##### Table of Contents



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, 2007
 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 and associated Preferred Stock Purchase Rights
 o þ
 o þ
 þ o
 þ
  o þ o
 o þ




---



##### 



CHINDEX INTERNATIONAL, INC.
TABLE OF CONTENTS
 PART I
    
    
    3ITEM 1. BUSINESS
    
    
    3General
    
    
    3Healthcare Services Division
    
    
    3Medical Products Division
    
    
    5Discontinued Operations
    
    
    6Competition
    
    
    6Employees
    
    
    7Internet Information and SEC Documents
    
    
    7ITEM 1A. RISK FACTORS
    
    
    7ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    19ITEM 2. PROPERTIES
    
    
    19ITEM 3. LEGAL PROCEEDINGS
    
    
    20ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    20PART II
    
    
    20ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER REPURCHASES OF EQUITY SECURITIES
    20ITEM 6. SELECTED FINANCIAL DATA *
    
    
    22ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    23Overview
    
    
    23Critical Accounting Policies
    
    
    24Fiscal year ended March 31, 2007 compared to fiscal year ended March 31, 2006
    
    
    25Fiscal year ended March 31, 2006 compared to fiscal year ended March 31, 2005
    
    
    28Liquidity and Capital Resources
    
    
    30Timing of Revenue
    
    
    32Foreign Currency Exchange and Impact of Inflation
    
    
    32ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    33ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    34ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
    
    
    59ITEM 9A. CONTROLS AND PROCEDURES
    
    
    59ITEM 9B. OTHER INFORMATION
    
    
    59PART III
    
    
    59ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    59ITEM 11. EXECUTIVE COMPENSATION
    
    
    59ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    59ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
    
    
    59ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    59PART IV
    
    
    60ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    60Exhibit 3.3Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 31.3Exhibit 32.1Exhibit 32.2Exhibit 32.3
  2




---



##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 
 General
  
    
    Healthcare Services division.This division operates the Companys United Family
Healthcare network of private hospitals and clinics. United Family Healthcare entered the
Beijing market in 1997 with the opening of Beijing United Family Hospital (BJU), and
entered the Shanghai market in 2004 with the opening of Shanghai United Family Hospital.
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 2007, the Healthcare Services
division accounted for 45% 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 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 2007, the Medical Products division accounted
for 55% 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 Healthcare Network (UFH)
   3




---



##### Table of Contents



UFH  Beijing Market  Beijing United Family Hospital and Clinics (BJU)
   4




---



##### Table of Contents



UFH  Shanghai Market  Shanghai United Family Hospital and Clinics (SHU)
   
 Medical Products Division
     5




---



##### Table of Contents



Discontinued Operations
  
 Competition
  6




---



##### Table of Contents



Employees
  
 Internet Information and SEC Documents
  http://www.sec.gov
 
 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.
 7




---



##### Table of Contents



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.
  
    
    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, including exchange rate fluctuations.
  We experienced a net loss in each of fiscal 2005 and fiscal 2006 and may resume experiencing 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.
 8




---



##### Table of Contents



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.
     9




---



##### Table of Contents



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.
  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.
  10




---



##### Table of Contents



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.
   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.
 11




---



##### Table of Contents



Timing of revenues due to seasonality and fluctuations in financial performance vary from quarter
to quarter and are not necessarily indicative of our performance over longer periods.
  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.
  12




---



##### Table of Contents



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.
  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.
  13




---



##### Table of Contents



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.
    
    
    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.
   14




---



##### Table of Contents



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.
  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.
  15




---



##### Table of Contents



If the Chinese Government tightens controls or policies on purchases of medical equipment or
implements reforms which disrupt the market for medical devices our sales could be adversely
affected.
  Risks Relating to Doing Business in China
  The economic policies of the Chinese Government and economic growth of China could adversely affect
us.
  16




---



##### Table of Contents



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, and these regulations could
adversely affect us.
  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.
  17




---



##### Table of Contents



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.
  Our unissued preferred stock could be issued to impede a change in control.
   18




---



##### Table of Contents



ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
      19




---



##### Table of Contents



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, 2006:First Quarter
    
    $
    6.43
    
    
    $
    4.44Second Quarter
    
    
    4.88
    
    
    
    3.30Third Quarter
    
    
    7.75
    
    
    
    3.11Fourth Quarter
    
    
    9.06
    
    
    
    4.33Year Ended March 31, 2007:First Quarter
    
    $
    12.90
    
    
    $
    6.84Second Quarter
    
    
    14.72
    
    
    
    7.60Third Quarter
    
    
    22.99
    
    
    
    11.68Fourth Quarter
    
    
    26.60
    
    
    
    14.54
  20




---



##### Table of Contents



(a)
    
    
    (b)
    
    
    (c)Number ofSecuritiesRemainingAvailable forNumber of
    
    
    
    
    
    
    Future IssuanceSecurities to Be
    
    
    
    
    
    
    UnderIssued Upon
    
    
    Weighted Average
    
    
    EquityExercise of
    
    
    Exercise
    
    
    CompensationOutstanding
    
    
    Price of Outstanding
    
    
    Plans (excludingOptions,
    
    
    Options, Warrants
    
    
    securitiesWarrants and
    
    
    and
    
    
    reflected in columnPlan Category
    
    Rights
    
    
    Rights
    
    
    (a)Equity Compensation Plans
Approved By Security Holders1994 Stock Option Plan
    
    
    773,374
    
    
    $
    4.75
    
    
    
    02004 Stock Incentive Plan
    
    
    360,269
    
    
    $
    6.25
    
    
    
    19,950Equity Compensation Plans Not
Approved By Security Holders
    
    None
    
    
    None
    
    
    NoneTotal
    
    
    1,133,643
    
    
    
    
    
    
    
    19,950
  21




---



##### Table of Contents



ITEM
6. SELECTED FINANCIAL DATA *
  Three months ended
    
    Year endedYear ended March 31,
    
    March 31,
    
    December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002
    
    2002(unaudited)Statement of Operations DataNet sales
    
    $
    105,921
    
    
    $
    90,836
    
    
    $
    83,159
    
    
    $
    75,419
    
    
    $
    19,418
    
    
    $
    13,827
    
    
    $
    62,501Percent increase over
prior period
    
    
    17
    %
    
    
    9
    %
    
    
    10
    %
    
    
    21
    %
    
    
    40
    %
    
    
    42
    %
    
    
    21
    %Net income (loss) from
continuing operations
    
    
    2,982
    
    
    
    167
    
    
    
    (3,924
    )
    
    
    (854
    )
    
    
    303
    
    
    
    (37
    )
    
    
    1,100Net income (loss) from
continuing operations per
share-basic
    
    
    .44
    
    
    
    .03
    
    
    
    (.74
    )
    
    
    (.23
    )
    
    
    .08
    
    
    
    (.01
    )
    
    
    .30Net income (loss) from
continuing operations per
share-diluted
    
    
    .39
    
    
    
    .02
    
    
    
    (.74
    )
    
    
    (.23
    )
    
    
    .08
    
    
    
    (.01
    )
    
    
    .29Market closing price per
share  end of year
    
    
    17.42
    
    
    
    9.06
    
    
    
    6.18
    
    
    
    10.09
    
    
    
    2.00
    
    
    
    2.78
    
    
    
    1.86Book value per share at
end of period
    
    
    3.93
    
    
    
    3.37
    
    
    
    3.84
    
    
    
    3.89
    
    
    
    3.79
    
    
    
    3.65
    
    
    
    3.77Cash dividends declared
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00Balance Sheet Data (at end of period):Total assets
    
    $
    62,907
    
    
    $
    57,046
    
    
    $
    57,288
    
    
    $
    47,851
    
    
    $
    42,340
    
    
    $
    32,859
    
    
    $
    43,126Long term liabilities
    
    
    8,737
    
    
    
    8,660
    
    
    
    2,873
    
    
    
    125
    
    
    
    3,734
    
    
    
    0
    
    
    
    3,609Total stockholders equity
    
    
    27,918
    
    
    
    22,638
    
    
    
    24,963
    
    
    
    17,198
    
    
    
    14,044
    
    
    
    13,497
    
    
    
    13,968
 Three months ended
    
    Year endedYear ended March 31,
    
    March 31,
    
    December 31,2007
    
    2006
    
    2005
    
    2004
    
    2003
    
    2002
    
    2002(unaudited)Segment information:Healthcare Services
division-sales
    
    $
    47,944
    
    
    $
    36,500
    
    
    $
    22,801
    
    
    $
    15,954
    
    
    $
    3,470
    
    
    $
    2,799
    
    
    $
    12,963Healthcare Services
division-operating income
(loss)
    
    
    5,028
    
    
    
    1,585
    
    
    
    (2,844
    )
    
    
    (680
    )
    
    
    (178
    )
    
    
    42
    
    
    
    586Medical Products division-sales
    
    
    57,977
    
    
    
    54,336
    
    
    
    60,358
    
    
    
    59,465
    
    
    
    15,948
    
    
    
    11,028
    
    
    
    49,538Medical Products division
operating (loss) income
    
    
    (1,154
    )
    
    
    (1,436
    )
    
    
    (880
    )
    
    
    223
    
    
    
    627
    
    
    
    (180
    )
    
    
    438
 
 We changed our fiscal year end to March 31 as of 2004.*
    
    In fiscal 2006, the Company determined that the retail operations of our former
Healthcare Products Distribution division, which had suffered continuing losses over a nine year
period, would be closed. The close-down of the retail operations, which distributed health and
personal care products to the consumer markets in China through retail pharmacies, was completed by
the end of fiscal 2007. The distribution and logistics services, which had been part of the
discontinued division, have been absorbed by the parent company. The distribution of medical
products that had been conducted in the former Healthcare Products
Distribution division is now conducted by the Medical Products division. The operating results
related to the closedown of this business have been segregated from continuing operations and
reported as discontinued operations on a separate line item on the consolidated statements of
operations. The segment information in the table above has been restated to reflect the new
reporting structure. See Notes 2 and 13 to the Companys consolidated financial statements. 22




---



##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 Overview
     
    
    Healthcare Services division.This division operates the Companys United Family
Healthcare network of private hospitals and clinics. United Family Healthcare entered the
Beijing market in 1997 with the opening of Beijing United Family Hospital (BJU), and
entered the Shanghai market in 2004 with the opening of Shanghai United Family Hospital.
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 2007, the Healthcare Services
division accounted for 45% 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. 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 2007, the Medical Products
division accounted for 55% of our revenue. (See Note 13 to the consolidated financial
statements appearing elsewhere in this Annual Report on Form 10-K.)
 23




---



##### Table of Contents



Critical Accounting Policies
   Revenue recognition
    24




---



##### Table of Contents



Receivable collectibility
    Valuation allowance of deferred tax assets
   Inventories
   
 Fiscal year ended March 31, 2007 compared to fiscal year ended March 31, 2006
  25




---



##### Table of Contents



Healthcare Services Division
    Medical Products Division
  26




---



##### Table of Contents



Other Income and Expenses
  Taxes
    27




---



##### Table of Contents



Fiscal year ended March 31, 2006 compared to fiscal year ended March 31, 2005
   Healthcare Services Division
   28




---



##### Table of Contents



Liquidity and
Capital Resources
 Medical Products Division
 Timing of Revenue
    29




---



##### Table of Contents



Other Income and Expenses
 Liquidity and Capital Resources
 Taxes
  Discontinued Operations
    
 Liquidity and Capital Resources
   30




---



##### Table of Contents



31




---



##### Table of Contents



Total
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    ThereafterLine of credit
    
    $
    549
    
    
    $
    549
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Bank Loan
    
    
    13,035
    (1)
    
    
    565
    
    
    
    565
    
    
    
    1,393
    
    
    
    1,373
    
    
    
    1,352
    
    
    
    7,787Vendor financing
    
    
    2,447
    (3)
    
    
    2,161
    
    
    
    231
    
    
    
    55
    
    
    
    0
    
    
    
    0
    
    
    
    0Capital leases
    
    
    98
    
    
    
    40
    
    
    
    39
    
    
    
    19
    
    
    
    0
    
    
    
    0
    
    
    
    0Operating leases
    
    
    10,162
    
    
    
    2,257
    
    
    
    1,656
    
    
    
    1,457
    
    
    
    1,296
    
    
    
    279
    
    
    
    3,217Other (2)
    
    
    271
    
    
    
    58
    
    
    
    64
    
    
    
    71
    
    
    
    78
    
    
    
    0
    
    
    
    0Total contractual
obligations
    
    $
    26,562
    
    
    $
    5,630
    
    
    $
    2,555
    
    
    $
    2,995
    
    
    $
    2,747
    
    
    $
    1,631
    
    
    $
    11,004
 
 (1)
    
    Includes interest of $4,642,000.(2)
    
    Contractual fees owing to our BJU joint venture partner.(3)
    
    Includes interest of $61,000.  
 Timing of Revenue
     
 Foreign Currency Exchange and Impact of Inflation
    32




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  33




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Report of Independent Registered Public Accounting Firm
on Internal Control over Financial Reporting
 
 Internal Control  Integrated Framework
      34




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     Share-Based Payment
 Internal Control 
Integrated Framework
   35




---



##### Table of Contents



March 31, 2007
    
    
    March 31, 2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,106
    
    
    $
    9,034Restricted cash
    
    
    1,590
    
    
    
    383Trade accounts receivable, less allowance for doubtful accounts of $2,827
and $2,250, respectivelyEquipment sales receivables
    
    
    13,133
    
    
    
    7,685Patient service receivables
    
    
    6,104
    
    
    
    5,468Inventories
    
    
    7,835
    
    
    
    8,681Deferred income tax
    
    
    2,463
    
    
    
    177Other current assets
    
    
    3,153
    
    
    
    2,322Current assets of discontinued operations
    
    
    
    
    
    
    1,006Total current assets
    
    
    43,384
    
    
    
    34,756Property and equipment, net
    
    
    18,482
    
    
    
    19,119Long-term deferred income taxes
    
    
    607
    
    
    
    2,452Other assets
    
    
    434
    
    
    
    719Total assets
    
    $
    62,907
    
    
    $
    57,046LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    22,877
    
    
    $
    21,727Short-term portion of capitalized leases
    
    
    36
    
    
    
    50Short-term debt and vendor financing
    
    
    2,710
    
    
    
    3,080Income taxes payable
    
    
    629
    
    
    
    143Current liabilities of discontinued operations
    
    
    
    
    
    
    748Total current liabilities
    
    
    26,252
    
    
    
    25,748Long-term portion of capitalized leases
    
    
    58
    
    
    
    91Long-term debt and vendor financing
    
    
    8,679
    
    
    
    8,569Total liabilities
    
    
    34,989
    
    
    
    34,408Commitments 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, 2007 and 2006, respectively:Common stock  6,332,345 and 5,946,873 shares issued and
outstanding at March 31, 2007 and 2006, respectively
    
    
    63
    
    
    
    60Class B stock  775,000 shares issued and outstanding at
March 31, 2007 and 2006
    
    
    8
    
    
    
    8Additional paid in capital
    
    
    38,947
    
    
    
    36,436Accumulated other comprehensive income
    
    
    106
    
    
    
    75Accumulated deficit
    
    
    (11,206
    )
    
    
    (13,941
    )Total stockholders equity
    
    
    27,918
    
    
    
    22,638Total liabilities and stockholders equity
    
    $
    62,907
    
    
    $
    57,046
  36




---



##### Table of Contents



Years endedMarch 31,2007
    
    
    2006
    
    
    2005Product sales
    
    $
    57,977
    
    
    $
    54,336
    
    
    $
    60,358Healthcare services revenue
    
    
    47,944
    
    
    
    36,500
    
    
    
    22,801Total revenue
    
    
    105,921
    
    
    
    90,836
    
    
    
    83,159Cost and expensesProduct sales costs
    
    
    43,891
    
    
    
    40,913
    
    
    
    46,249Healthcare services costs
    
    
    40,534
    
    
    
    33,455
    
    
    
    24,636Selling and marketing expenses
    
    
    9,930
    
    
    
    10,195
    
    
    
    9,993General and administrative
    
    
    6,921
    
    
    
    5,723
    
    
    
    6,058Income (loss) from continuing operations
    
    
    4,645
    
    
    
    550
    
    
    
    (3,777
    )Other (expenses) and incomeInterest expense
    
    
    (766
    )
    
    
    (589
    )
    
    
    (229
    )Interest income
    
    
    238
    
    
    
    173
    
    
    
    84Miscellaneous income (expense)  net
    
    
    70
    
    
    
    (18
    )
    
    
    (59
    )Income (loss) from continuing operations before income taxes
    
    
    4,187
    
    
    
    116
    
    
    
    (3,981
    )(Provision for) benefit from income taxes
    
    
    (1,205
    )
    
    
    51
    
    
    
    57Net income (loss) from continuing operations
    
    
    2,982
    
    
    
    167
    
    
    
    (3,924
    )Loss from discontinued operations
    
    
    (247
    )
    
    
    (3,105
    )
    
    
    (1,734
    )Net income (loss)
    
    $
    2,735
    
    
    $
    (2,938
    )
    
    $
    (5,658
    )Net income (loss) per common share  basicContinuing operations
    
    $
    .44
    
    
    $
    .03
    
    
    $
    (.74
    )Discontinued operations
    
    
    (.04
    )
    
    
    (.48
    )
    
    
    (.33
    )Net income (loss)
    
    $
    .40
    
    
    $
    (.45
    )
    
    $
    (1.07
    )Weighted average shares outstanding  basic
    
    
    6,857,913
    
    
    
    6,539,572
    
    
    
    5,313,573Net income
(loss) per common share  dilutedContinuing operations
    
    $
    .39
    
    
    $
    .02
    
    
    $
    (.74
    )Discontinued operations
    
    
    (.03
    )
    
    
    (.45
    )
    
    
    (.33
    )Net income (loss)
    
    $
    .36
    
    
    $
    (.43
    )
    
    $
    (1.07
    )Weighted
average shares outstanding  diluted
    
    
    7,677,406
    
    
    
    6,859,688
    
    
    
    5,313,573
  37




---



##### Table of Contents



Years ended March 31,2007
    
    
    2006
    
    
    2005OPERATING ACTIVITIESNet income (loss)
    
    $
    2,735
    
    
    $
    (2,938
    )
    
    $
    (5,658
    )Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:Depreciation
    
    
    3,258
    
    
    
    2,910
    
    
    
    1,966Inventory write down
    
    
    254
    
    
    
    538
    
    
    
    96Provision for doubtful accounts
    
    
    1,598
    
    
    
    797
    
    
    
    1,428Stock based compensation
    
    
    196
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    (442
    )
    
    
    (627
    )
    
    
    (201
    )Loss on disposal of assets
    
    
    95
    
    
    
    72
    
    
    
    Foreign exchange (gain) loss
    
    
    (771
    )
    
    
    (401
    )
    
    
    53Changes in operating assets and liabilities:Restricted cash
    
    
    (1,183
    )
    
    
    (383
    )
    
    
    Trade receivables
    
    
    (6,278
    )
    
    
    1,310
    
    
    
    120Inventories
    
    
    826
    
    
    
    1,845
    
    
    
    (1,622
    )Other current assets
    
    
    (597
    )
    
    
    (288
    )
    
    
    201Other assets
    
    
    300
    
    
    
    72
    
    
    
    (391
    )Accounts payable and accrued expenses
    
    
    (110
    )
    
    
    (4,582
    )
    
    
    2,011Income taxes payable
    
    
    480
    
    
    
    139
    
    
    
    (377
    )Net cash provided by (used) in operating activities
    
    
    361
    
    
    
    (1,536
    )
    
    
    (2,374
    )INVESTING ACTIVITIESPurchases of property and equipment
    
    
    (2,474
    )
    
    
    (4,133
    )
    
    
    (9,447
    )Cash received on disposal of property and equipment
    
    
    
    
    
    
    108
    
    
    
    Net cash used in investing activities
    
    
    (2,474
    )
    
    
    (4,025
    )
    
    
    (9,447
    )FINANCING ACTIVITIESProceeds from debt and vendor financing
    
    
    2,235
    
    
    
    11,046
    
    
    
    6,783Repayment of debt, vendor financing and capitalized leases
    
    
    (2,611
    )
    
    
    (5,167
    )
    
    
    (7,003
    )Debt issuance costs
    
    
    
    
    
    
    (96
    )
    
    
    Proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    13,179Proceeds from exercise of stock options
    
    
    2,318
    
    
    
    555
    
    
    
    238Net cash provided by financing activities
    
    
    1,942
    
    
    
    6,338
    
    
    
    13,197Effect of foreign exchange rate changes on cash and cash equivalents
    
    
    243
    
    
    
    84
    
    
    
    6Net increase in cash and cash equivalents
    
    
    72
    
    
    
    861
    
    
    
    1,382Cash and cash equivalents at beginning of year
    
    
    9,034
    
    
    
    8,173
    
    
    
    6,791Cash and cash equivalents at end of year
    
    $
    9,106
    
    
    $
    9,034
    
    
    $
    8,173Supplemental disclosures of cash flows information:Cash paid for interest
    
    $
    749
    
    
    $
    235
    
    
    $
    289Cash paid for taxes
    
    $
    1,123
    
    
    $
    453
    
    
    $
    301Non-cash investing and financing activities consist of the following:Acquisition of property and equipment via capital leases
    
    $
    0
    
    
    $
    0
    
    
    $
    205Transfer of demonstration inventory to property and equipment
    
    $
    0
    
    
    $
    0
    
    
    $
    1,033
  38




---



##### Table of Contents



AccumulatedCommon Stock
    
    Additional
    
    
    
    
    
    OtherCommon Stock
    
    Class B
    
    Paid In
    
    Accumulated
    
    ComprehensiveShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Deficit
    
    Income
    
    TotalBalance 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
    
    
    
    22,638Net income 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,735
    
    
    
    
    
    
    
    2,735Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    31Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,766Stock based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    
    
    
    
    196Options and warrants
exercised
    
    
    385,472
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    2,315
    
    
    
    
    
    
    
    
    
    
    
    2,318Balance at
March 31, 2007
    
    
    6,332,345
    
    
    $
    63
    
    
    
    775,000
    
    
    $
    8
    
    
    $
    38,947
    
    
    $
    (11,206
    )
    
    $
    106
    
    
    $
    27,918
  39




---



##### Table of Contents



CHINDEX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2007
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    Consolidation
   Revenue Recognition
    40




---



##### Table of Contents



Accounts Receivable
  Inventories
   Property and Equipment
   Income Taxes
   41




---



##### Table of Contents



Cash Equivalents
  Fair Value of Financial Instruments
  Earnings Per Share
  Stock Based Compensation
    42




---



##### Table of Contents



2006
    
    
    2005Net loss, as reported
    
    $
    (2,938
    )
    
    $
    (5,658
    )Deduct: total stock-based employee
compensation expense determined under fair value
method for all awards, net of related tax
effects
    
    
    (1,333
    )
    
    
    (1,266
    )Net loss, pro-forma
    
    $
    (4,271
    )
    
    $
    (6,924
    )Pro forma loss per share:Loss per share, basic
    
    As reported
    
    $
    (.45
    )
    
    $
    (1.07
    )Loss per share, basic
    
    Pro forma
    
    $
    (.65
    )
    
    $
    (1.30
    )Loss per share, diluted
    
    As reported
    
    $
    (.43
    )
    
    $
    (1.07
    )Loss per share, diluted
    
    Pro forma
    
    $
    (.62
    )
    
    $
    (1.30
    )
    Volatility
    
    71.02%Dividend yield
    
    0.00%Risk-free interest rate
    
    4.95%Expected average life
    
    7.0 years
   43




---



##### Table of Contents



Debt Issuance Costs
  Dividends
  Foreign Currencies
  Use of Estimates
  Reclassifications
  New Accounting Standards
   44




---



##### Table of Contents



2. DISCONTINUED OPERATIONS
   Year ended March 31,2007
    
    2006
    
    2005Net revenue from discontinued operations
    
    $
    0
    
    
    $
    11,370
    
    
    $
    17,616Loss from discontinued operations
    
    $
    (247
    )
    
    $
    (3,105
    )
    
    $
    (1,734
    )
    March 31,
    
    
    March 31,2007
    
    
    2006Current assets of discontinued operations:Product sales receivables
    
    $
    0
    
    
    $
    868Other current assets
    
    
    0
    
    
    
    138$
    0
    
    
    $
    1,006Current liabilities of discontinued operations:Accounts payable and accrued expenses
    
    $
    (0
    )
    
    $
    (748
    )$
    (0
    )
    
    $
    (748
    )
 45




---



##### Table of Contents



3. INVENTORIES
 March 31,
    
    
    March 31,2007
    
    
    2006Inventories consist of the following:Merchandise inventory
    
    $
    4,422
    
    
    $
    5,597Healthcare services inventory
    
    
    615
    
    
    
    508Parts and peripherals inventory
    
    
    2,798
    
    
    
    2,576$
    7,835
    
    
    $
    8,681
 4. PROPERTY AND EQUIPMENT, NET
 March 31,
    
    
    March 31,2007
    
    
    2006Property and equipment, net consists of the
following:Furniture and equipment
    
    $
    12,896
    
    
    $
    11,988Vehicles
    
    
    68
    
    
    
    68Demonstration equipment
    
    
    2,762
    
    
    
    2,509Leasehold improvements
    
    
    14,796
    
    
    
    13,75830,522
    
    
    
    28,323Less: accumulated depreciation and amortization
    
    
    (12,040
    )
    
    
    (9,204
    )$
    18,482
    
    
    $
    19,119
  5. DEBT
  March 31,
    
    
    March 31,2007
    
    
    2006Short term
    
    
    Long term
    
    
    Short term
    
    
    Long termLine of credit
    
    $
    549
    
    
    $
    0
    
    
    $
    1,476
    
    
    $
    0IFC loan
    
    
    0
    
    
    
    8,393
    
    
    
    0
    
    
    
    8,083Vendor financing
    
    
    2,161
    
    
    
    286
    
    
    
    1,604
    
    
    
    486$
    2,710
    
    
    $
    8,679
    
    
    $
    3,080
    
    
    $
    8,569
  46




---



##### Table of Contents



Total
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    ThereafterLine of credit
    
    $
    549
    
    
    $
    549
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Bank Loan
    
    
    8,393
    
    
    
    0
    
    
    
    0
    
    
    
    839
    
    
    
    839
    
    
    
    839
    
    
    
    5,876Vendor financing
    
    
    2,447
    
    
    
    2,161
    
    
    
    231
    
    
    
    55
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    11,389
    
    
    $
    2,710
    
    
    $
    231
    
    
    $
    894
    
    
    $
    839
    
    
    $
    839
    
    
    $
    5,876
  6. STOCKHOLDERS EQUITY
 Common Stock
  47




---



##### Table of Contents



Stock Option Plan
     Weighted AverageGrant-Date FairNumber of Shares
    
    
    ValueNonvested options outstanding, beginning of period
    
    
    76,333
    
    
    $
    5.26Vested
    
    
    (32,633
    )
    
    
    4.22Canceled
    
    
    (16,833
    )
    
    
    7.34Nonvested options outstanding, end of period
    
    
    26,867
    
    
    $
    5.22
 48




---



##### Table of Contents



Number of shares
    
    
    Aggregate Intrinsicunderlying
    
    
    Value of Restrictedrestricted
    
    
    Stock (in thousands)stock
    
    
    *Outstanding as of March 31, 2006
    
    
    0Grants
    
    
    28,000Vesting
    
    
    0Forfeiture
    
    
    0Outstanding at March 31, 2007
    
    
    28,000
    
    
    $
    488,000Expected to vest
    
    
    26,393
    
    
    $
    460,000
   Weighted
    
    
    Aggregate
    
    
    
    
    
    
    Weighted
    
    
    Aggregate
    
    
    
    
    
    
    Weighted
    
    
    AggregateAverage
    
    
    Intrinsic
    
    
    
    
    
    
    Average
    
    
    Intrinsic
    
    
    
    
    
    
    Average
    
    
    IntrinsicExercise
    
    
    Value (in
    
    
    
    
    
    
    Exercise
    
    
    Value (in
    
    
    
    
    
    
    Exercise
    
    
    Value (in2007
    
    
    Price
    
    
    000s)
    
    
    2006
    
    
    Price
    
    
    000s)
    
    
    2005
    
    
    Price
    
    
    000s)Options
outstanding,
beginning of year:
    
    
    1,315,742
    
    
    $
    5.53
    
    
    
    
    
    
    
    1,113,144
    
    
    $
    4.85
    
    
    
    
    
    
    
    948,700
    
    
    $
    2.30Granted
    
    
    3,000
    
    
    
    8.30
    
    
    
    
    
    
    
    449,050
    
    
    
    6.16
    
    
    
    
    
    
    
    306,900
    
    
    
    12.60Exercised
    
    
    (120,408
    )
    
    
    5.22
    
    
    
    
    
    
    
    (218,430
    )
    
    
    2.54
    
    
    
    
    
    
    
    (104,894
    )
    
    
    2.27Canceled
    
    
    (64,691
    )
    
    
    11.60
    
    
    
    
    
    
    
    (28,022
    )
    
    
    12.04
    
    
    
    
    
    
    
    (37,562
    )
    
    
    10.76Options outstanding,
end of year
    
    
    1,133,643
    
    
    $
    5.23
    
    
    $
    13,824
    
    
    
    1,315,742
    
    
    $
    5.53
    
    
    $
    9,399
    
    
    
    1,113,144
    
    
    $
    4.85
    
    
    $
    3,303Weighted average
remaining
contractual term
    
    
    5.85
    
    
    
    
    
    
    
    
    
    
    
    6.98
    
    
    
    
    
    
    
    
    
    
    
    6.55Options exercisable
at end of year
    
    
    1,106,776
    
    
    $
    5.17
    
    
    $
    13,558
    
    
    
    1,239,409
    
    
    $
    5.40
    
    
    $
    8,707
    
    
    
    1,036,344
    
    
    $
    4.32
    
    
    $
    3,289Options exercisable
at end of year and
expected to be
exercisable **
    
    
    1,127,859
    
    
    $
    5.19
    
    
    $
    13,788
    
    
    
    ***
    
    
    
    ***
    
    
    
    ***
    
    
    
    ***
    
    
    
    ***
    
    
    
    ***
 
 *
    
    The aggregate intrinsic value on this table was calculated based on the positive difference
between the closing market price of the Companys common stock on March 31, 2007, 2006 and 2005
($17.42, $9.06 and $6.18, respectively) and the exercise price of the underlying options.**
    
    Options exercisable at March 31, 2007, 2006 and 2005, and expected to be exercisable include
both vested options and non-vested options outstanding less our expected forfeiture rate.***
    
    Not calculated in prior years. Recent Issuance of Securities
  49




---



##### Table of Contents



Shares of Common Stock Reserved
  7. EARNINGS PER SHARE
   Year ended March 31,2007
    
    
    2006
    
    
    2005Numerator:Net income (loss) from continuing
operations
    
    $
    2,982
    
    
    $
    167
    
    
    $
    (3,924
    )Loss from discontinued operations
    
    
    (247
    )
    
    
    (3,105
    )
    
    
    (1,734
    )Net income (loss)
    
    $
    2,735
    
    
    $
    (2,938
    )
    
    $
    (5,658
    )Denominator:Weighted average shares outstanding-basic
    
    
    6,857,913
    
    
    
    6,539,572
    
    
    
    5,313,573Effect of dilutive securities:Shares issuable upon exercise of
dilutive outstanding stock options,
restricted stock & warrants:
    
    
    819,493
    
    
    
    320,116
    
    
    
    0Weighted average shares
outstanding-diluted
    
    
    7,677,406
    
    
    
    6,859,688
    
    
    
    5,313,573
 50




---



##### Table of Contents



Year ended March 31,2007
    
    
    2006
    
    
    2005Net income (loss) per common share 
basic:Net income (loss) from continuing
operations
    
    $
    .44
    
    
    $
    .03
    
    
    $
    (.74
    )Loss from discontinued operations
    
    $
    (.04
    )
    
    $
    (.48
    )
    
    $
    (.33
    )Net loss
    
    $
    .40
    
    
    $
    (.45
    )
    
    $
    (1.07
    )Net income (loss) per common share
- diluted:Net income (loss) from continuing
operations
    
    $
    .39
    
    
    $
    .02
    
    
    $
    (.74
    )Loss from discontinued operations
    
    $
    (.03
    )
    
    $
    (.45
    )
    
    $
    (.33
    )Net income (loss)
    
    $
    .36
    
    
    $
    (.43
    )
    
    $
    (1.07
    )
  8. INCOME TAXES
  2007
    
    
    2006
    
    
    2005U.S.
    
    $
    (875
    )
    
    $
    (544
    )
    
    $
    (1,847
    )Foreign
    
    
    5,062
    
    
    
    660
    
    
    
    (2,134
    )Total
    
    $
    4,187
    
    
    $
    116
    
    
    $
    (3,981
    )
  2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    ( 1,596
    )
    
    
    (576
    )
    
    
    (144
    )( 1,596
    )
    
    
    (576
    )
    
    
    (144
    )Deferred:Federal
    
    
    (1,301
    )
    
    
    (53
    )
    
    
    170State
    
    
    51
    
    
    
    (10
    )
    
    
    31Foreign
    
    
    1,641
    
    
    
    690
    
    
    
    391
    
    
    
    627
    
    
    
    201Total benefit (provision)
    
    $
    (1,205
    )
    
    $
    51
    
    
    $
    57
  51




---



##### Table of Contents



2007
    
    
    2006
    
    
    2005Income tax expense (benefit) at federal statutory rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State taxes (net of federal benefit)
    
    
    (1.0
    )%
    
    
    5.6
    %
    
    
    1.8
    %Foreign rate differential
    
    
    (5.0
    )%
    
    
    (227.6
    )%
    
    
    2.7
    %Change in valuation allowance
    
    
    (3.4
    )%
    
    
    140.5
    %
    
    
    (42.7
    )%Other permanent differences
    
    
    4.2
    %
    
    
    3.5
    %
    
    
    5.6
    %28.8
    %
    
    
    (44.0
    )%
    
    
    1.4
    %
  2007
    
    
    2006Deferred tax assets, net:Allowance for doubtful accounts
    
    
    803
    
    
    
    274Sales commissions
    
    
    187
    
    
    
    181Net operating loss carryforwards
    
    
    4,235
    
    
    
    4,947Alternative minimum tax
    
    
    47
    
    
    
    47Depreciation
    
    
    82
    
    
    
    150Start-up costs
    
    
    491
    
    
    
    758Other
    
    
    458
    
    
    
    6,303
    
    
    
    6,357Valuation allowance
    
    
    (3,081
    )
    
    
    (3,105
    )Deferred tax assets, net of valuation allowance
    
    
    3,222
    
    
    
    3,252Deferred tax liabilities:Unremitted earnings on foreign subsidiaries
    
    
    
    
    
    
    (623
    )Other
    
    
    (152
    )
    
    
    Total deferred tax liabilities
    
    
    (152
    )
    
    
    (623
    )Total net deferred taxes
    
    
    3,070
    
    
    
    2,629
   52




---



##### Table of Contents



9. COMMITMENTS
 Leases
   Year ending March 31:2008
    
    $
    2,2572009
    
    
    1,6562010
    
    
    1,4572011
    
    
    1,2962012
    
    
    279Thereafter
    
    
    3,217Net minimum rental commitments
    
    $
    10,162
   53




---



##### Table of Contents



10. CONCENTRATIONS OF CREDIT RISK
    11. SIGNIFICANT CUSTOMERS/SUPPLIERS
   12. ACCOUNTING FOR VARIABLE INTEREST ENTITIES (VIE)
  54




---



##### Table of Contents



13. SEGMENT REPORTING
   Healthcare
    
    
    MedicalServices
    
    
    Products
    
    
    TotalAssets
    
    $
    34,129,000
    
    
    $
    28,778,000
    
    
    $
    62,907,000Sales and service revenue
    
    $
    47,944,000
    
    
    $
    57,977,000
    
    
    $
    105,921,000Gross Profit
    
    
    n/a
    *
    
    
    14,086,000
    
    
    
    n/a
    *Gross Profit %
    
    
    n/a
    *
    
    
    24
    %
    
    
    n/a
    *Income (loss) from continuing
operations before foreign
exchange gain
    
    $
    5,028,000
    
    
    $
    (1,154,000
    )
    
    $
    3,874,000Foreign exchange gain
    
    
    
    
    
    
    
    
    
    
    771,000Income from continuing operations
    
    
    
    
    
    
    
    
    
    $
    4,645,000Other (expense) net
    
    
    
    
    
    
    
    
    
    
    (458,000
    )Income from continuing
operations before income taxes
    
    
    
    
    
    
    
    
    
    $
    4,187,000
  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/a
    *Gross Profit %
    
    
    n/a
    *
    
    
    25
    %
    
    
    n/a
    *Income (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
 55




---



##### Table of Contents



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/a
    *Gross Profit %
    
    
    n/a
    *
    
    
    23
    %
    
    
    n/a
    *Loss 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
    )
  
 *
    
    Gross profit margins not routinely calculated in the healthcare industry. 14. CONTINGENCIES
  15. SUBSEQUENT EVENTS
 Termination of Agreement:
  Stockholder Rights Plan:
  56




---



##### Table of Contents



16. SELECTED QUARTERLY DATA (UNAUDITED)
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterFor the year ended March 31, 2007:Revenue
    
    $
    24,415
    
    
    $
    26,480
    
    
    $
    30,344
    
    
    $
    24,682Income from continuing operations before
income taxes
    
    
    1,512
    
    
    
    762
    
    
    
    1,046
    
    
    
    867Net income from continuing operations
    
    
    525
    
    
    
    1,130
    
    
    
    679
    
    
    
    648Net income
    
    
    512
    
    
    
    879
    
    
    
    679
    
    
    
    665Income per share of common stock  basicNet income from continuing operations
    
    
    .08
    
    
    
    .17
    
    
    
    .10
    
    
    
    .09Net income
    
    
    .08
    
    
    
    .13
    
    
    
    .10
    
    
    
    .09Diluted income earnings per share of common
stockNet income from continuing operations
    
    
    .07
    
    
    
    .15
    
    
    
    .09
    
    
    
    .09Net income
    
    
    .07
    
    
    
    .12
    
    
    
    .09
    
    
    
    .08Cash dividends per share of common stock
    
    
    .00
    
    
    
    .00
    
    
    
    .00
    
    
    
    .00For 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
    
    
    
    .00
 57




---



##### Table of Contents



First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterFor 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
    
    
    
    .00
 58




---



##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Managements Report on Internal Control Over Financial Reporting
 Internal Control  Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission
  
 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, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  59




---



##### Table of Contents



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, 2007:Allowance for doubtful receivables
    
    $
    2,250
    
    
    
    1,598
    
    
    
    (169
    )
    
    
    852
    
    
    $
    2,827Deferred income tax valuation allowance
    
    $
    3,105
    
    
    
    0
    
    
    
    79
    
    
    
    103
    
    
    $
    3,081Litigation
accrual
    
    $
    280
    
    
    
    136
    
    
    
    11
    
    
    
    104
    
    
    $
    323For 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
    
    
    $
    3,105Litigation
accrual
    
    $
    0
    
    
    
    280
    
    
    
    0
    
    
    
    0
    
    
    $
    280For 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
    
    
    $
    2,623
    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 Companys Proxy Statement on Schedule 14A
filed with the Securities and Exchange Commission on June 7, 2002.3.3
    
    Certificate of Designations of
Series A Junior Participating Preferred Stock of Chindex
International, Inc. (filed herewith)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.
 60




---



##### Table of Contents



4.3
    
    Rights Agreement, dated as of June 7, 2007, between Chindex International, Inc. and American Stock Transfer &
Trust Company, as Rights Agent, which includes form of Right Certificate as Exhibit B and the Summary of Rights to Purchase
Preferred Stock as Exhibit C (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by
the registrant with the Securities and Exchange Commission on June 7, 2007).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, 2001.10.2
    
    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 March 1, 2006, between the Company and Roberta Lipson. Incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K dated October 31, 2006.10.13*
    
    Employment Agreement, dated as of March 1, 2006, between the Company and Elyse Beth Silverberg. Incorporated
by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K dated October 31, 2006.10.14*
    
    Employment Agreement, dated as of March 1, 2006, between the Company and Lawrence Pemble. Incorporated by
reference to Exhibit 10.3 to the Companys Current Report on Form 8-K dated October 31, 2006.10.15
    
    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, 2001.10.16
    
    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, 2001.10.17
    
    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, 2002.10.18
    
    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,
2002.10.19
    
    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)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
Chief Financial Officer 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 Chief Financial Officer 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 61




---



##### Table of Contents



SIGNATURES
  CHINDEX INTERNATIONAL, INC.Dated: June 12, 2007
    By:
    /S/ Roberta LipsonRoberta LipsonChief Executive Officer
(principal executive officer)  Dated: June 12, 2007
    By:
    /S/ A. Kenneth NilssonA. Kenneth NilssonChairman of the Board Dated: June 12, 2007
    By:
    /S/ Roberta LipsonRoberta LipsonChief Executive Officer and Director
(principal executive officer) Dated: June 12, 2007
    By:
    /S/ Lawrence PembleLawrence PembleExecutive Vice President-Finance, Chief Financial
Officer and Director
(principal financial officer) Dated June 12, 2007
    By:
    /S/ Elyse Beth SilverbergElyse Beth SilverbergExecutive Vice President, Secretary and Director Dated: June 12, 2007
    By:
    /S/ Cheryl ChartierCheryl ChartierCorporate Controller
(principal accounting officer) 62




---



##### Table of Contents



Dated: June 12, 2007
    By:
    /S/ Holli HarrisHolli HarrisDirector Dated: June 12, 2007
    By:
    /S/ Carol R. KaufmanCarol R. KaufmanDirector Dated: June 12, 2007
    By:
    /S/ Julius Y. OestreicherJulius Y. OestreicherDirector 63