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 [  ]

Check  if  there  is no disclosure of delinquent filers in response to Item 405  of  Regulation  S-B  not  contained in this form, and no disclosure will be contained,  to  the  best  of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or  any  amendment  to  this  Form  10-KSB. [  ]

The issuer’s revenues for the most recent fiscal year ended December 31, 2006 were $1,011,644.

The  aggregate  market  value  of the issuer’s voting and non-voting common equity  held  by non-affiliates computed by reference to the average bid and ask price   of   such   common  equity  as  of  April 11,  2006,  was  approximately $2,207,410.

As  of  April  11,  2007  the issuer had 33,960,450 shares of common stock, $.001  par  value per share outstanding (“Common Stock”).

Documents Incorporated by Reference:  NONE

Transitional Small Business Disclosure Format:  Yes [  ]   No [X]

 PART I

ITEM 1.

DESCRIPTION OF BUSINESS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain  statements  in  this  Annual  Report on Form 10-KSB (this “Form 10KSB”),  including  statements under “Item 1. Description of Business,” and “Item 6. Management’s  Discussion  and  Analysis”,  constitute  “forward  looking statements”  within the meaning of Section 27A of the Securities Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the  “Reform  Act”). Certain,  but not necessarily all, of such forward-looking statements  can  be identified by the use of forward-looking terminology such as “believes”,  “expects”,  “may”,  “should”,  or  “anticipates”,  or  the negative thereof or other variations thereon or comparable terminology, or by discussions of  strategy  that  involve  risks  and  uncertainties. Such  forward-looking statements  involve  known  and  unknown  risks, uncertainties and other factors which  may  cause  the actual results, performance or achievements of Healthcare Business  Services  Groups,  Inc. (the  Company”,  “we”,  “us”  or “our”) to be materially  different  from  any  future  results,  performance  or achievements expressed or implied by such forward-looking statements. References in this form 10-KSB, unless another date is stated, are to December 31, 2005.

BUSINESS DEVELOPMENT

The  Company  was  incorporated  in  the State of Nevada on May 2, 2000, as Winfield Capital Group, Inc. On June 6, 2001, the Company filed a Certificate of Amendment  to its Articles of Incorporation to affect a name change to “Winfield Financial  Group,  Inc.”  On  April  23,  2004, the Company acquired 100% of the equity  interest of Healthcare Business Services Groups, Inc. (“Healthcare”). As part  of  the same transaction, the Company acquired 100% of the equity interest of AutoMed Software Corp. (“AutoMed”) and Silver Shadow Properties, LLC (“Silver Shadow”)  on  May 7, 2004. Prior to the Acquisition (defined below), the Company was  a business broker, primarily representing sellers and offering its clients’ businesses  for  sale. As  a result of the acquisition, the Company changed its business  focus  to  medical  billing. On  January 7, 2005, the Company filed a Certificate  of  Amendment  to  its  Articles  of Incorporation, with the Nevada Secretary of State and changed its name to “Healthcare Business Services Groups, Inc.”

On  April 23, 2004, the Company 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 Company 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 Company acquired Healthcare, AutoMed, and Silver Shadow from Chandana  Basu, the sole owner, in exchange for 25,150,000 newly issued treasury shares  of  the  Company’s  Common  Stock. As  a result of the Acquisition, the Company  has  changed  its  business  focus. The term “Company” shall include a reference  to  Healthcare  Business  Services  Groups,  Inc. (the  “Company”),

During the year, Company sold the Silver Shadow Properties, LLC along with it’s asset bare land which company acquired through acquisition from Ms Basu, with a value of $390,000. Ms Basu held a note of $140,000 on the land. Company incurred $98,137 expenses through the end of the period towards the engineering and city fees. The loan associated with the land for $250,000 was due on November of 2005. Lender made demand for payoff and threatened to foreclose the property. The company was unable to refinance due to the facts that it was in multiple law suits. Then company appraised the land for $750,000 and sold to Ms Basu for this amount. Ms Basu took over the note of $250,000 and by settling her note payable to Ms Basu of $225,637 and in addition, writing a promissory note payable to the Company of $261,863. Total monetary value received by the Company was $750,000. The Company recorded the difference between the assets received from Ms. Basu of $750,000 and the carrying amounts of $488,137 as capital contribution in the amount of  $261,863. Ms Basu took responsibility of interest amount of $12,500 and unpaid outstanding bills for city fees and engineering for the amount of $45,000.

On  June 21, 2004, the Company entered into an agreement with Robert Burley (former  Director,  President  and  Chief  Executive Officer of the Company) and Linda  Burley (former Director and Secretary of the Company) whereby the Company agreed  to transfer certain assets owned by the Company 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 Company’s common stock. The Company  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 Company’s business operations  immediately  prior  to  the  change  in  control whether or not such intangible  property  was  accounted  for in the Company’s financial statements. After  the  issuance  of  shares  to  Ms. Basu and the cancellation of 2,640,000 shares  of  Mr. and Mrs. Burley’s Common Stock, there were 29,774,650 shares of the  Company’s  Common  Stock  outstanding. As  a result of these transactions, control  of the Company shifted to Ms. Basu. Ms. Basu currently owns 25,750,000 shares (or approximately 81.00%) out of 33,960,150 shares of the Company’s issued and  outstanding  Common  Stock.

DESCRIPTION  OF  THE  COMPANY’S  FORMER  BUSINESS  OPERATIONS

Prior  to  the  Acquisition  of  Healthcare,  AutoMed,  and  Silver  Shadow (described  above),  the  Company operated as a business  broker,  primarily representing  sellers and offering its clients’ businesses for sale. The Company limited  its  business  to asset sale transactions and not transactions in which businesses are sold through the sale of stock.

DESCRIPTION  OF  THE  COMPANY’S  CURRENT  BUSINESS  OPERATIONS

As  a result of the Acquisition, discussed above, the Company operates as a medical  billing  service  provider which attempts to assist various health care providers  to enhance their  billing  functions. The Company has a diversified market  base  with  customers  in  Texas,  California,  Florida,  New  York  and Washington. The Company  has  developed a proprietary medical billing software system  named  AutoMed. The Company has beta tested AutoMed, is currently using AutoMed  in-house  for  its  billing  service operations,  and  plans  to  market  AutoMed commercially  in  2006. The Company expects that after AutoMed is launched, the Company’s  revenues  will grow over the next three to five years, as the Company extends its billing model into the technology era, however, the Company can give no  assurances  that it will see increases in revenue, when AutoMed is launched, if  ever.

The Company, through a reimbursement account bills and collects on medical billings. The Company retains a percentage of the collection as a fee, typically 10%, and remits the balance to the client.

DESCRIPTION  OF  THE  COMPANY’S  PRINCIPAL  PRODUCTS  AND  SERVICES

The Company is a medical reimbursement consulting firm dedicated to helping medical  practices  become  more  efficient  and  save money by allowing them to out-source their insurance processing and medical billing functions. The Company currently provides  medical  billing  services  (“Medical  Billing”) to various health care providers within the United States. The Company is in the process of entering  into  another  new  line  of  business:  the research, development and marketing of its proprietary medical billing software (“AutoMed”).

The Company’s traditional core competency is Medical Billing. The Company conducts  the  Medical Billing line of business through its Delaware subsidiary, Healthcare Business Services Groups, Inc. With Medical Billing, the Company has a successful  track  record of assisting various health  care  providers to successfully enhance their billing function. The Company also continues to increase  relationships with  physicians and medical specialty practices around the  country to  provide  its Medical Billing services. The Company believes that  the  automated medical billing software business will provide higher margins to the Company’s  overall  business  operations.

COMPETITIVE  BUSINESS  CONDITIONS

MEDICAL BILLING

Due  to  today’s extremely competitive healthcare industry, many healthcare providers  are  outsourcing  their billing operations. Medical billing services exist to help healthcare providers better manage their medical practices. These services  relieve  medical  professionals  of tedious detail work, but rarely do they offer a means to substantially maximize the medical practice’s bottom line.

Medical  billing companies generally gather patient information and billing details  from  a  physician  or  clinic  and  submit  these details to insurance carriers for payment. A billing company may also submit statements to a patient for  payment  of  the  patient’s portion. The Company distinguishes itself from thousands  of  other  billing  agencies  in the industry as a customized billing agency and a “one-stop shopping” service for all medical practice administrative functions. The  Company  considers its medical billing service to be the key to its  clients  getting  paid  efficiently  and  quickly by private and government administered  insurance  companies.

The Company provides a customized medical billing service that can be fine tuned  to  any medical practice or specialty. The Company provides a wide range of  billing  services  including:

·

Delinquent  account  management

·

Surgery  center  setup  and  management

·

Assessment  of  practice  cash  flow

·

Practice  management

·

Health Maintenance Organization (HMO), Preferred Provider Organization

·

(PPO)  and  capitation  contract  management

·

Business  Auditing

The  medical  billing  business  is  labor  intensive; however, the Company believes that its clients collect more revenue than they otherwise would collect without  the Company’s services. Due to this benefit to its clients, Healthcare has  experienced  continued  growth since its inception in 1990. By outsourcing the  medical  billing  function, the Company believes that its clients have been able  to  maximize  their  return from insurance carriers, and to allocate their office  staff  capacity  to  more  crucial  tasks.

Electronic  submission  of  insurance  claims  provides  cost  savings  and decreases  in  payment  time  over  traditional  paper based submissions. These factors  have made electronic submission much more appealing to clients and have sparked  a  growing  demand. Potential  users  of electronic submission include family  practice,  internal  medicine,  surgeons,  psychologists, chiropractors, physical  therapists,  podiatrists,  specialists,  ambulance  services,  medical laboratories,  ambulatory  surgery  centers  and hospitals. In order to service this  growing  demand, the Company has developed AutoMed (discussed below) which it  has  installed,  and is currently beta testing, with few of its existing Medical  Billing  clients.

AUTOMED

The  Company  initially  designed  AutoMed  to  satisfy  its custom medical billing needs. The Company began implementing  AutoMed in the Company’s Medical Billing line of business in July 2003. The Company has been using AutoMed since October  2003  for  all new medical billing. The Company intends to use AutoMed for other aspects of medical office management as well, as discussed below. The Company is currently beta testing certain aspects of AutoMed at existing medical billing  clients  and developing certain other aspects of AutoMed.

DEPENDENCE  ON  ONE  OR  A  FEW  CUSTOMERS

The  Company  has  approximately 12 customers throughout the United States.

NEED  FOR  GOVERNMENTAL  APPROVAL  AND  THE  EFFECTS  OF  REGULATIONS

The  Company  offers  medical  business  services  which are subject to the compliance  requirements  of the Health Insurance Portability and Accountability Act  (“HIPPA”)  and  the  billing  guidelines  of  the  Health  Care  Financing Administration (“HCFA”). As a result, Medical Billing and AutoMed are subject to government  regulation  and  government approval.

RESEARCH  &  DEVELOPMENT  OVER  THE  PAST  TWO  YEARS

The  Company  has spent less than 10% of its time during the last two years on research and development. The Company has generated a predominate portion of its  business  through  word  of  mouth.

EMPLOYEES

The  Company  has  a  total  of  13  full-time employees, none of which are members  of  any union in connection with the Company’s operations. The Company may  hire  four  to  five  employees  in the next twelve months, if the need for additional  employees  arises.

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 headquartered in Upland, California. The Company has developed a proprietary medical billing software system named AutoMed™. The Company has installed, and is currently ready to market and install, AutoMed™ 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.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2006 COMPARED TO YEAR ENDED DECEMBER 31, 2005

Revenue for the year ended December 31, 2006 were $ 1,011,644 compared to $ 1,565,262 for the same period in 2005. The decrease in revenues was due to reduction in collections from the customers and hence decrease in commissions earned during the year ended December 31, 2006 as compared to same period in 2005. The Company expects to earn higher revenues in future since it has hired more marketing representatives. The revenues are recognized on accrual basis of accounting.

General & administrative (“G&A”) expense for the year ended December 31, 2006 was $ 1,430,130 compared to $ 1,758,137 for the same period in 2005. The decrease in G&A expenses in 2006 was due to decrease in costs incurred by the Company in marketing the company’s business as well as legal fees paid against settlement of various litigations.

Depreciation and amortization was $ 118,459 for the year ended December 31, 2006 as compared to $ 101,347 for the same period in 2005. The depreciation and amortization expense is consistent with the prior year since the assets are being depreciated straight line over the life.

Interest expense and financing costs for the year ended December 31, 2006 was $ 2,201,173 compared to $ 80,559 for the same period in 2005. The increase in interest expense and financing costs are due to $ 1,300,000 note that Company borrowed during the year.

Net loss was $ 2,997,584 (or basic and diluted net loss per share of $(0.05) for the year ended December 31, 2006 as compared to net loss of $ 1,236,297 (or basic and diluted net loss per share of $0.04) for the same period in 2005. Net loss for the year ended December 31, 2006 was higher as compared to the corresponding period in the last year since the Company incurred more expenses in marketing the business.

LIQUIDITY AND CAPITAL RESOURCES

The Company had a working capital deficiency of $ 5,144,299 as of December 31, 2006. The Company had total assets of $ 83,784 as of December 31, 2006, which consisted of $ 41,156 of property and equipment, $ 38,978 of intangible assets from the Company’s website technology costs and $3,650 of deposits.

The Company had total current liabilities of $ 5,144,299 as of December 31, 2006, consisting of accounts payable and accrued expenses of $ 1,327,796, litigation accrual of $ 325,000, line of credit of $96,418, note payable to third parties of $ 1,300,000, lease payable of $18,938, due to officer of $ 337,665 and $ 1,738,482 in derivative liability related to $ 1,300,000 note and 50,000,000 warrants associated with the note.

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 $22,412 and $74,006 from the credit lines as of December 31, 2006.

Net cash used in operating activities was $94,588 during the year ended December 31, 2006, as compared to net cash used in operating activities of $ 212,807 during the same period in 2005.

Net cash used in investing activity during the year ended December 31, 2006 was $7,290 as compared to net cash used in investing activities of $ 21,512 during the same period in 2005.

Net cash provided by financing activities was $ 201,245 during the year ended December 31, 2006, as compared to net cash provided by financing activities of $ 293,838 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.

On June 27, 2006, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (collectively, the “Investors”). Under the terms of the Securities Purchase Agreement, the Investors purchased an aggregate of (i) $2,000,000 in callable convertible secured notes (the “Notes”) and (ii) warrants to purchase 50,000,000 shares of our common stock (the “Warrants”).

Pursuant to the Securities Purchase Agreement, the Investors purchased the Notes and Warrants in three trenches as set forth below:

The Notes carry an interest rate of 6% and a maturity date of June 27, 2009. The notes are convertible into our common shares at the Applicable Percentage of the average of the lowest three (3) trading prices for our shares of common stock during the twenty (20) trading day period prior to conversion. The “Applicable Percentage” means 50%; provided, however, that the Applicable Percentage shall be increased to (i) 55% in the event that a Registration Statement is filed within thirty days of the closing and (ii) 60% in the event that the Registration Statement becomes effective within one hundred and twenty days from the Closing.

The Company has an option to prepay the Notes in the event that no event of default exists, there are a sufficient number of shares available for conversion of the Notes and the market price is at or below $.05 per share. In addition, in the event that the average daily price of the common stock, as reported by the reporting service, for each day of the month ending on any determination date is below $.05, the Company may prepay a portion of the outstanding principal amount of the Notes equal to 101% of the principal amount hereof divided by thirty-six (36) plus one month’s interest. Exercise of this option will stay all conversions for the following month. The full principal amount of the Notes is due upon default under the terms of Notes. In addition, the Company has granted the investors a security interest in substantially all of its assets and intellectual property as well as registration rights.

The Company simultaneously issued to the Investors seven year warrants to purchase 32,500,000 shares of common stock at an exercise price of $.07.

The Investors have contractually agreed to restrict their ability to convert the Notes and exercise the Warrants and receive shares of the Company’s common stock such that the number of shares of the Company’s common stock held by them and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of the Company’s common stock.

The Company has received the $ 1,300,000 through December 31, 2006.

The Company amortized the entire unamortized beneficial conversion feature amount of $1,103,741 as of December 31, 2006 due to the default on the note.

The Company prepaid lender attorney fees and broker commission of $ 180,000.  The Company amortized the entire amount of $180,000 as of December 31, 2006 due to the default on the note.

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 $3 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 a 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 (accrues if not paid). 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 SUCCESSFUL IN SELLING AUTOMED SOFTWARE

Currently the Company is in the process of marketing the AutoMed software through distributors. There is no revenue generated as of the date of this report and there’s no guarantee that the Company will be successful in selling AutoMed. The Company need additional capital to market the software.

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

The three major customers of the Company provided $ 708,369 or 73% of the revenues of the Company for the year ended December 31, 2006. If the Company were to lose any or all of these three 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.

ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

As of December 31, 2006 the Company has accumulated deficit amounting to $ 6,671,589, net loss amounting $ 2,997,584, working capital deficit amounting to $ 5,144,299 and net cash used in operations of $ 94,588. 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 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:

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:

(A) 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.

(B) Cash and Cash Equivalents

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

(C) Revenue Recognition

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  and recognized on a net basis.

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) Property and Equipment

Property and equipment is stated at cost.  Additions are capitalized and maintenance and repairs are charged to expense as incurred.  Gains and losses on dispositions of equipment are reflected in operations.  Depreciation is provided using the straight-line method over the estimated useful life of the assets from three to seven years.  Expenditures for maintenance and repairs are charged to expense as incurred.

(E) Software development Costs

The Company complied with Statement of Position 98-1 ("SOP 98-1") "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use", as accounting policy for internally developed computer software costs.  Under SOP 98-1, we capitalized software development costs incurred during the application development stage.

Subsequently, the Company decided to market the software AutoMed. Therefore the Company is following the guideline under SFAS 86. SFAS 86 specifies that costs incurred internally in creating a computer software product shall be charged to expense when incurred as research and development until technological feasibility has been established for the product.  Thereafter, all software production costs shall be capitalized and subsequently reported at the lower of unamortized cost or net realizable value.  

Capitalized costs is being amortized based on current and future revenue for the product (AutoMed) with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product.  

(F) 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.  

(G) 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 December 31, 2006, 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.

(H) Income Taxes

The Company accounts for income taxes under the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" ('Statement 109").  Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(I) 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 be 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.

(J) 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.

(K) 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.

(L) Reporting Segments

Statement of financial accounting standards No. 131, Disclosures about segments of an enterprise and related information (SFAS No. 131), which superseded 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.

(M) 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.  

(N) Reclassifications

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

(O) New Accounting Pronouncements

In February 2007 the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities--Including an amendment of FASB Statement No. 115." The statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. The company is analyzing the potential accounting treatment.

In September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)’ This Statement improves financial reporting by requiring an employer to recognize the overfunded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007.

However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:

a.

A brief description of the provisions of this Statement

b.

The date that adoption is required

c.

The date the employer plans to adopt the recognition provisions of this Statement, if earlier.

The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on financial statements.

In September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on financial statements.

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:

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.

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

The Company is The Company is currently plaintiff to two and defendant to two law suits. The Company filed claims for non payment of fees by former clients due to clients diverted funds billed by company and did not pay Billing fees.

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. HBSGI, et al. 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. This matter was dismissed by arbitrator for non payment of arbitrator’s fee.

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

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. Company argues that of this $275,000, $210,000 was already paid to Soloniuk since November 4, 2002, last date of payment were considered by arbitrator and therefore the judgment should be reduced accordingly. The Company can provide no assurances that it will be successful in this argument.

3. Company recently filed new legal actions against Solonuik for fraud, deception, and intentional non disclosure of money received from HBSGI collection to the arbitration hearing to gain advantage. Company also filed an application of injunction to prevent Solonuik to use HBSGI billing method. Hearing is set for May 10, 2007. Company is suing Solonuik for $750,000 plus cost of lawsuit.

4. 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., d/b/a/ Peacock Healthcare.

Kamran Ghadimi bought the Tariq judgment in April 28, 2006 and pursuing collection in California.  

This matter was settled on November 8, 2006 for $185,000. The Company paid $140,000 out of $185,000 and making payments monthly for $3000.00. As of filing this report company owes 15 months of payment equal to $45,000. Case was dismissed in 2007.

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.

Healthcare filed a collection action against Frank Zondlo, and Zondlo also filed across-complaint against Healthcare.  The matter is now in the discovery and law and motion stage.

ITEM 2. CHANGES IN SECURITIES

The Company increased its authorized capital to 750,000,000 shares from 50,000,000 shares of common stock $0.001 par value as of December 31, 2006.

During the year ended December 31, 2006, the Company issued 300 shares to consultants for services rendered. The Company recorded expense in the books based on the market value of the shares on the date of issuance of shares to the consultants.

The Company recorded $ 38,750 as officer compensation for 1,000,000 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 fair market rate.

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

* Filed Herein.

(b) Reports on Form 8-K

The Company filed no Reports on Form 8-K during the year ended December 31, 2006.

ITEM 7.

FINANCIAL STATEMENTS

HEALTHCARE BUSINESS SERVICES GROUPS INC.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2005