FORM 10-KSB
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549
                                        
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

                   For the Fiscal Year Ended December 31, 1998
                                        
                           Commission File No. 0-24624
                          ----------------------------
                         U.S.-CHINA INDUSTRIAL EXCHANGE
                 (Name of small business issuer in its charter)
                                        
           NEW YORK                                         13-3097642
 (State or other jurisdiction of                        (I.R.S. Employer
  incorporation or organization)                         Identification No.)

                              7201 Wisconsin Avenue
                            Bethesda, Maryland, 20814
                                 (301) 215-7777

Securities registered pursuant to Section 12(b) of the Act: NONE

        Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.01 par value
                         Class A Warrants
                         Class B Warrants

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange  Act during the past 12 months  (or for such
shorter  period  that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days.
Yes    [ x ]       No [    ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of  registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ x ].

The issuer's revenue for its most recent fiscal year was $21,610,000.

The aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, the average bid and asked
prices of such stock, as of March 26, 1999 was approximately $2,072,000

The number of shares outstanding of each of the issuer's class of common equity,
as of March 26, 1999, was 596,563 shares of Common Stock and 250,000 shares
of Class B Common Stock.

Documents Incorporated by Reference:  Part III:  Proxy Statement
<PAGE>

PART I
Item 1.  Business

General

     The Company, founded in 1981, is a leading American company in the
healthcare sectors of the Chinese marketplace, including Hong Kong and Macau.
The Company provides United States, European and other manufacturers of health
care products with access to the Chinese marketplace and offers a wide range of
marketing, sales and technical services for its products. The Company conducts
its marketing and sales and provides its services exclusively to buyers located
in China, Hong Kong and Macau.  The Company principally serves as the exclusive
sales representative for several major manufacturers of high-technology
diagnostic medical equipment and consumable medical supplies.  The Company also
sells certain health care products on a non-exclusive basis.  The Company's
national sales and technical support staff operates from its office in Beijing
and regional offices in Shanghai, Guangzhou, Tianjin and Hong Kong.  The Company
also provides health care services through the operation of a private hospital
in Beijing, China.

     During 1998, the Company continued its business of selling Western products
to the China market and providing health services through the operation of its
hospital, Beijing United Family Hospital.  The hospital provides Western style
primary care health services including a family practice clinic, obstetrics,
gynecology, birthing services and executive health care.  In 1998, the Hospital
received the first major expansion of its operating license granting permission
to open a dental clinic in a separate building on the Hospital campus.  In 1998
the Company continued to expand its offerings in the area of consumable health
care products.

     In order to concentrate and consolidate its efforts and eliminate
unprofitable and low growth product areas the Company undertook a significant
restructuring of its operations in 1997.  During 1997 and 1998 the Company
phased out its sale of construction, mining and other industrial machinery and
scientific research instrumentation, as well as some less profitable medical
equipment lines.  The Company now is concentrating its efforts on the health
care sector, including both sales of medical equipment and consumables and
provision of health services.

     In order to meet increased competition and difficult market conditions
caused by a restriction of credit available to domestic Chinese organizations
and to continue to expand its markets, the Company continued to offer certain
customers extended payment terms on purchases.  These sales were to familiar and
qualified purchasers and were structured to reduce the Company's risk of non-
payment.  In most cases the Company's suppliers participate in extending
reciprocal payment terms to the Company for a significant portion of these
extended payment arrangements.

    In addition, the Company has aggressively pursued obtaining government
supported financing for its customers.  In 1998, the Company concluded
arrangements on a $14 million financing program for the purchase of the
Company's equipment by China's Ministry of Public Health, with the goods now
scheduled to be shipped in 1999.  The loan is guaranteed by the Export-Import
Bank of the United States ("EXIM").  The Company is working with the Chinese and
U.S. governments toward making this type of financing an ongoing annual program.

     In 1998, the Company's subsidiary in Hong Kong, Chindex Hong Kong Limited,
continued its business in the sale of medical products into the Hong Kong
market.  This subsidiary initially focused on the sale of Acuson ultrasound
machines to end-users in Hong Kong but had begun to sell medical consumable
products in Hong Kong as well.  Chindex Hong Kong Limited currently has five
employees.

     In 1998, the Company's wholly foreign-owned subsidiary, Chindex Holdings
International Trade (Tianjin) Ltd., established in 1995, which is registered in
the special economic Tianjin Free Trade Zone, continued its planned expansion in
the import, warehousing and distribution of products.  This subsidiary supplies
certain medical products and consumables directly to hospitals in China for
domestic currency and is serving as a platform for the Company's growing
distribution activities.  In addition, in 1998, the Company established a second
wholly foreign-owned subsidiary in Shanghai, Chindex Shanghai International
Trading Co., Ltd. (Chindex Shanghai), which now serves as a major distribution
facility for consumable products.

    In 1998, the Company's distribution activities, involving both the
sale of medical and health care consumable products and off-the-shelf medical
equipment, as well as the provision of logistical services to other companies,
continued to expand.  The Company has established a dedicated team of sales
professionals located in Beijing, Shanghai, Guangzhou and Hong Kong.  Sales of
products by this team in mainland China are denominated in local currency, the
Renminbi, via a network of value-added sub-distributors who cover city-based
territories.  For the most part, the Company requires payment in advance for the
consumable products it sells.  The Company has established such sub-distributor
relationships nationwide.  The Company's distribution activities involve sales
to hospitals as well as to retail pharmacies.  The sale of branded healthcare
and health-related consumer products to China's growing retail pharmacy sector
commenced in 1998.

     Due to the regulatory restrictions on the importation and distribution of
foreign produced pharmaceuticals, in 1998 the Company discontinued most of its
efforts involving the distribution of pharmaceutical products in China.  The
Company has continued to distribute a contrast agent used in diagnostic
ultrasound studies but has phased out of other pharmaceutical products.  The
Company determined to evaluate opportunities in this sector at a later time when
the Chinese regulatory regime allows greater flexibility on the importation and
marketing of these products.

     In 1995, the Company began work on bringing much needed western standard
health care services to specific, targeted segments of China by establishing the
Beijing United Family Hospital (Beijing United) a 90/10 joint venture between
the Company and the Chinese Academy of Medical Sciences Union Medical &
Pharmaceutical General Corporation (Chinese Academy of Medical Sciences).
Beijing United opened for outpatient services in September of 1997 and opened
for inpatient services in March of 1998.  Since March of 1998, Beijing United
has been providing the expatriate business and diplomatic community in Beijing,
as well as the growing affluent segment of the local population, with complete
western standard primary care hospital services including family practice,
obstetrics, gynecology, neonatology and men's health.  The facility treats both
medical and surgical outpatients and in-patients.  The Company will consider
establishing a series of similar hospitals in other major metropolitan centers
in China over the next several years and has undertaken the initial evaluation
and planning process for that undertaking.  The Company also has plans to
establish satellite clinics which will serve as referral sites for the hospital
as well as draw upon the resources of the hospital for treating patients.  The
first of these, a dental clinic on the Hospital grounds, opened for business in
early 1999.
     
     The Company believes that Beijing United is the first foreign managed joint
venture hospital in operation with the full necessary authorizations to operate
in Beijing by China's ministry of health and other relevant governmental
offices.  There can be no assurances that the requisite approvals will be
forthcoming for additional facilities and the hospital must pass periodic
inspections and review for the requisite approvals to be continued in effect as
necessary for hospital operations.

     The provision of health care services entails the risk of potential medical
malpractice and similar claims which may be asserted against Beijing United
and/or against the Company in the event that services rendered by Beijing United
or procedures performed at the Beijing United facility are alleged to have
resulted in injury or other adverse effects.  Although the Company has obtained
liability insurance for itself and Beijing United that it believes will be
adequate as to both risk and amounts, there can be no assurance that successful
malpractice claims will not exceed the limits of the Company's insurance and
thus have a material adverse effect on the Company's business, financial
condition or operating results.

Marketing

     China, with more than one billion people, contains approximately one-fifth
of the world's population. It is the third largest economy in the world
according to the International Monetary Fund's (IMF) calculation methods for
Gross Domestic Product (GDP).  Using the IMF's Purchasing Power Parity method of
calculation, China's GDP is over $3 trillion, behind only the United States and
Japan.  China has expanding trade relations with the United States and,
according to the World Bank is now the tenth largest trading nation in the
world.  Since 1992 disposable income per capita in China has more than doubled
nationally, with urban income growth levels exceeding even these increases.  The
Company believes that there exists a substantial and expanding market for its
products in the China marketplace and the further integration of the Chinese
foreign trade system into the established global economy through its application
to the World Trade Organization and other initiatives to further open the
Chinese economy to foreign participation will further enhance the market for the
Company's products.

     The Company has decided to focus its efforts exclusively in the health
sector.  The size of the market for medical equipment in China has been
estimated to be in the range of $800 million to $1 billion U.S. dollars per
year.  The market is growing at a fast rate.   China's imports of medical
equipment from all sources has been in the range of $400 to $500 million
annually over the past few years.

     The medical equipment products which the Company sells are marketed to
hospitals, through hospital administrators and the doctors who are the ultimate
users of the products.  There is virtually no private practice of medicine in
China and all physicians are affiliated with hospitals or similar institutions.
Each hospital also has various economic and administrative forces at work
determining hospital policy and practice.  A hospital's decision to purchase the
Company's products depends on those economic and administrative forces.  The
Company's marketing is addressed to all relevant participants in the purchasing
decision, including the doctors and hospital administrators.
     	
     Most purchases of the Company's equipment products (as opposed to its off-
the-shelf medical products and consumable products), regardless of the nature of
the end-user, are made through foreign trade corporations (FTCs).  Although the
purchasing decision is made by the end-user, which may be an individual or a
group having the required approvals from their administrative organizations, the
Company enters into formal purchase contracts with FTCs.  The FTCs make
purchases on behalf of the end-users and are legally authorized by the Chinese
government to conduct import business. These organizations are chartered and
regulated by the government and are formed to facilitate foreign trade.  The
Company markets its products directly to end-users, but in consummating a sale
the Company also must interact with the particular FTC representing the end-
user.  For this reason, the Company seeks to maintain ongoing relationships with
the FTCs in its industries.  By virtue of its direct contractual relationship
with the FTC, rather than the end-user, the Company is to some extent dependent
upon the continuing existence of and contractual compliance by the FTC until the
particular transaction has been completed.

     Although the Company remains optimistic about the marketplace, there
continues to be uncertainties as to the direction of China's on-going political
and economic reforms, the possibility for future devaluation of the Chinese or
Hong Kong currencies as well as China's relationship with the United States.
This uncertainty may influence the budgeting and purchasing process in China.
Any of the foregoing circumstances may impede trade with China, thus impairing
the ability of the Company's customers to purchase the Company's products.

    Events in Asia impacted on the Company in 1998 and could further impact the
Company in 1999.  There are aspects of the Asian economic situation which
impacted on China and thus on the Company's business.  Although Chinese leaders
have consistently denied any plan to have a currency devaluation during 1999,
such a devaluation, if it happened, could serve to make the products which the
Company sells in China more expensive.  Other impacts could include decreased
funds available to Chinese end users as a result of a general economic slowdown
and increased competition from other American and European companies attempting
to deal with the declining markets for their products in other Asian countries
by increasing efforts in China.

Manufacturers and Products

     Acuson Corporation (Acuson), which manufactures only ultrasound imaging
devices, is the Company's largest supplier.  Sales by the Company of Acuson
products represented the largest component of total revenues during 1998 and
1997. The Company has an exclusive distribution agreement for China and Hong
Kong with Acuson.

     Other medical products which the Company sells in China include machines
and consumables manufactured by Johnson & Johnson Ortho Clinical Diagnostics
that utilize "dry slide" clinical chemistry technology, products manufactured by
Stryker Leibinger GmbH, a leading German manufacturer of radiosurgical treatment
planning and stereotactic systems, medical laboratory analysis equipment
manufactured by Nova Biomedical, Inc., sterilizers and other medical equipment
such as special lights and tables for operating rooms manufactured by Steris
Corporation, bone densitometry systems manufactured by Lunar Corporation, the
Heart Laser System, an innovative cardiosurgical technology manufactured by PLC
Medical Systems, and angiographic x-ray positioning equipment and interventional
x-ray imaging laboratories manufactured by the XRE Division of Trex Medical
Corporation.

     During 1998, the Company initiated marketing of the products of several new
medical manufacturers.  Two of these, PLC Medical Systems and the XRE Division
of Trex Medical Corporation are noted above.  In addition, the Company began
marketing health-oriented cosmetics and skin care products manufactured by
L'Oreal.  In addition, the Company began to serve other companies through the
provision of logistical services.  In late 1998, Chindex began offering custom
logistics services on a third party basis to principals who wish to manage their
own sales and marketing channels but need assistance with physical distribution
and financial management of their businesses in China.  Among these are Davis &
Geck, a premier manufacturer of advanced surgical suture products and Pari GmbH,
a German manufacturer of nebulizers.

Distribution Arrangements

     Where the Company functions as the exclusive sales representative of a
manufacturer, the contracts between the Company and each of its manufacturers do
not represent long-term obligations of the manufacturer and there can be no
assurance that the Company's manufacturers will not elect to change their method
of distribution into the China marketplace to a format that does not utilize the
services of the Company.

     Acuson Corporation

     The Company commenced its contractual relationship with Acuson in 1987.
Under the terms of its current agreements, the Company is the authorized
distributor of Acuson diagnostic ultrasound equipment in China and Hong Kong. In
addition, the Company's responsibilities include the training of all customers,
the maintenance and servicing of Acuson products and various promotional
activities within China and Hong Kong.  Acuson provides customers of the Company
with a parts warranty of up to thirteen months from the date of product shipment
from the United States.  In accordance with such guarantee, Acuson will replace
or repair any parts defective as a result of original materials used or
workmanship.  Servicing this warranty is the responsibility of the Company.  The
agreement with Acuson has been renewed regularly since 1987. The current
agreement with Acuson is automatically renewed for successive one year periods
from each January 1st, unless either party gives timely notice of intent not to
renew.

Competition

     In the sale of products, the Company competes with other independent
distributors in China that market similar products.  Although the Company
believes that it is one of the largest independent distributors in its markets,
there may be other distributors with greater resources or other competitive
advantages over the Company.

     In addition to other independent distributors, the Company faces more
significant competition from direct distribution of established manufacturers.
In the medical products field, for example, the Company competes with Hewlett-
Packard, which maintains its own direct sales force in China.  In addition,
since certain manufacturers, such as Hewlett-Packard, market under one brand
name a wide variety of products in China to different market sectors, those
manufacturers may be better able than the Company to establish name recognition
across industry lines.  For example, Hewlett-Packard also manufactures and
markets computers in China as well as other medical instruments not sold by the
Company.  The Company believes that Hewlett-Packard, ATL, and Siemens
Corporation are the largest such direct competitors in the medical products
field.  The Company believes that its products incorporate technologies that are
more advanced than those available in products currently available from domestic
Chinese manufacturers.

     In the sales and distribution of off-the-shelf medical products and 
consumables, the Company's sales, marketing and logistical distribution networks
also compete with similar distribution operations of other independent
distributors, both foreign and Chinese, joint ventures and foreign
manufacturers. In addition, the products themselves supplied by the Company to
the China market compete with similar products of foreign, joint venture and
domestic manufacturers.

     The Company's competitive position for product sales depends in part upon
its ability to attract and retain qualified personnel in sales, technical and
administrative capacities.  In addition, many of the Company's various
competitors have greater resources, financial or otherwise, than does the
Company.

     In response to increased competition, and, in an effort to expand its
business, the Company has entered into agreements with certain customers to
provide extended payment terms for purchase of goods.  These arrangements,
limited to selected purchasers qualified by the Company, have assisted the
Company in competing with financing offered by competing manufacturers and
governments.  See "Management's Discussion and Analysis or Plan of Operations-
Liquidity and Capital Resources" below.

     Two of the Company's subsidiaries, Chindex Holdings International Trade
(Tianjin) Ltd., and Chindex Shanghai International Trading Co., Ltd., sell goods
and receive payment in local Chinese currency and use the currency to pay for
local expenses.  Payments are generally required to be made in advance for
consumable products.  The Company recognizes that any devaluation in the local
currency may have a negative impact on the results of operations but does not
believe any loss would be significant.

     At the present time, the Company has no direct competition for its
hospital, Beijing United Family Hospital, in catering to the expatriate and
diplomatic market.  One other Western owned hospital venture has been approved
and is under construction but has not yet opened.

Employees

     At December 31, 1998, the Company had 285 full-time salaried employees, 249
of whom are in China and Hong Kong.  Of the full-time personnel in China and
Hong Kong, 21 are expatriates and 228 are Chinese or third country nationals. Of
the Company's non-USA based employees, 118 are employed at Beijing United Family
Hospital, and of the remainder, 61 are considered administrative personnel, 23
are engineering personnel, and 68 are considered sales personnel.  No employee
of the Company currently is represented by a labor union.  Management considers
its employee relations to be good.

Forward-Looking Statements

     With the exception of historical information, the matters discussed or
incorporated by reference in this Report on Form 10-KSB and, if any, in the
Company's 1998 Annual Report to Stockholders are forward-looking statements that
involve risks and uncertainties.  These forward-looking statements include, but
are not limited to, statements about the Company's (i) performance goals, (ii)
future revenues and earnings, (iii) markets and (iv) proposed new operations.
Actual results could differ materially from such forward-looking statements
because of, among other things, the following factors: developments relating to
conducting business in China (including political, economic and legal matters),
the timing of the Company's revenues, risks relating to commencement and early
operation of healthcare services, dependence on certain suppliers, and extension
of credit terms.

Item 2.     Facilities

     The Company's representative headquarters in China are located at a 12,000
square foot facility in Beijing pursuant to a lease expiring June 30, 2001.  The
Company also leases regional offices in the Chinese cities of Shanghai,
Guangzhou and Tianjin comprised of approximately 2,400, 810 and 700 square feet,
respectively, each lease expiring annually, and also leases a warehouse and
office space in the Waigaoqiao Free Trade Zone in Shanghai. The Company's
executive and administrative offices are located in Bethesda, Maryland, which
provides access to nearby Washington, D.C.  The lease for the Bethesda office,
which consists of approximately 3,800 square feet, expires on July 31, 2001.

     On November 8, 1995, the Company entered into a lease of a four story
building of approximately 43,500 square feet in Beijing.  On November 26, 1996
this lease was extended to 15 years, expiring on December 24, 2010.  On May 10,
1998, the Hospital entered into a five year lease for rental of the Gatehouse
building (now housing the dental clinic).  This lease provides for a combination
of an initial five year lease and a ten year extension.  The Company renovated
the first two floors of the main building for the Beijing United Family
Hospital, a family health center with birthing, pediatric and family medicine
capabilities.  The Hospital is a joint venture formed by the Company and the
Chinese Academy of Medical Sciences.  The Company has subleased the remaining
two floors. The sublease initially was scheduled to expire on January 31, 1999,
but the tenant and the Company negotiated an extension of the sublease which
continues until July 31, 2000, with an option for the subleasee to extend for an
additional one year beyond that.

     On September 30, 1998, Chindex Hong Kong Limited entered into a one year
lease for space in the same building where the Company office has been located.
This lease replaced the previous lease entered into in 1997.

     The Company believes that these facilities will be sufficient to satisfy
the Company's current requirements.  The Company believes that, in the event any
of the existing leases that expire within five years are not renewed, adequate
alternative space will be available in the same areas at comparable rates.

Item 3.   Legal Proceedings

     There are no pending material legal proceedings to which the Company or any
of its properties is subject.

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

		None


PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

     The Company's Units (one Common Stock, one Class A Warrant and one Class B
Warrant), Common Stock, Class A Warrants and Class B Warrants have been listed
on the National Association of Securities Dealers Automated Quotation Market
("Nasdaq") under the symbols CHDXU, CHDX, CHDXW, CHDXZ, respectively. Effective
February 26, 1999, the Company implemented a one-for-eight reverse stock split
in respect of all the issued and outstanding Common Stock, as well as the Units,
Class A Warrants and Class B Warrants.  The reverse stock split was approved by
the Company's stockholders at a special meeting on December 30, 1998.  The
reverse split was intended to increase the per share price of the Common Stock
towards maintaining listing on Nasdaq.  As of the effective date of the reverse
stock split, stockholders own one-eighth the number of shares of Common Stock
previously held.  In addition, each eight of the Company's Class A Warrants,
each eight of the Company's Class B Warrants and each eight of the Company's
Units was reverse split into one stock, warrant or unit, as the case may be.  As
a result of the reverse stock split, each of the Company's Units is now
comprised of a Class A Warrant, one Class B Warrant and one Common Stock.  The
following table shows the high and low Common Stock bid quotations in the
over-the-counter market, as quoted my Nasdaq, adjusted to reflect the reverse
stock split.  Such quotations reflect interdealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.

          Quarter Ended                      High Bid         Low Bid

          March 31, 1997                      44.000           25.000
          June 30, 1997                       38.000           16.000
          September 30, 1997                  40.000           28.000
          December 31, 1997                   42.000           10.000
    
          March 31, 1998                      23.504            8.000
          June 30, 1998                       18.504           11.000
          September 30, 1998                  14.248            4.504
          December 31, 1998                    6.504            1.504


     The Company's Common Stock is listed on The Nasdaq National Market.

     As of March 26, 1999, there were 4 record holders and there are estimated
to be approximately 1000 beneficial owners of the Company's Common Stock, and
three owners of the Company's Class B Common Stock.

    The Company has not paid any cash dividends on its Common Stock since
inception, and it does not anticipate paying any cash dividends in the
foreseeable future.  The Company expects to retain earnings for use in its
business.



Item 6.  Management's Discussion and Analysis or Plan of Operation

Results of Operations

Fiscal year 1998 compared to 1997

     The Company's revenues related to product sales are derived in two ways:
net sales by the Company for its own account and net commission income
consisting of commissions on sales made by manufacturers that are represented by
the Company.  The Company often elects the form of each transaction based on the
circumstances of the transaction, including the nature of the products and
parties involved. Consequently, the Company does not believe that the changes
over the periods in the mix comprising total gross profit on sales and net
commission income necessarily reflect any trends.

  The Company's revenue (sales plus net commission income) for the year 
ended December 31, 1998 decreased $2,772,000 or 11% from the year ended December
31, 1997.  Revenues from healthcare products contributed $19,750,000 or 91% of
total revenues; healthcare services contributed $1,860,000 or 9% of total
revenues.

  The Company believes that its health care products business has been
negatively impacted during 1998 by a variety of factors.  Primarily, these
include an inability of customers to make purchase commitments or open letters
of credit because of new foreign exchange documentation and procedural
requirements and delays in purchase commitments related to uncertainty regarding
foreign exchange regulations and exchange rates.  In addition, the Company's
business has also been negatively impacted by significantly increased
competition due to an increased focus on China by the Company's competitors and
lack of financing available to the Company's customers including restrictions
imposed by the Chinese government on the availability of credit from the Chinese
banking system.  The Company began to see substantial impact of the Asian
economic problems in China and in particular has been impacted by new
restrictions imposed by the Chinese Government on the transfer of foreign
exchange outside of China (See Liquidity and Capital Resources).  Finally, the
Company had anticipated shipping the goods purchased pursuant to the EXIM
guaranteed loan in 1998 but administrative delays resulted in shipment being
delayed until 1999.

  The Company's gross profit percentage on healthcare product revenue (as stated
in Note 12 in the accompanying interim financial statements) for the year ended
December 31, 1998 was 29% as compared to 27% for the year ended December 31,
1997.  The slightly higher gross profit margin is attributable to lower contract
costs.  The Company no longer combines its two business segments in computing
gross profit and does not calculate gross profit precentage for the healthcare
services segment as the costs associated with that segment do not lend
themselves to such measures and industry standards follow this approach.

  The Company's costs and expenses, including cost of goods sold, for the year
ended December 31, 1998 and 1997 were $25,223,000 and $30,079,000 respectively.
For the year ended December 31, 1998 as compared to the year ended December 31,
1997, cost of goods were down $3,114,000 on lower sales, salaries were up
$800,000 principally due to hiring increases in healthcare services, travel and
entertainment was down $719,000 due to reduced spending and other expenses were
down $351,000 due to cost controls implemented by the Company during 1998.

  In the Healthcare Products business total costs were $22,277,000 for the year
ended December 31, 1998 as compared with $29,449,000 for the year ended December
31, 1997 for a decrease of $7,172,000 or 24%.  The decrease was primarily
related to cost of goods decrease of $3,363,000, decrease in salary costs of
$33,000 and decreases in travel and entertainment of $734,000 and other costs of
$1,638,000.  The reductions are principally related to the cost containment
measures implemented at the end of 1997.

  The expenses from the Healthcare Services business were $2,946,000 during the
year ended December 31, 1998 as compared with $630,000 for the year ended
December 31, 1997.  This increase is due to an additional nine months of
expenses since healthcare services did not commence operations until September
of 1997 and includes salary increases of $767,000 and other costs of $1,535,000.

  Interest income for the year ended December 31, 1998 and 1997 was $127,000 and
$417,000 respectively.  The decrease is principally due to a decline in
available funds for investment.

  Other income rose to $1,516,000 for the year ended December 31, 1998 as
compared with $574,000 for the year ended December 31, 1997.  The increase is
principally due to income of $701,000 from final contracts associated with the
phase out of all non-healthcare related product areas.  If the Company had
maintained these products it would have recognized $2,575,000 in revenue and
$1,874,000 in related cost of goods.

Liquidity and Capital Resources

  In the third quarter, the Chinese Government introduced new foreign exchange
regulations which have severely limited the Company's ability to repatriate
foreign exchange from China related to prior receivables and slowed the
implementation of payment procedures (such as opening of letters of credit) on
existing contracts.  New contracts which the Company has entered into since
September 1, are not likely to be affected by these regulations and receipt of
foreign exchange with respect to these are not expected to present difficulties.
However, for pre-September contracts the new regulations are impacting the
Company's receipt of U.S. dollars from China pursuant to the contractual terms
of the transactions in connection with receivables for goods previously shipped.
China's State Administration of Foreign Exchange ("SAFE") issued a circular
effective September 1 which increases both documentation and procedures for the
processing and release of foreign exchange payments.  Most Chinese importers to
which the Company has sold goods have said that they are unable to produce the
documents now required for foreign remittances.  This problem has impacted all
companies which sell goods to China.  The Company has been working with the U.S.
Government, other similarly situated foreign companies and with the Chinese
government to solve this problem.  In meetings with Chinese government officials
on these issues, the Company was advised that it should arrange to accept local
currency payments for some of the outstanding amounts and the Company has done
this.  The Company advised its suppliers that cash flow from China for
previously sold goods had slowed significantly and requested that its suppliers
restructure the Company's payables in light of the cash flow difficulties caused
by these regulations.  The Company successfully negotiated with its principal
suppliers a restructuring of the Company's payables.  In some cases the
restructuring involves the extension of the due dates on invoices, in other
cases the restructuring provided specifically that invoices related to
pre-September 1, 1998, shipments are to be paid by the Company from the proceeds
of the pending Export-Import Bank transaction (which the Company expects to be
received in April or May of 1999).  This transaction, involving a loan from the
USA office of ABN AMRO Bank, N.V., and guaranteed by the U.S. Export-Import Bank
("EXIM"), for use by China's Ministry of Health in purchasing $14 million in
equipment from the Company, has been approved by the Export-Import Bank, the
operational memorandum with respect to the loan has been issued and the letter
of credit has been opened.  The Company recognized revenue totaling $2.2
million related to this transaction in 1998 as certain goods sold were shipped
prior to year-end and anticipates recognizing the remaining $11.0 million of
revenue in 1999.

  During the year ended December 31, 1998, the introduction of the SAFE 
regulations resulted in a $602,000 increase in accounts receivable, despite a
sales decline.
 
  During the year ended December 31, 1998 accounts payable increased $5,157,000 
and is related to increased inventories in advance of the pending EXIM
transaction and negotiated delay in payments due to new SAFE regulations.

  The Company negotiated a revision in certain extended payment payables with
a supplier to defer approximately $500,000 of payables through mid 1999.  The
Company has also reached preliminary agreement with the same supplier to extend
the due date of any payable where the Company's customer has delayed payment to
the Company and entered into a security agreement with that supplier.

  Inventories grew $3,135,000 as the Company increased inventories in advance
of the pending EXIM transaction and continued to expand its selling effort of
certain consumable products and product purchases in advance of the pending EXIM
transaction.

  As a result of the Company's efforts in connection with the expansion of its
Healthcare Products business and establishment and start-up of its new
Healthcare Services business, the Company's use of cash grew significantly in
1997 over prior periods.  During the year ended December 31, 1998, the use of
cash continued, but at a reduced rate.  The Company had anticipated raising
additional funding early in 1998 to continue its expansion plans at a rapid
pace; however, the Asian financial crisis has created an atmosphere of
uncertainty with respect to raising capital for companies operating in Asia.
Nevertheless, the Company continues to explore the possibility of raising
additional capital.

  As a result of these factors, in order to reduce the rate of cash depletion
and in an effort to bring operating expenses in line with current and projected
revenues, the Company undertook a restructuring charge of $1,500,000 at the end
of 1997 and increased its cost controls in order to reduce operating expenses.
Assuming timely completion of sales related to the EXIM transaction, the Company
believes that its cash and cash equivalents as well as cash flow from operations
is sufficient to maintain its current and planned operations.  The Company is
continuing to consider various financing alternatives as well as additional cost
reduction measures to satisfy its future capital requirements and bring
operating costs in line with anticipated revenues.

  The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year.  Any of the Company's
internal computer software that has time-sensitive programs may recognize a date
using "00" as the year 1900 rather than the year 2000.  This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.  Also, since the
Company is dependent on many suppliers, their inability to provide normal
business activities due to Year 2000 difficulties could impact the Company's
revenue.

  The Company began an assessment of the implications of the Year 2000 during
late 1997.  At December 31, 1998, the process of evaluating the Company's
services, products, internal systems and backup plan was still underway and is
to be completed in 1999.  At this time, the actual impact of Year 2000
compliance on the Company's future results of operations, capital spending, and
business operations is not known, but is not expected to be material.

  The Company's analysis will address issues related to its suppliers as well
as issues related to its own internal systems as well as that of its subsidiary
hospital and distribution operations.  As a distributor of high-technology
medical equipment and a provider of healthcare services, the Company needs to be
assured that it has all relevant information from its suppliers with respect to
Year 2000 implications of the equipment which the Company sells or utilizes.
Some units previously sold by the Company or currently in use by the Company's
hospital and distribution operations may need retrofit in the field.  In
addition, the Company may incur expense to train its service engineers to repair
certain specific software or other problems with respect to this equipment.
There may also be some minor additional expense related to transportation to
end-user sites in China, but, based on analysis to date, the principal expense
of retrofitting equipment with new components is likely to be absorbed by the
original equipment manufacturer.  The process of evaluating the Year 2000 issues
related to the equipment which the Company sells is ongoing.

  With the exception of historical information, the matters discussed or
incorporated by reference in this Report on Form 10-KSB and 10-KSB/A and, if
any, in the Company's 1998 Annual Report to Stockholders are forward-looking
statements that involve risks and uncertainties.  These forward-looking
statements include, but are not limited to, statements about the Company's (i)
performance goals, (ii) future revenues and earnings, (iii) markets and (iv)
proposed new operations.  Actual results could differ materially from such
forward-looking statements because of, among other things, the following
factors: developments relating to conducting business in China (including
political, economic, regulatory and legal matters), the timing of the Company's
revenues, risks relating to commencement and early operation of healthcare
services, dependence on certain suppliers, and extension of credit terms.

Timing of Revenues

  The timing of the Company's revenues is affected by several significant
factors. Many end-users of the products sold by the Company depend to a certain
extent upon the allocation of funds in the budgeting processes of the Chinese
government and the availability of credit from the Chinese banking system. These
processes and the availability of credit are based on policy determinations by
the Chinese government and are not necessarily subject to fixed time schedules.
In addition, the sales of certain products often require protracted sales
efforts, long lead times and other time-consuming steps. Further, in light of
the dependence by purchasers on the availability of credit, the timing of sales
may depend upon the timing of the Company's or its purchasers' abilities to
arrange for credit sources. As a result, the Company's operating results have
varied  and  are  expected  to  continue  to  vary  significantly from period to
period and year to year. In addition, a relatively limited number of orders and
shipments may constitute a meaningful percentage of the Company's revenue in any
one period. Correspondingly, a relatively small reduction in the number of
orders can have a material impact on the Company's revenues in any year.
Further, because the Company recognizes revenues and expenses relating to
certain contracts as products are shipped, the timing of shipments could affect
the Company's operating results for a particular period.

  The Company's cash flow is impacted by various issues related to the Company
growth program of granting extended payment terms to customers.  (Please refer
to accounts receivable and accounts payable discussions under Liquidity and
Capital Resources).

  In addition, the short-term cash flow implications on the Company were also
minimized by obtaining reciprocal payment terms from the Company's suppliers.
There can be no assurance, however, that the Company's suppliers will continue
to so participate in the future, which would have a negative impact on the
Company's short-term cash flow.

Foreign Currency Exchange and Impact of Inflation

  The results of operations of the Company for the periods discussed have not
been significantly affected by inflation or foreign currency fluctuation. To
date, substantially all of the Company's purchases and sales have been made in
U.S. dollars. Thus, the Company has not had extensive foreign currency risk.
However, changes in the valuation of the Chinese Renminbi or Hong Kong Dollar
may have an impact on the Company's results of operations in the future. The
Company's subsidiaries, Chindex Tianjin, Chindex Shanghai and Beijing United,
sell products and services in Renminbi.  In addition, due to the SAFE
regulations discussed above, the Company has begun collecting certain accounts
receivable attributable to healthcare product sales in Renminbi which
historically and pursuant to the terms of the initial sales contracts were
denominated in U.S. dollars.  However, the Company has not experienced
significant gains or losses on these collections and has been able to utilize
local currency collected for local costs incurred.  The Renminbi is not a freely
convertible currency and accordingly exchange risks cannot be hedged.

  Also, the Company has purchased and will continue to purchase some products in
currencies other than U.S. dollars and has sold and will continue to sell such
products in China for U.S. dollars. To the extent that the value of the U.S.
dollar declines against such a currency, the Company could experience a negative
impact on profitability. The Company anticipates hedging transactions wherever
possible to minimize such negative impacts.


Item 7.   Consolidated Financial Statements

          The consolidated financial statements are shown after this page
numbered as follows:

                                                                   Pages
          Report of Ernst & Young LLP, Independent Auditors         F-1

          Consolidated financial statements
             Consolidated Balance Sheets                            F-2
             Consolidated Statements of Operations                  F-3
             Consolidated Statements of Cash Flows                  F-4
             Consolidated Statements of Stockholders' Equity        F-5
             Notes 1 - 13 to the Consolidated Financial Statements follow



<PAGE>

                Report of Ernst & Young LLP, Independent Auditors


The Board Of Directors and Stockholders
U.S.-China Industrial Exchange, Inc.

We have audited the accompanying consolidated balance sheets of U.S.-China
Industrial Exchange, Inc. as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of U.S.-China
Industrial Exchange, Inc. at December 31, 1998 and 1997, and the consolidated
results of its operations and its cash flows for the years then ended in
conformity with U.S. generally accepted accounting principles.




                                           /s/ Ernst & Young, LLP

Vienna, Virginia
March 12, 1999

                                      F-1


<PAGE>
                      U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                   DECEMBER 31,    DECEMBER 31,
                                                       1997            1998
                                                  ------------     -------------
                                    ASSETS
<S>                                               <C>             <C>
Current assets:
  Cash & cash equivalents........................  $  6,228,000     $ 4,723,000
  Receivables:
    Trade accounts, less allowance for doubtful
    accounts of $604,000(1997 and 1998)               5,796,000       7,916,000
    Current portion -- long term trade accounts..     4,123,000       4,146,000
    Commissions receivable.......................        84,000          37,000
  Inventories....................................     2,761,000       5,771,000
  Other current assets...........................       794,000         697,000
                                                   ------------    -------------
       Total current assets......................    19,786,000      23,290,000
  Property & equipment, net .....................     3,824,000       3,914,000
  Trade accounts receivable, long term...........     2,092,000         551,000
  Other..........................................       878,000         798,000
                                                   ------------    -------------
       Total assets..............................  $ 26,580,000     $28,553,000
                                                   ============    =============
</TABLE>

<TABLE>
<CAPTION>

                        LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                               <C>             <C>
Current liabilities:
  Accounts payable and accrued expenses..........  $  6,836,000     $12,086,000
  Accrued contract training......................       924,000       1,101,000
  Current portion-long term accounts payable, net     2,171,000       2,841,000
  Short term loan payable .......................       467,000            --
  Income taxes payable...........................       208,000          57,000
  Accrued restructuring..........................       469,000            --
                                                   ------------    -------------
       Total current liabilities.................    11,075,000      16,085,000
  Long term accounts payable, net................     1,270,000         272,000
                                                   ------------    -------------
       Total liabilities.........................    12,345,000      16,357,000

Stockholders' equity:
  Preferred stock, $.01 par value: Authorized --
    5,000,000, none issued
  Common stock, $.01 par value
    Authorized -- 30,000,000 (including
    2,000,000 designated Class B);
    Common stock -- 596,563 issued and
    outstanding in each year....................          6,000           6,000
    Class B stock -- 250,000 issued and
    outstanding in each year....................          3,000           3,000
  Additional capital............................     17,294,000      17,294,000
  Foreign currency equity translation adjustment          2,000           2,000
  Retained earnings (deficit)...................     (3,070,000)     (5,109,000)
                                                   ------------    -------------
    Total stockholders' equity..................     14,235,000      12,196,000
                                                   ------------    -------------
    Total liabilities and stockholders' equity..   $ 26,580,000     $28,553,000
                                                   ============    =============
</TABLE>
                            See accompanying notes

                                      F-2


<PAGE>
                      U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                -------------------------------
                                                       1997            1998
                                                   -----------     ------------


<S>                                               <C>              <C>
Net sales.......................................   $23,849,000      $21,563,000
Net commission income...........................       532,000           47,000
                                                   -----------      -----------
Total revenue...................................    24,381,000       21,610,000

Cost and Expenses
 Cost of goods sold.............................    17,487,000       14,373,000
 Salaries and payroll taxes.....................     4,726,000        5,526,000
 Travel and entertainment.......................     2,214,000        1,495,000
 Other..........................................     4,180,000        3,829,000
 Restructuring..................................     1,472,000            --
                                                   -----------      -----------
                                                    (5,698,000)      (3,613,000)

Minority Interest                                        --             (12,000)

Other income and expenses
 Interest expense...............................       (31,000)        (118,000)
 Interest income................................       452,000          245,000
 Miscellaneous income - net.....................       554,000        1,534,000
                                                   -----------      -----------
Loss before benefit from /
  (provision for) income taxes .................    (4,723,000)      (1,964,000)
Benefit from / (provision for) income taxes.....        75,000          (75,000)
                                                   -----------      -----------
NET (LOSS)......................................   $(4,648,000)     $(2,039,000)
                                                   ===========      ===========
NET (LOSS) PER COMMON SHARE - Basic.............   $     (5.88)     $     (2.58)
                                                   ===========      ===========
Weighted average shares outstanding.............       790,313          790,313
                                                   ===========      ===========


</TABLE>

                            See accompanying notes


                                      F-3

<PAGE>
                      U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                     ------------------------
                                                      1997              1998
                                                   ----------       -----------
<S>                                             <C>                <C>
OPERATING ACTIVITIES
Net (loss)....................................    $(4,648,000)      $(2,039,000)
Adjustments to reconcile net (loss) to net
  cash (used in) operating activities:
  Depreciation................................        262,000           652,000
  Provision for doubtful accounts.............        489,000              --
  Provision for deferred taxes................         46,000              --
  Inventory write-down........................        106,000           126,000

Changes in operating assets and liabilities:
  Trade receivable............................     (2,194,000)         (602,000)
  Commissions receivable......................        365,000            47,000
  Inventories.................................       (679,000)       (3,136,000)
  Other current assets........................       (217,000)           97,000
  Other assets................................       (637,000)           80,000
  Accounts payable and accrued expenses.......      1,618,000         5,099,000
  Income taxes payable........................       (257,000)         (151,000)
  Accrued Restructuring.......................        469,000          (469,000)
                                                  -----------       -----------
Net cash (used in) operating activities.......     (5,277,000)         (296,000)

INVESTING ACTIVITIES
  Disposals of equipment, net.................           --             (89,000)
  Purchase of property and equipment..........     (2,303,000)         (653,000)
                                                  -----------       -----------
Net cash (used in) investing activities.......     (2,303,000)         (742,000)

FINANCING ACTIVITIES
  Fees from issuance of common stock..........        (43,000)             --
  Proceeds from short term borrowings.........        467,000
  Repayments of short term borrowings.........           --            (467,000)
                                                  -----------       -----------
Net cash provided by /(used in)
  financing activities........................        424,000          (467,000)

Effect of foreign exchange rate changes on cash
  and cash equivalents........................         10,000              --
                                                  -----------       -----------
Net (decrease) in cash and cash equivalents...     (7,146,000)       (1,505,000)
Cash and cash equivalents at beginning of period   13,374,000         6,228,000
                                                  -----------       -----------
Cash and cash equivalents at end of period....    $ 6,228,000       $ 4,723,000
                                                  ===========       ===========

Supplemental disclosure of cash flow information:
Cash paid for interest........................    $    23,000       $    33,000
                                                  ===========       ===========
Cash paid for income taxes....................    $   174,000       $   111,000
                                                  ===========       ===========
</TABLE>
                               See accompanying notes

                                       F-4


                     U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                   YEARS ENDED DECEMBER 31, 1997 AND 1998


<TABLE>
<CAPTION>
                                 COMMON STOCK       COMMON STOCK - CLASS B                  RETAINED
                               ------------------   ----------------------   ADDITIONAL     EARNINGS   TRANSLATION
                               SHARES    AMOUNT     SHARES         AMOUNT     CAPITAL      (DEFICIT)    ADJUSTMENT      TOTAL
                              --------  --------   --------      ---------   ----------   ----------   ----------     -------
<S>                         <C>        <C>       <C>           <C>         <C>           <C>          <C>         <C>
Balance at December 31, 1996   596,563   $6,000     250,000     $    3,000  $17,337,000     1,578,000     (8,000)   18,916,000

Additional offering expense      --        --         --               --       (43,000)         --          --        (43,000)

Net loss for 1997                --        --         --               --        --        (4,648,000)    10,000    (4,638,000)

                             ---------   ------   ---------     ----------  -----------   -----------   --------   -----------
Balance at December 31, 1997   596,563   $6,000     250,000     $    3,000  $17,294,000   $(3,070,000)  $  2,000   $14,235,000

Net loss for 1998                --        --         --               --        --        (2,039,000)       --     (2,039,000)

                             ---------   ------   ---------     ----------  -----------   -----------   --------   -----------
Balance at December 31, 1998   596,563   $6,000     250,000     $    3,000  $17,294,000   $(5,109,000)  $  2,000   $12,196,000
                             =========   ======   =========     ==========  ===========   ===========   ========   ===========

</TABLE>

                             See accompanying notes

                                      F-5

<PAGE>
                      U.S.-CHINA INDUSTRIAL EXCHANGE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

Organization and Description of Business

  U.S.-China Industrial Exchange, Inc. (the Company) is a sales representative
in China and Hong Kong for several major U.S., European, and other manufacturers
of high-technology medical equipment.  The Company markets and sells these
products in China and Hong Kong, and provides marketing, sales and technical
services for the products.  Substantially all direct sales, commissions and
purchases of these products are denominated in U.S. dollars.

  Two of the Company's subsidiaries, Chindex Holdings International Trade
(Tianjin) Ltd., and Chindex Shanghai International Trading Co., Ltd., sell goods
and receive payment in local Chinese currency and use the currency to pay for
local expenses and U.S. dollar imported goods.  Payments are generally required
to be made in advance for consumable products.

  In 1996 the Company established the Beijing United Family Hospital, a
contractual joint venture between the Company and a company controlled by the
Chinese Academy of Medical Sciences.  This Hospital provides much needed Western
primary family care health services including maternity, birthing services as
well as pediatric and executive health care.  Operations commenced late 1997.
Full-time operation began in March 1998.  While Beijing United does denominate
its revenue and expenses in local Chinese currency it can receive payments in
U.S. dollars.

  The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

Principles of Consolidation

  The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries, Chindex, Inc., Chindex Holdings International Trade
(Tianjin), Chindex Shanghai International Trading Co., Ltd., Chindex Hong Kong
and its 100% balance sheet interest and 90% earnings interest in the Beijing
United Family Hospital.  Significant intercompany accounts and transactions have
been eliminated in consolidation.

Revenue Recognition

  Sales and most commissions are recognized upon product shipment. Costs
associated with installation, after-sale servicing and warranty are not
significant and are recognized in cost of sales as they are incurred.

Inventories

  Inventory purchased to fill signed sales contracts and purchase orders that
remain undelivered at year-end (merchandise inventory), service parts and
inventory of peripheral components are stated at the lower of cost or market
using the specific identification method.  In addition, two wholly foreign owned
subsidiaries maintain merchandise inventory based on expected sales targets.
Certain items are purchased for demonstration purposes and subsequent sale
(Demonstration inventory). Management monitors the salability of such
demonstration inventory and reduces the carrying amount to net realizable value
when there is any impairment in value.

Property and Equipment

  Property and equipment are stated at cost. Depreciation is computed on the
straight line method over the estimated useful lives of the related assets.
Useful lives for office equipment, vehicles and furniture and fixtures range
from 5 to 7 years. Leasehold improvements are amortized by the straight-line
method over the shorter of the estimated useful lives of the improvements or the
lease term.  Certain medical equipment is depreciated over three years.

Long Term Receivables and Payables

  Long term receivables and payables are recorded at estimated present values
determined based on current rates of interest and reported at the net amounts in
the accompanying financial statements. Imputed interest is recognized using the
effective interest method and recognized as a component of interest income/
expense in the accompanying financial statements.

Income Taxes

  Provisions for income taxes are based upon earnings reported for financial
statement purposes and may differ from amounts currently payable or receivable
because certain amounts may be recognized for financial reporting purposes in
different periods than they are for income tax purposes. Deferred income taxes
result from temporary differences between the financial statement amounts of
assets and liabilities and their respective tax bases.

Cash Equivalents

  The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Fair Value of Financial Instruments

  The Company considers the recorded value of its financial instruments, which
consist of cash and cash equivalents, trade receivables, commissions receivable
and accounts payable, to approximate the fair value of the respective assets and
liabilities at December 31, 1997 and 1998.

Earnings Per Share

  In 1997, the Financial Accounting Standards Board issued Statement 128,
'Earnings per Share'.  Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities.  Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share.  All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements.  The Company does not include the effects of stock option,
warrants and convertible securities for periods when the Company reports a net
loss as such effects would be antidilutive.  Diluted earnings per share is not
presented for the years ended December 31, 1997 and 1998 as the effects of the
Company's stock options and warrants were antidilutive in such periods.

Stock Based Compensation

  In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
'Accounting for Stock-Based Compensation,' which was effective for the Company's
December 31, 1997 financial statements. SFAS No. 123 allows companies to either
account for stock-based compensation under the new provisions of SFAS No. 123 or
under the provisions of APB 25, but requires pro forma disclosure in the
footnotes to the financial statements as if the measurement provisions of SFAS
123 had been adopted.  The Company has elected to account for its stock-based
compensation to employees pursuant to the provisions of APB Opinion No. 25.

Dividends

  The Company has not paid dividends to the stockholders of its common stock and
any dividends that may be paid in the future will depend upon the financial
requirements of the Company and other relevant factors.

Comprehensive Income

  In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
'Reporting Comprehensive Income' (Statement 130) which is effective for fiscal
years beginning after December 15, 1997.  The Company adopted Statement 130 with
the fiscal year beginning January 1, 1998.  Statement 130 did not have a
material impact on the financial results of financial condition of the Company,
but did result in certain changes in required disclosures.

New Accounting Pronouncements

  In June 1998, the Financial Accounting standards Board issued SFAS No. 133,
'Accounting for Derivative Instruments and Hedging Activities' (Statement 133)
which is effective for fiscal years beginning after June 15, 1999.  Statement
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities.  It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value.  If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair market value of
a recognized asset or liability or an unrecognized firm commitment, (b) a hedge
of the exposure to variable cash flows of a forecasted transaction, or (c) a
hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction.  The Company will adopt the
new requirement prospectively commencing on January 1, 2000.  Management has not
completed its review of Statement 133, but does not anticipate the adoption of
this statement will have a significant impact on the Company's financial
position or results of operations.

Reclassifications
  Certain amounts for 1997 have been reclassified to conform to the 1998
presentation.

2. PROPERTY AND EQUIPMENT, NET

     Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
                                       DECEMBER 31, 1997    DECEMBER 31, 1998
                                       -----------------    ------------------

<S>                                       <C>                  <C>
Furniture and equipment..............      $2,277,000           $2,580,000
Vehicles.............................         124,000              109,000
Leasehold improvements...............       2,191,000            2,592,000
                                         -----------------    ----------------
                                            4,592,000            5,281,000
Less: accumulated depreciation
  and amortization...................         768,000            1,367,000
                                         -----------------    ----------------
                                           $3,824,000           $3,914,000
                                         =================    ================
</TABLE>


3. INVENTORIES

     Inventories consist of the following:

<TABLE>
<CAPTION>
                                       DECEMBER 31, 1997    DECEMBER 31, 1998
                                       ------------------   ------------------
<S>                                       <C>                  <C>
Merchandise inventory................      $   948,000           $3,973,000
Demonstration inventory, net.........          698,000              588,000
Parts and peripheral inventory.......        1,115,000            1,210,000
                                       -----------------    ------------------
                                           $ 2,761,000           $5,771,000
                                       =================    ==================
</TABLE>

4. EXTENDED PAYMENT TERM SALES ARRANGEMENTS


     The Company has entered into agreements with certain customers to provide
extended payment terms related to the sale of high technology medical equipment.
In conjunction with these transactions the Company has negotiated agreements 
with certain vendors to grant matching extended terms. Receivables and payables
under these arrangements were discounted at 6.76% for the years ended
December 31, 1997 and 1998, respectively.  The resulting discounts were recorded
as reductions in the gross amounts due from customers and due to suppliers under
long term arrangements and reported at net amounts in the accompanying financial
statements.

     Long-term receivables and payables under these
arrangements mature at December 31, as follows:

<TABLE>
<CAPTION>
                                  -------- 1997 ------   -------- 1998 -------
                                   ACCOUNTS   ACCOUNTS    ACCOUNTS   ACCOUNTS
                                  RECEIVABLE   PAYABLE   RECEIVABLE   PAYABLE
                                  ----------  ---------  ----------  ---------
<S>                              <C>        <C>         <C>        <C>
1998..........................    $4,225,000 $2,238,000       --         --
1999..........................     1,880,000  1,172,000  $4,244,000 $2,904,000
2000..........................       466,000    246,000     603,000    296,000
                                  ---------- ----------  ---------- ----------
                                   6,571,000  3,656,000   4,847,000  3,200,000
Less: imputed interest........       356,000    215,000     150,000     87,000
                                  ---------- ----------  ---------- ----------
                                   6,215,000  3,441,000   4,697,000  3,113,000
Less: current portion.........     4,123,000  2,171,000   4,146,000  2,841,000
                                  ---------- -----------  --------- ----------
                                  $2,092,000 $1,270,000  $  551,000 $  272,000
                                  ========== =========== ========== ==========
</TABLE>


Amortization of imputed interest on long-term accounts receivable was $50,000
and $194,000 for the years ended December 31, 1997 and 1998, respectively.
Amortization of imputed interest on long-term accounts payable was $7,000 and
$61,000 for the years ended December 31, 1997 and 1998, respectively.


5. STOCKHOLDERS' EQUITY

Common Stock

     The Class B common stock and the common stock are substantially identical
on a share-for-share basis, except that the holders of Class B common stock have
six votes per share on each matter considered by stockholders and the holders of
common stock have one vote per share on each matter considered by stockholders.
Each share of Class B common stock will convert at any time at the option of the
original holder thereof into one share of common stock and is automatically
converted into one share of common stock upon (i) the death of the original
holder thereof, or, if such stocks are subject to a stockholders agreement or
voting trust granting the power to vote such shares to another original holder
of Class B common stock, then upon the death of such original holder, or (ii)
the sale or transfer to any person other than specified transferees.

      The holders of the outstanding 250,000 shares of Class B common stock have
placed 56,250 shares in escrow.  These shares will not be assignable or
transferable (but may be voted) until such time as they are released from escrow
based upon the Company meeting certain earnings levels or the common stock
attaining certain price levels.  All reserved shares remaining in escrow on
March 31, 1999 will be forfeited and contributed to the Company's capital.  In
the event the Company attains any of the earnings thresholds or stock prices for
the release of the escrowed shares to the original stockholders, the Company
will recognize compensation expense at such time based on the fair market value
of the shares released.

     On October 28, 1996, the stockholders of the Company voted to increase the
number of authorized shares of common stock from 18,000,000 to 28,000,000
(excluding common stock -- Class B).

Public Offering, Common Stock, Warrants

    On August 18, 1994 the Company completed its initial public offering selling
200,000 common stock units for net proceeds to the Company of approximately
$6,206,000.  Additionally, on September 13, 1994 the underwriters exercised
their overallotment option purchasing an additional 30,000 common stock units
for net proceeds to the Company of approximately $1,044,000.  Each unit
consisted of one common stock, one Class A warrant and one Class B warrant.
Class A warrants entitle the holder to acquire one common stock and a Class B
warrant at an exercise price of $52.00.  Each Class B warrant entitles the
holder to acquire one share of common stock at an exercise price of $70.00.
Warrants are exercisable through August 18, 1999.  The underwriters and a
consultant have also been granted options to purchase an additional 18,000 and
2,000 units, respectively, at $54.00 per unit.  These options are exercisable at
any time during the four year period beginning August 18, 1995.

     On November 8, 1996 the Company completed a second underwritten public
offering of securities selling 318,750 common stock units and on November 21,
1996 the underwriters exercised their overallotment option purchasing an
additional 47,813 common stock units for net proceeds to the Company of
approximately $9,831,000.  Each unit is exactly the same as the original
offering described above.

    In April 1994 the Company issued 37,500 Class A and 37,500 Class B warrants
on a prorata basis to each stockholder of record.  The exercise prices of these
warrants are the same as the warrants sold in the Company's initial public
offering.  These warrants are exercisable at any time through August 18, 1999.

Stock Option Plan

     In April 1994, the Board of Directors adopted and the stockholders approved
the Company's 1994 Stock Option Plan (the Plan).  On January 9, 1997, the Board
of Directors amended the Plan in accordance with changes to the rules and
regulations of the Securities and Exchange Commission governing such plans.  The
Plan provides for the grant, at the discretion of the Board of Directors, of (i)
options that are intended to qualify as incentive stock options (Incentive Stock
Options) within the meaning of Section 422A of the Internal Revenue Code to
certain employees, consultants and directors, and (ii) options not intended to
so qualify (Nonqualified Stock Options) to employees, consultants and directors.
The total number of shares of common stocks for which options may be granted
under the Plan is 500,000.

     The Plan is administered by the Board of Directors, which determines the
terms of options, including the exercise price, the number of shares subject to
the options and the terms and conditions of exercise. No option granted under
the Plan is transferable by the optionee other than by will or the laws of
descent and distribution and each option is exercisable during the lifetime of
the optionee only by such optionee.

     The exercise price of options granted under the Plan must be at least equal
to the fair market value of such shares on the date of grant. With respect to
any participant who owns stock possessing more than 10% of the voting rights of
the Company's outstanding capital stock, the exercise price of any Incentive
Stock Option may be not less than 110% of the fair market value on the date of
grant. With respect to any Incentive Stock Option granted to a participant who
owns stock possessing more than 10% of the total combined voting power of all
classes of the Company's outstanding capital stock, the maximum term is five
years.

     The following is a summary of stock option activity during the years ended
December 31, 1997 and 1998:

<TABLE>
<CAPTION>
                                                                   Exercise
                                           1997         1998         Price
                                          ------       ------      --------
<S>                                      <C>         <C>       <C>
Options outstanding, beginning of year:   168,060     240,560   $27.00 - $42.48
  Granted                                  82,500      78,500   $16.00 - $36.88
  Canceled                                (10,000)     (8,220)
                                          -------     -------   ---------------
Options outstanding, end of year          240,560     310,840   $16.00 - $42.48
                                          =======     =======   ===============

</TABLE>

  The Company has not provided disclosures under FAS 123 for proforma net income
and proforma earnings per share, as such amounts are not materially different
from reported amounts.  The weighted average exercise price of options
outstanding is $35.04 and $30.32 and the weighted average remaining contractual
life of such options is 8.1 years and 7.7 years respectively as of December 31,
1997 and 1998.

Shares of Common Stock Reserved

     At  December 31, 1998 the Company has reserved 2,859,689 shares of common
stock for issuance upon exercise of stock options and purchase warrants.

6. EARNINGS PER SHARE

     The following is an illustration of the reconciliation of the numerators
and denominators of the basic and diluted Earnings per Share (EPS) computations
for "income before extraordinary item and accounting change" and other related
disclosures:

<TABLE>
<CAPTION
                                               For the Year Ended 1997
                                  -------------------------------------------
                                     Loss             Shares         Per-Share
                                  (Numerator)      (Denominator)       Amount

<S>                              <C>               <C>                <C>
Basic EPS
Net loss                          $(4,648,000)         790,313         $(5.88)

Effect of Dilutive Securities
Warrants and Options                                      --
                                  -----------        ---------         ------
Diluted EPS
Net loss                          $(4,648,000)         790,313         $(5.88)
                                  ===========        =========         ======
</TABLE>

<TABLE>
<CAPTION
                                               For the Year Ended 1998
                                  -------------------------------------------
                                    Income            Shares         Per-Share
                                  (Numerator)      (Denominator)       Amount

<S>                              <C>               <C>                <C>
Basic EPS
Net loss                          $(2,039,000)         790,313         $(2.58)

Effect of Dilutive Securities
Warrants and Options                                      --
                                  -----------        ---------         ------
Diluted EPS
Net loss                          $(2,039,000)         790,313         $(2.58)
                                  ===========        =========         ======
</TABLE>

Options to purchase 240,560 and 310,840 of common stock between $16.00 and
$42.48 were outstanding during most of 1997 and 1998 respectively but were not
included in the computation of diluted EPS because the options would have been
antidilutive.  See note 5.



7. INCOME TAXES

     The benefit from/(provision for) income taxes consists of the following:

<TABLE>
<CAPTION>
                                              YEAR ENDED DECEMBER 31,
                                            --------------------------
                                                1997           1998
                                            ------------   -----------
<S>                                         <C>           <C>
Current:
     Federal................................. $ 367,000    $       0
     Foreign.................................  (174,000)     (75,000)
     State...................................    43,000            0
                                              ----------   ----------
                                                236,000      (75,000)
Deferred:
     Federal.................................  (133,000)           0
     State...................................   (28,000)           0
                                              ----------   ----------
                                               (161,000)           0
                                              ----------   ----------
                                              $  75,000    $ (75,000)
                                              ==========   ==========
</TABLE>

    The net deferred tax asset has been reduced 100% by a valuation allowance
and consist of the following as of December 31:

<TABLE>
<CAPTION>
                                                  1997          1998
                                                --------      --------
<S>                                        <C>             <C>
Allowance for doubtful accounts.............   $  150,000    $  225,000
Inventory write downs.......................       89,000       190,000
Restructuring costs.........................      283,000           --
Net operating loss carry forwards...........    1,273,000     2,196,000
Foreign tax credit..........................          --         22,000
Other.......................................        3,000         3,000
                                               ----------    ----------
                                                1,798,000     2,636,000
Less valuation allowance....................   (1,798,000)   (2,636,000)
                                               ----------    ----------
Net deferred tax asset......................   $        0    $        0
                                               ==========    ==========
</TABLE>

     The  Company's effective income tax rate  varied from the statutory federal
income tax rate for the year ended December 31 as follows:

<TABLE>
<CAPTION>
                                                            1997       1998
                                                            ----       ----
<S>                                                       <C>        <C>
Statutory federal income tax rate.......................   (34.0)%    (34.0)%
Adjustments:
     State income taxes, net of federal tax benefit.....    (3.6)      (3.5)
     Foreign tax rate differential                            .4       (6.0)
     Change in valuation allowance                          39.8       42.7
     Other, including permanent differences.............    (4.2)       4.6
                                                           -----      -----
Effective income tax rate...............................    (1.6)%      3.8 %
                                                           =====      =====

</TABLE>

     A valuation allowance has been recorded as of December 31, 1997 and 1998 as
the realization of the Company's net deferred tax assets is not certain.

     The Company and its subsidiaries file separate income tax returns; the
Company is on a June 30 fiscal year and its subsidiaries on a December 31 fiscal
year.

     The Company has U.S. Federal net operating losses of approximately $4.4
million of which $2.4 million expire principally in 2012 and $2.0 million expire
in 2018.  The Company also has foreign losses from China of approximately $1.7
million that expire in 2002 and 2003.

8. COMMITMENTS

Employment Agreements

     The Company has entered into three-year employment agreements with four key
executives which, as amended or revised to date, provide for annual base
salaries amounting to an aggregate of $559,000 per year until May 1999.

Leases

     The Company leases office space and space for the Beijing United Family
Health Center under operating leases.  Future minimum payments under these
noncancelable operating leases consist of the following:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
-----------------------
<S>                                                       <C>
       1999.............................................   $  930,000
       2000.............................................      784,000
       2001.............................................      707,000
       2002.............................................      515,000
       2003.............................................      464,000
       Thereafter.......................................    3,095,000
                                                            ----------
                                                            6,495,000
       Less total minimum sublease rentals............ .   (1,024,000)
                                                           ----------
       Net minimum rental commitments...................   $5,471,000
                                                           ==========

</TABLE>

     The above leases require the Company to pay certain pass through operating
expenses and rental increases based on inflation.

     Included in miscellaneous (expenses)/income for the year ended December 31,
1997 and 1998 is net sublease income of $540,000.

     Rental expense was approximately $689,000 and $852,000 for the years ended
December 31, 1997 and 1998, respectively.

9. CONCENTRATIONS OF CREDIT RISK

     Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents,
trade receivables and commission receivables. Substantially all of the Company's
cash and cash equivalents at December 31, 1997 and 1998 were held by two U.S.
financial institutions. All of the Company's sales during the year were to end-
users located in China or Hong Kong.  Most of the Company's sales are
accompanied by down payments of either cash or letters of credit with one
Chinese financial institution. Sales on extended payment terms usually have down
payments in the form of a letter of credit and additional payments are secured
through several methods. Before extended payment terms are provided, the Company
performs a thorough review of the local operation, secures a guarantee from
higher authorities than the end-user, and performs other steps as needed.

     Extended payment term transactions are entered  into in the context of  the
Company's  sales activities in China and, as  such, the risks attendant to doing
business in  China  apply  to  such  transactions as  well.  The  absence  of  a
comprehensive  and  effective  legal  system  in  China,  among  other concerns,
requires alternative arrangements in order to reduce the Company's credit risks.
Guarantees from higher governmental authorities, for  example, usually  involve
requiring  customers to have a provincial or municipal governmental organization
sign a statement that the payment obligations will be satisfied. This  political
commitment  is,  in the  Company's experience,  an  effective method  in helping
ensure payment of obligations in China.  These commitments, however, are
different from traditional commercial guarantees in the United States, which
guarantees are not available in China for transactions of the type engaged in by
the Company.

    The Company has a $1,750,000 credit facility with First National Bank of
Maryland for short-term working capital needs, standby letters of credit, and
spot and forward foreign exchange transactions. Balances outstanding under the
facilities are payable on demand, fully secured and collateralized by government
securities acceptable to the Bank having an aggregate fair market value of not
less than $1,945,000. As of December 31, 1998, letters of credit issued by the
bank amounted to approximately $36,000 and no amounts were outstanding under the
line of credit facility.  Borrowings under the credit facility bear interest
at 1% over three month London Interbank Offered Rate ("LIBOR").

    The Company conducts its marketing and sales and provides its services
exclusively to buyers located in China, Hong Kong and Macau. The Company's
results of operations and its ability to obtain financing could be adversely
affected if there was a deterioration in trade relations between the United
States and China.

    Of the Company's net assets at December 31, 1998, approximately $6,168,000
of such assets are located in China, consisting principally of inventories,
property improvements and equipment.

See also Note 10.

10. SIGNIFICANT CUSTOMERS/SUPPLIERS

     Substantially all China purchases of the Company's products, regardless of
the end-user, are made through Chinese foreign trade corporations (FTCs).
Although the purchasing decision is made by the end-user, which may be an
individual or a group having the required approvals from their administrative
organizations, the Company enters into formal purchase contracts with FTCs. The
FTCs make purchases on  behalf of  the end-users  and are  authorized by  the
Chinese  government to conduct import business. FTCs are chartered and regulated
by the government and are  formed  to  facilitate  foreign trade.  The  Company
markets  its products directly to end-users, but in consummating a sale the
Company must also interact with the particular FTC representing the end-user.
By virtue of its direct contractual relationship with the FTC, rather than the
end user, the Company is to some extent dependent on the continuing existence of
and contractual compliance by the FTC until a particular transaction has been
completed.

     Purchases from one supplier totaled approximately $9,055,000 and $4,395,000
for the years ended December 31, 1997 and 1998, respectively.  The Company has
entered into a security arrangement to ensure the payment of such supplier's
accounts payable.


11. RESTRUCTURING

     At the end of 1997 the Company decided to end its relationship with certain
suppliers and to concentrate and consolidate all of its efforts on the health
care industry.  The restructuring charge includes a write-down of certain
inventory and receivables associated with these suppliers.  The portion of the
$1,472,000 charge related to this write down of assets amounted to $1,003,000.
In addition, the Company set up a reserve of $469,000 at December 31, 1997 for
the phase out of approximately 30 people associated with these products and
their related severance benefits and certain other future costs of close-out.
The Company completed the phase out by the end of 1998.


12. SEGMENT REPORTING

  The following segment information has been provided in response to the
Company's adoption of Financial Accounting Standards No. 131, 'Disclosures
about Segments of an Enterprise and Related Information':

For the twelve months ended December 31, 1998:
<TABLE>
<CAPTION>
Segments          Healthcare Products  Healthcare Services      Total
<S>                  <C>                  <C>               <C>
Assets                $24,311,000          $4,242,000        $28,553,000
                      ===========          ==========        ===========
                                  
Revenue               $19,750,000          $1,860,000        $21,610,000

Gross Profit            5,668,000               n/a               n/a
Gross Profit %            29%

Expenses                8,195,000           2,946,000        $25,223,000
                      -----------           ---------        -----------
Loss from operations  ( 2,527,000)         (1,086,000)       ( 3,613,000)

<S>                              <C>
Loss from combined operations      (3,613,000)
Other income/expense, net           1,661,000
Minority interest                     (12,000)
                                  -----------
Loss before income tax            ($1,964,000)
                                   ==========
</TABLE>

  Intersegment transactions were insignificant during the year ended December
31, 1998.  As of December 31, 1997, total assets of the Company's healthcare
services segment was approximately $4.0 million, of which approximately $2.7
million related to equipment and building improvements for the Beijing United
Family Hospital.  Revenues from the hospital were minimal in 1997.
Substantially all other assets, revenues and gross margins related to the
Company's healthcare products segment in 1997.  All of the Company's revenue is
attributable to its operations in China.


13. SUBSEQUENT EVENTS

     Effective February 26, 1999 the Company implemented a one-for-eight reverse
stock split in respect of all the issued and outstanding Common Stock, as well
as the Units, Class A Warrants, Class B Warrants and Class B common stock.  As
of the effective date of the reverse stock split, stockholders own one-eighth
the number of shares of Common Stock previously held.  All financial information
and number of shares issued, authorized and outstanding, has been retroactively
restated to include the effect of the stock split.  Without the effect of the
stock split, loss per share would have been .74 and .32 for the years ended
December 31, 1997 and 1998, respectively.


Item 8.   Changes In and Disagreements with Accountants on Accounting and
          Financial Disclosure.

          None.



PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons

     The information relating to the directors, executive officers, promoters
and control persons of the Company will be included in the Company's Proxy
Statement (the "Proxy Statement") relating to its 1997 Annual Meeting of
stockholders, which the Company intends to file with the Securities and Exchange
Commission on or prior to April 30, 1997, and is incorporated herein by
reference.


Item 10.   Executive Compensation

     Information required is set forth in the Proxy Statement, which is
incorporated herein by reference.

Item 11.   Security Ownership of Certain Beneficial Owners and Management
     Information required is set forth in the Proxy Statement, which is
incorporated herein by reference.

Item 12.   Certain Relationships and Related Transactions
     Information required is set forth in the Proxy Statement, which is
incorporated herein by reference.

Item 13.   Exhibits and Reports on Form 8-K

     a.   Exhibit listing:

          3.1  Restated Certificate of Incorporation of the Company.
               Incorporated by reference to Exhibit 3.1 to the Company's
               Registration Statement on Form SB-2 (No. 33-78446)(the "IPO
               Registration Statement").

          3.1A Certificate of Amendment of the Certificate of Incorporation
               dated February 18, 1999.

          3.2  By-laws of the Company.  Incorporated by reference to Exhibit
               3.2 to the IPO Registration Statement.

          4.1  Form of Warrant Agreement (including forms of Class A and Class
               B Warrant Certificates).  Incorporated by reference to Exhibit
               4.1 to the IPO Registration Statement.

          4.2  Form of Amendment to Warrant Agreement.  Incorporated by
               reference to Exhibit 4.2 to the Company's Registration
               Statement on Form SB-2 (No. 333-12861)(the "Secondary
               Registration Statement").

          4.3  Form of Specimen Certificate of the Company's Common Stock.
               Incorporated by reference to Exhibit 4.2 to the IPO Registration
               Statement.

          4.4  Form of Specimen Certificate of Class B Common Stock
               Certificate.  Incorporated by reference to Exhibit 4.3 to the
               IPO Registration Statement.

          4.5  Form of Escrow Agreement.  Incorporated by reference to Exhibit
               4.6 to the IPO Registration Statement.

         10.1  The Company's 1994 Stock Option Plan, as amended.  Incorporated
               by reference to Exhibit 10.1 to the Company's Annual Report on
               Form 10-KSB for the fiscal year ended December 31, 1997.

         10.2  Lease Agreement, dated as of July 1, 1987, between the Company
               and the Yiqing Hotel, relating to the Company's Beijing, China
               Facility.*+  Incorporated by reference to Exhibit 10.3 to the
               IPO Registration Statement.

         10.3  Addendum to Lease Agreement between the Company and the Yiqing
               Hotel, relating to the Company's Beijing, China Facility.*+
               Incorporated by reference to Exhibit 10.3 to the IPO
               Registration Statement.

         10.4  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.

         10.5  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.

         10.6  Employment Agreement, dated as of May 1, 1994, between the
               Company and Roberta Lipson.  Incorporated by reference to
               Exhibit 10.5 to the IPO Registration Statement.

         10.7  Employment Agreement, dated as of May 1, 1994, between the
               Company and Elyse Beth Silverberg.  Incorporated by reference to
               Exhibit 10.6 to the IPO Registration Statement.

         10.8  Employment Agreement, dated as of May 1, 1994, between the
               Company and Lawrence Pemble.  Incorporated by reference to
               Exhibit 10.7 to the IPO Registration Statement.

         10.9  Employment Agreement, dated as of May 1, 1994, between the
               Company and Robert C. Goodwin, Jr.  Incorporated by reference to
               Exhibit 10.8 to the IPO Registration Statement.
         
        10.10  Distribution Agreement dated as of January 1, 1998 between
               Acuson Corporation and the Company.

        10.11  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.

        10.12  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.

        10.13  Lease Agreement dated May 10, 1998, between the School of Posts
               and Telecommunications and the Company relating to the lease of
               additional space.

        10.14  Sublease Agreement between the Company and the Beijing
               International School dated March 4, 1996.  Incorporated by
               reference to Exhibit 10.15 to the Company's Annual Report on
               Form 10-K for the fiscal year ended December 31, 1995.

        10.15  Amendment Number One to the Sublease Agreement between the
               Company and the Beijing International School, dated April 23,
               1998.

        10.16  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.

        10.17  First Investment Loan Manager Demand Promissory Note dated
               July 10, 1997 between First National Bank of Maryland and
               Chindex, Inc.  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.

        21.1   List of subsidiaries as of 12/31/98.

        27.1   Financial Data Schedules.

-------------------

*   Confidential treatment has been granted as to a portion of this Exhibit.
+   English translation of summary from Chinese original.




         b.    Reports on Form 8-K

               None



                              SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                              U.S.-CHINA INDUSTRIAL EXCHANGE, INC.


Dated:  March 30, 1999        By: /S/ Roberta Lipson
                              Roberta Lipson
                              President and Chief Executive Officer





Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.


Dated:  March 30, 1999        By: /S/ Roberta Lipson
                              Roberta Lipson
                              Chairperson of the Board of Directors,
                              Chief Executive Officer and President


Dated:  March 30, 1999        By: /S/ Elyse Beth Silverberg
                              Elyse Beth Silverberg
                              Executive Vice President, Secretary and Director


Dated:  March 30, 1999        By: /S/ Lawrence Pemble
                              Lawrence Pemble
                              Executive Vice President-Finance and Director


Dated:  March 30, 1999        By: /S/ Robert C. Goodwin, Jr.
                              Robert C. Goodwin, Jr.
                              Executive Vice President of Operations,
                              Treasurer, General Counsel and Director


Dated:  March 30, 1999        By: /S/ Ronald Zilkowski
                              Ronald Zilkowski
                              Vice President Finance and Controller

<PAGE>