UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                                   FORM 10-QSB

         (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, 2000

                                       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                                     12-2227079
 (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 October 23, 2000

        TITLE OF CLASS                    NUMBER OF SHARES OUTSTANDING
        --------------                    ----------------------------
Common Stock, $.01 par value                      11,247,264


<PAGE>

                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES

                                      INDEX


PART I   FINANCIAL INFORMATION                                              PAGE

Item 1   Consolidated  Balance Sheets at September 30, 2000                  1
         (unaudited) and December 31, 1999

         Consolidated  Statements of Operations For the Periods
         Ended  September 30, 2000 and 1999 (unaudited)                      2

         Consolidated  Statements of Cash Flows For the Periods              3
         Ended  September 30, 2000 and 1999 (unaudited)

         Notes to Consolidated Financial Statements                          4

Item 2.  Management's  Discussion  and Analysis of Financial                 8
         Condition and Results of Operations

PART II  OTHER INFORMATION

Item 5.  Other information                                                  14




<PAGE>
<TABLE>
<CAPTION>
               ITEM 1. AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                                                               September 30,     December 31,
                                   ASSETS                                                           2000             1999
                                                                                              ---------------  ----------------
                                                                                               (unaudited)
Current assets:
<S>                                                                                          <C>             <C>
   Cash and cash equivalents                                                                 $    12,762,196 $       5,744,069
   Trade accounts receivable, net of allowance for doubtful accounts of
     $242,901 (unaudited) and $188,901                                                               752,213           813,589
   Advanced payment receivables                                                                    1,966,242         6,810,249
   Other receivables                                                                                 390,825           681,526
   Deferred tax asset                                                                                374,086           374,086
   Income tax receivable                                                                             310,529                 -
   Other                                                                                              75,987            27,527
   Net current assets of discontinued operations                                                           -           285,029
                                                                                              ---------------  ----------------
         Total current assets                                                                     16,632,078        14,736,075
                                                                                              ---------------  ----------------
Property and equipment:
   Computer equipment and software                                                                 1,131,637         1,063,674
   Furniture and fixtures                                                                            338,041           334,944
   Accumulated depreciation and amortization                                                        (701,693)         (506,535)
                                                                                              ---------------  ----------------
         Total property and equipment, net                                                           767,985           892,083
                                                                                              ---------------  ----------------
Other assets:
   Goodwill, net of accumulated amortization of $934,511 (unaudited) and $732,869                  2,821,106         3,022,748
   Net long-term assets of discontinued operations                                                 7,694,625         4,443,827
   Deposits                                                                                        2,574,357           185,514
   Purchased contracts, net of accumulated amortization of $314,998 (unaudited)
     and $276,208, respectively                                                                       39,265            70,555
   Non-recourse notes receivable, including $1,439,000 (unaudited) due from related parties        1,563,500                 -
   Other receivables, including $1,150,000 (unaudited) and $400,000, due from
     related parties                                                                               1,150,772           417,649
                                                                                              ---------------  ----------------
         Total other assets                                                                       15,843,625         8,140,293
                                                                                              ---------------  ----------------
         Total assets                                                                        $    33,243,688 $      23,768,451
                                                                                              ===============  ================
                           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current notes payable                                                                     $         6,667 $           6,667
   Trade accounts payable                                                                          2,907,786         4,369,562
   Accrued liabilities                                                                             3,983,284         2,576,753
   Income taxes payable                                                                                    -           255,673
   Deposits and other payables related to customers                                               17,326,623        10,908,168
   Net current liabilities of discontinued operations                                                135,037                 -
                                                                                              ---------------  ----------------
         Total current liabilities                                                                24,359,397        18,116,823
                                                                                              ---------------  ----------------
Long-term liabilities:
   Long-term portion of notes payable, due to related parties                                        331,405           325,195
                                                                                              ---------------  ----------------
Stockholders' equity:
   Preferred stock (20,000,000 shares authorized):
      Series A; $0.01 par value, 800,000 shares authorized, 391,667 shares issued
         and outstanding at September 30, 2000 (unaudited) and 400,000 at
         December 31, 1999 (liquidation preference of $391,667 at September 30, 2000
         (unaudited) and $400,000 at December 31, 1999)                                                3,917             4,000
      Series B; $0.01 par value,  1,050,000  shares  authorized,  390,000 shares
         issued and  outstanding at September 30, 2000  (unaudited) and December
         31, 1999 (liquidation preference of $390,000)                                                 3,900             3,900
      Series C; $0.01 par value, 340,000 shares authorized, 40,000 shares issued
         and outstanding at  September  30, 2000  (unaudited)  and 70,000 at
         December  31, 1999 (liquidation  preference of $40,000 at September 30, 2000
         (unaudited), and $70,000 at December 31, 1999)                                                  400               700
      Series D; $0.01 par value, 1,500,000 authorized, issued and outstanding
         at September 30, 2000 (unaudited) and December 31, 1999
         (liquidation preference of $1,500,000)                                                       15,000            15,000
      Series E; $0.01 par value, 350,000 authorized, issued and outstanding
         at September 30, 2000 (unaudited) and December 31, 1999
         (liquidation preference of $350,000)                                                          3,500             3,500
      Series F; $0.01 par value, 8,000,000 shares authorized, 0 shares issued and
         outstanding  at September 30, 2000  (unaudited)  and  3,890,373  shares
         issued and outstanding at December 31, 1999 (liquidation  preference of
         $0 at September 30, 2000 (unaudited) and $38,904 at December 31, 1999)                            -            38,904
      Series G; $0.01 par value, 8,000,000 shares authorized, 7,126,894 shares issued and
         outstanding at September 30, 2000 (unaudited) and 0 shares issued and
         outstanding at December 31, 1999 (liquidation preference of $71,269 at
         September 30, 2000 (unaudited) and $0 at December 31, 1999)                                  71,269                 -
   Common stock, $0.01 par value, 20,000,000 shares authorized, 9,972,435 shares issued at
      September 30, 2000 (unaudited) and 9,803,949 shares issued at December 31, 1999                 99,724            98,039
   Additional paid-in capital                                                                     15,734,219        12,306,164
   Accumulated deficit                                                                            (5,342,242)       (5,161,775)
   Treasury stock, 1,215,216 shares at September 30, 2000 (unaudited) and 1,176,916
      at December 31, 1999, respectively, at cost                                                 (2,036,801)       (1,981,999)
                                                                                              ---------------  ----------------
         Total stockholders' equity                                                                8,552,886         5,326,433
                                                                                              ---------------  ----------------
         Total liabilities and stockholders' equity                                          $    33,243,688 $      23,768,451
                                                                                              ===============  ================
</TABLE>


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

                                     - 1 -
<PAGE>
<TABLE>
<CAPTION>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
                                   (UNAUDITED)


                                                                Three Months Ended                  Nine Months Ended
                                                                   September 30,                       September 30,
                                                        ----------------------------------  ---------------------------------
                                                             2000              1999              2000             1999
                                                        ----------------  ----------------  ---------------- ----------------

<S>                                                     <C>               <C>               <C>              <C>
Revenues                                                $     9,665,863   $     6,607,559   $    27,443,282  $    16,335,812

Cost of revenues                                             (6,911,393)       (5,045,296)      (19,763,332)     (12,158,093)
                                                          --------------    --------------    --------------   --------------

     Gross profit                                             2,754,470         1,562,263         7,679,950        4,177,719

Selling, general and administrative espense                  (1,529,423)       (1,292,754)       (4,455,205)      (3,960,174)
Advance funding program income                                   36,987           150,680           227,111          452,273
Advance funding program costs                                   (35,564)          (47,646)         (130,046)        (192,772)
                                                          --------------    --------------    --------------   --------------
     Total                                                   (1,528,000)       (1,189,720)       (4,358,140)      (3,700,673)
                                                          --------------    --------------    --------------   --------------

     Operating income                                         1,226,470           372,543         3,321,810          477,046
                                                          --------------    --------------    --------------   --------------

Other income (expense):
   Interest expense                                             (14,464)          (78,354)          (50,240)        (254,036)
   Financing fees and debt issuance costs                             -                 -                 -         (321,736)
   Other, net                                                   126,299            39,328           297,961          100,723
                                                          --------------    --------------    --------------   --------------

     Total other income (expense)                               111,835           (39,026)          247,721         (475,049)
                                                          --------------    --------------    --------------   --------------
Income from continuing operations before
    income taxes                                              1,338,305           333,517         3,569,531            1,997
Income tax expense                                             (332,718)                -        (1,095,289)               -
                                                          --------------    --------------    --------------   --------------
Income from continuing  operations                            1,005,587           333,517         2,474,242            1,997

Loss from discontinued operations, net of income tax
   benefit of $563,658 and $1,314,025, respectively            (855,813)                -        (2,654,707)               -
                                                          --------------    --------------    --------------   --------------

     Net income (loss)                                  $       149,774   $       333,517   $      (180,465) $         1,997
                                                          ==============    ==============    ==============   ==============
Per share data:
Basic net income (loss) per share:
   Continuing operations                                $          0.11   $          0.03   $          0.26  $         (0.02)
   Discontinued operations                                        (0.10)             0.00             (0.30)            0.00
                                                          --------------    --------------    --------------   --------------
   Net income (loss)                                    $          0.01   $          0.03   $         (0.04) $         (0.02)
                                                          ==============    ==============    ==============   ==============
Diluted net income (loss) per share:
   Continuing operations                                $          0.06   $          0.03   $          0.16  $         (0.02)
   Discontinued operations                                        (0.05)             0.00             (0.17)            0.00
                                                          --------------    --------------    --------------   --------------
   Net income (loss)                                    $          0.01   $          0.03   $         (0.01) $         (0.02)
                                                          ==============    ==============    ==============   ==============
Weighted average number of common shares:
   Basic common shares                                        8,753,919         8,628,482         8,730,734        8,649,084
                                                          ==============    ==============    ==============   ==============
   Diluted common shares                                     16,791,723         9,509,878        15,865,627        8,649,084
                                                          ==============    ==============    ==============   ==============
</TABLE>


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

                                     - 2 -
<PAGE>
<TABLE>
<CAPTION>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
                                   (UNAUDITED)

                                                                              Nine Months Ended September 30,
                                                                         -------------------------------------
                                                                               2000               1999
                                                                         -----------------  ------------------
Cash flows from operating activities:
<S>                                                                      <C>                <C>
   Net income (loss)                                                     $       (180,465)  $           1,997
   Loss from discontinued operations                                            2,654,707                   -
   Adjustments to reconcile net income (loss) to net cash provided by
      operating activities from continuing operations:
     Bad debt expense                                                              54,000             188,901
     Amortization of loan discounts                                                 6,210               6,210
     Depreciation and amortization                                                435,590             398,374
     Treasury stock received in settlement                                        (54,802)                  -
   Change in operating assets and liabilities:
      Trade accounts receivable                                                     7,374             155,442
      Advance payment receivables                                               4,844,007           5,512,154
      Other current assets                                                        242,241             123,998
      Deposits                                                                 (2,388,843)          1,038,376
      Trade accounts payable and accrued liabilities                              (55,245)          1,518,613
      Income taxes payable/receivable                                            (566,202)                  -
      Deposits and other payables related to customers                          6,418,455          (1,618,176)
      Other assets                                                                 16,877             158,463
                                                                           ---------------   -----------------
          Net cash provided by operating activities                            11,433,904           7,484,352
          Net cash used in operating activities of discontinued operations     (1,910,439)                  -
                                                                           ---------------   -----------------
          Net cash provided by operations                                       9,523,465           7,484,352
                                                                           ---------------   -----------------
Cash flows from investing activities:
   Purchase of contracts                                                           (7,500)            (60,000)
   Purchase of property and equipment                                             (71,060)           (167,916)
   Capitalized cost in connection with Primal acquisition                               -            (266,874)
   Issuance of notes receivable                                                (2,313,500)                  -
                                                                           ---------------   -----------------
          Net cash used in investing activities                                (2,392,060)           (494,790)
                                                                           ---------------   -----------------
Cash flows from financing activities:
   Proceeds from notes payable                                                          -             160,000
   Principal payments on notes payable                                                  -          (5,668,415)
   Payment of preferred stock dividends                                          (247,392)           (252,900)
   Issuance of shares of common and preferred stock for cash                      134,114                   -
   Cash paid for treasury stock                                                         -            (115,632)
                                                                           ---------------   -----------------

          Net cash used in financing activities                                  (113,278)         (5,876,947)
                                                                           ---------------   -----------------
Increase in cash                                                                7,018,127           1,112,615
Cash at beginning of period                                                     5,744,069           1,086,473
                                                                           ---------------   -----------------
Cash at end of period                                                    $     12,762,196   $       2,199,088
                                                                           ===============  ==================
</TABLE>

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

                                     - 3 -
<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 nine-month period ended September 30, 2000
are not necessarily  indicative of the results that may be expected for the year
ended December 31, 2000.

         Certain   reclassifications  have  been  made  to  conform  to  current
classifications.


         NOTE 2. EARNINGS (LOSS) PER SHARE

         Basic net  income  (loss) per share is  computed  by  dividing  the net
income (loss), decreased (increased) by the preferred stock dividends of $70,692
and $71,800 for the three month periods  ending  September 30, 2000 and 1999 and
$213,092 and $215,400 for the nine-month  periods ending  September 30, 2000 and
1999  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 net income (loss) per common share was $0.01 and $0.02 per
weighted  average common share  outstanding for the three and nine-months  ended
September 30, 2000 and 1999,  respectively.  Diluted net income (loss) per share
includes  the  effect of all  dilutive  options  and  warrants  and  instruments
convertible into common stock. The effect of outstanding warrants and options on
the  computation  of net  income  (loss)  per  share for the  nine-months  ended
September 30, 1999 would be antidilutive and, therefore,  is not included in the
computation  of diluted  weighted  average  shares.  The  effect of  outstanding
warrants,  options and  convertible  securities on the computation of net income
(loss) per share for the three and nine month periods ending  September 30, 2000
and the three  month  period  ending  September  30,  1999 was  dilutive  and is
included in the computation of diluted weighted average shares.

         NOTE 3. 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.

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

         NOTE 4. 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  is  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,  the annual report as of December
31,  1999  and  the  quarterly  report  as of  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 the close of business on September  30, 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  Solutions,  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.


         Under  the  terms of the  spin-off  agreement  with  PSI,  each  common
shareholder  of Avery on the payment date of the spin-off will receive one share
of PSI common  stock for each  share of the  Avery's  common  stock held on that
date.  In  addition,  owners  of  shares  of  Avery's  series  A,  B,  C, D or E
convertible  preferred stock will receive PSI common stock, in the amount of the
preferred  stock's  common stock  equivalent  for each share of Avery  preferred
stock held on the payment date of the spin-off. The spin-off will be recorded at
book value for accounting purposes since PSI is an ongoing business.


         The Board of Directors  approved the spin-off primarily due to the fact
that it appears that  investors  will be better able to understand and value the
PSI and HBS businesses in separate  entities rather than being combined into one
entity. The exercise and conversion price of outstanding stock warrants, options
and  convertible  securities  will be  adjusted  to reflect  the  spin-off.  The
valuation  of the PSI stock to be  distributed  will be  determined  through  an
appraisal of the PSI business.  The spin-off will be a taxable  transaction  for
federal income tax purposes. As part of the transaction, the original PSI owners
have  agreed to  receive  15% and 32% of Avery and PSI,  respectively,  on fully
diluted basis.  In addition,  the former PSI  shareholders  have agreed to waive
their right for Avery to repurchase 1.55 million of their Avery shares and Avery
has agreed to provide $4.0 million in working capital to PSI.


         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 plus
expenses of Avery.

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


         At September  30, 2000 and December  31, 1999,  the net current  assets
(liabilities) and net long-term assets of PSI were as follows:

<TABLE>
<CAPTION>
                                                                                  September 30,      December 31,
                                                                                      2000               1999
                                                                               --------------------------------------
<S>                                                                                   <C>                <C>
 CURRENT ASSETS                                                                    (unaudited)
 Cash                                                                                 $ 1,311,690        $ 1,710,996
 Trade accounts receivable                                                              1,248,296            993,406
 Other current assets                                                                     779,130            366,088
                                                                               --------------------------------------
 Total current assets                                                                   3,339,116          3,070,490
                                                                               --------------------------------------
 CURRENT LIABILITIES
 Current portion of capital lease obligations                                             138,946             89,577
 Current portion of notes payable                                                         202,142            473,252
 Trade accounts payable                                                                   215,708            346,932
 Accrued liabilities                                                                      950,852            852,095
 Deferred revenue                                                                       1,966,505          1,023,605
                                                                               --------------------------------------
 Total current liabilities                                                              3,474,153          2,785,461
                                                                               --------------------------------------
 Net current assets (liabilities) of discontinued operations                           $ (135,037)         $ 285,029
                                                                               ======================================

 PROPERTY AND EQUIPMENT
 Computer equipment and software                                                      $ 2,256,098        $ 1,524,626
 Furniture and fixtures                                                                   110,814            107,650
 Accumulated depreciation and amortization                                               (351,955)           (23,431)
                                                                               --------------------------------------
 Total property and equipment                                                           2,014,957          1,608,845
                                                                               --------------------------------------
 OTHER ASSETS AND LONG-TERM LIABILITIES
 Goodwill, net                                                                          7,533,208          4,563,584
 Capital lease obligations                                                               (241,284)           (62,046)
 Notes payable                                                                         (1,673,543)        (1,728,108)
 Other                                                                                     61,287             61,552
                                                                               --------------------------------------
 Total other assets                                                                     5,679,668          2,834,982
                                                                               --------------------------------------
 Net long-term assets of discontinued operations                                      $ 7,694,625        $ 4,443,827
                                                                               ======================================
</TABLE>


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


         The  operating  results of PSI for the three months ended  December 31,
1999 and nine-months ended September 30, 2000, are as follows:

<TABLE>
<CAPTION>
                                                                                Nine-months ended  Three-months ended
                                                                               September 30, 2000   December 31, 1999
                                                                               --------------------------------------
<S>                                                                                   <C>                 <C>
 Operating revenues                                                                $  6,254,158        $  4,547,703
 Cost of revenues                                                                    (3,223,552)         (1,069,108)
                                                                               --------------------------------------
    Gross profit                                                                      3,030,606          3,478,595
 Selling, general and administrative expenses                                        (6,869,201)        (1,787,241)
                                                                               --------------------------------------
    Income (loss) from operations                                                    (3,838,595)         1,691,354
 Other expense                                                                         (130,137)           (64,786)
                                                                               --------------------------------------
    Income (loss) before income tax provision                                        (3,968,732)         1,626,568
    Income tax benefit (expense)                                                      1,314,025           (667,809)
                                                                               --------------------------------------
    Net income (loss)                                                              $ (2,654,707)       $   958,759
                                                                               ======================================
</TABLE>


         NOTE 5. NOTES AND OTHER RECEIVABLES

         In August 2000, the Company  advanced  certain former PSI  stockholders
$1,564,000 pursuant to the Preliminary PSI Distribution Agreement. The notes are
non-recourse,  bear  interest at 6.6% per annum and are due in August 2002.  The
loans are secured by the Company's  series g preferred stock owned by the former
PSI stockholders.  In addition, the Company advanced $750,000 to a company which
is related to its Chairman.  The advance was made on terms identical to those of
other advances to the company by other non-related  professional investors.  The
related  note  bears  interest  at 10% per  annum  and  will be  converted  into
securities of the related company prior to December 31, 2000.



         NOTE 6. PREFERRED STOCK


         In  accordance  with the  terms  of the  Preliminary  PSI  Distribution
Agreement,  in August 2000, an additional  3,236,531  shares of Avery's series f
preferred stock were issued to the former PSI stockholders. (See Note 7.)


         Immediately   subsequent  to  the  issuance  of  the  3,236,521  shares
discussed above the Company exchanged all of the outstanding  shares (7,126,894)
of the Company's  series f preferred stock for 7,126,894 shares of the Company's
series  g  preferred  stock,   pursuant  to  the  Preliminary  PSI  Distribution
Agreement.  The series g preferred  stock is identical to the series f preferred
stock  except  that (i) it will  have one vote for each  share of the  Company's
common  stock  into  which  it is  convertible  as a single  class,  (ii) is not
entitled to participate in the distribution  rights by the Company of the shares
of the PSI  common  stock to the  Company's  security  holders  and (iii) is not
convertible into the Company's common stock until the earlier of the date of the
distribution or the termination of the Preliminary PSI Distribution Agreement.


         NOTE 7.  PSI PRELIMINARY DISTRIBUTION AGREEMENT


         On August 1,  2000,  certain  contingencies  relating  to the  original
purchase of PSI by the Company were  resolved and resulted in the issuance of an
additional  3,236,531  shares of series f preferred  stock and the  recording of
additional  goodwill of $3,575,000  related to the purchase of PSI. The issuance
of preferred stock and resulting  additional  goodwill relates to the attainment
by PSI of certain revenue and net loss targets and from the  satisfaction of the
conditions  relating to the  repurchase  right of 1,550,000  Avery common shares
from former PSI shareholders.

         The Board of Directors of the Company approved the spin-off of PSI as a
separate  public  company in August 2000. In connection  with the  distribution,
certain  agreements with the Company and the former PSI shareholders were agreed
to as follows:  The Company  agreed to provide  $4,000,000  of cash to PSI.  The
former PSI  shareholders  waived the repurchase  right  discussed  above and the
additional  3,236,531  shares of Avery series f preferred  stock discussed above
was issued to those  shareholders.  The former  chief  executive  officer of the
Company  agreed to cancel  options to purchase  925,000  shares of the Company's
common stock in return for the issuance of 250,000  shares of PSI's common stock
post distribution.

         NOTE 8.  OPTIONS AND WARRANTS

         On August 1, 2000 the Board of  Directors  of the  Company  approved  a
temporary  reduction in the exercise price of most of the 4,495,000  outstanding
options and warrants to $0.50 per share.  This  reduction in exercise  price was
only applicable if the warrant/option  holder exercised the underlying option by
October 20, 2000.  During the fourth quarter 2,155,000 options and warrants were
exercised. The Company will record a charge to earnings in the fourth quarter in
connection with the reductions in exercise prices.

                                      - 7 -
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS


ITEM 2.


          This   Quarterly    Report   on   Form   10-QSB    contains    certain
"forward-looking"  statements as is defined in the Private Securities Litigation
Reform Act of 1995 and information  relating to the Company and its subsidiaries
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  intent,  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
limitations,   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 months  ended
September 30, 2000 and 1999, respectively. 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 for the year ended  December 31, 1999. 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, 2000 and 1999.

         The  results  on the  "Discontinued  operations"  lines  represent  the
results  of  operations  for the  respective  periods  for PSI,  a  wholly-owned
subsidiary that is being spun-off. The annual report as of December 31, 1999 and
the  quarterly  report  as  of  March  31,  2000  reflect  HBS  as  discontinued
operations.  See  Note  4  to  Consolidated  Financial  Statements  for  further
explanation.  All discussions relating to revenue,  cost of revenues,  operating
expenses, etc. pertain only to continuing operations, which consist of Avery and
HBS.

                                     - 8 -
<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  Condensed
Consolidated Statements of Operations:

<TABLE>
<CAPTION>
                                                                        Three Months Ended                   Nine Months Ending
                                                                            September 30,                       September 30,
                                                              ------------------------------------ --------------------------------
                                                                      2000               1999             2000              1999
                                                              ------------------  ---------------- --------------------------------
                                                                             (In Thousands)                       (In Thousands)
<S>                                                          <C>                 <C>              <C>              <C>
Revenues                                                     $           9,666   $         6,608  $       27,443   $         16,336
Cost of revenues                                                        (6,911)           (5,045)        (19,763)           (12,158)
                                                              ----------------    --------------    ------------     --------------
             Gross profit                                               2,755             1,563           7,680              4,178
Operating expenses, excluding DD&A                                     (1,390)           (1,157)         (4,040)            (3,581)
Advance funding program income                                             37               151             227                452
Advance funding program costs                                             (36)              (48)           (130)              (193)
Depreciation and amortization                                            (140)             (136)           (416)              (379)
                                                              ----------------    --------------    ------------     --------------
        Total                                                          (1,529)           (1,190)         (4,359)            (3,701)
                                                              ----------------    --------------    ------------     --------------
             Operating income from continuing operations                1,226               373           3,321                477
Other income (expense)                                                    112               (39)            248               (475)
Discontinued operations loss                                             (856)                -          (2,655)                 -
Income taxes                                                             (333)                -          (1,095)                 -
                                                              ----------------    --------------    ------------     --------------
             Net income (loss)                              $             149   $           334  $         (181)  $              2
                                                              ================    ==============    ============     ==============
</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  quarter  ended  September  30, 2000 were $9.7
million, an increase of 46.3% from the comparable prior year quarter. During the
first nine months of 2000, total revenues  increased 68.0% to $27.4 million from
$16.3 million during the comparable  period of 1999.  Billing  service  revenues
increased  47.3% to $9.4 million in the third quarter of 2000, from $6.4 million
in the third quarter of 1999. For the first nine months of 2000, billing service
revenues increased 71.3% to $26.7 million,  from $15.6 million in the first nine
months of 1999.  The  remaining  revenue in each period is primarily  related to
customer service operations. The billing service revenue

                                     - 9 -
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS


increase is  primarily  attributable  to an increase in the number of  telephone
call  records  processed  and  billed on behalf  of  direct  dial long  distance
customers.   Revenues  derived  from  year-to-date   enhanced  billing  services
customers  decreased  from the  comparable  prior year period due to the Company
canceling  enhanced  billing  contracts  with  most  of  its  enhanced  services
customers  effective  the  end of  February,  1999.  Enhanced  billing  services
revenues  were up slightly for the quarter  ending  September  30, 2000 over the
same period for the prior year due to  increased  volumes at the one  relatively
large remaining enhanced services  customer.  Telephone call record volumes were
as follows:


<TABLE>
<CAPTION>
                                                     Three-Months Ended                  Nine-Months Ended
                                                       September 30,                      September 30,
                                               --------------------------------  ----------------------------------
                                                    2000             1999             2000              1999
                                               ---------------  ---------------  ---------------   ----------------
                                                           (In Thousands)                    (In Thousands)
<S>                                                    <C>              <C>             <C>                <C>
Direct dial long distance                              87,155           66,154          265,079            155,619
Enhanced billing                                          193              173              530                586
</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 23.6% to 28.5% from the prior
year quarter ended September 30, 1999 to the current year quarter, respectively.
The gross profit margin also  increased  from 25.5% to 28.0% from the prior year
to date period to the current  period ended  September 30, 2000. The increase in
gross profit is primarily  due to lower LEC billing  costs as a percent of sales
and higher margins in the customer service department.


Operating Expense, Excluding DD&A

         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 second  quarter of 2000 and 1999 were
$1.4  million  and $1.2  million,  representing  14.4%  and  17.5% of  revenues,
respectively.  Operating expenses for the first nine months of 2000 increased to
$4.0 million, or 14.7% of revenues,  from $3.6 million, or 21.9% of revenues, in
the comparable period of 1999. The higher operating  expenses were primarily due
to professional,  and insurance costs somewhat offset by reduced personnel costs
which resulted from lower levels of employment.

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

                       CONDITION AND RESULTS OF OPERATIONS



Advance Funding Program Income and Costs


         Management  has made  significant  policy  changes  in  regards  to the
advance  funding  program.  In an effort to reduce the inherent risk involved in
advancing  customer  receivables,  HBS  encouraged and  participated  in placing
current  customers with  significant  financing needs with third party financing
companies.  HBS plans to assist future  customers in a similar manner.  Although
internal  advance  funding  is still  available,  its scope has been  reduced to
mainly start up companies and those  requiring  reduced  funding as a percent of
gross billable revenue with the LEC. As a result, advance funding program income
decreased  75.5% to $37,000 for the third  quarter of 2000 from $151,000 for the
third quarter of 1999.  Advance funding program income for the first nine months
of 2000  decreased  49.8% to $227,000  from $452,000 in the first nine months of
1999.


         Advance  funding program costs decreased 22.9% to $36,000 for the third
quarter of 2000 from  $48,000  for the third  quarter of 1999.  Advance  funding
program costs for the first nine months of 2000 decreased 32.6% to $130,000 from
$193,000  in the  comparable  period  of 1999.  The  decreases  result  from the
Company's policy decision discussed above.


Depreciation and Amortization


         Depreciation  and  amortization  expense  for  the  third  quarter  was
$140,000 in 2000, and $136,000 in 1999.  Depreciation and  amortization  expense
for the nine months ended September, was $416,000 in 2000, and $379,000 in 1999.
Both increases were due to the addition of equipment at HBS.


Operating Income from Continuing Operations


         Operating  income from  continuing  operations  in the third quarter of
2000 was  $1,226,000,  or 12.7% of  revenues,  compared  to  $373,000 or 5.6% of
revenues,  in the  third  quarter  of 1999.  Operating  income  from  continuing
operations in the first nine months of 2000 increased to $3,321,000, or 12.1% of
revenues,  from $477,000, or 2.9% of revenues, in the first nine months of 1999.
The  increases  in  operating  income from  continuing  operations  are directly
attributable  to  the  significant  increases  in the  volume  of  call  records
processed for the respective periods.


Other Income (Expense), Net


         Other income  (expense) net in the third quarter  increased to $112,000
of net income in 2000 from  $39,000  of net  expense in 1999.  The  increase  is
primarily  attributable to lower interest associated with reduced levels of debt
and higher  interest income  associated with higher cash balances.  Other income
(expense) net for the nine-month period ending 2000 increased to $248,000 of net
income  from  $475,000  of net  expense  in 1999.  The  increase  was due to the
reduction of interest expense due to lower levels of debt, warrant buy back cost
occurring in 1999 but not in 2000 and higher  interest  income  associated  with
higher cash balances.

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

                       CONDITION AND RESULTS OF OPERATIONS


Loss from Discontinued Operations


         Loss from  discontinued  operations was $856,000 for the quarter ending
2000 and  $2,655,000  for the nine  months  ending  2000 net of tax  benefit  of
$564,000 and $1,314,000 for the three and nine-months  ended September 30, 2000,
respectively.  Revenues from  discontinued  operations  were  $2,186,000 for the
quarter ending 2000 and  $6,254,000 for the nine months ending 2000.  There were
no  discontinued  operations  for 1999 as PSI was not  acquired  until after the
close of business on September 30, 1999.


         PSI designs,  develops and supports an integrated suit of client/server
and  browser-based  software  solutions  focusing  on customer  acquisition  and
retention  in  the  telecommunications  industry  primarily  utilizing  decision
support software and internet  technologies.  In addition,  PSI provides billing
and customer  care  software to the wireless  communications,  IP telephony  and
internet service provider industries.


Income Taxes


         An income tax provision of $333,000 was recorded for the quarter ending
September  30,  2000.  None was  recorded in 1999.  An income tax  provision  of
$1,095,000  was recorded for the nine month period  ending  September  30, 2000.
None was  recorded  in 1999.  Income tax  expense was  recorded  for  continuing
operations  but is  effectively  offset on a  consolidated  basis by income  tax
benefit recorded for discontinued operations.


LIQUIDITY AND CAPITAL RESOURCES


         Avery's cash balance  increased to  $12,762,000  at September 30, 2000,
from  $5,744,000 at December 31, 1999,  primarily due to timing of cash receipts
for LECs  and  increased  processing  volume  at HBS.  Avery's  working  capital
position  at  September  30,  2000 was a negative  $7.7  million,  compared to a
negative  $3.4  million as of December 31,  1999.  The $4.3 million  decrease in
working capital is due to a $6,243,000 increase in current  liabilities,  offset
by a $1,896,000  increase in current assets. The $6,243,000  increase in current
liabilities is primarily  attributable to a $6,419,000  increase in deposits and
other  payables  associated  with  increased  volume,  a $1,150,000  increase in
accrued  liabilities and income taxes offset by a $1,462,000 decline in accounts
payable. The $1,896,000 increase in current assets is primarily  attributable to
a  $7,018,000  increase  in cash  offset by a  $4,844,000  decrease  in advanced
payment  receivables  due to the  company's  change in direction  for  financing
receivables.


         Net cash  provided  by  operating  activities,  excluding  discontinued
operations,  was $11,434,000 and $7,484,000 for the nine months ending September
30, 2000 and 1999,  respectively.  The  $11,434,000  of cash flows,  provided by
operations for 2000 results  primarily from a $2,915,000 net income and non-cash
items from  continuing  operations,  $6,418,000  increase in deposits  and other
payables  related  to  customers,  a  $4,844,000  decrease  in  advance  payment
receivables offset by a $2,389,000 increase in customer deposits. The $7,484,000
cash flows provided by operations for

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

                       CONDITION AND RESULTS OF OPERATIONS

         1999 results  primarily from a $5,512,000  decrease in advance  payment
receivables,  a $1,519,000 increase in accounts payable and accrued liabilities,
a  $1,038,000  increase in  customer  deposits,  and  $595,000 of net income and
non-cash items from continuing  operations,  offset by a $1,618,000  decrease in
deposits and other payables to customers.


         During the  period  ending  September  30,  2000,  the  Company  issued
$2,314,000 of notes receivable to former PSI shareholders and a related company,
purchased  $71,000 of property and  equipment  and paid  preferred  dividends of
$247,000,  offset by proceeds  generated  from the sale of preferred  and common
stock of  $134,000.  During the  comparable  period in 1999,  the Company  spent
$168,000  on capital  expenditures,  $267,000 of costs  associated  with the PSI
acquisition,  $253,000 in  preferred  dividends,  $116,000  purchase of treasury
stock,  and  $5,668,000  to  pay  off  its  line  of  credit  with  a  financial
institution.


         The  Company's  operating  cash  requirements  consist  principally  of
working capital  requirements,  requirements under its advance-funding  program,
scheduled  payments  of  preferred  dividends  and  capital   expenditures.   In
accordance  with the  Preliminary PSI  Distribution  Agreement,  the Company has
advanced  an  additional  $2,000,000  of cash to PSI during the  quarter  ending
December 31, 2000. The Company  believes cash flows  generated from  operations,
the exercise of warrants and options and future borrowings, if required, will be
sufficient to fund capital expenditures,  advance funding requirements,  working
capital needs and funding requirements in the foreseeable future.


YEAR 2000 UPDATE


         During 1999 we  undertook  initiatives  to ensure that our systems were
Year 2000 compliant.  As of the date of this filing, we have not experienced any
disruption  of our  operations  due to Year 2000  issues.  The cost of Year 2000
modifications  have not been  significant  and no additional Year 2000 costs are
anticipated.


                                     - 13 -
<PAGE>
                          PART II - OTHER INFORMATION

Item 4. Submission of Matters to a vote of Security Holders


         Avery held its annual  meeting on September  13, 2000.  At the meeting,
the  shareholders  elected  five  directors,   approved  Avery's  1999  flexible
incentive plan and ratified the appointment of Avery's auditors,  King Griffin &
Adamson PC. The voting results were as follows:



     DIRECTORS                  FOR             AGAINST       ABSTAIN/WITHHELD
---------------------      -------------    --------------  -------------------
Patrick J. Haynes, III       14,580,728           ----             89,545

Scot M. McCormick            14,580,728           ----             89,545

Norman M. Phipps             14,580,728           ----             89,545

J. Alan Lindauer             14,580,728           ----             89,545

Robert T. Isham, Jr.         14,580,728           ----             89,545

      PLAN                   10,760,479          731,709            8,953

    AUDITORS                 14,605,003           64,020            1,250




ITEM 5. Other Information


         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 Hold Billing  Services  Company ("HBS")
its local  exchange  carrier  billing  clearinghouse  business.  The decision to
spin-off PSI instead of HBS is 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,  the  financial  information
contained in this document  presents PSI as a discontinued  operation due to the
spin-off and the amounts in the  statements of operations  through the provision
for  income  taxes are HBS's plus  expenses  of Avery.  The annual  report as of
December 31, 1999 and the quarterly  report as of March 31, 2000 have  reflected
HBS as discontinued operations.


                                     - 14 -
<PAGE>

                          PART II - OTHER INFORMATION



                                          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 Communication, Inc.

                                                   (Registrant)

Date____________________                      /s/Patrick J. Haynes III
                                       -----------------------------------------
                                              Patrick J. Haynes III

                                              Chairman of the Board

Date_____________________                     /s/ Scot McCormick
                                       -----------------------------------------
                                          /s/ Scot McCormick, Secretary



                                     - 15 -
<PAGE>