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U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-QSB

|/x/ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|--- | ----------------------------------------------------------------------------------

For the quarterly period ended June 30, 2001

or

|/ / | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|--- | ---------------------------------------------------------------

For the transition period from  to
.

Commission File No: 0-12382

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PERCEPTRONICS, INC.(Exact name of Registrant as specified in its Charter)

|Delaware(State or other jurisdiction of
incorporation or organization)                |  | 95-2577731(I.R.S. Employer
Identification Number)
|------------------------------------------------------------------------------------- |  | -------------------------------------------------
|10345 West Olympic Boulevard, Los Angeles, CA(Address of Principal Executive Offices) |  | 90064Zip Code                                    

Registrant's telephone number, including area code:(310) 229-9860

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)

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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: [11,131,260] shares of common stock
as of June 29, 2001.

Transitional
Small Business Disclosure Format (check one):
    YES / /  NO /x/

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INDEX    PERCEPTRONICS, INC.

|                              |  |                                                                                                   
|----------------------------- |  | --------------------------------------------------------------------------------------------------
|PART I. FINANCIAL INFORMATION
|Item 1.                       |  | Financial Statements                                                                              
|                              |  | Balance sheets, Perceptronics, Inc., June 30, 2001 and March 31, 2001.                            
|                              |  | Statements of operations, Perceptronics, Inc., three months ended June 30, 2001 and June 30, 2000.
|                              |  | Statements of cash flows, Perceptronics, Inc., three months ended June 30, 2001 and June 30, 2000.
|                              |  | Notes to financial statements.                                                                    
|Item 2.                       |  | Management's discussion and analysis of financial condition and results of operations.            
|PART II. OTHER INFORMATION   
|Item 2.                       |  | Changes in securities                                                                             
|Item 6.                       |  | Exhibits and Reports on Form 8-K.                                                                 

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

PERCEPTRONICS, INC.  BALANCE SHEETS  (UNAUDITED)

|                                                                                                                                                          |  | June 30, 2001 |             | March 31, 2001 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | -------------- | -
|ASSETS:                                                                                                                                                   |  |               |             |                |  
|Current Assets:                                                                                                                                           |  |               |             |                |  
|Cash and short term investments                                                                                                                           |  | $             | 33,310      |                | $
|ReceivablesNote C                                                                                                                                        |  |               | 17,613      |                |  
|Prepaid expenses                                                                                                                                          |  |               | 1,119       |                |  
|Total current assets:                                                                                                                                     |  |               | 52,054      |                |  
|Equipment & Leasehold Improvements, at cost                                                                                                               |  |               | 29,500      |                |  
|Less accumulated depreciation and amortization                                                                                                            |  |               | 22,848      |                |  
|                                                                                                                                                          |  |               | 6,652       |                |  
|Deferred Taxes                                                                                                                                            |  |               | 932,566     |                |  
|Other Assets                                                                                                                                              |  |               | 4,080       |                |  
|TOTAL ASSETS                                                                                                                                              |  |               | 995,340     |                |  
|LIABILITIES AND SHAREHOLDERS' EQUITY:                                                                                                                     |  |               |             |                |  
|Current Liabilities:                                                                                                                                      |  |               |             |                |  
|Current portion of long term debtNote D                                                                                                                  |  |               | 35,306      |                |  
|Short term debt                                                                                                                                           |  |               | 54,000      |                |  
|Accounts payableNote B                                                                                                                                   |  |               | 317,931     |                |  
|Accrued compensation                                                                                                                                      |  |               | 298,292     |                |  
|Loans payable to shareholders                                                                                                                             |  |               | 38,000      |                |  
|Other accrued liabilities                                                                                                                                 |  |               | 149,896     |                |  
|Total current liabilities:                                                                                                                                |  |               | 893,425     |                |  
|Long-Term Liabilities:                                                                                                                                    |  |               |             |                |  
|Long term debt, net of current portionNote D                                                                                                             |  |               |             |                |  
|Total Liabilities                                                                                                                                         |  |               | 893,425     |                |  
|COMMITMENTS AND CONTIGENCIES                                                                                                                              |  |               |             |                |  
|SHAREHOLDERS' EQUITY:                                                                                                                                     |  |               |             |                |  
|Common Stock,par value $.001 per share, authorized 30,000,000 shares, issued and outstanding 11,131,260 shares at 6/30/01 and 9,281,260 shares
at 3/31/01 |  |               | 11,131      |                |  
|Additional paid in capital                                                                                                                                |  |               | 14,313,400  |                |  
|Accumulated deficit                                                                                                                                       |  |               | (14,222,616 | )              |  
|TOTAL SHAREHOLDERS' EQUITY                                                                                                                                |  |               | 101,915     |                |  
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                |  |               | 995,340     |                |  

See Notes to Pro Forma Financial Statements (Unaudited)

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PERCEPTRONICS, INC.  CONDENSED STATEMENTS OF OPERATIONS  (UNAUDITED)

|                                                      |          | Three Months
Ended June 30 |           
|----------------------------------------------------- | -------- | -------------------------- | ----------
|
|Net Sales                                             |          | $                          | 0         
|Cost of Sales                                         |          |                            | 0         
|Gross Profit                                          |          |                            |           
|Costs and expenses:                                   |          |                            |           
|Selling, general and administrative                   |          |                            | 201,843   
|Research & development                                |          |                            | 146,044   
|                                                      |          |                            |           
|Operating (loss)                                      |          |                            | (347,887  
|Gain on Sale of Assets                                |          |                            |           
|Interest income                                       |          |                            |           
|Interest expense                                      |          |                            |           
|                                                      |          |                            |           
|Income (loss) before taxes                            |          |                            | (347,887  
|Income tax provision                                  |          |                            |           
|                                                      |          |                            |           
|Net Income (loss)                                     |          |                            | (347,887  
|                                                      |          |                            |           
|Earnings per share:                                   |          |                            |           
|                                                      | Basic:   |                            |           
|Net Income                                            |          |                            |           
|                                                      | Diluted: |                            |           
|Weighted average common and common equivalent shares: |          |                            |           
|Basic-Note E                                          |          |                            | 11,131,260
|Diluted-Note E                                        |          |                            | N/A       

See
Notes to Pro Forma Financial Statements (Unaudited)

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PERCEPTRONICS, INC.  CONDENSED STATEMENT OF CASH FLOWS  (UNAUDITED)

|                                                                              |  | Three Months Ended
June 30 |  
|----------------------------------------------------------------------------- |  | -------------------------- | -
|
|CASH FLOWS FROM OPERATING ACTIVITIES                                          |  |                            |  
|Net Income (loss)                                                             |  | (347,887                   | )
|Adjustments to reconcile net income to net cash used in operating activities: |  |                            |  
|Depreciation and amortization                                                 |  |                            |  
|Changes in assets and liabilities:                                            |  |                            |  
|Receivables                                                                   |  | 13,408                     |  
|Inventory                                                                     |  |                            |  
|Prepaid expenses                                                              |  | 231                        |  
|Pre-contract costs                                                            |  |                            |  
|Other assets                                                                  |  |                            |  
|Accounts payable                                                              |  | (8,937                     | )
|Accrued compensation                                                          |  | (298,292                   | )
|Notes to affiliates                                                           |  |                            |  
|Other accrued liabilities                                                     |  | 215,776                    |  
|Other long term liabilities                                                   |  | 92,568                     |  
|Net cash (used) by operating activities:                                      |  | (333,133                   | )
|CASH FLOWS FROM FINANCING ACTIVITIES                                          |  |                            |  
|Exercise of stock options and warrants                                        |  |                            |  
|Payment of long-term debt                                                     |  |                            |  
|Proceeds from sale of common stock                                            |  | 353,999                    |  
|Net cash provided in financing activities                                     |  | 353,999                    |  
|NET INCREASE (DECREASE) IN CASH                                               |  | 20,866                     |  
|Cash, beginning of period                                                     |  | 12,444                     |  
|Cash, end of period                                                           |  | 33,310                     |  
|Cash paid during period for income taxes                                      |  | 0                          |  
|Cash paid during period for interest expense                                  |  | 0                          |  

See
Notes to Pro Forma Financial Statements (Unaudited)

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PERCEPTRONICS, 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 June 30, 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 consolidated financial statements are read in conjunction with the consolidated 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:Perceptronics, 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 Company has sustained operating losses in recent years and requires substantial amounts of working capital in its
operations. 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

Between May 3, 2001 and June 14, 2001 the Company entered into settlement agreements with five suppliers and one lender whereby total liabilities
of approximately $251,000 would be settled with payments totaling approximately $62,500 to be made before August 20, 2001. This total reduction of approximately $188,500 in liabilities depended
on the Company receiving from Global Alpha Corporation payment for exercise of the fourth warrant under the stock purchase agreement sufficient to cover the agreed on payments to the suppliers and
lenders. Such payment was received from Global Alpha on August 6, 2001.

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 approximately $1.3 million for exercise of the fourth
warrant under the stock purchase agreement between the Companies, which is 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

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Company's books. Payment was received from Global Alpha on August 6, 2001 for the first monthly warrant, and Global Alpha appears to be encouraged with its relationship with Perceptronics.

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

Inventory:Inventory is stated at the lower of cost or market. Cost is determined principally by the
first-in, first-out method.

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:All sales were 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 stock 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

Billed receivables at June 30, 2001 and March 31, 2001 were $17,613 and $31,021, respectively. These represent amounts that have been invoiced on
commercial and United States Government contracts and agreements that remain unpaid.

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NOTE DLONG TERM DEBT

Long-term debt included the following at June 30 and March 31, 2001:

|                                                                                                                                                      |              | June 30,
2001 |        | March 31,
2001
|----------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ------------- | ------ | --------------
|Note PayableConsultant issued to resolve open accounts
Payable balance. Payable in monthly installments of $4,521
Including interest at 8% per annum |              | $             | 35,306 |               
|                                                                                                                                                      |              |               |        |               
|Current portion of long-term notes payable                                                                                                            |              | $             | 35,306 |               
|                                                                                                                                                      |              |               |        |               
|Maturities of long-term debt are as follows:                                                                                                          |              |               |        |               
|                                                                                                                                                      | June 30,2002 |               | $      |              
|                                                                                                                                                      |              |               |        |               

Short-term
debt included the following at June 30, 2001 and March 31, 2001:

As
of June 30, 2001 and March 31, 2001, there was a loan outstanding of $50,000 with a foreign customer and 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.

NOTE EEARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.128, "Earnings per Share"
which, when adopted, will replace the current methodology for calculating and presenting earnings per share. Under SFAS No. 128, primary earnings per share will be replaced with a presentation
of basic earnings per share and fully 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. The statement
became effective beginning in the Company's third quarter ended December 31, 1997. A reconciliation of shares used to compute earnings per share for the three month periods ended
June 30, 2001 and June 30, 2000 are as follows:

|                                                                  |  | Quarter ended
June 30
|----------------------------------------------------------------- |  | ---------------------
|
|Weighted average common shares
Outstanding                        |  | 10,206,260           
|Diluted stock options and warrants
Based on treasury stock method |  | 766,037              
|Diluted shares                                                    |  | 10,972,297           
|                                                                  |  |                      

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

General

Perceptronics, 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.

RESULTS OF OPERATIONS

Net Sales.Net sales for the three-month period ended June 30, 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 period ended June 30, 2001 decreased 100% as a result of the
100% decrease in sales discussed above. The decrease in cost of sales is not proportional to the decrease in net sales because of certain fixed and semi-fixed expenses.

Selling, General and Administrative Expenses.Selling, general and administrative expenses increased $15,812 or 8% in
the three-month period ended June 30, 2001 compared to the comparable three-month period in the prior fiscal year.

Interest Expense.Interest expense decreased $5,360 in the three-month period ended June 30, 2001 compared to
the comparable three-month period in the prior fiscal year.

Liquidity and Capital Resources.The Company is experiencing liquidity problems due to a lack of revenues and the
absence of cash reserves. At June 30, 2001, the Company's unrestricted cash balances of $33,310 were the result of equity investments made during the first quarter of fiscal 2002. The Company
had negative working capital of $841,576 at June 30, 2001, compared to negative working capital of $660,548 at June 30, 2000. At June 30, 2001, vendor accounts totaling
approximately $35,000 are past due. With the investment from Global Alpha, the company should be able to bring current most of its payables in the months of August and September. See Note B of
the Notes to Financial Statements, which is hereby incorporated herein by reference

The
Company still requires significant financing from external sources to be able to fund the development of the IC3D Framework and WyTH technology commercial software products. 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 continues to pursue U.S. Government sponsored development contracts that
have provided technical inputs to the commercial software products as well as providing revenue and income. 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.

The
Company also has a 24-month note payable with a starting principal of $100,000 that bears interest at 8% per annum. At June 30, 2001, the outstanding balance on
this note payable was $35,306. This note is part of the settlement agreements with five suppliers and one lender, described above, whereby total liabilities of approximately $251,000 would be settled
with payments totaling approximately $62,500 to be made before August 20, 2001. The Company made these payments on August 10th thus reducing the liabilities of the company.

The
Company's operating activities used cash of $333,133 during the quarter ended June, 30, 2001 resulting primarily from the operating loss incurred during the period.

The
Company's investing activities used no cash during the quarter ended June 30, 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.

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The Company's financing activities provided cash of $353,999 during the three-month period ended June 30, 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.

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PART II. OTHER INFORMATION

Item 6. Exhibits and reports on Form 8-K.





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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.

|      |  |                 |  | PERCEPTRONICS, INC. Registrant
|----- |  | --------------- |  | ------------------------------
|Date: |  | August 15, 2001 |  | By:                           
|      |  |                 |  |                               

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