Edgar Filing: HEALTHCARE BUSINESS SERVICES GROUPS, INC.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended March 31, 2006

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT

For the transition period from to
----------- -----------

Commission file number: 000-50014

HEALTHCARE BUSINESS SERVICES GROUPS, INC.
-----------------------------------------
(Exact name of small business issuer as specified in its charter)

NEVADA 88-0478644
------------------ --------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

1126 West Foothill Blvd, Suite 105, Upland, CA 91786
----------------------------------------------------
(Address of principal executive offices)

(909) 608-2035
--------------
(Registrant's telephone number)

N/A
---
(Former name and address)

Check whether the registrant (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 [ ]

As of May 15, 2006, 33,960,150 shares, $0.001 par value of the Company's
common stock ("Common Stock") of the issuer were outstanding.

HEALTHCARE BUSINESS SERVICES GROUPS INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 2006
UNAUDITED

ASSETS

CURRENT ASSETS
Cash & cash equivalents $ 141,768

PROPERTY AND EQUIPMENT, NET 56,930

INTANGIBLE ASSET, NET
Website technology costs, net 114,766

DEPOSITS 3,650
----------------------
317,114
======================

LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------

CURRENT LIABILITIES
Accounts payable and accrued expenses $1,286,689
Litigation accrual 675,747
Lines of credit 104,510
Notes payable 451,040
Due on settlement of loan 46,525
----------------------
Total current liabilities 2,564,511

COMMITMENTS & CONTINGENCIES -

STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value; Authorized shares 5,000,000,
none issued and outstanding -
Common stock, $0.001 par value; Authorized shares 50,000,000,
33,960,150 shares issued and outstanding 33,960
Additional paid in capital 849,103
Prepaid Consulting (32,861)
Shares to be issued 44,750
Accumulated deficit (3,142,349)
----------------------
Total stockholders' deficit (2,247,397)
----------------------
317,114
======================

The accompanying notes are an integral part of these consolidated unaudited
financial statements.

HEALTHCARE BUSINESS SERVICES GROUPS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED

FOR THE THREE MONTH PERIODS ENDED
MARCH 31
2006 2005
------------ ------------

NET REVENUES $ 314,809 $ 366,189

OPERATING EXPENSES
General and administrative expenses 326,838 447,069
Officer Compensation 166,250 150,000
Depreciation and amortization 19,607 28,117
------------ ------------
Total operating expenses 512,695 625,186
------------ ------------
LOSS FROM OPERATIONS (197,886) (258,997)

Other income (expenses) - Interest expense (17,755) (21,914)
------------ ------------
LOSS BEFORE INCOME TAXES (215,641) (280,911)

Provision for income taxes 1,700 2,400
------------ ------------
NET LOSS $ (217,341) $ (283,311)
============ ============

------------ ------------
BASIC & DILUTED NET LOSS PER SHARE $ (0.01) $ (0.01)
============ ============

------------ ------------
BASIC & DILUTED WEIGHTED AVERAGE NUMBER OF
COMMON STOCK OUTSTANDING 33,960,150 30,957,928
============ ============

* Weighted average number of shares used to compute basic and diluted loss per
share is the same since the effect of dilutive securities is anti-dilutive.

The accompanying notes are an integral part of these consolidated unaudited
financial statements.

HEALTHCARE BUSINESS SERVICES GROUPS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED

FOR THE THREE MONTH PERIODS ENDED
MARCH 31
2006 2005
------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (217,341) $ (283,311)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 19,607 28,116
Issuance of shares for service - 19,000
Shares to be issued for compensation 16,250
Amortization of shares issued for consulting expense 18,750 -
(Increase) decrease in current assets:
Receivables 4,458 (17,149)
Other assets - 216
Increase in current liabilities:
Accounts payable and accrued expenses 18,699 28,943
------------ ------------
Net cash used in operating activities (139,577) (224,185)
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property & equipment - (31,407)
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable (12,596) (5,335)
Proceeds (payment) on line of credit (9,182) 17,323
------------ ------------
Net cash provided by (used in) financing activities (21,778) 11,988
------------ ------------

NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (161,355) (243,604)

CASH & CASH EQUIVALENTS, BEGINNING BALANCE 303,123 243,604
------------ ------------
CASH & CASH EQUIVALENTS, ENDING BALANCE $ 141,768 $ -
============ ============

Supplementary Information:
Cash paid during the year for:
Interest $ 4,111 $ 13,228
============ =============
Income taxes $ 1,700 $ -
============ =============

The accompanying notes are an integral part of these consolidated unaudited
financial statements.

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
------ -----------------------------------------------------------

(A) ORGANIZATION AND NATURE OF BUSINESS
--------------------------------------------

Healthcare Business Services Groups Inc. (herein referred to as "Healthcare" or
"Company" formerly known as Winfield Financial Group, Inc.) ("Winfield") was
formed in Nevada in May 2000. On April 23, 2004, Winfield acquired 100%
of the issued and outstanding shares of Healthcare, a Delaware corporation. As
part of the same transaction on May 7, 2004, Winfield acquired 100% of the
issued and outstanding shares of AutoMed Software Corp., a Nevada corporation
("AutoMed"), and 100% of the membership interests of Silver Shadow Properties,
LLC, a Nevada single member limited liability company ("Silver Shadow"). The
transactions are collectively referred to herein as the "Acquisition." As a
result of the Acquisition, Winfield acquired 100% of three corporations.

Winfield acquired Healthcare, AutoMed, and Silver Shadow from the sole owner, in
exchange for 25,150,000 newly issued treasury shares of the Winfield's common
stock. Immediately after these transactions, there were 31,414,650 shares of
Winfield's common stock outstanding. As a result, control of Winfield shifted
to the sole owner who owns approximately 80.0% of Winfield's common stock, and
the Company changed its name to Healthcare. Here in after all references to
Winfield refer to Healthcare, AutoMed, and Silver Shadow as a collective whole
since their various inceptions.

The merger of the Company with Healthcare Business Services Groups Inc., has
been accounted for as a reverse acquisition under the purchase method of
accounting since the shareholders of Healthcare Business Services Groups Inc.
obtained control of the consolidated entity. Accordingly, the merger of the two
companies has been recorded as a recapitalization of the Healthcare Business
Services Groups Inc., with Healthcare Business Services Groups Inc. being
treated as the continuing entity. The continuing company has retained December
31 as its fiscal year end.

Healthcare is a medical billing service provider that for over fifteen years has
assisted various health care providers to successfully enhance their billing
function. Healthcare has a diversified market base with operations in
Providence, Rhode Island; Laredo, Texas; and Upland, California. Healthcare's
sister company, AutoMed, has developed a proprietary software system.

On January 7, 2005, the Company changed its name to Healthcare Business
Services Group, Inc.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
Healthcare Business Services Groups Inc. and its wholly owned subsidiaries,
AutoMed Software Corp. and Silver Shadow Properties, LLC (the "Company"). All
significant inter-company accounts and transactions have been eliminated in
consolidation. The acquisition of Healthcare Business Services Groups Inc. on
May 7, 2004, has been accounted for as a purchase and treated as a reverse
acquisition. The historical results for the three month periods ended March 31,
2006 and March 31, 2005 include Healthcare Business Services Groups Inc. and the
Company.

(B) USE OF ESTIMATES
--------------------

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses,
as well as certain financial statements disclosures. While management believes
that the estimates and assumptions used in the preparation of the financial
statements are appropriate, actual results could differ from those estimates.

The Company's revenue recognition policies are in compliance with Staff
accounting bulletin SAB 104. All revenue is recognized when persuasive evidence
of an arrangement exists, the service or sale is complete, the price is fixed or
determinable and collectibility is reasonably assured. Revenue is derived from
collections of medical billing services. Revenue is recognized when the
collection process is complete which occurs when the money is collected.

License Revenue - The Company recognizes revenue from license contracts when a
non-cancelable, non-contingent license agreement has been signed, the software
product has been delivered, no uncertainties exist surrounding product
acceptance, fees from the agreement are fixed and determinable and collection is
probable. Any revenues from software arrangements with multiple elements are
allocated to each element of the arrangement based on the relative fair values
using specific objective evidence as defined in the SOPs. If no such objective
evidence exists, revenues from the arrangements are not recognized until the
entire arrangement is completed and accepted by the customer. Once the amount
of the revenue for each element is determined, the Company recognizes revenues
as each element is completed and accepted by the customer. For arrangements
that require significant production, modification or customization of software,
the entire arrangement is accounted for by the percentage of completion method,
in conformity with Accounting Research Bulletin ("ARB") No. 45 and SOP 81-1.

Services Revenue - Revenue from consulting services is recognized as the
services are performed for time-and-materials contracts and contract accounting
is utilized for fixed-price contracts. Revenue from training and development
services is recognized as the services are performed. Revenue from maintenance
agreements is recognized ratably over the term of the maintenance agreement,
which in most instances is one year.

(D) SOFTWARE DEVELOPMENT COSTS
---------------------------------

The Company has adopted Statement of Position 98-1 ("SOP 98-1") "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use", as its
accounting policy for internally developed computer software costs. Under SOP
98-1, computer software costs incurred in the preliminary development stage are
expensed as incurred. Computer software costs incurred during the application
development stage are capitalized and amortized over the software's estimated
useful life.

(E) IMPAIRMENT OF LONG-LIVED ASSETS
---------------------------------------

Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" ("SFAS 144"), which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations for a Disposal of a Segment of a
Business." The Company periodically evaluates the carrying value of long-lived
assets to be held and used in accordance with SFAS 144. SFAS 144 requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amounts. In
that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair market value of the long-lived assets. Loss on
long-lived assets to be disposed of is determined in a similar manner, except
that fair market values are reduced for the cost of disposal.

(F) STOCK-BASED COMPENSATION
------------------------------

The Company accounts for non-cash stock-based compensation issued to
non-employees in accordance with the provisions of SFAS No. 123 and EITF No.
96-18, Accounting for Equity Investments That Are Issued to Non-Employees for
Acquiring, or in Conjunction with Selling Goods or Services. Common stock
issued to non-employees and consultants is based upon the value of the services
received or the quoted market price, whichever value is more readily
determinable. The Company accounts for stock options and warrants issued to
employees under the intrinsic value method. Under this method, the Company
recognizes no compensation expense for stock options or warrants granted when
the number of underlying shares is known and the exercise price of the option or
warrant is greater than or equal to the fair market value of the stock on the
date of grant. As of September 30, 2005, there were no options or warrants
outstanding.

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based
Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting

for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used, on reported
results. The adoption of SFAS No. 148 did not have a material affect on the net
loss of the Company.

(G) FAIR VALUE OF FINANCIAL INSTRUMENTS
--------------------------------------------

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments" requires disclosures of information about the
fair value of certain financial instruments for which it is practicable to
estimate that value. For purposes of this disclosure, the fair value of a
financial instrument is the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced sale or
liquidation. The carrying amounts of the Company's accounts and other
receivables, accounts payable, accrued liabilities, factor payable, capital
lease payable and notes and loans payable approximates fair value due to the
relatively short period to maturity for these instruments.

(H) CONCENTRATIONS OF RISK
-----------------------------
Financial instruments which potentially subject the Company to concentrations of
credit risk are cash and accounts receivable. The Company places its cash with
financial institutions deemed by management to be of high credit quality. The
amount on deposit in any one institution that exceeds federally insured limits
is subject to credit risk. All of the Company's revenue and majority of its
assets are derived from operations in Unites States of America.

(I) REPORTING SEGMENTS
------------------------

Statement of financial accounting standards No. 131, Disclosures about segments
of an enterprise and related information (SFAS No. 131), which superceded
statement of financial accounting standards No. 14, Financial reporting for
segments of a business enterprise, establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements.

Healthcare is a medical billing service provider. Healthcare's sister company,
AutoMed, has developed a proprietary software system. In addition, Healthcare's
other sister company, Silver Shadow, made an investment in real estate where
Healthcare plans to construct its first surgical center and corporate office
development.

There has been very insignificant activity in Automed and Silver Shadow. Hence
the Company has determined it has only one segment.

(J) COMPREHENSIVE INCOME
--------------------------

Statement of financial accounting standards No. 130, Reporting comprehensive
income (SFAS No. 130), establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity, except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS No. 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in financial statements that are displayed with the same prominence as other
financial statements.

(K) RECLASSIFICATIONS
----------------------

For comparative purposes, prior years' consolidated financial statements have
been reclassified to conform with report classifications of the current year.

(L) NEW ACCOUNTING PRONOUNCEMENTS
------------------------------------

NEW PRONOUNCEMENTS
-------------------

In March 2006 FASB issued SFAS 156 'Accounting for Servicing of Financial
Assets' this Statement amends FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, with
respect to the accounting for separately recognized servicing assets and
servicing liabilities. This Statement:

1. Requires an entity to recognize a servicing asset or servicing
liability each time it undertakes an obligation to service a financial
asset by entering into a servicing contract.

2. Requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, if practicable.

3. Permits an entity to choose 'Amortization method' or Fair value
measurement method' for each class of separately recognized servicing
assets and servicing liabilities:

4. At its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with
recognized servicing rights, without calling into question the
treatment of other available-for-sale securities under Statement 115,
provided that the available-for-sale securities are identified in some
manner as offsetting the entity's exposure to changes in fair value of
servicing assets or servicing liabilities that a servicer elects to
subsequently measure at fair value.

5. Requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement of
financial position and additional disclosures for all separately
recognized servicing assets and servicing liabilities.

An entity should adopt this Statement as of the beginning of its first fiscal
year that begins after September 15, 2006. Management believes that this
statement will not have a significant impact on the financial statement.

In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that otherwise would
require bifurcation, clarifies which interest-only strips and principal-only
strips are not subject to the requirements of SFAS No. 133, establishes a
requirement to evaluate interest in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation, clarifies
that concentrations of credit risk in the form of subordination are not embedded
derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
qualifying special-purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. This statement is effective for all financial instruments acquired
or issued after the beginning of the Company's first fiscal year that begins
after September 15, 2006.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections." This statement applies to all voluntary changes in accounting
principle and requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless this would be
impracticable. This statement also makes a distinction between "retrospective
application" of an accounting principle and the "restatement" of financial
statements to reflect the correction of an error. This statement is effective
for accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005.

In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the
Amortization Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides
guidance on determining the amortization period for leasehold improvements
acquired in a business combination or acquired subsequent to lease inception.
The guidance in EITF 05-6 will be applied prospectively and is effective for
periods beginning after June 29, 2005. The company is in the process of
evaluating the effect on its consolidated financial position or results of
operations.

In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires
companies to recognize in the statement of operations the grant-date fair value
of stock options and other equity-based compensation issued to employees. FAS
No. 123R is effective beginning in the Company's second quarter of fiscal 2006.
The company is still in the process of determining the effect of the Statement
on the financials.

(M) BASIS OF PRESENTATION
----------------------------

The accompanying unaudited condensed consolidated interim financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission for the presentation of interim financial
information, but do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. The
audited consolidated financial statements for the year ended December 31, 2005
were filed on April 15, 2006 with the Securities and Exchange Commission and are
hereby referenced. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
three months ended March 31, 2006 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2006.

(N) ISSUANCE OF SHARES FOR SERVICE
---------------------------------------

The Company accounts for the issuance of equity instruments to acquire goods and
services based on the fair value of the goods and services or the fair value of
the equity instrument at the time of issuance, whichever is more reliably
measurable.

(O) BASIC AND DILUTED NET LOSS PER SHARE
----------------------------------------

Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". Basic net
loss per share is based upon the weighted average number of common shares
outstanding. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to e exercised at the beginning of
the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period. Weighted average number of shares used to compute basic and diluted
loss per share is the same since the effect of dilutive securities is anti-
dilutive.

NOTE 2 PROPERTY AND EQUIPMENT
------- ------------------------

Property and equipment at March 31, 2006 consisted of the following:

Office and computer equipment $ 124,965
Furniture and fixtures 89,868
--------------
214,833
Less accumulated depreciation (157,903)
--------------
$ 56,930
==============

Depreciation expense for the three months ended March 31, 2006 and 2005 was $
7,069 and $ 9,311, respectively.

NOTE 3 INTANGIBLE ASSETS
------- ------------------

The Company is accounting for computer software technology costs under the
Capitalization criteria of Statement of Position 98-1 "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use."

Expenditures for maintenance and repairs are expensed when incurred; additions,
renewals and betterments are capitalized. Amortization is computed using the
straight-line method over the estimated useful life of the asset (3 years).
Amortization begins from the date when the software becomes operational. The
website became operational from July 1, 2004. The Company amortized $12,538 and
$ 18,805 for the three months period ending March 31, 2006 and 2005
respectively. The balance at March 31, 2006 amounts to $114,766.

The following is the amortization schedule for next five years:

2006 $ 37,614
2007 50,152
2008 27,000
------------
Total $ 114,766
============

NOTE 4 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
------ -----------------------------------------

Accounts payable and accrued expenses consist of the following:

Trade payable $ 69,814
Accrued expenses 36,217
Accrued interest 81,261
Income tax payable 7,955
Accrued payroll liabilities 12,627
Accrued vacation and sick time 12,114
Equipment payable 6,241
Payable to clients 1,026,165
Credit cards payable 34,295
------------
Total accounts payable
and accrued expenses $ 1,286,689
============

NOTE 5 LINE OF CREDIT
------- ----------------

The Company has two revolving lines of credit from two financial institutions
for $50,000 and $75,000. The credit lines are unsecured and bear an annual
interest rate of 10.75% and 16.24%, respectively. The credit lines are
personally guaranteed by the CEO of the Company. The Company has borrowed $
31,216 and $73,294 from the credit lines as of March 31, 2006.

NOTE 6 NOTES PAYABLE
------- --------------

Notes payable are summarized as follows:
March 31,
2006

Equipment loan: May 2003 due April 2008; payable in monthly
installments of $1,030; annual interest of 14%; secured by
equipment $ 23,782

Note payable: November 2004 due November 2006; interest only
payments of $3,500 monthly; annual interest of 12%; secured by
personal guaranty of the CEO and all of the issued and
outstanding stock of the Company, convertible at $1.00 per share
at the option of the holder 350,000

Note payable: August 2004 due August 2006; interest only
payments of $1,188 monthly; annual interest of 9.5%; unsecured 77,258
-----------
451,040
Less current portion (451,040)
-----------
Notes payable, net of current portion $ -
===========

The Company recorded interest expense of $12,753 and $21,915 on these notes for
the three month periods ended March 31, 2006 and 2005 respectively.

NOTE 7 DUE ON SETTLEMENT OF LOAN
------- -----------------------------

In connection with a consulting agreement, Healthcare agreed to pay $250,000 for
financial and business advisory services. During 2005, the Company entered
into a settlement agreement for the payment of the note by authorizing the
payment of $100,000 in cash and issuance of 1,500,000 restricted shares of
the Company. The Company valued the shares based on the market value of the
shares on agreement date. As of March 31, 2006 the outstanding balance on cash
portion of settlement was $46,525. The Company recorded interest expense of
$465 and $2,500 on the note for the three month periods ended March 31, 2006 and
2005 respectively.

NOTE 8 STOCKHOLDERS' DEFICIENCY
------- -------------------------

COMMON STOCK

The Company is presently authorized to issue 50,000,000 shares of $0.001 par
value Common Stock. The Company currently has 33,960,150 common shares issued
and outstanding. The holders of common stock, and of shares issuable upon
exercise of any Warrants or Options, are entitled to equal dividends and
distributions, per share, with respect to the common stock when, as and if
declared by the Board of Directors from funds legally available therefore. No
holder of any shares of common stock has a pre-emptive right to subscribe for
any securities of the Company nor are any common shares subject to redemption or
convertible into other securities of the Company. Upon liquidation, dissolution
or winding up of the Company, and after payment of creditors and preferred
stockholders, if any, the assets will be divided pro-rata on a share-for-share
basis among the holders of the shares of common stock. All shares of common
stock now outstanding are fully paid, validly issued and non-assessable. Each
share of common stock is entitled to one vote with respect to the election of
any director or any other matter upon which shareholders are required or
permitted to vote. Holders of the Company's common stock do not have cumulative
voting rights, so that the holders of more than 50% of the combined shares
voting for the election of directors may elect all of the directors, if they
choose to do so and, in that event, the holders of the remaining shares will not
be able to elect any members to the Board of Directors.

Healthcare acquired the Company from the sole owner, in exchange for 25,150,000
newly issued treasury shares of Healthcare's common stock.

On July 27, 2004, the Company cancelled 2,640,000 shares of common stock in
exchange for right to the name "Winfield Financial Group, Inc." and the transfer
of any contracts, agreements, rights or other intangible property owned by
Winfield Financial Group, Inc. (WFLD) that relate to the business operations of
WFLD prior to the change in control whether or not accounted for in WFLD's
financial statements. These shares have been included as part of
recapitalization on reverse acquisition of the Company.

The Company issued 1,000,000 shares to consultant as consideration for work done
in recapitalization of the Company. These shares have been included as part of
recapitalization on reverse acquisition of the Company.

The Company did not issue any stock during the three month period ended March
31, 2006.

The Company recorded $ 16,250 as officer compensation for 250,000 shares to be
issued pursuant to the employment agreement. The officer is entitled to
1,000,000 shares every year pursuant to the employment agreement. The value of
the stock is based on the market at March 31, 2006.

On March 16, 2005, the Company issued 100,000 restricted Common Shares to a
consultant valued at $19,000 for business consulting and advisory services.

CLASS B PREFERRED STOCK

The Company's Articles of Incorporation (Articles") authorize the issuance of
50,000,000 shares of no par value Class B Preferred Stock. No shares of
Preferred Stock are currently issued and outstanding. Under the Company's
Articles, the Board of Directors has the power, without further action by the
holders of the Common Stock, to designate the relative rights and preferences of
the preferred stock, and issue the preferred stock in such one or more series as
designated by the Board of Directors. The designation of rights and preferences
could include preferences as to liquidation, redemption and conversion rights,
voting rights, dividends or other preferences, any of which may be dilutive of
the interest of the holders of the Common Stock or the Preferred Stock of any
other series. The issuance of Preferred Stock may have the effect of delaying
or preventing a change in control of the Company without further shareholder
action and may adversely affect the rights and powers, including voting rights,
of the holders of Common Stock. In certain circumstances, the issuance of
preferred stock could depress the market price of the Common Stock.

NOTE 9 COMMITMENTS AND CONTINGENCIES
------- -------------------------------

During the three month period ended March 31, 2006, the Company leased its
corporate offices space in Upland, California under operating lease agreements.
The Upland facility lease calls for a monthly rent of $3,387. The operating
lease expires in November 2006 and has renewal options. Rent expense under
operating leases for the three month period ended March 31, 2006 was $ 10,749.

Future minimum lease payments are as follows:

Year Amount
---- ------
2006 $27,096

NOTE 10 GOING CONCERN
------- --------------

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles which contemplate
continuation of the company as a going concern. The Company had a loss of $
217,341, a working capital deficiency of $ 2,422,743, stockholders' deficiency
of $2,247,397, an accumulated deficit of $3,142,349 and net cash used in
operations of $ 139,577. In view of the matters described above, recoverability
of a major portion of the recorded asset amounts shown in the accompanying
consolidated balance sheet is dependent upon continued operations of the
company, which in turn is dependent upon the Company's ability to raise
additional capital, obtain financing and succeed in its future operations. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. The Company is actively pursuing
additional funding and seeking new clients for medical billings, which would
enhance stockholders' investment. Management believes that the above actions
will allow the Company to continue operations through the next fiscal year.

NOTE 11 LITIGATION
-------- ----------

The Company is defendant in multiple lawsuits initiated by the clients of the
Company. The complaints allege that the Company and its officers improperly
withheld monies from the clients. The complaints allege, among others, claims
for breach of contract and breach of fiduciary duty. The plaintiff seeks
compensatory and punitive damages, prejudgment interest, costs and attorney
fees. The parties have conducted discovery and permission to take additional
discovery is being sought. The Company has accrued $675,747 in the accompanying
financials and has recorded them as a liability.

1. On July 12, 2004, Nimish Shah, M.D. d/b/a New Horizon Medical, Inc. ("New
Horizon") initiated a lawsuit against the Company in the Superior Court of
California, County of Los Angeles, Case No. VC 042695, styled New Horizon
Medical, Inc. v. Chandana Basu, et al. The complaint raises a claim for
breach of contract against the Company . The complaint alleges that the
Company failed to remit sums due to New Horizon. On April 8, 2005, the
court dismissed the action and referred it to arbitration. Since May 2005,
there have been a number of telephonic conferences held with the assigned
arbitrator. Each of these calls has focused on the voluntary exchange of
insurance payment records by the parties. In connection with arbitration,
the Company has claimed against New Horizon the compensatory damages in the
amount of $75,000 (subject to amendment), prejudgment interest, costs and
attorneys' fees in an unspecified amount. New Horizon has not submitted a
cross-complaint against the Company for the breach of contract alleging
that there is substantial discrepancy between the amounts of bills provided
by New Horizon to the Company, for the purpose of securing payment from
various insurance companies, and the funds actually received from the
Company. New Horizon contends that the there are amounts in controversy of
around $ 1,000,000. The Company has denied the allegations. The matter is
in its initial stages.

2. On July 11, 2002, Plaintiff Kamran Ghadimi initiated a lawsuit against
HBSGI and others in the Superior Court of California, County of San
Bernardino, Case No. RCV 064904, styled Karman Ghadimi v. Chandana Basu, et
al.

The complaint alleges that HBSGI, its president and certain affiliated
companies, improperly withheld approx. $ 400,000 from Ghadimi. The
complaint alleges, among others, claims for breach of contract and breach
of fiduciary duty. Plaintiff seeks compensatory and punitive damages,
prejudgment interest, costs and attorney's fees. HBSGII refutes Ghadimi's
claim and denied the allegations and filed counter claim.

Discovery in this matter has closed and trial is set forth for May 22,
2006.

The Company has accrued $400,000 as litigation expense as of March 31,
2006

3. In January 2004, Claimant Leonard J. Soloniuk, MD initiated an arbitration
against HBSGI with the American Arbitration Association, Case No. 72 193
00102 04 TMS, styled Leonard J. Soloniuk, MD v. HBSGI

The complaint alleges that HBSGI failed to properly bill and collect
fees, intentionally miscoded bills, intentionally withheld collection
proceeds due to Soloniuk, breached its billings agreement, and otherwise
engaged in fraudulent conduct.

HBSGI refutes Soloniuk's claims and has filed a counter claim.

In a decision dated April 5, 2006, the arbitrator awarded HBSGI
nothing against Soloniuk. The arbitrator further awarded Soloniuk $ 275,000
against the HBSGI as well as interest accruing from June 1, 2006, at the
rate of ten percent per annum on the unpaid balance. The arbitrator further
ordered HBSGI to reimburse Soloniuk costs in the amount of $ 1,875. The
Company has accrued $275,000 as litigation expense as of March 31, 2006.

The Company filed motion to vacate this judgment. .

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This report contains forward looking statements within the meaning of section
27a of the securities act of 1933, as amended and section 21e of the securities
exchange act of 1934, as amended. the company's actual results could differ
materially from those set forth on the forward looking statements as a result of
the risks set forth in the company's filings with the securities and exchange
commission, general economic conditions, and changes in the assumptions used in
making such forward looking statements.

OVERVIEW

Winfield Financial Group, Inc. (the "Registrant") was incorporated in the State
of Nevada on May 2, 2000. Prior to the Acquisition, discussed below, the
Registrant was a business broker, primarily representing sellers and offering
its clients' businesses for sale. As a result of the Acquisition, the
Registrant changed its business focus.

On April 7, 2004, the Registrant filed Articles of Exchange with the State of
Nevada to take effect on such date. Under the terms of the Articles of
Exchange, the Registrant was to acquire Vanguard Commercial, Inc., a Nevada
corporation ("Vanguard") whereby the Registrant was to issue 197,000 of its
shares of Common Stock in exchange for all of the issued and outstanding Common
Stock of Vanguard. Robert Burley, a former Director of the Registrant and the
Registrant's former President, Chief Executive Officer and Treasurer is also an
officer and director of Vanguard. Subsequent to the effective date of the
exchange with Vanguard, the Registrant and Vanguard mutually agreed to rescind
the transaction. The Registrant filed a Certificate of Correction with the
State of Nevada rescinding the exchange with Vanguard, which never took place
and the Registrant never issued any of its shares with respect thereto.

On April 22, 2004, the Registrant amended its Articles of Incorporation to
increase the authorized shares to Fifty Million (50,000,000) shares of Common
Stock, to reauthorize the par value of $.001 per share of Common Stock and to
reauthorize 5,000,000 shares of preferred stock with a par value of $.001 per
share of preferred stock.

On April 23, 2004, the Registrant acquired 100% of the issued and outstanding
shares of Healthcare Business Services Groups, Inc., a Delaware corporation
("Healthcare"). As part of the same transaction on May 7, 2004, the Registrant
acquired 100% of the issued and outstanding shares of AutoMed Software Corp., a
Nevada corporation ("AutoMed"), and 100% of the membership interests of Silver
Shadow Properties, LLC, a Nevada single member limited liability company
("Silver Shadow"). The transactions are collectively referred to herein as the
"Acquisition." The Registrant acquired Healthcare, AutoMed, and Silver Shadow
from Chandana Basu, the sole owner, in exchange for 25,150,000 newly issued
treasury shares of the Registrant's Common Stock. The term "Company" shall
include a reference to Winfield Financial Group, Inc., Healthcare, AutoMed and
Silver Shadow unless otherwise stated. Healthcare, AutoMed and Silver Shadow
are sometimes collectively referred to herein as "HBSGII."

On June 21, 2004, the Registrant entered into an agreement with Robert Burley
(former Director, President and Chief Executive Officer of the Registrant) and
Linda Burley (former Director and Secretary of the Registrant) whereby the
Registrant agreed to transfer certain assets owned by the Registrant immediately
prior to the change in control in consideration for Mr. and Mrs. Burley's
cancellation of an aggregate of 2,640,000 of their shares of the Registrant's
Common Stock. The Registrant transferred the following assets to Mr. and Mrs.
Burley: i) the right to the name "Winfield Financial Group, Inc."; and ii) any
contracts, agreements, rights or other intangible property that related to the
Registrant's business operations immediately prior to the change in control
whether or not such intangible property was accounted for in the Registrant's
financial statements. After the issuance of shares to Ms. Basu and the
cancellation of 2,640,000 shares of Mr. and Mrs. Burley, there were 28,774,650
shares of the Registrant's Common Stock outstanding. As a result of these
transactions, control of the Registrant shifted to Ms. Basu. Ms. Basu currently
owns 25,150,000 shares (or approximately 81.1%) out of 31,040,150 of the
Registrant's issued and outstanding Common Stock.

On January 5, 2005, the Registrant changed its name to Healthcare Business
Services Groups, Inc. The Registrant is a holding company for HBSGI. The
business operations discussed herein are conducted by HBSGI. The Registrant,
through HBSGI, is engaged in the business of providing medical billing services
to healthcare providers in the United States.

The Company is a medical billing service provider that for over fourteen years
has assisted various healthcare providers to successfully enhance their billing
function. The Company has a diversified market base with operations in
Providence, Rhode Island and Upland, California. The Company has developed a
proprietary medical billing software system named AutoMed(TM) . The Company has
installed, and is currently ready to market and install, AutoMed(TM) at some of

the Company's existing medical billing clients. The Company expects that after
this software is launched, revenues will grow substantially over the next three
to five years extending its billing model into the technology era. In addition,
the Company made an investment in real estate which the Company had rezoned for
development and construction of a surgical center. In 2005, the Company
transferred the real estate and construction with historical cost of $ 488,137
and the loan associated with the real estate worth $ 250,000 with accrued
interest of $ 12,500 to the officer of the Company. The real estate and
construction has been valued at the fair market value for the purposes of
transfer to the officer of the Company. The fair market value has been arrived
based on the appraisal of the real estate amounting to $ 750,000.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2006 COMPARED TO THREE MONTHS ENDED MARCH 31, 2005

Revenue for the three months ended March 31, 2006 were $ 314,809 compared to $
366,189 for the same period in 2005. The decrease in revenues was due to
reduction in collections from the customers during the three months ended March
31, 2006 as compared to same period in 2005.

General & administrative ("G&A") expense for the three months ended March 31,
2006 was $ 326,838 compared to $ 447,069 for the same period in 2005. The
decrease in G&A expenses in 2006 was due to reduction in costs incurred by the
Company in marketing the company's business and costs associated with becoming a
publicly traded company.

Depreciation and amortization was $ 19,607 for the three months ended March 31,
2006 as compared to $ 28,117 for the same period in 2005. The decrease in
depreciation and amortization expense was primarily due to sale of the land and
building in year 2005 to the officer of the company resulting in lesser fixed
assets to be depreciated.

Interest expense for the three months ended March 31, 2006 was $ 17,755 compared
to $ 21,914 for the same period in 2005. The Company paid notes and line of
credit during the period resulting in decrease in interest expense for the year
as compared to year 2005.

Net loss was $ 217,341 (or basic and diluted net loss per share of $(0.01) for
the three months ended March 31, 2006 as compared to net loss of $ 283,311 (or
basic and diluted net loss earnings per share of $(0.01) for the same period in
2005. The increase in net loss was due to increase in operating expenses in
2006.

LIQUIDITY AND CAPITAL RESOURCES

The Company had $ 141,768 in current assets and a working capital deficiency of
$ 2,422,743 as of March 31, 2006. The Company had total assets of $ 317,114 as
of March 31, 2006, which consisted of $ 141,768 of cash, $ 56,930 of property
and equipment, $114,766 of intangible assets from the Company's website
technology costs, and $3,650 of deposits.

The Company had total current liabilities of $2,564,511 as of March 31, 2006,
consisting of accounts payable and accrued expenses of $ 1,286,689, litigation
accrual of $ 675,747, line of credit of $104,510, note payable to third parties
of $ 451,040 and monies due on settlement of note amounting to $ 46,525.

Net cash used in operating activities was $ 139,577 during the three months
ended March 31, 2006, as compared to net cash provided by operating activities
of $ 224,185 during the same period in 2005.

There was no investing activity during the three months ended March 31, 2006 as
compared to net cash used in investing activities of $ 31,407 during the same
period in 2005.

Net cash used in financing activities was $ 21,778 during the three months ended
March 31, 2006, as compared to net cash provided by financing activities of $
11,988 for the same period in 2005.

The Company does not have any commitments or identified sources of additional
capital from third parties or from its officers, directors or majority
shareholders. There is no assurance that additional financing will be available
on favorable terms, if at all. If the Company is unable to raise such additional
financing, it would have a materially adverse effect upon the Company's ability
to implement its business plan and may cause the Company to curtail or scale
back its current operations.

RISK FACTORS

WE NEED A SUBSTANTIAL AMOUNT OF ADDITIONAL FINANCING.

In addition to its continued medical billing operation, the Company has
planned to begin marketing AutoMed. The Company believes that it can satisfy the
current cash requirements for Medical Billing, if the Company maintains its
operations as they are currently. The Company needs to raise $4 to $5 million of
additional financing to implement its business plan with respect to AutoMed.

The Company intends to raise the additional capital in one or more private
placements. The Company does not have any commitments or identified sources of
additional capital from third parties or from its officers, directors or
majority shareholders. There is no assurance that additional financing
will be available on favorable terms, if at all. If the Company is unable
to raise such additional financing, or accepts financing on unfavorable terms to
the Company, it could have a materially adverse effect upon the Company's
ability to implement its business plan with respect to AutoMed, and may force
the Company to curtail or scale back its current Medical Billing operations.

WE PAY A SUBSTANTIAL SALARY TO OUR CHIEF EXECUTIVE OFFICER AND TREASURER.

Chandana Basu, our Chief Executive Officer and Treasurer, receives the
substantial amount of $50,000 per month (or $600,000 per year) for her services,
which includes approximately $5,000 of salary and a minimum bonus of $45,000
each month. Ms. Basu also serves as the Chief Executive Officer and President of
AutoMed, and the manager of Silver Shadow, both wholly-owned subsidiaries of the
Company. The Company has an employment agreement with Ms. Basu; however, the
Company expects to continue to pay Ms. Basu such salary or more for the
foreseeable future. The amount of salary that Ms. Basu receives relative to the
Company's revenue and other expenses reduces the likelihood that the Company
will make a profit, and increases the possibility that the Company be forced to
curtail or abandon its business plan in the future if the Company fails to raise
additional capital.

WE MAY NOT BE ABLE TO COMPLETE THE DEVELOPMENT OF AUTOMED AS A STAND-ALONE,
COMMERCIALLY VIABLE PRODUCT.

The Company is currently developing additional features for AutoMed with the
intent that the AutoMed software package will be used for medical office
management. The Company intends to make the AutoMed software applications
available based on what the Company calls "one-stop shopping." The Company
intends for a medical practice to be able to customize AutoMed based on the
particular needs of each medical specialization, office or hospital. The Company
is currently using AutoMed to perform the medical billing function for some of
its existing Medical Billing clients. Further development will be required
before AutoMed is commercially viable as a stand-alone product for its intended
use for medical office management. There is no assurance that the Company will
complete the development. In the event that the Company does not complete the
development of AutoMed as a stand-alone, commercially viable product, the
Company will not generate revenue from AutoMed unless the Company charges an
additional fee for AutoMed in connection with Medical Billing. The failure to
develop AutoMed would have a materially adverse effect on the Company's
potential for future revenues and as a result, the value of the Company's
securities would likely decrease in value.

A SUBSTANTIAL AMOUNT OF OUR REVENUES COME FROM FOUR MAIN CLIENTS.

The four major customers of the Company provided $ 229,811 or 73% of the
revenues of the Company for the three month period ended March 31, 2006.. If the
Company were to lose any or all of these four clients, it would have a
materially adverse effect on the Company's revenue, and if the Company is unable
to gain a new large client to take its place, of a sufficient number of smaller
clients to take the place of the major client or clients who are lost, the
Company could be forced to abandon or curtail its business plan.

WE MAY NOT BE ABLE TO DEVELOP A MARKET FOR AUTOMED IN THE EVENT THAT WE ARE
UNABLE TO RAISE ENOUGH MONEY TO MARKET AUTOMED.

Assuming that the Company completes development of the AutoMed software as a
stand-alone, commercially viable product, the Company plans to market AutoMed as
a "one-stop shopping" solution for medical office management. The Company plans
to charge $50,000 per installation for a single user and one computer. Currently
the Company generates no revenue through AutoMed. The extent to which AutoMed
gains acceptance, if any, will depend, in part, on its cost effectiveness and
performance as compared to conventional means of office management, as well as
known or unknown alternative software packages. If conventional means of office
management or alternative software packages are more cost-effective or
outperform AutoMed, the demand for AutoMed may be adversely affected.
Additionally, the Company anticipates the need for approximately $1 million to
begin marketing AutoMed. The failure of the Company to raise an additional $1
million in financing or AutoMed to achieve and maintain meaningful levels of
market acceptance would have a material adverse effect on the AutoMed line of
business and the Company's overall business, financial condition and results of
operations, and would likely cause the value of the Company's securities to
decrease.

ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

The Company had a loss of $ 217,341, a working capital deficiency of $
2,422,743, stockholders' deficiency of $2,247,397, an accumulated deficit of
$3,142,349 and net cash used in operations of $ 139,577. The accompanying
financial statements have been prepared assuming that the Company will continue
as a going concern. The financial statements do not include any adjustments that
might result from our inability to continue as a going concern. Our continuation
as a going concern is dependent upon future events, including obtaining
financing (discussed above) for expansion and to implement our business plan
with respect to AutoMed and Surgery Centers. If we are unable to continue as a
going concern, you will lose your entire investment.

WE MAY FACE POTENTIAL LIABILITY IN CONNECTION WITH PENDING LEGAL PROCEEDINGS AND
ARBITRATION PROCEEDINGS WHICH HAVE BEEN BROUGHT AGAINST THE COMPANY.

As of the filing of this report, the Company is a party to approximately three
separate legal proceedings and/or arbitration matters in which former clients
and a former law firm of the Company have brought claims against the Company
ranging from $79,000 to $675,747. If the Company is unable to settle or defend
against claims made by former clients and a law firm, the plaintiffs in those
matters may obtain judgments against the Company. If this happens Company does
not have enough cash on hand to pay amount of the judgments, which may be
substantial, the Company may be forced to abandon or curtail its business
operations.

In November 2004, the Company entered into a convertible promissory note with
Falguni Patel, MD. The Company received $350,000 in connection with the
promissory note, which bears interest at the rate of 12% per year and is
convertible at $1.00 per share into shares of the Company's Common Stock. The
promissory note is also personally secured by all of the Common Stock held by
our Chief Executive Officer. If we are unable to pay the interest which accrues
on the promissory note, or we default on the note, we could be forced to curtail
or abandon our business operations.

WE RELY ON KEY MANAGEMENT.

The success of the Company depends upon the personal efforts and abilities of
Chandana Basu. The Company faces competition in retaining Ms. Basu and in
attracting new personnel should Ms. Basu chose to leave the Company. There is no
assurance that the Company will be able to retain and/or continue to adequately
motivate Ms. Basu in the future. The loss of Ms. Basu or the Company's inability
to continue to adequately motivate her could have a material adverse effect on
the Company's business and operations.

BECAUSE MS. CHANDANA BASU OWNS 81.1% OF OUR OUTSTANDING COMMON STOCK, SHE WILL
EXERCISE CONTROL OVER CORPORATE DECISIONS THAT MAY BE ADVERSE TO OTHER MINORITY
SHAREHOLDERS.

Chandana Basu, a Director of the Company and the Company's Chief Executive
Officer and Treasurer, owns approximately 81.1% of the issued and outstanding
shares of our common stock. Accordingly, she will exercise control in
determining the outcome of all corporate transactions or other matters,
including mergers, consolidations and the sale of all or substantially all of
our assets, and also the power to prevent or cause a change in control. The
interests of Ms. Basu may differ from the interests of the other stockholders
and thus result in corporate decisions that are adverse to other shareholders.

IF THERE'S A MARKET FOR OUR COMMON STOCK, OUR STOCK PRICE MAY BE VOLATILE.

If there's a market for our common stock, we anticipate that such market would
be subject to wide fluctuations in response to several factors, including, but
not limited to:

(1) actual or anticipated variations in our results of operations;
(2) our ability or inability to generate new revenues;
(3) increased competition; and
(3) conditions and trends in the medical billing industry.

Further, because our common stock is traded on the NASD over the counter
bulletin board, our stock price may be impacted by factors that are unrelated or
disproportionate to our operating performance. These market fluctuations, as
well as general economic, political and market conditions, such as recessions,
interest rates or international currency fluctuations may adversely affect the
market price of our common stock.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations
is based upon our financial statements, which have been prepared in accordance
with accounting principals generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of any contingent assets and liabilities. On an
on-going basis, we evaluate our estimates. We base our estimates on various
assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements:

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. Our chief executive
officer and principal financial officer, after evaluating the effectiveness
of the Company's "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the
end of the period covered by this quarterly report (the "Evaluation Date"),
has concluded that as of the Evaluation Date, our disclosure controls and
procedures were effective and designed to ensure that material information
required to be disclosed by the Company in the reports that it files or
submits under the Exchange Act of 1934 is 1) recorded, processed,
summarized and reported, within the time periods specified in the
Commission's rules and forms; and 2) accumulated and communicated to her as
appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting. There were no
significant changes in our internal control over financial reporting during
our most recent fiscal quarter that materially affected, or were reasonably
likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On September 20, 1999, Mohammad Tariq, MD was granted a default judgment in the
District Court of Collin County, Texas, 380th Judicial District in the amount of
$280,835.10, plus prejudgment and post-judgment interest against Healthcare
Business Services Group, Inc. As of the filing of this Report, Healthcare has
not paid any money with respect to such default judgment. The default judgment
relates to a contract for billing services between Healthcare and Dr. Tariq
entered into in 1996. After termination of the contract, Dr. Tariq requested an
accounting of the amounts collected from his patients by Healthcare in
connection with the billing services. In July 1999, Healthcare sent an
accounting to Dr. Tariq in the amount of $275,355 collected, $42,512 charged by
Healthcare as its fee, and $222,298 paid to Dr. Tariq. On September 22, 1999,
Healthcare received notice of the default judgment. Although Healthcare has not
taken legal steps to defend itself against the default judgment, Healthcare
claims to have not received proper notice from Dr. Tariq of a civil action. To
the best of Healthcare management's knowledge, Dr. Tariq has not sought to
enforce the judgment as of the filing of this Report.

On July 11, 2002, Kamran Ghadimi ("Ghadimi") initiated a lawsuit against the
Company and others in the Superior Court of California, County of San
Bernardino, Case No. RCV 064904, styled Kamran Ghadimi v. Chandana Basu, et al.
The complaint alleges that the Company, the Company's President, Ms. Basu, and
Alta Vista Billing Service For Complex Medical Care, Inc., which is 100% owned
by Ms. Basu improperly withheld monies from Ghadimi, and seeks in excess of
60,000 from the Company and Ms. Basu. The Complaint alleges, among others,
claims for breach of contract and breach of fiduciary duty. Ghadimi seeks
compensatory and punitive damages, prejudgment interest, costs and attorney's
fees. The Company refutes Ghamadi's claims and has filed a counterclaim
alleging, among others, claims for breach of contract and misappropriation of
trade secrets. The counterclaim seeks compensatory and punitive damages,
prejudgment interest, costs and attorney's fees in an unspecified amount. The
trial is set for May 22, 2006.

In January 2004, Leonard J. Soloniuk, M.D. ("Soloniuk") initiated an arbitration
against the Company with the American Arbitration Association, Case No. 72 193
00102 04 TMS, styled Leonard J. Soloniuk, M.D. v. HBSG. The complaint alleges
that the Company failed to properly bill and collect fees, intentionally
miscoded bills, intentionally withheld collection proceeds due to Soloniuk,
breached its billing agreement and otherwise engaged in fraudulent conduct.
Soloniuk seeks damages in the range of $250,000 to $500,000. The Company refutes
Soloniuk's claims and has filed a counterclaim asserting claims for breach of
contract, breach of confidence, intentional misrepresentation and negligent
misrepresentation. The Company seeks damages in an approximate range of $75,000
to $100,000. By agreement, the Company is supposed to receive all collections
for which it billed and then pay client its share pursuant to the fee agreement.
At the time of dispute the total amount of billings was approximately $1
million. The client changed addresses to insurance companies and started to
receive collections directly from the insurance companies and do its own
billings to patients while under contract with the Company. In addition, the
client did not provide an accounting to the Company nor pay the Company its due
share. Hearing in this matter was held in February 2006. Post-hearing briefs
were submitted to the arbitrator in March 2006 and the closing statements were
held on March 30, 2006.In decision dated April 5, 2006,the arbitrator awarded
Soloniuk $ 275,000 against the Company as well as interest accruing from June 1,
2006 at rate of ten percent per annum on the unpaid balance. The arbitrator
further ordered the Company to reimburse arbitration costs in amount of $ 1,875.
The Company filed motion to vacate this judgment.

On July 12, 2004, Nimish Shah, M.D. d/b/a New Horizon Medical, Inc. ("New
Horizon") initiated a lawsuit against the Company in the Superior Court of
California, County of Los Angeles, Case No. VC 042695, styled New Horizon
Medical, Inc. v. Chandana Basu, et al. The complaint raises a claim for breach
of contract against the Company . The complaint alleges that the Company failed
to remit sums due to New Horizon. On April 8, 2005, the court dismissed the
action and referred it to arbitration. Since May 2005, there have been a number
of telephonic conferences held with the assigned arbitrator. Each of these calls
has focused on the voluntary exchange of insurance payment records by the
parties. In connection with arbitration, the Company has claimed against New
Horizon the compensatory damages in the amount of $75,000 (subject to
amendment), prejudgment interest, costs and attorneys' fees in an unspecified
amount. New Horizon has not submitted a cross-complaint against the Company for
the breach of contract alleging that there is substantial discrepancy between
the amounts of bills provided by New Horizon to the Company, for the purpose of
securing payment from various insurance companies, and the funds actually
received from the Company. New Horizon contends that the there are amounts in
controversy of around $ 1,000,000. The Company has denied the allegations. The
matter is in its initial stages.

From time to time, we may become party to litigation or other legal proceedings
that we consider to be a part of the ordinary course of our business. Other than
the legal proceedings listed below, we are not currently involved in legal
proceedings that could reasonably be expected to have a material adverse effect
on our business, prospects, financial condition or results of operations.
However, we may become involved in material legal proceedings in the future.

ITEM 2. CHANGES IN SECURITIES

The Company did not issue any stock during the three month period ended March
31, 2006.

The Company recorded $ 16,250 as officer compensation for 250,000 shares to be
issued pursuant to the employment agreement. The officer is entitled to
1,000,000 shares every year pursuant to the employment agreement, which was
modified in May of 2005. The value of the stock is based on the market at March
31, 2006.

On March 16, 2005, the Company issued 100,000 restricted Common Shares to a
consultant valued at $19,000 for business consulting and advisory services.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit No.* Description

31.1 Certificate of the Chief Executive Officer and Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *

32.1 Certificate of the Chief Executive Officer and Principal Financial Officer
pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 *

* Filed Herein.

(b) Reports on Form 8-K

The Company filed no Reports on Form 8-K during the fiscal quarter ended March
31, 2006.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Healthcare Business Services Group, Inc.

Dated: May 20, 2006 By: /s/ Chandana Basu
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Chandana Basu,
Chief Executive Officer and
Principal Financial Officer