<PAGE>


                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


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


                                  FORM 10-QSB/A
                                  -------------
                                (Amendment No. 2)
                                -----------------

         (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                                 1,190,184


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 6.   Exhibits and Reports on Form 8-K                                   15


<PAGE>

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


<TABLE>
<CAPTION>
                                                  ASSETS                                            03/31/02           12/31/01
                                                                                                 ----------------   ----------------
                                                                                                   (UNAUDITED)          Restated
                                                                                                       and
                                                                                                    Restated
<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                                                                            7,111,358          5,360,845
        Other receivables                                                                                121,285             94,376
                                                                                                 ----------------   ----------------
            Total accounts receivable                                                                 18,036,174         15,429,241
                                                                                                 ----------------   ----------------

    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                                                                      23,186,855         22,929,105
                                                                                                 ----------------   ----------------

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                                                                         $    37,273,524    $    37,140,523
                                                                                                 ================   ================
</TABLE>

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

                                     - 1 -

<PAGE>

                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                    CONSOLIDATED BALANCE SHEETS -(Continued)

                            LIABILITIES AND STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>

                                                                                                   MARCH 31, 2002  DECEMBER 31, 2001
                                                                                                  ---------------- -----------------
                                                                                                     (Unaudited)        Restated
                                                                                                         and
                                                                                                      Restated
<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                                                    20,563,823       23,518,963
                                                                                                   ---------------  ---------------
           Total current liabilities                                                                   36,927,531       36,059,512
                                                                                                   ---------------  ---------------

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, 77,771 and 60,271 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                                          $      37,273,524  $    37,140,523
                                                                                                   ===============  ===============
</TABLE>

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

                                     - 2 -

<PAGE>
                   AVERY COMMUNICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  FOR THE QUARTER ENDED MARCH 31, 2002 AND 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  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)                          $      (0.56)  $        0.28
Discontinued operations                                                 -           (0.46)
                                                              ------------   -------------
Net loss                                                     $      (0.56)  $       (0.18)
                                                              ============   =============
Diluted net loss per share:
Continuing operations income (loss)                          $      (0.56)  $        0.19
Discontinued operations                                                 -           (0.46)
                                                              ------------   -------------
Net loss                                                     $      (0.56)  $       (0.27)
                                                              ============   =============
Weighted average number of common shares outstanding:
   Basic common shares                                          1,198,906       1,307,090
                                                              ============   =============
   Diluted common shares                                        1,198,906       1,937,389
                                                              ============   =============
</TABLE>

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

                                     - 3 -

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


<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED
                                                                                 MARCH 31,
                                                                         2002                2001
                                                                       (unaudited)
                                                                           and
                                                                        Restated
<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                                                  (1,564,734)                 -
       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                   (3,067,270)        (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:

<TABLE>
<CAPTION>

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

                                     - 6 -

<PAGE>

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




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

<TABLE>
<CAPTION>

                                                            December 31,
                                                                2000
                                                        ------------------
<S>                                                     <C>
PROPERTY AND EQUIPMENT
  Computer equipment and software                       $       2,257,142
  Furniture and fixtures                                          115,943
  Accumulated depreciation and amortization                      (571,665)
                                                        ------------------
  Total property and equipment                                  1,801,420
                                                        ------------------
OTHER 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
                                                        ==================
</TABLE>


     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                           32,491,868              4,451,027                330,629              37,273,524

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.


     NOTE 10. RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS

     During the third quarter of 2002, the Company determined, with OAN's
cooperation, that an error was made in the computation of the purchase price for
net assets purchased. It was determined that the liability assumed by the
Company for amounts withheld from customers to cover future obligations of the
customers as of the closing date of the purchase was actually $3.7 million,
rather than the $0.7 million calculated at the time of closing. The Company
additionally adjusted post-acquisition bad debt reserves of the acquired
business for other transactions which were incorrectly reflected within the
Company's previously issued financial statements. Accordingly, the Company has
increased its reserves held against customers and increased its receivable from
OAN. Such adjustments are reflected in the accompanying restated balance sheet
as of March 31, 2002 and the restated statement of cash flows for the three
months ended March 31, 2002. The restated figures supersede the information
within the Company's Quarterly Report on Forms 10-QSB and 10-QSB/A for the
period ended March 31, 2002. The adjustments affect only the balance sheet and
statement of cash flows dated after August 2001. There was no impact to the
Company's statement of operations.

                                     - 9 -

<PAGE>

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS


ITEM 2.


     This Quarterly Report on Form 10-QSB/A contains certain "forward-looking"
statements as such term is defined in the Private Securities Litigation Reform
Act of 1995 and information relating to the Company that are based on the
beliefs of the Company's management as well as assumptions made by and
information currently available to the Company's management. When used in this
report, the words "anticipate," "believe," "estimate," "expect" and "intend" and
words or phrases of similar import, as they relate to the Company or its
subsidiaries or Company management, are intended to identify forward-looking
statements. Such statements reflect the current risks, uncertainties and
assumptions related to certain factors including, without 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 $20.6 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 $3.1 million reduction of customer
deposits and payables, a $1.6 million increase in other receivables, a $1.1
million increase in trade receivables and the $0.6 million net loss, offset by a
$1.1 million reduction in trade accounts payable and accrued liabilities. 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

         99.1     Certificate of the Chief Executive Officer dated as of
                  September 3, 2002 pursuant to the Sarbanes-Oxley Act of 2002

         99.2     Certificate of the Chief Financial Officer dated as of
                  September 3, 2002 pursuant to the Sarbanes-Oxley Act of 2002

         99.3     Certificate of the Chief Financial Officer dated as of
                  December 16, 2002 pursuant to the Sarbanes-Oxley Act of 2002
                  (filed herewith)

         99.4     Certificate of the Chief Financial Officer dated as of
                  December 16, 2002 pursuant to the Sarbanes-Oxley Act of 2002
                  (filed herewith)


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


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

                                     - 15 -

<PAGE>


                           AVERY COMMUNICATIONS, INC.
                                  CERTIFICATION


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

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

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

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

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


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

<PAGE>


                           AVERY COMMUNICATIONS, INC.
                                  CERTIFICATION

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

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

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

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

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


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