The accompanying notes are an integral part of the financial statements.

The accompanying unaudited consolidated condensed financial statements of Chindex International, Inc. (the ''Company'') have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002.    

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K and 10-K/A for the year ended December 31, 2001.

Note 4. NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted Loss Per Share (LPS) for the periods indicated:

Note 5. SEGMENT INFORMATION

As a result of the growth of the Healthcare Products Distribution unit the Company has split its Healthcare Products segment. The Company now has three reportable segments: Capital Medical Equipment, Healthcare Products Distribution and Healthcare Services. The Company evaluates performance and allocates resources based on profit or loss from operations before income taxes, not including gains or losses on the Company's investment portfolio.

For the quarter ended September 30, 2002:

	Capital Medical Equipment	Healthcare Products Distribution	Healthcare Services	Total
Assets	$15,008,000	$10,127,000	$10,138,000	$35,273,000
Sales and service revenue	$7,705,000	$6,935,000	$3,161,000	$17,801,000
Gross Profit	2,601,000	996,000	n/a	n/a
Gross Profit %	34%	14%	n/a	n/a
Income (loss) from operations	$516,000	$(149,000)	$136,000	$503,000
Other income/(expense), net				(97,000)
Minority interest				(6,000)
Income before taxes				$400,000

For the quarter ended September 30, 2001:

	Capital Medical Equipment	Healthcare Products Distribution	Healthcare Services	Total
Assets	$15,167,000	$10,932,000	$6,215,000	$32,314,000
Sales and service revenue	$6,460,000	$5,027,000	$1,960,000	$13,447,000
Gross Profit	2,071,000	679,000	n/a	n/a
Gross Profit %	32%	14%	n/a	n/a
Income (loss) from operations	$274,000	$(284,000)	$58,000	$48,000
Other income/(expense), net				135,000
Minority interest				(5,000)
Loss before taxes				$178,000

For the nine months ended September 30, 2002:

	Capital Medical Equipment	Healthcare Products Distribution	Healthcare Services	Total
Assets	$15,008,000	$10,127,000	$10,138,000	$35,273,000
Sales and service revenue	$18,995,000	$19,966,000	$9,386,000	$48,347,000
Gross Profit	5,056,000	2,744,000	n/a	n/a
Gross Profit %	27%	14%	n/a	n/a
(Loss) income from operations	$(392,000)	$(537,000)	$542,000	$(387,000)
Other income/(expense), net				(102,000)
Minority interest				(29,000)
Loss before taxes				$(518,000)

For the nine months ended September 30, 2001:

	Capital Medical Equipment	Healthcare Products Distribution	Healthcare Services	Total
Assets	$15,167,000	$10,932,000	$6,215,000	$32,314,000
Sales and service revenue	$17,103,000	$14,137,000	$6,014,000	$37,254,000
Gross Profit	5,366,000	1,858,000	n/a	n/a
Gross Profit %	31%	13%	n/a	n/a
Income (loss) from operations	$541,000	$(1,050,000)	$281,000	$(228,000)
Other income/(expense), net				410,000
Minority interest				(14,000)
Income before taxes				$168,000

The Company's revenues for the three months ended September 30, 2002 were $17,801,000, up 32% from the three months ended September 30, 2001 revenues of $13,447,000. Included in the revenues for the period was $3,326,000 attributable to loan sales by the Company for its customers. The Company believes that this type of financing is important to its customers and will continue to try to secure such financings in the future. These financings can be very complex and their timing and impact on the Company's results are difficult to predict (see "Timing of Revenues").

The Company recorded net income of $176,000 for the three months ended September 30, 2002, as compared to net income of $109,000 for the three months ended September 30, 2001.

The capital medical equipment segment is the Company's original core business, exporting top quality Western capital medical equipment to the China market. In the three months ended September 30, 2002 this segment had revenues of $7,705,000, a 19% increase from revenues of $6,460,000 in the three months ended September 30, 2001. The increase was primarily attributable to $3,326,000 in loan sales, while there were no such sales in the prior year period. The period to period revenues of this segment fluctuate due to financing programs from time to time facilitated by the Company and due to fluctuating hospital purchasing cycles in China. The U.S. Dollar-based sales of capital medical equipment are often contingent on financing (see "Timing of Revenues").

Gross profit in the three months ended September 30, 2002 increased to $2,601,000 from $2,071,000 in the three months ended September 30, 2001. As a percentage of revenues, gross profit from the capital medical equipment segment for the recent period was 34% as compared to 32% in the prior period.

Expenses for the capital medical equipment segment in the three months ended September 30, 2002 increased to $2,085,000 from $1,797,000 in the three months ended September 30, 2001, and as a percentage of revenues over the period decreased to 27% from 28%. Salaries for the segment in the three months ended September 30, 2002 increased by $223,000 from the three months ended September 30, 2001, and as a percentage of revenues over the period increased to 10% from 9%. The salary increase was primarily due to increased payroll benefits mandated by the Chinese government. In addition, travel and entertainment expenses for the segment increased $36,000 (but decreased as a percentage of revenues over the periods to 5% from 6%). Other costs increased $29,000 over the three months, primarily due to additional bad debt reserve offset by lower costs for exhibitions and lower administrative expense allocation.

The healthcare products distribution segment, consisting of medical consumables and personal healthcare products, had revenues growth of 38% to $6,935,000 in the three months ended September 30, 2002, from the three months ended September 30, 2001 revenues of $5,027,000. These local currency sales of medical consumables and personal healthcare products are made from inventories maintained locally in China (see Foreign Currency Exchange) to a network of sub-dealers and pharmacies.

Gross profit in the three months ended September 30, 2002 rose to $996,000 from $679,000 in the three months ended September 30, 2001. As a percentage of revenue, gross profit from the healthcare products segment for the recent period was 14% as compared to 14% in the prior period.

Expenses for the healthcare products distribution segment in the three months ended September 30, 2002 increased to $1,145,000 from $963,000 in the three months ended September 30, 2001, but decreased as a percentage of revenues over the periods to 17% from 19%. Salaries for the segment increased $86,000 (but decreased as a percentage of revenues over the periods to 5% from 6%) primarily due to increased payroll benefits mandated by the Chinese government. In addition, travel and entertainment expense for the segment increased $22,000 (but was flat at 2% of revenue for both periods) and other costs increased $74,000 due primarily to increased auto expense and promotion.

The healthcare services segment consists of a Western style primary care hospital and outpatient facility, the Beijing United Family Hospital (''BJU''). For the three months ended September 30, 2002, the revenues from this segment were $3,161,000, an increase of 61% over the three months ended September 30, 2001 revenues of $1,960,000. During the recent period, the hospital continued to expand the services offered, which contributed to increased patient visits as well as increased inpatient stays over the three months. Healthcare services costs increased for the three months ended September 30, 2002 to $3,025,000, a 59% increase over the three months ended September 30, 2001 costs of $1,902,000. This increase was due primarily to the costs associated with increased services offered. The hospital is currently expanding its present facility to include space formerly occupied by a sublease tenant (see Liquidity and Capital Resources). The hospital a lso has continued its efforts to explore the establishment of additional satellite clinics to serve as referral sites to its hospital. In this regard, as of the date of this report, the first satellite clinic has now opened. This clinic, in Shunyi county outside of Beijing, is funded by a Chindex subsidiary and is staffed by doctors and other health professionals from the hospital. Salaries increased by $465,000 (salaries were 49% and 55% of revenue for the three months ended September 30, 2002 and 2001, respectively), with all other costs increasing $658,000, including increases of $94,000 in supplies, $63,000 in rent and $29,000 in office expenses and $125,000 in increased administrative allocation. The salary increases resulted from increased staffing for the emergency room and for other expanded facilities as well as additional payroll benefits.

Minority interest in the net income of BJU amounted to $6,000 for the three months ended September 30, 2002 and $5,000 for the three months ended September 30, 2001. This income is directly related to the local entity profitability of the hospital.

Other Income and Expenses

Other expense (other than interest) for the three months ended September 30, 2002 was $88,000, compared to other income of $116,000 for the three months ended September 30, 2001. The prior period other income was derived from a sublease of space in the building housing BJU that ended on December 31, 2001. In 2001, income attributable to this sublease was approximately $550,000. The part of the building that was sublet is now being renovated as part of the hospital expansion. Although the Company does not anticipate sublease revenues in 2002, it nevertheless anticipates that once the space is renovated and put into service for use by BJU, the Company will recognize additional revenues through the expanded operations of BJU, which additional revenues may offset part or all of the loss of income from the sublease.

As of the end of 2001 the Company had substantially completed a global restructuring. The Company is modifying inter-company relationships to better accommodate its predominantly Chinese operations. This restructuring was motivated, in part, by the Company's desire to "incorporate" various functions previously operated as divisions or branches of the Company and, in part, by the Company's intent to expand its presence in the direct healthcare market by opening an additional hospital.

As a result of this restructuring the Company expects to make use of a portion of its U.S. federal net operating losses. The Company recorded a $224,000 provision for taxes for the three months ended September 30, 2002 as compared to a provision for taxes of $69,000 for the three months ended September 30, 2001. This tax computation is in line with current accounting standards but assumes a certain level of future profitability. The Company may have to reverse this treatment by the end of the year should current expectations not be fully met.

The Company's revenues for the nine months ended September 30, 2002 were $48,347,000, up 30% from the nine months ended September 30, 2001 revenues of $37,254,000. Of these amounts, $5,328,000 in the recent period and $1,812,000 in the prior period, was attributable to loan sales by the Company for its customers. The Company believes that this type of financing is important to its customers and will continue to source such financings in the future. These financings can be very complex and their timing and impact on the Company's results are difficult to predict (see "Timing of Revenues").

The Company recorded a net loss of $428,000 for the nine months ended September 30, 2002, as compared to a net loss of $91,000 for the nine months ended September 30, 2001.

In the nine months ended September 30, 2002 this segment had revenues of $18,995,000, an 11% increase over the revenues of $17,103,000 in the nine months ended September 30, 2001. The period to period revenues of this segment fluctuate due to financing programs from time to time facilitated by the Company and due to fluctuating hospital purchasing cycles in China. The increase for the nine months ended September 30, 2002 was primarily attributable to loan sales by the Company to its customers, which were $5,328,000 in the recent period as compared to $1,812,000 in the prior period. The U.S. Dollar-based sales of capital medical equipment are often contingent on financing (see "Timing of Revenues").

Gross profit in the nine months ended September 30, 2002 decreased to $5,056,000 from $5,366,000 in the nine months ended September 30, 2001. As a percentage of revenues, gross profit from the capital medical equipment segment for recent period was 27% as compared to 31% in the prior period. The gross profit in the nine months ended September 30, 2001 reflected a different mix of revenue sources having different profit margins. In particular, in the recent period, the Company had less service contract revenues than in the prior period, which revenues carry higher margins. In addition, competitive factors such as the timing and composition of major tenders as well as the ongoing competitive pricing pressures due to Chinese government tendering regulations in the sale of capital medical equipment in the recent nine months yielded lower margins on such sales.

Expenses for the capital medical equipment segment in the nine months ended September 30, 2002 increased to $5,448,000 from $4,825,000 in the nine months ended September 30, 2001, and as a percentage of revenues over the period increased to 29% from 28%. Salaries for the segment in the nine months ended September 30, 2002 increased by $495,000 from the nine months ended September 30, 2001 and as a percentage of revenues over the period increased to 11% from 9%. The salary increase was primarily due to increased payroll benefits mandated by the Chinese government. In addition, travel and entertainment expenses for the segment increased $63,000 (but were flat at 5% of revenues in both nine month periods). Other costs increased $65,000 over the nine month period, primarily due to increased exhibition fees and bad debt reserve offset by lower admin allocations and lower promotion costs.

The healthcare products distribution segment, consisting of medical consumables and personal healthcare products, had revenues growth of 41% to $19,966,000 in the nine months ended September 30, 2002, from the nine months ended September 30, 2001 revenues of $14,137,000.

Gross profit in the nine months ended September 30, 2002 rose to $2,744,000 from $1,858,000 in the nine months ended September 30, 2001. As a percentage of revenues, gross profit from the healthcare products distribution segment for the recent period increased to 14% from 13% in the prior period.

Expenses for the healthcare products distribution segment in the nine months ended September 30, 2002 increased to $3,281,000 from $2,908,000 in the nine month period ended September 30, 2001, but decreased as a percentage of revenues over the nine month period to 16% from 21%. Salaries for the segment increased $257,000, but remained flat as a percentage of revenues over the nine month periods at 6%. The increase is primarily due to increased payroll benefits mandated by the Chinese government. In addition, travel and entertainment expense for the segment increased $59,000 (but was flat at 1% of revenues for both nine month periods) and other costs increased $57,000 primarily from increased auto expense and promotion.

For the nine months ended September 30, 2002, the revenues from this segment were $9,386,000, an increase of 56% over the nine months ended September 30, 2001 revenues of $6,014,000. During the recent period, the hospital continued to expand the services offered, which contributed to increased patient visits as well as increased inpatient stays over the nine months. Healthcare services costs during the nine months ended September 30, 2002 were $8,844,000, an increase of 54% over the nine months ended September 30, 2001 costs of $5,733,000. This increase was due primarily to the costs associated with increased services offered. The hospital is currently expanding its present facility to include space formerly occupied by a sublease tenant (see Liquidity and Capital Resources). The hospital also has continued its efforts to explore the establishment of additional satellite clinics to serve as referral sites to its hospital. In this regard, as of t he date of this report, the first satellite clinic has now opened. This clinic, in Shunyi county outside of Beijing, is funded by a Chindex subsidiary and is staffed by doctors and other health professionals from the hospital. Salaries increased by $1,820,000 (salaries were 50% and 47% of revenue for the nine months ended September 30, 2002 and 2001, respectively), with all other costs increasing $1,291,000, including $237,000 in supplies, $233,000 in rent, $125,000 in admin allocation and $87,000 in office expenses. The salary increases resulted from increased staffing for the emergency room and for other expanded facilities as well as additional payroll benefits.

Minority interest in the net income of BJU amounted to $29,000 for the nine months ended September 30, 2002 and $14,000 for the nine months ended September 30, 2001. This income is directly related to the local entity profitability of the hospital.

Other Income and Expenses

Other expense (other than interest) for the nine months ended September 30, 2002 was $109,000, compared to other income of $314,000 for the nine months ended September 30, 2001. The prior period other income was derived from a sublease of space in the facility housing BJU that ended on December 31, 2001. In 2001, income attributable to this sublease was approximately $550,000. The part of the building that was sublet is now being renovated as part of the hospital expansion. Although the Company does not anticipate any sublease revenues in 2002, it nevertheless anticipates that once the space is renovated and put into service for use by BJU, the Company will recognize additional revenues through the expanded operations of BJU, which additional revenues may offset part or all of the loss of income from the sublease.

The Company recorded a $90,000 benefit from taxes for the nine months ended September 30, 2002 as compared to a provision for taxes of $259,000 for the nine months ended September 30, 2001. This tax computation is in line with current accounting standards but assumes a certain level of future profitability. The Company may have to reverse this treatment by the end of the year should current expectations not be fully met.

As of September 30, 2002, total accounts receivable increased by $1,039,000 compared to total accounts receivable on December 31, 2001. While the Company collected the loan project receivable from the end of the year, it was partially offset by shipment of the third quarter loan project that will not be collected until the fourth quarter of 2002. Other sales were comparable to the prior year.

The $469,000 net increase as of September 30, 2002 in accounts payable, accrued expenses and long term payables was related to increased accruals for the third quarter loan project offset by vendor payments for inventory.

As of September 30, 2002, inventories were $9,122,000, an increase of $1,888,000 from the December 31, 2001 balance of $7,365.000. This increase was mainly attributable to expanding inventory supply and currently limited vendor credit.

The Company has recorded a deferred tax asset and income tax receivable of $928,000, or $531,000 over the prior year end balance. The Company expects the tax situation to reverse by year end and almost all of the deferred tax will be reversed to a small tax payable.

As of September 30, 2002 the Company capitalized an additional $1,670,000 of improvements and equipment, primarily for the expansion of BJU. The Company plans to continue to renovate the facility housing BJU during 2002. The remaining estimated cost of such renovation at BJU and related expenses is approximately $1,510,000 and will be primarily financed through internal cash flows, bank borrowings and vendor financing.

In June, 2002, BJU renewed and increased its short term financing arrangement in China with Hongkong Shanghai Banking Corp. ("HSBC") for up to $600,000 in revolving loans or standby credit. As of September 30, 2002 the Company had fully utilized this facility and had $600,000 outstanding. In addition, the Company also utilized its short term credit facility with Allfirst Bank, under which, as of September 30, 2002, the Company had $1,354,000 outstanding.

The Company received the business license for its Shanghai United Hospital on July 17, 2002. Under Chinese law the Company is required to begin making its payment of registered capital for the hospital within 3 months of the receipt of the business license. The Company's total registered capital obligation is $4 million, with the first payment of 15% of that amount, or $600,000, due by the end of October 2002, which has been paid. In connection with the Company's efforts to locate additional funding to meet this investment obligation, the Company has entered into an agreement with a major supplier for the provision of extended credit terms for up to $4 million of purchases over a seven year term. Such terms will allow the Company to defer payment on purchases from that supplier for up to one, one and one half or two years on any particular sale and utilize the funds received from customers for the development of Shanghai United Hospital. As payment is made pursuant to the one or one and one half or t wo years terms on outstanding obligations, credit will be granted to new equipment sales so that there continues to be a total of approximately $ 4 million outstanding. The arrangement carries an interest component of 5%. The agreement was effective as of August 15, 2002 and $1,442,000 is committed.

The Company has received notice from Nasdaq that it did not have the required number of market makers and would be delisted in the absence thereof. Although the Company promptly cured the deficiency and currently is in compliance with the requirement, a failure to comply in the future could result in such delisting, which could have an adverse impact on the liquidity of the Company's common stock.

The Company continues to consider various other financing alternatives to satisfy its future expansion, capital improvements and equipment requirements.

The timing of the Company's revenues is affected by several significant factors. Many end-users of the capital equipment 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 of purchasers of capital equipment 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, including Export-Import Bank or other loan financing. As a result, the Company's operating results have varied and are expected to continue to vary 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. As a result, a relatively small reduction in the number of orders can have a material impact on the Company's revenues in any year. Furthermore, because the Company recognizes revenues and expenses as products are shipped, the timing of shipments could affect the Company's operating results for a particular period. At the s ame time, a growing percentage of the Company's revenues are attributable to hospital services and local currency sales through the Healthcare Products Distribution Segment, both of which have more even revenue streams.

The results of operations of the Company for the periods discussed in this report have not been significantly affected by inflation or foreign currency fluctuation. Since the Company sells goods and services in local Chinese currency as well as U.S. dollars, the Company is exposed to some extent to foreign currency risk. 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, Chindex Beijing and Beijing United, sell products and services in Renminbi.

Also, the Company has purchased and will continue to purchase some products in Western 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 other currencies, the Company could experience a negative impact on profitability. The Company anticipates entering into hedging transactions whenever necessary to minimize such negative impacts. Currently, the Company is not a party to any such hedging transactions.

FORWARD-LOOKING STATEMENTS

With the exception of historical information, certain matters discussed or incorporated by reference in this Quarterly Report on Form 10-Q 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, including successful conclusion of efforts to secure government-backed financing, (ii) future revenues and earnings, including revenues from the Company's developmental businesses such as the health services segment, (iii) markets, including growth in demand in China for the Company's products and services, and (iv) proposed new operations, including expansion of its health services business. 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks in a variety of ways. The principal market risk has to do with the nature of the Chinese economy and political system. Since the Company generates all of its revenues from its operations in China, any risk having to do with the environment in China for a foreign business operating there can have a significant impact on the Company.

The Company's growth plan includes continuing expansion of the Capital Medical Equipment Segment, rapid expansion of the Healthcare Products Distribution Segment product portfolio, with an emphasis on increasing the number and variety of products that are sold directly to retail pharmacies, and the development of a network of private family hospitals, based on the BJU model, to serve China's growing middle class. Management continues to develop this growth plan, the implementation of which will be contingent on a number of factors, including requisite financing.

Although the Company remains optimistic about the marketplace, there are some continuing 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. These uncertainties 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 and services. In the Company's view, China's entry into the World Trade Organization in 2001 has made the risks from these uncertainties less significant. Other possibly adverse circumstances 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.

The Company's interests may be adversely affected by the political environment in China. China is a socialist state which since 1949 has been, and is expected to continue to be, controlled by the Communist Party of China. Changes in the top political leadership of the Chinese government and/or the Communist Party, may have a significant impact on policy and the political and economic environment in China. Moreover, economic reforms and growth have been more successful in certain sections of the country than others, and the continuation or increase of such disparities could affect political or social stability.

The government of China has exercised and continues to exercise substantial control over virtually every section of the Chinese economy through regulation and state ownership. China's continued commitment to reform and the development of a vital private sector in that country have, to some extent, limited the practical effects of the control currently exercised by the government over business enterprises. However, the economy continues to be subject to significant government controls which, if applied to business activities in which the Company engages could have a significant adverse impact on the Company. For example, if the government were to limit the number of foreign personnel who could work in the country or were to substantially increase taxes on foreign businesses or were to impose any number of other possible types of limitations on the Company's operations, the Company could be subject to a significant adverse impact.

China's legal system is a civil law system, which is based on written statutes and in which decided legal cases have little precedential value. Moreover, China's legal system is still in the early stage of development and there are not sufficient numbers of trained judges or other legal professionals to manage disputes that may arise. As a result, the administration of laws and regulations by government agencies in China may be subject to considerable discretion, which may cause uncertainty with respect to certain legal aspects of the Company's operations.

In the sale of its capital equipment to China, the Company must make most of its sales through foreign trade corporations ("FTCs"). Although purchasing decisions are made by the end-user, which is obligated to pay the applicable purchase prices, the Company enters into a formal purchase contract only with the FTC. 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 is completed.

The Company has made commitments for the lease of the building for its Shanghai hospital and will soon make commitments for construction works at the building and the purchase of medical equipment for use in the hospital. While the Company has obtained approximately $4 million in financing for the foregoing commitments, fulfillment of these commitments will likely require the Company to obtain additional sources of financing for the hospital, although it is possible that these costs will be met through internally generated cash flows. The Company believes that sufficient financing will be obtained in a timely manner. However, should this prove not to be the case, the Company may have to amend some of its commitments.

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us 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. The Company's estimates, judgments and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

Certain of the Company's accounting policies require higher degrees of judgment than others in their application. These include revenue recognition, estimation of useful lives of long-term assets, income tax recognition of deferred tax items and accruals and contingencies.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we are required to filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Company's management, including the Company's principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures which, by their nature, can provide only reasonable assurance regarding management's control objectives.

Within 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chairperson of the Board and Chief Executive Officer, Executive Vice President - Finance and Business Development and Senior Vice President Finance and Corporate Controller, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, the Company's Chairperson of the Board and Chief Executive Officer, Executive Vice President - Finance and Business Development and Senior Vice President Finance and Corporate Controller concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (and its consolidated subsidiaries) required to be included in its Exchange Act reports.

There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date the Company carried out the evaluation referred to above.

PART II. OTHER INFORMATION

The exhibits listed below are filed as a part of this quarterly report (references herein to the Company prior to June 17, 2002 mean the Company's predecessor, U.S.-China Industrial Exchange, Inc.):

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

* Confidential treatment has been granted as to a portion of this Exhibit.

+ English translation of summary from Chinese original.

Form 8-K, Item 5. Other Events, dated July 19, 2002.

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