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 September 30, 2002
                                          -----------------

[ ] 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

        The number of shares outstanding of the Registrant's common stock as of
September 30, 2002 was 4,697,209.

        Transitional Small Business Disclosure Format (check one):
        Yes        No   X
            -----     -----
                                     1 of 15

<PAGE>
                                      INDEX
                                      -----
                               ALPHA VIRTUAL, INC.


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

         Balance sheets, Alpha Virtual, Inc., September 30, 2002 and
         March 31, 2002.                                                    3

         Statements of operations, Alpha Virtual, Inc., six months
         ended September 30, 2002 and six months ended September 30, 2001   5

         Statements of cash flows, Alpha Virtual, Inc., six months
         ended September 30, 2002 and September 30, 2001.                   6

         Notes to financial statements.                                     7

Item 2. Management's  Discussion and Analysis and Plan of Operation        10

PART II. OTHER INFORMATION
--------------------------
Item 2.  Changes in Securities and Use of Proceeds.                        12

Item 4.  Submission of Matters to a Vote of Security Holders.              12

Item 5.  Other Information.                                                13

Item 6.  Exhibits and Reports on Form 8-K.                                 14


























                                     2 of 15

<PAGE>
Part I.        FINANCIAL INFORMATION

Item 1.       Financial Statements


                               ALPHA VIRTUAL, INC.
                                 BALANCE SHEETS

                                                   September 30,    March 31,
                                                       2002           2002
                                                    (Unaudited)     (Audited)
                                                   ------------    ------------
ASSETS:
Current Assets:
--------------
Cash and short term investments                    $         24    $     19,807
Receivables, net of allowance of $3,000 as of            34,570          27,070
   September 30, 2002 and March 31, 2002 - Note C
Prepaid expenses                                          6,779          24,481
                                                   ------------    ------------

Total current assets:                                    41,373          71,358

Equipment & Leasehold Improvements, at cost              45,850          45,850
Less accumulated depreciation and amortization          (30,704)        (28,038)
                                                   ------------    ------------
                                                         15,146          17,812

Other Assets                                             21,825          21,825
                                                   ------------    ------------

TOTAL ASSETS                                       $     78,344    $    110,995
                                                   ============    ============






















                  See Notes to Financial Statements (Unaudited)

                                     3 of 15

<PAGE>
                               ALPHA VIRTUAL, INC.
                                 BALANCE SHEETS
                                   (Continued)

                                                   September 30,    March 31,
                                                        2002          2002
                                                    (Unaudited)     (Audited)
                                                   ------------    ------------

LIABILITIES AND SHAREHOLDERS' DEFICIT:
Current Liabilities:
-------------------
Accounts payable                                   $    335,889    $    111,546
Payroll taxes payable                                   239,608         138,167
Accrued compensation                                     15,951          47,853
Other accrued liabilities                                52,449          49,929
Short term debt - Note D                                375,000          50,000
Current portion of obligation under capital lease         3,290           3,176
Loans payable to shareholders - Note D                   28,000          28,000
Rate reserve                                            100,000         100,000
                                                   ------------    ------------
Total current liabilities:                            1,150,187         528,671

Long-Term Liabilities:
---------------------
Obligation under capital lease                            4,139           5,813
                                                   ------------    ------------

Total Liabilities                                     1,154,326         534,484

COMMITMENTS AND CONTIGENCIES

SHAREHOLDERS' DEFICIT:
---------------------
Common Stock, par value $.001 per share,
  authorized 60,000,000 shares, issued
  and outstanding 4,697,209 shares at
  September 30, 2002 and
  4,228,876 shares at March 31, 2002                      4,697           4,229
Additional paid in capital                           17,153,235      16,403,703
Accumulated deficit                                 (18,233,914)    (16,831,421)
                                                   ------------    ------------

TOTAL SHAREHOLDERS' DEFICIT                          (1,075,982)       (423,489)
                                                   ------------    ------------

TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT                                            $     78,344    $    110,995
                                                   ============    ============






                  See Notes to Financial Statements (Unaudited)

                                     4 of 15

<PAGE>
                               ALPHA VIRTUAL, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<S>                    <C>             <C>             <C>             <C>
                              Three Months Ended               Six Months Ended
                                 September 30,                   September 30,

                               2002            2001            2002            2001
                       ------------    ------------    ------------    ------------
Net Sales              $          -    $          -    $     52,270    $          -
Cost of Sales                     -               -    $     47,058    $          -
                       ------------    ------------    ------------    ------------

Gross Profit                      -               -           5,212               -

Costs and expenses:
Selling, general and
  administrative            245,306         401,817         916,203         603,660
Research & development       91,529          65,935         491,502         211,979
                       ------------    ------------    ------------    ------------

Operating loss             (336,835)       (467,752)     (1,402,493)       (815,639)

Other income                      -         137,500               -         137,500

Loss before taxes          (336,835)       (330,252)     (1,402,493)       (678,139)
Income tax provision              -               -               -               -
                       ------------    ------------    ------------    ------------

Net loss               $   (336,835)   $   (330,252)     (1,402,493)       (678,139)
                       ============    ============    ============    ============

Earnings per share:
       Basic:          $      (0.07)   $      (0.14)   $      (0.30)   $      (0.29)

       Diluted:        $      (0.07)   $      (0.14)   $      (0.30)   $      (0.29)
                       ============    ============    ============    ============

Weighted average common and common equivalent shares:


Basic - Note E            4,697,209       2,437,616       4,541,098       2,331,934

Diluted - Note E          4,697,209       2,437,616       4,541,098       2,331,934
                       ============    ============    ============    ============
</TABLE>














                  See Notes to Financial Statements (Unaudited)

                                     5 of 15

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

                                                  Six Months Ended September 30,

                                                        2002            2001
                                                   ------------    ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                           $ (1,402,493)   $   (678,139)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization                             2,666               -

Changes in assets and liabilities:
   Receivables                                           (7,500)         13,408
   Prepaid expenses                                      17,702             231
   Other assets                                               -          (7,000)
   Accounts payable                                     224,343        (285,815)
   Payroll taxes payable                                101,441               -
   Accrued compensation                                 (31,902)              -
   Other accrued liabilities                              2,520         (24,531)
                                                   ------------    ------------

Net cash used by operating activities:               (1,093,223)       (981,846)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment                                         -          (1,416)
                                                   ------------    ------------

Net cash provided (used) by investing activities              -          (1,416)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock                      750,000       1,100,000
Proceeds from note payable                              325,000               -
Payments on capital lease                                (1,560)              -
                                                   ------------    ------------

Net cash provided in financing activities             1,073,440       1,100,000

NET INCREASE (DECREASE) IN CASH                         (19,783)        116,738
                                                   ------------    ------------


Cash, beginning of period                          $     19,807    $     12,444
Cash, end of period                                          24         129,182
                                                   ============    ============

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





                  See Notes to Financial Statements (Unaudited)

                                     6 of 15

<PAGE>
                               ALPHA VIRTUAL, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE A - UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
The  unaudited  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 the opinion of
management,  of a normal  recurring  nature.  Results for the three month period
ended September 30, 2002 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, 2002.


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
Description of the Company:  Alpha Virtual,  Inc., (the "Company")  develops and
markets innovative,  real-time Web collaboration products for business, consumer
entertainment,  education,  and government markets. The Company's patent pending
OneViewTM   product  platform  meets  the  growing  demand  for  new  multi-user
interactivity-integrating   browser,  Instant  Messaging,  and  real-time  group
collaboration in an on-demand basis.

Basis of Presentation:  The accompanying financial statements have been prepared
in conformity with generally accepted accounting  principles,  which contemplate
continuation  of the Company as a going  concern.  The Company has  continued to
sustain operating losses and requires  substantial amounts of working capital to
support its operations. At September 30, 2002 current liabilities exceed current
assets by $1,108,814. At September 30, 2002 the Company was delinquent in paying
$240,000 of payroll taxes.  The Company  continues to have difficulty in meeting
its  obligations  as they become due.  The ability of the Company to operate its
business and  generate  sufficient  positive  cash flows is dependent on 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.

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: Sales of services are recorded when performed in accordance
with  contracts.  Revenues  from  long-term  contracts  are  recorded  using the
percentage-of-completion (cost-to-cost) method of accounting. Under this method,

                                     7 of 15

<PAGE>
                               ALPHA VIRTUAL, INC.
                          NOTES TO FINANCIAL STATEMENTS

sales are recorded as costs (including general and  administrative  expenses) as
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.  Revenues  from software  sales are recorded in accordance  with SOP
97-2 "Software Revenue Recognition", which requires that revenue recognized from
software  arrangements  be allocated to the various  elements of the arrangement
based on the relative  fair values of the elements,  such as software  products,
upgrades,   enhancements,   post  contract  customer  support,  installation  or
training. Revenues from product services are recognized at the time services are
provided.  The Company has been developing and marketing their OneView  software
products and  services.  As of September 30, 2002 there were $36,000 of revenues
related to these products.

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.  Refer to Note E for a reconciliation  of the shares used
to compute earnings per share.

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
--------------------
At  September  30,  2002 and March 31,  2002 there  were  $34,570  and  $27,070,
respectively,  of receivables that represent amounts from services performed and
royalties  from  the  Eidetics  sale.  These  amounts  are  net of  $3,000  that
represents amounts that may become uncollectible.


NOTE D - SHORT TERM DEBT
------------------------
As of September  30, 2002 and March 31,  2002,  there is a loan  outstanding  of
$50,000 with a foreign  customer.  The note bears  interest at 6% per year.  The
terms of the note required repayment by March 1, 1996.

As of September 30, 2002 and March 31, 2002 the Company had loans outstanding of
$28,000 to various shareholders.  These loans are past due as of March 31, 2002.
The loans are  convertible  to common  stock at $0.15 per share at the option of
the note holder.


                                     8 of 15

<PAGE>
                               ALPHA VIRTUAL, INC.
                          NOTES TO FINANCIAL STATEMENTS


During  the  three  month  period  ended   September  30,  2002,   Global  Alpha
Corporation,  the majority  shareholder of the Company,  loaned  $325,000 to the
Company.  This  note  bears  interest  at 11.5% per year.  The terms of the note
require repayment on demand, but in no event, earlier than July 9, 2003.


NOTE E - EARNINGS PER SHARE
---------------------------
The Company  uses SFAS #128 in  accounting  for basic and diluted  earnings  per
share.  Basic earnings per share  excludes  dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares  outstanding  for the  period.  Diluted  earnings  per share is  computed
similarly to fully diluted earnings per share. A  reconciliation  of shares used
to  compute  earnings  per  share  for the three  and  six-month  periods  ended
September 30, 2002 and 2001 are as follows:


                                 Quarter ended            Six months ended
                                  September 30             September 30
                               2002         2001          2002         2001
                           -----------  -----------  ------------ ------------

Weighted average common      4,697,209    2,437,616     4,541,098    2,331,934
shares Outstanding

Diluted stock options and            -            -             -            -
warrants Based on treasury
stock method
                           -----------  -----------   ------------ -----------

Diluted shares               4,697,209    2,437,616     4,541,098    2,331,934
                           ===========  ===========   ============ ===========


NOTE F - SUBSEQUENT EVENTS
--------------------------
Financing - in October  and  November  2002,  the  Company  received  additional
funding in the amount of $125,000  from Global Alpha  Corporation,  the majority
shareholder of the Company.

Reverse  Stock Split - on October 31,  2002 the  Company  consummated  a 1-for-5
reverse stock split of its outstanding common shares. The par value of the stock
remained at $.001 per share.  All references to common stock,  average number of
common shares  outstanding and these notes to the financial  statements  reflect
the value of common stock after the effects of the 1-for-5 reverse split.








                                     9 of 15

<PAGE>


Item 2. Management's Discussion and Analysis and Plan of Operation


General

From fiscal 2001 through October 2002, our business refocus has been entirely on
developing new commercial  products in the area of Internet  collaboration.  Our
patent-pending  OneView(TM)  product  platform  meets the growing demand for new
multi-user interactivity - integrating browser, Instant Messaging, and real-time
group  collaboration in an on-demand basis.  OneView allows users to immediately
form groups and explore Web sites  together,  sharing the same experience at the
same  time,  whether  they are  located  in the next room or half way around the
world.  As  such,  it  is  the  fastest,  most  convenient  way  to  collaborate
synchronously over the Internet today.

Prior to our refocus on Internet  collaboration  product design, our company had
historically   engaged  in  the   design,   development   and   manufacture   of
computer-based  simulation  systems for  training and  decision  support.  These
systems  include both  hardware and software and are used to train  personnel in
the  use of  various  military  and  commercial  equipment,  including  weapons,
vehicles and aircraft.  Much of the company's simulator business has been in the
foreign  defense   industry  where  the  company  has  built  an   international
reputation.  The  tightening  of defense  budgets  worldwide,  combined with the
continuing  consolidation and intense  competition in the defense industry,  had
negatively impacted the growth and profit opportunities for small companies such
as Alpha Virtual. As a result, in July 2000, the Company sold the assets related
to the PGTS product line to Eidetics  Corporation,  a developer and manufacturer
of  specialized  defense  simulation  products.  From the  disposition  of those
assets, the company will earn certain royalties.

In October 2002, we licensed  substantially all of our proprietary  software and
systems to our  principal  shareholder,  Global Alpha  Corporation  ("GAC").  On
October 31, 2002,  we laid off all but two  employees.  We had been  negotiating
with a venture  capital  company for several weeks,  and on November 6, 2002, we
entered into several agreements with Manhattan Capital Partners,  LLC wherein we
would sell  $300,000 of our common stock and grant up to  2,000,000  warrants to
purchase our common stock. See "Item 5. Other Information -- Subsequent Events."

Upon the successful closing of the sale of our securities,  we intend to resolve
all of our outstanding  liabilities,  including federal and state payroll taxes.
In  addition,  we have  been  negotiating  with our  principal  shareholder  and
licensee,  GAC,  for the  sale to GAC of  substantially  all of our  technology,
including  software and systems,  in exchange for the  cancellation  of all debt
owed to GAC in the amount of approximately $435,000 as of November 15, 2002.

In view of the above,  our activities  will be reduced to paying our liabilities
and to  seeking  business  combinations.  Our  objective  will be to  acquire an
operating  company  that  has  experienced  management  and  the  potential  for
profitable growth in exchange for our securities. Such transaction may result in
a change in control of the Company.  As of the date of this filing,  we have not
been in negotiations  to acquire any company.  There can be no assurance that we
will be successful in acquiring any business.



                                    10 of 15

<PAGE>
Going Concern Qualification

The  following  discussion  is  based  on  the  financial  statements  contained
elsewhere  in this  report.  The  financial  statements  have been  prepared  in
conformity with generally  accepted  accounting  principles,  which  contemplate
continuation of the Company as a going concern.  The financial statements do not
include  any   adjustments  to  reflect  the  possible  future  effects  on  the
recoverability and  classification of assets or the amounts and  classifications
of the liabilities that may result from the possible inability of the Company to
continue as a going concern. See Note B of Notes to Financial Statements.

RESULTS OF OPERATIONS

Net Sales.  Net sales for the  three-month  periods ended September 30, 2002 and
2001 were $0. Net sales for the six-month  periods ended  September 30, 2002 and
2001 were $52,270 and $0, respectively.  The company is in a state of transition
and net sales are  representative  of initial  attempts to market their software
and fees for services rendered.

Cost of Sales.  Cost of sales for the  three-month  periods ended  September 30,
2002 and 2001 were $0. Cost of sales for the six-month  periods ended  September
30, 2002 and 2001 were  $47,058  and $0,  respectively.  These  costs  primarily
related to salaries and wages  expenses  related to software  products  sold and
services rendered.

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses  decreased  $156,511 or 39% in the  three-month  period
ended  September 30, 2002 compared to the comparable  three-month  period in the
prior fiscal year.  This decrease was the result of decreased  staffing  levels.
Selling,  general and  administrative  expenses increased $312,543 or 52% in the
six-month  period ended September 30, 2002 compared to the comparable  six-month
period  in the  prior  fiscal  year  mainly  as a  result  of  attempts  to grow
operations and develop the OneView software products for market launch.

Interest  Expense.  Interest  expense was $0 in the  three-month  and  six-month
periods ended September 30, 2002 and 2001.

Liquidity  and  Capital  Resources.   The  Company  is  experiencing  continuing
liquidity  problems due to a lack of revenues and the absence of cash  reserves.
At September  30, 2002,  the  Company's  unrestricted  cash and cash  equivalent
balance  of $24 was the result of equity  investments  made  during the  quarter
ended  September 30, 2002 and revenues from  contracts and fees. The majority of
that cash has been used for operations. The Company had negative working capital
of $1,108,814 at September 30,  2002,  compared to negative  working  capital of
$457,313 at March 31,  2002.  The increase in negative  working  capital was due
primarily to the continued  operating losses the Company sustained.  The Company
continues to have difficulty in meeting all of its obligations as they come due.
In addition,  the Company owes  approximately  $240,000 in payroll  taxes in the
quarter  ended  September  30, 2002 and may not have  sufficient  capital to pay
payroll taxes in the next quarter of this year.  The lack of sufficient  working
capital which  restricted the Company's  ability to market its OneView  products
and to expand its revenue  base led to its  licensing  substantially  all of its
technology to its principal shareholder, GAC, in October 2002.




                                    11 of 15

<PAGE>
The Company's operating activities used cash of $1,093,223 during the six-months
ended  September 30, 2002  resulting  primarily from the operating loss incurred
during the period and the costs  associated  with the development and commercial
introduction of the its commercial software products.

On October 31, 2002, the Company  terminated  all but two of its employees;  and
except for a license agreement, it ceased all of its prior operating activities.
Its  principal  activities  will be  directed to reducing  its  liabilities  and
seeking possible acquisitions.

The only  foreseeable  cash  requirements  during the next twelve months will be
related to reducing the Company's liabilities,  maintaining its corporate status
as a corporate entity, complying with the periodic reporting requirements of the
U.S. Securities and Exchange  Commission,  and evaluating and reviewing business
ventures and  opportunities.  On November 6, 2002,  the Company  entered into an
agreement to raise $300,000 from the sale of its common stock. If the Company is
successful in  completing  this sale,  the proceeds  should allow the Company to
continue.  If additional  funds are required,  it is anticipated that management
will seek  additional  equity  capital or loans.  There is no assurance that the
Company will be able to raise or borrow additional capital or that the terms and
conditions  relating to the acquisition of such new capital will be favorable to
the Company.

The Company's financing  activities provided cash of $325,000 during the quarter
ended  September  30, 2002.  The funding came as a loan 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, 2002.



                           Part II. OTHER INFORMATION
                           --------------------------

Item 2.  Changes in Securities and Use of Proceeds.

Subsequent Event
----------------
On October 29, 2002, the Company issued 2,482,843 pre-split shares of its common
stock to Global Alpha  Corporation  ("GAC") upon exercise of warrants in May and
June 2002 in the aggregate  amount of $425,000.  GAC is the Company's  principal
shareholder and is an accredited and sophisticated investor.

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

On  September  24,  2002, a majority of the  Company's  shareholders  approved a
one-for-five reverse stock split. After required filings with the Securities and
Exchange  Commission  and  notice  to  all  shareholders  of  the  Company,  the
one-for-five reverse stock split became effective on October 31, 2002.

In  connection  with the reverse  stock split,  the  Company's  common stock now
trades under the new trading symbol: "AVUL."

                                    12 of 15

<PAGE>
Item 5.  Other Information.

On  July  9,  2002,  the  Company  entered  into  a  Restated  Multiple  Advance
Convertible Promissory Note (the "Note") with its principal shareholder ("GAC").
The Note provides up to $425,000 of term debt to the Company maturing on July 9,
2003 at an interest  rate of 11.5  percent.  As of September 30 and November 15,
2002,   the  Company  had  borrowed  an  aggregate  of  $325,000  and  $425,000,
respectively,  from GAC. The Note is  convertible,  at the election of GAC, into
the  Company's  common  stock at a price per share  equal to 30% of the  average
trading  price for the twenty  business day period prior to date of  conversion.
The Note is secured,  pursuant to a Security Agreement,  by all of the Company's
computer software programs.

Subsequent Event
----------------
Effective October 31 2002, the Company entered into a License Agreement with its
principal shareholder,  Global Alpha Corporation ("GAC") wherein GAC was granted
an exclusive license to the Company's  software and systems commonly referred to
as the "IC3D Framework" (the "System). The System encompasses  substantially all
of the Company's  software  including  software  developed to support multi-user
online collaborative  interactivity in a broad variety of applications employing
a variety of virtual media over a number of networks  including the Internet and
intra-nets.  Under the  Agreement,  GAC will pay to the Company a license fee of
ten  percent of the revenue  generated  from the sale or use of the System up to
$1,000,000,  nine percent up to $2,000,000,  eight percent up to $3,000,000 and,
thereafter,  seven percent of the revenue generated.  A minimum,  annual license
fee of $25,000 for the year ending  December 31, 2002 and December 31, 2003 must
be paid to maintain the exclusive license.

On November 6, 2002, the Company  entered into a Securities  Purchase  Agreement
("Purchase  Agreement") and a Registration Rights Agreement ("Rights Agreement")
with certain  accredited  investors to be named by Manhattan  Capital  Partners,
LLC, a venture capital limited liability company.  Under the Purchase Agreement,
the Company has agreed to sell $300,000 of its common stock at a purchase  price
based upon the lower of (i) $0.10 per share, or (ii) the average price per share
between the "bid" and "ask" price on the Over-the-Counter  Bulletin Board at the
close of business for the five (5) business  days  preceding  the closing  date.
There may be several  closings  but, in no event,  later than December 30, 2002.
There is no assurance that all or any portion of the Company's common stock will
be sold.

Upon the sale of the Company's common stock to the investors,  and in accordance
with the  Rights  Agreement,  the  Company  has  agreed  to file a  registration
agreement with the Securities and Exchange Commission ("SEC") registering all of
the common stock purchased by the investors.

Also,  on November  6, 2002,  and in  connection  with the  Purchase  and Rights
Agreements with certain investors, the Company agreed to enter into a Consulting
Agreement and Registration Rights Agreement with Manhattan Capital Partners, LLC
("Manhattan")  upon the receipt by the  Company of  $300,000.  In  exchange  for
general  business  consulting  services,  the Company  shall  grant  warrants to
purchase an  aggregate  of  2,000,000  shares of its common  stock.  The warrant
expires five years after the date of grant.  The  Registration  Rights Agreement
requires the Company to file a registration  statement with the SEC, registering
the underlying common stock of the warrants granted to Manhattan.


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<PAGE>
Item 6.  Exhibits and Reports on Form 8-K.

(a) Exhibits:

10.18  Securities Purchase Agreement entered into between the Company and
       certain investors to be named by Manhattan Capital Partners, LLC dated
       November 6, 2002.

10.19  Registration Rights Agreement entered into between the Company and
       certain investors to be named by Manhattan Capital Partners, LLC dated
       November 6, 2002.

10.20  Consulting Agreement to be entered into between the Company and Manhattan
       Capital Partners, LLC upon the receipt of the Company of $300,000
       pursuant to a Securities Purchase Agreement (Exhibit 10.18 above).

10.21  Registration Rights Agreement to be entered into between the Company and
       Manhattan Capital Partners, LLC upon the signing of the Consulting
       Agreement (Exhibit 10.20 above).

10.22  License Agreement entered into between the Company and Global Alpha
       Corporation.

10.23  Restated Multiple Advance Convertible Promissory Note entered into by the
       Company and Global Alpha Corporation, Dated July 9, 2002.

10.24  Security Agreement entered into between the Company and Global Alpha
       Corporation, dated July 9, 2002.

99.1   Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350,
       as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2   Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350,
       as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

On July 15, 2002, the Company filed a Form 8-K reporting the termination of Dan
Mapes as President, CEO and director of the Company and the appointment of Saif
Mansour as interim President and as a director of the Company.

















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<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: November 19, 2002                By: /s/ Saif Mansour
      -----------------                ---------------------------------------
                                        Saif Mansour
                                        President

































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