UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

OR

For the quarterly period ended December 31, 2004

Commission file number 0-24624

CHINDEX INTERNATIONAL, INC.

(301) 215-7777
(Registrant’s telephone number)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes [x ] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [ x ]

The number of shares outstanding of each of the issuer’s class of common equity, as of January 24, 2005, was 4,648,046 shares of Common Stock and 775,000 shares of Class B Common Stock.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(thousands except share data)
(Unaudited)

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

CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(thousands except share and per share data)
(Unaudited)

Share information has been retroactively adjusted to give effect to the stock splits, each in the form of a 100% stock dividend. The stock splits were announced by us on August 6, 2003 with a record date of August 18, 2003 and on December 29, 2003 with a record date of January 10, 2004.

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

CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(thousands)
(Unaudited)

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

CHINDEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the nine months ended December 31, 2004
(thousands except share data)

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

CHINDEX INTERNATIONAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

Note 1. BASIS OF PRESENTATION

     The accompanying unaudited consolidated condensed financial statements of Chindex International, Inc. 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 or nine-month periods ended December 31, 2004 are not necessarily indicative of the results that may be expected for the year.

     References to “Chindex”, “we”, “us” and “our” refer to Chindex International, Inc. and subsidiaries, unless the context otherwise requires.

     For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form 10-K for the fiscal year ended March 31, 2004, as amended.

     Certain balances in the March 31, 2004 financial statements have been reclassified to conform to the 2005 presentation.

     The share information has been restated after giving retroactive effect to the stock split, in the form of a stock dividend, announced by us on August 6, 2003 and having a record date of August 18, 2003 and a second stock split announced by us on December 29, 2003 and having a record date of January 10, 2004. The authorized shares of Common Stock and Class B Common Stock as of December 31, 2004 have been adjusted to give effect to an amendment to our Certificate of Incorporation dated October 28, 2004 increasing the number of such authorized shares by 100%.

NEW ACCOUNTING PRONOUNCEMENTS:

     In December 2004, the Financial Accounting Standards Board (FASB) issued Statement No. 123R, “Share-Based Payment” (SFAS 123R), which requires companies to measure and recognize compensation expense for all stock-based payments at fair value. SFAS 123R is effective for all interim periods beginning after June 15, 2005 and, thus, will be effective for us beginning with the second quarter of fiscal 2006. We are currently evaluating the impact of SFAS 123R on our financial position and results of operations. See Note 4 for information related to the pro forma effects on our reported net loss and net loss per share of applying the fair value recognition provisions of the previous Statement of Financial Accounting Standards (SFAS) 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

Note 4. NET EARNINGS PER SHARE

     The following is a reconciliation of the numerators and denominators of the basic and diluted Earnings per Share (EPS) or Loss per Share (LPS) computations for net income and other related disclosures:

     (thousands except share and per share data)

For the periods in which losses were incurred, shares issuable upon exercise of stock options are excluded from diluted earnings per share because the effect would be anti-dilutive.

STOCK-BASED COMPENSATION: We account for stock options under the provisions of Accounting Principles Board Opinion (“APB”) No. 25, under which no compensation expense is recognized when the exercise price of the stock options granted to colleagues and directors is equal to or greater than the fair market value of the underlying stock on the grant date.

Had compensation cost for the plan been determined following the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” our pro forma net income (loss) and pro forma earnings (loss) per share would have been as follows:

(thousands except share and per share data)

Note 5. STOCKHOLDER’S EQUITY

     As of December 31, 2004, we also had received net proceeds of approximately $12.3 million from the sale of 1.5 million shares of common stock and warrants to purchase 300,000 shares at an exercise price of $9.00 per share, which proceeds were received on March 31, April 1 and May 5, 2004. Such net proceeds were used to repay a portion of our vendor financing and capital expenditures as well as for working capital purposes.

Note 6. SEGMENT INFORMATION

     We have three reportable segments: Medical Capital Equipment, Healthcare Products Distribution, and Healthcare Services.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Three months ended December 31, 2004 compared to three months ended December 31, 2003

     Our revenue for the three months ended December 31, 2004 was $22,329,000, up 3% from the three months ended December 31, 2003 revenue of $21,630,000. We experienced continued growth in the medical capital equipment and healthcare services segments, with revenue growth of 8% in the medical capital equipment segment and 14% in the healthcare services segment, compared to the same period last year. We experienced a 7% decrease in revenue over the same period last year in our healthcare products distribution segment the reasons for which are discussed below. Costs and expenses were $25,674,000 for the period as compared with costs and expenses of $22,151,000 for the three months ended December 31, 2003. The nature of the increased costs in each segment is discussed below. We recorded a net loss of $3,713,000 for the three months ended December 31, 2004, as compared to a net loss of $383,000 for the three months ended December 31, 2003. During the recent period, we continued to incur operational expenses in connection with our new hospital in Shanghai. There were a number of increased costs at the parent level of the Company, including significant increases related to local entity excise taxes and increased corporate governance, including in general Sarbanes-Oxley compliance and in particular compliance with Section 404 thereof. The largest parent level increases, which have been allocated among the segments as described below, include increased excise taxes of $171,000, increased payroll of $66,000, increased professional fees of $31,000 and increased rent of $83,000.

Medical Capital Equipment Segment

     The medical capital equipment segment exports high quality Western capital medical equipment to the China market. In the three months ended December 31, 2004, this segment had revenue of $8,879,000, an 8% increase over revenue of $8,239,000 in the three months ended December 31, 2003. We continued to develop new sales channels for our capital medical equipment, involving greater use of local Chinese sub-distributors, which was a significant contributing factor to the increase in revenue.

     Gross profit in the three months ended December 31, 2004 increased to $2,315,000 from $2,019,000 in the three months ended December 31, 2003. As a percentage of revenue, gross profit from the medical capital equipment segment for the recent period was 26% as compared to 25% in the prior period.

     Expenses for the medical capital equipment segment in the three months ended December 31, 2004 increased to $3,378,000 from $2,653,000 in the three months ended December 31, 2003 and as a percentage of revenues over the period increased to 38% from 32%. Salaries for the segment in the three months ended December 31, 2004 increased by $173,000 from the three months ended December 31, 2003, and as a percentage of revenues over the period increased to 11% from 10%. Other costs increased $552,000 over the three months, primarily due to a $400,000 increase in the allowance for doubtful accounts and the allocation of additional administrative costs. Loss from operations was $1,063,000 in the recent period compared with loss from operations of $634,000 in the prior period.

Healthcare Products Distribution Segment

     The healthcare products distribution segment, consisting of medical consumables and personal healthcare products, had a decrease in revenue of 7% to $8,262,000 in the three months ended December 31, 2004, as compared to revenue of $8,850,000 in the three months ended December 31, 2003. During the recent period the decline in revenue was attributable to faster than expected phase-out of third party logistics services and delays in the program for the rollout of certain branded products in the retail pharmacy business. The local currency sales of medical consumables and personal healthcare products are made from inventories maintained locally in China (see Foreign Currency Exchange and Impact of Inflation) to a network of sub-dealers and pharmacies.

     Gross profit in the three months ended December 31, 2004 decreased to $1,239,000 from $1,364,000 in the three months ended December 31, 2003. As a percentage of revenue, gross profit from the healthcare products distribution segment for the recent period was 15%, the same as in the prior period. We have encountered increased pressure from our current suppliers to provide services at a reduced margin to us. Accordingly we are not realizing the expected increase in gross profit margin. In addition, with respect to our retail product sales through Chinese pharmacies, as part of the annual distributor agreement renewal process, effective January 1, 2005, our territory for one large supplier was significantly reduced. Although this reduction would lead to a significant decrease in segment revenues in the absence of further developments, we intend to offset this decrease to a significant extent with an increase in the number of pharmacy outlets covered in the retained provinces, based on the supplier’s announced intention to expand market penetration. In light of these changes in the business of this segment we are exploring opportunities to diversify our supplier base in the retail sector, considering strategic relationships with other potential business partners and evaluating the short- and long-term strategy for the segment.

     Expenses for the healthcare products distribution segment in the three months ended December 31, 2004 increased to $1,683,000 from $1,237,000 in the three months ended December 31, 2003, and as a percentage of revenue, increased to 20% from 14% in the prior period. Salaries for the segment increased $100,000 and other costs increased by $346,000 primarily due to increased allocation of administrative expenses and additional promotion. The segment had a loss from operations of $444,000 in the recent period, compared with income from operations of $127,000 in the prior period.

Healthcare Services Segment and Hospital Development

     During the period, the healthcare services segment consisted of an international standard private healthcare facility, Beijing United Family Hospital and Clinics (“BJU”) as well as an affiliated satellite clinic in Beijing. The segment also included developmental activities consisting of (i) Shanghai United Family Hospital and Clinics (“SHU”), which had its opening ceremony on October 21, 2004, and (ii) other developmental activities such as the proposed hospital in Xiamen and a clinic in downtown Beijing. For the three months ended December 31, 2004, the revenue from the segment was $5,188,000, an increase of 14% over the three months ended December 31, 2003 revenue of $4,541,000. The Beijing revenue increase was less than expected while expenses increased greater than expected. These increased expenses are expected to improve Beijing revenue growth in the future. Total inpatient days increased 3% from the prior period. Outpatient visits increased 13% from the prior period. Healthcare services costs increased for the three months ended December 31, 2004 to $7,026,000, a 54% increase over the three months ended December 31, 2003 costs of $4,555,000. The increase in costs is mainly attributable to the startup of hospital operations in Shanghai. Salaries increased by $1,504,000 (salaries were 74% and 52% of revenue for the three months ended December 31, 2004 and 2003, respectively), with the total staff increasing in size by 78% and the number of physicians increasing by 46%. Other costs increased $966,000, including increases in insurance, travel and direct patient care supplies. Development costs related to SHU increased to $1,363,000 for the three months ended December 31, 2004 from $252,000 for the three months ended December 31, 2003. The healthcare services segment had a loss from operations of $1,838,000 in the recent period, compared with a loss from operations of $14,000 in the prior period.

     In the chart below we have broken out the developmental activities in order to give a clearer picture of our hospital finances:

     SHU received its operating license from the Chinese government on October 19, 2004 and held its opening ceremony on October 21, 2004. From that date through the end of the quarter the hospital provided family medicine including pediatrics and ob/gyn outpatient services. Inpatient services began in early January 2005.

Other Income and Expenses

     Interest incurred on short-term capitalized leases of $188,000, short-term debt of $4,205,000, long-term capitalized leases of $166,000 and long-term debt of $3,585,000 amounted to $125,000 as compared to $67,000 interest expense in the prior period. Interest expense of $36,000 for the current period is net of $89,000 of capitalized interest. The long-term debt is for the development of SHU (see Liquidity and Capital Resources).

Taxes

     We recorded a $314,000 provision for income taxes for the three months ended December 31, 2004, as compared to a benefit from income taxes of $119,000 for the three months ended December 31, 2003. Our tax position in certain entities was unfavorable resulting in a reversal of previous benefits.

Nine months ended December 31, 2004 compared to nine months ended December 31, 2003

     Our revenue for the nine months ended December 31, 2004 was $76,559,000, up 21% from the nine months ended December 31, 2003 revenue of $63,159,000. We experienced continued growth in each of the three segments of the business, with revenue growth of 36% in the medical capital equipment segment, 1% in the healthcare products distribution segment, and 40% in the healthcare services segment, compared to the same period last year. Costs and expenses were $79,412,000 for the period as compared with costs and expenses of $64,954,000 for the nine months ended December 31, 2003. The nature of the increased costs in particular segments is discussed below. We recorded a net loss of $3,559,000 for the nine months ended December 31, 2004, as compared to net loss of $1,503,000 for the nine months ended December 31, 2003. During the recent period, we continued to incur operational expenses in connection with our new hospital in Shanghai. There were a number of increased costs at the parent level of the Company, including significant increases related to local entity excise taxes and increased corporate governance, including in general Sarbanes-Oxley compliance and in particular compliance with section 404 thereof. The largest parent level increases, which have been allocated among the segments as described below, include increased excise taxes of $153,000, increased payroll of $107,000, increased professional fees of $45,000 and increased rent of $142,000.

Medical Capital Equipment Segment

     The medical capital equipment segment exports high quality Western capital medical equipment to the China market. In the nine months ended December 31, 2004 this segment had revenue of $32,530,000, a 36% increase over revenue of $23,991,000 in the nine months ended December 31, 2003. We continued to develop new sales channels for our capital medical equipment, involving greater use of local Chinese sub-distributors, which was a significant contributing factor to the increase in revenue. In addition, a portion of this increase in revenue is attributable to the fact that SARS was a significant negative factor in the prior period. Finally, the addition of a new range of medium-priced ultrasound products from Siemens enabled us to penetrate new market segments, thus helping to increase sales.

     Gross profit in the nine months ended December 31, 2004 increased to $8,423,000 from $6,374,000 in the nine months ended December 31, 2003. As a percentage of revenue, gross profit from the medical capital equipment segment for the recent period was 26% as compared to 27% in the prior period.

     Expenses for the medical capital equipment segment in the nine months ended December 31, 2004 increased to $8,564,000 from $7,064,000 in the nine months ended December 31, 2003 and as a percentage of revenues over the period decreased to 26% from 29%. Salaries for the segment in the nine months ended December 31, 2004 increased by $719,000 from the nine months ended December 31, 2003, and as a percentage of revenues over the period remained the same at 10%. Other costs increased $781,000 over the nine months, primarily due to a $400,000 increase in bad debt allowance and allocation of additional administrative costs. This segment had a loss from operations of $141,000 in the recent period compared with a loss from operations of $690,000 in the prior period.

Healthcare Products Distribution Segment

     The healthcare products distribution segment, consisting of medical consumables and personal healthcare products, had revenue growth of 1% to $27,979,000 in the nine months ended December 31, 2004, as compared to revenue of $27,690,000 in the nine months ended December 31, 2003. The modest increase in revenue during the recent period was attributable to faster than expected phase-out of third party logistics services and delays in the program for the rollout of additional branded products in the retail pharmacy business. The local currency sales of medical consumables and personal healthcare products are made from inventories maintained locally in China (see Foreign Currency Exchange and Impact of Inflation) to a network of sub-dealers and pharmacies.

     Gross profit in the nine months ended December 31, 2004 increased to $3,624,000 from $3,614,000 in the nine months ended December 31, 2003. As a percentage of revenue, gross profit from the healthcare products distribution segment for the recent period was 13%, the same percentage as in the prior period. We have encountered increased pressure from our current suppliers to provide services at a reduced margin to us. Accordingly we are not realizing the expected increase in gross profit margin. In addition, with respect to our retail product sales through Chinese pharmacies, as part of the annual distributor agreement review process, effective January 1, 2005, our territory for one large supplier was significantly reduced. Although this reduction would lead to a significant decrease in segment revenues in the absence of further developments, we intend to offset this decrease to a significant extent with an increase in the number of pharmacy outlets covered in the retained provinces based on our supplier’s announced intention to expand market penetration. In light of these changes in the business of this segment, we are exploring opportunities to diversify our supplier base in the retail sector, considering strategic relationships with other potential business partners and evaluating the short- and long-term strategy for the segment.

     Expenses for the healthcare products distribution segment in the nine months ended December 31, 2004 increased to $4,891,000 from $4,070,000 in the nine months ended December 31, 2003 and increased as a percentage of revenues over the period to 17% from 15%. Salaries for the segment increased $180,000 due to increased staffing. In addition, other expenses increased $641,000 primarily due to promotion expenses and allocation of additional administrative costs. The segment had a loss from operations of $1,267,000 in the recent period, compared with a loss from operations of $456,000 in the prior period.

Healthcare Services Segment and Hospital Development

     During the period, the healthcare services segment consisted of an international standard private healthcare facility, Beijing United Family Hospital and Clinics (“BJU”) as well as an affiliated satellite clinic in Beijing. The segment also included developmental activities consisting of (i) Shanghai United Family Hospital and Clinics (“SHU”), which had its opening ceremony on October 21, 2004, and (ii) other developmental activities such as the proposed hospital in Xiamen and a clinic in downtown Beijing. For the nine months ended December 31, 2004, the revenue from the segment was $16,050,000, an increase of 40% over the nine months ended December 31, 2003 revenue of $11,478,000. Total inpatient days increased 49% from the prior period. Outpatient visits increased 24% from the prior period. During the prior period the hospital was significantly impacted by the SARS crisis in Beijing, which was principally responsible for the loss in that period. Healthcare services costs increased for the nine months ended December 31, 2004 to $17,495,000, a 44% increase over the nine months ended December 31, 2003 costs of $12,127,000. This increase was due primarily to the costs associated with increased services offered. Salaries increased by $3,521,000 (salaries were 61% and 55% of revenue for the nine months ended December 31, 2004 and 2003, respectively), with the total staff increasing in size by 78% and the number of physicians increasing by 46% Other costs increased $1,847,000, including increases in professional fees and direct patient care supplies. Development costs related to SHU increased to $2,044,000 for the nine months ended December 31, 2004 from $647,000 for the nine months ended December 31, 2003. The healthcare services segment had a loss from operations of $1,445,000 in the recent period, compared with a loss from operations of $649,000 in the prior period.

     In the chart below we have broken out the developmental activities in order to give a clearer picture of our hospital finances:

     SHU received its operating license from the Chinese government on October 19, 2004 and held its opening ceremony on October 21, 2004. From that date through the end of the quarter the hospital provided family medicine including pediatrics and ob/gyn outpatient services. Inpatient services began in early January, 2005.

Other Income and Expenses

     Interest incurred on short-term capitalized leases of $188,000, short-term debt of $4,205,000, long-term capitalized leases of $166,000 and long-term debt of $3,585,000 amounted to $197,000 as compared to $186,000 interest expense in the prior period. Interest expense of $108,000 for the current period is net of $89,000 of capitalized interest. The long-term debt is for the development of SHU that is currently under construction (see Liquidity and Capital Resources).

Taxes

     We recorded a $549,000 provision for income taxes for the nine months ended December 31, 2004, as compared to a benefit from income taxes of $349,000 for the nine months ended December 31, 2003. Our tax position in certain entities was unfavorable resulting in a reversal of previous benefits.

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 2004, our cash and cash equivalents, net accounts receivable and net inventories were $4,033,000, $15,579,000 and $9,430,000, respectively, as compared to $6,791,000, $17,374,000 and $9,537,000, respectively, as of March 31, 2004.

     As of December 31, 2004, our short-term loan payable was comprised of bank loans of $3,105,000 and extended payment accounts payable to one vendor of $1,100,000. With respect to the vendor accounts payable, the vendor has agreed to provide continuing credit facilities for purchases for a seven-year period(four and a half of which are remaining), each grant of credit bearing interest of five percent per annum and expiring at the end of 18 months, to be replaced by subsequent purchases and payables. BJU has a short-term financing arrangement in China with the Hong Kong and Shanghai Banking Corporation (HSBC) for $600,000 in revolving loans bearing interest at 1.5% over the three-month Singapore Interbank Money Market Offer Rate (SIBOR). Also, a line of credit is included in the arrangement with HSBC for up to $1,200,000, bearing interest at 2.25% over SIBOR and having a term of up to three years. As of December 31, 2004, the balances on these credit lines were $600,000 and $718,000, respectively.

     We opened our hospital facility in Shanghai, the cost of which was financed through (i) vendor financing (ii) local bank borrowings and (iii) proceeds of the sale of 1.5 million shares of common stock and warrants. The outstanding local bank borrowing for SHU consists of a $4 million loan facility with HSBC, which is fully utilized during calendar 2004. Of this loan, $967,000 is classified as short-term and $2,841,000 is classified as long-term. The long-term facility has a five-year term and an interest rate of 2.5% over the six month SIBOR. We have guaranteed the full amount of the HSBC facilities.

     As of December 31, 2004, letters of credit in the aggregate amount of approximately $135,000 were outstanding and we had borrowings of $820,000 outstanding under a credit facility with M&T Bank. The borrowings under the credit facility bear interest at 1% over the three-month London Interbank Offered Rate (LIBOR).

     We also received net proceeds of approximately $12.3 million from the sale of 1.5 million shares of common stock and warrants to purchase 300,000 shares at an exercise price of $9.00 per share, which proceeds were received on March 31, April 1 and May 5, 2004. Such net proceeds were used to repay a portion of our vendor financing, for capital expenditures, and for working capital purposes.

     Over the next twelve months we anticipate capital expenditures of $2-6 million; however, substantially all of these expenditures are expected to be elective and subject to the availability of capital. We intend to finance these expenditures as well as our other cash requirements principally through availability under our vendor financing arrangements and additional bank loans, both to the extent available, as well as through current cash and cash flow from operations. With respect to bank financing, we have been engaged in discussions in China with several local banks after an increase in our existing credit facility from HSBC was not forthcoming. We continue to consider various other financing alternatives to satisfy our future expansion, capital improvements and equipment requirements. If we are unable to obtain additional financing we may have to curtail or terminate certain operations.

TIMING OF REVENUES

     The timing of our revenues is affected by several significant factors. Many end-users of the capital equipment products sold by Chindex 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 some purchasers of capital equipment on the availability of credit, the timing of sales may depend upon the timing of our abilities to arrange for credit sources, including Ex-Im Bank or other loan financing. As a result, our 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 our revenue in any one period. As a result, a relatively small reduction in the number of orders can have a material impact on our revenues in any one period. Further, because we recognize revenues and expenses as products are shipped, the timing of shipments could affect our operating results for any one period. At the same time, a growing percentage of our revenues are attributable to hospital services and local currency sales through the healthcare products distribution segment, both of which have more even revenue streams.

FOREIGN CURRENCY EXCHANGE AND IMPACT OF INFLATION

     The results of operations of Chindex for the periods discussed have not been significantly affected by inflation or foreign currency fluctuation. Since we receive over 60% of our revenues in local Chinese currency, we have some foreign currency risk. Changes in the valuation of the Chinese Renminbi or Hong Kong dollar may have an impact on our results of operations in the future. Our subsidiaries, Chindex Tianjin, Chindex Shanghai and our hospital joint ventures, sell products and services in Renminbi. For over 20 years the Chinese and Hong Kong dollars have been pegged to the US dollar. If the Chinese government allows the Renminbi to float in a broader band as against the dollar, the expectation of economists is that the Renminbi would strengthen, thus having a positive impact on us.

     We also purchase and will continue to purchase some products in Western currencies other than U.S. dollars and have 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, we could experience a negative impact on profitability. We anticipate hedging transactions wherever possible to minimize such negative impacts. Currently there are no such hedges.

     As part of our risk management program, we also perform sensitivity analyses to assess potential changes in revenue, operating results, cash flows and financial position relating to hypothetical movements in currency exchange rates. Our sensitivity analysis of changes in the fair value of the Renminbi to the U.S. Dollar at December 31, 2004, indicated that if the U.S. Dollar uniformly increased in value by 10 percent relative to the Renminbi, then we would experience a 5% increase in net loss. Conversely, a 10 percent increase in the value of the Renminbi relative to the U.S. Dollar at December 31, 2004 would have resulted in a 5% lower net loss.

FORWARD LOOKING STATEMENTS

     Some of the information in this Form 10-Q may contain statements regarding future expectations, plans, prospects for performance of the Company that constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. The Company cannot guarantee future results, levels of activity, performance or achievements. The numbers discussed in this Form 10-Q also involve risks and uncertainties. The following factors, among others, could cause actual results to differ materially from those described by such statements: our ability to manage our growth and maintain adequate controls, the loss of services of key personnel, our ability to obtain additional financing, general market conditions including inflation or foreign currency fluctuations, our dependence on relationships with suppliers, the timing of our revenues and fluctuations in financial performance, the availability to our customers of third-party financings, product liability claims and product recalls, competition, hiring and retaining qualified sales and service personnel, management of inventory, relations with foreign trade corporations, dependence on sub-distributors and dealers, completion and opening of healthcare facilities, attracting and retaining qualified physicians and other hospital personnel, regulatory compliance, the cost of malpractice , our dependence on our information systems, the economic policies of the Chinese government, the newness and undeveloped nature of the Chinese legal system, the regulation of the conversion of Chinese currency, future epidemics in China such as SARS, the control over our operation by insiders, continuity of relationships with existing suppliers, and those other factors contained in the section titled “Risk Factors” as set forth on page 7 of the Company’s Registration Statement on Form S-1 (File No. 333-114299) declared effective by the Securities and Exchange Commission on July 30, 2004, as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. The forward-looking statements and numbers contained herein represent the judgment of the Company, as of the date of this Form 10-Q, and the Company disclaims any intent or obligation to update such forward-looking statements to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions, circumstances on which such statements are based.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risks in a variety of ways. The principal market risk is related to the nature of the Chinese economy and political system. Since we generate all of our revenues from China, any risk having to do with the environment in China for a foreign business operating there can have a significant impact on us.

     The Chindex growth plan includes continuing expansion of the Medical Capital Equipment business, 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 healthcare facilities, based on the Beijing United Family Hospital and Clinics 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.

ITEM 4. CONTROLS AND PROCEDURES

     We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that are filed with the Securities and Exchange Commission is recorded, processed and reported within the time periods required for each report and that such information is reported to the our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

     We performed an evaluation under the supervision and with the participation of Chindex management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls as of December 31, 2004. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective.

     During the nine months ended December 31, 2004, we implemented a new financial accounting system for the local entity reporting and corporate consolidations that contains a number of additional controls. Some of these new controls are still in the process of being fully implemented. In addition, we made the following significant changes in our internal controls or in other factors that could significantly affect our internal controls, the implementation of which changes had commenced prior to the end of our fiscal year ended March 31, 2004: our outsourced software provider remedied its software writing problem in connection with a recent upgrade to our systems at Beijing United designed to permit proper accounts receivable recordkeeping; we retained additional outside tax expertise in the U.S. and reorganized our tax staff in China to improve our level of tax expertise in both the U.S. and China; and, as noted above, we initiated supplemental procedures and added resources in order to formalize and improve our fiscal period closing process on an ongoing basis. Reference is made to Item 9A of our annual report on Form 10-K for the fiscal year ended March 31, 2004, as amended, for further information regarding these changes.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

The exhibits listed below are filed as a part of this quarterly report:

SIGNATURES

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

		CHINDEX INTERNATIONAL, INC.
Dated: February 10, 2005		By:  /S/ Lawrence Pemble
		Lawrence Pemble Executive Vice President Finance and Business Development

Dated: February 10, 2005		By:  /S/ Ronald Zilkowski
		Ronald Zilkowski Senior Vice President Finance and Corporate Controller