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 June 30, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
For the transition period from__________to________
Commission file number 000-50014
WINFIELD FINANCIAL GROUP, 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)
2770 S. Maryland Parkway, Suite 402
Las Vegas, Nevada 89109
-----------------------
(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 August 23, 2004, 29,774,650 shares of common stock of the issuer were
outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
During the period covered by this Report, the Registrant acquired Healthcare
Business Services Groups, Inc., AutoMed Software Corp., Silver Shadow
Properties, LLC (collectively referred to as "HBSGI"). HBSGI is the wholly-
owned subsidiary through which the Registrant conducts its business. The
following financial statements include the business operations of HBSGI.
WINFIELD FINANCIAL GROUP, INC.
(formerly Healthcare Business Services Groups, Inc.)
CONSOLIDATED BALANCE SHEET
June 30, 2004
ASSETS
Current Assets
Cash $ 3,725
Property and equipment, net of accumulated
depreciation of $99,818 762,085
Other assets 4,330
------------
Total Assets $ 770,140
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 131,743
Accrued expenses 67,150
Income tax payable 5,555
Line of credit 45,433
Due to trust fund 181,427
Notes payable 480,704
Convertible Note payable for services 250,000
Note payable - related party 166,282
------------
Total Current Liabilities 1,328,294
Commitments & Contingencies
Stockholders' Deficit
Preferred stock, $.001 par value, 5,000,000 shares
authorized, none issued and outstanding
Common stock, $.001 par value, 50,000,000 shares
authorized, 32,414,650 shares are issued and outstanding 32,415
Additional paid in capital 987,585
Accumulated deficit (1,578,154)
------------
Total Stockholders' Deficit (558,154)
------------
Total Liabilities and Stockholders' Deficit $ 770,140
============
WINFIELD FINANCIAL GROUP, INC.
(formerly Healthcare Business Services Groups, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2004 and 2003
Three Months Six Months
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenue $ 423,750 $ 643,046 $ 832,066 $ 1,114,888
Selling, general
& administrative 1,816,492 598,070 2,336,344 1,142,048
Depreciation 9,312 7,534 18,624 15,068
Interest expense 26,809 448 42,290 448
Income taxes (recovery) - - - (7,274)
----------- ----------- ----------- -----------
Total expenses 1,852,613 606,052 2,397,258 1,150,290
----------- ----------- ----------- -----------
Net income (loss) $(1,428,863) $ 36,994 $ (1,565,192) $ (35,402)
=========== =========== =========== ===========
Basic and diluted net
loss per share $ (.05) $ .00 $ (.06) $ (.00)
Weighted average
shares outstanding 29,831,277 25,150,000 27,490,638 25,150,000
WINFIELD FINANCIAL GROUP, INC.
(formerly Healthcare Business Services Groups, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOW
Six Months Ended June 30, 2004 and 2003
2004 2003
----------- -----------
Cash Flows From Operating Activities
Net loss $ (1,565,192) $ (35,402)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 18,624 15,068
Stock for services 1,010,000 -
Changes in:
Other accounts receivable 78,306 (18,456)
Other assets 156 1,460
Accounts payable (132,417) 169,497
Income tax payable (13,655) (4,508)
Accrued expenses 34,693 -
Note payable for services 250,000 -
----------- -----------
Net Cash Provided by (Used In)
Operating Activities (319,485) 127,659
----------- -----------
Cash Flows From Investing Activities
Purchase of property and equipment (67,699) (93,781)
----------- -----------
Net Cash Used In Investing Activities (67,699) (93,781)
----------- -----------
Cash Flows From Financing Activities
Net increase (decrease) from line of credit (1,751) 8,490
Net increase from trust fund 181,427 -
Proceeds from notes payable 193,000 -
Payments on notes payable (2,852) -
Proceeds from note payable to related party 20,169 -
----------- -----------
Net Cash Provided By Financing Activities 389,993 8,490
----------- -----------
Net change in cash 2,809 42,368
Cash at beginning of period 916 17,398
----------- -----------
Cash at end of period $ 3,725 $ 59,766
=========== ===========
WINFIELD FINANCIAL GROUP, INC.
(formerly Healthcare Business Services Groups, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Winfield Financial
Group, Inc. ("Winfield" or the "Company") have been prepared in accordance with
accounting principles generally accepted in the United States of America and the
rules of the Securities and Exchange Commission ("SEC"), and should be read in
conjunction with the audited financial statements and notes thereto contained in
Winfield's upcoming Form 8-K to be filed with the SEC. In the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the interim periods presented have been reflected herein. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the full year. Notes to the financial statements
which would substantially duplicate the disclosure contained in the audited
financial statements for 2003 to be reported in the Form 8-K have been omitted.
NOTE 2 - REVERSE LISTING
On April 23, 2004, Winfield 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, 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 two corporations and one limited liability company and has changed
its business focus.
Winfield acquired Healthcare, AutoMed, and Silver Shadow from Chandana Basu, the
sole owner, in exchange for 25,150,000 newly issued treasury shares of
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 Ms. Basu who owned approximately 80.0% of Winfield's
common stock immediately after the Acquisition. Due to cancellations and an
additional issuance, Ms. Basu currently owns 25,150,000 shares out of
29,774,650 shares of common stock of Winfield (or approximately 84.5%).
NOTE 3 - DUE TO TRUST FUND
During the six months ended June 30, 2004, Winfield borrowed $181,427 from an
account that Winfield controls on behalf of itss clients. The monies
were borrowed without permission of Winfield's clients. All amounts are
considered due on demand and interest of 18% is being accrued on all outstanding
amounts. Winfield is in the process of repaying the amounts borrowed
including interest.
NOTE 4 - NOTES PAYABLE
Notes payable consist of the following:
Term loan: proceeds received February 2004; payable in
monthly installments of $1,000 per month; remaining principal
and interest due January 31, 2005; interest of 9.5%; unsecured $ 93,000
Term loan: proceeds received February 2004; due May 18, 2004;
currently in default; interest of 18%; unsecured 100,000
Equipment loan: May 2003 due April 2008; payable in months
installments of $1,030; interest of 14%; secured by equipment 37,704
Land purchase loan: November 2003 due November 2005; interest
only payment of $1,563 payable monthly; interest of 7.5%;
secured by land 250,000
---------
$480,704
=========
NOTE 5 - CONVERTIBLE NOTE PAYABLE FOR SERVICES
In connection with a consulting agreement, Winfield agreed to pay $250,000
for financial advisory services. The payment is in the form of a convertible
note payable. The note was entered into in April 2004 and is due in April
2005 unless the Winfield receives $3,000,000 in funding at which time the
note is payable immediately. The note bears interest of 4% and is
unsecured. The note and accrued interest are convertible into the
Company's common stock at 75% of the market price when converted. If the
Company defaults on the note, the note is convertible at 50% of the market
price when converted. When the note was issued, the market value of the
stock approximated $0, therefore, there is no beneficial conversion feature
associated with the note.
NOTE 6 - NOTE PAYABLE - RELATED PARTY
Winfield's majority shareholder and CEO has loaned Winfield money for
operations on an as needed basis. The balance as of June 30, 2004
was $166,282.
NOTE 7 - COMMON STOCK
In June 2004, Winfield issued 1,000,000 shares for services valued at the
then trading price totaling $1,010,000.
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.
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 is transferring 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. The Registrant expects to change its name from Winfield
Financial Group, Inc. to Healthcare Business Services Groups, Inc. After the
issuance of shares to Ms. Basu and the cancellation of 2,640,000 shares of Mr.
and Mrs. Burley, there were 29,774,650 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
84.5%) out of 29,774,650 of the Registrant's issued and outstanding common
stock.
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 nine years
has assisted various healthcare providers to successfully enhance their billing
function. The Company has a diversified market base with customers in
Providence, Rhode Island; Laredo, Texas; and Upland, California. The Company
closed its office in Stockton, California. The Company has developed a
proprietary medical billing software system named AutoMed(TM). The Company has
installed, and is currently beta testing, 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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2004 COMPARED TO THREE MONTHS ENDED JUNE 30, 2003
Revenue for the three months ended June 30, 2004 decreased $219,296 (or
34%) to $423,750 as compared to revenue of $643,046 for the three months ended
June 30, 2003. The decrease in revenues was due to the implementation of new
software that is in compliance with the Health Insurance Portability and
Accountability Act ("HIPPA").
Selling, general & administrative ("SG&A") expense for the three months
ended June 30, 2004 increased $1,218,422 (or 204%) to $1,816,492 as compared to
SG&A expenses of $598,070 for the three months ended June 30, 2003. The
increase in SG&A expense was due to costs associated with the Acquisition,
the issuance of stock for services, and costs of property development by
Silver Shadow.
Depreciation expense was $9,312 for the three months ended June 30, 2004,
as compared to depreciation expense of $7,534 for the three months ended June
30, 2003. The increase in depreciation expense was due to an increase in
property and equipment.
Interest expense was $26,809 for the three months ended June 30, 2004, as
compared to interest expense of $448 for the three months ended June 30, 2003.
The increase in interest expense was primarily due to an increase in notes
payable.
Total expenses for the three months ended June 30, 2004 increased
$1,246,561 (or 206%) to $1,852,613 as compared to total expenses of $606,052
for the three months ended June 30, 2003. The increase in total expenses
was due to the increase in SG&A, depreciation expense, and interest expense.
Net loss was $1,428,863 (or basic and diluted net loss per share of $0.05)
for the three months ended June 30, 2004, as compared to net income of $36,994
(or basic and diluted net loss per share of $0.00) for the three months
ended June 30, 2003. The change from net income to a net loss was due to the
decrease in revenues and the increase in total expenses.
SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO SIX MONTHS ENDED JUNE 30, 2003
Revenue for the six months ended June 30, 2004 decreased $282,822 (or 25%)
to $832,066 as compared to revenue of $1,114,888 for the six months ended June
30, 2003. The decrease in revenues was due to the implementation of new
software that is in compliance with HIPPA.
SG&A expense for the six months ended June 30, 2004 increased $1,194,296
(or 105%) to $2,336,344 as compared to SG&A expenses of $1,142,048 for the six
months ended June 30, 2003. The increase in SG&A expense was due to costs
associated with the Acquisition, the issuance of stock for services, and
costs of property development by Silver Shadow.
Depreciation expense was $18,624 for the six months ended June 30, 2004, as
compared to depreciation expense of $15,068 for the six months ended June 30,
2003. The increase in depreciation expense was due to an increase in property
and equipment.
Interest expense was $42,290 for the six months ended June 30, 2004, as
compared to interest expense of $448 for the six months ended June 30, 2003.
The increase in interest expense was primarily due to an increase in notes
payable.
Income taxes were $0 for the six months ended June 30, 2004, as compared
to a recovery of income taxes of $7,274 for the six months ended June 30, 2003.
Total expenses for the six months ended June 30, 2004 increased $1,246,968
(or 108%) to $2,397,258 as compared to total expenses of $1,150,290 for the
six months ended June 30, 2003. The increase in total expenses was due
to the increases in SG&A, depreciation expense, interest expense, and income
taxes.
Net loss was $1,565,192 (or basic and diluted net loss per share of $0.06)
for the six months ended June 30, 2004, as compared to net loss of $35,402 (or
basic and diluted net loss per share of $0.00) for the six months ended June 30,
2003. The increase in net loss was due to the decrease in revenues and the
increase in total expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company had current assets of $3,725 as of June 30, 2004, which
consisted solely of cash. The Company had total current liabilities of
$1,328,294 as of June 30, 2004, consisting of accounts payable of $131,743,
accrued expenses of $67,150, income tax payable of $5,555, line of credit of
$45,433, due to trust fund of $181,427, note payable of $480,704, convertible
note payable for services of $250,000, and note payable to related party of
$166,282.
The Company had negative working capital of $1,324,569 as of June 30, 2004.
Net cash used in operating activities was $319,485 during the six months
ended June 30, 2004, as compared to net cash provided by operating activities of
$127,659 during the six months ended June 30, 2003. The change from net
cash provided by, to net cash used in, operating activities was primarily due to
a net loss of $1,565,192, a decrease in accounts payable of $132,417, and a
decrease in income taxes payable of $13,655 that were primarily offset by an
issuance of stock for services of $1,010,000, an increase in notes payable for
services of $250,000, a decrease in other accounts receivable of $78,306, and an
increase in accrued expenses of $34,693.
Net cash used in investing activities was $67,699 during the six months
ended June 30, 2004, as compared to net cash used in investing activities of
$93,781 during the six months ended June 30, 2003.
Net cash provided by financing activities was $389,993 during the six
months ended June 30, 2004, as compared to net cash provided by financing
activities of $8,490 for the six months ended June 30, 2003. The
increase in net cash provided by financing activities was primarily due to a net
increase from trust fund loans of $181,427 and proceeds from notes payable of
$193,000.
In addition to its continued medical billing operation, the Company has
planned to begin marketing AutoMed(TM), to begin development and construction on
its first surgery center, and to purchase a second parcel of land for its second
surgery center. The Company believes that it can satisfy the current cash
requirements for Medical Billing. It is imperative that we raise $4 to $5
million of additional capital to fully implement our business plan with respect
to AutoMed(TM) and Surgery Centers. 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, it would have a
materially adverse effect upon the Company's ability to implement its business
plan with respect to AutoMed(TM) and Surgery Centers, and may cause the Company
to curtail or scale back its current Medical Billing operations.
RISK FACTORS
NEED FOR ADDITIONAL FINANCING. In addition to its continued medical
billing operation, the Company has planned to begin marketing AutoMed(TM), to
begin development and construction on its first surgery center, and to purchase
a second parcel of land for its second surgery center. The Company believes
that it can satisfy the current cash requirements for Medical Billing. The
Company needs to raise $4 to $5 million of additional financing to implement its
business plan with respect to AutoMed(TM) and Surgery Centers. 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, it would have a materially adverse effect upon the
Company's ability to implement its business plan with respect to AutoMed(TM) and
Surgery Centers, and may cause the Company to curtail or scale back its current
Medical Billing operations.
POTENTIAL LIABILITY REGARDING "DUE TO TRUST FUND." The Company may be
liable for an amount in excess of the recorded balance for due to trust fund of
$181,427 (and accrued interest) as of June 30, 2004. During 2004, the
Company's CEO and majority shareholder borrowed money without authorization from
a bank account used as a clearing account for monies collected on behalf of
anesthesiologists in the ordinary course of business. About 10% of these
collected monies belong to the Company as their fees for providing the
collection service, but the amounts borrowed were in excess of this 10%. The
monies are tallied and disbursed each week for the previous week's collections.
All amounts borrowed are considered due on demand and interest of 18% is being
accrued on all outstanding amounts. While the Company does not own this
account, they have the power to transfer money, which is an internal control
weakness. Management has pledged to correct this weakness and alter procedures
to prevent the transfer of money solely by an officer of the Company. The
Company is in the process of repaying the amounts borrowed including interest.
If the clients were to sue the Company, the Company may be required to repay an
amount in excess of $181,427 and the accrued interest.
RELIANCE ON KEY MANAGEMENT. The success of the Company depends upon the
personal efforts and abilities of Chandana Basu, Payel Madero, Gina Ruiz,
Valerie Salazar, and Sherryl Montgomery. The Company faces competition in
retaining such personnel and in attracting new personnel should any of the
foregoing chose to leave the Company. There is no assurance that the Company
will be able to retain and/or continue to adequately motivate such personnel.
The loss of any of these employees or the Company inability to continue to
adequately motivate them could have a material adverse effect on the Company's
business and operations.
BECAUSE MS. CHANDANA BASU OWNS 84.5% 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 84.5% 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) 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:
Due to trust fund. During 2004, the Company's CEO and majority
shareholder borrowed money without authorization from a bank account used as a
clearing account for monies collected on behalf of anesthesiologists in the
ordinary course of business. About 10% of these collected monies belong to the
Company as their fees for providing the collection service, but the amounts
borrowed were in excess of this 10%. The monies are tallied and disbursed each
week for the previous week's collections. All amounts borrowed are considered
due on demand and interest of 18% is being accrued on all outstanding amounts.
While the Company does not own this account, they have the power to transfer
money, which is an internal control weakness. Management has pledged to correct
this weakness and alter procedures to prevent the transfer of money solely by
an officer of the Company. The Company is in the process of repaying the
amounts borrowed including interest. If the clients were to sue the Company,
the Company may be required to repay an amount in excess of the $181,427 (and
the accrued interest) shown on the Company's balance sheet as of June 30,
2004.
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 adequate 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.
During 2004, the Company's CEO and majority shareholder borrowed money
without authorization from a bank account used as a clearing account for monies
collected on behalf of anesthesiologists in the ordinary course of business.
About 10% of these collected monies belong to the Company as their fees for
providing the collection service, but the amounts borrowed were in excess of
this 10%. The monies are tallied and disbursed each week for the previous week's
collections. While the Company does not own this account, they have the power to
transfer money, which is an internal control weakness. Management has pledged to
correct this weakness and alter procedures to prevent the transfer of money
solely by an officer of the Company.
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.
ITEM 2. CHANGES IN SECURITIES
(C) In January 2004, the Company issued 38,000 shares of its common stock which
were not registered under the Securities Act of 1933, as amended (the
"Act"), to Karimi & Associates in consideration for services that they
provided to the Company regarding the Acquisition. The Company claims an
exemption from registration afforded by Section 4(2) of the Act since the
foregoing issuance did not involve a public offering, the recipient had
access to information that would be included in a registration statement,
took the shares for investment and not resale and the Company took
appropriate measures to restrict transfer.
In April 2004, the Company issued 100,000 shares and 400,000 shares of its
common stock which were not registered under the Act to two Directors of the
Company, Thomas Gutherie and Mark D. Johnson, respectively, in consideration for
their services as Directors of the Company. The Company claims an exemption
from registration afforded by Section 4(2) of the Act since the foregoing
issuances did not involve a public offering, the recipients had access to
information that would be included in a registration statement, took the shares
for investment and not resale and the Company took appropriate measures to
restrict transfer.
In May 2004, the Company issued 25,150,000 shares of its common stock which
were not registered under the Act to Chandana Basu pursuant to the Acquisition
whereby Healthcare, AutoMed and Silver Shadow became wholly-owned subsidiaries
of the Company. The Company claims an exemption from registration afforded by
Section 4(2) of the Act since the foregoing issuance did not involve a public
offering, the recipient had access to information that would be included in a
registration statement, took the shares for investment and not resale and the
Company took appropriate measures to restrict transfer.
In June 2004, the Company issued 1,000,000 shares of its common stock that
were not registered under the Act to an entity in consideration for consulting
services that the entity provided to the Company in connection with various
corporate transactions. The Company claims an exemption from registration
afforded by Section 4(2) of the Act since the foregoing issuance did not involve
a public offering, the recipient had access to information that would be
included in a registration statement, took the shares for investment and not
resale and the Company took appropriate measures to restrict transfer.
(e) In June 2004, Robert Burley and Linda Burley former directors and officers
of the Company agreed to cancel an aggregate of 2,640,000 of their shares
of common stock of the Company in consideration for the transfer of certain
intangible assets of the Company held immediately prior to the Acquisition.
The shares were canceled in July 2004.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) The Company is in default on an unsecured term loan that it received in
February 2004. The loan accrues interest at 18% per annum. The principal
and interest were due on May 18, 2004. The Company is in default with
respect to the principal of $100,000 and accrued interest of approximately
$10,500. The total amount past due including principal and accrued interest
on the date of filing this Report is approximately $110,500.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On April 21, 2004, the majority stockholders consented to action without a
meeting whereby the majority stockholders approved a change to the
Company's 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. Of the 5,764,650 shares of the Company's common stock that were
eligible to vote or give their signed written consent, shareholders
representing 3,340,000 shares (or 57.9%) of the Company's common stock
consented to the action.
ITEM 5. OTHER INFORMATION
Related Party Transactions
----------------------------
Chandana Basu, the Company's Chief Executive Officer has loaned the Company
money for operations on an as needed basis in the past, but has no commitment to
do so moving forward. The balance as of June 30, 2004 was $166,282.
Narinder Grewal, MD, a Director of the Company, is the Company's largest
client. Dr. Grewal is an anesthesiologist and pain management specialist. He
also operates a surgery center that is not otherwise affiliated with the Company
or the Company's Surgery Center line of business. The Company provides Dr.
Grewal with medical billing and other administrative services. The Company
generates between 35% and 40% of its revenues from the services that it provides
to Dr. Grewal. The Company has had a relationship with Dr. Grewal for eight
years.
The Company also provides services to Bharati Shah, MD, a Director of the
Company. The Company receives less than 5% of its revenue from Dr. Shah.
Changes in Directors and Officers
-------------------------------------
On April 30, 2004, Linda Burley resigned as a Director of the Company and
as the Company's Secretary. On May 12, 2004, Bharati Shah, MD was appointed as
a Director to fill the vacancy created by Mrs. Burley's resignation. On that
same day, Christopher Madero was appointed as the Secretary.
On May 24, 2004, Robert Burley resigned as a Director of the Company and as
the Company's President, Chief Executive Officer and Treasurer. On that same
day Narinder Grewal, MD was appointed as a Director to fill the vacancy created
by Mr. Burley's resignation, and Chandana Basu was appointed as the Company's
Chief Executive Officer and Treasurer.
Other Events
-------------
On June 21, 2004, Robert Burley and Linda Burley agreed to cancel an
aggregate of 2,640,000 shares of the Company's common stock held by them in
consideration for certain intangible assets of the including the use of the name
"Winfield Financial Group, Inc." The shares were cancelled on July 27, 2004.
As a result of this agreement and the change in business focus, the Company
expects to change its name from Winfield Financial Group, Inc. to Healthcare
Business Services Groups, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
2.1 Common Stock Purchase Agreement (1)
2.2 Addendum to Common Stock Purchase Agreement (1)
3.1 Certificate of Amendment to Articles of
Incorporation (2)
31 Certificate of the Chief Executive Officer and
Principal Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 *
32 Certificate of the Chief Executive Officer and
Principal Financial Officer pursuant to Section
906 of the Sarbanes- Oxley Act of 2002 *
(1) Filed as Exhibits 2.1 and 2.2, respectively, to the Report on Form 8-K
filed with the Commission on May 17, 2004 and incorporated herein by
reference.
(2) Filed as Exhibit 3.1 to the Report on Form 10-QSB filed with the Commission
on May 17, 2004, and incorporated herein by reference.
* Filed Herein.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on May 17, 2004, to report a change
in control, the acquisition and disposition of assets, and changes in directors
and officers.
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.
WINFIELD FINANCIAL GROUP, INC.
Dated: August 27, 2004 By": /s/ Chandana Basu
---------------------
Chandana Basu,
Chief Executive Officer and
Principal Financial Officer
EXHIBIT 31
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Chandana Basu, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Winfield Financial
Group, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. As the small business issuer's certifying officer, I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under my supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this report is being
prepared;
b) Paragraph omitted in accordance with SEC transition instructions contained
in SEC Release No. 33-8238;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report my conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the small business issuer's internal
control over financial reporting that occurred during the small business
issuer's most recent fiscal quarter (the small business issuer's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: August 27, 2004
By: /s/ Chandana Basu
---------------------
Chandana Basu,
Chief Executive Officer and
Principal Financial Officer
EXHIBIT 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Chandana Basu, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Winfield Financial Group, Inc. on Form 10-QSB for the quarterly period
ended June 30, 2004 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and that information contained in
such Form 10-QSB fairly presents in all material respects the financial
condition and results of operations of Winfield Financial Group, Inc.
Date: August 27, 2004
By: /s/ Chandana Basu
---------------------
Chandana Basu,
Chief Executive Officer and
Principal Financial Officer