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,
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--15th
Floor   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:


Yes þ          No o





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):


Yes x          No o




As of
May 10, 2009, there were 6,500,000 shares of the Registrant’s Common Stock
outstanding.


1


TABLE OF
CONTENTS




PART I. FINANCIAL
      INFORMATION
                                2Item 1.
                                FINANCIAL
      STATEMENTS
                                2Item 2.
                                MANAGEMENT’S DISCUSSION &
      ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
      OPERATIONS
                                10Item 3.
                                QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK
                                13Item 4.
                                CONTROLS AND
      PROCEDURES
                                13PART II. OTHER
      INFORMATION
                                13Item 1.
                                LEGAL
      PROCEEDINGS
                                13Item 1A.
                                RISK
    FACTORS
                                13Item 2.
                                UNREGISTERED SALES OF EQUITY
      SECURITIES AND USE OF PROCEEDS
                                15Item 3.
                                DEFAULTS UPON SENIOR
      SECURITIES
                                15Item 4.
                                SUBMISSION OF MATTERS TO A VOTE OF
      SECURITY HOLDERS
                                15Item 5.
                                OTHER
      INFORMATION
                                15Item 6.
                                EXHIBITS
                                15SIGNATURES
                                16EXHIBIT
      31.1EXHIBIT
      31.2EXHIBIT
      32.1EXHIBIT
32.1




2




PART I. FINANCIAL
INFORMATION


ITEM
I. FINANCIAL STATEMENTS


SPATIALIZER
AUDIO LABORATORIES, INC.





CONDENSED BALANCE
SHEETS





March
      31,
                    
                    December
      31,2009
                    
                    2008(unaudited)ASSETSCurrent
      Assets:Cash
      and Cash Equivalents
                    
                    $
                    35,845
                    
                    
                    $
                    66,833Prepaid
      Expenses and Deposits
                    
                    
                    0
                    
                    
                    
                    2,842Total
      Current Assets
                    
                    
                    35,845
                    
                    
                    
                    69,675Total
      Assets
                    
                    $
                    35,845
                    
                    
                    $
                    69,675LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      Liabilities:Accounts
      Payable
                    
                    
                    7,466
                    
                    
                    
                    5,206Accrued
      Professional Fees
                    
                    
                    
                    
                    
                    
                    16,000Accrued
      Expenses
                    
                    
                    1,626
                    
                    
                    
                    —Total
      Current Liabilities
                    
                    
                    9,092
                    
                    
                    
                    21,206Commitments
      and ContingenciesShareholders’
      Equity:Common
      shares, $.01 par value, 300,000,000 shares authorized, 6,500,000 shares
      issued and outstanding
                    
                    
                    650,000
                    
                    
                    
                    650,000Additional
      Paid-In Capital
                    
                    
                    46,634,856
                    
                    
                    
                    46,634,856Accumulated
      Deficit
                    
                    
                    (45,893,103
                    )
                    
                    
                    (45,871,387
                    )Total
      Shareholders’ Equity
                    
                    
                    26,753
                    
                    
                    
                    48,469$
                    35,845
                    
                    
                    $
                    69,675


See notes to Consolidated financial
statement (following).
 3


SPATIALIZER
AUDIO LABORATORIES, INC.


AND
SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited)





For
      the Three Month PeriodEndedMarch
      31,
                  
                  March
      31,2009
                  
                  2008Operating
      Expenses:General
      and Administrative
                  
                  $
                  16,691
                  
                  
                  $
                  70,682Operating
      Loss
                  
                  
                  (16,691
                  )
                  
                  
                  (70,682)Interest
      and Other Income
                  
                  
                  0
                  
                  
                  
                  11,134Loss
      Before Income Taxes
                  
                  
                  (16,691
                  )
                  
                  
                  (59,548)Income
      Taxes
                  
                  
                  (5,025
                  )
                  
                  
                  (4,842)Net
      Loss
                  
                  $
                  (21,716
                  )
                  
                  $
                  (64,391)Basic
      and Diluted Earnings Per Share
                  
                  $
                  (.00
                  )
                  
                  $
                  (.01)Weighted
      Average Shares Outstanding
                  
                  
                  6,500,000
                  
                  
                  
                  6,500,000


See notes to Consolidated financial
statement (following).
 4




SPATIALIZER
AUDIO LABORATORIES, INC.


AND
SUBSIDIARY


CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS


(unaudited)





Three
      Months EndedMarch
      31,2009
                            
                            2008Cash
      Flows from Operating Activities:Net
      Loss
                            
                            $
                            (21,716
                            )
                            
                            $
                            (64,391
                            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Net
      Change in Assets and Liabilities:Prepaid
      Expenses and Deposits
                            
                            
                            2,842
                            
                            
                            
                            15,147Accounts
      Payable
                            
                            
                            2,261
                            
                            
                            
                            30,621Accrued
      Wages and Benefits
                            
                            
                            
                            
                            
                            
                            (1,323
                            )Accrued
      Professional Fees
                            
                            
                            
                            
                            
                            
                            (36,000
                            )Accrued
      Expenses
                            
                            
                            (14,375
                            )
                            
                            
                            10,735Net
      Cash Used In Operating Activities
                            
                            
                            (30,988
                            )
                            
                            
                            (45,211
                            )Net
      Cash Provided By (Used in) Investing Activities
                            
                            
                            —
                            
                            
                            
                            —Cash
      flows from Financing Activities:Repayment
      of Notes Payable
                            
                            
                            
                            
                            
                            
                            (9,680
                            )Net
      Cash Provided by Financing Activities
                            
                            
                            
                            
                            
                            
                            (9,680
                            )Increase
      (Decrease) in Cash and Cash Equivalents
                            
                            
                            (30,988
                            )
                            
                            
                            (54,891
                            )Cash
      and Cash Equivalents, Beginning of Period
                            
                            
                            66,833
                            
                            
                            
                            1,582,019Cash
      and Cash Equivalents, End of Period
                            
                            $
                            35,845
                            
                            
                            $
                            1,527,128Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the period for:Interest
                            
                            $
                            —
                            
                            
                            $
                            —Income
      Taxes
                            
                            
                            5025
                            
                            
                            
                            4842




See notes to Consolidated financial
statement (following).
 5


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 andwas 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.




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. 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 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.




6




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 March 31, 2009, the Company has a remaining cash residual of
$35,845.  The Company currently has no plans to dissolve. The Company
may need to raise funds in the short term in order to continue
operations.




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, 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.





(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 March 31, 2009, all cash and cash equivalents
were on deposit at one financial institution.





At
March 31, 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.





Stock Option Plan —During the
year ended December 31, 2005, the Company determined the effects of stock
based compensation in accordance with SFAS No. 123, Accounting for Stock-Based
Compensation, as amendedwhich 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)





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.





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 March 31, 2009 approximated fair
value due to their short maturity or nature.





(3) Shareholders’
Equity





During
the quarters ended March 31, 2009 and 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.




8


(4) Net Operating Loss
Carryforwards




At
March 31, 2009, we had net operating loss carry-forwards for Federal income
tax purposes of approximately $26,175,000 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 March 31, 2009
                
                
                60,000
                
                
                
                60,000
                
                
                $
                0.98




At
March 31, 2009 and 2008, 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.




9




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
March 31, 2009 and March 31, 2008, the number of options exercisable
and fully vested was 60,000 and 115,000. 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 March 31, 2009 or 2008.





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 March 31, 2009, compared to $0 for the
quarter ended March 31, 2008.





Net loss
was $21,716 for the quarter ended March 31, 2009, ($0.00) basic and diluted
per share, compared to a net loss of $64,391, $(0.01) per share for the quarter
ended March 31, 2008.





At
March 31, 2009, we had $35,845 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. We had working capital of $26,753 at March 31, 2009, as
compared with working capital of $48,469 at December 31, 2008.





10




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.





Critical Accounting
Policies




11




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 March 31, 2009 was $21,716, compared to a
net loss of $64,391 in the comparable period last year.





12




Operating
Expenses




Operating
expenses in the three months ended March 31, 2009 were $16,691, compared to
operating expenses of $70,682 in the comparable period last year. The decrease
in operating expenses resulted from a decrease in general and administrative
expense due to the suspension of operations.





Liquidity and Capital
Resources




At
March 31, 2009, we had $35,845 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. We had working capital of $26,753
at March 31, 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. 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 for more than 3-6 months without raising
additional capital. There is no current source of future cash flow for the
Company.





Net Operating Loss Carry
forwards




At March
31 2009, we had net operating loss carry-forwards for Federal income tax
purposes of approximately $26,175,000 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.





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.




13




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.  Consequently, as of the date of this report, the Chairman of
the Board and President, acting as the principal executive officer and its
principal financial officer of the Company, have concluded that our system
of internal control over financial reporting and disclosure controls and
procedures were effective.




As of
March 31, 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.




As of
March 31, 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, and concluded that there were
no changes in the Company’s internal control over financial reporting during the
quarter that materially affected, or is reasonably likely to materially affect,
the Company’s internal control, as compared with the assessment described in
Form 10-K for the year ended December 31, 2008.





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 May 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.





14




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





15


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 13, 2009


SPATIALIZER
      AUDIO
              LABORATORIES,
      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


16