UNITED
STATES
 SECURITIES AND EXCHANGE
COMMISSION
 Washington,
D.C. 20549
   FORM 10-Q/A*
  (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, 2008
  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.)
   2060
East Avenida de Los Arboles—Suite 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, 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 o          No þ
  As
of May 10, 2008, there were 65,000,000 shares of the Registrant’s Common
Stock outstanding.
 
 *
              This
      Form 10-Q was filed April 15, 2009 to respond to SEC staff
      comments.  Such filing did not reflect the actual date of
      filing.  This Amendment reflects today’s filing date, May 6,
      2009.
 1


TABLE OF
CONTENTS




PART I. FINANCIAL
      INFORMATION
            
            
            2Item 1. FINANCIAL
      STATEMENTS (as restated)
            
            
            2Item 2. MANAGEMENT’S
      DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
      OPERATOINS
            
            
            9Item 3. QUANTITATIVE AND
      QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            
            
            13Item 4. CONTROLS AND
      PROCEDURESPART II. OTHER
      INFORMATION
            
            
            14Item 1. LEGAL
      PROCEEDINGS
            
            
            14Item 1A. RISK
      FACTORS
            
            
            14Item 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
            
            
            15SIGNATURES
            
            
            15EXHIBIT
      31.1EXHIBIT
      32.1EXHIBIT 31EXHIBIT
32




This
Amendment to the registrant’s Form 10-Q for the period ended March 31, 2008 is
being filed in response to the Staff’s comments letters dated December 11, 2008;
February 18, 2009; and March 27, 2009.


2


PART I. FINANCIAL
INFORMATION


ITEM I. FINANCIAL STATEMENTS


SPATIALIZER
AUDIO LABORATORIES, INC.


AND
SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE
SHEET





March
      31,
                    
                    December
      31,2008
                    
                    2007(unaudited)ASSETSCurrent
      Assets:Cash
      and Cash Equivalents
                    
                    $
                    1,527,128
                    
                    
                    $
                    582,019Short
      Term Investments
                    
                    
                    
                    
                    
                    
                    1,000,000Prepaid
      Expenses and Deposits
                    
                    
                    7,842
                    
                    
                    
                    22,989Total
      Current Assets
                    
                    
                    1,534,970
                    
                    
                    
                    1,605,008Total
      Assets
                    
                    $
                    1,534,970
                    
                    
                    $
                    1,605,008LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      Liabilities:Note
      Payable
                    
                    
                    —
                    
                    
                    
                    9,680Accounts
      Payable
                    
                    
                    31,521
                    
                    
                    
                    900Accrued
      Wages and Benefits
                    
                    
                    —
                    
                    
                    
                    1,323Accrued
      Professional Fees
                    
                    
                    
                    
                    
                    
                    36,000Accrued
      Expenses
                    
                    
                    10,735
                    
                    
                    
                    —Total
      Current Liabilities
                    
                    
                    42,256
                    
                    
                    
                    47,903Commitments
      and ContingenciesShareholders’
      Equity:Common
      shares, $.01 par value, 300,000,000 shares authorized, 65,000,000 shares
      issued and outstanding at March 31, 2008 and December 31,
      2007.
                    
                    
                    650,000
                    
                    
                    
                    650,000Additional
      Paid-In Capital
                    
                    
                    46,634,856
                    
                    
                    
                    46,634,856Accumulated
      Deficit
                    
                    
                    (45,792,141
                    )
                    
                    
                    (45,727,751
                    )Total
      Shareholders’ Equity
                    
                    
                    1,492,714
                    
                    
                    
                    1,557,105$
                    1,534,970
                    
                    
                    $
                    1,605,008


See notes to Consolidated financial
statement (following).
 3


SPATIALIZER
AUDIO LABORATORIES, INC.


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(as
restated)


(unaudited)





For
      the Three Month PeriodEndedMarch
      31,
                            
                            March
      31,2008
                            
                            2007Operating
      Expenses:General
      and Administrative
                            
                            $
                            70,682
                            
                            
                            $
                            72,04270,682
                            
                            
                            
                            72,042Operating
      Profit(Loss)
                            
                            
                            (70,682
                            )
                            
                            
                            (72,042)Interest
      and Other Income
                            
                            
                            11,134
                            
                            
                            
                            3,04111,134
                            
                            
                            
                            3,041Loss
      from Continuing Operations Before Income Taxes
                            
                            
                            (59,548
                            )
                            
                            
                            (69,001)Income
      Taxes
                            
                            
                            (4,842
                            )
                            
                            
                            (418
                            )Loss
      from Continuing Operations
                            
                            
                            (64,391
                            )
                            
                            
                            (69,419)Gain
      (Loss) from Discontinued Operations (Note 9)
                            
                            
                            (0.00
                            )
                            
                            
                            303,076Net
      Income (Loss)
                            
                            $
                            (64,391
                            )
                            
                            $
                            233,657Basic
      and Diluted Earnings Per Share
                            
                            $
                            (0.00
                            )
                            
                            $
                            0.00Weighted
      Average Shares Outstanding
                            
                            
                            65,000,000
                            
                            
                            
                            48,763,383





[Balance of Page Intentionally Left
Blank]




See notes to Consolidated financial
statement (following).
 4


SPATIALIZER
AUDIO LABORATORIES, INC.


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS


(unaudited)





Three
      Months EndedMarch
      31,2008
                  
                  2007Cash
      Flows from Operating Activities:Net
      Income (Loss)
                  
                  $
                  (64,391
                  )
                  
                  $
                  233,657Adjustments
      to reconcile net income (loss) to net cash provided by (used in)
      operating activities:Depreciation
      and Amortization
                  
                  
                  
                  
                  
                  
                  5,840Net
      Change in Assets and Liabilities:Accounts
      Receivable and Employee Advances
                  
                  
                  
                  
                  
                  
                  29,277Prepaid
      Expenses and Deposits
                  
                  
                  15,147
                  
                  
                  
                  (16,062
                  )Accounts
      Payable
                  
                  
                  30,621
                  
                  
                  
                  (32,136
                  )Accrued
      Wages and Benefits
                  
                  
                  (1,323
                  )
                  
                  
                  (686
                  )Accrued
      Professional Fees
                  
                  
                  (36,000
                  )
                  
                  
                  (26,900
                  )Accrued
      Commissions
                  
                  
                  
                  
                  
                  
                  (100
                  )Accrued
      Expenses
                  
                  
                  10,735
                  
                  
                  
                  1,000Deferred
      Revenue
                  
                  
                  
                  
                  
                  
                  313,116Net
      Cash Provided By (Used In) Operating Activities
                  
                  
                  (45,211
                  )
                  
                  
                  507,006Cash
      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
                  
                  
                  (9,680
                  )
                  
                  
                  (9,670
                  )Net
      Cash Provided by Financing Activities
                  
                  
                  (9,680
                  )
                  
                  
                  (9,670
                  )Increase
      (Decrease) in Cash and Cash Equivalents
                  
                  
                  (54,891
                  )
                  
                  
                  497,336Cash
      and Cash Equivalents, Beginning of Period
                  
                  
                  1,582,019
                  
                  
                  
                  228,940Cash
      and Cash Equivalents, End of Period
                  
                  $
                  1,527,128
                  
                  
                  $
                  726,276Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the period for:Interest
                  
                  $
                  —
                  
                  
                  $
                  —Income
      Taxes
                  
                  
                  4842
                  
                  
                  
                  418




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 LaboratoAudio 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—Suite 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 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. 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 Company has no plans to dissolve.





6


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, 2008 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2008. Accordingly, your
attention is directed to footnote disclosures found in the December 31,
2007 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
inter-company balances and transactions have been eliminated in consolidation.
Corporate administration expenses are not allocated to
subsidiaries.





Revenue Recognition —The
Company recognized royalty revenue upon reporting of such royalties by
licensees. License revenues were 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 were
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 recognized revenue in accordance with SEC Staff
Accounting Bulletin (SAB) 104. The company’s only source of revenue is a
nominal amount of interest income.





Deferred Revenue- The Company
received royalty fee advances from certain customers in accordance with contract
terms. The Company did not require advances from all customers. Advances were
negotiated on a per contract basis. Cash received in advance of revenue earned
from a contract was recorded as deferred revenue until the related contract
revenue is earned under the Company’s revenue recognition policy. The Company
currently has no source of revenue.





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, 2008, substantially all cash and cash
equivalents were on deposit at two financial institutions.





At
March 31, 2008, we did not have any accounts receivable. At March 31,
2007, one customer, Sharp, accounted for 66% of our accounts
receivable.





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





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





7


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. —The Company did not generate sales in the year to date period ended
March 31, 2008. Sales to foreign customers were 100% of total sales in the
year to date period ended March 31, 2007.





Major Customers —During the
quarter ended March 31, 2008, the Company did not generate revenue. During
the quarter ended March 31, 2007, one customer, Samsung, accounted for 87%
of the Company’s revenue as incurred, which is presented as a separate line on
the statement of operations.





Property and Equipment —Property and equipment were stated at cost. Major renewals and
improvements are charged to the asset accounts while replacements, maintenance
and repairs, which did not improve or extend the lives of the respective assets,
were 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 were depreciated over
the useful lives of the asset ranging from 3 years to 5 years under
the straight line method. All property and equipment was written off upon
completion of the sale of assets, in June 2007.





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. All
intangible assets were written off upon completion of the sale of assets, in
June 2007.





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. For the quarters ended March 31, 2008 and 2007, options to purchase
1,750,000 shares of common stock were considered in the computation of diluted
income per share.


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)





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.





8


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 had only one operating segment, DPI, the
Company’s audio enhancement licensing business.





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 replaced 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 adopted SFAS 157 effective January 1, 2008; the adoption had no material
effects 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, short-term investments,
accounts receivable, accounts payable and accrued liabilities at
December 31, 2007 and March 31, 2008 approximated fair value due to
their short maturity or nature.





(3) 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 2008.





(4) Shareholders’
Equity





During
the quarters ended March 31, 2008 and 2007, no shares were issued,
cancelled or converted, nor were any options granted or exercised.





9


(5) 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 contingent amount of $259,786. Such escrowed funds were
released to the Company ten (10) days after the closing of the transactions
contemplated by the Asset Purchase Agreement, on July 16,
2007.





(6) Net Operating Loss
Carryforwards





At
December 31, 2007, we had net operating loss carry-forwards for Federal
income tax purposes of approximately $26,000,000 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.





(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 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, 2005
                
                
                2,381,666
                
                
                
                2,635,000
                
                
                $
                0.11Options
      granted
                
                
                
                
                
                
                500,000
                
                
                $
                0.10Options
      exercised
                
                
                
                
                
                
                (0
                )
                
                $
                —Options
      forfeited/expired
                
                
                
                
                
                
                (325,000
                )
                
                $
                0.31Options
      outstanding at December 31, 2006
                
                
                2,726,666
                
                
                
                2,810,000
                
                
                $
                0.10Options
      granted
                
                
                
                
                
                
                (0
                )
                
                $
                0.10Options
      exercised
                
                
                
                
                
                
                (0
                )
                
                $
                —Options
      forfeited/expired
                
                
                (976,666
                )
                
                
                (1,060,000
                )
                
                $
                0.10Options
      outstanding at December 31, 2007
                
                
                1,750,000
                
                
                
                1,750,000
                
                
                $
                0.09Options
      granted
                
                
                
                
                
                
                (0
                )
                
                $
                0.10Options
      exercised
                
                
                
                
                
                
                (0
                )
                
                $
                —Options
      forfeited/expired
                
                
                (0
                )
                
                
                (0
                )
                
                $
                0.10Options
      outstanding at March 31, 2008
                
                
                1,750,000
                
                
                
                1,750,000
                
                
                $
                0.09





At
March 31, 2008 and 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 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.





10


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:





2005NET
      INCOME (LOSS):As
      Reported
                
                $
                (81,515
                )Pro
      Forma
                
                $
                (89,715
                )BASIC
      AND DILUTED LOSS:As
      Reported
                
                $
                (0.00
                )Pro
      Forma
                
                $
                (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 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, 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, 2008 or 2007.





(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, although at
the current time we are not party to any legal proceedings.





Operating Lease
Commitments





The
Company is not obligated under any leases as of March 31,
2008.





(9) Discontinued
Operations





Substantially
all of the operating assets of the Company were disposed in a transaction with
DTS that was effective in July 2007.  The consolidated statements of
operations for the years ended December 31, 2007, 2006 and 2005 have been
restated, with no effects on previously reported net income (loss) or
stockholders equity, to reflect separately, as discontinued operations, the
activities related to the disposed assets.  The applicable portion of
such data related to 2007 activity is summarized below.





For
      the Three Month PeriodEndedMarch
      31,
                                
                                
                                March
      31,2008
                                
                                
                                2007Revenues:Royalty
      Revenues
                                
                                $
                                0
                                
                                
                                $
                                359,6840
                                
                                
                                
                                359,684Cost
      of Revenues
                                
                                
                                0
                                
                                
                                
                                31,493Gross
      Profit
                                
                                
                                0
                                
                                
                                
                                328,191Operating
      Expenses:General
      and Administrative
                                
                                
                                0
                                
                                
                                
                                25,1150
                                
                                
                                
                                25,115Gain
      (Loss) from Discontinued Operations
                                
                                
                                0
                                
                                
                                $
                                303,076





11


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, 2007,
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
decreased to $0 for the quarter ended March 31, 2008, compared to $359,684
for the quarter ended March 31, 2007, a decrease of 100%. Revenues were
previously comprised of royalties pertaining to the licensing of Spatializer
audio signal processing algorithms and circuit designs. Revenues in the current
quarter reflect the sale of all operating assets during 2007. 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 loss
was $64,391 for the quarter ended March 31, 2008, ($0.00) basic and diluted
per share, compared to a net gain of $234,000, $0.00 per share for the quarter
ended March 31, 2007. The net loss for the current period is primarily the
result of the sale of all of the Company’s operating assets during 2007. There will be no more licensing
revenue in the future under our former business model, as the assets of the
Company were sold on July 2, 2007.





At
March 31, 2008, we had $1,527,100 in cash and cash equivalents as compared
to $1,582,000 at December 31, 2007. The decrease in cash resulted primarily
from the afore-mentioned transaction involving the sale of the Company’s
operating assets. We had working capital of $1,492,700 at March 31, 2008, as
compared with working capital of $1,557,100 at December 31,
2006





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:


12





•
            
            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/A)•
            
            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 determined it was in the Company’s and its
      stockholders’ interests to sell the Company’s Assets, and such asset sale
      was consummated on July 2, 2007.•
            
            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, 2007 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
appeared not to be sustainable in the future. In December 2005, two of our
three independent 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, Inc. to assist
us in this endeavor. After a long process of negotiation and stockholder
approval, the assets were sold to a subsidiary of DTS, Inc on July 2, 2007.
The transaction included a nine month window within which to file any claims for
breaches of our representations and warranties. Although we believed our
representations and warranties to be true and complete, it was possible that an
unforeseen claim may arise that could put financial demands on the
Company.





13


We had no
source(s) of revenue beginning in the third quarter of 2007. Based on current
and forecasted operating levels, we do not believe that we can maintain our
liquidity position at a consistent level, on a short-term or long-term basis,
without a new business model and outside funding. As such, we have marshaled our
assets and satisfied our liabilities and, after the contractual nine month
indemnification period relating to the sale of assets on July 2, 2007,
other than a $109,915 cash residual, distributed the remaining cash assets of
the Company ($1,365,000).





Upon
distribution of the cash assets, each of Messrs. Mandell and Civelli
resigned from the Board of Directors and the new investor group involved in the
April 25, 2007 stock offering took control of management of the Company on
April 28, 2008. 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. Should the new management believe it in the Company’s
and stockholders’ best interests to raise additional financing to pursue, such
new financing is likely to dilute existing stockholders. Stockholders at the
special meeting held on June 15, 2007 approved amending the Company’s
charter and gave the Board of Directors authority to affect a substantial
reverse stock split at the time of its choosing and to increase the number of
authorized common and preferred shares. While a new financing and new business
model, if affected, could be successful, there is no assurance this will
occur.





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. 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.





14


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.





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.
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.





15


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.





Results of
Operations





Continuing
Operations





Net Loss





Net Loss
from continuing operations for the three months ended March 31, 2008 was
$64,391, compared to net loss of $69,419 in the comparable period last
year.





Operating
Expenses





Operating
expenses for continuing operations in the three months ended March 31, 2008
were $70,682, compared to operating expenses of $72,042 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.


Discontinued
Operations





Revenues





Revenues
from discontinued operations decreased to $0 for the quarter ended
March 31, 2008, compared to $359,684 for the quarter ended March 31,
2007, a decrease of 100%. The decreased revenue is the result of the cessation
of business activities during 2007.





Loss from Discontinued
Operations





The loss
from discontinued operations for the three months ended March 31, 2008 was
$0, compared to a gain of $303,076 in the comparable period last
year.





Operating
Expenses





Operating
expenses for discontinued operations in the three months ended March 31,
2008 were $0, compared to operating expenses of $25,115 in the comparable period
last year. The decrease in operating expenses resulted primarily from a decrease
in general and administrative expense due to the suspension of
operations.





Research and
Development





Research
and Development expenses for discontinued operations in the three months ended
March 31, 2008 were $0, compared to research and development expenses of $0
in the comparable period last year. This lack of expense was due to the
elimination of an in-house applications engineering position and the
May 2006 resignation of the principal engineer.





Sales and
Marketing





Sales and
Marketing expenses for discontinued operations in the three months ended
March 31, 2008 were $0, compared to sales and marketing expenses of $0 in
the comparable period last year. The lack of such expenses resulted from
cessation of all licensing and marketing activities in January 2006 due to
the suspension of operations.





16


Net Income (Loss)





Net loss
was $64,400 for the quarter ended March 31, 2008, $(0.00) basic and diluted
per share, compared to net income of $234,000 or $0.00 per share, for the
quarter ended March 31, 2007. The decrease for the current period is
primarily the result of the cessation of operations in 2007.





At
March 31, 2008, we had $1,527,100 in cash and cash equivalents as compared
to $1,582,000 at December 31, 2007. The decrease in cash resulted primarily
from the use of cash to sustain ongoing expenses. We had working capital of
$1,492,700 at March 31, 2008, as compared with working capital of
$1,557,100 at December 31, 2007.


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.





There is
no current source of future cash flow for the Company as we sold substantially
all of our audio assets and those of our wholly owned subsidiary, Desper
Products, Inc. (“DPI”), on July 2, 2007.





Based on
current and projected operating levels, we do not believe that we can maintain
our liquidity position at a consistent level, on a short-term or long-term
basis, without a new business model and outside funding. As such, we intend to
marshal our assets and after a contractual nine month indemnification period
relating to the sale of assets on July 2, 2007, we distributed
April 22, 2008 the remaining cash assets of the Company, after satisfying
liabilities and leaving a $109,915 cash residual. Upon distribution of the cash
assets, each of Messrs. Mandell and Civelli resigned April 28, 2008, from
the Board of Directors and the new investor group involved in the April 25,
2007 stock offering took control of management 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, including new,
revenue generating businesses. 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 was subject to approval of holders of a majority of the
outstanding shares of the Common Stock of the Company. In April 2007, the
Company sold an aggregate of 16,236,615 shares of its Common Stock to certain
investors.





The
Company held a special meeting of stockholders on June 15, 2007 to vote on
the asset sale transaction but not with respect to the dissolution of the
Company. The asset sale transaction was approved. The asset sale transaction
closed on July 2, 2007





Net Operating Loss Carry
forwards





At
December 31, 2007, we had net operating loss carry-forwards for Federal
income tax purposes of approximately $26,000,000 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 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.





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 adopted SFAS 157
effective January 1, 2008; the adoption had not material effects on its
financial position, results of operations and cash flows.





17


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, 2008.
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 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





As of
March 31, 2008, 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 ineffective.





As
of March 31, 2008, 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/A for the year ended December 31, 2007, which is being filed
concurrently with this Form 10-Q/A.





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 12, 2008, 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, 2007, 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





18


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





None





ITEM 5.
SUBSEQUENT EVENTS





On
April 4, 2008, the Board of Directors of Registrant declared a $1,365,000
cash dividend ($0.021 per share on its outstanding shares of Common Stock)
payable (and then paid) on April 22, 2008 to stockholders of record on
April 15, 2008. Such dividend was paid from existing cash balances of the
Company on April 22, 2008. As of such date, the Company had a cash balance
of approximately $109,915.





As
previously reported in an April 26, 2007 Form 8-K filing, Registrant
entered into a Common Stock Purchase Agreement dated April 25, 2007 (the
“SPA”) with Jay A. Gottlieb, Greggory A. Schneider and Helaine Kaplan
(collectively, the “Investors”) pursuant to which Registrant sold and the
Investors collectively purchased 16,236,615 shares of common stock of Registrant
for an aggregate purchase price of $422,152.15. Of the total shares sold to the
Investors, Mr. Gottlieb purchased 8,739,115 shares of Registrant’s common
stock for an aggregate purchase price of $227,217.15. Pursuant to the SPA,
Registrant agreed, after the sale of substantially all of its assets to DTS,
Inc. and its subsidiary (the “Asset Sale”), to take such corporate actions as
may be reasonably required to appoint Mr. Gottlieb or other designee of the
Investors to the Board of Directors. The Asset Sale was consummated on
July 2, 2007. On August 13, 2007, the Board of Directors appointed Jay
A. Gottlieb as a director of Registrant.





There are
no family relationships between Mr. Gottlieb and any director or executive
officer of Registrant or any of its subsidiaries. Other than as stated herein,
neither Mr. Gottlieb nor any member of his immediate family has engaged in
any transactions with Registrant of the sort described under Item 404(a) of
Regulation S-K.





As
contemplated under the SPA, Registrant distributed substantially all of its
remaining cash assets to its stockholders on April 22, 2008, after
satisfying its liabilities and leaving a $109,915 cash residual. Effective
April 28, 2008, Henry Mandell and Carlo Civelli resigned from the Board of
Directors of Registrant, the only Director then remaining on the Board being
Mr. Gottlieb. As permitted under Delaware law, specific provisions of
Registrant’s Bylaws and provided for in the SPA, on April 29, 2008,
Mr. Gottlieb appointed Messrs. Greggory Schneider and Michael Pearce
to fill out the terms of Messrs. Mandell and Civelli until the next
election of Directors. Concurrently, the following officerships were also
assigned, effective immediately: Mr. Gottlieb (Chairman of the Board,
Secretary and Treasurer) and Mr. Schneider (Chief Financial Officer). As a
result of the foregoing resignations and appointments, Registrant experienced a
change in control. Such Change of Control was the subject of Schedule 14-F
Information Statement filed with the SEC on May 7, 2008 and sent
shareholders on or about May 16, 2008.





ITEM 6.
EXHIBITS





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


19


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 6, 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


20


Exhibit 31.1


RULE
13a-14(a)/15d-14(a) CERTIFICATION





I, Jay
Gottlieb certify, that:




1.
            
            I
      have reviewed this quarterly report on Form 10-Q/A of Spatializer Audio
      Laboratories, Inc. (“registrant”) for the period ended March 31,
      2008;2.
            
            Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;3.
            
            Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this
      report;4.
            
            The
      registrant’s other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15D-15(f)) for the registrant and
  have:




a)  Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this report is being prepared;


b)  Designed such
internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable
assur- ance regarding the reliability of financial reporting and the preparation
of financial state-ments for external purposes in accordance with generally
accepted accounting principles;


c)  Evaluated the
effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and


d)  Disclosed in
this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting.




5.
            
            The
      registrant’s other certifying officer(s) and I have disclosed, based on
      our most recent evaluation of internal control over financial reporting,
      to the registrant’s auditors and the audit committee of the registrant’s
      board of directors (or persons performing the equivalent
      functions):




a)  All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information; and


b)  Any fraud,
whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial
reporting.





Date: May
6, 2009


/s/ Jay
      GottliebJay
      GottliebChairman
      of the Board, President, Secretary, Treasurer and Principal Executive
      Officer


21


Exhibit 31.2


RULE
13a-14(a)/15d-14(a) CERTIFICATION





I,
Greggory Schneider, certify that:




1.
            
            I
      have reviewed this quarterly report on Form 10-Q/A of Spatializer Audio
      Laboratories, Inc. (“registrant”) for the period ended March 31,
      2008;2.
            
            Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;3.
            
            Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this
      report;4.
            
            The
      registrant’s other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15D-15(f)) for the registrant and
  have:




a)  Designed such
disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this report is being prepared;


b)  Designed such
internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable
assur- ance regarding the reliability of financial reporting and the preparation
of financial state-ments for external purposes in accordance with generally
accepted accounting principles;


c)  Evaluated the
effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and


d)  Disclosed in
this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting.




5.
            
            The
      registrant’s other certifying officer(s) and I have disclosed, based on
      our most recent evaluation of internal control over financial reporting,
      to the registrant’s auditors and the audit committee of the registrant’s
      board of directors (or persons performing the equivalent
      functions):




a)  All
significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and
report financial information; and


b)  Any fraud,
whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial
reporting.





Date: May
6, 2009


/s/  Greggory
      SchneiderGreggory
      SchneiderDirector,
      Chief Financial and Principal Financial Officer


22


Exhibit 32.1


SECTION
1350 CERTIFICATION





Pursuant
to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of Title 18, United States Code), the
undersigned officer of Spatializer Audio Laboratories, Inc. (the “Company”)
hereby certifies with respect to the Quarterly Report on Form 10-Q/A of the
Company for the quarter ended March 31, 2008 as filed with the Securities and
Exchange Commission (the “10-Q Report”) that to his knowledge:





1)
            
            The
      Report fully complies with the requirements of Section 13(a) or 15(d) of
      the Securities and Exchange Act of 1934; and2)
            
            The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.





Date: May
6, 2009


/s/ Jay
      GottliebJay
      GottliebChairman
      of the Board, President, Secretary, Treasurer and Principal Executive
      Officer


23


Exhibit 32.2


SECTION
1350 CERTIFICATION





Pursuant
to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of Title 18, United States Code), the
undersigned officer of Spatializer Audio Laboratories, Inc. (the “Company”)
hereby certifies with respect to the Quarterly Report on Form 10-Q/A of the
Company for the quarter ended March 31, 2008 as filed with the Securities and
Exchange Commission (the “10-Q Report”) that to his knowledge:





1)
            
            The
      Report fully complies with the requirements of Section 13(a) or 15(d) of
      the Securities and Exchange Act of 1934; and2)
            
            The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.





Date: May
6, 2009


/s/ Greggory
      SchneiderGreggory
      SchneiderDirector,
      Chief Financial and Principal Financial Officer





24