UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: March 31, 2007

OR

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 000-26460

SPATIALIZER AUDIO LABORATORIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-4484725
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

2060 East Avenida de Los Arboles, # D190, Thousand Oaks, California           91362-1376
(Address of principal corporate offices)

Telephone Number: (408) 453-4180

(Registrant’s telephone number, including area code)

Indicate by check mark 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o      accelerated filer o      non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes o No þ

As of April 30, 2007, there were 65,000,000 shares of the Registrant’s Common Stock outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	ITEM I. FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4T. Controls and Procedures
PART II. OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 1A. RISK FACTORS
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS
SIGNATURES
EXHIBIT 31
EXHIBIT 32

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2007			2006
	(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	726,275		$	228,940
Accounts Receivable, net		45,551			74,828
Prepaid Expenses and Deposits		41,135			25,073
Total Current Assets		812,961			328,841
Property and Equipment, net		3,213			3,477
Intangible Assets, net		125,682			131,258
Total Assets	$	941,856		$	463,576
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Note Payable		—			9,670
Accounts Payable		—			32,136
Accrued Wages and Benefits		2,483			3,169
Accrued Professional Fees		15,000			41,900
Accrued Commissions		100			200
Accrued Expenses		1,000			—
Deferred Revenue		313,116			—
Total Current Liabilities		331,699			87,075
Commitments and Contingencies
Shareholders’ Equity:
Common shares, $.01 par value, 65,000,000 shares authorized, 48,763,383 shares issued and outstanding at March 31, 2007 and December 31, 2006.		469,772			469,772
Additional Paid-In Capital		46,441,755			46,441,755
Accumulated Deficit		(46,301,370	)		(46,535,026	)
Total Shareholders’ Equity		610,157			376,501
	$	941,856		$	463,576

See notes to consolidated financial statements

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SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

	For the Three Month Period Ended
	March 31,			March 31,
	2007			2006
Revenues:
Royalty Revenues	$	359,684		$	100,488
		359,684			100,488
Cost of Revenues		31,493			10,189
Gross Profit		328,191			90,299
Operating Expenses:
General and Administrative		97,157			130,092
Research and Development		—			144,901
Sales and Marketing		—			1,241
		97,157			276,234
Operating Profit(Loss)		231,034			(185,935	)
Interest and Other Income		3,041			3,219
Interest and Other Expense		—			—
		3,041			3,219
Income (Loss) Before Income Taxes		234,075			(182,716	)
Income Taxes		(418	)		(2,400	)
Net Income (Loss)	$	233,657		$	(185,116	)
Basic and Diluted Earnings Per Share	$	0.00		$	(0.00	)
Weighted Average Shares Outstanding		48,763,383			48,763,383

See notes to consolidated financial statements

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SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)

	Three Months Ended
	March 31,
	2007			2006
Cash Flows from Operating Activities:
Net Income (Loss)	$	233,657		$	(185,116	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and Amortization		5,840			9,641
Net Change in Assets and Liabilities:
Accounts Receivable and Employee Advances		29,277			59,868
Prepaid Expenses and Deposits		(16,062	)		17,894
Accounts Payable		(32,136	)		(5,229	)
Accrued Wages and Benefits		(686	)		(32,955	)
Accrued Professional Fees		(26,900	)		(34,000	)
Accrued Commissions		(100	)		10,188
Accrued Expenses		1,000			(28,144	)
Deferred Revenue		313,116			—
Net Cash Provided By (Used In) Operating Activities		507,006			(187,853	)
Cash Flows from Investing Activities:
Purchase/Disp of Property and Equipment		—			—
Increase in Capitalized Patent and Technology Costs		—			—
Net Cash Provided By (Used in) Investing Activities		—			—
Cash flows from Financing Activities:
Issuance (Repayment) of Notes Payable		(9,670	)		(10,443	)
Net Cash Provided by Financing Activities		(9,670	)		(10,443	)
Increase (Decrease) in Cash and Cash Equivalents		497,336			(198,296	)
Cash and Cash Equivalents, Beginning of Period		228,940			550,633
Cash and Cash Equivalents, End of Period	$	726,276		$	352,337
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	—		$	—
Income Taxes		418			2,400

See notes to consolidated financial statements

4

SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1) Ability to Continue as a Going Concern, Sale of All or Substantially All of the Assets of Spatializer Audio Laboratories, Inc. and Desper Products, Inc.

     Spatializer has been a developer, licensor and marketer of next generation technologies for the consumer electronics, personal computing, entertainment and cellular telephone markets. Our technology is incorporated into products offered by our licensees and customers on various economic and business terms. We were incorporated in the State of Delaware in February 1994 and are the successor company in a Plan of Arrangement pursuant to which the outstanding shares of Spatializer Audio Laboratories, Inc., a publicly held Yukon, Canada corporation, were exchanged for an equal number of shares of our common stock. Our corporate office is located at 2060 East Avenida de Los Arboles, # D190, Thousand Oaks, California 91362-1376.

     The Company’s wholly-owned subsidiary, Desper Products, Inc. (“DPI”), has been in the business of developing proprietary advanced audio signal processing technologies and products for consumer electronics, entertainment, and multimedia computing. All Company revenues are generated from DPI. DPI is a California corporation incorporated in June 1986.

     On December 19, 2005, at a regularly scheduled board of directors meeting, the board of directors of Spatializer discussed Spatializer’s current financial outlook. Management indicated to the board of directors that two customers, the revenues from which accounted for approximately 70% of Spatializer’s income during 2005, would not be sustainable in 2006. This called into question the ability of the Company to operate as a going concern. The Company’s financial statements have been prepared assuming that it will continue as a going concern.

     As previously reported, on September 18, 2006, the Company and DPI entered into an Asset Purchase Agreement with DTS, Inc. and a wholly owned subsidiary thereof pursuant to which the Company and DPI agreed to sell substantially all of their intellectual property assets. A special stockholders meeting was called for January 24, 2007 to approve sale of assets and to authorize the dissolution of the Company. Proxies were mailed on or about December 1, 2006. The meeting was adjourned without a final vote in the Board’s view of the best interest of the stockholders. The meeting was reconvened on February 21, 2007. The vote required to approve the asset sale and dissolution was a majority of the shares outstanding on the record date. The dissolution proposal was contingent upon approval of the asset sale. A total of 15,334,520 shares voted on the asset sale proposal, of which 14,407,084 shares were voted in favor, 823,182 shares voted against and 104,284 votes abstained. Although the votes cast on the proposal to sell the assets was overwhelmingly in favor thereof, the requisite vote was not obtained. As a result, the proposal regarding dissolution was not presented to a vote of stockholders.

     On April 25, 2007, pursuant to a Common Stock Purchase Agreement dated April 25, 2007, the Company sold to a group of investors, in a private transaction, an aggregate of 16,236,615 shares for an aggregate purchase price of $162,366.15. The Company anticipates that it will re-solicit a vote on the sale of assets to DTS in the second quarter of 2007 (but not

5

a vote for dissolution of the Company). There is no assurance that such asset sale vote will take place in the second quarter 2007 or that, if such vote is taken, that the proposal to sell the assets to DTS and its subsidiary will be approved. Even if such asset sale is approved in second quarter 2007, there is no assurance that the DTS transaction will be consummated as it is subject to various conditions. If such vote is not taken in the second quarter 2007 or such asset sale is not approved, the Company will have to re-evaluate its alternatives.

     The foregoing interim financial information is unaudited and has been prepared from the books and records of the Company. The financial information reflects all adjustments necessary for a fair presentation of the financial condition, results of operations and cash flows of the Company in conformity with generally accepted accounting principles. All such adjustments were of a normal recurring nature for interim financial reporting. Operating results for the three months ended March 31, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. Accordingly, your attention is directed to footnote disclosures found in the December 31, 2006 Annual Report and particularly to Note 2 thereof, which includes a summary of significant accounting policies.

     The foregoing financial information has been prepared assuming that the Company will continue as a going concern. As discussed above, the Company’s current circumstances, including significant operating losses, raise substantial doubt about the likelihood that the Company will continue as a going concern. The foregoing financial information does not include any adjustments that might result from the outcome of this uncertainty.

(2) Significant Accounting Policies

     Basis of Consolidation — The consolidated financial statements include the accounts of Spatializer Audio Laboratories, Inc. and its wholly-owned subsidiary, DPI. All significant intercompany balances and transactions have been eliminated in consolidation. Corporate administration expenses are not allocated to subsidiaries.

     Revenue Recognition — The Company recognizes royalty revenue upon reporting of such royalties by licensees. License revenues are recognized when earned, in accordance with the contractual provisions, typically upon our delivery of contracted services or delivery and contractual availability of licensed product. Royalty revenues are recognized upon shipment of products incorporating the related technology by the original equipment manufacturers (OEMs) and foundries, as reported by quarterly royalty statements. The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin (SAB) 104.

     Deferred Revenue - The Company receives royalty fee advances from certain customers in accordance with contract terms. The Company does not require advances from all customers. Advances are negotiated on a per contract basis. Cash received in advance of revenue earned from a contract is recorded as deferred revenue until the related contract revenue is earned under the Company’s revenue recognition policy.

     Concentration of Credit Risk — Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash, cash equivalents and trade accounts receivable. The Company places its temporary cash investments in certificates of deposit in excess of FDIC insurance limits, principally at CitiBank FSB. At March 31, 2006 substantially all cash and cash equivalents were on deposit at two financial institutions.

6

     At March 31, 2007, one customer, Sharp, accounted for 66% of our. accounts receivable. At March 31, 2006, three customers, not presented in the order of importance, Matsushita, Sharp and Funai, accounted for 37%, 34% and 20% respectively of our. accounts receivable.

     The Company performs ongoing credit evaluations of its customers and normally does not require collateral to support accounts receivable. Due to the contractual nature of sales agreements and historical trends, no allowance for doubtful accounts has been provided.

     The Company does not apply interest charges to past due accounts receivable.

     Cash and Cash Equivalents — Cash equivalents consist of highly liquid investments with original maturities of three months or less.

     Customers Outside of the U.S. — Sales to foreign customers were 100% and 100% of total sales in the year to date periods ended March 31, 2007 and 2006, respectively. Approximately 87% and 13% of sales were generated in Korea and Japan, respectively, in the three months ended March 31, 2007

     Major Customers — During the quarter ended March 31, 2007, one customer, Samsung , accounted for 87% of the Company’s revenue. During the quarter ended March 31, 2006, three customers, Sharp, Funai and Matsushita, not presented in order of importance, accounted for 37%, 34% and 20% of the Company’s revenue

     Research and Development Costs — The Company expenses research and development costs as incurred, which is presented as a separate line on the statement of operations.

     Property and Equipment — Property and equipment are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income. Property and equipment are depreciated over the useful lives of the asset ranging from 3 years to 5 years under the straight line method.

     Intangible Assets — Intangible assets consist of patent costs and trademarks which are amortized on a straight-line basis over the estimated useful lives of the patents which range from five to twenty years. The weighted average useful life of patents was approximately 11 years. All of our intangible assets have finite lives as defined by Statement of Financial Accounting Standard (SFAS) 142.

     Earnings Per Share — Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The following table presents contingently issuable shares, options and warrants to purchase shares of common stock that were outstanding during the three month periods ended March 31, 2007 and 2006 which were not included in

7

the computation of diluted loss per share because the impact would have been antidilutive or less than $0.01 per share:

	2007		2006
Options		1,750,000		2,160,000
Warrants		0		0
		1,750,000		2,160,000

     Stock Option Plan — During the years ended December 31, 2005 and 2004, the Company determined the effects of stock based compensation in accordance with SFAS No. 123, Accounting for Stock-Based Compensation ,as amended which permitted entities to recognize expense using the “fair-value” method over the vesting period of all employee stock-based awards on the date of grant. Alternatively, SFAS No. 123 allowed entities to continue to utilize the “intrinsic value” method for equity instruments granted to employees and provide pro forma net income (loss) and pro forma earnings (loss) per share disclosures for employee stock option grants after 1994 as if the fair-value-based method defined in SFAS No. 123 has been applied. The Company elected to continue to utilize the “intrinsic value” method for employee stock option grants and provide the pro forma disclosure provisions of SFAS No. 123 (Note 7)

     On January 1, 2006 the Company adopted SFAS 123R, Share Based Payment, using the modified prospective transition method to account for changes to the method of accounting for options outstanding at the effective date. Estimated compensation cost of $11,725 related to vested options outstanding as of January 1, 2006, net of those cancelled or expired during 2006, has been recognized as additional paid-in capital. The statements of operations for periods prior to the effective date have not been restated.

     Impairment of Long-Lived Assets and Assets to be Disposed of - The Company adopted the provisions of SFAS No. 144, Accounting for the Impairment of Long-Lived Assets, on January 1, 2002. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amounts of the assets exceed the fair value of the assets.

     Segment Reporting - The Company adopted SFAS 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS No. 131”), in December 1997. MDT has been considered a discontinued operation since September 1998. The Company has only one operating segment, DPI, the Company’s audio enhancement licensing business.

8

     Income Taxes - Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Recent Accounting Pronouncements -

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” . SFAS 157 replaces the different definitions of fair value in the accounting literature with a single definition. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for fair-value measurements already required or permitted by other standards for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company has not yet determined the impact, if any, of adopting the provisions of SFAS 157 on its financial position, results of operations and cash flows.

     Use of Estimates - Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

     Fair Value of Financial Instruments - The carrying values of cash equivalents, accounts receivable, accounts payable and accrued liabilities and those potentially subject to valuation risk at December 31, 2006 and March 31, 2007 approximated fair value due to their short maturity or nature.

(3) Property and Equipment

     Property and equipment, as of December 31, 2006 and March 31, 2007, consists of the following in accordance with application of SFAS 144:

	March 31,		December 31,
	2007		2006
Office Computers, Software, Equipment and Furniture	$	337,144	$	337,145
Test Equipment		73,300		73,300
Tooling Equipment		45,539		45,539
Trade Show Booth and Demonstration Equipment		174,548		174,548
Automobiles		7000		7,000
Total Property and Equipment		637,531		637,531
Less Accumulated Depreciation and Amortization		634,318		634,054
Property and Equipment, Net	$	3,213	$	3,477

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(4) Intangible Assets

     Intangible assets, as of December 31, 2006 and March 31, 2007 consist of the following:

	March 31,		December 31,
	2007		2006
Capitalized Patent, Trademarks and Technology Costs	$	540,708	$	540,708
Less Accumulated Amortization		415,026		409,450
Intangible Assets, Net	$	125,682	$	131,258

     Estimated amortization is as follows:

2007	$	131,258
2008	$	0
2009	$	0
Thereafter	$	0

     It is anticipated that the intangible assets will be written off upon completion of the sale of assets, subject to stockholder approval, in June 2007.

(5) Notes Payable

     The Company was indebted to the Premium Finance, Inc., an unrelated insurance premium finance company. The balance was paid off in full in March 2007.

(6) Shareholders’ Equity

     During the quarters ended March 31, 2007 and 2006, no shares were issued, cancelled or converted, nor were any options granted or exercised.

Capitalization

     On April 25, 2007, pursuant to a Common Stock Purchase Agreement dated April 25, 2007, the Company sold to a group of investors, in a private transaction, an aggregate of 16,236,615 shares for an aggregate purchase price of $162,366.15. At the closing of the stock sale, the investors delivered into escrow an additional amount $259,786. Such escrowed funds are to be immediately released to the Company concurrently with the closing of the transactions contemplated by the Asset Purchase Agreement, dated as of September 18, 2006 by and between the Company, DPI, DTS, Inc. and its wholly owned subsidiary . In the event that the closing under such Asset Purchase Agreement does not occur prior to June 30, 2007, the escrowed funds are to be released to the investors in an amount equal to the amount paid into the escrow fund by each such investor.

10

(7) Stock Options

In 1995, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stock options to directors, officers and employees. The Plan which was approved by the stockholders authorizes grants of options to purchase authorized but unissued common stock up to 10% of total common shares outstanding at each calendar quarter, 4,876,339 as of March 31, 2007. Stock options were granted under the Plan with an exercise price equal to the stock’s fair market value at the date of grant. Outstanding stock options under the Plan have five-year terms and vest and become fully exercisable up to three years from the date of grant. The Plan expired in February 2005. To date, the Company has not adopted a new stock option plan.

				WEIGHTED-AVERAGE
	Exercisable			Number			Exercise Price
Options outstanding at December 31, 2004		2,381,666			2,635,000		$	0.11
Options granted					500,000		$	0.10
Options exercised					(0	)	$	—
Options forfeited/expired					(325,000	)	$	0.31
Options outstanding at December 31, 2005		2,726,666			2,810,000		$	0.10
Options granted					(0	)	$	0.10
Options exercised					(0	)	$	—
Options forfeited/expired		(976,666	)		(1,060,000	)	$	0.10
Options outstanding at December 31, 2006		1,750,000			1,750,000		$	0.09
Options granted					(0	)	$	0.10
Options exercised					(0	)	$	—
Options forfeited/expired		(0	)		(0	)	$	0.10
Options outstanding at March 31, 2007		1,750,000			1,750,000		$	0.09

     At March 31, 2007 there were no additional shares available for grant under the Plan, since the Plan had expired in 2005. The per share weighted-average fair value of stock options granted during 2005 and 2004 was $0.02 and $0.09, respectively, on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: 2005- expected dividend yield 0%, risk-free interest rate of 4.5%, expected volatility of 150% and an expected life of 5 years 2004- expected dividend yield 0%, risk-free interest rate of 4.1%, expected volatility of 150% and an expected life of 5 years.

     Through December 31, 2005, as permitted by SFAS No. 123, the Company applied the “intrinsic value” method outlined in APB Opinion No. 25 in accounting for its Plan and, accordingly, no compensation cost was recognized for the fair value of its stock options in the consolidated financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company’s net loss would have been increased to the pro forma amounts indicated below:

	2005			2004
NET INCOME (LOSS):
As Reported	$	(81,515	)	$	(157,490	)
Pro Forma	$	(89,715	)	$	(172,770	)
BASIC AND DILUTED LOSS:
As Reported	$	(0.00	)	$	(0.00	)
Pro Forma	$	(0.00	)	$	(0.00	)

     Effective January 1, 2006, the Company adopted SFAS 123R “Share Based Payments, using the modified prospective transition method to account for changes to the method of accounting for 1,750,000 vested options outstanding at the effective date. Estimated compensation cost related to vested options outstanding as of January 1, 2006 was recognized as additional paid-in capital. During the year ended December 31, 2006, 1,060,000 vested options expired or were cancelled, resulting in a reduction of compensation cost and additional paid-in capital. Net compensation cost recorded for the year ended December 31, 2006 was $11,725; net loss for the year was increased by a corresponding amount, or a basic and diluted loss per share of $0.00. The grant-date

11

fair value of vested options was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions: expected dividend yield — 0%; risk-free interest rate of 4.5%, expected volatility of 100% and an expected life of 3 years

          Options to purchase 600,000 shares of common stock were cancelled in the quarter ended March 31, 2006 to two former directors as a result of their resignation form the Board of Directors, per the Plan requirements.

          Options to purchase 210,000 shares of common stock previously granted to two directors and two employees, at an exercise price of $0.30 expired.

          Options to purchase 250,000 shares of common stock previously granted to one employee, at an exercise price of $0.05 were cancelled after the resignation of the employee per terms of the option agreement.

          At March 31, 2007 and December 31, 2006, the number of options exercisable and fully vested was 1,750,000. The weighted-average exercise price of those options was $0.09; the weighted average remaining contractual term was 3 years; and the aggregate intrinsic value was zero per share.

          There were no warrants outstanding at March 31, 2007 or 2006.

(8) Commitments and Contingencies

     We also anticipate that, from time to time, we may be named as a party to legal proceedings that may arise in the ordinary course of our business.

Operating Lease Commitments

          The Company is obligated under one non-cancelable operating lease as of December 31, 2006. Future minimum rental payments for this operating lease is approximately $900 through December 2007.

          Rent expense amounted to approximately $33,000, $25,000 and $ 23,000 for the years ended December 31, 2006, 2005 and 2004, respectively, and related primarily to leases for office space. These leases expired during 2006 and were not renewed.

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

     This information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, the audited consolidated financial statements and the notes thereto included in the Form 10-K and the unaudited interim consolidated financial statements and notes thereto included in this report.

     This report contains forward-looking statements, within the meaning of the Private Securities Reform Act of 1995, which are subject to a variety of risks and uncertainties. Our actual results, performance, or achievements may differ significantly from the results, performance, or achievements expressed or implied in such forward-looking statements.

Executive Overview

     Revenues increased to $360,000 for the quarter ended March 31, 2007 compared to $100,000 for the quarter ended March 31, 2006, an increase of 260%. Revenues were comprised of royalties pertaining to the licensing of Spatializer^® audio signal processing algorithms and circuit designs. Revenues in the current quarter reflect the extension of a prior year licensing agreement that was renewed in the first quarter of 2007, revenues from which are recognized in the first and will be fully recognized in the second quarter, based on projected product life. Revenues are not expected to continue and a key issue discussed below is the wind-down of revenue streams in fiscal 2006 and fiscal 2007 due to the discontinuation of operations.

     Net income was $234,000 for the quarter ended March 31, 2007, $0.00 basic and diluted per share, compared to a net loss of $185,000, ($0.00) per share for the quarter ended March 31, 2006. The increased net income for the current period is primarily the result of the recognition of half the payment received from a major customer to license additional usage rights which had expired in the first quarter of 2007. The remaining cash received was classified as deferred revenue and will be recognized in its entirety next quarter.

          At March 31, 2007, we had $726,000 in cash and cash equivalents as compared to $229,000 at December 31, 2006. The increase in cash resulted primarily from the afore-mentioned transaction involving the license of additional units by one licensee. We had working capital of $481,000 at March 31, 2007 as compared with working capital of $242,000 at December 31, 2006

          We ceased operations in 2006. As previously disclosed, we are parties to an Asset Purchase Agreement pursuant to which we have agreed to sell substantially all of our assets and those of out wholly owned subsidiary, DPI (excluding certain assets, such as cash), to DTS, Inc. and its wholly owned subsidiary. Such asset sales require the approval of a majority of the outstanding shares of the Common Stock of the Company. Such proposal was put to a vote of the stockholders during the fiscal quarter ended March 31, 2007. While the votes received were overwhelmingly in favor of the asset sales, the requisite vote was not obtained. The Company anticipates that it will re-solicit a vote on the sale of assets to DTS and its subsidiary in the second quarter of 2007 (but not a vote for dissolution of the Company). There is no assurance that such asset sale vote will take place in second quarter

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2007 or that, if such vote is taken, that the proposal to sell the assets to DTS and its subsidiary will be approved. Even if such asset sale is approved in second quarter 2007, there is no assurance that the DTS transaction will be consummated as it is subject to various conditions. If such vote is not taken in the second quarter 2007 or such asset sale is not approved, the Company will have to re-evaluate its alternatives.

Approach to MD&A

     The purpose of MD&A is to provide our shareholders and other interested parties with information necessary to gain an understanding of our financial condition, changes in financial condition and results of operations. As such, we seek to satisfy three principal objectives:

•   to provide a narrative explanation of a company’s financial statements “in plain English” that enables the average investor to see the company through the eyes of management;

•   to enhance the overall financial disclosure and provide the context within which financial information should be analyzed; and

•   to provide information about the quality of, and potential variability of, a company’s earnings and cash flow, so that investors can ascertain the likelihood and relationship of past performance being indicative of future performance.

     We believe the best way to achieve this is to give the reader:

• An understanding of our operating environment and its risks (see below and Item 1A of Part II of this Form 10-Q)

• An outline of critical accounting policies

• A review of our corporate governance structure

• A review of the key components of the financial statements and our cash position and capital resources

• A review of the important trends in the financial statements and our cash flow

• Disclosure on our internal controls and procedures

Operating Environment

     We operate in a very difficult business environment. This environment impacts us in various ways, some of which are discussed below:

• Our Board of Directors has Determined it is in the Company’s and its Stockholders’ Interests to Sell the Company’s Assets

• We Are Unable to Achieve or Sustain Profitability in the Future or Obtain Future

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	Financing and Our Business Operations Will Fail
•	There is No Guarantee That There Will be Funds Available for Distribution to Stockholders if We Cannot Get Stockholder Approval for the Asset Sale, if the Approval is Untimely or if Claims Arise Post-Sale During the 275-Day Warranty Period
•	The Market For Our Stock May Not Remain Liquid And The Stock Price May Be Subject To Volatility

Certain other risk factors are set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 on file with the Securities and Exchange Commission.

     In December 2005 our revenues were stagnant, with those from certain of our major customers winding down. Revenues from certain of our other customers appear not to be sustainable in the future. In December 2005, two of our four directors resigned and the Chairman of the Board, Chief Executive Officer, Chief Financial Officer and Secretary resigned from all positions held with the Company other than as a director, Chairman and Secretary. For these and other reasons, and after exploring other exit strategies and opportunities, our Board of Directors concluded in December 2005 to attempt to sell the Company either through a sale of assets or a sale of multiple, non-exclusive perpetual licenses with a subsequent sale of the residual assets and engaged Strategic Equity Group to assist us in this endeavor. In September 2006, the Company and DPI entered into an Asset Purchase Agreement with DTS, Inc. and a wholly owned subsidiary thereof pursuant to which we agreed to sell substantially all of our assets (other than certain excluded assets, such as cash). The consummation of the asset sale is subject to approval of holders of a majority of the outstanding shares of the Common Stock of the Company. An annual meeting of stockholders was called for January 2007 to, among other things, vote on such asset sale and, if approved, to vote on the dissolution of the Company. The meeting was adjourned and reconvened in February 2007. While the shares actually voted at the meeting were overwhelmingly in favor of the asset sale transaction, due to the high vote threshold, the requisite vote was not obtained. As a result, the proposal regarding the dissolution of the Company was not put to a vote. In April 2007, the Company sold an aggregate of 16,236,615 shares of its Common Stock to certain investors. The Company anticipates holding a special meeting of stockholders in second quarter 2007 to vote on the asset sale transaction but not with respect to the dissolution of the Company. Although there is no assurance thereof, the new investors in the Company may bring forth their own plan in the future regarding the direction of the Company. There is no assurance that such meeting will be held or that, if held, that the asset sale transaction will be approved. Even if approved, there is no assurance that the asset sale will be consummated as it is subject to various conditions. Further, even if such transaction is consummated, there is no assurance that there will be any funds available for distribution to stockholders. If such sale is not approved, the Board of Directors will be required to explore other alternatives for the Company and its business.

Critical Accounting Policies

     Our discussion and analysis of our financial condition and results of operations are based upon our consolidated statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these

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financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. In consultation with our Board of Directors and Audit Committee, we have identified three accounting policies that we believe are critical to an understanding of our financial statements. These are important accounting policies that require management’s most difficult, subjective judgments.

     The first critical accounting policy relates to revenue recognition. Royalty revenues are recognized upon shipment of products incorporating the related technology by the original equipment manufacturers (OEMs) and foundries. These revenues are reported to us by our licensees in formal, written royalty reports, which serve as the basis for our quarterly revenue accruals. Infrequently, certain written reports are received after our required reporting deadlines, sometimes due to contractual requirements. In such cases, management tries to obtain verbal reports or informal reports from the Licensee. In the absence of such information, management may utilize conservative estimates based on information received or historical trends. In such isolated cases, management strives to under-estimate such revenues to err on the side of caution. In the event such estimates are used, the revenue for the following quarter is adjusted based on receipt of the written report. In addition, any error in Licensee reporting, which is very infrequent, is adjusted in the subsequent quarter when agreed by both parties as correct.

     The second critical accounting policy relates to research and development expenses. We expense all research and development expenses as incurred. Costs incurred to establish the technological feasibility of our algorithms (which is the primary component of our licensing) are expensed as incurred and included in Research and Development expenses. Such algorithms are refined based on customer requirements and licensed for inclusion in the customer’s specific product. There are no production costs to capitalize as defined in Statement on Financial Accounting Standards No. 86.

     The third critical accounting policy relates to our long-lived assets. The Company continually reviews the recoverability of the carrying value of long-lived assets using the methodology prescribed in Statement of Financial Accounting Standards (SFAS) 144, “Accounting for the Impairment and Disposal of Long-Lived Assets.” The Company also reviews long-lived assets and the related intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Upon such an occurrence, recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows to which the assets relate, to the carrying amount. If the asset is determined to be unable to recover its carrying value, then intangible assets, if any, are written down to fair value first, followed by the other long-lived assets. Fair value is determined based on discounted cash flows, appraised values or management’s estimates, depending on the nature of the assets. Our intangible assets consist primarily of patents. We capitalize all costs directly attributable to patents and trademarks, consisting primarily of legal and filing fees, and amortize such costs over the remaining life of the asset (which range from 3 to 20 years) using the straight-line method. In accordance with SFAS 142, “Goodwill and Other Intangible Assets”, only intangible assets with definite lives are amortized. Non-amortized intangible assets are instead subject to annual impairment testing. Management believes, based on the negotiated purchase price for the sales of its assets, that the fair value of its assets exceeds the recorded net carrying value.

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     Our financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s current circumstances, including significant operating losses, raise substantial doubt about the likelihood that the Company will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Key Components of the Financial Statements and Important Trends

     The Company’s financial statements, including the Consolidated Balance Sheets, the Consolidated Statements of Operations, the Consolidated Statements of Cash Flows and the Consolidated Statements of Stockholders’ Equity, should be read in conjunction with the Notes thereto included elsewhere in this report. MD&A explains the key components of each of these financial statements, key trends and reasons for reporting period-to-period fluctuations.

     The Consolidated Balance Sheet provides a snapshot view of our financial condition at the end of our current fiscal period. A balance sheet helps management and our stockholders understand the financial strength and capabilities of our business. Balance sheets can help identify and analyze trends, particularly in the area of receivables and payables. A review of cash balances compared to the prior years and in relation to ongoing profit or loss can show the ability of the Company to withstand business variations. The difference between Current Assets and Current Liabilities is referred to as Working capital and measures how much in liquid assets a company has available to build its business. Receivables that are substantially higher than revenue for the quarter may indicate a slowdown of collections, with an impact on future cash position. This is addressed further in MD&A under Liquidity and Capital Resources.

     The Consolidated Statement of Operations tells the reader whether the Company had a profit or loss. It shows key sources of revenue and major expense categories. It is important to note period-to-period comparisons of each line item of this statement, reasons for any fluctuation and how costs are managed in relation to the overall revenue trend of the business. These statements are prepared using accrual accounting under generally accepted accounting standards in the United States. This is addressed further in MD&A under Revenues and Expenses.

     The Consolidated Statement of Cash Flows explains the actual sources and uses of cash. Some expenses of the Company, such as depreciation and amortization, do not result in a cash outflow in the current period, since the underlying patent expenditure or asset purchase was made years earlier. New capital expenditures, on the other hand, result in a disbursement of cash, but will be expensed in the Consolidated Statement of Operations over their useful lives. Fluctuations in receivables and payables also explain why the net change in cash is not equal to the net loss reported on the Statement of Operations. Therefore, it is possible that the impact of a net loss on cash is less or more than the actual amount of the loss. This is discussed further in MD&A under Liquidity and Capital Resources.

     The Consolidated Statement of Changes in Stockholders’ Equity shows the impact of the operating results on the Company’s equity. In addition, this statement shows new equity brought into the Company through stock sales or stock option exercise. This is discussed further in MD&A under Liquidity and Capital Resources.

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Results of Operations

Revenues

     Revenues increased to $360,000 for the quarter ended March 31, 2007 compared to $100,000 for the quarter ended March 31, 2006, an increase of 260%. Revenues were comprised of royalties pertaining to the licensing of Spatializer^® audio signal processing algorithms and circuit designs. The increased revenue is primarily the result of the recognition of half the payment received from a major customer to license additional usage rights which had expired in the current quarter. The remaining cash received was classified as deferred revenue and will be recognized in its entirely next quarter.

Gross Profit

     Gross profit for the three months ended March 31, 2007 was $328,000 (91% of revenue) compared to gross profit of $90,000 (90% of revenue) in the comparable period last year, an increase of 264%. Gross profit increased due to increased revenue.

Operating Expenses

          Operating expenses in the three months ended March 31, 2007 were $97,000 (27% of revenue) compared to operating expenses of $276,000 (276% of revenue) in the comparable period last year, a decrease of 65%. The decrease in operating expenses resulted primarily from decreases in general and administrative expense, sales and marketing expense, and research and development expense due to the suspension of operations.

General and Administrative

     General and administrative expenses in the three months ended March 31, 2007 were $97,000 (27% of revenue) compared to general and administrative expenses of $130,000 (130% of revenue) in the comparable period last year, a decrease of 25%. The decrease in general and administrative expense for the three month period resulted primarily from the vacancy in the CEO position and no sales related travel for the CEO.

     Research and Development

          Research and Development expenses in the three months ended March 31, 2007 were zero compared to research and development expenses of $145,000 (145% of revenue) in the comparable period last year. The decrease in research and development expense was due to the elimination of an in-house applications engineering position and the resignation of the principal engineer in May 2006.

     Sales and Marketing

          Sales and Marketing expenses in the three months ended March 31, 2007 were zero compared to sales and marketing expenses of $1,000 (1% of revenue) in the comparable period last year. The decrease in such expenses resulted from cessation of all licensing and marketing activities in January 2006 due to the suspension of operations.

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     Net Income (Loss)

     Net Income was $234,000 for the quarter ended March 31, 2007; $0.00 basic and diluted per share, compared to net loss of $185,000, ($0.00) per share, for the quarter ended March 31, 2006. The increased net income for the current period is primarily the result of the recognition of half the payment received from a major customer to license additional usage rights which had expired in the current quarter. The remaining cash received was classified as deferred revenue and will be recognized in its entirety next quarter.

     At March 31, 2007, we had $726,000 in cash and cash equivalents as compared to $229,000 at December 31, 2006. The increase in cash resulted primarily from the receipt of current and deferred revenue on the license of additional units by one licensee in its normal course of business. We had working capital of $481,000 at March 31, 2007 as compared with working capital of $242,000 at December 31, 2006.

     Future payments due under operating lease obligations as of March 31, 2007 are described below:

			Payment due by period
			Less than						More than
Contractual obligations	Total		1 year		1-3 years		3-5 years		5 years
Operating Lease Obligations	$	900	$	900		0		0		0
Total	$	900	$	900		0		0		0

     Our future cash flow must come primarily from the audio signal processing licensing and OEM royalties unless and until our efforts to sell the assets of the company, with stockholders approval, is consummated (if ever) and, in that case, from any net proceeds from the sale such assets and/or from any other business operations, if any, in which the Company may determine to engage in the future, none of which are anticipated at present.

     The fluid, competitive and dynamic nature of the market brought a high degree of uncertainty to our operations. The operations of our business, and those of our competitors, are also impacted by the continued trend in the semiconductor industry to offer free, but minimal audio solutions to certain product classes to maintain and attract market share. In addition, the commoditization of many consumer electronics segments, our lack of resources and the departure of key employee and directors has made it unfeasible to continue to compete.

     Based on current and projected operating levels, we no longer believe that we can maintain our liquidity position at a consistent level, on a short-term or long-term basis. As such, we do not believe our current cash reserves and cash generated from our existing operations and customer base are sufficient for us to meet our operating obligations and the anticipated additional research and development for our audio technology business for at least the next 12 months.

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     In September 2006, the Company and DPI entered into an Asset Purchase Agreement with DTS, Inc. and a wholly owned subsidiary thereof pursuant to which we agreed to sell substantially all of our assets (other than certain excluded assets, such as cash). The consummation of the asset sale is subject to approval of holders of a majority of the outstanding shares of the Common Stock of the Company. An annual meeting of stockholders was called for January 2007 to, among other things, vote on such asset sale and, if approved, to vote on the dissolution of the Company. The meeting was adjourned and reconvened in February 2007. While the shares actually voted at the meeting were overwhelmingly in favor of the asset sale transaction, due to the high vote threshold, the requisite vote was not obtained. As a result, the proposal regarding the dissolution of the Company was not put to a vote. In April 2007, the Company sold an aggregate of 16,236,615 shares of its Common Stock to certain investors. The Company anticipates holding a special meeting of stockholders in second quarter 2007 to vote on the asset sale transaction but not with respect to the dissolution of the Company. Although there is no assurance thereof, the new investors in the Company may bring forth their own plan in the future regarding the direction of the Company. There is no assurance that such meeting will be held or that, if held, that the asset sale transaction will be approved. Even if approved, there is no assurance that the asset sale will be consummated as it is subject to various conditions. Further, even if such transaction is consummated, there is no assurance that there will be any funds available for distribution to stockholders. If such sale is not approved, the Board of Directors will be required to explore other alternatives for the Company and its business.

Net Operating Loss Carry forwards

     At December 31, 2006 we had net operating loss carry forwards for Federal income tax purposes of approximately $26,500,000 which are available to offset future Federal taxable income, if any, through 2013. Approximately $21,700,000 of these net operating loss carry forwards are subject to an annual limitation of approximately $1,000,000. Based on the suspension of operations and the pending sale of assets, these net operating loss carry forwards will not be utilized, other than for any income in 2007.

Recently Issued Accounting Pronouncements

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” . SFAS 157 replaces the different definitions of fair value in the accounting literature with a single definition. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for fair-value measurements already required or permitted by other standards for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company has not yet determined the impact, if any, of adopting the provisions of SFAS 157 on its financial position, results of operations and cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     We have not been exposed to material future earnings or cash flow fluctuations from changes in interest rates on our short-term investments at March 31, 2007. A hypothetical decrease of 100 basis points in interest rate would not result in a material fluctuation in future earnings or cash flow. We have not entered into any derivative financial instruments to

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manage interest rate risk or for speculative purposes and we are not currently evaluating the future use of such financial instruments.

Item 4T. Controls and Procedures

     We carried out an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934. Due to the Company’s present circumstances, there are only one remaining part-time employee and a contract bookkeeper that are responsible for maintenance of the accounting records and other aspects of internal control. Thus, segregation of duties is limited, and there is limited oversight of the remaining employee. While the contract bookkeeper initiates disbursements, and while the employee signs the checks, the lack of segregation of duties, forced by the circumstances, must be deemed a material weakness in internal controls. Nevertheless, based on that evaluation, the Chairman of the Board, acting as the principal executive and principal financial officer of the Company, concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission’s rules and forms. There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     From time to time we may be involved in various disputes and litigation matters arising in the normal course of business. As of April 30, 2007 we are not involved in any legal proceedings that are expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, given the size of our company, there exists the possibility of a material adverse impact on our results of operations of the period in which the ruling occurs. Our estimate of the potential impact on our financial position or overall results of operations for new legal proceedings could change in the future.

ITEM 1A. RISK FACTORS

     In addition to the other information set forth in this Quarterly Report, stockholders should carefully consider the factors discussed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     There were no unregistered sales of equity securities or repurchases during the period covered by this report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On January 24, 2007, the Company convened its annual meeting, which meeting was then adjourned by the vote of a majority of the shares present at the meeting. The Company stated that the adjourned meeting would be held at the offices of Reed Smith LLP, 1901 Avenue of the Stars, Suite 700, Los Angeles, California on February 21, 2007 at 4 p.m. local time. On January 25, 2007, the Board of Directors of Registrant ratified the adjournment of the annual meeting and the holding of the adjourned meeting on February 21, 2007.

     The adjourned annual meeting of stockholders reconvened on February 21, 2007. At that meeting, Henry R. Mandell was re-elected as a director of Registrant for a three year term. The votes cast for the election of Mr. Mandell were 24,860,264 and the votes withheld from the election of Mr. Mandell were 1,414,089 (there being no non-votes or votes against

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with respect to the election of Mr. Mandell). The term of office of Carlo Civelli, the only other director of the Company, continued after the annual meeting.

     The stockholders also voted on the proposed sale of the assets of the Company and DPI to DTS, Inc. and DTS BVI, Limited, a wholly subsidiary of DTS, Inc. While the shares voted at the meeting were overwhelmingly in favor of the proposal to sell the assets of the Company and DPI, the proposal was not approved because the requisite vote needed to pass such proposal was not obtained. The number of votes cast for and against, as well as the number of abstentions and broker non-votes as to, the asset sale proposal were as follows:

Vote Type	Shares Voted
For		14,407,084
Against		823,182
Abstain		104,284
Non-votes		10,939,803

     The Proxy Statement relating to the annual meeting also indicated that there would be presented at the meeting for a vote a proposal to dissolve the Company and a proposal to ratify the appointment of Farber & Hass as the independent auditors for the Company. The vote on the proposal to dissolve was subject to the approval of the asset sale. As the proposal regarding the asset sale was not approved, the proposal to dissolve was not put to a vote of stockholders. As Farber & Hass resigned as the independent auditors of the Company prior to the reconvened meeting (as previously disclosed by the Company in its Securities and Exchange Act filings), such proposal was not put to a vote of the stockholders.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

10.1	Letter agreement between Spatializer Audio Laboratories, Inc. and Henry R. Mandell extending employment agreement term (Management Contract)
31	Rule 13a-14(a)/15d-14(a) Certification
32*	Section 1350 Certification

* Certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.

SIGNATURES

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

Dated: May 10, 2007

SPATIALIZER AUDIO LABORATORIES, INC.
(Registrant)
 

/s/ Henry R. Mandell  

Henry R. Mandell  

Chairman of the Board and Secretary (Principal Executive, Financial and Accounting Officer) 

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