UNITED STATES


                       SECURITIES AND EXCHANGE COMMISSION


                             WASHINGTON, D.C. 20549


                                  -------------


                                  FORM 10-QSB/A
                                (Amendment No. 1)

         (Mark One)

[X]      QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15 (d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934
         For the quarterly period ended September 30, 2001

                                       Or

[ ]      TRANSACTION  REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the transition period from to


                        Commission File Number 000-27095
                                  -------------

                           AVERY COMMUNICATIONS, INC.


             (Exact name of registrant as specified in its charter)

                DELAWARE                                     22-2227079
     (State or other jurisdiction of                   (IRS Employer ID No.)
     incorporation or organization)

        190 SOUTH LASALLE STREET,                              60603
               SUITE 1710
           CHICAGO, ILLINOIS
(Address and principal executive offices)                   (Zip code)
                                 (312) 419-0077
              (Registrant's telephone number, including area code)

The  number of shares  outstanding  of each of the  issuer's  classes  of common
equity, as of September 30, 2001:


       TITLE OF CLASS                              NUMBER OF SHARES OUTSTANDING
       --------------                              ----------------------------

Common Stock, $.01 par value                                 10,142,076


<PAGE>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES


                                      INDEX





PART I  FINANCIAL INFORMATION                                               PAGE

Item 1. Consolidated Financial Statements

        Consolidated Balance Sheets - September 30, 2001                       1
        (unaudited) and December 31, 2000

        Consolidated Statements of Operations - For the                        3
        Periods Ended September 30, 2001 and 2000 (unaudited)

        Consolidated Statements of Cash Flows - For the                        4
        Periods Ended September 30, 2001 and 2000 (unaudited)

        Notes to Consolidated Financial Statements                             5

Item 2. Management's Discussion and Analysis of Financial                     11
        Condition and Results of Operations

PART II OTHER INFORMATION

Item 4. Submission of matters to a vote of Security Holders                   17

Item 6. Exhibits and Reports on Form 8-K                                      17

<PAGE>

               ITEM 1. AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                     -----------------------------
                                                                                                     SEPTEMBER 30,   DECEMBER 31,
                                    ASSETS                                                               2001            2000
                                                                                                     --------------  -------------
                                                                                                       (Unaudited
                                                                                                      and Restated)
<S>                                                                                                  <C>              <C>
Current assets:
   Cash and cash equivalents                                                                         $  17,680,719    $ 6,719,888
   Trade accounts and notes receivable, net of allowance for doubtful accounts of $242,901
     for both periods                                                                                    1,935,744      1,414,249
   Advance payment receivables                                                                           2,942,664      1,797,634
   LEC billing and collection fees receivables                                                           6,422,750      4,561,600
   Other receivables                                                                                       320,091        210,227
   Deferred tax asset                                                                                    1,226,832        565,562
   Deposits with LECs                                                                                   10,326,123      2,746,869
   Other current assets                                                                                    124,196         29,661
   Net current assets of discontinued operations                                                                 -        669,620
                                                                                                        -----------    -----------
         Total current assets                                                                           40,979,119     18,715,310
                                                                                                        -----------    -----------
Property and equipment:
   Computer equipment and software                                                                       4,927,488      1,282,988
   Furniture and fixtures                                                                                  322,823        322,023
   Accumulated depreciation and amortization                                                            (1,120,205)      (784,168)
                                                                                                        -----------    -----------
         Total property and equipment, net                                                               4,130,106        820,843
                                                                                                        -----------    -----------
Other assets:
   Goodwill, net of accumulated amortization of $1,198,003 and $1,001,725, respectively                  2,557,614      2,753,892
   Investments                                                                                              30,100      1,519,000
   Net long-term assets of discontinued operations                                                               -      7,746,836
   Purchased contracts, net of accumulated amortization of $337,053
    and $328,225, respectively                                                                              17,210         26,038
   Notes receivable due from related parties, net of allowance of $1,210,800 at September 30, 2001       4,664,472      4,046,772
   Capitalized acquisition costs                                                                           254,345              -
   Other assets                                                                                             15,634         14,554
                                                                                                        -----------    -----------

         Total other assets                                                                              7,539,375     16,107,092
                                                                                                        -----------    -----------
         Total assets                                                                                $  52,648,600    $35,643,245
                                                                                                        ===========    ===========
</TABLE>

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

                                     - 1 -
<PAGE>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                    CONSOLIDATED BALANCE SHEETS -(Continued)

<TABLE>
<CAPTION>
                                                                                                     --------------  -------------
                                                                                                     SEPTEMBER 30,   DECEMBER 31,
                          LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                 2001            2000
                                                                                                     --------------  -------------
                                                                                                       (Unaudited
                                                                                                      and Restated)
<S>                                                                                                   <C>             <C>
Current liabilities:
   Current notes payable                                                                              $      6,667    $     6,667
   Trade accounts payable                                                                                4,007,026      4,117,671
   Accrued liabilities                                                                                   4,591,565      3,323,874
   Purchase price payable to OAN                                                                         1,948,654              -
   Income taxes payable                                                                                    614,653        314,547
   Deposits and other payables related to customers                                                     38,946,201     18,594,786
                                                                                                        -----------    -----------
         Total current liabilities                                                                      50,114,766     26,357,545
                                                                                                        -----------    -----------
Non-current liabilities
   Long-term notes payable due to related parties                                                          339,685        333,475
   Customer cure liability                                                                               2,200,000              -
                                                                                                        -----------    -----------
         Total non-current liabilities                                                                   2,539,685        333,475
                                                                                                        -----------    -----------
Redeemable preferred stock:
   Series A; $0.01 par value, 391,667 shares authorized,  issued and outstanding
      at September 30, 2001 and December 31, 2000 (liquidation preference
      of $391,667 at September 30, 2001 and December 31, 2000)                                             391,667        391,667
   Series B; $0.01 par value, 390,000 shares authorized, issued and
      outstanding at September 30, 2001 and December 31, 2000 (liquidation preference                      390,000        390,000
      of $390,000 at September 30, 2001 and December 31, 2000)
   Series C; $0.01 par value,  40,000 shares authorized,  issued and outstanding
      at September 30, 2001 and December 31, 2000, (liquidation preference
      of $40,000 at September 30, 2001 and December 31, 2000)                                               40,000         40,000
   Series D; $0.01 par value, 1,500,000 authorized, issued and
      outstanding at September 30, 2001 and December 31, 2000 (liquidation preference                    1,500,000      1,500,000
      of $1,500,000 at September 30, 2001 and December 31, 2000)
   Series E;  $0.01 par  value,  0 and  350,000  shares  authorized,  issued and
      outstanding  at September  30, 2001 and  December  31, 2000,  respectively
      (liquidation
      preference of $0 and  $350,000 at September 30, 2001 and December 31, 2000, respectively)                  -        350,000
                                                                                                        -----------    -----------
         Total redeemable preferred stock                                                                2,321,667      2,671,667
                                                                                                        -----------    -----------
Commitments and contingencies Stockholders' equity (deficit):
   Preferred stock (20,000,000 shares authorized):
      Series G; $0.01 par value,  2,150,493  and  7,126,894  shares  authorized,
         issued and  outstanding  at  September  30, 2001 and December 31, 2000,
         respectively (liquidation
         preference of $21,505 and $71,269 at September 30, 2001 and December 31, 2000, respectively)       21,505         71,269
      Series H; $0.01 par value, 1,600,000 and  0 shares authorized, issued and
         outstanding at September 30, 2001 and December 31, 2000, respectively (liquidation
         preference of $1,600,000 and $0 at September 30, 2001 and December 31, 2000, respectively)         16,000              -
      Series I; $0.01 par value, 500,000 and  0 shares authorized, issued and
         outstanding at September 30, 2001 and December 31, 2000, respectively (liquidation
         preference of $500,000 and $0 at September 30, 2001 and December 31, 2000, respectively)            5,000              -
   Common stock: $0.01 par value, 20,000,000 shares authorized, 12,541,230 and 12,461,230 shares issued
      at September 30, 2001 and December 31, 2000, respectively                                            125,412        124,613
   Additional paid-in capital                                                                            9,885,927     15,752,226
   Accumulated deficit                                                                                  (8,058,516)    (6,539,013)
   Treasury stock, 2,399,154 and 1,215,216 shares at September 30, 2001 and December 31, 2000,
      respectively, at cost                                                                             (3,244,418)    (2,036,801)
   Subscription notes receivable                                                                        (1,078,428)    (1,091,736)
                                                                                                        -----------    -----------
         Total stockholders' equity (deficit)                                                           (2,327,518)     6,280,558
                                                                                                        -----------    -----------
         Total liabilities and stockholders' equity (deficit)                                        $  52,648,600    $35,643,245
                                                                                                        ===========    ===========
</TABLE>




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

                                     - 2 -
<PAGE>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE PERIODS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               ------------------------------  ------------------------------
                                                                      THREE MONTHS ENDED               NINE MONTHS ENDED
                                                                        September 30,                   September 30,
                                                               ------------------------------  ------------------------------
                                                                   2001            2000            2001            2000
                                                               --------------  --------------  --------------  --------------

<S>                                                            <C>             <C>             <C>             <C>
Revenues                                                       $  12,455,802   $   9,665,863   $  29,056,262   $  27,443,282

Cost of revenues                                                  (8,842,297)     (6,911,393)    (20,509,098)    (19,763,332)
                                                                 ------------   -------------    ------------   -------------

     Gross profit                                                  3,613,505       2,754,470       8,547,164       7,679,950

Operating expenses                                                 3,204,196      (1,528,000)      6,331,192      (4,358,140)
                                                                 ------------   -------------    ------------   -------------

     Operating income                                                409,309       1,226,470       2,215,972       3,321,810
                                                                 ------------   -------------    ------------   -------------

Other income (expense):
   Interest expense                                                   66,327         (14,464)        (48,120)        (50,240)
   Option buyback costs                                                    -               -         (88,378)              -
   Write off investment in affilitate                             (2,221,305)              -      (2,221,305)              -
   Reserve for non-recourse notes receivable                        (930,869)              -        (930,869)
   Other, net                                                         86,685         126,299         269,157         297,961
                                                                 ------------   -------------    ------------   -------------

     Total other income (expense), net                            (2,999,162)        111,835      (3,019,515)        247,721
                                                                 ------------   -------------    ------------   -------------
Income (loss) from continuing  operations before
    provision for income taxes and discontinued operations        (2,589,853)      1,338,305        (803,543)      3,569,531
Income tax benefit (expense)                                         623,030        (332,718)       (110,701)     (1,095,289)
                                                                 ------------   -------------    ------------   -------------
Income (loss) from continuing operations                          (1,966,823)      1,005,587        (914,244)      2,474,242
Loss from discontinued operations (less applicable income
   tax benefit of $563,654  for the three months  ended
   September  30, 2000 and $311,799 and 1,314,028 for the
   nine months ended September 30, 2001 and 2000, respectively)            -        (855,813)       (605,259)     (2,654,707)
                                                                 ------------   -------------    ------------   -------------

     Net income (loss)                                         $  (1,966,823)  $     149,774   $  (1,519,503)  $    (180,465)
                                                                 ============   =============    ============   =============
Per share data:
Basic net income (loss) per share:
Continuing operations income (loss)                            $       (0.21)  $        0.11   $       (0.12)  $        0.26
Discontinued operations                                                    -           (0.10)          (0.06)          (0.30)
                                                                 ------------   -------------    -------------- -------------
Net income (loss)                                              $       (0.21)  $        0.01   $       (0.18)  $       (0.04)
                                                                 ============   =============    ============== =============
Diluted net income (loss) per share:
Continuing operations income (loss)                            $       (0.21)  $        0.06           (0.12)           0.16
Discontinued operations                                                    -           (0.05)          (0.06)          (0.17)
                                                                 ------------   -------------    ------------   -------------
Net income (loss)                                              $       (0.21)  $        0.01   $       (0.18)  $       (0.01)
                                                                 ============   =============    ============   =============
Weighted average number of common shares outstanding:
   Basic common shares                                            10,142,076       8,753,919      10,236,868       8,730,734
                                                                 ============   =============    ============   =============
   Diluted common shares                                          10,142,076      16,791,723      10,236,868      15,865,627
                                                                 ============   =============    ============   =============
</TABLE>


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

                                     - 3 -
<PAGE>



                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE PERIODS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (UNAUDITED)


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

<TABLE>
<CAPTION>
                                                                                             --------------------------------------
                                                                                                        NINE MONTHS ENDED
                                                                                                          SEPTEMBER 30,
                                                                                             --------------------------------------
                                                                                                    2001                2000
                                                                                             -------------------  -----------------
                                                                                                 (Restated)
<S>                                                                                          <C>                  <C>
Cash flows from operating activities:
   Net loss                                                                                  $       (1,519,503)  $       (180,465)
   Loss from discontinued operations                                                                    605,259          2,654,707
   Adjustments to reconcile net loss to net cash provided by (used in)
       operating activities from continuing operations net of effects of acquisition:
   Provision for bad debt expense                                                                     1,210,800             54,000
     Amortization of loan discounts                                                                       6,210              6,210
     Deferred income taxes                                                                             (661,270)                 -
     Depreciation and amortization                                                                      541,143            435,590
     Treasury stock received in settlement                                                                    -            (54,802)
     Option buyback costs                                                                                88,378                  -
     Write off investment in affiliate                                                                2,221,305                  -
     Change in  operating assets and liabilities:
       Trade accounts receivable                                                                       (521,495)             7,374
       Advance payment receivables                                                                   (1,145,030)         4,844,007
       Other current assets                                                                             (94,535)           (48,460)
       Deposits                                                                                        (282,775)        (2,402,043)
       Other receivables                                                                               (627,890)        (1,104,717)
       Trade accounts payable and accrued liabilities                                                (2,077,723)           (55,245)
       Income taxes payable                                                                             300,106           (566,202)
       Deposits and other payables related to customers                                              17,003,235          7,813,873
       Other assets                                                                                      (1,080)            30,077
                                                                                               -----------------    ---------------

           Net cash provided by continuing operations                                                15,045,135         11,433,904
           Net cash provided by (used in) discontinued operations                                       275,271         (1,910,439)
                                                                                               -----------------    ---------------
           Net cash provided by operations                                                           15,320,406          9,523,465
                                                                                               -----------------    ---------------

Cash flows from investing activities:
   Purchase of contracts                                                                                      -             (7,500)
   Purchase of property and equipment                                                                  (445,300)           (71,060)
   Payment received on notes receivable                                                                  13,308                  -
   Amounts loaned for notes receivable                                                               (2,549,805)        (2,313,500)
   Acquisition costs                                                                                   (254,345)                 -
   Purchase of OAN Services, Inc. net assets                                                         (1,108,000)                 -
   Purchase of investments                                                                              (11,100)                 -
                                                                                               -----------------    ---------------

           Net cash used in investing activities                                                     (4,355,242)        (2,392,060)
                                                                                               -----------------    ---------------

Cash flows from financing activities:
   Redemption of preferred shares                                                                      (350,000)                 -
   Purchase of options for cash                                                                        (215,000)                 -
   Cash paid for treasury stock                                                                      (1,207,617)                 -
   Payment of preferred stock dividends                                                                (278,023)          (247,392)
   Issuance of shares of common and preferred stock for cash                                          2,046,307            134,114
                                                                                               -----------------    ---------------

           Net cash used in financing activities                                                         (4,333)          (113,278)
                                                                                               -----------------    ---------------

Increase in cash                                                                                     10,960,831          7,018,127

Cash at beginning of period                                                                           6,719,888          5,744,069
                                                                                               -----------------    ---------------

Cash at end of period                                                                        $       17,680,719   $     12,762,196
                                                                                               =================    ===============
Supplemental disclosures:
   Interest paid                                                                             $           46,702   $         55,849
                                                                                               =================    ===============
   Income taxes paid                                                                         $          160,066   $        453,000
                                                                                               =================    ===============
</TABLE>


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

                                     - 4 -
<PAGE>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



         NOTE 1. BASIS OF PRESENTATION

         The   accompanying    unaudited    financial    statements   of   Avery
Communications,  Inc. ("Avery") and subsidiaries  ("Company") have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial information and in accordance with the instructions per Item 310(b) of
Regulation  SB.  Accordingly,  they do not  include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.

         In the opinion of  management,  all  adjustments  (consisting of normal
recurring  adjustments)  considered  necessary for a fair presentation have been
included. Operating results for the three and nine month periods ended September
30, 2001 are not necessarily  indicative of the results that may be expected for
the year ended December 31, 2001.


         Certain   reclassifications  have  been  made  to  conform  to  current
classifications,  in part reclassifying Local Exchange Carriers ("LEC") deposits
from "Other Assets" to "Deposits with LECs" and LEC billing and collection  fees
receivables  from  "Customer  Deposits  and Other  Payables"  to "Other  Current
Receivables".


         NOTE 2. NET INCOME (LOSS) PER COMMON SHARE

         Basic net  income  (loss) per share is  computed  by  dividing  the net
income (loss), (decrease) increased by the preferred stock dividends of $123,192
and $70,692  for the three month  periods  ending  September  30, 2001 and 2000,
respectively,  and  $330,523  and  $213,092  for the nine month  periods  ending
September 30, 2001 and 2000,  respectively,  by the weighted  average  number of
shares of common stock outstanding during the respective periods.  The effect of
the  preferred  stock  dividend on the basic income  (loss) per common share was
$0.01 per weighted average common share  outstanding for the three month periods
ending  September  30,  2001 and 2000 and $0.03  and  $0.02,  respectively,  per
weighted  average  common share  outstanding  for the nine month periods  ending
September 30, 2001 and 2000.  Diluted loss per share  includes the effect of all
dilutive options, warrants and instruments convertible into common stock.


         NOTE 3. DISCONTINUED OPERATIONS


         On August  1,  2000,  the  Board of  Directors  of Avery  approved  the
spin-off  of Primal  Solutions,  Inc.  ("PSI").  The  decision  revised its plan
announced February 29, 2000 to spin-off HBS Billing Services Company ("HBS") its
local exchange carrier billing clearing house business. The decision to spin-off
PSI  instead  of HBS was  motivated  primarily  by the  expectation  that  Avery
shareholders will pay less in taxes under a spin-off of PSI than would have been
the case with a spin-off of HBS.  Accordingly,  prior filed financial statements
for the period ending March 31, 2000 reflect HBS as discontinued operations.


         In March  1999,  Avery  entered  into a merger  agreement  with PSI and
certain  shareholders  of PSI.  Pursuant to this  agreement,  PSI was  purchased
effective  as of October 1,

                                     - 5 -
<PAGE>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1999. PSI is a software development company that designs,  develops and supports
an  integrated  suite of  client/server  and  browser-based  software  solutions
focusing on customer  acquisition and retention in the communications  industry,
primarily utilizing decision support software and Internet technologies. As part
of this merger, Avery also acquired Wireless Billing Systems,  PSI's subsidiary,
which sells and supports convergent billing,  customer care and mediation system
software  products.  The transaction was accounted for using the purchase method
of  accounting  with  revenues  and  expenses  of PSI being  included in Avery's
operations from the acquisition date.


         On February 12, 2001, Avery distributed 100% of the outstanding capital
stock of PSI to its security holders. Accordingly, as of such date, Avery had no
further ownership interest in PSI or its subsidiary, Wireless Billing Systems.


         As part of the formal  distribution,  the seven PSI stockholders at the
time of the  Company's  acquisition  of PSI  redeemed  4,976,401  shares  of the
Company's  Series G voting  preferred stock in exchange for 32% of PSI's capital
stock.  Also,  the  exercise  prices  of  Avery's  outstanding  options  and the
conversion prices of Avery's convertible securities were adjusted to reflect the
distribution.  After the transaction was completed, Avery's outstanding Series G
preferred  stock was reduced to  2,150,493  shares,  which are held by the seven
original PSI stockholders on a pro-rata basis.


         The financial  information contained in this document presents PSI as a
discontinued  operation  due to the  spin-off.  Accordingly,  the amounts in the
statements  of  operations  through the provision for income taxes are HBS's and
ACI's (See Note 7) plus expenses of Avery.


         At December 31, 2000, the net current assets of PSI were as follows:

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                                           2000
                                                                                   ---------------------
<S>                                                                                         <C>
    CURRENT ASSETS
        Cash                                                                                $ 1,844,767
        Trade accounts receivable                                                             1,770,317
        Other current assets                                                                    312,548
                                                                                   ---------------------
        Total current assets                                                                  3,927,632
                                                                                   ---------------------
    CURRENT LIABILITIES
        Current portion of capital lease obligations                                            237,204
        Current portion of notes payable                                                        512,572
        Trade accounts payable                                                                  403,872
        Accrued liabilities                                                                   1,030,356
        Deferred revenue                                                                      1,074,008
                                                                                   ---------------------
        Total current liabilities                                                             3,258,012
                                                                                   ---------------------
    NET CURRENT ASSETS OF DISCONTINUED OPERATIONS                                             $ 669,620
                                                                                   =====================
</TABLE>

                                     - 6 -
<PAGE>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

         At December 31, 2000, the net long-term assets of PSI were as follows:

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                                           2000
                                                                                   ---------------------
<S>                                                                                 <C>
    PROPERTY AND EQUIPMENT
        Computer equipment and software                                             $        2,257,142
        Furniture and fixtures                                                                 115,943
        Accumulated depreciation and amortization                                             (571,665)
                                                                                   ---------------------
        Total property and equipment                                                         1,801,420
                                                                                   ---------------------
    OTHER ASSETS AND LONG-TERM LIABILITIES
        Goodwill, net                                                                        7,219,072
        Capital lease obligations                                                              (75,555)
        Notes payable                                                                       (1,219,728)
        Other                                                                                   21,627
                                                                                   ---------------------
        Total other assets                                                                   5,945,416
                                                                                   ---------------------
    NET LONG-TERM ASSETS OF DISCONTINUED OPERATIONS                                 $        7,746,836
                                                                                   =====================
</TABLE>

         The operating results of PSI for the period January 1, 2001 to February
12,  2001 and for the three  and nine  months  ended  September  30,  2000 is as
follows:

<TABLE>
<CAPTION>
                                                                 --------------------------------------------------------------
                                                                  Period  January 1,
                                                                  2001 to February      Three months ended   Nine months ended
                                                                      12, 2001          September 30, 2000  September 30, 2000
                                                                 --------------------------------------------------------------
<S>                                                                      <C>                <C>                 <C>
        Operating revenues                                               $ 825,417          $ 2,186,362         $ 6,254,158
        Cost of revenues                                                  (598,792)          (1,187,295)         (3,223,552)
                                                                 -----------------------------------------------------------
           Gross profit                                                    226,625              999,067           3,030,606
        Selling, general and administrative expenses                    (1,127,751)          (2,363,338)         (6,869,201)
                                                                 -----------------------------------------------------------
           Loss from operations                                           (901,126)          (1,364,271)         (3,838,595)
        Other Expense                                                      (15,932)             (55,200)           (130,137)
                                                                 -----------------------------------------------------------
           Loss before income tax provision                               (917,058)          (1,419,471)         (3,968,732)
           Income tax benefit                                              311,799              563,658           1,314,025
                                                                 -----------------------------------------------------------
           Net loss                                                     $ (605,259)          $ (855,813)       $ (2,654,707)
                                                                 ===========================================================
</TABLE>

         NOTE 4. CERTAIN TRANSACTIONS


         On March 9, 2001, HBS' largest customer, which accounted for 57% of its
call records  processed in 2000 and 64% of all call  records  processed  for the
nine months ended September 30, 2001, filed a voluntary  petition for protection
under  Chapter  11  of  the  U.  S.  Bankruptcy  Code  in  connection  with  the
reorganization of its parent company. As of October 31, 2001, the filing has had
no material  adverse  effect on HBS' business  relationship  with this customer,
and, based upon conversations between the managements of the two companies,  the
Company does not presently anticipate that this filing will materially adversely
affect the relationship with this customer in the immediate future.


                                     - 7 -
<PAGE>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         On February 1, 2001, the Company  purchased all of the capital stock of
the Company held by (at the time of the  transaction) a beneficial owner of more
than five percent (5%) of the common stock of the Company,  and all  outstanding
options  and  warrants  to purchase  capital  stock of the  Company  held by two
individuals,  who were also former directors of the Company.  The total purchase
price for the transaction was $1,787,000. The transaction consisted of 1,183,938
shares of common stock at $1.02 per share (totaling  $1,207,617,  the fair value
at the date of the  transaction),  350,000 shares of Series E preferred stock at
$1.00 per share  (totaling  $350,000,  the  liquidation  value) plus accrued and
unpaid  dividends and options to purchase  215,000  shares of Avery common stock
for $215,000. The Company recorded the fair value of the options,  calculated by
using the Black  Scholes  model,  at $126,622.  This $126,622 was reflected as a
reduction  in  additional  paid in capital,  with the  balance,  $88,378,  being
charged to the income statement in the other income section.


         During the nine months  ended  September  30,  2001,  the Company  also
advanced an additional $1,828,500 to a company in which it owns 3,010,000 common
shares,  1,100,000  shares of which were  acquired  during the nine months ended
September 30, 2001.  The related  notes bear interest at 10% per annum,  are due
December 31, 2001 and are secured.  On May 2, 2001,  Avery's  board of directors
approved the acquisition of this company subject to certain conditions (See Note
8). These notes are expected to be converted to equity during the fourth quarter
of 2001 in connection with the acquisition.  Avery's Chief Executive  Officer is
also a director and officer of this entity.


         During 2000 and 2001,  the Company  invested  $1,995,000  in  preferred
stock, $4,905 in common stock and $221,400 in receivables of a company for which
Avery's  Chief  Executive  Officer is also a controlling  shareholder  and Chief
Executive Officer.  During September,  2001 the Company wrote off the investment
of $2,221,305. The Company has ceased operations.


         In connection  with the spin-off of PSI, the Company  loaned amounts to
certain PSI shareholders.  The resulting notes receivables were non-recourse and
were secured by Avery's common stock owned by the PSI  shareholders.  Because of
the continued decline in the Company's stock price during the three months ended
September  30, 2001, a valuation  reserve of $810,800 was provided for the notes
reducing their carrying value to estimated net realizable value.

NOTE. 5 PREFERRED STOCK


SERIES H


         The Company sold  1,600,000  shares of Series H  convertible  preferred
stock  for $1.00  per  share in  February  2001.  The  holders  of the  Series H
convertible preferred stock are entitled to annual cumulative dividends of $0.12
per share payable quarterly,  a $1.00 per share liquidation value and conversion
into common  stock on a one for one basis.  One  company,  whose  president is a
director of Avery, holds 1,250,000 shares of the Series H preferred stock.


SERIES I

                                     - 8 -
<PAGE>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         The Company sold 500,000 shares of Series I convertible preferred stock
for $1.00 per  share in April  2001.  The  holder  of the  Series I  convertible
preferred  stock is entitled to annual  cumulative  dividends of $0.12 per share
payable  quarterly,  a $1.00 per share  liquidation  value and  conversion  into
common stock on a one for one basis.

         NOTE 6. COMMITMENTS AND CONTINGENCIES

         The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business.  The Company believes it
is unlikely that the final outcome of any of the claims or  proceedings to which
the  Company  is a party will have a material  adverse  effect on the  Company's
financial  position  or  results of  operations;  however,  due to the  inherent
uncertainty of litigation,  there can be no assurance that the resolution of any
particular  claim or proceeding  would not have a material adverse effect on the
Company's  results of operations for the fiscal period in which such  resolution
occurred.


         NOTE 7. ACQUISITIONS


         On August 3, 2001,  the Company,  through its wholly owned  subsidiary,
ACI  Communications,  Inc. ("ACI"),  completed the acquisition of certain assets
from OAN Services, Inc. ("OAN"), which was approved by the U.S. Bankruptcy Court
in Los Angeles,  California.  The results of operations of the acquired business
is  included  in the  Company's  results  of  operations  from  the  date of the
acquisition.  OAN is located in  Northridge,  California and was a competitor to
the Company's local exchange carrier billing clearinghouse business, HBS Billing
Services  Company.  Under the asset  purchase  agreement,  ACI has agreed to pay
approximately $11.8 million,  consisting of a combination of assumed liabilities
and cash. The assets purchased include substantially all of OAN's customer base,
cash deposits with the local exchange  carriers of  approximately  $7.2 million,
substantially  all of its computer  software and hardware,  all of its furniture
and fixtures,  all of its call center assets and certain other assets. A summary
of the net assets acquired are as follows:

                                     - 9 -
<PAGE>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
<S>                                                                                         <C>
    ASSETS
        LEC billing and collection fee receivable                                           $ 1,343,124
        Deposits with LEC's                                                                   7,296,479
        Fixed Assets                                                                          3,200,000
                                                                                   ---------------------
        TOTAL ASSETS                                                                         11,839,603
                                                                                   ---------------------

    LIABILITIES
        Due to OAN                                                                            2,142,598
        Accrued LEC billing and collection fees                                               2,111,567
        Customer bad debt reserves                                                            3,697,938
        Customer termination reserves                                                           579,500
        Customer cure liabilities                                                             2,200,000
                                                                                   ---------------------
        Total Liabilities                                                                    10,731,603
                                                                                   ---------------------

                                                                                   ---------------------
        Net Assets Purchased                                                                $ 1,108,000
                                                                                   =====================
</TABLE>




         The customer cure liabilities  amount  represents 5% of the cure amount
due for  customers  that agreed to assign their  billing  contracts  with OAN to
Avery. Avery has agreed to pay this amount in the future through reduced billing
fees.

         At the  time of  ACI's  purchase  of the  net  assets  of OAN,  OAN had
indicated  that the net bad debt  reserve  held  against  customers (a liability
which was assumed by ACI) was $0.7 million.  This amount  represents a liability
for funds  withheld from  customers to cover bad debt charges for processed call
records.  During the third quarter of 2002, the Company  determined,  with OAN's
cooperation,  that the amount  withheld from  customers to cover bad debts as of
the closing  date of the purchase was  actually  $3.7  million.  The Company has
adjusted its bad debt  reserves and reduced the  purchase  price  payable to OAN
within the accompanying  restated balance sheet and statement of cash flows (see
Note 10 to Consolidated Financial Statements).


         NOTE 8. PENDING ACQUISITION


         On May 2, 2001,  Avery's board of directors approved the acquisition of
the assets of a company in which it,  through a wholly owned  subsidiary,  has a
note receivable in the amount of $3,728,000 and owns 3,010,000  shares of common
stock in the target company's parent.  Avery's Chief Executive Officer is also a
controlling  shareholder  and chairman of the entity.  The  consummation of this
transaction  will be subject to a number of  conditions,  including  appropriate
regulatory  approval,  the  affirmative  votes of  shareholders  of the  selling
company and  receipt of fairness  opinions.  The  company  provides  intelligent
message  communications  services  to  enterprises  notably  in the  travel  and
hospitality sectors.


         NOTE 9. PENDING REVERSE STOCK SPLIT


         The  board  of  directors  approved  a  1-for-8  reverse  split  of the
Company's common stock. An information statement regarding the reverse split was
filed  with the SEC on August 2,  2001.  It is  presently  anticipated  that the
reverse split will become  effective mid-December 2001. An affirmative vote of a
majority  of the  holders of shares  entitled to vote is required to approve the
amendment of the Certificate of Incorporation to effect the reverse stock split.
Controlling  stockholders have consented in writing to the amendment and this is
sufficient  to obtain the  stockholder  vote  necessary to approve the amendment
without the approval of any other stockholders.  The board of directors believes
the reverse  stock split may allow  Avery to meet the listing  criteria  for its
common  stock  to be  listed  on the  Nasdaq  SmallCap  Market,  increasing  the
acceptance  of its common stock by the  financial  community  and,  accordingly,
enhancing stockholder value.


         NOTE 10.   RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS

         During the third quarter of 2002,  the Company  determined,  with OAN's
cooperation, that an error was made in the computation of the purchase price for
net  assets  purchased.  It was  determined  that the  liability  assumed by the
Company for amounts  withheld from customers to cover future  obligations of the
customers as of the closing date of the  purchase  was  actually  $3.7  million,
rather than the $0.7  million  calculated  at the time of  closing.  The Company
additionally  adjusted  post-acquisition  bad  debt  reserves  of  the  acquired
business for other  transactions  which were  incorrectly  reflected  within the
Company's previously issued financial statements.  Accordingly,  the Company has
increased its reserves held against  customers and decreased its payable to OAN.
Such adjustments are reflected in the accompanying  restated balance sheet as of
September 30, 2001 and the restated  statement of cash flows for the nine months
ended September 30, 2001. The restated figures supersede the information  within
the Company's Quarterly Report on Form 10-QSB for the period ended September 30,
2001. The adjustments  affect only the balance sheet and statement of cash flows
dated after  August  2001.  There was no impact to the  Company's  statement  of
operations.

                                     - 10 -
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS


ITEM 2.


         This   Quarterly    Report   on   Form   10-QSB/A    contains   certain
"forward-looking"  statements as such term is defined in the Private  Securities
Litigation  Reform Act of 1995 and information  relating to the Company that are
based on the beliefs of the Company's  management as well as assumptions made by
and information  currently available to the Company's  management.  When used in
this  report,  the  words  "anticipate,"  "believe,"  "estimate,"  "expect"  and
"intend" and words or phrases of similar  import,  as they relate to the Company
or  its   subsidiaries   or  Company   management,   are  intended  to  identify
forward-looking   statements.   Such  statements   reflect  the  current  risks,
uncertainties  and  assumptions  related to certain factors  including,  without
limitation,   competitive  factors,   general  economic   conditions,   customer
relations,   relationships   with  vendors,   the  interest  rate   environment,
governmental  regulation and supervision,  seasonality,  distribution  networks,
product introductions and acceptance,  technological change, changes in industry
practices,  onetime  events  and other  factors  described  herein  and in other
filings made by the Company with the Securities and Exchange  Commission.  Based
upon changing conditions, should any one or more of these risks or uncertainties
materialize,  or should  any  underlying  assumptions  prove  incorrect,  actual
results  may  vary  materially  from  those  described  herein  as  anticipated,
believed, estimated, expected or intended. The Company does not intend to update
these forward-looking statements.



GENERAL


         The following is a discussion of the consolidated  financial  condition
and results of  operations  of the Company for the three and nine month  periods
ended  September  30, 2001 and 2000. It should be read in  conjunction  with the
Consolidated  Financial  Statements of the Company,  the notes thereto and other
financial  information  included  elsewhere  in this report,  and the  Company's
Annual  Report on Form  10-KSB/A  for the year  ended  December  31,  2000.  For
purposes of the  following  discussion,  references to year periods refer to the
Company's  fiscal year ended  December 31 and  references  to quarterly  periods
refer to the Company's  fiscal three and nine month periods ended  September 30,
2001 and 2000.

         The results of operations  include ACI  Communications,  Inc.  ("ACI"),
from August 3, 2001 through  September 30, 2001. ACI purchased the net assets of
OAN Services, Inc. ("OAN").

         The  results  on the  "Discontinued  operations"  lines  represent  the
results  of  operations  for the  respective  periods  for PSI,  a wholly  owned
subsidiary  that was spun-off in February 2001. The annual report as of December
31,  1999  and  the  quarterly  report  as of  March  31,  2000  reflect  HBS as
discontinued  operations.  See  Note  3  to  Consolidated  Financial  Statements
discussed  above.  All  discussions  relating  to  revenue,  cost  of  revenues,
operating expenses, etc. pertain only to continuing operations, which consist of
Avery, HBS and ACI.

                                     - 11 -
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS



         RESULTS OF OPERATIONS


         The   following   table   presents   certain  items  in  the  Company's
Consolidated Statements of Operations:

<TABLE>
<CAPTION>
                                       --------------------- -----------------------
                                        THREE MONTHS ENDED     NINE MONTHS ENDED
                                          September 30,          September 30,
                                       --------------------- -----------------------
                                         2001       2000        2001        2000
                                       --------------------- -----------------------
                                          (In Thousands)         (In Thousands)
<S>                                    <C>         <C>        <C>         <C>
Revenues                               $  12,456   $  9,666   $  29,056   $  27,443
Cost of revenues                          (8,842)    (6,911)    (20,509)    (19,763)
                                        ---------   --------   ---------   ---------
         Gross profit                      3,614      2,755       8,547       7,680
Operating expenses                        (2,944)    (1,382)     (5,789)     (3,922)
Depreciation and amortization               (261)      (146)       (541)       (436)
                                        ---------   --------   ---------   ---------
         Operating income (loss)             409      1,227       2,217       3,322
Other income (expense), net               (2,999)       111      (3,020)        249
Income tax benefit (expense)                 623       (333)       (111)     (1,095)
Discontinued operations loss                   -       (856)       (605)     (2,655)
                                        ---------   --------   ---------   ---------
         Net income (loss)             $  (1,967)  $    149   $  (1,519)  $    (179)
                                        =========   ========   =========   =========
</TABLE>



Operating Revenues

         The  Company's  revenues are derived  primarily  from the  provision of
billing  clearinghouse and information  management  services to direct dial long
distance  carriers and operator  services  providers  ("Local  Exchange  Carrier
billing" or "LEC billing").  To a lesser extent,  revenues are also derived from
enhanced  billing services  provided to companies that offer voice mail,  paging
and Internet services or other  non-regulated  telecommunications  equipment and
services.  LEC  billing  fees  charged by the  Company  include  processing  and
customer service inquiry fees.  Processing fees are assessed to customers either
as a fee charged for each telephone call record or other  transaction  processed
or as a percentage of the customer's revenue that is submitted by the Company to
local  telephone  companies  for billing and  collection.  Processing  fees also
include any charges  assessed to the Company by local  telephone  companies  for
billing  and  collection  services  that are  passed  through  to the  customer.
Customer  service  inquiry  fees are  assessed as a fee charged for each billing
inquiry made by end users.

         Total revenues for the three months ended September 30, 2001 were $12.5
million,  up 28.9% from the comparable prior year quarter.  Revenues included in
this period for ACI were $4.5 million. Billing service revenues increased 28% to
$12.1  million,  from $9.5 million in 2000.  Eliminating  the effects of the ACI
acquisition  produces a 17%  reduction  in billing  service  revenues  from $9.5
million in 2000 to $7.6  million in 2001,  reflecting  a 21% decrease in records
processed.  The  remaining  revenue is  primarily  related to  customer  service
operations  and was $364,000 for the three months ended  September  30, 2001, up
74.3%  from  $209,000  in the prior  year.  The  majority  of this  increase  is
attributable  to ACI. Total revenue for the nine months ended September 30, 2001
was  $29.1  million,  up 6%  from  $27.4  million  in  the  prior  year  period.
Eliminating  the effects of the ACI  acquisition  generates a 10.9% reduction in
revenues  from $27.4  million for the nine months  ended  September  30, 2000 to
$23.8 million for the same period in

                                     - 12 -
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS

2001,  reflecting  a 19%  reduction  in call records  processed.  The  remaining
revenue is primarily related to customer service operations and was $756,200 for
the nine months  ended  September  30,  2001,  up 2.6% from the $736,000 for the
prior year period. ACI contributed  $229,000 during this period.  Telephone call
record  volumes,  including  records  processed by the newly acquired ACI, which
were 13.4 million for the period from August 3, 2001 through  September 30, 2001
were as follows:

<TABLE>
<CAPTION>
                                                 ---------------------------------  ---------------------------------
                                                         THREE-MONTHS ENDED               NINE-MONTHS ENDED
                                                           September 30,                      September 30,
                                                 ---------------------------------  ---------------------------------
                                                      2001             2000              2001             2000
                                                 ---------------  ----------------  ---------------  ----------------
                                                  (In Thousands)                     (In Thousands)
<S>                                                      <C>               <C>             <C>               <C>
    Records processed                                    82,384            87,348          228,148           265,609
</TABLE>


Cost of Revenues


         Cost of revenues  includes  billing and collection  fees charged to the
Company by local telephone companies and related  transmission costs, as well as
all costs associated with the customer service organization,  including staffing
expenses and costs  associated  with  telecommunications  services.  Billing and
collection fees charged by the local telephone  companies  include fees that are
assessed for each record  submitted  and for each bill  rendered to its end-user
customers.  The Company achieves  discounted billing costs due to its aggregated
volumes and can pass these discounts on to its customers.

         The gross profit  margin  increased  from 28.5% to 29.0% from the prior
three month  period  ended  September  30, 2000 to the current  year.  The gross
profit  margin  increased  from 28.0% to 29.4% from the prior nine month  period
ended  September  30, 2000 to the current  year  period.  The  increase in gross
profit  percentage  is primarily  due to improved  gross margins in the existing
business offset by lower gross margins in the business aquired by ACI.

Operating Expenses

         Operating  expenses  are  comprised  of  all  selling,   marketing  and
administrative  costs incurred in direct  support of the business  operations of
the Company.  Operating expenses for the three-month periods ended September 30,
2001 and 2000  were  $2.9  million  and $1.4  million,  respectively.  Operating
expenses for the nine-month  periods ended September 30, 2001 and 2000 were $5.8
million and $3.9 million, respectively. The major components of the increases in
operating  expenses  for the  three  month  and nine  month  periods  are  fully
reserving an employee  note  receivable  in the amount of $400,000 and including
$800,000 of additional operating expenses resulting from the ACI acquisition.

Depreciation and Amortization

         Depreciation  and  amortization  expense  for the  three  months  ended
September  30, was $260,500 in 2001,  and $146,000 in 2000.  For the nine months
ended September 30,  depreciation and amortization  expense was $541,000 in 2001
and $435,600 in 2000.  The increase is primarily  due to the purchase of ACI and
the resulting amortization of computers and software.

                                     - 13 -
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS

Operating Income (Loss) from Continuing Operations


         Operating income from continuing  operations for the three months ended
September  30, 2001 was  $409,000,  or 3.3% of  revenues,  compared to operating
profit of $1,227,000  or 12.7% of revenues,  in the  comparable  period of 2000.
Operating  income  for the nine  month  period  ending  September  30,  2001 was
$2,217,000,  or 7.6% of revenue, compared to $3,322,000, or 12.1% of revenue, in
the comparable  period of 2000. The decrease in operating income from continuing
operations  is  primarily  attributable  to the  decrease  in the volume of call
records  processed  and the  reserve  established  for the  employee  receivable
discussed above.


Other Income (Expense), Net


         Other income  (expense),  net in the three months ended  September  30,
2001 was  $2,999,000 of net expense  compared to $111,000 of net income in 2000.
During the nine months ended September 30, 2001, the other income (expense), net
was  $3,020,000  of net  expense in 2001  compared  to $249,000 of net income in
2000.  The  changes  for both the  three  and nine  month  periods  are due to a
valuation  allowance  and write off of  interest  receivable  totaling  $931,000
relating  to  non-recourse  notes  receivable  and  writing-off   $2,221,000  of
investment in a affiliated company which has ceased  operations.  Because of the
continued  decline in the  Company's  stock price  during the three months ended
September  30, 2001, a valuation  reserve of $810,800 was provided for the notes
reducing their carrying value to estimated net realizable value.



Income Taxes


         A income tax  benefit of $623,000  was  recorded  for the three  months
ended September 30, 2001 and income tax expense of $333,000 was recorded for the
prior year quarter.  For the nine months ended September 30, 2001, an income tax
benefit of $111,000 was recorded  compared to expense of $1,095,000 for the same
period in 2000.  The income  tax  benefit  for the three and nine month  periods
ended  September 30, 2001 and a portion of income tax expense for the nine month
period ending  September 30, 2000 are offset on a  consolidated  basis by income
tax benefit recorded for discontinued operations. Total income taxes differ from
expected  income taxes because of  permanently  non-deductible  items and income
taxes recorded to adjust prior year estimates.



Loss from Discontinued Operations


         Loss from  discontinued  operations was $856,000 for the quarter ending
September 30, 2000 net of tax benefits of $564,000.  Revenues from  discontinued
operations  were  $825,000  and  $2,186,000  for the  period  January 1, 2001 to
February 12, 2001 and for the quarter ending  September 30, 2000,  respectively.
Loss from discontinued operations was $605,000 for the period January 1, 2001 to
February 12, 2001 and  $2,655,000  for the nine months ended  September 30, 2000
net of tax benefits of $312,000 and  $1,314,000,  for the period January 1, 2001
to  February  12,  2001  and  the  three  months  ending   September  30,  2000,
respectively. PSI was spun-off on February 12, 2001, as previously discussed.


LIQUIDITY AND CAPITAL RESOURCES


         On  August  3,  2001,  the  Company  purchased  the net  assets  of ACI
Services,  Inc.  for  $1,108,000.  The net assets  acquired  are  accounted  for
separately  on the Cash Flow  Statement  and  therefore  are not included in the
following discussion.

                                     - 14 -
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS

         Avery's cash balance  increased to $17.7 million at September 30, 2001,
from $6.7  million  at  December  31,  2000.  Large  fluctuations  in daily cash
balances  are normal due to the large  amount of  customer  receivables  that we
collect on behalf of our customers. Timing of these receipts also produces large
movements in day-to-day  cash balances.  In addition,  the  acquisition of OAN's
assets by ACI provided a certain amount of cash as of September 30, 2001.

         Avery's working  capital  position at September 30, 2001 was a negative
$9.0 million  compared to a negative  $7.6 million as of December 31, 2000.  The
decline in working  capital is  primarily  due to a $22.3  million  increase  in
current assets offset by a $23.6 million  increase in current  liabilities.  The
substantial  increase in both current assets and current  liabilities was due to
ACI's acquisition of OAN.



         Net cash  provided  by  operating  activities,  excluding  discontinued
operations,  was $15.0 million for the nine months ending September 30, 2001, as
compared to $11.4  million for 2000.  The $15.0  million  cash flow  provided by
operations for 2001 results  primarily from a $17.0 million increase in deposits
and other payables related to customers and $2.5 million net income and non cash
items from continuing  operations  offset by a $1.1 million  increase in advance
payment  receivables,  a $1.2 million  reduction in trade  accounts  payable and
accrued  liabilities,  a $0.3  million  increase  in  deposits,  a $0.6  million
increase in other receivables and a $0.5 million increase in trade  receivables.
The $11.4 million cash flow  provided by  operations  for 2000 results from $2.9
million net income and non-cash items from continuing  operations,  $7.8 million
increase in deposits and other payables  related to customers and a $4.8 million
decline in advance  payment  receivables  offset by a $2.4  million  increase in
deposits,  a $1.1  million  increase  in other  receivables  and a $0.6  million
decrease in income taxes payable.


         During the nine months ended  September 30, 2001, the Company  advanced
$2.5 million for notes  receivable,  purchased $1.1 million of net assets of ACI
Services, Inc., purchased $0.4 million of property and equipment,  redeemed $0.4
million of the  Company's  preferred  stock,  purchased  $0.2 million of Avery's
options to acquire Avery common stock, paid $0.3 million for acquisition  costs,
paid $0.3 million for preferred  stock  dividends and purchased  $1.2 million of
treasury  stock.  This  use of cash was  partially  offset  by the $2.0  million
received from the issuance of preferred.  During the nine months ended September
30,  2000,  the Company  issued $2.3 million of notes  receivable  to former PSI
shareholders and a related company,  purchased  $71,000 of capital equipment and
paid $247,000 of preferred dividends. The $134,000 received from the issuance of
stock offset this use of cash.


         Avery's  operating  cash  requirements  consist  principally of working
capital  requirements,  scheduled  payments of preferred  dividends  and capital
expenditures.  The  Company  believes

                                     - 15 -
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS

cash  flows  generated  from  operations,
together with borrowings and/or proceeds from the sale of equity securities will
be  sufficient  to fund capital  expenditures,  working  capital  needs and debt
repayment requirements for the foreseeable future.


         ACCOUNTING CHANGES


         In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 141 "Business Combinations" which requires
the  purchase  method  of  accounting  for  business  combination   transactions
initiated after June 30, 2001.


         In July 2001, the Financial Accounting Standards Board issued Statement
of  Financial  Accounting  Standards  No.  142  "Goodwill  and Other  Intangible
Assets". The statement requires that goodwill recorded on acquisitions completed
prior  to  July  1,  2001 be  amortized  through  December  31,  2001.  Goodwill
amortization  is  precluded  on  acquisitions  completed  after  June 30,  2001.
Effective  January 1, 2002,  goodwill  will no longer be  amortized  but will be
tested for impairment as set forth in the statement.  We are currently reviewing
the new  standard  and  evaluating  the  effects of this  standard on our future
financial  condition,   results  of  operations,  and  accounting  policies  and
practices.  Amortization  of goodwill  for the first nine months of 2001 totaled
$122,000.

                                     - 16 -
<PAGE>
PART II OTHER INFORMATION


Item 4:  Submission  of Matters to a Vote of  Security  Holders.
         ----  Obtained  consent  for a 1 for 8 reverse  split of the  Company's
         stock by a 51.5% vote of all security holders entitled to vote.


Item 6:  Exhibits and Reports on Form 8-K

(a)      Exhibits


                  99.1     Certificate of the Chief  Executive  Officer dated as
                           of  December 3, 2002  pursuant to the  Sarbanes-Oxley
                           Act of 2002 (filed herewith)

                  99.2     Certificate of the Chief  Financial  Officer dated as
                           of  December 3, 2002  pursuant to the  Sarbanes-Oxley
                           Act of 2002 (filed herewith)

(b)      Reports on Form 8-K

                  None



                                     - 17 -
<PAGE>
                                   SIGNATURES


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


                                          Avery Communications, Inc.

                                                 (Registrant)

Date  December 16, 2002                   /s/ Patrick J. Haynes, III
    --------------------       -------------------------------------------------
                                             Patrick J. Haynes, III
                                             Chairman of the Board



Date  December 16, 2002                 /s/ Thomas C. Ratchford
     -------------------       -------------------------------------------------
                                         Thomas C. Ratchford
                                         Chief Financial Officer


                                     - 18 -
<PAGE>

                           AVERY COMMUNICATIONS, INC.
                                  CERTIFICATION


I, Patrick J. Haynes, III, Chief Executive Officer of Avery Communications, Inc.
(the "Company"), certify that:

1.       I have reviewed this quarterly report of the Company on Form 10-QSB/A;

2.       Based on my  knowledge,  this  quarterly  report  does not  contain any
         untrue  statement of a material  fact or omit to state a material  fact
         necessary to make the  statements  made, in light of the  circumstances
         under which such  statements  were made, not misleading with respect to
         the period covered by this quarterly report; and

3.       Based on my knowledge,  the financial  statements,  and other financial
         information included in this quarterly report,  fairly represent in all
         material  respects the financial  condition,  results of operations and
         cash flows of the Company as of, and for, the periods presented in this
         quarterly report.

         [Items 4, 5 and 6 omitted  pursuant  to the  transition  provisions  of
Release No. 34-46427.]


December 16, 2002                /s/ Patrick J. Haynes, III
                                 --------------------------
                                 Patrick J. Haynes, III, Chief Executive Officer



                                     - 19 -
<PAGE>

                           AVERY COMMUNICATIONS, INC.
                                  CERTIFICATION

I, Thomas C. Ratchford,  Chief Financial Officer of Avery  Communications,  Inc.
(the "Company"), certify that:

1.       I have reviewed this quarterly report of the Company on Form 10-QSB/A;

2.       Based on my  knowledge,  this  quarterly  report  does not  contain any
         untrue  statement of a material  fact or omit to state a material  fact
         necessary to make the  statements  made, in light of the  circumstances
         under which such  statements  were made, not misleading with respect to
         the period covered by this quarterly report; and

3.       Based on my knowledge,  the financial  statements,  and other financial
         information included in this quarterly report,  fairly represent in all
         material  respects the financial  condition,  results of operations and
         cash flows of the Company as of, and for, the periods presented in this
         quarterly report.


         [Items 4, 5 and 6 omitted  pursuant  to the  transition  provisions  of
Release No. 34-46427.]


December 16, 2002                   /s/ Thomas C. Ratchford
                                    -----------------------
                                    Thomas C. Ratchford, Chief Financial Officer



                                     - 20 -
<PAGE>