UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, DC  20549

                           Form 10-KSB



(Mark one)

[X]  Annual Report Under Section 13 or 15(d) of The Securities Exchange
     Act of 1934

     For the fiscal year ended May 31, 2005
                               ------------

[ ]  Transition Report Under Section 13 or 15(d) of The Securities
     Exchange Act of 1934

     For the transition period from ______________ to _____________



                  Commission File Number: 000-17058

                  Epicus Communications Group, Inc.
  -----------------------------------------------------------------
  (Exact name of small business issuer as specified in its charter)

          Florida                                 59-2564162
  ------------------------                ------------------------
  (State of incorporation)                (IRS Employer ID Number)

         1750 Osceola Dr., West Palm Beach, Florida 33409
         ------------------------------------------------
             (Address of principal executive offices)

                          (561) 688-0440
                   ---------------------------
                   (Issuer's telephone number)




Securities registered under Section 12 (b) of the Exchange Act - None

Securities registered under Section 12(g) of the Exchange Act: -
Common Stock - $0.001 par value



Check whether the issuer has (1) filed all reports required to be files
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period the Company 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 contained in this form, and no disclosure will be
contained, to the best of Company'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 fiscal year ended May 31, 2005 were
$18,775,796.

The aggregate market value of voting common equity held by non-affiliates
as of August 30, 2005 was approximately $661,400.00

As of August 30, 2005, there were 661,404,214 shares of Common Stock
issued and outstanding.

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


<PAGE>

                Epicus Communications Group, Inc.

                        Index to Contents

                                                            Page Number
                                                            -----------

Part I

Item 1    Description of Business                                3
Item 2    Description of Property                                7
Item 3    Legal Proceedings                                      7
Item 4    Submission of Matters to a Vote of Security
            Holders                                              8

Part II

Item 5    Market for Company's Common Stock and Related
            Stockholders Matters                                 8
Item 6    Management's Discussion and Analysis or Plan
            of Operation                                         9
Item 7    Financial Statements                                   15
Item 8    Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosures              15
Item 8A   Controls and Procedures                                15

Part III

Item 9    Directors, Executive Officers, Promoters and
            Control Persons; Compliance with Section 16(a)
            of the Exchange Act                                  16
Item 10   Executive Compensation                                 16
Item 11   Security Ownership of Certain Beneficial Owners
            and Management and Related Stockholder Matters       17
Item 12   Certain Relationships and Related Transactions         18
Item 13   Exhibits and Reports on 8-K                            18
Item 14   Principal Accountant Fees and Services                 19

Signatures                                                       20

Financial Statements                                         F-1 - F-27


                                                                         2
<PAGE>

           Caution Regarding Forward-Looking Information
           ---------------------------------------------

Certain statements contained in this annual filing, including, without
limitation, statements containing the words "believes", "anticipates",
"expects" and words of similar import, constitute forward-looking
statements. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.

Such factors include, among others, the following: international,
national and local general economic and market conditions: demographic
changes; the ability of the Company to sustain, manage or forecast its
growth; the ability of the Company to successfully make and integrate
acquisitions; raw material costs and availability; new product
development and introduction; existing government regulations and changes
in, or the failure to comply with, government regulations; adverse
publicity; competition; the loss of significant customers or suppliers;
fluctuations and difficulty in forecasting operating results; changes in
business strategy or development plans; business  disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.

Given these uncertainties, readers of this Form 10-KSB and investors are
cautioned not to place undue reliance on such forward-looking statements.
The Company disclaims any obligation to update any such factors or to
publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.


                              PART I

Item 1 - Description of Business

Epicus Communications Group, Inc. (Epicus Group), is a holding company,
with primary interests in the telecommunications industry.  As of May 31,
2005, the Company consisted of Epicus Communications Group, Inc. and
three wholly owned subsidiaries, EPICUS, Inc., Moye & Associates (a/k/a
TheBest.Net), and Mic-Mac Investments, Inc.  Only EPICUS is active and
the other two entities have been inactive for at least the past two (2)
years.  For Fiscal 2005, 2004 and  2003,  our sole source of revenue was
from our EPICUS, Inc. subsidiary.  Further liquidity was obtained through
the sale of Epicus Group common stock.

Historical Development
----------------------

We were incorporated on July 22 1985, pursuant to the laws of the State
of Florida under the name Hydrobac, Inc. On July 7, 1986, the company's
name was changed to ProBac, Inc. and on October 5, 1994, its name was
changed to Trident Environmental Systems, Inc.  During those periods our
primary business was in various types of products and systems for use in
the environmental clean- up industry.

On October 2, 1996 our name was changed to Phoenix International
Industries, Inc. and our common stock was reverse split 15 to 1.  Our
shareholders approved Amendments to the Articles of Incorporation,
changing the authorized capital to 20,000,000 shares of common stock, par
value $.001 per share, and up to 5,000 shares of Preferred Stock for use
as needed.  From January 1996 through May 31, 1997, we sought
acquisitions as we wound down and closed our original environmental
clean-up business.  We have not been in the environmental clean-up
business since May 31, 1997.

On June 13, 1998, we acquired 100% of the stock of Intuitive Technology
Consultants, Inc. ("ITC") of Atlanta, Georgia. ITC was engaged in the
business of computer system design and computer related (MIS) employee
placement.  By  June 1999, we had sold Intuitive Technology Consultants
Inc to a group headed by the current management of ITC. We recognized a
total gain of $479,583 on the sale of this business.

On July 21, 1997, we acquired 100% of the stock of HDX 9000, Inc.
("HDX"), a company specializing in compliance methodology for the Y2K
problem and for the various types of "ISO" compliance certification.
Since the demand for HDX's primary product, a compliance methodology to
solve the Year 2000 date change problem, has become understandably
non-existent, and due to HDX's inability to establish a new marketable
product in a timely fashion, on March 20, 2000, it was the decision of
our Board of Directors, in concert with the previous shareholder of 100%
of HDX's stock, to rescind the agreement by which HDX was acquired by
Phoenix.  This was done and the stock of each company which was
originally exchanged to effect the acquisition was returned to the
original holder or issuer.  We recognized a total loss of $99,140 in
connection with this transaction.

                                                                         3
<PAGE>

On April 9, 1998, we acquired 100% of the outstanding stock of Mic Mac
Investments, Inc., a long distance telephone service "reseller"
specializing in the hospitality industry.  Mic-Mac ceased to operate by
the end of the quarter ended February 28, 1999 and had no remaining
assets or liabilities as of May 31, 1999.  We abandoned and wrote off any
remaining investment in Mic Mac Investments, Inc. as of May 31, 1999.
We recognized a gain of $13,417 in connection with the write off this
investment.  Although it has ceased to operate, we have maintained the
corporate integrity of this entity in the event our management identifies
a suitable acquisition candidate that could be placed in this subsidiary.

Based on an agreement entered into on December 14, 1998, we acquired 100%
of the stock of Cambridge Gas Transport Corporation (CGTC), a Cayman
Islands Corporation, in the business of owning and operating specialized
chemical/fuel tanker transport ships.  Due to various disagreements, an
agreement to rescind the acquisition was executed by the parties.  We did
not recognize any gain or loss on this transaction.  We filed litigation
to recoup our payments to CGTC, resulting in an out of court settlement
on December 15, 2000.

During Fiscal 2000, we acquired 100.0% of the issued and outstanding
stock of Telephone Company of Central Florida, Inc. ("TCCF").  TCCF is
a "competitive local exchange carrier" (CLEC) telephone company and a
reseller of other telecommunications services.  TCCF was at that time
operating under the protection of "Chapter 11"of the United States
Bankruptcy Code.  The effective date of the our acquisition was ten days
after the Order of Confirmation was issued by the Bankruptcy Court.  The
Order of Confirmation was issued on June 9, 1999 and TCCF began operating
as a reorganized debtor on that date.  On January 17, 2001 the name of
TCCF was changed to EPICUS, Inc.

On July 28, 2000, we acquired 100% of the stock of Moye & Associates,
Inc. (Moye).  Moye's primary business was that of an Internet Service
Provider (ISP) known as TheBest.Net.  This move was seen by management,
at that time, to be synergetic with the operations of TCCF.  On July 19,
2001, we signed a Letter of Intent to sell the active clients of Moye.
The buyer paid $133.33 for each existing"dial-up" and "domain hosting
client".  It was estimated that there were between approximately 1,500
and 2,700 active fee-for-service clients on the date of signing the
Letter of Intent.  The buyer deposited a down payment of $150,000 with
the Company and an additional $50,000 into an interest bearing account
at the date of signing.   As of May 31, 2002, all amounts due under this
sale of assets contract have been satisfied.  During our year ended May
31, 2003, we issued approximately 500,000 shares of restricted,
unregistered common stock to Tully Moye in complete settlement of all
remaining obligations related to the acquisition and disposition of Moye.

Business of Subsidiaries
------------------------

EPICUS, Inc.
------------

Our only active subsidiary, EPICUS, Inc., is a multi-service
telecommunications company with approximately 19,000 active accounts
incorporating approximately 21,765 lines, as of August 1, 2005, in both
the residential and business markets.  We focus on developing integrated
telephone service in the Competitive Local Exchange Carrier area of the
telecommunications industry.  Like many other emerging Competitive Local
Exchange Carriers, our entry in this industry was facilitated by the
passing of the Telecommunications Act of 1996 which allows Competitive
Local Exchange Carriers to lease various elements of the networks of the
Incumbent Local Exchange Carriers that are necessary to provide local
telephone service in a cost-effective manner.  We offer small businesses
and residential consumers an integrated set of telecommunications
products and services, including local exchange, local access, domestic
and international long distance telephone, data and dial up access to the
Internet.  We are certified to offer long distance and internet services
in the 48 contiguous states.

Our current service market is focused on the 9 States serviced by
BellSouth Corp..  We have provided long distance services to customers
in 40 of the Continental 48 states in prior periods and have elected to
withdraw from these markets as these markets have proven themselves to
be unprofitable.

Further, changes in Telecommunications Law have caused the profitability
of a CLEC to provide telecommunications services to seriously
deteriorate.  Our future survival is predicated on being able to develop
products and pricing structures to be profitable and competitive in
today's telecommunication marketplace.

We have built our company by primarily focusing on being in the vanguard
of new telecommunication products and services such as our "Freedom
Rings[TM]  and AccessNOW[TM]  voice and data services brands, and creating
software systems and processes to deliver telecommunication services over
leased networks, instead of concentrating on buying switches and hardware
to build a very expensive network, which could be severely under-utilized
for a potentially long period of time.  In our opinion, owned network
development has been a major expense which has contributed to the demise
of many emerging telephone companies.  Instead, we have developed a
scalable operating platform that can provision a local phone line, read
usage records, rate phone calls for billing purposes, and prepare monthly
invoices to customers.  Our system has allowed for the billing of a
customer's telecommunication services on one itemized bill.


                                                                         4
<PAGE>

Because of the expense and complexity of the telecommunications business,
we have focused on improving our performance through automation.  We
believe one of the greatest accomplishments in building our business over
the past three years was the development of our own operational support
systems ("OSS").  It is these systems that allow us to rapidly execute
our customers orders, for example: orders for new service and repair
orders, plus real time information on billing and collections.  It is
more economic, more efficient and more accurate than being totally
dependent upon outside sources and clerical performance.

Moye & Associates, Inc. (a/k/a TheBest.Net)
-------------------------------------------

Moye's primary business was that of an Internet Service Provider (ISP)
known as TheBest.Net.  This acquisition was seen by management, at that
time, to be synergetic with the operations of TCCF.  Due to
capitalization, liquidity and other issues with the former owners of
Moye, who remained as Moye's senior management, on July 19, 2001, we
signed a Letter of Intent to sell the active clients of Moye.  The buyer
paid $133.33 for each existing"dial-up" and "domain hosting client".  As
of May 31, 2002, all amounts due under this sale of assets contract had
been satisfied.  During our year ended May 31, 2003, we issued
approximately 500,000 shares of restricted, unregistered common stock to
Tully Moye in complete settlement of all remaining obligations related
to the acquisition and disposition of Moye.

Mic-Mac Investments, Inc. (Mic-Mac)
-----------------------------------

Mic-Mac Investments, Inc. and Hospitality Telecom (together Hospitality)
were acquired on April 1, 1998. For the period from the date of
acquisition through May 31, 1998, Hospitality had aggregate revenues of
approximately $15,600 and expenses of $30,400.  Hospitality ceased to
operate late in the third quarter of fiscal 1999, as their management
claimed that they would be unable to meet their business plan projections
or continue without Epicus Group acquiring a long distance telephone
company.  Hospitality had liquidated all assets or liabilities as of May
31, 1999, we wrote off our remaining investment in them in that Fiscal
year.  Although Hospitality has ceased to operate, Mic- Mac, Inc.,
remains the property of the Company until a decision is made as to its
future.

Petition for Relief Under Chapter 11 of the U. S. Bankruptcy Code
-----------------------------------------------------------------

On October 25, 2004 (Petition Date), Epicus Communications Group, Inc.
(Epicus Communications for purposes of this section) and its subsidiary,
Epicus, Inc., (Epicus for purposes of this section) filed voluntary
petitions in the United States Bankruptcy Court for the Southern District
of Florida (Bankruptcy Court) seeking reorganization relief under the
provisions of Chapter 11 of Title 11 of the United States Code
(Bankruptcy Code) (Case Nos. 04-34915, 04-34916, (collectively, Cases).

Under Chapter 11, certain claims against the Debtors in existence prior
to the filing of the petitions for relief under Federal Bankruptcy Laws
are stayed while the Debtors continue to operate their businesses as
Debtors-In-Possession pursuant to Sections 1107 and 1108 of the Bankruptcy
Code and the orders of the Bankruptcy Court.  These claims are reflected
in the accompanying May 31, 2005 and 2004 balance sheet as "Liabilities
Subject to Compromise."  Additional claims (liabilities subject to
compromise) may arise subsequent to the Petition Date resulting from the
rejection of executory contracts, including leases, and from the
determination of the court (or agreed to by parties in interest) of
allowed claims for contingencies and other disputed amounts.  Claims
secured against the Debtors' assets (secured claims) are also stayed,
although the holders of such claims have the right to move the Bankruptcy
Court for relief from the stay.  Secured claims, if any, are secured
primarily by liens on the Debtors' property, plant and equipment.

As a result of the bankruptcy filing, the Company is in default under the
terms of the Callable Secured Convertible Notes (the Notes) it executed
on May 28, 2004, July 22, 2004 and September 27, 2004 in connection with
the private placement of an aggregate of $3,300,000 in 8% secured
convertible notes which begin to mature on May 28, 2006.  As a result of
such default, the principal amount plus accrued and unpaid interest,
including any liquidated damages, if any, on the Notes may be determined
to be due and payable.  As a result of the bankruptcy filing, the ability
of creditors to seek remedies to enforce their rights under all such
agreements are stayed and creditor rights of enforcement are subject to
the applicable provisions of the Bankruptcy Code.    Additionally,
despite the uncertainty of the ultimate settlement and/or outcome of the
Bankruptcy action, the Debtors have continued the accrual of the
applicable contractual interest charges on all outstanding notes and/or
debenture agreements for all periods through May 31, 2005.

The Debtors have received approval from the Bankruptcy Court to pay or
otherwise honor certain of its pre-petition obligations, including
employee wages.

Plan of Reorganization
----------------------

The Company has submitted a Plan of Reorganization (Plan) for
consideration by the Bankruptcy Court and the affected creditors.

                                                                         5
<PAGE>

Summary of the Plan
-------------------

(1)  Treatment of Claims and Interests
     ---------------------------------

The Plan classifies claims and interest into thirteen (13) classes as
follows:

  A. CLASS 1: is the Bell South secured claim in the amount of
     $1,929,396.96, which is secured by a lien on the assets of Epicus.
  B. CLASS 2: is compromised of all secured claims other than the
     BellSouth Secured Claim, the NIR Group Debenture Claim and the IRS
     Secured Claim.
  C. CLASS 3: is the Debenture Claim of the NIR Group secured by a lien
     upon the NIR Group Collateral.  The NIR Group is the company which
     is the common ownership and management group associated with the
     hedge funds that comprise the AJW Group.
  D. CLASS 4: are the priority claims against Epicus Communications.
  E. CLASS 5: are the priority claims against Epicus.
  F. CLASS 6:are the Convenience Claims against Epicus Communications.
  G. CLASS 7: are the Convenience Claims against Epicus.
  H. CLASS 8:are the Claims of General Unsecured Creditors against Epicus
     Communications.
  I. CLASS 9: are the General Unsecured Creditors against Epicus.
  J. CLASS 10: are the Insider Subordinated Debt Claims of Gerard
     Haryman, Thomas Donaldson and Aptek.
  K. CLASS 11: are the Equity Interest in Epicus Communications,
     exclusive of the equity interests of the Haryman Parties.
  L. CLASS 13: is the Secured Claim of the IRS.

The Plan calls for the acquisition of the assets and business operations
of Epicus by Epicus Communications.  The payment of $100,000.00 for the
acquisition will be made to a Plan trustee and distributed pro rata to
the holders of priority claims in the Epicus case.  The BellSouth
agreement will be assumed and assigned to Epicus Communications and the
pre-petition default will be cured.  Holders of unsecured claims will
receive a pro rata distribution from a $175,000.00 contribution made by
Gerard Haryman to the plan trust in exchange for releases for himself,
Thomas Donaldson, Timothy Palmer, and Aptek, Inc. .  Unsecured creditors
will also receive a $25,000.00 payment from the NIR Group in exchange for
a release, 7.5% of the capital stock of Reorganized Epicus Communications
and the proceeds of Avoidance Actions, through a plan trust. Equity
interests in Epicus will be extinguished.

Gerald Haryman will also contribute $25,000.00 (on behalf of himself and
all holders of equity interests in Epicus Communications) to the
reorganization of Epicus Communications so that holders of equity in
Epicus Communications will retain their interest, subject to the dilution
provided for in the Plan.  The $25,000.00 contribution by Mr. Haryman
will be utilized to make a pro rata distribution to the holders of Epicus
Communications' priority claims and to the extent funds remain, they will
be distributed pro rata to the holders of Epicus Communications' general
unsecured claims.  The NIR Group debentures will be reinstated and will
retain or be granted a security interest in the assets it claims as its
collateral.

(2)  Classification of Claims and Equity Interests
     ---------------------------------------------

Claims, other than Administrative Expense Claims, are classified for all
purposes, including voting, confirmation, and distribution pursuant to
the Plan, as follows:

<TABLE>
<CAPTION>

         Class                Designation                  Impairment      Entitled to Vote
       -------   --------------------------------------    ----------   ---------------------
<S>    <C>       <C>                                       <C>          <C>
       Class 1   BellSouth Secured Claim                    Impaired          Yes
       Class 2   Other Secured Claims                       Impaired          Yes
       Class 3   NIR Group Debenture Claims                 Impaired          Yes
       Class 4   Priority Claims -Epicus Communications     Impaired          Yes
       Class 5   Priority Claims - Epicus                   Impaired          Yes
       Class 6   Convenience Claims
                   Epicus Communications                   Unimpaired   No (deemed to accept)
       Class 7   Convenience Claims - Epicus               Unimpaired   No (deemed to accept)
       Class 8   General Unsecured Claims
                   Epicus Communications                    Impaired          Yes
      Class 9    General Unsecured Claims - Epicus          Impaired          Yes
      Class 10   Insider Subordinated Debt Claims           Impaired          Yes
      Class 11   Epicus Communications Equity Interests     Impaired          Yes
      Class 12   Epicus Equity Interests                    Impaired    No (deemed to reject)
      Class 13   IRS Secured Claim                          Impaired          Yes
</TABLE>

                                                                         6
<PAGE>

(3)  Claimants and Impaired Interest Holders
     ---------------------------------------

Claimants and Interest Holders entitled to vote under the Plan must
affirmatively act in order for the Plan to be confirmed by the Court.
According to the Debtors' Joint Plan, Classes 1, 2, 3, 4, 5, 8, 9, 10,
11, 12 and 13 are "impaired" classes within the meaning of Section 1124
of the Bankruptcy Code.  These classes, accordingly, must vote to accept
the Plan in order for the Plan to be confirmed without a cram down.  A
Claimant who fails to vote to either accept or reject the Plan will not
be included in the calculation regarding acceptance or rejection of the
Plan.  A ballot to be completed by the holders of Claims and/or Interests
is included herewith.  Instructions for completing and returning the
ballots are set forth thereon and should be reviewed at length.  The Plan
will be confirmed by the Bankruptcy Court and made binding upon all
Claimants and Interest holders if (a) with respect to impaired Classes
of Claimants, the Plan is accepted by holders of two-thirds (2/3) in
amount and more than one-half (1/2) in number of Claims in each such class
voting upon the Plan and (b) with respect to classes of Interest Holders,
if the Plan is accepted by the holders of at least two-thirds (2/3) in
amount of the allowed interests of such class held by holders of such
interests.  In the event the requisite acceptances are not obtained, the
Bankruptcy Court may, nevertheless, confirm the Plan if it finds that the
Plan accords fair and equitable treatment to any class rejecting it.
Your attention is directed to Section 1129 of the Bankruptcy Code for
details regarding the circumstances of such "cram down" provisions.


Item 2 - Description of Property

Our principal executive offices are located at 1750 Osceola Drive, West
Palm Beach, Florida 33409 and our telephone number is (561) 688-0440.
This space is approximately 1,500 square feet including three offices and
a conference room. This lease was renegotiated in June 2005 and provides
for annual payments of approximately $18,000 (approximately $1,500.00 per
month).  We are responsible for all utilities and other direct operating
expenses.  The property is owned by a corporation owned by Gerard
Haryman, our President and Chief Executive Officer.  We occupy the
property on a month to month basis.

The Company's operating subsidiary, EPICUS, entered into sublease
agreement for office space in Lake Mary, Florida.  The lease expired
September 24, 2004 and required monthly rental payments of approximately
$11,500 per month for the first 12 months of the sublease term and
$11,845 for the remainder of the term.  This obligation expired with no
further obligation on the part of Epicus.

EPICUS executed a long-term operating lease agreement for office space
in Lake Mary, Florida to house its operations and administrative
functions.  The lease commenced on September 20, 2004 and expires on
March 19, 2010.  The lease requires initial minimum monthly payments of
approximately $20,800 per month, plus the applicable state sales taxes.
The monthly rental rate increases by 3.0% in each successive twelve-month
period.    Additionally, the Company is responsible for it's proportional
share of increases in "operating expenses" (as defined) over the base
calendar year as defined in the Lease Agreement.

Future non-cancellable minimum lease payments due under this operating
lease agreement are as follows:

<TABLE>
<CAPTION>
                                                Year ended
                                                  May 31,        Amount
                                                ----------     ----------
<S>                                             <C>            <C>
                                                   2006        $  255,249
                                                   2007           262,906
                                                   2008           270,793
                                                   2009           278,917
                                                   2010           239,053
                                                               ----------
                                                 Total         $1,306,918
                                                               ==========
</TABLE>

Item 3 - Legal Proceedings

EPICUS has been involved in a dispute with one of its former
telecommunication service providers, Sprint Florida, regarding a default
in payment for services.  On August 23, 2000, Sprint filed suit in the
Circuit Court of the Ninth Judicial Circuit in and for Orange County
Florida.  The Company believed that the accusation was incorrect, however
after obtaining advice from legal counsel, we decided not to litigate the
matter and on December 21, 2000, the carrier was awarded by that court,
a default judgment against EPICUS in the amount of $321,587.52.  In
accordance with a Judgment Payment Agreement dated February 15, 2001,
Epicus agreed to pay Sprint as follows: Principal payments of $10,000


                                                                         7
<PAGE>

each will be due commencing March 15, 2001 through September 15, 2002 (18
months). The final balloon payment of $142,000 was payable on October 15,
2002.  While the scheduled payment(s) have not been demanded by Sprint,
as of the date of this filing, Management of the Company intends to enter
negotiations to renew and/or restructure the payment agreement in order
to mitigate any potentially negative effect on the Company's cash flow
while satisfying this obligation.  At the present time, the ultimate
resolution of this matter is a component of the Company's filing for
protection under Chapter 11 of the U. S. Bankruptcy Code.

A suit has been filed against Epicus in the Supreme Court of British
Columbia in Vancouver, Canada by EXL Information Corporation, a Canadian
corporation, in the amount of $184,761 for alleged breach of contract
regarding a licensing fee for the use of their billing software.  Epicus
used the software for a short period of time and found that, contrary to
the vendor's representations, it did not meet our specific needs and
therefore stopped payment.  EXL Information Corporation is seeking
damages for the loss of revenue that would have been earned over the life
of the agreement.  The outcome of this litigation is not determinable at
this time.  Management intends to aggressively defend this action to
conclusion and, at the present time, the ultimate resolution of this
matter is a component of the Company's filing for protection under
Chapter 11 of the U. S. Bankruptcy Code.

In June 2002, AT&T Corporation filed a lawsuit against Epicus Group in
the amount of $480,796 alleging non-payment of charges.  Epicus Group has
consistently denied responsibility for the charges and negotiations have
been ongoing in an attempt to resolve this dispute.  The matter has gone
to mediation and a verbal agreement for a settlement in the amount of
$120,000 has been reached.  At the present time, the ultimate resolution
of this matter is a component of the Company's filing for protection
under Chapter 11 of the U. S. Bankruptcy Code.

During the quarter ended May 31, 2005, and subsequent thereto, there has
been no significant change in any of the above listed litigation, except
as noted.

On March 11, 2004, in the U.S. Bankruptcy Court, Southern District of
Florida, Judge Arthur Briskin ruled in favor of the Internal Revenue
Service (IRS) allowing the IRS to amend their claim of past due excise
taxes to a total of $2,849,469.98.  This motion was made by the IRS in
October of 1997 during the bankruptcy hearings of Epicus, Inc.'s
predecessor, The Telephone Company of Central Florida (TCCF).  Epicus
Communications Group, Inc.'s original Plan of Reorganization was approved
and accepted by Judge Briskin on July 9, 1999.  In the approved Plan of
Reorganization, Epicus Communications Group agreed to pay a maximum of
$300,000 in past due excise taxes.  Management is of the opinion that
there would have never been an agreement to a debt of this size in the
Plan of Reorganization for TCCF.  Management is examining is legal
options in this matter and a course of action has yet to be decided.  Due
to the unusual nature of this event and the uncertainty of the ultimate
outcome related hereto, Management has not accrued any provision for this
contingency in the accompanying financial statements.  At the present
time, the ultimate resolution of this matter is a component of the
Company's filing for protection under Chapter 11 of the U. S. Bankruptcy
Code.


Item 4 - Submission of Matters to a Vote of Security Holders

We have not submitted any matters to a vote of the Company's security
holders during the year ended May 31,  2005.

We held an Annual Meeting of Shareholders on February 3, 2004, at our
corporate offices in West Palm Beach, Florida.  The following items were
passed by a majority vote of the shareholders:

 * The re-election of the current Board of Directors, Mr. Gerard Haryman,
   Mr. Thomas Donaldson, and Mr. Timothy Palmer;

 * The ratification of S. W. Hatfield, CPA of Dallas, Texas as our
   auditors for both Fiscal Years ended May 31, 2004 and May 31, 2003,
   respectively;

 * The increase of our authorized common stock to be issued from
   200,000,000 shares to 800,000,000 shares, and

 * The approval of the previous actions taken by the Board of Directors
   on behalf of the Corporation.


                             PART II

Item 5 - Market for Common Equity and Related Stockholder Matters

Our common stock is quoted on the NASDAQ OTC Bulletin Board under the
symbol "EPUCQ.OB".  During the past three years through August 1, 1005,
there has been no established trading market for the shares of our common

                                                                         8
<PAGE>

stock over an exchange, however the stock has been trading
over-the-counter in small quantities.  There can be no assurance that
quotations will not fluctuate greatly in the future in the event trading
activity increases or decreases.  The information contained in the
following table was obtained from the NASD and from various
broker-dealers and shows the range of representative bid prices for our
common stock for the periods indicated. The prices represent quotations
between dealers and do not include retail mark, mark-down or commission
and do not necessarily represent actual transactions:

<TABLE>
<CAPTION>
                                                 BID
                                         ---------------------
Quarter ending                           High             Low
--------------                           ----             ---
<S>                                      <C>              <C>
 2002
  March 31                               .05              .04
  June 30                                .05              .03
  September 30                           .06              .01
  December 31                            .05              .01

 2003
  March 31                               .03              .01
  June 30                                .13              .02
  September 30                           .12              .05
  December 31                            .07              .03

 2004
  March 31                               .05              .02
  June 30                                .03              .01
  September 30                           .013             .0012
  December 31                            .0034            .0001

 2005
  March 31                               .0018            .0004
  June 30                                .0035            .0005
</TABLE>

Dividends
---------

The Company has not paid any dividends during the past five fiscal years
on any class of its issued and outstanding securities.

The payment by the Company of dividends, if any, in the future rests
within the discretion of its Board of Directors and will depend, among
other tier things, upon the Company's earnings, its capital requirements
and its financial  condition, as well;  as other relevant factors. By
reason of the Company's present financial condition, the Company does not
contemplate or anticipate paying any dividends on, the Common Stock in
the foreseeable future.


Item 6 - Management's Discussion and Analysis or Plan of Operation

Results of Operations
---------------------

Year ended May 31, 2005 compared to May 31, 2004
------------------------------------------------

On October 25, 2004 (Petition Date), Epicus Communications Group, Inc.
(Epicus Communications for purposes of this section) and its subsidiary,
Epicus, Inc., (Epicus for purposes of this section) filed voluntary
petitions in the United States Bankruptcy Court for the Southern District
of Florida (Bankruptcy Court) seeking reorganization relief under the
provisions of Chapter 11 of Title 11 of the United States Code
(Bankruptcy Code) (Case Nos. 04-34915, 04-34916, (collectively, Cases).

Under Chapter 11, certain claims against the Debtors in existence prior
to the filing of the petitions for relief under Federal Bankruptcy Laws
are stayed while the Debtors continue to operate their businesses as
Debtors-In-Possession pursuant to Sections 1107 and 1108 of the Bankruptcy
Code and the orders of the Bankruptcy Court.  These claims are reflected
in the accompanying May 31, 2005 balance sheet as "Liabilities Subject to
Compromise."  Additional claims (liabilities subject to compromise) may
arise subsequent to the Petition Date resulting from the rejection of
executory contracts, including leases, and from the determination of the
court (or agreed to by parties in interest) of allowed claims for
contingencies and other disputed amounts.  Claims secured against the
Debtors' assets (secured claims) are also stayed, although the holders

                                                                         9
<PAGE>

of such claims have the right to move the Bankruptcy Court for relief
from the stay.  Secured claims, if any, are secured primarily by liens
on the Debtors' property, plant and equipment.

As a result of the bankruptcy filing, the Company is in default under the
terms of the Callable Secured Convertible Notes (the Notes) it executed
on May 28, 2004, July 22, 2004 and September 27, 2004 in connection with
the private placement of an aggregate of $3,300,000 in 8% secured
convertible notes which begin to mature on May 28, 2006.  As a result of
such default, the principal amount plus accrued and unpaid interest,
including any liquidated damages, if any, on the Notes may be determined
to be due and payable.  As a result of the bankruptcy filing, the ability
of creditors to seek remedies to enforce their rights under all such
agreements are stayed and creditor rights of enforcement are subject to
the applicable provisions of the Bankruptcy Code.    Additionally,
despite the uncertainty of the ultimate settlement and/or outcome of the
Bankruptcy action, the Debtors have continued the accrual of the
applicable contractual interest charges on all outstanding notes and/or
debenture agreements for all periods through May 31, 2005.

For the year ended May 31, 2005, as a result of management's actions
related to the October 2004 filing for relief under the U. S. Bankruptcy
Code, total revenues declined by approximately $6,400,000 from Fiscal
2004 revenues of approximately $25,191,000 to approximately $18,776,000
for Fiscal 2005.  This decline was directly related to an evaluation of
the various states where the Company was providing service, the direct
cost of service to that State, the number of customers in a particular
State and various problems in dealing with telecommunications backbone
providers outside BellSouth Corp. and Global Crossing, the Company's two
primary backbone providers.  Management believes that it has identified
the service areas which afford the best potential profitability and
customer quality.

Corresponding to the reduction in revenues, the Company experienced costs
of sales of approximately $15,289,000 in Fiscal 2005 as compared to
approximately $17,509,000 for Fiscal 2004.  The Company has experienced
deteriorations in gross margins as a result of various statutory changes
and U. S. Congressional legislation allowing the primary
telecommunication carriers, which provide the Company's backbone service,
to raise rates and diminish pricing margins on CLEC carriers, such as the
Company.

As a result of the bankruptcy action, the Company disbanded it's in-house
marketing operations and experienced a cost savings of approximately
$610,000 as selling and marketing expenses decreased from approximately
$1,958,000 for Fiscal 2004 as compared to approximately $1,348,000 for
Fiscal 2005.  The Company is also experiencing a negative impact from
this action in replacing customers lost through normal attrition in the
telecommunications industry.

As a result of the bankruptcy action, management adopted the accounting
policy of recording a net accounts receivable balance equal to the actual
cash collected during the 30 day period subsequent to any reporting
period.  Any differential between the Company's actual accounts
receivable generated through the Company's revenue billing cycles and the
actual subsequent 30-day cash collections is recorded as bad debt expense
in the reporting period.  Accordingly, in revising the estimate of
collectable accounts receivable during Fiscal 2005, management recognized
an increase in bad debt expense of approximately $1,938,000 during Fiscal
2005.  The Company recognized bad debt expenses of approximately
$5,139,000 for Fiscal 2005 and approximately $3,202,000 for Fiscal 2004.

General and administrative expenses declined by approximately $930,000
from approximately $4,983,000 in Fiscal 2004 to approximately $4,055,000
in Fiscal 2005.  The elimination of personnel and the related support
costs as a result of the bankruptcy action was the primary source of
these cost savings.  Management is of the opinion that the cost levels
experienced during the 4th quarter of Fiscal 2005 should be reflective of
future periods.  However, due to the uncertainty of the bankruptcy
action, the need for adding personnel and other unpredictable factors,
the actual cost levels in future periods may experience significant
fluctuations.

During Fiscal 2005, the Company, as a result of the bankruptcy action,
was restricted in the avenues available to utilize it's common stock as
a source of payment on outstanding debt and debentures.  In Fiscal 2005,
the Company recognized interest expense on debt and debentures payable
of approximately $414,000 as compared to approximately $325,000 for
Fiscal 2004.  During Fiscal 2005, the Company issued approximately
403,590,000 shares of common stock during the period from June 1, 2004
through October 25, 2004, valued at approximately $1,400,000 in payment
of outstanding principal on debt and debentures payable.  As these shares
were issued at contractually agreed-upon values which were below the
closing stock price on the date of each redemption transaction, the
Company recognized compensation expense for the difference between the
contractually agreed redemption price and the "fair value" of the
Company's securities aggregating approximately $742,000 in Fiscal 2005
as compared to approximately $358,000 in Fiscal 2004 for comparable
transactions.

As a result of the bankruptcy action, management is evaluating all
possible areas of personnel and expenditure savings, including the
utilization of third-party service providers for customer service,
billing, cash management and carrier billing review.  The ultimate
impact, if any, of these items being considered is unknown at this time;
however, management is of the opinion that only actions with a positive

                                                                         10
<PAGE>

impact on the Company's operations and profitability will be undertaken.

Year ended May 31, 2004 compared to May 31, 2003
------------------------------------------------

For the year ending May 31, 2003, the Company reported revenues of
approximately $10,413,000, with a gross profit of approximately
$4,370,000 with operating expenses of approximately $5,883,000 and an
operating loss of approximately $(1,513,000) versus the year ending May
31, 2004 with revenues of approximately $25,191,000 and a gross profit
of approximately $7,681,000 with operating expenses of approximately
$10,617,000 and an operating loss of approximately $(2,956,000).  These
revenues were solely derived from telecommunication service sales
generated by Epicus Group's operating subsidiary, Epicus, Inc., as
disclosed in the combined financial statement which is included in this
filing.

Fiscal year 2004's increase in gross profit was primarily attributable
to an increase in revenue coupled with lower cost of sales resulting from
more favorable pricing from several suppliers.  The increase in our net
loss was primarily the result of writing down bad debt expense in our
accounts receivable portfolio.  However, we believe if we can maintain
the current revenue growth and favorable profit ratios, we anticipate the
net loss to be eliminated and to earn a net profit for the year ending
May 31, 2005.

Our current profit ratio is a direct result of our computerized billing
and provisioning, plus increased independent agent sales which are only
commissioned.  Our "in house" sales staff has also been greatly reduced
as more emphasis is placed on developing our independent agent sales
network and outsourced telemarketing.  During the year ended May 31,
2004, we incurred a net loss of approximately $(3,287,000) compared to
net losses of approximately $(1,630,000) for the preceding year.  A
significant portion of our net loss for the year ended May 31, 2004,
continues to be the result of paying down previously incurred long and
short term debts and the debt service associated with those debts.

Also continuing to contribute to our loss during the period are the
expenses associated with continuing to operate and maintain Epicus
Group's offices, professional fees, including legal and accounting plus
other expenses associated with being a reporting public company.  We also
incurred non-cash expenses associated with the issuance of 17,384,592
shares of stock to the holders of our convertible debenture.

In order for us to pay our operating expenses, including office rents,
communication expenses, accounting and bookkeeping fees, printing and
EDGAR preparation costs, publication costs, and other general and
administrative expenses, we have been dependent upon the funds provided
by non-interest bearing loans from our executive officers, directors and
shareholders, and the sale of stock in prior periods under the terms and
conditions of Regulation S of the Securities Act of 1933.

We still continue to be dependent upon the willingness of our executive
officers/directors and consultants to accept shares and/or defer all or
partial compensation for continued services to us, which services we
consider to be valuable and necessary to our continued operations.

In Fiscal 2000, under the Bankruptcy "Plan of Reorganization", we
purchased and acquired 100% of the common stock of Epicus, Inc., and as
the "Reorganized Debtor" we operate Epicus, Inc's. business.  In addition
to the payment of $570,000 ten days after the Plan of Reorganization was
approved by the Court; a "Creditors Trust" was established for all
"Allowed Unsecured Claims in excess of $1,000, into which we paid an
initial deposit of $100,000 and are to continue to make semi-annual
deposits of $100,000 each to a maximum of $500,000.  In July of 2001 an
agreement was made with the Creditors Committee to reduce the semi-annual
payment to $50,000, on which the company is currently in arrears.  There
remains a balance due to the Creditors Trust of $350,000.  For "Priority
Claims" we agreed to pay a maximum of $300,000 over a 6 year period plus
8% simple interest with an initial deposit of $25,000.  There is no
structured payment amount scheduled for the priority claims.  There is
a balance remaining for Priority Claims of $275,000 plus interest of 8%.
The total balance due on the purchase of EPICUS is $625,000 plus
applicable interest.

Liquidity and Capital Resources
-------------------------------

As of May 31, 2005 and 2004, Epicus Group had approximately $164,000 and
$922,000 in cash in its operating account.  To assist us in our cash flow
requirements we may determine, depending upon the prevailing stock price
of our shares, to seek subscriptions from the sale of securities to
private investors, although there can be no assurance that we will be
successful in securing any investment from private investors at terms and
conditions satisfactory to us, if at all.

During the years ending May 31, 2005 and 2004, respectively, we issued
403,590,000 and 109,161,000 shares of common stock in satisfaction of
certain debt and accrued interest.  We further issued approximately
17,000,000 shares of common stock during the year ended May 31, 2004 for
cash to support our operations.

                                                                         11
<PAGE>

Previously, the Company has funded its capital requirements for operating
cash flow, by loans against its accounts receivable, loans from
shareholders, sales of equity securities and the issuance of equity
securities in exchange for assets acquired and services rendered.  The
Company has been continually seeking new investment capital, which the
Company believes will be necessary to sustain its ongoing operations and
to facilitate growth, through the date of the filing of it's Bankruptcy
petition..

To that end on July 11, 2001, the Company sold $2,000,000 in convertible
debentures.  On May 1, 2003, as reported on Form 8-K, filed with the SEC
on May 7, 2003, the Company entered into a "Debenture Redemption
Agreement" with the holders of the convertible debentures.  This was done
in order to extend the "due date" of the loans backed by the debentures
and to obtain a more favorable method of paying off the notes. Additional
detail on the "Debenture Redemption Agreement" is presented below.

The Company continues to explore opportunities to raise private equity
capital and, in conjunction therewith, to provide credit support for the
Company's operations and potential acquisitions.  Although the Company
has in the past been, and continues to be, in discussions with potential
investors, there can be no assurance that its efforts to raise any
substantial amount of private capital will be successful.  Any
substantial private equity investment in the Company will result in
voting dilution of the Company's existing stockholders and could also
result in economic dilution.  If the Company is unable to obtain new
capital, the Company will be unable to carry out its strategy of growth
through acquisitions and the long-term ability of the Company to continue
its operations may be in doubt.

Our monthly operating expenses reflect the accrual of salaries due to
Gerard Haryman and Thomas  Donaldson, our executive officers, at the rate
of $29,917 and $10,833 per month respectively, which have not been paid.
We do not contemplate commencing full salary payments to Messrs. Haryman
and Donaldson unless and until we begin to generate positive cash flow
from operations.

Competition
-----------

We have many competitors ranging from the very large like BellSouth
Corporation, McLeod Communications ICG Communications as well as smaller
competitors that may be better capitalized, have better name recognition
or longer track records of providing telecommunications services.  The
Company believes that the competitive factors affecting its markets
include features such as functionality, adaptability, ease of use,
quality, performance, price, customer service and support, effectiveness
of sales and marketing efforts and Company reputation.  Although the
Company believes that it currently competes favorably with respect to
such factors, there can be no assurance that the Company can maintain its
competitive position against current and potential competitors,
especially those with greater financial marketing support and other
resources than the Company.

We believe that our "Alternative Sales" approach of using utility
companies gives us a distinct marketing identity, as does our almost
total automation in provisioning of new services and all of our billing,
which is very rare for a CLEC.  These factors we believe, give us the
competitive edge we need to continue our growth.  However, there can be
no assurance that we can maintain our competitive position against
current and potential competitors, especially those with greater
financial resources than we have.

Risks related to our business
-----------------------------

Our auditors have expressed doubt about our ability to continue as a
going concern.
--------------------------------------------------------------------

Our independent auditors have issued their report dated July 15, 2005 on
our consolidated financial statements as of May 31, 2005, which includes
an explanatory paragraph expressing substantial doubt about our ability
to continue as a going concern.  Among the reasons cited by the
independent auditors as raising substantial doubt as to our ability to
continue as a going concern are the following: we have experienced
cumulative operating losses for the previous four-year period and have
used cash in operating activities for the cumulative four-year period
from May 31, 2002 through May 31, 2005 of approximately $(4,200,000).
We have a positive working capital of approximately $600,000 in positive
working capital as of May 31, 2005; however, we continue to experience
cash flow difficulties in matching our contractual payment obligations,
principally to BellSouth Corp. and Global Crossing, to our revenue
billing cycles.

These conditions raise substantial doubt about our ability continue as
a going concern.  We have a history of operating
losses and may continue to incur operating losses.  We will most likely
require additional financing and, if we are unable to raise such funds,
our operations may be adversely affected.

At May 31, 2005 and 2004, we had current assets of approximately
$2,558,226 and $6,646,176, respectively, and total assets of
approximately $3,258,942 and $7,768,803, respectively.  As a result of
our bankruptcy action, our liquidity is limited to the cash collections
on our accounts receivable.  Other avenues of liquidity, such as loans
or private sales of the Company's securities, may or may not be available


                                                                         12
<PAGE>

in future periods.  There can be no assurance that we will be successful
in securing any investment from private investors at terms and conditions
satisfactory to us, if at all.

Based upon our present liquid resources, our present operating expenses,
and the commitment of our executive officers to continue to defer most
or all of their salaries, and if no increased revenues are generated from
operations or other sources, we believe we will be able to operate for
a minimum of an additional twelve months.

If additional funds are required, but cannot be raised, it will have an
adverse effect upon our operations.  To the extent that additional funds
are obtained by the sale of equity securities, our stockholders may
sustain significant dilution.

Convertible Debentures
----------------------

As of May 31, 2005 and 2004, the Company has outstanding aggregate
balances on convertible debentures of approximately $4,137,000 and
$1,591,000.

Debenture #1
------------

On September 28, 2001, a consortium of four (4) separate investment
entities under common management purchased 12% convertible debentures
from the Company and were issued the right to receive warrants to
purchase an aggregate of 3,500,000 shares of common stock from the
Company in a future private placement transaction.

Interest on these debentures is payable on a quarterly basis on March 31,
June 30, September 30 and December 31 of each year while such Debentures
are outstanding and on each Conversion Date, whichever occurs earlier.
Interest may be paid, at the Company's option, in either cash or
restricted, unregistered common stock.  The Debentures must be prepaid
if an event of default occurs under the Debentures and at the Company's
option may be prepaid within thirty days of the original issue date of
the Debentures.  Management is of the opinion that the Company has
sufficient authorized common shares to cover the conversions.  In the
event that the Company does not have adequate authorized and unissued
shares of common stock to effect the maximum shares needed to effect the
conversion, the Company may need to seek shareholder consent to increase
our amount of authorized shares.  If we do not have enough authorized
shares to cover the conversions and are unable to obtain shareholder
approval to increase our authorized shares, such failure would be
considered a breach of certain relevant provisions and representations
and warranties under the Debenture documents and could result in the
acceleration of all amounts due under the Debentures.

On May 1, 2003, the Company and the Debenture Holders entered into a
Debenture Redemption Agreement (Redemption Agreement).  The Redemption
Agreement sets forth the following terms and conditions related to the
Debentures on an ongoing basis:

 a.  Redemption Schedule; Payment of Net Redemption Amount: The Company
     shall pay the Net Redemption Price to the Debenture Holders in
     monthly installments in the amount of $40,000 (the "Monthly
     Redemption Payment"), with the first installment thereof due on July
     1, 2003 and subsequent installments thereof due on the first business
     day of each succeeding month (each, a "Payment Date") until the Net
     Redemption Amount has been paid in full.  The Company shall pay the
     Debenture Holders by wire transfer of immediately available funds
     pursuant to the Debenture Holders' written instructions.  The Monthly
     Redemption Payment shall be applied with respect to the Debenture
     Holders in the following order: (I) Accrued Interest, (ii) Redemption
     Premium, and (iii) outstanding principal balance of the Owned
     Debentures.  During Fiscal 2004, the Company paid approximately
     $120,000 cash in accordance with this section of this Agreement.

 b.  Prohibited Conversions: The Debenture Holders shall not convert the
     Owned Debentures into shares of the Company's common stock, par value
     $0.001 per share (the "Shares") during the period commencing on the
     date hereof and ending on June 30, 2003 (the "Prohibited Period").

 c.  Permitted Conversions: Following the Prohibited Period, the Debenture
     Holders shall be permitted to convert its Owned Debentures, to the
     extent such Owned Debentures have not been previously redeemed
     hereunder, into Shares in accordance with the terms and subject to
     the conditions of the Owned Debentures, subject to the following
     restrictions:

     (1) If the last reported sale price of the Shares on the
         Over-the-Counter Bulletin Board as reported by Bloomberg (the
         "Price") is less than $.10 per Share, then the Debenture Holders
         shall have the right to convert their Owned Debentures into not
         more than an aggregate of 300,000 Shares every thirty (30) days
         during the period in which the Price remains less than $.10 per
         Share,
     (2) If the Price is equal to or exceeds $.10 per Share but is less
         than $.20 per Share, then the Debenture Holders shall have the
         right to convert their Owned Debentures into not more than an
         aggregate of 500,000 Shares every thirty (30) days during the

                                                                         13
<PAGE>

         period that the Price is equal to or exceeds $.10 per Share but
         is less than $.20 per Share,
     (3) If the Price is equal to or exceeds $.20 per Share but is less
         than $.30 per Share, then the Debenture Holders shall have the
         right to convert their Owned Debentures into not more than an
         aggregate of 750,000 Shares every thirty (30) days during the
         period that the Price is equal to or exceeds $.20 per Share but
         is less than $.30 per Share, and
     (4) If the Price is equal to or exceeds $.30 per Share, then the
         Debenture Holders shall not be restricted by the Company
         hereunder with respect to the number of Shares into which the
         Debentures may be converted during the period that the Price is
         equal to or exceeds $.30 per Share, provided, however, that if
         the Company fails to (I) make the Monthly Redemption Payment
         pursuant to Section 2 hereof within five (5) business days
         following the Payment Date or (ii) pay any delinquent amounts
         that are due and owing under this Agreement, then the foregoing
         restrictions on the Debenture Holders' right to convert their
         Owned Debentures into Shares shall be suspended until the first
         day of the next month following the date that the Monthly
         Redemption Payment is received in full by the Debenture Holders.

 d.  Issuance of Additional Shares: The Company shall issue and deliver
     to the Debenture Holders shares of common stock representing, in the
     aggregate, one percent (1%) of the outstanding shares of the Company
     on the earlier to occur of: (I) the date of full conversion by the
     Debenture Holders of all of the Owned Debentures and (ii) the date
     of payment by the Company of the total Aggregate Redemption Price
     (collectively, the "Additional Shares").

 e.  Interest: Interest on the outstanding balance of the Owned Debentures
     shall continue to accrue following the date hereof as specified in
     the respective Owned Debenture and shall be payable in cash or Shares
     in accordance with the terms thereof.

 f.  Effectiveness of the Registration Statement: The Company shall take
     all necessary actions, including the preparing and filing of one or
     more registration statements of the Company and any amendments or
     supplements thereto (the "Registration Statement") required under the
     Securities Act of 1933, as amended, and the rules and regulation
     thereunder, to cause the Shares issuable upon conversion of the Owned
     Debentures to be registered for resale pursuant to an effective
     Registration Statement.  If (I) the Company fails to respond to all
     comments made by the Securities and Exchange Commission (the "SEC")
     in connection with the Registration Statement within ten (10)
     business days of receipt from the SEC or (ii) the SEC has not
     declared the Registration Statement effective on or before July 10,
     2003, then the Company shall immediately pay to each Debenture
     Holders an amount equal to five percent (5%) of the sum of (a) the
     outstanding balance of the Debenture Holders's Owned Debentures, (b)
     accrued interest on the Debenture Holders's Owned Debentures and
     a premium equal to thirty percent (30%) of the sum of (a) and (b)
     (the "Registration Penalty").  The Registration Penalty shall be
     payable either in cash or Shares, the number of which shall be based
     on the conversion price set forth in the Owned Debentures, at each
     Debenture Holders's option.  If a Debenture Holders elects to receive
     the Registration Penalty in cash, then the full amount of the
     Registration Penalty shall be paid to such Debenture Holders by wire
     transfer of immediately available funds in accordance with the
     instructions set forth on attached Schedule II.

 g.  Effect of Breach:  In the event of a breach by the Company of any of
     the provisions of this Agreement, either by a failure to timely make
     any payment or failure to effect any conversion by the Debenture
     Holders or otherwise, in addition to any other remedies available to
     the Debenture Holders in law or equity with respect to such breach,
     the applicable discount to the market price of the Owned Debentures
     shall permanently be amended from fifty percent (50%) to seventy-five
     percent (75%).

In conjunction with the issuance of the convertible debentures, the
debentures were issued with an equivalent per share value of common stock
below the ending quoted market price of the Company's common stock on the
issue date.  This difference created a Beneficial Conversion Feature
Discount of approximately $300,000.  This discount was then amortized
over the unexpired time period between the date of issue of the eligible
shares and the maturity date of the underlying debentures.  Approximately
$141,177 was amortized to operations during the year ended May 31, 2003.

Debenture #2
------------

On May 28, 2004, July 22, 2004 and September 27, 2004, the Company
completed separate private placements of an aggregate of (a) $1,100,000
in 8% secured convertible notes and (b) warrants to purchase 1,100,000
shares of our common stock each to 4 accredited investors. The
transaction was consummated pursuant to a Securities Purchase Agreement
by and among us and the purchasers named therein (the "Securities
Purchase Agreement").

The secured convertible notes mature on the second anniversary date of
each respective closing and are convertible into shares of our common
stock, at the option of the holder at any time and from time to time
after the date when the debentures where issued, at a conversion price
equal to the lower of (I) $0.10 per share and (ii) 60% of the average of

                                                                         14
<PAGE>

the lowest three inter-day trading prices of our common stock during the
twenty trading days immediately preceding the date of conversion. The
warrants are exercisable, at $0.03 per share, until the fifth (5th)
anniversary date of the issuance of the warrants.

Interest on the notes are payable, quarterly on March 31, June 30,
September 30 and December 31 of each year beginning on June 30, 2004.
The warrants and debentures contain customary anti-dilution protections.
In addition, on May 28, 2004, we have also agreed to sell additional
Notes to the original purchasers in the aggregate principal amount of
$2,200,000 and additional Warrants to purchase an aggregate of 2,200,000
shares of our common stock for an aggregate purchase price of $2,200,000.
As noted above, these additional notes were sold on July 22, 2004 and
September 27, 2004 in segments of $1,100,000 each.

The terms of these additional Notes and the additional Warrants shall be
identical to the terms of the Notes and Warrants that are currently
outstanding.  The Securities Purchase Agreement contains various
representations, warranties and covenants of the parties customary for
a transaction of this type. We have agreed to indemnify the purchasers
against various liabilities.  We entered into a Registration Rights
Agreement with each purchaser, and have agreed to file a Registration
Statement with the SEC under the Securities Act, covering the resale of
(I) the shares of common stock underlying the currently issued warrants;
(ii) the shares of common stock underlying the notes currently
outstanding in the amount of $3,300,000; (iii) the shares of common stock
underlying the warrants to be issued; and (iv) any shares of common stock
issued or issuable upon a stock split, dividend or other distribution,
recapitalization or similar event for an offering to be made on a
continuous basis pursuant to Rule 415.

The Registration Rights Agreement requires us to initially register 200%
of the shares issuable upon the exercise of all of the warrants and the
conversion of all of the notes both issued and to be issued.  We and the
purchasers each agreed with the other to indemnify the other for certain
liabilities arising under the Securities Act.  Pursuant to the
Registration Rights Agreement and subject to certain other provisions
therein, if we fail to timely perform or provide in accordance with our
responsibilities under the Registration Rights Agreement and certain
Securities Act provisions, then, in addition to any other rights the
holder or holders may have pursuant to the Registration Rights Agreement
or under applicable law, on each monthly anniversary of each such event
date (if the applicable event shall not have been cured by such date)
until the applicable event is cured, we shall pay to each holder an
amount in cash, as partial liquidated damages and not as a penalty, equal
to 2.0% of the outstanding principal amount of the Notes issued pursuant
to the Securities Purchase Agreement.  The foregoing transactions were
completed under exemptions from the registration requirements of the
Securities Act, including those afforded by Section 4(2) of the
Securities Act of 1933, and the rules and regulations promulgated under
that Section.

As of May 31, 2005, and subsequent thereto, the Company has not
successfully completed the filing of the mandated Registration Statement
and had said filing deemed effective by the U. S. Securities and Exchange
Commission.


Item 7 - Financial Statements

The required financial statements begin on page F-1 of this document.


Item 8 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

As previously disclosed on Form 8-K/A dated August 7, 2002 and in our
Annual Reports on Form 10-KSB for the years ended May 31, 2003 and 2004,
respectively, our Board of Directors terminated the accounting firm of
Wieseneck, Andres and Company, P.A. (Wieseneck) of North Palm Beach,
Florida in a prior year..

As of the date of this filing, Wieseneck has not provided the required
exhibit letter to be included in our Form 8-K/A dated August 7, 2002,
stating that they agree or disagree with the disclosures therein related
to the change in auditors for the Company.  We will file an additional
amendment to that Form 8-K/A upon receipt of that letter.  As of the date
of this filing, Wieseneck has not complied with the requirements of the
SEC.


Item 8A - Controls and Procedures

As of the date of this filing, an evaluation of the effectiveness of the
design and operation of Epicus Communications, Group, Inc.'s disclosure
controls and procedures was carried out under the supervision and with
the participation of management, including our Chief Executive and
Financial Officer.  Based upon that evaluation, our Chief Executive and
Financial Officer concluded that the Company's disclosure controls and
procedures are effective.  There have been no significant changes in our


                                                                         15
<PAGE>


disclosure controls or in other factors that could significantly affect
disclosure controls subsequent to the date we carried out the evaluation.

                             PART III

Item 9 - Directors and  Executive Officers of the Registrant

The following table sets forth certain information with respect to our
executive officers and directors. Each director serves a term of one year
or until a successor is elected.

The directors and executive officers serving the Company are as follows:

<TABLE>
<CAPTION>
       Name                    Age           Position Held and Tenure
       ----                    ---           ------------------------
<S>                            <C>           <C>
  Gerard Haryman               61            Chairman, President,
                                             Chief Executive Officer
                                             and Director
  Thomas Donaldson             62            Vice President, Secretary
                                             and Director
  Timothy Palmer               60            Director
</TABLE>

Gerard Haryman, has served as our Chairman of the Board, President and
--------------
Chief Executive Officer since January of 1996.  Previously and
concurrently, since 1981 to the present,  Mr. Haryman has been President
and Chief Executive Officer of SA, Sitmo, developers and builders
of commercial and residential properties throughout Europe, with
corporate offices in Paris, France.  Mr. Haryman has also been involved
in the development of residential property in the Palm Beach area since
1988, and during that period has also served on the Board of Directors
of several other companies, both public and private .  Mr. Haryman
attended the "Institute General de Finance" in Paris, France majoring in
finance and administration.

Thomas N. Donaldson, has been and officer and director of the Company and
-------------------
it's predecessors since February 1993.  Prior to joining the Company, he
had an extremely successful background in the electronic media, both
television and radio.  Before being promoted to executive level
management, he was an award winning Producer/ Director at both the local
and network levels. Additionally, he was a majority partner in the
television production company, "American Televent", which produced
commercials and syndicated programming.  Mr. Donaldson attended both the
University of Miami and the University of Paris.

Timothy Palmer, has been President of HDX 9000, Inc., of New York and
--------------
West Palm Beach, Florida, a computer and business consulting firm, since
October 1993.  He has been a Director of the Company since July 1997.
From March 1997 to the present, he has been President of Quality
Advantage, Ltd. of Kingston, Jamaica, a computer and business consulting
firm.  Prior to October 1993, he was manager of the Palmer Family Trust
in London, England.  Mr. Palmer holds a Bachelor of Commerce Degree from
McGill University in Montreal, Canada.


Item 10 - Executive Compensation

The following table shows all the cash compensation paid or to be paid
by us or our subsidiaries, as well as certain other
compensation paid or accrued, during the fiscal years indicated, to our
chief executive officer and all other executive officers whose total
annual salary and bonus exceeded $100,000 in all capacities in which the
person served.

<TABLE>
<CAPTION>

Summary Compensation Table
--------------------------

Name and                        (1)                   Annual      Restricted   Options/    All Other
Principal Positions    Year    Salary     Bonus    Compensation      Stock      SARs(#)   Compensation
-------------------    ----   --------    -----    ------------   ----------   --------   ------------
<S>                    <C>    <C>         <C>      <C>            <C>          <C>        <C>

Gerard Haryman         2005   $250,000    $-0-         $-0-          $-0-       $-0-          $-0-
President, CEO         2004   $250,000    $-0-         $-0-          $-0-       $-0-          $-0-
CFO and Chairman       2003   $250,000    $-0-         $-0-          $-0-       $-0-          $-0-
of the Board

Thomas N. Donaldson    2005   $104,000    $-0-         $-0-          $-0-       $-0-          $-0-
Vice President,        2004   $104,000    $-0-         $-0-          $-0-       $-0-          $-0-
and Director           2003   $104,000    $-0-         $-0-          $-0-       $-0-          $-0-
</TABLE>

                                                                         16
<PAGE>

(1)   Due to our cash position, Mr. Haryman and Mr. Donaldson
      have deferred payment of all or part of their salaries
      and bonuses.

Directors are not compensated for acting in their capacity as directors.
Directors are reimbursed for their accountable expenses incurred in
attending meetings and conducting their duties.

Options granted in the last Fiscal Year
---------------------------------------

There were no grants of stock options made during either Fiscal 2005 or
Fiscal 2004 to our executive officers.

Stock Options held at end of Fiscal 2005 or 2004
------------------------------------------------

No stock options, stock appreciation rights or other compensation were
granted to our President or other corporate officers or directors during
either Fiscal 2005 or Fiscal 2004.

Employment Agreements
---------------------

On February 27, 2004, Gerard Haryman and Thomas Donaldson entered into
employment agreements with Epicus Communications Group, Inc. pursuant to
which Mr. Haryman has been retained as the President and Chief Executive
Officer of the Epicus Group and Mr. Donaldson has been retained as the
Vice President of Epicus Group.  The term of each employment agreement
commenced on February 27, 2004 and continues for a term of 5 years.
Pursuant to the employment agreements, Mr. Haryman and Mr. Donaldson will
receive an annual salary of $275,000 and $130,000 respectively.  Mr.
Haryman and Mr. Donaldson will also receive a bonus of 3% and 2%,
respectively, of the adjusted net profits of Epicus Communications during
each fiscal year during the term of the agreements, which bonus may be
payable in cash or common stock of Epicus Group or any combination
thereof.  Each employment agreement also provides for additional
compensation and/or benefits to be paid or provided to Messrs. Haryman
and Donaldson as follows:

 * The base salary shall be adjusted at the end of each year of
   employment to reflect any change in cost of living.
 * Messrs. Haryman and Donaldson may elect to accept partial payment of
   his base salary and/or bonus and defer payment of the balance upon
   demand at a later date.
 * Deferred compensation payments shall be made to Messrs. Haryman and
   Donaldson for a period of twenty years after retirement in an amount
   equal to base payments equal to 30% of the average total salary (base
   salary plus incentive salary) due to each employee.
 * Reimbursement of all reasonable relocation expenses should either
   Messrs. Haryman or Donaldson be transferred and assigned to a new
   principal place of work located more than fifty (50) miles from each
   employees place of residence.
 * Each of Messrs. Haryman and Donaldson is entitled to receive
   reimbursement for all reasonable expenses incurred by him in the
   course of his employment by Epicus Group.
 * Each of Messrs. Haryman and Donaldson's employment agreements may be
   terminated (I) by Epicus for cause upon 10 days notice; (ii) at
   anytime by employee upon ninety (90) days notice; or (iii) at anytime
   by Epicus Group, without cause, by paying to employee the amount of
   compensation due to the employee for the remainder of the term of
   employment.

Compensation of Directors
-------------------------

Each of our Directors is to receive 12,000 shares of common stock for
each year cumulative of service plus reimbursement of out-of- pocket
expenses.

Outside Directors
-----------------

Currently, the Company has only one outside Director, Timothy Palmer.


Item 11 - Security Ownership of Certain Beneficial Owners and Management
          and Related Stockholder Matters

The following table sets forth information as of July12, 2004, with
respect to any person known by us to own beneficially more than 5% of our
common stock, common stock beneficially owned by each of our officers
named in "Executive Compensation," and each of our directors, and the
amount of common stock beneficially owned by our officers and directors
as a group.

                                                                         17
<PAGE>

<TABLE>
<CAPTION>
                                                 % of Class
Name and Address         Number of Shares    Beneficially Owned
----------------         ----------------    ------------------
<S>                      <C>                 <C>
Gerard Haryman              358,252,469            54.17%
Thomas Donaldson                100,000              *
Timothy Palmer                      -0-              *

All Executive Officers      358,352,469            54.17%
and Directors as a
Group (3 persons)
</TABLE>

* Represents less than 1% of our outstanding common stock.

(1)  Percentage of beneficial ownership is based upon the 661,404,214
     shares of our common stock outstanding as of August 30, 2005.

Unless otherwise noted below, we believe that all persons named in the
table have sole voting and investment power with respect to all shares
of common stock beneficially owned by them.  For purposes hereof, a
person is considered to be the beneficial owner of securities that can
be acquired by such person within 60 days from the date hereof upon the
exercise of warrants or options or the conversion of convertible
debentures.  Each beneficial owner's percentage ownership is determined
by assuming that any such warrants, options or convertible debentures
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days from the date hereof, have been
exercised.

The mailing address for all the above individuals is the Company's
corporate office:  1750 Osceola Dr., West Palm Beach, Florida 33409.

Beneficial Ownership Reporting Compliance
-----------------------------------------

None of the Company's officers and/or directors, and/or their affiliates,
as appropriate, complied with the annual requirements to file Form 3, 4
or 5 with the U. S. Securities and Exchange Commission.  These
individuals include Gerard Haryman, Thomas Donaldson, and Timothy Palmer.


Item 12 - Certain Relationships and Related Transactions

The company was a party to and has a direct or indirect material interest
in the following transactions during the years ended May 31, 2005 and
2004, respectively:

The Company leases it's executive offices in West Palm Beach, Florida
from a corporation owned by Gerard Haryman, the Company's President and
Chief Executive Officer.  The terms and conditions of this arrangement
are discussed in Item 2 - Description of Property.

During Fiscal 2005 and 2004, respectively, the Company received (repaid)
interest bearing advances either directly from Gerard Haryman, the
Company's President and Chief Executive Officer or entities affiliated
with Gerard Haryman in the net amounts of approximately $(1,223,880) and
$415,803.


Item 13 - Exhibits

3 Articles of Incorporation and By-Laws

The Articles of Incorporation and Articles of Amendment to The Articles
of Incorporation and By-Laws of the Registrant were pre-filed as Exhibits
3-1, 3.2, and 3.3, respectively, to our Form I 0-KSB, for the fiscal year
1995, filed April 1, 1998, with the Securities and Exchange Commission
and are incorporated herein by reference.

10   Material Contracts

Some of the Material Contracts of the Registrant were filed as Exhibits
10.1, 10.2, 10.3, 10.4, and 10.5, respectively, to the Registrant's Form
10-KSB as of May 31, 195 under the Securities and Exchange Ad: of 1934,
filed April 1, 1998 with the Securities and Exchange Commission - The
Contracts for the sale of ITC and the purchases of Hospitality Telecom
Corp (formerly Mic Mac Investments, Inc.) and Cambridge Gas Transport
Corporation, were included in Epicus Group's (formerly Phoenix

                                                                         18
<PAGE>


International Industries, Inc.'s) 10-KSB for the year ended May 31, 1998
and are incorporated herein by reference.

31.1   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
       of 2002

32.1   Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
       of 2002


Item 14 - Principal Accountants Fees and Services

The Company paid or accrued the following fees in each of the prior two
fiscal years to it's principal accountant, either S. W. Hatfield, CPA of
Dallas, Texas:

<TABLE>
<CAPTION>
                                              Year ended     Year ended
                                             May 31, 2005   May 31, 2004
                                             ------------   ------------
<S>                                          <C>            <C>

1. Audit fees                                   $18,644        $23,200
2. Audit-related fees                                 -              -
3. Tax fees                                           -              -
4. All other fees                                     -              -
                                                -------        -------
 Totals                                         $18,644        $23,200
                                                =======        =======
</TABLE>


The Company has no formal audit committee.  However, as defined in
Sarbanes-Oxley Act of 2002, the entire Board of Directors is the
Company's defacto audit committee.

In discharging its oversight responsibility as to the audit process, the
Board obtained from the independent auditors a formal written statement
describing all relationships between the auditors and the Company that
might bear on the auditors' independence as required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees."  The Board discussed with the auditors any relationships
that may impact their objectivity and independence, including fees for
non-audit services, and satisfied itself as to the auditors'
independence.  The Board also discussed with management, the internal
auditors and the independent auditors the quality and adequacy of the
Company's internal controls.  The Board reviewed with the independent
auditors their management letter on internal controls, if one was issued
by the Company's auditors.

The Board discussed and reviewed with the independent auditors all
matters required to be discussed by auditing standards generally accepted
in the United States of America, including those described in Statement
on Auditing Standards No. 61, as amended, "Communication with Audit
Committees".

The Board reviewed the audited consolidated financial statements of the
Company as of and for the year ended May 31, 2005 and 2004, with
management and the independent auditors.  Management has the sole
ultimate responsibility for the preparation of the Company's financial
statements and the independent auditors have the responsibility for their
examination of those statements.

Based on the above-mentioned review and discussions with the independent
auditors and management, the Board of Directors approved the Company's
audited consolidated financial statements and recommended that they be
included in its Annual Report on Form 10-KSB for the year ended January
31, 2005, for filing with the Securities and Exchange Commission.

The Company's principal accountant, S. W. Hatfield, CPA did not engage
any other persons or firms other than the principal accountant's full-
time, permanent employees.

                                                                         19
<PAGE>


                            SIGNATURES

In accord with Section 13 or 15(d) of the Securities Act of 1933, as
amended, the Company caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.

                                Epicus Communications Group, Inc.

Dated: August 30, 2005          By:  /s/ Gerard Haryman
                                   ------------------------------
                                                   Gerard Haryman
                                         Chief Executive Officer,
                                          Chief Financial Officer
                                                     and Director

In accordance with the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons on behalf of the
Company and in the capacities and on the date as indicated.


Dated: August 30, 2005          By:    /s/ Gerard Haryman
                                   ------------------------------
                                                   Gerard Haryman
                                       President, Chief Executive
                                            Officer, and Director


Dated: August 30, 2005          By:    /s/ Thomas N. Donaldson
                                   ------------------------------
                                                 Thomas Donaldson
                                        Vice President, Secretary
                                                     and Director


Dated: August 30, 2005          By:    /s/ Timothy Parker
                                   ------------------------------
                                                   Timothy Palmer
                                                         Director



                                                                         20
<PAGE>


        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                     Page

Report of Registered Independent Certified Public Accounting Firm    F-2

Consolidated Financial Statements

 Consolidated Balance Sheets
   as of May 31, 2005 and 2004                                       F-3

 Consolidated Statements of Operations and Comprehensive Loss
  for the years ended May 31, 2005 and 2004                          F-4

 Consolidated Statement of Changes in Stockholders' Equity
  for the years ended May 31, 2005 and 2004                          F-5

 Consolidated Statements of Cash Flows
  for the years ended May 31, 2005 and 2004                          F-6

 Notes to Consolidated Financial Statements                          F-7























                                                                         F-1
<PAGE>

                 LETTERHEAD OF S. W., HATFIELD, CPA
                 ----------------------------------

   REPORT OF REGISTERED INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM
   -----------------------------------------------------------------

Board of Directors and Stockholders
Epicus Communications Group, Inc.

We have audited the accompanying consolidated balance sheets of Epicus
Communications Group, Inc. (a Florida corporation) and Subsidiaries
(Debtors-in-Possession) as of May 31, 2005 and 2004 and the related
statements of operations and comprehensive loss, changes in stockholders'
equity and cash flows for each of the years ended May 31, 2005 and 2004,
respectively.  These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these consolidated financial statements based on
our audit.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States).  Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements.  An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall consolidated financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Epicus Communications Group, Inc. (Debtors-in-Possession) as
of May 31, 2005 and 2004 and the results of its operations and its cash
flows for each of the years ended May 31, 2005 and 2004, respectively,
in conformity with accounting principles generally accepted in the United
States of America.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern.  As discussed
in Note C to the consolidated financial statements, the Company has filed
for protection under Chapter 11 of the U. S. Bankruptcy Code and
continues to experience operating losses and negative cash flow from
operating activities.  These circumstances create substantial doubt about
the Company's ability to continue as a going concern.  The consolidated
financial statements do not contain any adjustments that might result
from the outcome of these uncertainties.


                                              /s/S.W. HATFIELD, CPA

                                              S. W. HATFIELD, CPA
Dallas, Texas
July 15, 2005

                                                                         F-2
<PAGE>

        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)
                   CONSOLIDATED BALANCE SHEETS
                      May 31, 2005 and 2004

<TABLE>
<CAPTION>
                                                       May 31, 2005     May 31, 2004
                                                       ------------     ------------
<S>                                                    <C>              <C>
                              ASSETS
                              ------
Current Assets
 Cash on hand and in bank                             $     163,914     $    921,740
 Accounts receivable - Trade, net of allowance
   for doubtful accounts of approximately
   $500,000 and $1,500,000, respectively                  1,415,849        5,709,436
 Advances due from officer                                        -           15,000
 Prepaid expenses                                           978,463          275,517
                                                       ------------     ------------
  Total current assets                                    2,558,226        6,921,693
                                                       ------------     ------------

Property and equipment - at cost                            688,786          673,729
 less accumulated depreciation                             (538,570)        (407,360)
                                                       ------------     ------------
  Net property and equipment                                150,216          266,369
                                                       ------------     ------------

Other Assets
 Deposits and other                                         526,976          357,217
 Trademark and corporate name development costs              23,524           23,524
                                                       ------------     ------------
  Total other assets                                        550,500          380,741
                                                       ------------     ------------

TOTAL ASSETS                                           $  3,258,942     $  7,568,803
                                                       ============     ============
               LIABILITIES AND STOCKHOLDERS' EQUITY
               ------------------------------------
Liabilities not subject to compromise
 Current Liabilities
  Deferred customer revenue                           $     670,402     $          -
  Accounts payable - trade                                  198,664                -
  Accrued taxes payable and other liabilities               877,942                -
  Accrued rent to officer/shareholder                        10,500                -
  Accrued officers compensation                             206,031                -
                                                       ------------     ------------
  Total liabilities not subject to compromise             1,963,539                -
Liabilities subject to compromise                        17,566,475       16,853,375
                                                       ------------     ------------
  Total Liabilities                                      19,530,014       16,853,375
                                                       ------------     ------------

Commitments and contingencies

Stockholders' (Deficit)
 Preferred stock - $0.001 par value
  5,000 shares authorized
 None issued and outstanding                                      -                -
 Common stock - $0.001 par value.
  800,000,000 shares authorized.
  661,404,214 and 258,058,655 shares issued
    and outstanding, respectively                           661,404          258,059
 Additional paid-in capital                              17,865,139       16,874,667
 Accumulated deficit                                    (34,797,615)     (26,417,298)
  Total stockholders' (deficit)                         (16,271,072)      (9,284,572)
                                                       ------------     ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             $  3,258,942     $  7,568,803
                                                       ============     ============
</TABLE>

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

                                                                         F-3
<PAGE>


        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)
   CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                Years ended May 31, 2005 and 2004

<TABLE>
<CAPTON>
                                                        Year ended       Year ended
                                                       May 31, 2005     May 31, 2004
                                                       ------------     ------------
<S>                                                    <C>              <C>
Revenues - net                                         $ 18,775,796     $ 25,190,543
Cost of Sales                                           (15,288,616)     (17,509,300)
                                                       ------------     ------------

Gross Profit                                              3,487,180        7,681,243
                                                       ------------     ------------
Operating Expenses
 Selling and marketing expenses                           1,348,356        1,957,613
 General and administrative expenses                      4,054,945        4,982,769
 Bad debt expense                                         5,139,138        3,201,630
 Depreciation and amortization                              133,875          116,321
 Compensation expense related to
  common stock issuances at
  less than "fair value"                                    742,254          358,464
                                                       ------------     ------------
  Total operating expenses                               11,418,568       10,616,797
                                                       ------------     ------------

Income (Loss) from operations                            (7,931,388)      (2,935,554)

Other income
 Interest and other income (expense) - net                   14,612            1,826
 Interest expense                                          (413,541)        (324,649)
 Loss on disposition of fixed assets                              -          (28,185)
                                                       ------------     ------------

Earnings before reorganization items
 and income tax benefit                                  (8,330,317)      (3,286,562)

Reorganization items
 Professional fees                                          (50,000)               -
                                                       ------------     ------------

Loss before income tax benefit                           (8,380,317)      (3,286,562)

Provision for income tax benefit                                  -                -
                                                       ------------     ------------
Net (Loss)                                               (8,380,317)      (3,286,562)

Other comprehensive income                                        -                -
                                                       ------------     ------------
Comprehensive Loss                                     $ (8,380,317)    $ (3,286,562)
                                                       ============     ============

Net loss per weighted-average share
 of common stock outstanding, calculated
 on Net Loss - basic and fully diluted                       $(0.01)          $(0.02)
                                                             ======           ======
Weighted-average number of shares
 of common stock outstanding                            588,774,840      163,960,608
                                                        ===========      ===========
</TABLE>

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

                                                                         F-4
<PAGE>


         EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                      (Debtors-in-Possession)
    CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                Years ended May 31, 2005 and 2004
<TABLE>
<CAPTION>

                                                            Additional
                                       Common Stock          paid-in      Accumulated
                                   Shares        Amount      capital        Deficit         Total
                                -----------    ---------   -----------   -------------   -------------
<S>                             <C>            <C>         <C>           <C>             <C>
Balances at June 1, 2003        113,817,571    $ 113,818   $13,891,580   $(23,130,736)   $ (9,125,338)

Issuance of common stock for
 Cash                            17,000,000       17,000       621,000              -         638,000
 Retirement of debt             109,160,584      109,161     1,813,652              -       1,922,813
 Services rendered               18,080,500       18,080       548,435              -         566,515
                                -----------    ---------   -----------   ------------    ------------
Net loss for the year                     -            -             -     (3,286,562)     (3,286,562)

Balances at May 31, 2004        258,058,655      258,059    16,874,667    (26,417,298)     (9,284,572)

Issuance (Retirement) of
common stock for
 Retirement of debt             403,589,684      403,589       996,528              -       1,400,117
 Services rendered                 (244,125)        (244)       (6,056)             -          (6,300)

Net loss for the year                     -            -             -     (8,380,317)     (8,380,317)
                                -----------    ---------   -----------   ------------    ------------
Balances at May 31, 2005        661,404,214    $ 661,404   $17,865,139   $(34,797,615)   $(16,271,072)
                                ===========    =========   ===========   ============    ============
</TABLE>











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

                                                                         F-5
<PAGE>

        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)
              CONSOLIDATED STATEMENTS OF CASH FLOWS
                Years ended May 31, 2005 and 2004


<TABLE>
<CAPTON>
                                                        Year ended       Year ended
                                                       May 31, 2005     May 31, 2004
                                                       ------------     ------------
<S>                                                    <C>              <C>
Cash Flows from Operating Activities
 Net loss for the year                                 $ (8,380,317)    $ (3,286,562)
 Adjustments to reconcile net loss to net cash
  provided by operating activities
   Depreciation                                             133,875          116,321
   Loss on disposition of fixed assets                            -           28,185
   Bad Debt Expense                                       5,139,138        3,201,630
   Expenses paid (rescinded) with common stock               (6,300)         566,515
     Forgiveness and extinguishment of accounts
       payable                                                    -         (111,000)
   Compensation expense related to common stock
     issuances at less than "fair value"                    742,254          358,464
   (Increase) Decrease in
     Accounts receivable                                   (845,551)      (5,906,179)
     Deposits, intangible and other assets                 (872,705)        (142,500)
   Increase (Decrease) in
     Deferred revenue                                       670,402                -
     Accounts payable                                       198,663                -
     Accrued taxes payable and other liabilities          1,094,473                -
     Liabilities subject to compromise                      239,180        3,815,817
                                                       ------------     ------------
Net cash used in operating activities                    (1,886,888)      (1,359,309)
                                                       ------------     ------------

Cash Flows from Investing Activities
 Decrease in restricted cash                                      -          201,296
 Proceeds from sale of fixed assets                               -            2,100
 Purchase of property and equipment                         (17,722)         (98,896)
                                                       ------------     ------------
Net cash used in investing activities                       (17,722)         104,500
                                                       ------------     ------------

Cash Flows from Financing Activities
 Increase (Decrease) in cash overdraft                     (233,072)         233,072
 Proceeds from sale of common stock                               -          638,000
 Cash advances (repayments) to/from affiliated
   entities                                              (1,223,880)         415,803
 Cash paid to acquire convertible debt                     (196,264)        (275,517)
 Proceeds from convertible debentures                     2,800,000        1,100,000
                                                       ------------     ------------
Net cash provided by financing activities                 1,146,784        2,111,358
                                                       ------------     ------------

Increase (Decrease) in Cash                                (757,826)         856,549
Cash at beginning of period                                 921,740           65,191
                                                       ------------     ------------

Cash at end of period                                  $    163,914     $    921,740
                                                       ============     ============

Supplemental Disclosure of Interest and Income
Taxes Paid
  Interest paid for the period                         $    556,344     $    120,000
                                                       ============     ============
  Income taxes paid for the period                     $          -     $          -
                                                       ============     ============
Supplemental Disclosure of Non-cash Investing
and Financing Activities
  Common stock issued for retirement of debt           $    247,878     $    764,348
                                                       ============     ============
  Common stock issued for payment of accrued
    interest                                           $          -     $    132,206
                                                       ============     ============
  Common stock issued in repayment of advances from
   shareholder/officer or affiliated entity            $    600,000     $    667,794
                                                       ============     ============
</TABLE>

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

                                                                         F-6
<PAGE>

         EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - Organization and Description of Business

Phoenix International Industries, Inc. (Company) was incorporated on July
22 1985, pursuant to the laws of the State of Florida under the name
Hydrobac, Inc.  On July 7, 1986, the Company's name was changed to
ProBac, Inc. and on October 5, 1994, its name was changed to Trident
Environmental Systems, Inc.  During those periods the Company's primary
business was in various types of products and systems for use in the
environmental clean-up industry.  On October 2, 1996, the Company's name
was changed to Phoenix International Industries, Inc.  From January 1996
through May 31, 1997, the Company sought acquisitions as it wound down
and closed its original environmental clean-up business.

In May 2003, Phoenix International Industries Inc. changed the company's
name to Epicus Communications Group, Inc. (Epicus Group).  The name
change was effected to better reflect the Company's business emphasis on
the telecommunications sector and to better create consistent name
branding with the Company's wholly-owned operating subsidiary, EPICUS,
Inc.

During Fiscal 2000, the Company acquired control of Telephone Company of
Central Florida, Inc. (TCCF), an entity then operating under Chapter 11
of the United States Bankruptcy Court.  As an integral component of
TCCF's Plan of Reorganization, the Company recapitalized TCCF, effective
on the effective date of TCCF's discharge from bankruptcy.  On July 9,
1999, the U. S. Bankruptcy Court issued an Order of Confirmation related
to TCCF's Plan of Reorganization and the Company recapitalized TCCF
within ten days of the Confirmation Order.  TCCF is a "competitive local
exchange carrier ("CLEC") telephone company and a reseller of other
telecommunications services.  On January 17, 2001, the corporate name of
TCCF was changed to EPICUS, Inc. (Epicus).

On July 28, 2000, the Company acquired 100% of the stock of Moye &
Associates, Inc. (Moye) of St. Simons Island, Georgia.  Moye's primary
business was that of an Internet Service Provider (ISP) known as
TheBest.Net.  This move was seen by management as being synergetic with
the operations of TCCF.  On July 19, 2001, the Company sold all operating
assets of Moye to an unrelated party and, effectively, discontinued all
operations within this subsidiary.

On April 9, 1998, the Company acquired 100% of the outstanding stock of
Mic Mac Investments, Inc. (Mic Mac), a South Carolina corporation.  Mic
Mac at the time of acquisition was a  long distance telephone service
"reseller" specializing in services to the hospitality industry.  All
operations related to Mic Mac were discontinued by February 1999.


NOTE B - Petition for Relief Under Chapter 11 of the U. S. Bankruptcy
         Code

On October 25, 2004 (Petition Date), Epicus Communications Group, Inc.
(Epicus Communications for purposes of this footnote) and its subsidiary,
Epicus, Inc., (Epicus for purposes of this footnote) filed voluntary
petitions in the United States Bankruptcy Court for the Southern District
of Florida (Bankruptcy Court) seeking reorganization relief under the
provisions of Chapter 11 of Title 11 of the United States Code
(Bankruptcy Code) (Case Nos. 04-34915, 04-34916, (collectively, Cases).

Under Chapter 11, certain claims against the Debtors in existence prior
to the filing of the petitions for relief under Federal Bankruptcy Laws
are stayed while the Debtors continue to operate their businesses as
Debtors-In-Possession pursuant to Sections 1107 and 1108 of the Bankruptcy
Code and the orders of the Bankruptcy Court.  These claims are reflected
in the accompanying August 31, 2004 balance sheet as "Liabilities Subject
to Compromise."  Additional claims (liabilities subject to compromise)
may arise subsequent to the Petition Date resulting from the rejection
of executory contracts, including leases, and from the determination of
the court (or agreed to by parties in interest) of allowed claims for
contingencies and other disputed amounts.  Claims secured against the
Debtors' assets ("secured claims") are also stayed, although the holders
of such claims have the right to move the Bankruptcy Court for relief
from the stay.  Secured claims, if any, are secured primarily by liens
on the Debtors' property, plant and equipment.

                                                                         F-7
<PAGE>

        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE B - Petition for Relief Under Chapter 11 of the U. S. Bankruptcy
         Code - Continued

As a result of the bankruptcy filing, the Company is in default under the
terms of the Callable Secured Convertible Notes (the "Notes") it executed
on May 28, 2004, July 22, 2004 and September 27, 2004 in connection with
the private placement of an aggregate of $3,300,000 in 8% secured
convertible notes which begin to mature on May 28, 2006.  As a result of
such default, the principal amount plus accrued and unpaid interest,
including any liquidated damages, if any, on the Notes may be determined
to be due and payable.  As a result of the bankruptcy filing, the ability
of creditors to seek remedies to enforce their rights under all such
agreements are stayed and creditor rights of enforcement are subject to
the applicable provisions of the Bankruptcy Code.    Additionally,
despite the uncertainty of the ultimate settlement and/or outcome of the
Bankruptcy action, the Debtors have continued the accrual of the
applicable contractual interest charges on all outstanding notes and/or
debenture agreements for all periods through February 28, 2005.

The Debtors have received approval from the Bankruptcy Court to pay or
otherwise honor certain of its pre-petition obligations, including
employee wages.

Plan of Reorganization
----------------------

The Company has submitted a Plan of Reorganization (Plan) for
consideration by the Bankruptcy Court and the affected creditors.

                       Summary of the Plan

(1)  Treatment of Claims and Interests
     ---------------------------------

The Plan classifies claims and interest into thirteen (13) classes as
follows:

  A. CLASS 1: is the Bell South secured claim in the amount of
     $1,929,396.96, which is secured by a lien on the assets of Epicus.
  B. CLASS 2: is compromised of all secured claims other than the
     BellSouth Secured Claim, the NIR Group Debenture Claim and the IRS
     Secured Claim.
  C. CLASS 3: is the Debenture Claim of the NIR Group secured by a lien
     upon the NIR Group Collateral.  The NIR Group is the company which
     is the common ownership and management group associated with the
     hedge funds that comprise the AJW Group.
  D. CLASS 4: are the priority claims against Epicus Communications.
  E. CLASS 5: are the priority claims against Epicus.
  F. CLASS 6:are the Convenience Claims against Epicus Communications.
  G. CLASS 7: are the Convenience Claims against Epicus.
  H. CLASS 8:are the Claims of General Unsecured Creditors against Epicus
     Communications.
  I. CLASS 9: are the General Unsecured Creditors against Epicus.
  J. CLASS 10: are the Insider Subordinated Debt Claims of Gerard
     Haryman, Thomas Donaldson and Aptek.
  K. CLASS 11: are the Equity Interest in Epicus Communications,
     exclusive of the equity interests of the Haryman Parties.
  L. CLASS 13: is the Secured Claim of the IRS.

The Plan calls for the acquisition of the assets and business operations
of Epicus by Epicus Communications.  The payment of $100,000.00 for the
acquisition will be made to a Plan trustee and distributed pro rata to
the holders of priority claims in the Epicus case.  The BellSouth
agreement will be assumed and assigned to Epicus Communications and the
pre-petition default will be cured.  Holders of unsecured claims will
receive a pro rata distribution from a $175,000.00 contribution made by
Gerard Haryman to the plan trust in exchange for releases for himself,
Thomas Donaldson, Timothy Palmer, and Aptek, Inc. .  Unsecured creditors
will also receive a $25,000.00 payment from the NIR Group in exchange for
a release, 7.5% of the capital stock of Reorganized Epicus Communications
and the proceeds of Avoidance Actions, through a plan trust. Equity
interests in Epicus will be extinguished.


                                                                         F-7
<PAGE>

        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE B - Petition for Relief Under Chapter 11 of the U. S. Bankruptcy
         Code - Continued

Gerald Haryman will also contribute $25,000.00 (on behalf of himself and
all holders of equity interests in Epicus Communications) to the
reorganization of Epicus Communications so that holders of equity in
Epicus Communications will retain their interest, subject to the dilution
provided for in the Plan.  The $25,000.00 contribution by Mr. Haryman
will be utilized to make a pro rata distribution to the holders of Epicus
Communications' priority claims and to the extent funds remain, they will
be distributed pro rata to the holders of Epicus Communications' general
unsecured claims.  The NIR Group debentures will be reinstated and will
retain or be granted a security interest in the assets it claims as its
collateral.

(2)  Classification of Claims and Equity Interests
     ---------------------------------------------

Claims, other than Administrative Expense Claims, are classified for all
purposes, including voting, confirmation, and distribution pursuant to
the Plan, as follows:

<TABLE>
<CAPTION>

         Class                Designation                  Impairment      Entitled to Vote
       -------   --------------------------------------    ----------   ---------------------
<S>    <C>       <C>                                       <C>          <C>
       Class 1   BellSouth Secured Claim                    Impaired          Yes
       Class 2   Other Secured Claims                       Impaired          Yes
       Class 3   NIR Group Debenture Claims                 Impaired          Yes
       Class 4   Priority Claims -Epicus Communications     Impaired          Yes
       Class 5   Priority Claims - Epicus                   Impaired          Yes
       Class 6   Convenience Claims
                   Epicus Communications                   Unimpaired   No (deemed to accept)
       Class 7   Convenience Claims - Epicus               Unimpaired   No (deemed to accept)
       Class 8   General Unsecured Claims
                   Epicus Communications                    Impaired          Yes
      Class 9    General Unsecured Claims - Epicus          Impaired          Yes
      Class 10   Insider Subordinated Debt Claims           Impaired          Yes
      Class 11   Epicus Communications Equity Interests     Impaired          Yes
      Class 12   Epicus Equity Interests                    Impaired    No (deemed to reject)
      Class 13   IRS Secured Claim                          Impaired          Yes
</TABLE>

(3)  Claimants and Impaired Interest Holders

Claimants and Interest Holders entitled to vote under the Plan must
affirmatively act in order for the Plan to be confirmed by the Court.
According to the Debtors' Joint Plan, Classes 1, 2, 3, 4, 5, 8, 9, 10,
11, 12 and 13 are "impaired" classes within the meaning of Section 1124 of
the Bankruptcy Code.  These classes, accordingly, must vote to accept the
Plan in order for the Plan to be confirmed without a cram down.  A
Claimant who fails to vote to either accept or reject the Plan will not
be included in the calculation regarding acceptance or rejection of the
Plan.  A ballot to be completed by the holders of Claims and/or Interests
is included herewith.  Instructions for completing and returning the
ballots are set forth thereon and should be reviewed at length.  The Plan
will be confirmed by the Bankruptcy Court and made binding upon all
Claimants and Interest holders if (a) with respect to impaired Classes
of Claimants, the Plan is accepted by holders of two-thirds (2/3) in
amount and more than one-half (1/2) in number of Claims in each such class
voting upon the Plan and (b) with respect to classes of Interest Holders,
if the Plan is accepted by the holders of at least two-thirds (2/3) in
amount of the allowed interests of such class held by holders of such
interests.  In the event the requisite acceptances are not obtained, the
Bankruptcy Court may, nevertheless, confirm the Plan if it finds that the
Plan accords fair and equitable treatment to any class rejecting it.
Your attention is directed to Section 1129 of the Bankruptcy Code for
details regarding the circumstances of such "cram down" provisions.



        (Remainder of this page left blank intentionally)


                                                                         F-8
<PAGE>


        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE C - Preparation of Financial Statements

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.  Actual
results could differ from those estimates.

The Company follows the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of America
and has adopted a year-end of May 31.

Management acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud.  The Company's
system of internal accounting control is designed to assure, among other
items, that 1) recorded transactions are valid; 2) valid transactions are
recorded; and 3) transactions are recorded in the proper period in a
timely manner to produce financial statements which present fairly the
financial condition, results of operations and cash flows of the Company
for the respective periods being presented.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.

These financial statements reflect the books and records of Epicus
Communications Group, Inc., EPICUS, Inc., Mic Mac, Inc. and Moye &
Associates, Inc. for the respective years ended May 31, 2005 and 2004,
respectively.  All significant intercompany transactions have been
eliminated in consolidation.  The consolidated entities are referred to
as either Company or Epicus Group.

The Company conducts business activities in only one distinct business
segment.


NOTE D - Going Concern Uncertainty

The Company, in it's wholly-owned operating subsidiary only,  has
experienced cumulative operating losses for the five years ending May 31,
2001 through May 31, 2005 of approximately $9,200,000.  The consolidated
entity has used cash in operating activities for four years ending May
31, 2002 through May 31, 2005 of approximately $4,200,000.

Further, the Company remains delinquent in the payment of various Federal
and State telecommunications service and sales taxes accrued subsequent
to seeking protection under Chapter 11 of the U. S. Bankruptcy Code.  The
Company, prior to seeking protection under Chapter 11 of the U. S.
Bankruptcy Code, was the subject of various levies and collection actions
by the Internal Revenue Service and various State tax authorities.  The
withdrawal of the Company's ability to operate in any jurisdiction as a
result of the non-payment of these taxes could be detrimental to the
Company's ongoing operations and financial condition.

On October 25, 2004, the Company and it's operating subsidiary, Epicus,
Inc., filed voluntary petitions in the United States Bankruptcy Court for
the Southern District of Florida seeking reorganization relief under the
provisions of Chapter 11 of Title 11 of the United States Code (Case Nos.
04-34915, 04-34916, respectively).

The Company's liquidity, in periods prior to the bankruptcy filing, was
sustained through the sale of equity securities, restricted and
unrestricted, domestically and in international markets and significant
working capital advances have been made by members of management or by
entities owned or controlled by members of management during the current
and prior periods.  Due to the bankruptcy filing, the availability of
further liquidity from these sources is uncertain.


                                                                         F-9
<PAGE>




<PAGE>
        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE D - Going Concern Uncertainty - Continued

Since the filing of the respective bankruptcy petitions and prior
thereto, management undertook and continues to perform a detailed review
of all customer accounts, the credit ratings and payment history of the
respective customers.  In accordance with the Company's various operating
tariffs in the States in which the Company conducts business operations,
management is raising service rates and/or discontinuing service to
unprofitable customers and service areas.  However, due to the Company's
customer base, the Company continues to experience significant charges
for bad debts which impair the related cash flows and the Company's
continued existence is principally dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations on
a timely basis as well as provide sufficient resources to satisfy the
components of its proposed reorganization plan to retire pre-petition
liabilities and obligations.

There is no assurance that the Company's reorganization plan will be
approved, or if approved, will be successful.  Further the ability to
obtain additional funding through the sales of additional securities or,
that such funding, if available, will be obtained on terms favorable to
or affordable by the Company is uncertain.


NOTE E - Summary of Significant Accounting Policies

(1)  Cash and cash equivalents
     -------------------------

  For Statement of Cash Flows purposes, the Company considers all cash
  on hand and in banks, certificates of deposit and other highly-liquid
  investments with maturities of three months or less, when purchased,
  to be cash and cash equivalents.

  Cash overdraft positions may occur from time to time due to the timing
  of making bank deposits and releasing checks, in accordance with the
  Company's cash management policies.

(2)  Accounts receivable
     -------------------

  In the normal course of business, the Company extends unsecured credit
  to virtually all of its customers which are located throughout the
  United States and are principally concentrated in the southeastern
  quadrant of the country.  Because of the credit risk involved,
  management has provided an allowance for doubtful accounts which
  reflects its opinion of amounts which will eventually become
  uncollectible.  In the event of complete non-performance, the maximum
  exposure to the Company is the recorded amount of trade accounts
  receivable shown on the balance sheet at the date of non-performance.
  Concurrent with the Company's filing of a Petition for Relief under
  Chapter 11, the Company adopted the policy of recording a net accounts
  receivable balance equal to the actual cash collected during the 30
  day period subsequent to any reporting period.  Any differential
  between the Company's actual accounts receivable and the actual
  subsequent cash collections is recorded as bad debt expense in the
  reporting period.

(3)  Property and Equipment
     ----------------------
  Property and equipment are recorded at historical cost.  These costs
  are depreciated over the estimated useful lives, generally three to
  ten years, of the individual assets using the straight-line method.
  Gains and losses from the disposition of property and equipment are
  included in operations as incurred.

(4)  Intangible Assets
     -----------------

  Monies paid for development of the trade name "Epicus", approximately
  $23,525, were capitalized as a component of Other Assets on the
  Company's consolidated balance sheet.  In accordance with Statement of
  Financial Accounting Standards No. 144, "Accounting for the Impairment
  or Disposal of Long-Lived Assets", the Company follows the policy of
  evaluating all qualifying assets as of the end of each reporting
  quarter.  For each of the years ended May 31, 2004 and 2003, no
  charges to operations were made for impairments in the future benefit
  of this trade name.


                                                                         F-10
<PAGE>


          EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE E - Summary of Significant Accounting Policies - Continued

(4)  Intangible Assets - continued
     -----------------

  Other intangible assets are amortized over the estimated useful life
  of the underlying asset using the straight-line method.

(5)  Revenue Recognition
     -------------------

  Bundled telecommunications services and charges for local telephone
  services for business and residential customers are billed to the
  respective customer in advance at the initiation of each monthly
  billing cycle.  Long distance telephone services are billed in arrears
  in the month following the provision of the service.  Revenue for
  services billed in advance is recognized on a pro-rata basis over the
  course of the related billing cycle and revenue for long distance
  service billed in arrears is recognized at the respective billing
  date.  Accordingly, the Company has recognized an unearned revenue
  item in the accompanying balance sheet for unearned advance billings
  for service.

  The cancellation or termination of service by a customer prior to the
  expiration of the completion of the monthly billing cycle results in
  a partial refund due to the customer.  These reductions of revenue, if
  any, due to the cancellation of service by a customer, are recognized
  at the point of service termination and are recognized as a component
  of trade accounts payable until final settlement of the customer's
  account balance.

(6)  Income Taxes
     ------------

  The Company uses the asset and liability method of accounting for
  income taxes.  At May 31, 2005 and 2004, respectively, the deferred
  tax asset and deferred tax liability accounts, as recorded when
  material to the financial statements, are entirely the result of
  temporary differences.  Temporary differences represent differences in
  the recognition of assets and liabilities for tax and financial
  reporting purposes, primarily accumulated depreciation and
  amortization, allowance for doubtful accounts and vacation accruals.

  As of May 31, 2005 and 2004, respectively, the deferred tax asset
  related to the Company's net operating loss carryforward is fully
  reserved.

(7)  Advertising costs
     -----------------
  The Company does not conduct any direct response advertising
  activities.  For non-direct response advertising, the Company charges
  the costs of these efforts to operations at the first time the related
  advertising is published.

(8)  Earnings (loss) per share
     -------------------------

  Basic earnings (loss) per share is computed by dividing the net income
  (loss) available to common shareholders by the weighted-average number
  of common shares outstanding during the respective period presented in
  our accompanying financial statements.

  Fully diluted earnings (loss) per share is computed similar to basic
  income (loss) per share except that the denominator is increased to
  include the number of common stock equivalents (primarily outstanding
  options and warrants).

  Common stock equivalents represent the dilutive effect of the assumed
  exercise of the outstanding stock options and warrants, using the
  treasury stock method, at either the beginning of the respective
  period presented or the date of issuance, whichever is later, and only
  if the common stock equivalents are considered dilutive based upon the
  Company's net income (loss) position at the calculation date.

  At May 31, 2005 and 2004, the Company's issued and outstanding
  warrants, options and convertible debt are considered antidilutive due
  to the Company's net operating loss position.


                                                                         F-11
<PAGE>


          EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE E - Summary of Significant Accounting Policies - Continued

(9)  Employee Stock Options
     ----------------------

  The Company has adopted the policy of fair value based accounting for
  stock-based compensation in accordance with Statement of Financial
  Accounting Standards No. 123.


NOTE F - Fair Value of Financial Instruments

The carrying amount of cash, accounts receivable, accounts payable and
notes payable, as applicable, approximates fair value due to the short
term nature of these items and/or the current interest rates payable in
relation to current market conditions.

Interest rate risk is the risk that the Company's earnings are subject
to fluctuations in interest rates on either investments or on debt and
is fully dependent upon the volatility of these rates.  The Company does
not use derivative instruments to moderate its exposure to interest rate
risk, if any.

Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully
dependent upon the volatility of these rates.  The company does not use
derivative instruments to moderate its exposure to financial risk, if
any.


NOTE G - Concentrations of Credit Risk

The Company and its Epicus subsidiary maintain their respective cash
accounts in a financial institution subject to insurance coverage issued
by the Federal Deposit Insurance Corporation (FDIC).  Under FDIC rules,
the Company and its subsidiaries are entitled to aggregate coverage of
$100,000 per account type per separate legal entity per financial
institution.  During the years ended May 31, 2005 and 2004, respectively,
the various operating companies had deposits in a financial institution
with credit risk exposures in excess of statutory FDIC coverage.  The
Company has not incurred any losses as a result of any of these unsecured
situations.


NOTE H -Restricted Cash

As collateral for a standby letter of credit securing telephone service
provided by BellSouth Corp., the Company placed on deposit with the
financial institution issuing the standby letter of credit approximately
$201,000 in an interest bearing certificate of deposit.  During the
quarter ended February 29, 2004, management redeemed the amounts on
deposit and transferred the funds directly to BellSouth Corp. in lieu of
maintaining the standby letter of credit.

As of May 31, 2005, the Company has approximately $375,000 in cash on
deposit with BellSouth Corp. to secure future service and has assigned
a collateral interest, via a UCC-1 filing, in virtually all of the
Company's assets to BellSouth Corp.


NOTE I - Advances due from Officer

In prior periods, predating Sarbanes-Oxley Act of 2002, the Company
advanced approximately $15,000 to a corporate officer.  During the
quarter ended August 31, 2004, the Company and the corporate officer
agreed to offset the $15,000 advance against the accrued, but unpaid,
compensation.  As of May 31, 2004, the Company had accrued approximately
$826,000 in compensation due, but unpaid, to this officer.


                                                                         F-12
<PAGE>


        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE J - Property and Equipment

Property and equipment consists of the following as of May 31, 2005 and
2004, respectively:

<TABLE>
<CAPTION>
                                         May 31, 2005   May 31, 2004  Estimated life
                                         ------------   ------------  --------------
<S>                                      <C>            <C>           <C>

     Computer equipment                   $ 462,295      $ 460,488      5 years
     Office furniture and fixtures           81,452         68,202     7-10 years
     Software and system programming        145,039        145,039      5 years
                                          ---------      ---------
                                            688,786        673,729
     Less accumulated depreciation         (538,570)      (407,360)
                                          ---------      ---------
     Net property and equipment           $ 150,216      $ 266,369
                                          =========      =========
</TABLE>

Depreciation expense for the years ended May 31, 2005 and 2004 was
approximately $133,875 and $116,321, respectively.

NOTE K - Liabilities Subject to Compromise

Liabilities subject to compromise, pursuant to the Company's bankruptcy
petition, are as follows:

<TABLE>
<CAPTION>
                                                     May 31, 2005    May 31, 2004
                                                     ------------    ------------
<S>                                                  <C>             <C>

     Accounts payable - trade                        $  5,200,758    $  5,085,574
     Convertible debentures                             4,136,652       1,590,780
     Accrued sales and service taxes payable            3,602,860       3,305,537
     Accrued officer compensation                       2,927,733       2,825,568
     Accrued interest payable                             813,787         956,590
     Notes payable to banks and other                     350,000       1,197,878
     Accrued payroll and payroll taxes payable            337,503         492,692
     Accrued rent payable to affiliate                    157,567         150,067
     Advances from controlling shareholder/officer         39,615       1,015,617
     Cash overdraft                                             -         233,072
                                                     ------------    ------------
         Total liabilities subject to compromise     $ 17,566,475    $ 16,853,375
                                                     ============    ============
</TABLE>


NOTE L - Accrued Officer Compensation

As of May 31, 2005, the Company has accrued post-petition compensation
of approximately $206,031 to it's Chief Executive Officer and Chief
Operating Officer, at a rate of approximately at the rate of
approximately $20,833 and $8,600 per month respectively.

Included in liabilities subject to compromise is approximately $2,928,000
for accrued, but unpaid, officers compensation through October 31, 2004.



        (Remainder of this page left blank intentionally)

                                                                         F-13
<PAGE>



        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE M - Notes Payable - Other - Subject to Compromise

Notes payable to others at May 31, 2005 and 2004, respectively, are as
follows:

<TABLE>
<CAPTION>
                                                     May 31, 2005    May 31, 2004
                                                     ------------    ------------
<S>                                                  <C>             <C>

$400,000 note payable to creditor trust fund.
Interest at 8.0%.                                      $  350,000     $   350,000

$750,000 note payable to a foreign corporation.
  Interest at 13.0%. This debt was purchased by
  the Company's controlling shareholder/
  officer during the quarter ended August 31, 2004              -         750,000

$97,878 note payable to an unrelated entity.
  Non-interest bearing.  This debt was purchased
  by the Company's controlling shareholder/officer
  during the quarter ended August 31, 2004                      -          97,878
                                                       ----------      ----------
 Total notes payable to others                         $  350,000      $1,197,878
                                                       ==========      ==========
</TABLE>


NOTE N - Advances from Controlling Shareholder/Officer - Subject to
         Compromise

The Company's controlling shareholder and executive officer and/or
entities owned or controlled by the Company's controlling
shareholder/officer have made cumulative cash advances to the Company to
provide working capital and to directly support operations.  These
advances bear interest at 6.25% and are unsecured and are due upon
demand.

Additionally, during the quarter ended August 31, 2004, the controlling
shareholder/officer purchased and assumed ownership of two (2) separate
debts of the Company owed to a foreign corporation and another unrelated
entity, respectively, in the amount of approximately $750,000 and
$97,878.

At May 31, 2005 and 2004, the Company was indebted to the controlling
shareholder/officer in the amounts of approximately $39,615 and
$1,015,617, respectively, and cumulative accrued interest on these debts
of approximately $443,000 and $161,000.  These balances are included in
the "Liabilities subject to compromise" caption on the accompanying
balance sheet.


NOTE O - Convertible Debentures - Subject to Compromise

As of May 31, 2005 and 2004, the Company has outstanding aggregate
balances on convertible debentures of approximately $4,137,000 and
$1,591,000.

Debenture #1
------------

On September 28, 2001, a consortium of four (4) separate investment
entities under common management purchased 12% convertible debentures
from the Company and were issued the right to receive warrants to
purchase an aggregate of 3,500,000 shares of common stock from the
Company in a future private placement transaction.

Interest on these debentures is payable on a quarterly basis on March 31,
June 30, September 30 and December 31 of each year while such Debentures
are outstanding and on each Conversion Date, whichever occurs earlier.
Interest may be paid, at the Company's option, in either cash or
restricted, unregistered common stock.  The Debentures must be prepaid
if an event of default occurs under the Debentures and at the Company's
option may be prepaid within thirty days of the original issue date of
the Debentures.  Management is of the opinion that the Company has
sufficient authorized common shares to cover the conversions.  In the
event that the Company does not have adequate authorized and unissued
shares of common stock to effect the maximum shares needed to effect the
conversion, the Company may need to seek shareholder consent to increase
our amount of authorized shares.  If we do not have enough authorized
shares to cover the conversions and are unable to obtain shareholder
approval to increase our authorized shares, such


                                                                         F-14
<PAGE>

        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE O - Convertible Debentures - Subject to Compromise

Debenture #1 - continued
------------

failure would be considered a breach of certain relevant provisions and
representations and warranties under the Debenture documents and could
result in the acceleration of all amounts due under the Debentures.

On May 1, 2003, the Company and the Debenture Holders entered into a
Debenture Redemption Agreement (Redemption Agreement).  The Redemption
Agreement sets forth the following terms and conditions related to the
Debentures on an ongoing basis:

 1.  Redemption Schedule; Payment of Net Redemption Amount: The Company
     shall pay the Net Redemption Price to the Debenture Holders in
     monthly installments in the amount of $40,000 (the "Monthly
     Redemption Payment"), with the first installment thereof due on July
     1, 2003 and subsequent installments thereof due on the first business
     day of each succeeding month (each, a "Payment Date") until the Net
     Redemption Amount has been paid in full.  The Company shall pay the
     Debenture Holders by wire transfer of immediately available funds
     pursuant to the Debenture Holders' written instructions.  The Monthly
     Redemption Payment shall be applied with respect to the Debenture
     Holders in the following order: (I) Accrued Interest, (ii) Redemption
     Premium, and (iii) outstanding principal balance of the Owned
     Debentures.  During Fiscal 2004, the Company paid approximately
     $120,000 cash in accordance with this section of this Agreement.

 2.  Prohibited Conversions: The Debenture Holders shall not convert the
     Owned Debentures into shares of the Company's common stock, par value
     $0.001 per share (the "Shares") during the period commencing on the
     date hereof and ending on June 30, 2003 (the "Prohibited Period").

 3.  Permitted Conversions: Following the Prohibited Period, the Debenture
     Holders shall be permitted to convert its Owned Debentures, to the
     extent such Owned Debentures have not been previously redeemed
     hereunder, into Shares in accordance with the terms and subject to
     the conditions of the Owned Debentures, subject to the following
     restrictions:

     1. If the last reported sale price of the Shares on the
        Over-the-Counter Bulletin Board as reported by Bloomberg (the
        "Price") is less than $.10 per Share, then the Debenture Holders
        shall have the right to convert their Owned Debentures into not
        more than an aggregate of 300,000 Shares every thirty (30) days
        during the period in which the Price remains less than $.10 per
        Share,
     2. If the Price is equal to or exceeds $.10 per Share but is less
        than $.20 per Share, then the Debenture Holders shall have the
        right to convert their Owned Debentures into not more than an
        aggregate of 500,000 Shares every thirty (30) days during the
        period that the Price is equal to or exceeds $.10 per Share but is
        less than $.20 per Share,
     3. If the Price is equal to or exceeds $.20 per Share but is less
        than $.30 per Share, then the Debenture Holders shall have the
        right to convert their Owned Debentures into not more than an
        aggregate of 750,000 Shares every thirty (30) days during the
        period that the Price is equal to or exceeds $.20 per Share but is
        less than $.30 per Share, and
     4. If the Price is equal to or exceeds $.30 per Share, then the
        Debenture Holders shall not be restricted by the Company hereunder
        with respect to the number of Shares into which the Debentures may
        be converted during the period that the Price is equal to or
        exceeds $.30 per Share, provided, however, that if the Company
        fails to (I) make the Monthly Redemption Payment pursuant to
        Section 2 hereof within five (5) business days following the
        Payment Date or (ii) pay any delinquent amounts that are due and
        owing under this Agreement, then the foregoing restrictions on the
        Debenture Holders' right to convert their Owned Debentures into
        Shares shall be suspended until the first day of the next month
        following the date that the Monthly Redemption Payment is received
        in full by the Debenture Holders.

 4.  Issuance of Additional Shares: The Company shall issue and deliver
     to the Debenture Holders shares of common stock representing, in the
     aggregate, one percent (1%) of the outstanding shares of the Company
     on the earlier to occur of: (I) the date of full conversion by the
     Debenture Holders of all of the Owned Debentures and (ii) the date
     of payment by the Company of the total Aggregate Redemption Price
     (collectively, the "Additional Shares").


                                                                         F-15
<PAGE>

             EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE O - Convertible Debentures - Subject to Compromise - Continued

Debenture #1 - continued
------------

 5.  Interest: Interest on the outstanding balance of the Owned Debentures
     shall continue to accrue following the date hereof as specified in
     the respective Owned Debenture and shall be payable in cash or Shares
     in accordance with the terms thereof.

 6.  Effectiveness of the Registration Statement: The Company shall take
     all necessary actions, including the preparing and filing of one or
     more registration statements of the Company and any amendments or
     supplements thereto (the "Registration Statement") required under the
     Securities Act of 1933, as amended, and the rules and regulation
     thereunder, to cause the Shares issuable upon conversion of the Owned
     Debentures to be registered for resale pursuant to an effective
     Registration Statement.  If (I) the Company fails to respond to all
     comments made by the Securities and Exchange Commission (the "SEC")
     in connection with the Registration Statement within ten (10)
     business days of receipt from the SEC or (ii) the SEC has not
     declared the Registration Statement effective on or before July 10,
     2003, then the Company shall immediately pay to each Debenture
     Holders an amount equal to five percent (5%) of the sum of (a) the
     outstanding balance of the Debenture Holders's Owned Debentures, (b)
     accrued interest on the Debenture Holders's Owned Debentures and
     a premium equal to thirty percent (30%) of the sum of (a) and (b)
     (the "Registration Penalty").  The Registration Penalty shall be
     payable either in cash or Shares, the number of which shall be based
     on the conversion price set forth in the Owned Debentures, at each
     Debenture Holders's option.  If a Debenture Holders elects to receive
     the Registration Penalty in cash, then the full amount of the
     Registration Penalty shall be paid to such Debenture Holders by wire
     transfer of immediately available funds in accordance with the
     instructions set forth on attached Schedule II.

 7.  Effect of Breach:  In the event of a breach by the Company of any of
     the provisions of this Agreement, either by a failure to timely make
     any payment or failure to effect any conversion by the Debenture
     Holders or otherwise, in addition to any other remedies available to
     the Debenture Holders in law or equity with respect to such breach,
     the applicable discount to the market price of the Owned Debentures
     shall permanently be amended from fifty percent (50%) to seventy-five
     percent (75%).

In conjunction with the issuance of the convertible debentures, the
debentures were issued with an equivalent per share value of common stock
below the ending quoted market price of the Company's common stock on the
issue date.  This difference created a Beneficial Conversion Feature
Discount of approximately $300,000.  This discount was then amortized
over the unexpired time period between the date of issue of the eligible
shares and the maturity date of the underlying debentures.  Approximately
$141,177 was amortized to operations during the year ended May 31, 2003.

Debenture #2
------------

On May 28, 2004, July 22, 2004 and September 27, 2004, the Company
completed separate private placements of an aggregate of (a) $1,100,000
in 8% secured convertible notes and (b) warrants to purchase 1,100,000
shares of our common stock each to 4 accredited investors. The
transaction was consummated pursuant to a Securities Purchase Agreement
by and among us and the purchasers named therein (the "Securities
Purchase Agreement").

The secured convertible notes mature on the second anniversary date of
each respective closing and are convertible into shares of our common
stock, at the option of the holder at any time and from time to time
after the date when the debentures where issued, at a conversion price
equal to the lower of (I) $0.10 per share and (ii) 60% of the average of
the lowest three inter-day trading prices of our common stock during the
twenty trading days immediately preceding the date of conversion. The
warrants are exercisable, at $0.03 per share, until the fifth (5th)
anniversary date of the issuance of the warrants.

Interest on the notes are payable, quarterly on March 31, June 30,
September 30 and December 31 of each year beginning on June 30, 2004.
The warrants and debentures contain customary anti-dilution protections.
In addition, on May 28, 2004, we have also agreed to sell additional
Notes to the original purchasers in the aggregate principal amount of
$2,200,000 and additional Warrants to purchase an aggregate of 2,200,000
shares of our common stock for an aggregate purchase price of $2,200,000.
As noted above, these additional notes were sold on July 22, 2004 and
September 27, 2004 in segments of $1,100,000 each.

                                                                         F-16
<PAGE>

        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE O - Convertible Debentures - Subject to Compromise - Continued

Debenture #2 - continued
------------

The terms of these additional Notes and the additional Warrants shall be
identical to the terms of the Notes and Warrants that are currently
outstanding.  The Securities Purchase Agreement contains various
representations, warranties and covenants of the parties customary for
a transaction of this type. We have agreed to indemnify the purchasers
against various liabilities.  We entered into a Registration Rights
Agreement with each purchaser, and have agreed to file a Registration
Statement with the SEC under the Securities Act, covering the resale of
(I) the shares of common stock underlying the currently issued warrants;
(ii) the shares of common stock underlying the notes currently
outstanding in the amount of $3,300,000; (iii) the shares of common stock
underlying the warrants to be issued; and (iv) any shares of common stock
issued or issuable upon a stock split, dividend or other distribution,
recapitalization or similar event for an offering to be made on a
continuous basis pursuant to Rule 415.

The Registration Rights Agreement requires us to initially register 200%
of the shares issuable upon the exercise of all of the warrants and the
conversion of all of the notes both issued and to be issued.  We and the
purchasers each agreed with the other to indemnify the other for certain
liabilities arising under the Securities Act.  Pursuant to the
Registration Rights Agreement and subject to certain other provisions
therein, if we fail to timely perform or provide in accordance with our
responsibilities under the Registration Rights Agreement and certain
Securities Act provisions, then, in addition to any other rights the
holder or holders may have pursuant to the Registration Rights Agreement
or under applicable law, on each monthly anniversary of each such event
date (if the applicable event shall not have been cured by such date)
until the applicable event is cured, we shall pay to each holder an
amount in cash, as partial liquidated damages and not as a penalty, equal
to 2.0% of the outstanding principal amount of the Notes issued pursuant
to the Securities Purchase Agreement.  The foregoing transactions were
completed under exemptions from the registration requirements of the
Securities Act, including those afforded by Section 4(2) of the
Securities Act of 1933, and the rules and regulations promulgated under
that Section.

As of May 31, 2005, and subsequent thereto, the Company has not
successfully completed the filing of the mandated Registration Statement
and had said filing deemed effective by the U. S. Securities and Exchange
Commission.


NOTE P - Income Taxes

The components of income tax (benefit) expense for each of the years
ended May 31, 2005 and 2004, respectively, are as follows:

<TABLE>
<CAPTION>
                                         May 31, 2005     May 31, 2004
                                         ------------     ------------
<S>                                      <C>              <C>
   Federal:
     Current                                  $     -          $     -
     Deferred                                       -                -
                                              -------          -------
                                                    -                -
                                              -------          -------
   State:
     Current                                        -                -
     Deferred                                       -                -
                                              -------          -------
                                                    -                -
                                              -------          -------
     Total                                    $     -          $     -
                                              =======          =======
</TABLE>




        (Remainder of this page left blank intentionally)

                                                                         F-17
<PAGE>


        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE P - Income Taxes - Continued

The Company has a net operating loss carryforward of approximately
$16,500,000 to offset future taxable income.  Subject to current
regulations, this carryforward will begin to expire in 2006.
Additionally, this operating loss carryforward will be adjusted in future
periods for the forgiveness of any amounts through the Company's filing
for protection under Chapter 11 of the U. S. Bankruptcy Code.  The amount
and availability of the net operating loss carryforwards may be subject
to limitations set forth by the Internal Revenue Code. Factors such as
the number of shares ultimately issued within a three year look-back
period; whether there is a deemed more than 50 percent change in control;
the applicable long-term tax exempt bond rate; continuity of historical
business; and subsequent income of the Company all enter into the annual
computation of allowable annual utilization of the carryforwards.

The Company's income tax expense for each of the years ended May 31, 2005
and 2004, respectively, differed from the statutory federal rate of 34
percent as follows:

<TABLE>
<CAPTION>
                                         May 31, 2005     May 31, 2004
                                         ------------     ------------
<S>                                      <C>              <C>
Statutory rate applied to loss before
  income taxes                           $ (2,600,000)    $ (1,120,000)
Increase (decrease) in income taxes
resulting from:
  State income taxes                                -                -
  Other, including reserve for deferred
  tax asset                                 2,600,000        1,120,000
                                         ------------     ------------
     Income tax expense                  $          -     $          -
                                         ============     ============
</TABLE>

Temporary differences, consisting primarily of statutory recognition of
bad debt expenses, deferrals of expenses for organizational costs and
accrued, but unpaid, accruals for officer compensation and statutory
differences in the depreciable lives for property and equipment, between
the financial statement carrying amounts and tax bases of assets and
liabilities give rise to deferred tax assets and liabilities as of May
31, 2005 and 2004, respectively:

<TABLE>
<CAPTION>
                                         May 31, 2005     May 31, 2004
                                         ------------     ------------
<S>                                      <C>              <C>
   Deferred tax assets
     Net operating loss carryforwards    $  8,280,000     $  5,680,000
     Less valuation allowance              (8,280,000)      (5,680,000)
                                         ------------     ------------
   Net Deferred Tax Asset                $          -     $          -
                                         ============     ============
</TABLE>

During each of the years ended May 31, 2005 and 2004, respectively, the
valuation allowance (decreased) increased by approximately $2,600,000 and
$920,000.


NOTE Q - Preferred Stock

The Company's Articles of Incorporation authorize the issuance of up to
5,000 shares of Preferred Stock, $0.001 par value per share, the
designation and rights of which are to be determined by our Board of
Directors.  There are no shares of Preferred Stock issued and outstanding
at May 31, 2005 and 2004, respectively.

The Board of Directors has authority, without action by the shareholders,
to issue all or any portion of the authorized but unissued Preferred
Stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other
rights of such series.  We consider it desirable to have Preferred Stock
available to provide increased flexibility in structuring possible future
acquisitions and financings and in meeting corporate needs which may
arise.

                                                                         F-18
<PAGE>


        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE Q - Preferred Stock - Continued

If opportunities arise that would make desirable the issuance of
Preferred Stock through either public offering or private placements, the
provisions for Preferred Stock in our Articles of Incorporation would
avoid the possible delay and expense of a shareholder's meeting, except
as may be required by law or regulatory authorities.  Issuance of the
Preferred Stock could result, however, in a series of securities
outstanding that will have certain preferences with respect to dividends
and liquidation over the common stock that would result in dilution of
the income per share and net book value of the common stock.  Issuance
of additional common stock pursuant to any conversion right that may be
attached to the terms of any series of Preferred Stock may also result
in dilution of the net income per share and the net book value of the
common stock.  The specific terms of any series of Preferred Stock will
depend primarily on market conditions, terms of a proposed acquisition
or financing, and other factors existing at the time of issuance.
Therefore, it is not possible at this time to determine in what respect
a particular series of Preferred Stock will be superior to our common
stock or any other series of Preferred Stock which we may issue. Our
Board of Directors may issue additional Preferred Stock in future
financings, but has no current plans to do so at this time.


NOTE R - Common Stock Transactions

During the period from June 24, 2003 through August 8, 2003, the Company
sold an aggregate 12,000,000 shares of common stock pursuant to
Regulation S of the Securities Act of 1933 for gross proceeds of
approximately $568,000.  No underwriter was used in connection with the
sale of these securities.

On July 14, 2003, the Company issued approximately 1,000,000 shares of
restricted, unregistered common stock to an unrelated entity providing
consulting and telemarketing services to the Company's wholly-owned
subsidiary, Epicus, Inc.  This transaction was valued at approximately
$45,000, which was equal to or in excess of the discounted closing price
of the Company's common stock on the NASDAQ Electronic Bulletin Board on
the date of each respective transaction.  The Company relied upon Section
4(2) of The Securities Act of 1933, as amended, for an exemption from
registration on these shares.

On July 11, 2003, the Company issued approximately 680,000 shares of
common stock previously registered pursuant to a Registration Statement
on Form S-8 for legal services.  These transactions were valued at
approximately $64,600, which was equal to the quoted closing price of the
Company's securities on the NASDAQ Electronic Bulletin Board.

During the period from September 10, 2003 through November 14, 2003, the
Company issued an aggregate 8,978,902 shares of common stock to the
respective Debenture Holders as a result of the exercise of the
conversion of outstanding 12% debentures.  These transactions were valued
pursuant to the debenture terms.  In situations where the conversion
price, per the debenture terms, was less than the discounted closing
price of the Company's common stock on the NASDAQ Electronic Bulletin
Board on the date of each respective transaction, the Company recognized
a non-cash charge to operations.  The Company recognized a cumulative
non-cash charge of approximately $51,473 for the differential between the
"fair value" of these securities sold and the contractual exchange price.

During the period from December 12, 2003 through February 27, 2004, the
Company issued an aggregate 15,173,478 shares of common stock to the
respective Debenture Holders as a result of the exercise of the
conversion of outstanding 12% debentures.  These transactions were valued
pursuant to the debenture terms.  In situations where the conversion
price, per the debenture terms, was less than the discounted closing
price of the Company's common stock on the NASDAQ Electronic Bulletin
Board on the date of each respective transaction, the Company recognized
a non-cash charge to operations.  The Company recognized a cumulative
non-cash charge of approximately $79,254 for the differential between the
"fair value" of these securities sold and the contractual exchange price.


                                                                         F-19
<PAGE>


        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE R - Common Stock Transactions - Continued

During January 2004, the Company's Board of Directors approved the
issuance of an aggregate 62,500,000 shares of restricted, unregistered
common stock to Gerard Haryman, the Company's Chairman, in repayment of
approximately $1,000,000 in unsecured debt.  Through February 29, 2004,
the Company has issued 50,000,000 of the approved shares in retirement
of $800,000 in debt.  The per share exchange price was equal to or in
excess of the discounted closing price of the Company's common stock on
the NASDAQ Electronic Bulletin Board on the date of the transaction.  The
Company relied upon Section 4(2) of The Securities Act of 1933, as
amended, for an exemption from registration on these shares.

On February 27, 2004, the Company filed a Registration Statement under
the Securities Act of 1933 on Form S-8 to register an aggregate
50,500,000 shares of common stock to be used as follows:

  1.  20,000,000 shares of the Company's Common Stock that may be issued
      pursuant to its 2004 Stock Option Plan. Also registered hereunder
      are such additional shares of Common Stock, presently
      indeterminable, as may be necessary to satisfy the anti-dilution
      provisions of the Plan to which this Registration Statement
      relates in accordance with Rule 416 under the Securities Act of
      1933, as amended (the "Securities Act");
  2.  9,000,000 shares of the Company's Common Stock to be issued to
      Marc Sporn as compensation for consulting services performed by
      Mr. Sporn under contract with Eastern Consulting Corp;
  3.  3,500,000 shares of the Company's Common Stock to be issued to
      Jeffrey A. Rinde as compensation for legal services rendered by
      Mr. Rinde under a retainer agreement with Bondy & Schloss LLP, the
      Company's new principal securities counsel; and
  4.  18,000,000 shares of the Company's Common Stock to be issued to
      Manny Shulman as compensation for consulting services rendered by
      Mr. Shulman.

Approximately 15,650,500 shares registered on this Form S-8 were issued
between March 1, 2004 and May 31, 2004.

During the period from March 9, 2004 through May 25, 2004, the Company
issued an aggregate 33,208,204shares of common stock to the respective
Debenture Holders as a result of the exercise of the conversion of
outstanding 12% debentures.  These transactions were valued pursuant to
the debenture terms.  In situations where the conversion price, per the
debenture terms, was less than the discounted closing price of the
Company's common stock on the NASDAQ Electronic Bulletin Board on the
date of each respective transaction, the Company recognized a non-cash
charge to operations.  The Company recognized a cumulative non-cash
charge of approximately $255,490 for the differential between the "fair
value" of these securities sold and the contractual exchange price.

During the period from June 7, 2004 through August 27, 2004, the Company
issued an aggregate 68,045,158 shares of common stock to the respective
Debenture Holders as a result of the exercise of the conversion of
outstanding 12% debentures.  These transactions were valued pursuant to
the debenture terms.  In situations where the conversion price, per the
debenture terms, was less than the discounted closing price of the
Company's common stock on the NASDAQ Electronic Bulletin Board on the
date of each respective transaction, the Company recognized a non-cash
charge to operations.  The Company recognized a cumulative non-cash
charge of approximately $142,397 for the differential between the "fair
value" of these securities sold and the contractual exchange price.

On August 2, 2004, the Company executed an agreement between Gerard
Haryman, the Company's controlling shareholder and executive officer for
the partial repayment of still outstanding direct and indirect loans in
excess of $2,000,000 made by Gerard Haryman to the Company.  The Company
issued 301,507,538 shares of restricted, unregistered common stock, with
an agreed-upon value of $600,000.  As the agreed-upon value of these
shares was below the closing quoted price of the Company's common stock
on the transaction date, the recognized a cumulative non-cash charge of
approximately $425,126 for the differential between the "fair value" of
these securities and the agreed-upon value.


                                                                         F-20
<PAGE>


        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE R - Common Stock Transactions - Continued

During the period from September 10, 2004 through October 18, 2004, the
Company issued an aggregate 25,527,754 shares of common stock to the
respective Debenture Holders as a result of the exercise of the
conversion of outstanding 12% debentures.  These transactions were valued
pursuant to the debenture terms.  In situations where the conversion
price, per the debenture terms, was less than the discounted closing
price of the Company's common stock on the NASDAQ Electronic Bulletin
Board on the date of each respective transaction, the Company recognized
a non-cash charge to operations.  The Company recognized a cumulative
non-cash charge of approximately $31,484 for the differential between the
"fair value" of these securities sold and the contractual exchange price.

As of May 31, 2005, Company management completed a reconciliation of the
issued and outstanding stock with the records of the Company's
independent stock transfer agent.  It was determined that the
cancellation of approximately
244,125 shares of common stock had not been recorded.  The initial
transaction related to these shares was for various consulting fees
valued at approximately $6,300.  The Company recorded the effect of this
transaction in the fourth quarter of Fiscal 2005 as if it had happened
on June 1, 2004, the first day of the current fiscal year.


NOTE S - Stock Warrants

On September 28, 2001, in conjunction with the sale of an aggregate of
$700,000 of 12% convertible debentures, the Company issued the right to
receive warrants to purchase an aggregate 3,500,000 shares of common
stock at a price to be determined at the time of the warrant(s) issue.
As of May 31, 2004, and subsequent thereto, the Company has not issued
any warrants related to this issue.

In conjunction with the sale of an aggregate of $3,300,000 in 8% secured
convertible notes, the Company issued warrants to purchase 3,300,000
shares of our common stock to 4 accredited investors. The transaction was
consummated pursuant to a Securities Purchase Agreement by and among us
and the purchasers named therein (the "Securities Purchase Agreement").
The warrants are exercisable, at $0.03 per share, through the 5th
anniversary date of the issuance of each respective warrant.

The following table presents warrant activity through May 31, 2005:

<TABLE>
<CAPTION>
                                                                Weighted
                                                                Average
                                                  Number of     Exercise
                                                    Shares       Price
                                                  ---------     --------
<S>                                               <C>           <C>
   Balance at May 31, 2002                                -         -
   Issued                                         1,100,000       $0.03
   Exercised                                              -         -
   Expired                                                -                     -
                                                  ---------
   Balance at May 31, 2004                        1,100,000       $0.03

   Issued                                         2,200,000       $0.03
   Exercised                                              -         -
   Expired                                                -                     -
                                                  ---------
   Balance at May 31, 2005                        3,300,000       $0.03
                                                  =========
</TABLE>

                                                                         F-21
<PAGE>

        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE T - Stock Options

1998 Stock Option Plan
----------------------

On May 31, 1998, the Company's Board of Directors adopted a Stock Option
Plan far its employees, directors and consultants.  On April 24, 2001,
the Company filed a Registration Statement under the Securities Act of
1933 on Form S-8 to register 5,000,000 underlying shares of the stock
option plan.

The purpose of the plan is to promote success of the Company by providing
a method whereby eligible employees, directors and independent
contractors and consultants providing services to the Company may be
awarded additional remuneration for services rendered and invest in the
capital stock of the Company.   The plan will be administered by the
Compensation Committee of the Board of Directors and will consist of not
less than two people.  This committee shall have the full power and
authority to grant to eligible persons options under the plan.  Persons
eligible to participate in the plan include officers and directors,
employee, non-employee directors, independent contractors and consultants
of the Company, as the Committee shall select.  The plan includes and
participants may receive Incentive Stock Options or Nonqualified Stock
Options.  An option granted under the plan shall remain exercisable
during the term of the option to the extent provided in the applicable
agreement and the plan.  Shares of Common Stock delivered in payment in
connection with the exercise of an Option, and shares of Common Stock
withheld for such payment, shall be valued for such purpose at their Fair
Market Value as of the exercise date.  By acceptance of an Award, the
Award is a special incentive compensation that will not be taken into
account, in any manner, as salary, compensation or bonus in determining
the amount of any payment under any pension, retirement or other employee
benefit plan, program or policy of the Company or any Subsidiary.

Employees of the Company who have been granted options are authorized by
the Committee to purchase the shares at a price equal to 55% of the three
day average closing bid price prior to the date of written election to
exercise.  Through May 31, 2004, options to purchase a cumulative
4,280,277 shares of common stock of the 5,000,000 shares authorized in
the Plan have been granted and were concurrently exercised.

2004 Stock Option Plan
----------------------

In February 2004, the Company's Board of Directors adopted a Stock Option
Plan far its employees, directors and consultants.  On February 27, 2004,
Company filed a Registration Statement under the Securities Act of 1933
on Form S-8 to register 20,000,000 underlying shares of the 2004 Stock
Option Plan.

The purpose of the 2004 Stock Option Plan (2004 Plan) is to secure for
the Company and its shareholders the benefits arising from capital stock
ownership by employees, officers, directors, consultants and other
service providers of the Company or any parent or subsidiary of the
Company (each an "Affiliate") who are expected to contribute to the
Company's future growth and success.  The 2004 Plan is also designed to
attract and retain other persons who will provide services to the
Company.  Those provisions of the 2004 Plan which make express reference
to Section 422 of the Internal Revenue Code of 1986, as amended or
replaced from time to time (the "Code"), shall apply only to Incentive
Stock Options (as that term is defined herein).

Options granted pursuant to 2004 Plan shall be authorized by action of
the Board of Directors (the "Board") of the Company (or the committee
appointed by the Board in accordance with Section 2(b) below) and may be
either incentive stock options ("Incentive Stock Options") intended to
meet the requirements of Section 422 of the Code or non-statutory options
which are not intended to meet the requirements of Section 422 of the
Code ("Non-Qualified Options").


                                                                         F-22
<PAGE>


        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE T - Stock Options

2004 Stock Option Plan - continued
----------------------

The purchase price per Share issuable upon the exercise of an option
shall be determined by the Board or the Committee at the time of grant
of such option, provided, however, that such exercise price in the case
of Incentive Stock Options, shall not be less than 100% of the Fair
Market Value (as hereinafter defined) of such Shares at the time of grant
of such option, and for Incentive Stock Options granted to a "10%
Shareholder" (as defined in Section 11(b)), shall not be less than 110%
of such Fair Market Value.  "Fair Market Value" of a Share as of a
specified date for purposes of the Plan shall mean the closing price of
a Share on the principal securities exchange (including, but not limited
to, the Nasdaq SmallCap Market or the Nasdaq National Market) on which
such Shares are traded on the day immediately preceding the date as of
which Fair Market Value is being determined, or on the next preceding
date on which such Shares are traded if no Shares were traded on such
immediately preceding day, or if the Shares are not traded on a
securities exchange, Fair Market Value shall be deemed to be the average
of the high bid and low asked prices of the Shares in the over-the-
counter market on the day immediately preceding the date as of which Fair
Market Value is being determined or on the next preceding date on which
such high bid and low asked prices were recorded.  If the Shares are not
publicly traded, Fair Market Value of a Share (including, in the case of
any repurchase of Shares, any distributions with respect thereto which
would be repurchased with the Shares) shall be determined in good faith
by the Board taking into consideration prices at which the Company has
issued Shares during the preceding six months.  In no case shall Fair
Market Value be determined with regard to restrictions other than
restrictions which, by their terms, will never lapse.

Options granted under the Plan may provide for the payment of the
exercise price by delivery of cash or a check to the order of the Company
in an amount equal to the exercise price of such options, or by any other
means which the Board determines are consistent with the purpose of the
Plan and with applicable laws and regulations (including, without
limitation, the provisions of Rule 16b-3).

Subject to earlier termination as provided herein, each option and all
rights thereunder shall expire on such date as determined by the Board
or the Committee and set forth in the applicable option agreement,
provided that such date shall not be later than ten (10) years after the
date on which the option is granted, or as prescribed by Section 11(b)
of the 2004 Plan.

Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall
be set forth in the option agreement evidencing such option, subject to
the provisions of the Plan.  Subject to the requirements in the
immediately preceding sentence, if an option is not at the time of grant
immediately exercisable, the Board or the Committee may (I) in the
agreement evidencing such option, provide for the acceleration of the
exercise date or dates of the subject option upon the occurrence of
specified events and/or (ii) at any time prior to the complete
termination of an option, accelerate the exercise date or dates of such
option.

As of May 31, 2005, no options under the 2004 Stock Option Plan have been
granted.

The following tables summarize common stock options activity for the two
years ended May 31, 2005:

<TABLE>
<CAPTION>
                                                            Weighted average
                                                            price per share
                                                            ----------------
<S>                                        <C>              <C>
  Options outstanding at May 31, 2003           -                    -
   Issued                                       -                    -
   Exercised                                    -                    -
                                           ------
   Expired/Terminated                           -                    -

  Options outstanding at May 31, 2004           -                    -
   Issued                                       -                    -
   Exercised                                    -                    -
                                           ------
   Expired/Terminated                           -                    -
  Options outstanding at May 31, 2005           -                    -
</TABLE>


                                                                         F-23
<PAGE>


          EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE T - Stock Options - Continued

<TABLE>
<CAPTION>
                   Options      Options     Options       Options       Exercise price range
                   granted     exercised   terminated   outstanding   per outstanding option
                  ---------    ---------   ----------   -----------   ----------------------
<S>               <C>          <C>         <C>          <C>           <C>
2002 employees    3,067,777    3,067,777            -             -       $0.04 - $0.09
2002 officers     1,212,500    1,212,500            -             -           $0.07
                  ---------    ---------   ----------   -----------
  Totals          4,280,277    4,280,277            -             -
                  =========    =========   ==========   ===========
</TABLE>

As of May 31, 2005, there are no granted and outstanding options.
Additionally, all granted options were concurrently and simultaneously
exercised by the respective employee or officer.

The weighted-average fair value of options covering approximately
1,227,868 shares of common stock granted during the year ended May 31,
2002 for which the exercise price was greater than the market price on
the grant date was $0.06 and the weighted-average exercise price was
$0.07.

The weighted-average fair value of options covering approximately
2,442,192 shares of common stock granted during the year ended May 31,
2002 for which the exercise price was less than the market price on the
grant date was $0.07 and the weighted-average exercise price was $0.04.
The Company recognized a cumulative non-cash charge to operations for the
differential between "fair value" and the exercise price of approximately
$72,242 on these transactions.

The Company issued options covering approximately 610,217 shares of
common stock during the year ended May 31, 2002 where the weighted-
average fair value was equal to the market price on the grant date.  In
these situations, the weighted-average fair value of the options and the
weighted-average exercise price was $0.06.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which do not have vesting
restrictions and are fully transferable.  In addition, option valuation
models require the input of highly subjective assumptions, including the
expected stock price volatility.  Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.


NOTE U - Commitments and Contingencies

Leased facilities
-----------------

The Company leases its corporate offices from an entity owned by the
Company's President and Chief Executive Officer.  The lease was
renegotiated in June 2003 and provides for annual rentals of
approximately $18,000.  Rent expense for each of the years ended May 31,
2005 and 2004 was $18,000, respectively.

The Company's operating subsidiary, Epicus, entered into sublease
agreement for office space in Lake Mary, Florida.  The lease expired
September 24, 2004 and required monthly rental payments of approximately
$11,500 per month for the first 12 months of the sublease term and
$11,845 for the remainder of the term.  This obligation expired with no
further obligation on the part of Epicus.

Epicus executed a long-term operating lease agreement for office space
in Lake Mary, Florida to house its operations and administrative
functions.  The lease commenced on September 20, 2004 and expires on
March 19, 2010.  The lease requires initial minimum monthly payments of
approximately $20,800 per month, plus the applicable state sales taxes.
The monthly rental rate increases by 3.0% in each successive twelve-month
period.    Additionally, the Company is responsible for it's proportional
share of increases in "operating expenses" (as defined) over the base
calendar year as defined in the Lease Agreement.


                                                                         F-24
<PAGE>

        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE U - Commitments and Contingencies - Continued

Leased facilities - continued

Future non-cancellable minimum lease payments due under this operating
lease agreement are as follows:

<TABLE>
<CAPTION>
                                                Year ended
                                                  May 31,        Amount
                                                ----------    -----------
<S>                                             <C>           <C>
                                                   2006       $   255,249
                                                   2007           262,906
                                                   2008           270,793
                                                   2009           278,917
                                                   2010           239,053
                                                              -----------
                                                 Total        $ 1,306,918
                                                              ===========
</TABLE>

Litigation
----------

EPICUS, Inc. (Epicus) has been involved in a dispute with one of its
former carriers, Sprint Florida, regarding a default in payment for
services.  On August 23, 2000, Sprint filed suit in the Circuit Court of
the Ninth Judicial Circuit in and for Orange County Florida.  The Company
believed that the accusation was incorrect, however after obtaining
advice from legal counsel, we decided not to litigate the matter and on
December 21, 2000, the carrier was awarded by that court, a default
judgment against Epicus in the amount of $321,587.52.  In accordance with
a Judgment Payment Agreement dated February 15, 2001, Epicus agreed to
pay Sprint as follows: Principal payments of $10,000 each will be due
commencing March 15, 2001 through September 15, 2002 (18 months). The
final balloon payment of $142,000 was payable on October 15, 2002.  While
the scheduled payment(s) have not been demanded by Sprint, as of the date
of this filing, Management of the Company intends to enter negotiations
to renew and/or restructure the payment agreement in order to mitigate
any potentially negative effect on the Company's cash flow while
satisfying this obligation.  At the present time, the ultimate resolution
of this matter is a component of the Company's filing for protection
under Chapter 11 of the U. S. Bankruptcy Code.

A suit has been filed against Epicus in the Supreme Court of British
Columbia in Vancouver, Canada by EXL Information Corporation, a Canadian
corporation, in the amount of $184,761 for alleged breach of contract
regarding a licensing fee for the use of their billing software.  Epicus
used the software for a short period of time and found that, contrary to
the vendor's representations, it did not meet our specific needs and
therefore stopped payment.  EXL Information Corporation is seeking
damages for the loss of revenue that would have been earned over the life
of the agreement.  The outcome of this litigation is not determinable at
this time.  Management intends to aggressively defend this action to
conclusion and, at the present time, the ultimate resolution of this
matter is a component of the Company's filing for protection under
Chapter 11 of the U. S. Bankruptcy Code.

In June 2002, AT&T Corporation filed a lawsuit against Epicus Group in
the amount of $480,796 alleging non-payment of charges.  Epicus Group has
consistently denied responsibility for the charges and negotiations have
been ongoing in an attempt to resolve this dispute.  The matter has gone
to mediation and a verbal agreement for a settlement in the amount of
$120,000 has been reached.  At the present time, the ultimate resolution
of this matter is a component of the Company's filing for protection
under Chapter 11 of the U. S. Bankruptcy Code.

During the quarter ended May 31, 2005, and subsequent thereto, there has
been no significant change in any of the above listed litigation, except
as noted.


                                                                         F-25
<PAGE>


        EPICUS COMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
                     (Debtors-in-Possession)

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE U - Commitments and Contingencies - Continued

Other matters

On March 11, 2004, in the U.S. Bankruptcy Court, Southern District of
Florida, Judge Arthur Briskin ruled in favor of the Internal Revenue
Service (IRS) allowing the IRS to amend their claim of past due excise
taxes to a total of $2,849,469.98.  This motion was made by the IRS in
October of 1997 during the bankruptcy hearings of Epicus, Inc.'s
predecessor, The Telephone Company of Central Florida (TCCF).  Epicus
Communications Group, Inc.'s original Plan of Reorganization was approved
and accepted by Judge Briskin on July 9, 1999.  In the approved Plan of
Reorganization, Epicus Communications Group agreed to pay a maximum of
$300,000 in past due excise taxes.  Management is of the opinion that
there would have never been an agreement to a debt of this size in the
Plan of Reorganization for TCCF.  Management is examining is legal
options in this matter and a course of action has yet to be decided.  Due
to the unusual nature of this event and the uncertainty of the ultimate
outcome related hereto, Management has not accrued any provision for this
contingency in the accompanying financial statements.  At the present
time, the ultimate resolution of this matter is a component of the
Company's filing for protection under Chapter 11 of the U. S. Bankruptcy
Code.


NOTE U - SELECTED FINANCIAL DATA (Unaudited)

The following is a summary of the quarterly results of operations for the
years ended May 31, 2004 and 2005, respectively:

<TABLE>
<CAPTION>
                           Quarter ended   Quarter ended   Quarter ended   Quarter ended    Year ended
                             August 31,     November 31,    February 28,      May 31,         May 31,
                           -------------   -------------   -------------   -------------   ------------
<S>                        <C>             <C>             <C>             <C>             <C>

Fiscal 2004
-----------
 Telecommunication
  revenues                   $ 6,060,810     $ 3,592,718    $  4,868,117   $   4,254,151   $ 18,775,796
 Gross profit                $ 1,885,164     $  (498,039)   $    750,885   $   1,349,170   $  3,487,180
 Net earnings (loss)
  after provision
  for income taxes           $(3,443,008)    $(3,921,313)   $   (665,168)  $   (350,828)   $ (8,380,317)
 Basic and fully diluted
  earnings per share              $(0.01)         $(0.01)            nil            nil          $(0.01)
 Weighted average
  number of shares
  issued and outstanding     388,338,979     646,653,521     653,199,105    661,404,214     588,774,840

Fiscal 2005
-----------
 Telecommunication
  revenues                   $ 5,180,596     $ 5,852,767    $  6,906,208   $  7,250,972    $ 25,190,543
 Gross profit                $ 1,641,560     $ 1,888,936    $  1,826,433   $  2,324,314    $  7,681,243
 Net earnings (loss)
  after provision
  for income taxes           $  (211,160)    $  (711,591)   $  (588,412)   $ (1,511,163)   $ (3,086,562)
 Basic and fully diluted
  earnings per share                 nil          $(0.01)           nil    $      (0.01)         $(0.02)
 Weighted average
  number of shares
  issued and outstanding     121,470,398     133,413,944    167,746,141     233,131,297     164,013,204

</TABLE>

                                                                         F-26
<PAGE>