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 March 31, 2002

                                       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 incorporation or
                 organization)                             (IRS Employer ID No.)
       190 SOUTH LASALLE STREET, SUITE 1710
               CHICAGO, ILLINOIS                                   60603
     (Address and principal executive offices)                   (Zip code)
                                 (312) 419-0077
              (Registrant's telephone number, including area code)


         Check whether the Issuer (1) filed all reports  required to be filed by
         Section 13 or 15(d) of the Securities Exchange Act during the preceding
         12 months (or for such shorter  period that the registrant was required
         to file  such  reports),  and  (2)  has  been  subject  to such  filing
         requirements for the past 90 days. YES X NO .

          The number of shares  outstanding  of each of the issuer's  classes of
common equity, as of March 31, 2002:


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

Common Stock, $.01 par value                                 1,149,059




Transitional Small business Disclosure Format (Check One): Yes   No X


<PAGE>


                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES


                                      INDEX





PART I    FINANCIAL INFORMATION                                             PAGE

Item 1.   Consolidated Financial Statements

          Consolidated Balance Sheets - March 31, 2002                        1
          (unaudited) and December 31, 2001

          Consolidated Statements of Operations - For the Three               3
          Months Ended March 31, 2002 and 2001  (unaudited)

          Consolidated Statements of Cash Flows - For the Three               4
          Months Ended March 31, 2002 and 2001 (unaudited)

          Notes to Consolidated Financial Statements                          5

Item 2.   Management's Discussion and Analysis of Financial                  10
          Condition and Results of Operations

PART II   OTHER INFORMATION

Item 2.   Changes in securities                                              15




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

                                                                                                 ----------------   ----------------
                                                  ASSETS                                            03/31/02           12/31/01
                                                                                                 ----------------   ----------------
                                                                                                   (UNAUDITED)
<S>                                                                                           <C>                 <C>
Current assets:
    Cash and cash equivalents                                                                 $        2,534,886  $       5,422,202
    Accounts receivable:
        Trade accounts and notes receivable, net of allowance for doubtful accounts
            of $242,901 for both periods                                                               4,333,542          3,231,166
        Advance payment receivables                                                                    1,734,175          1,794,352
        LEC billing and collection fees receivable                                                     4,735,814          4,948,502
        Receivable from OAN                                                                            2,113,056          2,113,056
        Other receivables                                                                                121,285             94,376
                                                                                                 ----------------   ----------------
            Total accounts receivable                                                                 13,037,872         12,181,452
                                                                                                 ----------------   ----------------

    Deferred tax asset                                                                                 1,375,183          1,090,690
    Deposits with LECs                                                                                   581,295            933,618
    Other current assets                                                                                 659,317             53,354
                                                                                                 ----------------   ----------------
            Total current assets                                                                      18,188,553         19,681,316
                                                                                                 ----------------   ----------------

Property and equipment:
    Computer equipment and software                                                                    5,844,075          5,718,172
    Furniture and fixtures                                                                               500,003            500,003
    Accumulated depreciation and amortization                                                         (1,648,475)        (1,379,877)
                                                                                                 ----------------   ----------------

            Property and equipment, net                                                                4,695,603          4,838,298
                                                                                                 ----------------   ----------------

Other assets:
    Goodwill, net                                                                                      5,577,735          5,577,735
    Investments                                                                                                -             30,100
    Deposits with LECs                                                                                 2,236,983          2,236,983
    Purchased contracts, net of accumulated amortization of $342,772 and $339,996, respectively           11,491             14,267
    Notes receivable due from related parties, net of allowance of $1,210,800 in both periods            752,700            752,700
    Capitalized financing fees                                                                           763,228            718,299
    Other assets                                                                                          48,929             43,036
                                                                                                 ----------------   ----------------

            Total other assets                                                                         9,391,066          9,373,120
                                                                                                 ----------------   ----------------

            Total assets                                                                      $       32,275,222  $      33,892,734
                                                                                                 ================   ================
</TABLE>

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

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

                            LIABILITIES AND STOCKHOLDERS' DEFICIT
                                                                                                   ---------------  ---------------
                                                                                                  MARCH 31, 2002   DECEMBER 31, 2001
                                                                                                   ---------------  ---------------
                                                                                                     (Unaudited)
<S>                                                                                             <C>               <C>
Current liabilities:

   Line of credit                                                                               $       5,374,983 $      2,607,705
   Trade accounts payable                                                                               6,164,904        5,144,763
   Accrued liabilities                                                                                  4,393,626        4,306,386
   Current portion of customer cure liability                                                             317,701          317,701
   Income taxes payable                                                                                   112,494          163,994
   Deposits and other payables related to customers                                                    15,565,521       20,271,174
                                                                                                   ---------------  ---------------
           Total current liabilities                                                                   31,929,229       32,811,723
                                                                                                   ---------------  ---------------

Non-current liabilities:
   Long-term notes payable due to related parties                                                         680,681          680,681
   Customer cure liability, less current portion                                                        1,463,891        1,576,021
                                                                                                   ---------------  ---------------
           Total non-current liabilities                                                                2,144,572        2,256,702
                                                                                                   ---------------  ---------------

Redeemable preferred stock:
   Series A; $0.01 par value, 391,667 shares authorized, issued and
       outstanding at March 31, 2002 and December 31, 2001 (liquidation preference of $391,667)           391,667          391,667
   Series B; $0.01 par value, 390,000 shares authorized, issued and
       outstanding at March 31, 2002 and December 31, 2001 (liquidation preference of $390,000)           390,000          390,000
   Series C; $0.01 par value, 40,000 shares authorized,  issued and
       outstanding at March 31, 2002 and December 31, 2001 (liquidation preference of $40,000)             40,000           40,000
   Series D; $0.01 par value, 1,500,000 authorized, issued and
       outstanding at March 31, 2002 and December 31, 2001 (liquidation preference of $1,500,000)       1,500,000        1,500,000
                                                                                                   ---------------  ---------------
           Total redeemable preferred stock                                                             2,321,667        2,321,667
                                                                                                   ---------------  ---------------

Commitments and contingencies (Note 5)

Stockholders' deficit:
   Preferred stock:
       Series G; $0.01 par value, 2,150,493 shares authorized, issued and
           outstanding at March 31, 2002 and December 31, 2001 (liquidation preference of $21,505)         21,505           21,505
       Series H; $0.01 par value, 1,600,000 shares authorized, issued and
           outstanding at March 31, 2002 and December 31, 2001 (liquidation preference of $1,600,000)      16,000           16,000
       Series I; $0.01 par value, 500,000 shares authorized, issued and
           outstanding at March 31, 2002 and December 31, 2001 (liquidation preference of $500,000)         5,000            5,000
   Common stock: $0.01 par value, 20,000,000 shares authorized, 1,267,955 issued
     and outstanding at March 31, 2002 and December 31, 2002, respectively                                 12,680           12,680
   Additional paid-in capital                                                                           6,601,837        6,639,337
   Accumulated deficit                                                                                 (9,607,263)      (9,055,012)
   Treasury stock,118,896 and 101,396 shares at March 31, 2002 and December 31, 2001,
     respectively, at cost                                                                                (91,577)         (58,440)
   Subscription notes receivable                                                                       (1,078,428)      (1,078,428)
                                                                                                   ---------------  ---------------
           Total stockholders' deficit                                                                 (4,120,246)      (3,497,358)
                                                                                                   ---------------  ---------------

           Total liabilities and stockholders' deficit                                          $      32,275,222  $    33,892,734
                                                                                                   ===============  ===============
</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 OPERATIONS
                  FOR THE QUARTER ENDED MARCH 31, 2002 AND 2001
                                   (UNAUDITED)
                                                                  THREE MONTHS ENDED
                                                                      March 31,
                                                                 2002           2001
                                                              (unaudited)

<S>                                                          <C>            <C>
Revenues                                                     $ 11,179,661   $   8,464,611

Cost of revenues                                               (8,027,725)     (5,836,390)
                                                              ------------   -------------

     Gross profit                                               3,151,936       2,628,221

Operating expenses                                             (3,824,798)     (1,721,189)
                                                              ------------   -------------

     Operating income (loss)                                     (672,862)        907,032
                                                              ------------   -------------

Other income (expense):
   Interest expense                                               (40,011)        (14,745)
   Option buyback costs                                                 -         (88,378)
   Other, net                                                    (123,871)        105,745
                                                              ------------   -------------

     Total other income (expense), net                           (163,882)          2,622
                                                              ------------   -------------
Income (loss) from continuing  operations before
    provision for income taxes and discontinued operations       (836,744)        909,654
Income tax benefit (expense)                                      284,493        (430,867)
                                                              ------------   -------------
Income (loss) from continuing operations                         (552,251)        478,787
Loss from discontinued operations (less applicable income
   tax benefit of $311,799 at March 31, 2001                            -        (605,259)
                                                              ------------   -------------

     Net loss                                                $   (552,251)  $    (126,472)
                                                              ============   =============

Net loss attributable to common stockholders                 $   (675,443)  $    (238,398)
                                                              ============   =============
Per share data:
Basic net loss per share:
Continuing operations income (loss)                          $      (0.58)  $        0.28
Discontinued operations                                                 -           (0.46)
                                                              ------------   -------------
Net loss                                                     $      (0.58)  $       (0.18)
                                                              ============   =============
Diluted net loss per share:
Continuing operations income (loss)                          $      (0.58)  $        0.19
Discontinued operations                                                 -           (0.46)
                                                              ------------   -------------
Net loss                                                     $      (0.58)  $       (0.27)
                                                              ============   =============
Weighted average number of common shares outstanding:
   Basic common shares                                          1,157,781       1,307,090
                                                              ============   =============
   Diluted common shares                                        1,157,781       1,937,389
                                                              ============   =============
</TABLE>


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

                                     - 3 -
<PAGE>
<TABLE>
<CAPTION>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE QUARTERS ENDED MARCH 31, 2002 AND 2001
                                   (UNAUDITED)

                                                                            THREE MONTHS ENDED
                                                                                 MARCH 31,
                                                                         2002                2001
                                                                       (unaudited)

<S>                                                                <C>                 <C>
Cash flows used in operating activities:
   Net loss                                                        $        (552,251)  $       (126,472)
   Loss from discontinued operations                                                            605,259
   Adjustments to reconcile net loss to net cash provided by
    (used in) operating activities from continuing operations
     net of effects of acquisitions:
     Amortization of loan discounts                                                -              2,070
     Deferred income taxes                                                  (284,493)            11,850
     Depreciation and amortization                                           223,669            139,816
     Option buyback costs                                                          -             88,378
     Asset exchanged for royalty obligation                                   30,100                  -
     Change in  operating assets and liabilities:
       Trade accounts receivable                                          (1,102,376)           814,396
       Advance payment receivables                                            60,177           (174,911)
       Other current assets                                                 (605,963)          (191,312)
       Deposits with LECs                                                    352,323           (118,563)
       Other receivables                                                     185,779                  -
       Other assets                                                           (5,893)              (193)
       Trade accounts payable and accrued liabilities                      1,107,381         (1,407,522)
       Income taxes payable                                                  (51,500)           107,218
       Deposits and other payables related to customers                   (4,817,783)        (4,331,399)
                                                                     ----------------    ---------------

           Net cash provided by (used in) continuing operations           (5,460,830)        (4,581,385)
           Net cash provided by (used in) discontinued operations                  -            275,271
                                                                     ----------------    ---------------
           Net cash provided by (used in) operations                      (5,460,830)        (4,306,114)
                                                                     ----------------    ---------------

Cash flows from used in investing activities:
   Purchase of property and equipment                                       (123,127)           (14,620)
   Payment received on notes receivable                                            -             13,308
   Amounts loaned for notes receivable                                             -           (730,000)
   Purchase of investments                                                         -           (495,000)
                                                                     ----------------    ---------------

           Net cash used in investing activities                            (123,127)        (1,226,312)
                                                                     ----------------    ---------------

Cash flows from used in financing activities:
   Redemption of preferred shares                                                  -           (350,000)
   Net proceeds from line of credit                                        2,767,278                  -
   Proceeds from notes payable                                                     -            210,000
   Purchase of options for cash                                                    -           (215,000)
   Cash paid for treasury stock                                              (33,137)        (1,207,617)
   Payment of preferred stock dividends                                      (37,500)           (74,426)
   Issuance of shares of common and preferred stock for cash                                  1,600,000
                                                                     ----------------    ---------------

           Net cash provided by (used in) financing activities             2,696,641            (37,043)
                                                                     ----------------    ---------------

Decrease  in cash                                                         (2,887,316)        (5,569,469)

Cash at beginning of period                                                5,422,202          6,719,888
                                                                     ----------------    ---------------

Cash at end of period                                              $       2,534,886   $      1,150,419
                                                                     ================    ===============
Supplemental disclosures:
   Interest paid                                                   $          40,011   $         13,385
                                                                     ================    ===============
   Income taxes paid                                               $          51,500   $              -
                                                                     ================    ===============
</TABLE>


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


                                     - 4 -
<PAGE>

                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



         NOTE 1. BASIS OF PRESENTATION

         The   accompanying    unaudited    financial    statements   of   Avery
Communications,  Inc.  ("Avery")  and  subsidiaries  (together  with Avery,  the
"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.

         Management  uses  estimates  and  assumptions  in  preparing  financial
statements in accordance with generally accepted  accounting  principles.  Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses.  Actual  results could vary from the estimates  that were
used.

         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 month period ended March 31, 2002 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending December 31, 2002.



         NOTE 2. NET INCOME (LOSS) PER COMMON SHARE

         Basic and diluted net income  (loss) per share are computed by dividing
the net income  (loss),  increased by the preferred  stock  dividends  earned of
$123,192 and $111,926 for the three month periods ended March 31, 2002 and 2001,
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 $0.10 and $0.08 per
weighted  average  common share  outstanding  for the three month  periods ended
March 31, 2002 and 2001, respectively. Diluted net income per share includes the
effect of all dilutive options, warrants and instruments convertible into common
stock.  Preferred  stock  dividends  paid were $37,500 and $74,426 for the three
month periods ended March 31, 2002 and 2001, respectively.



         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.

                                     - 5 -
<PAGE>

                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         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  Primal  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 exclude expenses
relating to PSI.


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

                                                            December 31,
                                                                2000
                                                        ------------------
        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 libilities                                    1,030,356
          Deferred revenue                                      1,074,008
                                                        ------------------
          Total current liabilities                             3,258,012
        NET CURRENT ASSESTS OF DISCONTINUED OPERATIONS   $        669,620
                                                        ==================

                                     - 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:



                                                            December 31,
                                                                2000
                                                        ------------------
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 ASSESTS AND LONG-TERM LIABILITIES
  Goodwill, net                                                 7,219,072
  Capial 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
                                                        ==================




         The operating results of PSI for the period January 1, 2001 to February
12, 2001 were as follows:


<TABLE>
<CAPTION>
                                                                ------------------
                                                                 Period January 1,
                                                                     2001 to
                                                                     February 12,
                                                                       2001
                                                                ------------------
<S>                                                                     <C>
        Operating revenues                                              $ 825,417
        Cost of revenues                                                 (598,792)
                                                                ------------------
           Gross profit                                                   226,625
        Selling, general and administrative expenses                   (1,127,751)
                                                                ------------------
           Loss from operations                                          (901,126)
        Other Expense                                                     (15,932)
                                                                ------------------
           Loss before income tax provision                              (917,058)
           Income tax benefit                                             311,799
                                                                ------------------
           Net loss                                                    $ (605,259)
                                                                ==================
</TABLE>

                                     - 7 -
<PAGE>

                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



         NOTE 4. CERTAIN TRANSACTIONS


         On March 9, 2001, HBS' largest customer, which accounted for 57% of its
call  records  processed in 2000 and 55% of all call  records  processed  during
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. The
customer's  volume of call records  processed has declined  since the bankruptcy
filing,  but the  decline in volume is believed  to be  attributable  to general
industry  trends.  As of May 15,  2002,  the filing has had no material  adverse
effect on HBS Billing Services' business  relationship with this customer,  and,
based upon  conversations  between the  managements  of the two  companies,  the
Company does not presently  anticipate that the filing will materially adversely
affect the relationship with this company in the immediate future.

         In connection  with our purchase of assets from Qorus in November 2001,
the Company  agreed to pay Qorus an amount equal to five percent (5%) of the net
after-tax  income,  if  any,  generated  by  the  acquired  intelligent  message
communications service business for a period of five years following the closing
date. Pursuant to an agreement among the parties entered into in March 2002, the
parties  agreed to  eliminate  this  royalty  obligation  in exchange for a cash
payment in the amount of $100,000, the return of all common shares of Qorus held
by Avery or its subsidiaries and the cancellation of all unexercised  options to
purchase common shares of Qorus held by Avery or its  subsidiaries.  At December
31,  2001,  the  investment  in Qorus was  recorded in the  Company's  financial
statements at $30,100.

         On  January  3, 2002,  the  Company  advanced  the sum of  $200,000  to
Norlenton Investments, a shareholder of the Company, which executed a promissory
note in the amount of $200,000  payable to the Company.  The note bears interest
at 6% and calls for the  repayment of all  principal  and interest on January 3,
2003. The advance is secured by 38,881 shares of common stock in the Company.



         NOTE 5.  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.

                                     - 8 -
<PAGE>


         NOTE 6.  OAN and AELIX TRANSACTIONS

         Unaudited pro forma  financial  information  for the three months ended
March 31, 2001 as though the OAN and Aelix  acquisitions had occurred on January
1, 2001 is as follows:

                                                                     Q1
                                                                     2001
Revenues                                                        $ 16,761,789
Net Income (loss) from continuing operations                      (2,698,741)
Net Income (loss) per share from continuing operations:
     Basic                                                      $      (2.06)
     Diluted                                                    $      (1.39)



         NOTE 7 - SEGMENT INFORMATION


         The local exchange  carrier billing segment  represents the third party
billing  clearinghouses for the telecommunications  industry.  These third party
clearinghouses  process these telephone call records and other  transactions and
submit them to local telephone companies for inclusion in their monthly bills to
end-users. The intelligent message communication services segment represents the
intelligent  message  communications  services  to  enterprises,  notably in the
travel, hospitality and trucking sectors.


         A summary of the segments'  operating income for the period ended March
31, 2002 is as follows:

<TABLE>
<CAPTION>
                                      LOCAL EXCHANGE        INTELLIGENT MESSAGE          CORPORATE
                                      CARRIER BILLING         COMMUNICATIONS            ADMINISTRATION        CONSOLIDATED


<S>                                    <C>                       <C>                   <C>                   <C>
Revenue                                $ 11,070,198              $ 109,463                    $ -            $ 11,179,661

Depreciation and Amortization               177,436                 45,900                    333                 223,669

Segment profit (loss)                       257,069               (335,901)              (473,419)               (552,251)

Segment assets                           26,299,229              4,451,027                330,629              31,080,885

Capital expenditures by                     125,903                      -                      -                 125,903
segment
</TABLE>



         There was only one  segment  during the three  months  ended  March 31,
2001.  Approximately $0.6 million of Avery's corporate office expenses have been
allocated  to the local  exchange  carrier  billing  segment  based on  services
provided to that segment.



         NOTE 8. REVERSE STOCK SPLIT


         The  board  of  directors  approved  a  1-for-8  reverse  split  of the
Company's common stock, which was effective on December 12, 2001. Prior periods'
earnings  per share have been  adjusted  to include  the effect of this  reverse
split.



         NOTE 9. NEW ACCOUNTING STANDARDS


         Financial  Accounting  Standard No. 142 "Goodwill and Other  Intangible
Assets" requires that goodwill recorded on acquisitions  completed prior to July
1, 2001 be  amortized  through  December 31,  2001.  Effective  January 1, 2002,
goodwill is no longer to be amortized but will instead be tested for  impairment
as set forth in the  statement.  The Company  adopted this  statement  effective
January 1, 2002.  The  effect of not  recording  any  amortization  of  goodwill
reduced the net loss by $61,000 for the three months ended March 31, 2002.

                                     - 9 -
<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 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   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 month periods ended March
31,  2002 and  2001.  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,  2001.  For  purposes  of the
following discussion, references to year periods refer to the

                                     - 10 -
<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS



         Company's  fiscal year ended  December 31 and  references  to quarterly
periods refer to the  Company's  fiscal three month periods ended March 31, 2002
and 2001.

         The results of the operations for the first quarter of 2002 include the
activities of ACI  Communications,  Inc. ("ACI"),  which purchased the assets of
OAN Services,  Inc., in August 2001 and the activities of Aelix, Inc. ("Aelix"),
which was purchased in November 2001.

         The results on the  "Discontinued  operations"  lines  during the first
quarter of 2001 relate to PSI, a wholly  owned  subsidiary  that was spun-off in
February  2001.  All  discussions  relating  to revenue,  cost of  revenues  and
operating  expenses  pertain only to  continuing  operations,  which  consist of
Avery, HBS, ACI and Aelix.


         RESULTS OF OPERATIONS


         The   following   table   presents   certain  items  in  the  Company's
Consolidated Statements of Operations for the first quarter of 2002:

<TABLE>
<CAPTION>
                                                             -----------------------------
                                                                  THREE MONTHS ENDED
                                                                       March 31,
                                                             -----------------------------
                                                                 2002           2001
                                                             -------------  --------------

<S>                                                          <C>            <C>
Revenues                                                     $ 11,179,661   $   8,464,611

Cost of revenues                                               (8,027,725)     (5,836,390)
                                                              ------------   -------------

     Gross profit                                               3,151,936       2,628,221

Operating expenses                                             (3,601,129)     (1,581,373)
Depreciation and amortization                                     223,669         139,816
                                                              ------------   -------------
     Operating income (loss)                                     (672,862)        907,032
Other income (expense, net                                       (163,882)          2,622
Income tax benefit (expense)                                      284,493        (430,867)
Discontinued operations loss                                            -        (605,259)
                                                              ------------   -------------
     Net income (loss)                                       $   (552,251)  $    (126,472)
                                                              ============   =============
</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,  and from electronic messaging services provided by Aelix. 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 March 31, 2002 were $11.2
million, up 32.1% from the comparable prior year's quarter. Revenues included in
this period for the acquired  ACI and Aelix  business  units were $4.9  million.
Excluding revenue generated by ACI and Aelix, the



                                     - 11 -
<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS


Company's  revenue would have declined by 25.5%,  reflecting a 28.9% decrease in
records processed.  The decline in volume of call records processed reflects the
general downturn in the telecommunications industry.


         Cost of revenue

         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  Company's  gross  profit  margin in the first  quarter of 2002 was
28.2%,  compared  to 31.0% in the first  quarter of 2001.  The  decline in gross
margin reflects price competition in the industry, lower volumes of call records
processed and the inability to reduce costs in line with changes in revenue.


         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 first quarter of 2002 were $3.8 million,
compared to $1.7 million in the first quarter of 2001. The increase in operating
expenses was  attributable  to the  inclusion,  in the first quarter of 2002, of
operating expenses of ACI totaling $1.8 million and Aelix totaling $0.3 million.
Excluding  the effect of the  acquired  businesses,  operating  expenses in 2002
would have been $1.7 million,  which would have been equal to operating expenses
in the first quarter of 2001.


         Depreciation and Amortization

         Depreciation and amortization  expense for the three months ended March
31, 2002 and 2001 was $223,669 and $139,816,  respectively. The increase was due
to depreciation  and amortization  expenses  associated with fixed assets of ACI
and Aelix, offset by the absence of amortization expense for goodwill during the
first  quarter of 2002,  pursuant to the  provisions  of  Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets."


                                     - 12 -
<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS


         Operating Income (Loss) from Continuing Operations

         During the first quarter of 2002,  the Company  incurred a $0.8 million
operating loss, compared to operating income from continuing  operations of $0.9
million during the first quarter of 2001. The decrease in operating  income from
continuing operations is primarily  attributable to a declining gross margin and
operating expenses which increased more than revenue, on a relative basis.


         Other Income (Expense), Net

         Other  income  (expense),  net,  in the  first  quarter  of 2002 was an
expense of  $163,882  compared to income of $2,622  during the first  quarter of
2001. The expense in 2002 is largely attributable to a transaction in March 2002
in which the Company  recorded a $130,100 expense when it made a cash payment of
$100,000 and surrendered 3,010,000 shares of Qorus.com,  Inc. ("Qorus") to Qorus
to cancel  Avery's  obligation to pay Qorus an amount equal to five percent (5%)
of the net  after-tax  income,  if any,  generated  by the Aelix  business for a
period of five years following the closing date. The surrendered shares of Qorus
common stock had a cost basis of $30,100.  The Company  concurrently  waived its
right to purchase up to  1,066,500  shares of Qorus  common  stock for $0.01 per
share. The Company had not assigned any value to the options.


         Income Taxes

         An income tax benefit of $284,493 was recorded for the first quarter of
2002 compared to an expense of $430,867 (for continuing operations) in the first
quarter of 2001. The Company expects its tax rate in 2002 will approximate 34%.


         Loss from Discontinued Operations

         Loss from discontinued  operations,  net of tax benefits,  was $605,259
for the quarter ended March 31, 2001. As previously  noted,  PSI was spun-off on
February 12, 2001.

                                     - 13 -
<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL


                       CONDITION AND RESULTS OF OPERATIONS


         LIQUIDITY AND CAPITAL RESOURCES

         Avery's  cash balance at March 31, 2002 was $2.5  million,  compared to
$5.4  million at December  31,  2001.  Fluctuations  in daily cash  balances are
normal due to the large  amount of  customer  receivables  that we  collect  and
process on behalf of our  customers.  Additionally,  the timing of receipts  and
disbursements produces large movements in day-to-day cash balances.

         Avery's working capital position at March 31, 2002 was a negative $13.7
million,  compared to a negative $13.1 million at December 31, 2001. The Company
can operate with negative working capital in the absence of any significant loss
of customers.  At March 31, 2002, the Company had retained deposits and reserves
totaling  $15.6 million.  These deposits are refundable  over time following the
customer's  termination  and are treated as a current  liability.  Avery has not
historically experienced any material loss of customers in its business.


         Net  cash  used  in  operating   activities,   excluding   discontinued
operations,  was $5.5  million for the first  quarter of 2002,  compared to $4.6
million used during the first  quarter of 2001.  The $5.5 million cash flow used
in operating activities was principally attributable to a $4.8 million reduction
of customer deposits and payables,  a $1.1 million increase in trade receivables
and the $0.6  million net loss,  offset by a $1.1  million  increase in accounts
payable. During the first quarter of 2001, the Company's net use of $4.6 million
in operating activities from continuing operations  principally reflected a $4.3
million reduction in customer deposits and payables and a $1.4 million reduction
in trade  payables and  accruals,  offset by a $0.8  million  reduction in trade
accounts receivable.


         During the first  quarter of 2002 the Company  purchased  property  and
equipment costing $123,127. In the same period in 2001, the Company used $14,620
of  cash to  purchase  property  and  equipment,  loaned  $730,000  under  notes
receivable,  purchased  investments  for $495,000  and received  $13,308 for the
repayment of notes receivable. The net impact of these transactions is that cash
used for investing activities for the first quarter of 2002 was $123,127, versus
$1,226,312 for the first quarter of 2001, a net change of $1,103,185.


         The Company drew down  $2,767,278  in cash from a line of credit (taken
out in 2001)  during the first  quarter of 2002 and paid  dividends to preferred
stock  holders  of  $37,500  as well as  purchasing  shares of its own stock for
treasury purposes in the amount of $33,137. In the corresponding period in 2001,
the Company  used  $350,000 to redeem  shares of  preferred  stock,  $215,000 to
purchase outstanding stock options,  $1,207,617 to purchase common stock for the
treasury,  and $74,426 to pay preferred  stock  dividends.  In addition,  in the
first  quarter of 2001 the Company  received  $210,000  in proceeds  from a note
payable and  $1,600,000  in proceeds  from the issuance of common and  preferred
stock. The net effect of these transaction was that in the first quarter of 2002
the Company generated  $2,696,641 in cash from financing  activities  whereas in
the first  quarter of 2001 it used cash of  $37,043;  a net change  between  the
periods of $2,733,684.


         Avery's  operating  cash  requirements  consist  principally of working
capital  requirements,  scheduled  payments of preferred  dividends  and capital
expenditures.  The  Company  believes  cash  flows  generated  from  operations,
together with borrowings and/or proceeds from the sale

                                     - 14 -
<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS


of equity  securities will be sufficient to fund capital  expenditures,  working
capital needs and debt repayment requirements for the next twelve months.




PART II OTHER INFORMATION





Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits


         10.48    Receivables Sale Agreement dated as of December 19, 2001 among
                  HBS Billing Services Company and ACI Billing  Services,  Inc.,
                  individually and collectively, and RFC Capital Corporation

(b)      Reports on Form 8-K


         None


                                   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    May 15, 2002                     /s/Patrick J. Haynes III
    ---------------------               ---------------------------------
                                             Patrick J. Haynes III


                                              Chairman of the Board

Date______May 15, 2002 _______                /s/ Thomas C. Ratchford
    ---------------------               ---------------------------------
                                                Thomas C. Ratchford

                                               Chief Financial Officer

                                     - 15 -
<PAGE>