Ability to Continue as a Going Concern

6 Months Ended

Jun. 30, 2011

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

Spatializer was a developer, licensor and marketer of next generation technologies for the consumer electronics, personal computing, entertainment and cellular telephone markets. Our technology was 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 410 Park Avenue--15th Floor, New York, New York 10022.

The Company’s former wholly-owned subsidiary, Desper Products, Inc. (“DPI”), was in the business of developing proprietary advanced audio signal processing technologies and products for consumer electronics, entertainment and multimedia computing. All Company revenues were generated from DPI. DPI was a California corporation incorporated in June 1986 and was dissolved during December, 2008.

The Asset Purchase Agreement and the transactions contemplated therein were approved by the stockholders of the Company at a special meeting on June 15, 2007. The Asset Purchase Agreement was consummated with DTS on July 2, 2007. Upon the conclusion of the nine-month indemnification period, the Company distributed substantially all of its remaining cash assets to its stockholders, after satisfying its liabilities, leaving a cash residual of $109,915.

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 six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. Accordingly, your attention is directed to footnote disclosures found in the December 31, 2010 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. Two of the Company's stockholders, who also serve as its principal officers, have been advancing cash to the Company to pay for ongoing expenses. As of June 30, 2011 and December 31, 2010, they had advanced $68,598 and $40,000, respectively, which has been reflected as Loans from Stockholders.

On May 9, 2011, the Company received a demand notice from the California State Controller indicating that the Company is liable in the amount of $7,204 in connection with certain property purportedly abandoned in 1996. Management has commenced an investigation to ascertain the validity of this liability. As it may take a protracted period of time to resolve the issue, the entire amount of $7,204 has been recorded as a liability.

We are now quoted on the OTCQB of the OTC Marketplace under the symbol “SPZR”.