U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934.
           For the quarterly period ended December 31, 2001
                                          -----------------

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)  OF THE EXCHANGE ACT
           For the transition period from                  to                  .
                                          ----------------    -----------------

                           Commission File No: 0-12382
                                               -------
                               Alpha Virtual, Inc.
                               -------------------
                         (formerly Perceptronics, Inc.)
                         ------------------------------
             (Exact name of Registrant as specified in its Charter)

           Delaware                                      95-2577731
-------------------------------                    ----------------------
(State or other jurisdiction of                      (I.R.S. Employer
 incorporation or organization)                    Identification Number)

         10345 West Olympic Boulevard, Los Angeles, CA          90064
      --------------------------------------------------------------------
           (Address of Principal Executive Offices)            Zip Code

       Registrant's telephone number, including area code: (310) 432-6200
                                                           --------------
           Securities registered pursuant to Section 12(b) of the Act:

                                      NONE
                                      ----
           Securities registered pursuant to Section 12(g) of the Act:

                         COMMON STOCK - $.001 PAR VALUE
                         ------------------------------
                                (Title of Class)

        Check whether the  Registrant  (1) has filed all reports  required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 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

        State the number of shares  outstanding of each of the issuer's  classes
of common equity,  as of the latest  practicable  date:  [17,985,501]  shares of
common stock as of December 31, 2001.

        Transitional Small Business Disclosure Format (check one):
        Yes        No   X
            -----     -----
                                     1 of 12
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                                      INDEX
                                      -----
                               ALPHA VIRTUAL, INC.


PART I.  FINANCIAL INFORMATION
------------------------------
Item 1.  Financial Statements

         Balance sheets, Alpha Virtual, Inc., December 31, 2001 and
         March 31, 2001.

         Statements of operations, Alpha Virtual, Inc., three and nine months
         ended December 31, 2001 and three and nine months ended
         December 31, 2000.

         Statements of cash flows, Alpha Virtual, Inc., nine months ended
         December 31, 2001 and December 31, 2000.

         Notes to financial statements.

Item 2. Management's  discussion and analysis of financial condition and results
of operations.

PART II. OTHER INFORMATION
--------------------------
Item 6.  Exhibits and Reports on Form 8-K.

























                                     2 of 12
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Part I.        FINANCIAL INFORMATION
------------------------------------
Item 1.       Financial Statements

                               ALPHA VIRTUAL, INC.
                                 BALANCE SHEETS
                                   (UNAUDITED)
                                                    Dec. 31, 2001 March 31, 2001
                                                    ------------- --------------
 ASSETS:
 Current Assets:
 ---------------
 Cash and short term investments                 $     26,633     $     12, 444
 Receivables-Note C                                     5,328            31,021
 Prepaid expenses                                      50,635             1,350

 Total current assets:                                 82,596            44,815

 Equipment & Leasehold Improvements, at cost           30,915            29,500
 Less accumulated depreciation and amortization        24,154            22,848
                                                        6,761             6,652

 Deferred Taxes                                       932,566           932,566
 Other Assets                                          17,280             4,080

 TOTAL ASSETS                                       1,039,203           988,113

 LIABILITIES AND SHAREHOLDERS' EQUITY:
 Current Liabilities:
 --------------------
 Current portion of long term debt-Note D              35,306            35,306
 Short term debt                                       50,000            54,000
 Accounts payable-Note B                               76,258           326,868
 Accrued compensation                                 299,125           298,292
 Loans payable to shareholders                         38,000            38,000
 Other accrued liabilities                            122,153           139,844

 Total current liabilities:                           620,842           892,310

 Long-Term Liabilities:
 ----------------------
 Long term debt, net of current portion-Note D

 Total Liabilities                                    620,842           892,310

 COMMITMENTS AND CONTIGENCIES

 SHAREHOLDERS' EQUITY:
 ---------------------
 Common Stock, par value $.001 per share,
 authorized 60,000,000 shares, issued and
 outstanding 17,985,501 shares at 12/31/01
 and 9,281,260 shares at 03/31/2001                    17,986             9,281
 Additional paid in capital                        15,831,545        13,961,251
 Accumulated deficit                             ( 15,431,170 )     (13,874,729)


                                     3 of 12
<PAGE>
 TOTAL SHAREHOLDERS' EQUITY                           418,361           95,.803

 TOTAL LIABILITIES AND SHAREHOLDERS'                1,039,203           988,113
 EQUITY




             See Notes to Pro Forma Financial Statements (Unaudited)
















































                                     4 of 12
<PAGE>
                               ALPHA VIRTUAL, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<S>                                       <C>               <C>             <C>               <C>
                                               Three Months Ended                Nine Months Ended
                                                   December 31                      December 31

                                             2001                 2000        2001                 2000

Net Sales                                 $          0      $   41,001      $        0          117,438
Cost of Sales                                        0          28,164               0          112,415


Gross Profit                                         0          12,837               0            5,023

Costs and expenses:
Selling, general and administrative            751,493         150,821       1,355,153          427,563
Research & development                         126,809          20,642         338,788          190,258

Operating (loss)                              (878,302)       (158,626)     (1,693,941)        (612,798)

Gain on Sale of Assets                               -               -                          154,981
Interest income                                      -               -                            1,012
Interest expense                                     -               -               0           (5,760)
 Other Income  Note B                                -                         137,500

 Income (loss) before taxes                   (878,302)       (158,626)     (1,556,441)        (462,565)
Income tax provision
                                                                     -

Net Income (loss)                             (878,302)     $ (158,626)     (1,556,441)        (462,565)

Earnings per share:
       Basic:                                    (0.06)     $    (0.02)          (0.11)           (0.06)
Net Income (loss)
       Diluted:                                    N/A             N/A             N/A              N/A

Weighted average common and common equivalent shares:


Basic                                       15,615,199       8,075,760      13,633,381        7,886,260

Diluted                                            N/A             N/A             N/A              N/A
</TABLE>





             See Notes to Pro Forma Financial Statements (Unaudited)






                                     5 of 12
<PAGE>
                               ALPHA VIRTUAL, INC.
                        CONDENSED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

                                                      Nine Months Ended
                                                          December 31


                                                   2001                2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)                             (1,556,441)           (462,565)
Adjustments to reconcile net income to
net cash used in operating activities:                                 1,508
Depreciation and amortization                       1,306             12,262

Changes in assets and liabilities:
Receivables                                        25,693              1,334
Inventory                                               -             80,620
Prepaid expenses                                  (49,285)             4,170
Pre-contract costs                                      -            220,000
Other assets                                      (13,200)             4,124
Accounts payable                                 (250,610)          (219,714)
Accrued compensation                                  833             56,423
Notes to affiliates                                     -             60,845
Other accrued liabilities                         (17,691)           (13,101)
Other long term liabilities                                          (57,500)

Net cash (used) by operating activities:       (1,859,395)          (313,102)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment                              (1,416)                 -
Net cash used by investing activities              (1,416)                 -

CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of stock options and warrants                  -                480
Payment of long-term debt                               -           (176,902)

Proceeds from sale of common stock              1,875,000            157,270

Net cash provided in financing activities       1,875,000            (19,152)

NET INCREASE (DECREASE) IN CASH                    14,189           (332,254)


Cash, beginning of period                          12,444            355,781
Cash, end of period                                26,633             23,527

Cash paid during period for income taxes                -                  -
Cash paid during period for interest expense            -                  -





             See Notes to Pro Forma Financial Statements (Unaudited)


                                     6 of 12
<PAGE>
                       ALPHA VIRTUAL, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
The unaudited consolidated financial statements have been prepared in conformity
with generally accepted accounting  principles and include all adjustments which
are,  in the  opinion of  management,  necessary  for fair  presentation  of the
results for the interim periods presented.  All such adjustments are, in opinion
of management,  of a normal recurring nature. Results for the three month period
ended December 31, 2001 are not necessarily  indicative of the operating results
to be expected for the full year.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted. It is suggested that these financial  statements
are read in conjunction with the financial statements and notes thereto included
in the Company's annual report on Form 10-KSB for the year ended March 31, 2001.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
Description  of the  Company:  Alpha  Virtual,  Inc.,  the  "Company"  develops,
produces and markets  peer-to-peer  software  products  and services  that allow
Internet Web site developers and owners as well as Internet  infrastructure  and
services providers to create online multi-media  collaborative  experiences that
meet the growing demand for expanded multi-user interactivity on the Internet.

Basis of Presentation: The financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. The ability of the Company to operate profitably
and generate  sufficient  positive cash flows is dependent on the  generation of
license revenues and raising  additional  investment capital to fund development
of  commercial  software  products.  The Company's  financial  statements do not
include  any   adjustments  to  reflect  the  possible  future  effects  on  the
recoverability and classification of assets or the amounts and classification of
liabilities  that may  result  from the  possible  inability  of the  Company to
continue as a going concern.

Settlement of Liabilities

After  receiving the fourth  warrant  under the stock  purchase  agreement  with
Global  Alpha,  the  company  was able to settle  approximately  $200,000 of its
accounts payable with cash totaling  approximately $62,500. The accounts payable
were settled in August.

On May 4, 2001, in  consideration  for Global Alpha  Corporation's  agreement to
invest in the Company,  CEO Richard  Moskowitz and President Dr. Gershon Weltman
entered  into general  release and waiver  agreements  with the Company  whereby
Moskowitz  and  Weltman  agreed  to  cancel  previously  booked  obligations  of
approximately $175,000 and $63,000,  respectively,  arising from accrued salary,
vacation and loans to the Company,  and to accept payment of one hundred dollars
($100) each as full and final  payment of the  obligations.  This further  total
reduction  of  approximately  $238,000  in  liabilities  depended on the Company
receiving  from Global Alpha  Corporation on or before August 3, 2001 payment of


                                     7 of 12
<PAGE>
approximately  $1.3 million for exercise of the fourth  warrant  under the stock
purchase  agreement between the Companies,  which was not assured.  By agreement
between  Global  Alpha and the Company  dated  August 3, 2001,  the terms of the
fourth warrant were changed to provide a series of monthly warrants. The general
release and waiver  agreements  were  modified to reflect this  change,  so that
failure by Global Alpha to fund any future warrant results in restoration of the
obligation on the Company's books.

In December 2002, the initial Securities  Purchase Agreement between the Company
and Global Alpha was once again  modified to provide Global Alpha with 8 monthly
warrants  beginning  December 7, 2001 to purchase up to $170,000 of Common Stock
and a ninth  warrant  exercisable  August 2, 2002 to  purchase up to $126,000 of
Common Stock,  all at an exercise  price of  fair-market  value at five business
days prior to exercise or $0.22,  whichever is less. Payments have been received
from  Global  Alpha since  August 6, 2001,  including  payment for the  December
warrant,  and Global Alpha appears to be encouraged with its  relationship  with
Alpha Virtual.

Cash Equivalents: All highly liquid investments maturing in three months or less
when purchased are considered cash equivalents.

Equipment and Leasehold  Improvements:  Equipment and leasehold improvements are
stated at cost.  Depreciation of equipment is provided for by the  straight-line
method  over  their  estimated  useful  lives,  which  range  from 3 to 5 years.
Amortization of leasehold  improvements is provided by the straight-line  method
over the shorter of the useful lives or the terms of the leases.

Revenue  Recognition:  Expected  future  revenues  from  software  products  and
services  will be  recorded  in  accordance  with  SOP  97-2  (Software  Revenue
Recognition).  Revenues  from  consulting  services  are  recorded  at the  time
services are provided.  Sales from long term  contracts  historically  have been
recorded using the percentage-of-completion (cost to cost) method of accounting.
Under  this  method,   sales  are  recorded  as  costs  (including  general  and
administrative  expenses) are incurred, plus a portion of the profit expected to
be  realized on each  contract in the ratio that costs  incurred to date bear to
total  estimated  cost at  completion.  General and  administrative  expenses in
excess of rates billed on contracts are recorded in the period  incurred.  Costs
related to  anticipated  future  losses on contracts  are accrued and charged to
expense in the period when the losses are identified.

Income Taxes:  Provisions  for federal and state income taxes are  calculated on
reported  financial  statement  income  based  on  the  current  tax  law.  Such
provisions  differ from the amounts  currently  payable because certain items of
income and expense, known as temporary differences,  are recognized in different
tax periods  for  financial  reporting  purposes  than for income tax  purposes.
Deferred  income taxes are the result of the  recognition  of tax benefits  that
management  expects  to  realize  from the  utilization  of net  operating  loss
carryforwards. The amounts recorded are net of valuation allowance and represent
management's estimate of the amount that is more likely than not to be realized.

Per Share  Data:  Per share data is based upon the  weighted  average  number of
shares of common and dilutive  common stock  equivalents  outstanding  using the
treasury stock method.




                                     8 of 12
<PAGE>
Use of  Estimates:  Company  management  has  made a  number  of  estimates  and
assumptions relating to the reporting of assets and liabilities and the reported
amounts  of  revenues  and  expenses,  in  conformity  with  generally  accepted
accounting principles. Actual amounts could differ from these estimates.

NOTE C - RECEIVABLES
--------------------
Billed  receivables  at  December  31,  2001 and March 31,  2001 were $5,328 and
$31,021,  respectively.  These  represent  amounts  that have been  invoiced  on
commercial and United States  Government  contracts and  agreements  that remain
unpaid.

NOTE D- LONG TERM DEBT
----------------------
Long-term debt included the following at December 31 and March 31, 2001:

                                                       December 31,    March 31,
                                                           2001          2001
                                                           ----          ----

Note Payable-Consultant issued to resolve open accounts
Payable balance, interest at 8% per annum.               $  35,306    $  35,306
                                                         ---------    ---------


Current portion of long-term notes payable               $  35,306    $  35,306
                                                         =========    =========


  Short-term  debt  included  the  following  at December 31, 2001 and March 31,
2001:

As of December  31, 2001 and March 31,  2001,  there was a loan  outstanding  of
$50,000 with a foreign  customer.  As of March 31, 2001, there was a note with a
former employee of $4,000.  The notes bear interest at 6% per year. The terms of
the note required repayment by March 1, 1996 and December 31, 1995 respectively.
As of June 30, 2001 there are Convertible Promissory Notes totaling $38,000 with
a number of officers,  directors  and others that require  repayment by December
31, 2002, bear interest at 10% per year and can be converted before repayment to
common stock at $0.15 per share.

















                                     9 of 12
<PAGE>
Item 2. Management's  discussion and analysis of financial condition and results
of operations.

General

Alpha Virtual,  Inc.,  (the  "Company"),  is focused  entirely on developing new
commercial products in the area of Internet Collaboration.  The products, called
the IC3Dtm  Framework and WyTHtm  technologies,  are directed toward the rapidly
growing market for multi-person,  online,  real-time collaborative  interactions
involving multiple media accessed over the Internet.  The major vertical markets
for  the  products  are  entertainment,   education,   e-commerce  and  business
communication.

With the investment  from Global Alpha,  Alpha Virtual has been able to increase
its software  engineering  team. The company is planning product launches in the
first quarter of the 2002 calendar year.

RESULTS OF OPERATIONS

Net Sales.  Net sales for the three-month  and nine-month  period ended December
31,  2001  were  zero.  The  company  is in a state of  transition  and no sales
resulted in the period.

Cost of Sales.  Cost of sales for the  three-month  and nine-month  period ended
December 31, 2001  decreased  100% as a result of the 100%  decrease in sales as
discussed above.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  increased  $600,672 or 398% in the three-month  period
ended December 31, 2001 and increased  $927,590 or 217% in the nine-month period
ended December 31, 2001,  compared to the comparable  three-month and nine-month
periods in the prior fiscal year.  The large increase in spending was due to the
company  receiving the outside  investment from Global Alpha which allowed Alpha
Virtual to increase its operational and business development expenses.

Interest Expense. Interest expense booked was $0 in the three month period ended
December 31, 2001 compared to $5,760 in the comparable three month period in the
prior fiscal year.

Liquidity  and  Capital   Resources.   At  December  31,  2001,   the  Company's
unrestricted cash balances of $26,633 were the result of equity investments made
during the third  quarter of fiscal  2002.  The  Company  had  negative  working
capital of $538,246 at December 31, 2001,  compared to negative  working capital
of $847,495 at March 31, 2001. At December 31, 2001,  vendor  accounts  totaling
approximately  $15,000 were past due.  See Note B of the Notes to the  Financial
Statements, which is hereby incorporated herein by reference.

Over the next eight months,  the Company should continue to receive funding from
Global Alpha in $175,000  increments  per month.  There is no assurance that the
Company  will be able to  continue  to  raise  the  financing  required  to fund
operations in the future and whether the commercial software products will start
to generate  revenue and  profits.  Also,  the terms of any  financing  could be
unfavorable to the Company and dilutive to its shareholders. The Company is also
exploring alternative sources for financing such as strategic business alliances
and  potential  business  combinations  in order  to meet  short  and  long-term
objectives.

                                    10 of 12
<PAGE>
The  Company's  operating  activities  used cash of $877,549  during the quarter
ended  December 31, 2001  resulting  primarily  from the operating loss incurred
during the period.

The  Company's  investing  activities  used no cash  during  the  quarter  ended
December 31, 2001. The Company is primarily a developer of computer software and
therefore  not  capital  intensive.  The  Company  does not  currently  have any
material commitments for the purchase of capital assets.

The  Company's  financing  activities  provided  cash of  $1,875,000  during the
nine-month  period  ended  December  31,  2001.  The funding  came from its main
investor, Global Alpha.

FORWARD LOOKING STATEMENTS

The Company  hereby  incorporates  by  reference  "Forward  Looking  Statements"
contained in the  "Management's  Discussion And Analysis Of Financial  Condition
And Results Of Operations" of the Company's Form 10-KSB dated March 31, 2001.


Part II.     OTHER INFORMATION
------------------------------
Item 6.      Exhibits and Reports on Form 8-K

             (a)   Exhibits

                   10.16 Second Addendum to First Amendment to Securities
                         Purchase Agreement

                   10.17 Form of Revised Warrant

             (b)   Reports on Form 8-K

                   No reports on Form 8-K were filed by the Company during the
                   fiscal quarter ended December 31, 2001





















                                    11 of 12
<PAGE>




                                   Signatures
                                   ----------

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report to the  signed  on its  behalf by the
undersigned hereunto duly authorized.


                                    Alpha Virtual, Inc.
                                    Registrant



Date: February 19, 2002             By: /s/ Dan Mapes
      -----------------                ---------------------------------------
                                        Dan Mapes
                                        Chief Executive Officer





































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