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: September 30,
2009





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
              incorporation
      or organization)
            
            (IRS
      Employer
              Identification
      No.)





410
Park Avenue--15 thFloor   New York, New York 10022


(Address
of principal corporate offices)





Telephone
Number: (212)  231-8359


(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:


Yesþ           Noo





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





Large accelerated filer  o
            Accelerated
      filer  o
            Non-accelerated
      filer  o
              (Do
      not check if a smaller reporting company)
            Smaller
      reporting company  þ





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


Yesx           Noo





,











TABLE OF
CONTENTS





PART I.
      FINANCIAL INFORMATIONItem 1.
            FINANCIAL
      STATEMENTS
            2Item 2.
            MANAGEMENT’S DISCUSSION &
      ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
      OPERATIONS
            9Item 3.
            QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK
            12Item 4.
            CONTROLS AND
      PROCEDURES
            12PART II. OTHER
      INFORMATIONItem 1.
            LEGAL
      PROCEEDINGS
            13Item 1A.
            RISK
    FACTORS
            13Item 2.
            UNREGISTERED SALES OF EQUITY
      SECURITIES AND USE OF PROCEEDS
            14Item 3.
            DEFAULTS UPON SENIOR
      SECURITIES
            14Item 4.
            SUBMISSION OF MATTERS TO A VOTE
      OF SECURITY HOLDERS
            14Item 5.
            OTHER
      INFORMATION
            14Item 6.
            EXHIBITS
            14SIGNATURES
            15EXHIBIT
      31.1EXHIBIT
      31.2EXHIBIT
      32.1EXHIBIT
      32 .1








1


PART I. FINANCIAL
INFORMATION


ITEM I. FINANCIAL STATEMENTS


SPATIALIZER AUDIO LABORATORIES, INC.





CONDENSED
CONSOLIDATED BALANCE SHEETS





September
      30,
            
            December
      31,2009
            
            2008(unaudited)ASSETSCurrent
      Assets:Cash
      and Cash Equivalents
            
            $
            46,236
            
            
            $
            66,833Prepaid
      Expenses and Deposits
            
            
            -
            
            
            
            2,842Total
      Current Assets
            
            
            46,236
            
            
            
            69,675Total
      Assets
            
            $
            46,236
            
            
            $
            69,675LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      Liabilities:Accounts
      Payable
            
            
            164
            
            
            
            5,206Account
      Payable, related parties
            
            
            36,450
            
            
            
            -Accrued
      expenses
            
            
            1,000
            
            
            
            16,000Total
      Current Liabilities
            
            
            37,614
            
            
            
            21,206Commitments
      and ContingenciesShareholders’
      Equity:Preferred
      shares, $.01 par value, 1,000,000 shares authorized, none issued and
      outstanding
            
            
            -
            
            
            
            -Common
      shares, $.01 par value, 300,000,000 shares authorized, 6,500,000 shares
      issued and outstanding
            
            
            65,000
            
            
            
            65,000Additional
      Paid-In Capital
            
            
            45,854,856
            
            
            
            45,854,856Accumulated
      Deficit
            
            
            (45,911,234
            )
            
            
            (45,871,387
            )Total
      Shareholders’ Equity
            
            
            8,622
            
            
            
            48,469$
            46,236
            
            
            $
            69,675







2


SPATIALIZER
AUDIO LABORATORIES, INC.


AND
SUBSIDIARIES





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited)





For
      the Three Month Period Ended
            
            
            For
      the Nine Month Period EndedSept 30,
              2009
            
            
            Sept 30,
              2008
            
            
            Sept 30,
              2009
            
            
            Sept 30,
              2008Revenues
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Operating
      Expenses :General
      and Administrative
            
            
            4,501
            
            
            
            7,747
            
            
            
            34,794
            
            
            
            116,4284,501
            
            
            
            7,747
            
            
            
            34,794
            
            
            
            116,428Operating
      Income (Loss)
            
            
            (4,501
            )
            
            
            (7,747)
            
            
            
            (34,794
            )
            
            
            (116,428)Interest
      and Other Income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            12,6490
            
            
            
            0
            
            
            
            0
            
            
            
            12,649(Loss)
      Before Income Taxes
            
            
            (4,501
            )
            
            
            (7,747)
            
            
            
            (34,794
            
            
            
            (103,779)Income
      Taxes
            
            
            0
            
            
            
            0
            
            
            
            (5,053)
            
            
            
            (4,842)Net
      (Loss)
            
            $
            (4,501
            )
            
            $
            (7,747)
            
            
            $
            (39,847)
            
            
            $
            (108,621)Basic
      and Diluted Earnings Per Share
            
            $
            (0.00)
            
            
            $
            (0.00)
            
            
            $
            (0.01)
            
            
            $
            (0.02)Weighted
      Average Shares Outstanding
            
            
            6,500,000
            
            
            
            6,500,000
            
            
            
            6,500,000
            
            
            
            6,500,000





The
accompanying notes are an integral part of these Statements


3


SPATIALIZER
AUDIO LABORATORIES, INC.


AND
SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS


(unaudited)





Nine
      Months EndedSeptember
      30,2009
            
            2008Cash
      Flows from Operating Activities:Net
      Loss
            
            $
            (39,847
            )
            
            $
            (108,621
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Net
      Change in Assets and Liabilities:Prepaid
      Expenses and Deposits
            
            
            2,842
            
            
            
            20,147Accounts
      Payable
            
            
            (5,042
            )
            
            
            65Accrued
      Wages and Benefits
            
            
            
            
            
            
            (1,323
            )Accrued
      Professional Fees
            
            
            (15,000
            )
            
            
            (30,265
            )Accounts
      payable, related parties
            
            
            36,450
            
            
            
            -Net
      Cash Used In Operating Activities
            
            
            (20,597
            )
            
            
            (119,996
            )Cash
      flows from Investing Activities:Short
      Term Investments
            
            
            -
            
            
            
            1,000,000Net
      Cash Provided By (Used in) Investing Activities
            
            
            -
            
            
            
            1,000,000Cash
      flows from Financing Activities:Cash
      Distribution
            
            
            -
            
            
            
            (1,365,000
            )Repayment
      of Notes Payable
            
            
            -
            
            
            
            (9,680
            )Net
      Cash used in Financing Activities
            
            
            -
            
            
            
            (1,374,680
            )Increase
      (Decrease) in Cash and Cash Equivalents
            
            
            (20,597
            )
            
            
            (494,676
            )Cash
      and Cash Equivalents, Beginning of Period
            
            
            66,833
            
            
            
            582,019Cash
      and Cash Equivalents, End of Period
            
            $
            46,236
            
            
            $
            87,342Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the period for:Interest
            
            $
            -
            
            
            $
            -Income
      Taxes
            
            
            5,053
            
            
            
            4,842




The accompanying notes are an
integral part of these 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.





Spatializer
was 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 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 are generated from DPI. DPI was a
California corporation incorporated in June 1986 and was dissolved during
December, 2008.





On
December 19, 2005, at a regularly scheduled board of directors meeting, the
board of directors of Spatializer discussed its then 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 current financial statements have been prepared assuming
that it will continue as a going concern.





The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplates continuation of the Company as a going concern. However, the
Company has no further operating activities, and has limited working capital and
stockholders’ equity. These matters raise substantial doubt about the Company’s
ability to continue as a going concern.  In view of these matters,
realization of certain of the assets in the accompanying balance sheet is
dependent upon the Company’s ability to meet its financing requirements, raise
additional capital, and the success of its future
operations.  Management’s plans are to complete a merger or
acquisition or be able to maintain sufficient liquidity to continue to seek a
merger or acquisition.  There can be no assurances that the Company
will be able to accomplish this successfully, in which case the Company might be
forced to liquidate or seek protection under the Federal bankruptcy statutes, or
both. Management believes that actions planned and presently being taken provide
an opportunity for the Company to continue as a going concern.  The
financial statements do not include any adjustments that might result from these
uncertainties.





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 such 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, instead reconvening the meeting 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. Adjusted for the 1:10 reverse split a
total of 1,533,452 shares voted on the asset sale proposal, of which 1,440,708
shares were voted in favor, 82,318 shares voted against and 10,428 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, (Adjusted for the 1:10 reverse split) an aggregate of 1,623,661
shares for an aggregate purchase price of $162,366.15 with an additional payment
of $259,786 placed into escrow to be released ten days after the closing of the
sale of assets to DTS in the second quarter of 2007. 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.





5





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.  As
of  September 30, 2009, the Company had a remaining cash residual of
$46,236.  The Company currently has no plans to dissolve. The
company borrowed an additional $36,450 from related parties on July 7,
2009, for working capital purposes.





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
and nine months ended September 30, 2009 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2009.
Accordingly, your attention is directed to footnote disclosures found in the
December 31, 2008 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.





A Form
8-K was filed July 7, 2009 regarding a proposed sale of 13,500,000 shares in
exchange of cash in aggregate $36,450 to certain purchasers however
 that filing is being amended to reflect voiding of such proposed sale and
reflecting instead as accounts payable




(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 through it dissolution
in December 2008.  All significant inter-company balances and
transactions have been eliminated in consolidation. Corporate administration
expenses are not allocated to subsidiaries.





Concentration of Credit Risk —Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and cash
equivalents.  At September 30, 2009, all cash and cash equivalents
were on deposit at one financial institution. At September 30, 2009 and 2008, we
did not have any accounts receivable





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


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.





6





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.





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 payable and accrued
liabilities at December 31, 2008 and September 30, 2009 approximated fair
value due to their short maturity or nature.





(3) Shareholders’
Equity





No
options granted or exercised. For the quarter ended September 30, 2008, no
shares were issued, cancelled or converted, nor were any options granted or
exercised.





The
company effected a 1 for 10 reverse stock split in November 2008. Accordingly,
all common share data in the accompanying consolidated financial statements have
been restated to reflect the effects of the split.





7
 (4) Net
Operating Loss Carryforwards





At
September 30, 2009, we had net operating loss carry-forwards for Federal income
tax purposes of approximately $26,200,000 which were available to offset future
Federal taxable income, if any, through 2013. Approximately $21,700,000 of these
net operating loss carry forwards were subject to an annual limitation of
approximately $1,000,000. As a
result of the events described in Item 5 below and the resulting change of
control of the Company, it is expected that these net operating loss
carry-forwards will not be utilized to offset taxable income generated by the
Company after 2007.





(5) 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 un-issued 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-AVERAGEExercisable
            
            Number
            
            Exercise
      PriceOptions
      outstanding at December 31, 2006
            
            
            175,000
            
            
            
            175,000
            
            
            $
            .90Options
      granted
            
            
            
            
            
            
            
            
            
            $Options
      exercised
            
            
            —
            
            
            
            —
            
            
            $
            —Options
      forfeited/expired
            
            
            (60,000)
            
            
            
            (60,000
            )
            
            $
            1.02Options
      outstanding at December 31, 2007
            
            
            115,000
            
            
            
            115,000
            
            
            $
            0.80Options
      granted
            
            
            
            
            
            
            (
            )
            
            $Options
      exercised
            
            
            —
            
            
            
            —
            
            
            $
            —Options
      forfeited/expired
            
            
            (55,000
            )
            
            
            (55,000
            )
            
            $
            0.60Options
      outstanding at December31, 2008
            
            
            60,000
            
            
            
            60,000
            
            
            $
            0.98Options
      granted
            
            
            
            
            
            
            (
            )
            
            $Options
      exercised
            
            
            
            
            
            
            (
            )
            
            $
            —Options
      forfeited/expired
            
            
            —
            
            
            
            —
            
            
            $
            —Options
      outstanding at September 30, 2009
            
            
            60,000
            
            
            
            60,000
            
            
            $
            0.98





At
September 30, 2009, 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 was $0.02 on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions: expected dividend yield of 0%, risk-free interest rate of 4.5%,
expected volatility of 150% and an expected life of 5 years.





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.





8





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





At
September 30, 2009 and December 31, 2008, the number of options exercisable and
fully vested was 60,000. The weighted-average exercise price of those options
was $0.98; the weighted average remaining contractual term was 2 years; and
the aggregate intrinsic value was zero per share. There were no warrants
outstanding at September 30, 2009.





(6)  Subsequent
Event











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, 2008,
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. The Company plans to continue as a public
entity and continues to seek merger, acquisition and business combination
opportunities with other operating businesses or other appropriate financial
transactions. Until such an acquisition or business combination is effectuated,
the Company does not expect to have significant operations.





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
were $0 for the quarter ended September 30, 2009, compared to $0 for the quarter
ended September 30, 2008. Net loss was $4,501 for the quarter ended September
30, 2009, ($0.00) basic and diluted per share, compared to a net loss of $7,747,
$(0.00) per share for the quarter ended September 30, 2008.




Revenues
were $0 for the nine months ended September 30, 2009, compared to $0 for the
nine months ended September 30, 2008. Net loss was $39,847 for the nine months
ended September 30, 2009, ($0.00) basic and diluted per share, compared to a net
loss of $108,621, $(0.00) per share for the nine months ended September 30,
2008
  At  September
30, 2009, we had $46,236 in cash and cash equivalents as compared to $66,833 at
December 31, 2008. The decrease in cash resulted primarily from operating
expenses incurred from the costs of maintaining the corporate entity as a public
entity and from one time expenses due to compliance issues. We had working
capital of $8,622 at September 30, 2009, as compared with working capital of
$48,469 at December 31, 2008.


9


We ceased
commercial operations in 2006. As previously disclosed, pursuant to an Asset
Purchase Agreement, we sold substantially all of our assets and those of our
wholly owned subsidiary, DPI (excluding certain assets, such as cash), to a
wholly owned subsidiary of DTS, Inc. This transaction was approved by the
stockholders on June 15, 2007 and was closed on July 2,
2007.





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





•
              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, 2008 on file with the Securities and
Exchange Commission.


10
  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 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.





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 liquid assets a company has available to build its business. 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.





The
Consolidated Statement of Cash Flows explains the actual sources and uses of
cash.





Results
of Operations





Net
Loss





Our net
loss for the three months ended September 30, 2009 was $4,501, compared to a net
loss of $7,747 in the comparable period last year.


11
 Operating
Expenses





Operating
expenses in the three months ended September 30, 2009 were $4,501, compared to
operating expenses of $7,747 in the comparable period last year. The decrease in
operating expenses resulted from a decrease in general and administrative
expenses.





Liquidity
and Capital Resources





At
September 30, 2009, we had $46,236 in cash and cash equivalents as compared to
$66,833 at December 31, 2008. The decrease in cash resulted primarily from
the use of cash to sustain ongoing expenses and one-time compliance issues. We
had working capital of $8,622 at September 30, 2009, as compared with working
capital of $48,469 at December 31, 2008.





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.  On July 7, 2009, we borrowed an additional
$36,450 from related parties, for working capital purposes. Please refer to
subsequent events later on in the report.





Net
Operating Loss Carry forwards





At
September 30 2009, we had net operating loss carry-forwards for Federal income
tax purposes of approximately $26,200,000 which were available to offset future
Federal taxable income, if any, through 2013. Approximately $21,700,000 of these
net operating loss carry forwards were subject to an annual limitation of
approximately $1,000,000 and may be further limited due to the change in control
of the company.





Item 3. Quantitative and Qualitative
Disclosures About Market Risk





Not
applicable.





Item 4T. Controls and
Procedures





After
current management gained control of the Company in April 2008, the Company
appointed a Chief Financial Officer so that the respective duties of the
principal executive officer and principal financial officer are segregated and
there are four functioning directors.  There are three people involved in
any Company financial transactions.  Specifically, all bills are sent to
the bookkeeper and the President/CEO authorizes all expenditures, checks are
then drawn by the bookkeeper for payment based on such authorization and,
finally, the CFO actually signs the check and distributes.  The
President/CEO has never signed a check, the CFO can not sign a check unless the
bookkeeper has prepared and the bookkeeper has no check signing authority.


12
  With
regard to revenues, since the Company has discontinued operations, its only
function being to find a merger partner, revenues are minimal and the foregoing
internal process should reflect a substantive improvement over that of recent
prior years.





As of
September 30, 2009, the Company carried out an evaluation, under the supervision
and with the participation of management, including the Company’s Principal
Executive Officer and Principal Financial Officer, of the effectiveness of the
design and operation of the Company’s disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act
of 1934.  Based on that evaluation, the Company’s Principal Executive
Officer and Principal Financial Officer have concluded that the Company’s
disclosure controls and procedures as of the end of the period covered by this
report were effective.





There
were no changes in the Company’s internal controls over financial reporting,
known to the CEO, that occurred during the period covered by this report that
have materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.





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 August 10, 2009, 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, 2008, 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.


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  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





None





ITEM 5. SUBSEQUENT
EVENTS





None.





ITEM 6.
EXHIBITS





31
            
            Rule 13a-14(a)/15d-14(a)
      Certification32
            
            Section 1350
      Certification











14


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:
November 23, 2009


SPATIALIZER
      AUDIOLABORATORIES,
      INC.
              (Registrant)/s/
      Jay
      GottliebJay GottliebChairman of the Board,
      President, Secretary, Treasurer and Principal Executive Officer/s/
      GREGGORY SCHNEIDERGreggory SchneiderDirector, Chief Financial and
      Principal Financial Officer














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