare Services-sales
    
    $
    36,500
    
    
    $
    22,801
    
    
    $
    15,954
    
    
    $
    3,470
    
    
    $
    2,799
    
    
    $
    12,963
    
    
    $
    8,779Healthcare Services-operating
income (loss)
    
    
    1,585
    
    
    
    (2,844
    )
    
    
    (680
    )
    
    
    (178
    )
    
    
    42
    
    
    
    586
    
    
    
    458Medical Products division-sales
    
    
    54,336
    
    
    
    60,358
    
    
    
    59,465
    
    
    
    15,948
    
    
    
    11,028
    
    
    
    49,538
    
    
    
    43,049Medical Products division
operating (loss) income
    
    
    (1,436
    )
    
    
    (880
    )
    
    
    223
    
    
    
    627
    
    
    
    (180
    )
    
    
    438
    
    
    
    (817
    )
 
 We changed our fiscal year end to March 31 as of 2004.  -20-




---



##### 



-21-




---



##### 



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
     
    
    Healthcare Services division.This division operates the Companys private
hospitals and clinics. Beijing United Family Hospital and Clinics (BJU) opened in
1997 and Shanghai United Family Hospital and Clinics (SHU) opened in 2004. In
2002, we opened our first satellite clinic associated with BJU in Shunyi County
outside of Beijing. In 2005 a second clinic was opened in downtown Beijing. We have
also established a satellite clinic associated with SHU. We are the only
foreign-invested, multi-facility hospital network in China. For fiscal 2006, the
Healthcare Services division accounted for 40% of the
Companys revenue. (See Note 13 to the consolidated financial statements appearing
elsewhere in this Annual Report on Form 10-K.)
 -22-




---



##### 




    
    Medical Products division.This division, formerly named the Medical Capital
Equipment division, markets, distributes and sells select medical capital
equipment, instrumentation and other medical products for use in hospitals in China
and Hong Kong on the basis of both exclusive and non-exclusive agreements with the
manufacturers of these products. Chindex believes based on its knowledge and
experience in the Chinese healthcare system, that it is the largest independent
U.S. distributor of imported healthcare equipment in China. For fiscal 2006, the
Medical Products division accounted for 60% of our revenue. (See Note 13 to the
consolidated financial statements appearing elsewhere in this Annual Report on Form
10-K.)
    Critical Accounting Policies
   Revenue recognition
  -23-




---



##### 



Receivable collectibility
    Valuation allowance of deferred tax assets
   Inventories
  Fiscal year ended March 31, 2006 compared to fiscal year ended March 31, 2005
  -24-




---



##### 



Healthcare Services Division
    -25-




---



##### 



Medical Products Division
 Timing of Revenue
     -26-




---



##### 



Other Income and Expenses
 Liquidity and Capital Resources
 Taxes
  Discontinued Operations
    -27-




---



##### 



Fiscal year ended March 31, 2005 compared to fiscal year ended March 31, 2004
 General
   Healthcare Services Division
   .
 -28-




---



##### 



Medical Products Division
     Other Income and Expenses
  Taxes
  -29-




---



##### 



Discontinued Operations
   Liquidity and Capital Resources
     -30-




---



##### 



Total
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterLine of credit
    
    $
    1,476
    
    
    $
    1,476
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Bank Loan
    
    
    13,097
    (1)
    
    
    544
    
    
    
    544
    
    
    
    1,352
    
    
    
    1,342
    
    
    
    1,322
    
    
    
    7,993Vendor financing
    
    
    2,090
    
    
    
    1,604
    
    
    
    154
    
    
    
    154
    
    
    
    141
    
    
    
    37
    
    
    
    0Capital leases
    
    
    154
    
    
    
    56
    
    
    
    40
    
    
    
    39
    
    
    
    19
    
    
    
    0
    
    
    
    0Operating leases
    
    
    11,064
    
    
    
    2,403
    
    
    
    1,900
    
    
    
    1,391
    
    
    
    1,268
    
    
    
    1,118
    
    
    
    2,984Total contractual
obligations
    
    $
    27,881
    
    
    $
    6,083
    
    
    $
    2,638
    
    
    $
    2,936
    
    
    $
    2,770
    
    
    $
    2,477
    
    
    $
    10,977
 
 (1)
    
    Includes interest of $5,014,000.  Timing of Revenue
    -31-




---



##### 



Foreign Currency Exchange and Impact of Inflation
     ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  -32-




---



##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
      
 -33-




---



##### 



-34-




---



##### 



March 31, 2006
    
    
    March 31, 2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,034
    
    
    $
    8,173Restricted cash
    
    
    383
    
    
    
    Trade accounts receivable, less allowance for doubtful accounts of $2,250
and $1,851, respectivelyEquipment sales receivables
    
    
    7,685
    
    
    
    13,120Patient service receivables
    
    
    5,468
    
    
    
    2,706Inventories
    
    
    8,681
    
    
    
    10,856Deferred income tax
    
    
    177
    
    
    
    222Other current assets
    
    
    2,322
    
    
    
    2,034Current assets of discontinued operations
    
    
    1,006
    
    
    
    Total current assets
    
    
    34,756
    
    
    
    37,111Property and equipment, net
    
    
    19,119
    
    
    
    17,620Long-term deferred income taxes
    
    
    2,452
    
    
    
    1,780Other assets
    
    
    719
    
    
    
    777Total assets
    
    $
    57,046
    
    
    $
    57,288LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    21,727
    
    
    $
    26,420Short-term portion of capitalized leases
    
    
    50
    
    
    
    189Short-term debt and vendor financing
    
    
    3,080
    
    
    
    2,839Income taxes payable
    
    
    143
    
    
    
    4Current liabilities of discontinued operations
    
    
    748
    
    
    
    Total current liabilities
    
    
    25,748
    
    
    
    29,452Long-term portion of capitalized leases
    
    
    91
    
    
    
    124Long-term debt and vendor financing
    
    
    8,569
    
    
    
    2,749Total liabilities
    
    
    34,408
    
    
    
    32,325Commitments and contingenciesStockholders equity:Preferred stock, $.01 par value, 500,000 shares authorized, none issued
    
    
    0
    
    
    
    0Common stock, $.01 par value, 13,600,000 shares authorized, including
1,600,000 designated Class B at March 31, 2006 and 2005, respectively:Common stock
 5,946,873 and 5,728,443 shares issued and
outstanding at March 31, 2006 and 2005, respectively
    
    
    60
    
    
    
    57Class B
stock  775,000 shares issued and outstanding at
March 31, 2006 and 2005
    
    
    8
    
    
    
    8Additional capital
    
    
    36,436
    
    
    
    35,884Accumulated other comprehensive income
    
    
    75
    
    
    
    17Accumulated deficit
    
    
    (13,941
    )
    
    
    (11,003
    )Total stockholders equity
    
    
    22,638
    
    
    
    24,963Total liabilities and stockholders equity
    
    $
    57,046
    
    
    $
    57,288
  -35-




---



##### 



Year endedMarch 31,2006
    
    
    2005
    
    
    2004Product sales
    
    $
    54,336
    
    
    $
    60,358
    
    
    $
    59,465Healthcare services revenue
    
    
    36,500
    
    
    
    22,801
    
    
    
    15,954Total revenue
    
    
    90,836
    
    
    
    83,159
    
    
    
    75,419Cost and expensesProduct sales costs
    
    
    40,913
    
    
    
    46,249
    
    
    
    46,426Healthcare services costs
    
    
    33,455
    
    
    
    24,636
    
    
    
    15,731Selling and marketing expenses
    
    
    10,195
    
    
    
    9,993
    
    
    
    9,230General and administrative
    
    
    5,723
    
    
    
    6,058
    
    
    
    4,502Income (loss) from continuing operations
    
    
    550
    
    
    
    (3,777
    )
    
    
    (470
    )Loss on equity investment
    
    
    0
    
    
    
    0
    
    
    
    (222
    )Other (expenses) and incomeInterest expense
    
    
    (589
    )
    
    
    (229
    )
    
    
    (249
    )Interest income
    
    
    173
    
    
    
    84
    
    
    
    44Miscellaneous expense  net
    
    
    (18
    )
    
    
    (59
    )
    
    
    107Income (loss) from continuing operations before income
taxes
    
    
    116
    
    
    
    (3,981
    )
    
    
    (790
    )Benefit from (provision for) income taxes
    
    
    51
    
    
    
    57
    
    
    
    (64
    )Net income (loss) from continuing operations
    
    
    167
    
    
    
    (3,924
    )
    
    
    (854
    )Loss from discontinued operations
    
    
    (3,105
    )
    
    
    (1,734
    )
    
    
    (1,133
    )Net loss
    
    $
    (2,938
    )
    
    $
    (5,658
    )
    
    $
    (1,987
    )Net income (loss) per common share  basicContinuing operations
    
    $
    .03
    
    
    $
    (.74
    )
    
    $
    (.23
    )Discontinued operations
    
    
    (.48
    )
    
    
    (.33
    )
    
    
    (.30
    )Net loss
    
    $
    (.45
    )
    
    $
    (1.07
    )
    
    $
    (.53
    )Weighted average shares outstanding  basic
    
    
    6,539,572
    
    
    
    5,313,573
    
    
    
    3,758,170Net loss per
common share  dilutedContinuing operations
    
    $
    .02
    
    
    $
    (.74
    )
    
    $
    (.23
    )Discontinued operations
    
    
    (.45
    )
    
    
    (.33
    )
    
    
    (.30
    )Net loss
    
    $
    (.43
    )
    
    $
    (1.07
    )
    
    $
    (.53
    )Weighted
average shares outstanding  diluted
    
    
    6,859,688
    
    
    
    5,313,573
    
    
    
    3,758,170
  -36-




---



##### 



Year ended March 31,2006
    
    
    2005
    
    
    2004OPERATING ACTIVITIESNet loss
    
    $
    (2,938
    )
    
    $
    (5,658
    )
    
    $
    (1,987
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    2,910
    
    
    
    1,966
    
    
    
    1,309Inventory write down
    
    
    538
    
    
    
    96
    
    
    
    151Provision for doubtful accounts
    
    
    797
    
    
    
    1,428
    
    
    
    777Deferred income taxes
    
    
    (627
    )
    
    
    (201
    )
    
    
    (909
    )Loss on disposal of assets
    
    
    72
    
    
    
    0
    
    
    
    0Loss on equity investment
    
    
    0
    
    
    
    0
    
    
    
    222Foreign exchange (gain) loss
    
    
    (401
    )
    
    
    53
    
    
    
    13Changes in operating assets and liabilities:Restricted cash
    
    
    (383
    )
    
    
    
    
    
    
    Trade receivables
    
    
    1,310
    
    
    
    120
    
    
    
    (3,121
    )Inventories
    
    
    1,845
    
    
    
    (1,622
    )
    
    
    373Income taxes payable
    
    
    139
    
    
    
    (377
    )
    
    
    516Other current assets
    
    
    (288
    )
    
    
    201
    
    
    
    (713
    )Other assets
    
    
    72
    
    
    
    (391
    )
    
    
    25Accounts payable and accrued expenses
    
    
    (4,582
    )
    
    
    2,011
    
    
    
    673Net cash used in operating activities
    
    
    (1,536
    )
    
    
    (2,374
    )
    
    
    (2,671
    )INVESTING ACTIVITIESPurchases of property and equipment
    
    
    (4,133
    )
    
    
    (9,447
    )
    
    
    (2,925
    )Cash received on disposal of property and equipment
    
    
    108
    
    
    
    0
    
    
    
    0Net cash used in investing activities
    
    
    (4,025
    )
    
    
    (9,447
    )
    
    
    (2,925
    )FINANCING ACTIVITIESProceeds from debt and vendor financing
    
    
    11,046
    
    
    
    6,783
    
    
    
    1,974Repayment of debt, vendor financing and capitalized leases
    
    
    (5,167
    )
    
    
    (7,003
    )
    
    
    (623
    )Debt issuance costs
    
    
    (96
    )
    
    
    0
    
    
    
    0Cash paid to joint venture partner investment
    
    
    0
    
    
    
    0
    
    
    
    (61
    )Proceeds from issuance of common stock
    
    
    0
    
    
    
    13,179
    
    
    
    4,892Proceeds from exercise of stock options
    
    
    555
    
    
    
    238
    
    
    
    247Net cash provided by financing activities
    
    
    6,338
    
    
    
    13,197
    
    
    
    6,429Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    84
    
    
    
    6
    
    
    
    2Net increase in cash and cash equivalents
    
    
    861
    
    
    
    1,382
    
    
    
    835Cash and cash equivalents at beginning of year
    
    
    8,173
    
    
    
    6,791
    
    
    
    5,956Cash and cash equivalents at end of year
    
    $
    9,034
    
    
    $
    8,173
    
    
    $
    6,791Supplemental disclosures of cash flows information:Cash paid for interest
    
    $
    235
    
    
    $
    289
    
    
    $
    124Cash paid for taxes
    
    $
    453
    
    
    $
    301
    
    
    $
    460Non-cash investing and financing activities consist of the following:Acquisition of property and equipment via capital leases
    
    $
    0
    
    
    $
    205
    
    
    
    0Transfer of demonstration inventory to property and equipment
    
    $
    0
    
    
    $
    1,033
    
    
    
    0
  -37-




---



##### 



CHINDEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
For the years ended March 31, 2006, 2005 and period ended March 31, 2004
 AccumulatedCommon Stock
    
    
    
    
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Class B
    
    
    Additional
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    TotalBalance at
December 31, 2002
    
    
    2,932,956
    
    
    $
    29
    
    
    
    775,000
    
    
    $
    8
    
    
    $
    17,356
    
    
    $
    (3,434
    )
    
    $
    9
    
    
    $
    13,968Net income for the
three months ended
March 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    76Net loss 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,987
    )
    
    
    
    
    
    
    (1,987
    )Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,985
    )Issuance of common
stock
    
    
    600,000
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    4,886
    
    
    
    
    
    
    
    
    
    
    
    4,892Options exercised
    
    
    110,196
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    246
    
    
    
    
    
    
    
    
    
    
    
    247Balance at
March 31, 2004
    
    
    3,643,152
    
    
    
    36
    
    
    
    775,000
    
    
    
    8
    
    
    
    22,488
    
    
    
    (5,345
    )
    
    
    11
    
    
    
    17,198Net loss 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,658
    )
    
    
    
    
    
    
    (5,658
    )Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    6Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,652
    )Issuance of common
stock
    
    
    1,980,397
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    13,159
    
    
    
    
    
    
    
    
    
    
    
    13,179Options exercised
    
    
    104,894
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    
    
    
    
    
    
    
    
    238Balance at
March 31, 2005
    
    
    5,728,443
    
    
    
    57
    
    
    
    775,000
    
    
    
    8
    
    
    
    35,884
    
    
    
    (11,003
    )
    
    
    17
    
    
    
    24,963Net loss 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,938
    )
    
    
    
    
    
    
    (2,938
    )Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    58Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,880
    )Options exercised
    
    
    218,430
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    552
    
    
    
    
    
    
    
    
    
    
    
    555Balance at
March 31, 2006
    
    
    5,946,873
    
    
    $
    60
    
    
    
    775,000
    
    
    $
    8
    
    
    $
    36,436
    
    
    $
    (13,941
    )
    
    $
    75
    
    
    $
    22,638
  -38-




---



##### 



CHINDEX INTERNATIONAL, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    Consolidation
   Revenue Recognition
    -39-




---



##### 



Accounts Receivable
  Inventories
    Property and Equipment
   Income Taxes
  -40-




---



##### 



Cash Equivalents
  Fair Value of Financial Instruments
  Earnings Per Share
  Stock Based Compensation
  -41-




---



##### 



2006
    
    
    2005
    
    
    2004Net loss, as reported
    
    $
    (2,938
    )
    
    $
    (5,658
    )
    
    $
    (1,987
    )Deduct: total stock-based employee
compensation expense determined
under fair value method for all
awards, net of related tax effects
    
    
    (1,333
    )
    
    
    (1,266
    )
    
    
    (18
    )Net loss, pro-forma
    
    $
    (4,271
    )
    
    $
    (6,924
    )
    
    $
    (2,005
    )Pro forma earnings per share:EPS, basic
    
    As reported
    
    $
    (.45
    )
    
    $
    (1.07
    )
    
    $
    (.53
    )EPS, basic
    
    Pro forma
    
    $
    (.65
    )
    
    $
    (1.30
    )
    
    $
    (.53
    )EPS, diluted
    
    As reported
    
    $
    (.43
    )
    
    $
    (1.07
    )
    
    $
    (.53
    )EPS, diluted
    
    Pro forma
    
    $
    (.62
    )
    
    $
    (1.30
    )
    
    $
    (.53
    )
   Debt Issuance Costs
  Dividends
  Foreign Currencies
  Use of Estimates
  -42-




---



##### 



Reclassifications
  New Accounting Standards
    2. DISCONTINUED OPERATIONS
  -43-




---



##### 



Year ended March 31,2006
    
    2005
    
    2004Net revenue from discontinued operations
    
    $
    11,370
    
    
    $
    17,616
    
    
    $
    12,764Loss from discontinued operations
    
    $
    (3,105
    )
    
    $
    (1,734
    )
    
    $
    (1,133
    )
   March 31,2006Current assets of discontinued operations:Product sales receivables
    
    $
    868Other current assets
    
    
    138$
    1,006Current liabilities of discontinued operations:Accounts payable and accrued expenses
    
    $
    (748
    )$
    (748
    )
 3. INVENTORIES
 March 31,
    
    
    March 31,2006
    
    
    2005Inventories consist of the following:Merchandise inventory
    
    $
    5,597
    
    
    $
    7,797Healthcare services inventory
    
    
    508
    
    
    
    399Parts and peripherals inventory
    
    
    2,576
    
    
    
    2,660$
    8,681
    
    
    $
    10,856
 -44-




---



##### 



4. PROPERTY AND EQUIPMENT, NET
 March 31,
    
    
    March 31,2006
    
    
    2005Property and equipment, net consists of the
following:Furniture and equipment
    
    $
    11,988
    
    
    $
    10,079Vehicles
    
    
    68
    
    
    
    68Demonstration equipment
    
    
    2,509
    
    
    
    2,456Leasehold improvements
    
    
    13,758
    
    
    
    12,60728,323
    
    
    
    25,210Less: accumulated depreciation and amortization
    
    
    (9,204
    )
    
    
    (7,590
    )$
    19,119
    
    
    $
    17,620
 5. DEBT
    -45-




---



##### 



Total
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    ThereafterLine of credit
    
    $
    1,476
    
    
    $
    1,476
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Bank Loan
    
    
    8,083
    
    
    
    0
    
    
    
    0
    
    
    
    808
    
    
    
    808
    
    
    
    809
    
    
    
    5,658Vendor financing
    
    
    2,090
    
    
    
    1,604
    
    
    
    154
    
    
    
    154
    
    
    
    141
    
    
    
    37
    
    
    
    0Total
    
    
    11,649
    
    
    
    3,080
    
    
    
    154
    
    
    
    962
    
    
    
    949
    
    
    
    846
    
    
    
    5,658
 6. STOCKHOLDERS EQUITY
 Common Stock
  -46-




---



##### 



Stock Option Plan
    Weighted
    
    
    
    
    
    
    WeightedWeighted
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAverage
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    Exercise2006
    
    
    Exercise Price
    
    
    2005
    
    
    Price
    
    
    2004
    
    
    PriceOptions
outstanding,
beginning of year:
    
    
    1,113,144
    
    
    $
    4.85
    
    
    
    948,700
    
    
    $
    2.30
    
    
    
    1,053,416
    
    
    $
    2.29Granted
    
    
    449,050
    
    
    
    6.16
    
    
    
    306,900
    
    
    
    12.60
    
    
    
    20,000
    
    
    
    2.60Exercised
    
    
    (218,430
    )
    
    
    2.54
    
    
    
    (104,894
    )
    
    
    2.27
    
    
    
    (110,196
    )
    
    
    2.25Canceled
    
    
    (28,022
    )
    
    
    12.04
    
    
    
    (37,562
    )
    
    
    10.76
    
    
    
    (14,520
    )
    
    
    2.49Options outstanding,
end of year
    
    
    1,315,742
    
    
    $
    5.53
    
    
    
    1,113,144
    
    
    $
    4.85
    
    
    
    948,700
    
    
    $
    2.30
  Recent Issuance of Securities
  -47-




---



##### 



Shares of Common Stock Reserved
  -48-




---



##### 



7. EARNINGS PER SHARE
   Year ended March 31,2006
    
    2005
    
    2004Numerator:Net income (loss) from continuing operations
    
    $
    167
    
    
    $
    (3,924
    )
    
    $
    (854
    )Loss from discontinued operations
    
    
    (3,105
    )
    
    
    (1,734
    )
    
    
    (1,133
    )Net loss
    
    $
    (2,938
    )
    
    $
    (5,658
    )
    
    $
    (1,987
    )Denominator:Weighted
average shares outstanding  basic
    
    
    6,539,572
    
    
    
    5,313,573
    
    
    
    3,758,170Effect of dilutive securities:Shares issuable upon exercise of dilutive
outstanding stock options:
    
    
    320,116
    
    
    
    0
    
    
    
    0Weighted
average shares outstanding  diluted
    
    
    6,859,688
    
    
    
    5,313,573
    
    
    
    3,758,170Net income
(loss) per common share  basic:Net income (loss) from continuing operations
    
    $
    .03
    
    
    $
    (.74
    )
    
    $
    (.23
    )Loss from discontinued operations
    
    $
    (.48
    )
    
    $
    (.33
    )
    
    $
    (.30
    )Net loss
    
    $
    (.45
    )
    
    $
    (1.07
    )
    
    $
    (.53
    )Net income
(loss) per common share  diluted:Net income (loss) from continuing operations
    
    $
    .02
    
    
    $
    (.74
    )
    
    $
    (.23
    )Loss from discontinued operations
    
    $
    (.45
    )
    
    $
    (.33
    )
    
    $
    (.30
    )Net loss
    
    $
    (.43
    )
    
    $
    (1.07
    )
    
    $
    (.53
    )
  -49-




---



##### 



8. INCOME TAXES
  (in thousands)2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    0
    
    
    $
    0
    
    
    $
    0Foreign
    
    
    (576
    )
    
    
    (144
    )
    
    
    (356
    )State
    
    
    0
    
    
    
    0
    
    
    
    0(576
    )
    
    
    (144
    )
    
    
    (356
    )Deferred:Federal
    
    
    (53
    )
    
    
    170
    
    
    
    208State
    
    
    (10
    )
    
    
    31
    
    
    
    2Foreign
    
    
    690
    
    
    
    0
    
    
    
    82627
    
    
    
    201
    
    
    
    292$
    51
    
    
    $
    57
    
    
    $
    (64
    )
  (in thousands)2006
    
    
    2005Deferred tax liabilities:Unremitted earnings on foreign
subsidiaries
    
    $
    (623
    )
    
    $
    (497
    )Deferred tax assets:Allowance for doubtful accounts
    
    
    274
    
    
    
    274Sales commissions
    
    
    181
    
    
    
    240Net operating loss carryforwards
    
    
    5,705
    
    
    
    4,472Alternative minimum tax
    
    
    47
    
    
    
    47Depreciation
    
    
    150
    
    
    
    42Other
    
    
    0
    
    
    
    47Subtotal
    
    
    5,734
    
    
    
    4,625Less valuation allowance
    
    
    (3,105
    )
    
    
    (2,623
    )Net deferred tax asset
    
    $
    2,629
    
    
    $
    2,002
  2006
    
    2005
    
    2004Statutory federal income tax rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %Adjustments:State income taxes, net of federal benefit
    
    
    1.0
    
    
    
    1.0
    
    
    
    4.0Foreign tax rate differential
    
    
    (13.0
    )
    
    
    (5.0
    )
    
    
    (9.0
    )Use of net operating losses
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0Change in valuation allowance
    
    
    (18.0
    )
    
    
    (30.0
    )
    
    
    17.0Other, including permanent differences
    
    
    (6.0
    )
    
    
    1.0
    
    
    
    (49.0
    )(2.0
    )%
    
    
    1.0
    %
    
    
    (3.0
    )%
 -50-




---



##### 



9. COMMITMENTS
 Leases
  (thousands)Year ending March 31:2007
    
    $
    2,4032008
    
    
    1,9002009
    
    
    1,3912010
    
    
    1,2682011
    
    
    1,118Thereafter
    
    
    2,984Net minimum rental commitments
    
    $
    11,064
   10. CONCENTRATIONS OF CREDIT RISK
  -51-




---



##### 



11. SIGNIFICANT CUSTOMERS/SUPPLIERS
   12. ACCOUNTING FOR VARIABLE INTEREST ENTITIES (VIE)
   -52-




---



##### 



13. SEGMENT REPORTING
   Healthcare
    
    
    MedicalServices
    
    
    Products
    
    
    TotalAssets
    
    $
    29,801,000
    
    
    $
    26,239,000
    
    
    $
    56,040,000Sales and service revenue
    
    $
    36,500,000
    
    
    $
    54,336,000
    
    
    $
    90,836,000Gross Profit
    
    
    n/a
    
    
    
    13,423,000
    
    
    
    n/aGross Profit %
    
    
    n/a
    
    
    
    25
    %
    
    
    n/aIncome (loss) from continuing
operations before foreign
exchange gain
    
    $
    1,585,000
    
    
    $
    (1,436,000
    )
    
    $
    149,000Foreign exchange gain
    
    
    
    
    
    
    
    
    
    
    401,000Income from continuing operations
    
    
    
    
    
    
    
    
    
    $
    550,000Other (expense) net
    
    
    
    
    
    
    
    
    
    
    (434,000
    )Income from continuing
operations before income taxes
    
    
    
    
    
    
    
    
    
    $
    116,000
   Healthcare
    
    
    MedicalServices
    
    
    Products
    
    
    TotalAssets
    
    $
    21,304,000
    
    
    $
    30,669,000
    
    
    $
    51,973,000Sales and service revenue
    
    $
    22,801,000
    
    
    $
    60,358,000
    
    
    $
    83,159,000Gross Profit
    
    
    n/a
    
    
    
    14,109,000
    
    
    
    n/aGross Profit %
    
    
    n/a
    
    
    
    23
    %
    
    
    n/aLoss from continuing
operations before foreign
exchange loss
    
    $
    (2,844,000
    )
    
    $
    (880,000
    )
    
    $
    (3,724,000
    )Foreign exchange loss
    
    
    
    
    
    
    
    
    
    
    (53,000
    )Loss from continuing operations
    
    
    
    
    
    
    
    
    
    $
    (3,777,000
    )Other (expense) net
    
    
    
    
    
    
    
    
    
    
    (204,000
    )Loss from continuing
operations before income taxes
    
    
    
    
    
    
    
    
    
    $
    (3,981,000
    )
 -53-




---



##### 



Healthcare
    
    
    MedicalServices
    
    
    Products
    
    
    TotalAssets
    
    
    *
    
    
    
    *
    
    
    
    *Sales and service revenue
    
    $
    15,954,000
    
    
    $
    59,465,000
    
    
    $
    75,419,000Gross Profit
    
    
    n/a
    
    
    
    13,039,000
    
    
    
    n/aGross Profit %
    
    
    n/a
    
    
    
    22
    %
    
    
    n/a(Loss) income from continuing
operations before foreign
exchange loss
    
    $
    (680,000
    )
    
    $
    223,000
    
    
    $
    (457,000
    )Foreign exchange loss
    
    
    
    
    
    
    
    
    
    
    (13,000
    )Loss from continuing operations
    
    
    
    
    
    
    
    
    
    $
    (470,000
    )Other (expense) net
    
    
    
    
    
    
    
    
    
    
    (98,000
    )Loss on equity investment
    
    
    
    
    
    
    
    
    
    
    (222,000
    )Loss from continuing
operations before income taxes
    
    
    
    
    
    
    
    
    
    $
    (790,000
    )
 
 *
    
    It is impracticable for us to restate the March 31, 2004 total assets into our new segment
structure. Under our old segment structure our assets where distributed as follows: Healthcare
Services assets of $12,339,000, Medical Capital Equipment assets of $ 22,987,000 and Healthcare
Products Distribution assets of $12,525,000. 14. SUBSEQUENT EVENT
    -54-




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##### 



15. SELECTED QUARTERLY DATA (UNAUDITED)
  First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterFor the year ended March 31, 2006:Revenue$
    22,197
    
    
    $
    22,733
    
    
    $
    22,621
    
    
    $
    23,285(Loss) income from continuing operations
before income taxes
    
    
    (766
    )
    
    
    502
    
    
    
    222
    
    
    
    158Net (loss) income from continuing operations
    
    
    (581
    )
    
    
    189
    
    
    
    439
    
    
    
    120Net (loss)
    
    
    (1,364
    )
    
    
    (717
    )
    
    
    (463
    )
    
    
    (394
    )(Loss)
income per share of common stock  basicNet (loss) income from continuing operations
    
    
    (.09
    )
    
    
    .03
    
    
    
    .07
    
    
    
    .02Net (loss)
    
    
    (.21
    )
    
    
    (.11
    )
    
    
    (.07
    )
    
    
    (.06
    )(Loss)
income per share of common stock 
dilutedNet (loss) income from continuing operations
    
    
    (.09
    )
    
    
    .03
    
    
    
    .07
    
    
    
    .02Net (loss)
    
    
    (.21
    )
    
    
    (.11
    )
    
    
    (.07
    )
    
    
    (.06
    )Cash dividends per share of common stock
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00For the year ended March 31, 2005:Revenue
    
    $
    21,756
    
    
    $
    22,996
    
    
    $
    17,404
    
    
    $
    21,003Income (loss) from continuing operations
before income taxes
    
    
    690
    
    
    
    504
    
    
    
    (3,245
    )
    
    
    (1,930
    )Net income (loss) from continuing operations
    
    
    504
    
    
    
    455
    
    
    
    (3,559
    )
    
    
    (1,324
    )Net income (loss)
    
    
    244
    
    
    
    (89
    )
    
    
    (3,713
    )
    
    
    (2,100
    )Income
(loss) per share of common stock  basicNet income (loss) from continuing operations
    
    
    .10
    
    
    
    .09
    
    
    
    (.66
    )
    
    
    (.24
    )Net income (loss)
    
    
    .05
    
    
    
    (.02
    )
    
    
    (.69
    )
    
    
    (.38
    )Income
(loss) per share of common stock 
dilutedNet income (loss) from continuing operations
    
    
    .09
    
    
    
    .09
    
    
    
    (.66
    )
    
    
    (.24
    )Net income (loss)
    
    
    .04
    
    
    
    (.02
    )
    
    
    (.69
    )
    
    
    (.38
    )Cash dividends per share of common stock
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00For the year ended March 31, 2004:Revenue
    
    $
    17,161
    
    
    $
    18,446
    
    
    $
    18,298
    
    
    $
    21,514(Loss) income from continuing operations
before income taxes
    
    
    (1,429
    )
    
    
    829
    
    
    
    (432
    )
    
    
    242Net (loss) income from continuing operations
    
    
    (1,041
    )
    
    
    671
    
    
    
    (313
    )
    
    
    (171
    )Net (loss) income
    
    
    (1,338
    )
    
    
    219
    
    
    
    (383
    )
    
    
    (485
    )(Loss) income per share of common stock  basicNet (loss) income from continuing operations
    
    
    (.28
    )
    
    
    .18
    
    
    
    (.08
    )
    
    
    (.04
    )Net (loss) income
    
    
    (.36
    )
    
    
    .06
    
    
    
    (.10
    )
    
    
    (.13
    )Diluted (loss) income earnings per share of
common stockNet (loss) income from continuing operations
    
    
    (.28
    )
    
    
    .15
    
    
    
    (.08
    )
    
    
    (.04
    )Net (loss) income
    
    
    (.36
    )
    
    
    .05
    
    
    
    (.10
    )
    
    
    (.13
    )Cash dividends per share of common stock
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00
 -55-




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##### 



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  ITEM 9A. CONTROLS AND PROCEDURES
  ITEM 9B. OTHER INFORMATION
  PART III
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  ITEM 11. EXECUTIVE COMPENSATION
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  -56-




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##### 



PART IV
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
          Balance
    
    
    
    
    
    
    Additions
    
    
    
    
    
    
    Balancebeginning
    
    
    Additions
    
    
    not
    
    
    
    
    
    
    endDescription (amounts in thousands)
    
    of year
    
    
    expensed
    
    
    expensed
    
    
    Deductions
    
    
    of yearFor the year ended March 31, 2006:Allowance for doubtful receivables
    
    $
    1,851
    
    
    $
    797
    
    
    $
    24
    
    
    $
    422
    
    
    $
    2,250Deferred income tax valuation allowance
    
    
    2,623
    
    
    
    482
    
    
    
    0
    
    
    
    0
    
    
    
    3,105Total allowances deducted from assets
    
    $
    4,474
    
    
    $
    1,279
    
    
    $
    24
    
    
    $
    422
    
    
    $
    5,355For the year ended March 31, 2005:Allowance for doubtful receivables
    
    $
    1,131
    
    
    $
    1,428
    
    
    $
    0
    
    
    $
    708
    
    
    $
    1,851Deferred income tax valuation allowance
    
    
    1,203
    
    
    
    1,420
    
    
    
    0
    
    
    
    0
    
    
    
    2,623Total allowances deducted from assets
    
    $
    2,334
    
    
    $
    2,848
    
    
    $
    0
    
    
    $
    708
    
    
    $
    4,474For the year ended March 31, 2004:Allowance for doubtful receivables
    
    $
    1,001
    
    
    $
    777
    
    
    $
    0
    
    
    $
    647
    
    
    $
    1,131Deferred income tax valuation allowance
    
    
    456
    
    
    
    278
    
    
    
    469
    
    
    
    0
    
    
    
    1,203Total allowances deducted from assets
    
    $
    1,457
    
    
    $
    1,055
    
    
    $
    469
    
    
    $
    647
    
    
    $
    2,334
    3.1
    
    Amended and Restated Certificate of Incorporation of the Company dated October 28, 2004. Incorporated by
reference to Exhibit 3.1 to the Companys Annual Report on Form 10-K for the fiscal year ended March 31, 2005.3.2
    
    By-laws of the Company. Incorporated by reference to Annex C to the Proxy Statement.4.1
    
    Form of Specimen Certificate representing the Registrants Common Stock. Incorporated by reference to
Exhibit 4.2 to the Registrants Registration Statement on Form SB-2 (No. 33-78446) (The IPO Registration
Statement).4.2
    
    Form of Specimen Certificate representing Class B Common Stock. Incorporated by reference to Exhibit 4.3 to
the IPO Registration Statement.10.1
    
    The Companys 1994 Stock Option Plan, as amended as of July 17, 2001. Incorporated by reference to Exhibit
10.1 to the Companys Quarterly Report on Form 10-Q for the six months ended June 30, 2001.
 -57-




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##### 



10.2
    
    The Companys 2004 Stock Incentive Plan. Incorporated by reference to Annex B to the Companys Proxy
Statement on Schedule 14A filed with the Securities and Exchange Commission on September 14, 2004.10.3
    
    Lease Agreement, dated as of March 1994, between the Company and Central Properties Limited Partnership,
relating to the Companys Bethesda, Maryland facility. Incorporated by reference to Exhibit 10.4 to the IPO
Registration Statement.10.4
    
    First Amendment to Lease, dated as of June 26, 1996, between the Company and Central Properties Limited
Partnership, relating to additional space at the Companys Bethesda, Maryland facility. Incorporated by reference
to Exhibit 10.5 to the Companys Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997.10.5
    
    Lease Agreement between the School of Posts and Telecommunications and the Company dated November 8, 1995.
Incorporated by reference to Exhibit 10.14 to the Companys Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995.10.6
    
    Amendments Numbers One, Two and Three to the Lease Agreement between the School of Posts and
Telecommunications and the Company dated November 8, 1995, each such amendment dated November 26, 1996.
Incorporated by reference to Exhibit 10.13 to the Companys Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.10.7
    
    Lease Agreement dated May 10, 1998, between the School of Posts and Telecommunications and the Company
relating to the lease of additional space. Incorporated by reference to Exhibit 10.13 to the Companys Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998.10.8
    
    Contractual Joint Venture Contract between the Chinese Academy of Medical Sciences Union Medical &
Pharmaceutical Group Beijing Union Medical & Pharmaceutical General Corporation and the Company, dated September
27, 1995. Incorporated by reference to Exhibit 10.16 to the Companys Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1995.10.9
    
    First Investment Loan Manager Demand Promissory Note dated July 10, 1997 between First National Bank of
Maryland and the Company. Incorporated by reference to Exhibit 10.16 to the Companys Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1997.10.10
    
    Distribution Agreement dated October 11, 2001 between Siemens AG and the Company, Incorporated by reference to
Exhibit 10.18 to the Companys Quarterly Report on Form 10-Q for the nine months ended September 30, 2001.10.11
    
    Second amendment to lease, dated as of November 24, 2000, between the Company and Central Properties Limited
Partnership, relating to the extension of the lease term for the Companys Bethesda, Maryland offices.
Incorporated by reference to Exhibit 10.19 to the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.10.12*
    
    Employment Agreement, dated as of September 1, 2001, between the Company and Roberta Lipson. Incorporated by
reference to Exhibit 10.20 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2001.10.13*
    
    Employment Agreement, dated as of September 1, 2001, between the Company and Elyse Beth Silverberg.
Incorporated by reference to Exhibit 10.21 to the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.10.14*
    
    Employment Agreement, dated as of September 1, 2001, between the Company and Lawrence Pemble. Incorporated by
reference to Exhibit 10.22 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2001.10.15*
    
    Amendment to Employment Agreement dated November 1, 2004, between the Company and Roberta Lipson, incorporated
by reference to Exhibit 10.16 to the Companys Quarterly Report on Form 10-Q for the period ended September 30,
2004.10.16*
    
    Amendment to Employment Agreement dated November 1, 2004, between the Company and Elyse Beth Silverberg,
incorporated by reference to Exhibit 10.17 to the Companys Quarterly Report on Form 10-Q for the period ended
September 30, 2004.10.17*
    
    Amendment to Employment Agreement dated November 1, 2004, between the Company and Lawrence Pemble,
incorporated by reference to Exhibit 10.18 to the Companys Quarterly Report on Form 10-Q for the period ended
September 30, 2004.10.18
    
    Contractual Joint Venture Contract between Shanghai Changning District Central Hospital and the Company, dated
February 9, 2002. Incorporated by reference to Exhibit 10.24 to the Companys Annual Report on Form 10-K for the
fiscal year ended December 31, 2001.10.19
    
    Lease Agreement between Shanghai Changning District Hospital and the Company related to the lease of the
building for Shanghai United Family Hospital. Incorporated by reference to Exhibit 10.25 to the Companys Annual
Report on Form 10-K for the fiscal year ended December 31, 2001.
 -58-




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##### 



10.20
    
    Lease Agreement between China Arts & Crafts Import & Export Corporation and Chindex (Beijing) Consulting
Incorporated related to the lease of the building for the Companys main office in Beijing+. Incorporated by
reference to Exhibit 10.17 to the Companys Quarterly Report on Form 10-Q for the six months ended June 30, 2002.10.21
    
    Agreement between Siemens AG and the Company for long term payment of vendor invoices. Incorporated by
reference to Exhibit 10.18 to the Companys Quarterly Report on Form 10-Q for the nine months ended September 30,
2002.10.22
    
    Form of Securities Purchase Agreement dated as of March 29, 2004 among the Company and the purchasers
thereunder. Incorporated by reference to Exhibit 10.19 to the Companys Registration Statement on Form S-1 (No.
333-114299).10.23
    
    Form of Securities Purchase Agreement dated as of March 21, 2005 among the Company and the purchasers
thereunder. Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated March 21,
2005.10.24
    
    Form of Common Stock Purchase Warrant issued to investors on March 24, 2005. Incorporated by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K dated March 21, 2005.21.1
    
    List of subsidiaries. Incorporated by reference to Exhibit 21.1 to the Companys Registration Statement on
Form S-3 (No. 333-123975).23.1
    
    Consent of Independent Registered Public Accounting Firm (filed herewith)23.2
    
    Consent of Independent Registered Public Accounting Firm (filed herewith)31.1
    
    Certification of the Companys Chief Executive Officer Pursuant to Rule 13a-14(a) (filed herewith)31.2
    
    Certification of the Companys Executive Vice President Finance Pursuant to Rule 13a-14(a) (filed herewith)31.3
    
    Certification of the Companys Principal Accounting Officer Pursuant to Rule 13a-14(a) (filed herewith)32.1
    
    Certification of the Companys Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 (filed herewith)32.2
    
    Certification of the Companys Executive Vice President Finance Pursuant to 18 U.S.C. Section 1350 (filed
herewith)32.3
    
    Certification of the Companys Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350 (filed herewith)
 
 *
    
    Exhibits related to Executive Compensation -59-




---



##### 



SIGNATURES
  CHINDEX INTERNATIONAL, INC.Dated: June 23, 2006
    
    
    
    By: /s/ Roberta LipsonRoberta LipsonChief Executive Officer(principal executive officer)Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant in the capacities and on the dates
indicated.Dated: June 23, 2006
    
    
    

By:
/s/ A. Kenneth NilssonA. Kenneth NilssonChairman of the BoardDated: June 23, 2006
    
    
    

By: /s/ Roberta LipsonRoberta LipsonChief Executive Officer and Director(principal executive officer)Dated: June 23, 2006
    
    
    

By:
/s/ Lawrence PembleLawrence PembleExecutive Vice President-Finance and Director(principal financial officer)Dated: June 23, 2006
    
    
    

By:
/s/ Elyse Beth SilverbergElyse Beth SilverbergExecutive Vice President, Secretary and DirectorDated: June 23, 2006
    
    
    

By:
/s/ Cheryl ChartierCheryl ChartierCorporate Controller(principal accounting officer)
 -60-




---



##### 



Dated: June 23, 2006
    
    
    

By:
/s/ Douglas B. GrobDouglas B. GrobDirectorDated: June 23, 2006
    
    
    

By:
/s/ Holli HarrisHolli HarrisDirectorDated: June 23, 2006
    
    
    

By:
/s/ Carol R. KaufmanCarol R. KaufmanDirectorDated: June 23, 2006
    
    
    

By:
/s/ Julius Y. OestreicherJulius Y. OestreicherDirector
 -61-