##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the period ended: December 31, 2006
 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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 2060 East Avenida de Los Arboles, # D190, Thousand Oaks, California 91362-1376
 Telephone Number: (408) 453-4180
 Securities registered pursuant to Section 12(b) of the Act:
None
 Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
 o þ
 o þ
 þ o
 þ
  o o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### Table of Contents



TABLE OF CONTENTS
 PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataREPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMSCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF OPERATIONSCONSOLIDATED STATEMENTS OF CASH FLOWSCONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)NOTES TO CONSOLIDATED FINANCIAL STATEMENTSItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESEX-10.11 Amendment to Employment Agreement between the Company and Henry MandellEX-21.1 Subsidiaries of the CompanyEX-23.1 Consent of Ramirez International Financial and Accounting Services, Inc.EX-23.2 Consent of Farber Hass Hurley McEwen LLP (for 2004/2005 financials)EX-31.1 Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 2002EX-32.1 Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002EXHIBIT 10.11EXHIBIT 21.1EXHIBIT 23.1Exhibit 23.2EXHIBIT 31.1EXHIBIT 32.1
 2




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##### Table of Contents



CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
  
 PART I
 
 Item 1. Business
 Overview
    Background of the Sale of Assets and Dissolution
  3
    Table of Contents         4
    Table of Contents         5
    Table of Contents            6




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Desper Products, Inc.  Virtual Audio Signal Processing Technologies
  Technology
    
    Product Categories
    
    Audio EnhancementSpatializer® 3-D Stereo
    
    Stereo TVs, Stereo
Components and Systems,
Car Audio, Laptop and
Desktop Multimedia
Computers, Set-top Boxes
    
    Surround sound
enhancement from an
ordinary stereo
(two-channel)
signalSpatializer ((environ))TM
    
    Cell Phones and Mobile Multimedia
Players
    
    Widens sound stage and improves
stereo separation from two-channel
ring tones, compressed audio, FM
and TV broadcast and games.Spatializer N-2-2 UltraTM
    
    DVDP, DVDR, PVR, AV Receivers,
Multimedia PCs, DTV,STB
    
    Creation of spatially accurate home
theater surround sound from two
channel sourcesSpatializer enCompass AVTM
    
    Products incorporating
multi-channel audio
sources like Dolby
ProLogic II®: AV
Receivers
    
    Creation of
spatially accurate
multi-speaker
cinematic audio
experience from
two-channel audio
informationSpatializer Audio AlchemyTM
    
    Computers and Recordable DVD
utilizing DVD/MPEG and decoding, Cell
phone handsets.
    
    Static noise reduction combined
with stabilization of dynamic audio
rangeSpatializer Vi.B.E.TM
    
    Mobile Multimedia Players, Cell
Phones, DVD Players/Recorders, DTV,
Stereo Components and Systems, Car
Audio, Laptop and Desktop Multimedia
PCs and Headphones.
    
    Simulation of low frequency
response from speakers with poor
low frequency capabilitySpatializer DRCTM
    
    Laptop and Desktop Multimedia
Computers, Cell Phones and Portable
Multimedia Players
    
    Prevents over-driving speakers,
headphones or ear buds while
maximizing the dynamic audio outputSpatializer Natural HeadphoneTM
    
    Headphones, Mobile
Phones, Mobile Multimedia
Players
    
    Creation of
spatially accurate
multi- speaker
cinematic audio
experience from
headphones
utilizing discrete
multi-channel audio
informationSpatializer PCETM
    
    DTV, Mobile Phones, Mobile Multimedia
Players, Multimedia PCs, Headphones
    
    Creation of more recognizable and
cleaner music or dialog from all
media sources
 7




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##### Table of Contents



Licensed Products
  1.
    
    Spatializer3D Stereo.Based upon proprietary methods of stereo signal processing, our
Spatializer 3D Stereotechnology is designed to create a vivid and expansive three-
dimensional surround sound listening experience from any stereo source input using only two
ordinary speakers. Along with professional audio quality and coherent stable sonic imaging,
the technology includes our unique DDP (Double Detect and Protect) algorithm. DDP
continuously monitors the underlying stereo signal and dynamically optimizes spatial
processing, avoiding deleterious sonic artifacts common in other systems and provides set
and forget ease of use for consumers. First introduced in July 1994 by DPI, in the form of
a 20 pin analog integrated circuit (IC) from Matsushita Electronics Corporation (MEC), the
technology is now incorporated into low-cost, standard process ICs by three chip foundries
(Matsushita, ESS Technologies, Inc. and OnChip Systems) for easy and inexpensive
implementation in any consumer electronics or computer products utilizing stereo audio. The
technology is currently available in both analog and digital formats. Matsushita introduced
a new Spatializer IC design in 1999, offering the Spatializer 3-D Stereoeffect in a
simplified, lower cost package. In early 2002, we introduced a new algorithm-based
technology which provides a virtual surround sound effect from a two channel input for
DSP-based environments. In 2003, we introduced Spatializer ((environ)), especially designed
for cellular phones with two, closely spaced speakers to enhance both ring tones and music.2.
    
    SpatializerN-2-2 Ultra Digital Virtual Surround. In September 1996, DPI introduced
Spatializer N-2-2,which we consider a core, and enabling technology for Dolby
Digital-based home theater products and personal computers. In mid-2001, DPI introduced
Spatializer N-2-2 Ultraas the latest generation of this core audio technology. The audio
standards for multi-channel digital audio(based upon geographic region) are multi-channel
audio formats (Dolby Digital® (AC-3) and MPEG-2) which carry up to eight (or more) discrete
(independent) channels of audio  the front left and right channels, a center channel (for
vocal tracks), two rear surround channels and a Low Frequency Effects (LFE or sub-woofer)
channel for sound effects. The Spatializer N-2-2Ultrasoftware- based algorithms permit
spatially accurate reproduction of this multi-channel audio over any ordinary stereo system
using two rather than the five or six speakers normally required in traditional home theater
setups. Spatializer N-2-2Ultraruns in real-time on general purpose Digital Signal
Processing (DSP) hardware platforms like those offered by LSI, Acer Labs, Inc., NEC,
Motorola, MediaTek and Zoran; may be integrated with host based software-only MPEG-2 or DVD
decoders (like WinDVD and PowerDVD, offered by InterVideo and Cyberlink, respectively, for
the Intel® Pentium® series of microprocessors); and can be ported to any of the principal
audio codecs or media processor/accelerator platforms performing Dolby Digital (AC-3) or
MPEG-2 audio decoding. Spatializer N-2-2Ultrahas been approved by Dolby Laboratories and
qualifies Spatializer licensees to use the newly created Dolby Digital VIRTUAL trademark on
products incorporating the technology. We believe our Spatializer N-2-2Ultra process has
helped to widen and accelerate the market for DVD acceptance, because it delivers the full
cinematic audio experience to ordinary consumers without the additional expense and
complication of multi-speaker home theater playback systems. The Company holds a patent on
this technology.3.
    
    SpatializerVi.B.E.In early 1999, DPI introduced Spatializer Vi.B.E., a virtual bass
enhancement technology. Spatializer Vi.B.E. produces a dynamic bass response from even the
lowest-end speakers or headphones. This is particularly important in enhancing the audio of
all forms of portable digital audio devices. Spatializer Vi.B.E. uses proprietary technology
to generate the perception of realistic bass frequencies that are unaffected by actual
speaker system frequency response capability.4.
    
    SpatializerVSP-11First introduced by DPI in early 2002, Spatializer VSP-11 (Virtual
Sound Processor 11) is a stand-alone application program for Microsoft Windows 95, 98, ME,
2000 and XP platforms that utilizes Spatializer proprietary psychoacoustic techniques to
allow consumers to enjoy the benefits of the renowned Spatializer audio enhancement
technologies on leading media players, soft DVD players and file sharing programs. This
means that Spatializer VSP-11 is a universal audio enhancement software package that will
enhance output from the Microsoft®Media Player, Real Player®, Real Jukebox®, WinAmp®,
WinDVD®, PowerDVD®, among others, without any special modification. It will run in
conjunction with any sound card, as well as with USB audio.
 8




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5.
    
    SpatializerNatural HeadphoneSpatializer Natural Headphone, introduced by DPI in March
2001, renders spatially accurate multiple speaker positions simulating the typical home
theater or stereo arrangement through a headphone. The headphone algorithm delivers a high
performance simulated surround sound experience, using a reasonable amount of processing
power at a reasonable cost. Thus, this solution is equally practical and effective for both
low-power portable devices and home theater applications. Unlike typical virtual surround
sound headphone solutions, which rely heavily on reverberation which can sound unnatural,
Spatializer Natural Headphone utilizes a combination of techniques to provide an expanded,
yet natural sound field.6.
    
    SpatializerPCE, introduced in October 2001, makes high frequencies clearer, crisper and
more brilliant while low frequencies are more dramatic, tighter and have more impact.
Spatializer® PCE gives the manufacturer an inexpensive way to dramatically improve the sound
of low-end loudspeakers, such as the kind found in televisions, boom boxes and computers.
Spatializer PCE is also ideal for improving the quality of Internet audio, which can sound
rather lackluster and dull due to compression or low bit rates. It can be applied prior to
encoding audio streams, and can just as easily enhance the playback of the decompressed
audio. It can improve the clarity, intelligibility and impact of both dialog and music.
Spatializer PCE works by both modifying and smoothing non-linear phase response and by
creating psycho-acoustic cues. Typical equalization techniques cause phase distortion
(non-zero group delay) due to non-linear phase response. Spatializer PCE has a nearly-linear
phase response, which results in a near-zero group delay. This improves the naturalness,
or transparency of the dialog or music by not adding to phase distortion already present in
many playback systems. This technology is patent pending. Spatializer PCE can be custom
tailored for two or an array of speaker configurations. The technology, without a surround
sound effect, can enhance single speaker applications as well.7.
    
    SpatializerenCompass AVSpatializer enCompass AV, launched in late 2002, is designed to
offer high quality, multi-channel audio, even from mono or stereo sources. This technology
allows owners of home theater systems with five or more speakers to hear a surround sound
effect, utilizing all of their speakers to deliver full system utility from CDs, cassettes
or VHS tape or records.8.
    
    SpatializerVirtuaLFEprocesses the sub-woofer channel with proprietary psycho-acoustic
techniques to virtualize, reinforce and enhance the effect for accurate reproduction through
two speaker home audio or on-board television speakers. The result is an emotive low
frequency effect that brings DVDs alive as if an actual sub-woofer speaker were employed.
The efficient algorithm architecture makes implementation feasible on a wide array of home
entertainment products.9.
    
    SpatializerAudio Alchemydynamically removes noise from up to six input channel
simultaneously. Utilizing state of the art noise removal and reduction techniques,
Spatializer Audio Alchemy dynamically adjusts to changing noise levels and environments.
Tailored for the human voice, Spatializer Audio Alchemy removes background noise such as
fans, motor hum, and tape hiss. Spatializer Audio Alchemy features an advanced equalization
processor to compensate for frequency response limitations in the audio recording hardware
and transducers. In addition, Spatializer Audio Alchemy also performs spatial reconstruction
to simulate the original acoustic environment, and normalizes the dynamic range of the
digital audio source to a level compatible with home theater environments. This technology
is patent pending.
   9




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.
  Licensing Activities
      IC/DSP Foundry Licenses
   10




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OEM Licensees and Customers
   
    
    Acer Labs
    
    Apple Computer
    
    Funai
    
    InterVideo
    
    JVC
    
    LG Electronics
    
    Logitech
    
    LSI
    
    Matsushita Electronics
    
    Micronas
    
    Mitsubishi Image and Information Works
    
    Motorola
    
    NEC
    
    Orion
    
    Panasonic TV
    
    Samsung
    
    Sanyo Corp.
    
    Sharp Corp.
    
    Sigmatel
    
    Texas Instruments
    
    Theta Digital
    
    Toshiba DVD
    
    Toshiba TV
    
    Zoran
  Customers, Revenues and Expenses
    Competition
  11




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® ® ®








Research and Development






Intellectual Property and Proprietary Information






Seasonality




12



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Employees
  
 Item 1A. Risk Factors
  Our Board of Directors has Determined it is in the Companys and its Stockholders Best Interests to
Attempt to Sell the Companys Assets.
  We Are Unable to Achieve or Sustain Profitability in the Future or Obtain Future Financing and Our
Business Operations Will Fail
  There is No Guarantee That There Will be Funds Available for Distribution to Stockholders if We
Cannot Get Stockholder Approval for the Asset Sale, if the Approval is Untimely or if Claims Arise
Post-Sale During the 275-Day Warranty Period
  13




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The Market For Our Stock May Not Be Liquid And The Stock Price May Be Subject To Volatility
  The Lack of Personnel Has Created a Deficiency in the Segregation of Duties That Has Been
Disclosed as a Material Weakness
  
 Item 1B. Unresolved Staff Comments
  
 Item 2 Properties
    
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
 14




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Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
  Period:
    
    High (U.S. $)
    
    Low (U.S. $)2005First Quarter
    
    
    
    
    
    $
    0.10
    
    
    $
    0.06Second Quarter
    
    
    
    
    
    $
    0.09
    
    
    $
    0.05Third Quarter
    
    
    
    
    
    $
    0.07
    
    
    $
    0.05Fourth Quarter
    
    
    
    
    
    $
    0.07
    
    
    $
    0.032006First Quarter
    
    
    
    
    
    $
    0.04
    
    
    $
    0.02Second Quarter
    
    
    
    
    
    $
    0.03
    
    
    $
    0.02Third Quarter
    
    
    
    
    
    $
    0.02
    
    
    $
    0.01Fourth Quarter
    
    
    
    
    
    $
    0.02
    
    
    $
    0.02
      15




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Item 6. Selected Financial Data
  Fiscal Year EndedDecember 31, 2002
    
    
    December 31, 2003
    
    
    December 31, 2004
    
    
    December 31, 2005
    
    
    December 31, 2006Consolidated Statement of
Operations Data:Revenues
    
    $
    1,856
    
    
    $
    1,269
    
    
    $
    1,106
    
    
    $
    1,192
    
    
    $
    333Cost Of Revenues
    
    
    (131
    )
    
    
    (122
    )
    
    
    (111
    )
    
    
    (106
    )
    
    
    (1
    )Gross Profit
    
    
    1,725
    
    
    
    1,147
    
    
    
    995
    
    
    
    1,086
    
    
    
    332Total Operating Expenses
    
    
    (1,711
    )
    
    
    (1,631
    )
    
    
    (1,146
    )
    
    
    (1,177
    )
    
    
    (686
    )Other Income (Expense), Net
    
    
    (2
    )
    
    
    (6
    )
    
    
    (5
    )
    
    
    8
    
    
    
    6Income taxes
    
    
    (6
    )
    
    
    (5
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    (5
    )Net Income (Loss)
    
    $
    18
    
    
    $
    (495
    )
    
    $
    (157
    )
    
    $
    (82
    )
    
    $
    (353
    )Basic Income (Loss) Per Share
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.01
    )Diluted Income (Loss) Per Share
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.00
    )
    
    $
    (0.00
    )
    
    $
    (0.01
    )Weighted Average Common Shares
    
    
    47,406,939
    
    
    
    47,309,171
    
    
    
    46,975,363
    
    
    
    46,990,059
    
    
    
    48,763,383Consolidated Balance Sheet DataCash and Cash Equivalents
    
    $
    859
    
    
    $
    590
    
    
    $
    871
    
    
    $
    551
    
    
    $
    229Working Capital
    
    
    1,125
    
    
    
    793
    
    
    
    603
    
    
    
    560
    
    
    
    242Total Assets
    
    
    1,746
    
    
    
    1,205
    
    
    
    1,464
    
    
    
    897
    
    
    
    464Redeemable Preferred Stock
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    0
    
    
    
    0Advances From Related Parties
    
    
    113
    
    
    
    108
    
    
    
    0
    
    
    
    0
    
    
    
    0Total Shareholders Equity
    
    $
    1,429
    
    
    $
    955
    
    
    $
    798
    
    
    $
    717
    
    
    $
    377
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Executive Overview
 ®
   16




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Approach to MD&A
  
    
    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
    
    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
  
    
    Our Board of Directors has Determined it is in the Companys and its Stockholders
Interests to Sell the Companys Assets
    
    We Are Unable to Achieve or Sustain Profitability in the Future or Obtain Future
Financing and Our Business Operations Will Fail
    
    There is No Guarantee That There Will be Funds Available for Distribution to
Stockholders if We Cannot Get Stockholder Approval for the Asset Sale, if the Approval is
Untimely or if Claims Arise Post-Sale During the 275-Day Warranty Period
    
    The Market For Our Stock May Be Not Remain Liquid And The Stock Price May Be Subject To
Volatility
  17




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.
  Critical Accounting Policies
   18




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Key Components of the Financial Statements and Important Trends
  Liquidity and Capital Resources.
  19




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Liquidity and Capital Resources.
 Liquidity and Capital Resources.
 Results of Operations
  For the Year Ended December 31, 2006, Compared to the Year Ended December 31, 2005
 Revenues
 ®
  Gross Profit
  Operating Expenses
  General and Administrative
  20




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Research and Development
  Sales and Marketing
  Net Income (Loss)
  For the Year Ended December 31, 2005, Compared to the Year Ended December 31, 2004
 Revenues
 ®
  Gross Profit
  Operating Expenses
  General and Administrative
  21




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Research and Development
   Sales and Marketing
  Net Income (Loss)
  Liquidity and Capital Resources
       Payments due by periodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual obligations
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsLong-Term Debt ObligationsCapital Lease ObligationsOperating Lease Obligations
    
    $
    1,200
    
    
    $
    1,200Purchase ObligationsTotal
    
    $
    1,200
    
    
    $
    1,200
 22




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Net Operating Loss Carryforwards
  Recently Issued Accounting Pronouncements
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  23




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Item 8. Financial Statements and Supplementary Data
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the Board of Directors of Spatializer Audio Laboratories, Inc.:
     
 
 24




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REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the Board of Directors of Spatializer Audio Laboratories, Inc.:
      
 25




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SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent Assets:Cash and Cash Equivalents
    
    $
    228,940
    
    
    $
    550,633Accounts Receivable
    
    
    74,828
    
    
    
    155,233Prepaid Expenses and Other Current Assets
    
    
    25,073
    
    
    
    34,104Total Current Assets
    
    
    328,841
    
    
    
    739,970Property and Equipment, Net
    
    
    3,477
    
    
    
    18,403Intangible Assets, Net Held for Sale
    
    
    131,258
    
    
    
    138,548Total Assets
    
    $
    463,576
    
    
    $
    896,921LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Notes Payable
    
    
    9,670
    
    
    
    10,443Accounts Payable
    
    
    32,136
    
    
    
    14,195Accrued Wages and Benefits
    
    
    3,169
    
    
    
    48,095Accrued Professional Fees
    
    
    41,900
    
    
    
    34,000Accrued Commissions
    
    
    200
    
    
    
    31,917Accrued Expenses
    
    
    0
    
    
    
    40,869Total Current Liabilities
    
    
    87,075
    
    
    
    179,519Commitments and ContingenciesStockholders Equity (Deficit):Common shares, $0.01 par value;
65,000,000 shares authorized;
48,763,383 shares issued and
outstanding at December 31, 2006
and 2005, respectively
    
    
    469,772
    
    
    
    469,772Additional Paid-In Capital
    
    
    46,441,755
    
    
    
    46,430,030Accumulated Deficit
    
    
    (46,535,026
    )
    
    
    (46,182,400
    )Total Stockholders Equity
    
    
    376,501
    
    
    
    717,402Total Liabilities and Stockholders Equity
    
    $
    463,576
    
    
    $
    896,921
  26




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SPATIALIZER AUDIO LABORATORIES, INC.
 AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Revenues:Royalty Revenues
    
    $
    333,201
    
    
    $
    1,192,447
    
    
    $
    1,105,923Cost of Revenues
    
    
    897
    
    
    
    106,062
    
    
    
    111,395332,304
    
    
    
    1,086,385
    
    
    
    994,528Operating Expenses:General and Administrative
    
    
    526,865
    
    
    
    670,124
    
    
    
    615,412Research and Development
    
    
    157,739
    
    
    
    354,138
    
    
    
    393,004Sales and Marketing
    
    
    1,241
    
    
    
    152,473
    
    
    
    137,889685,845
    
    
    
    1,176,735
    
    
    
    1,146,305Operating Loss
    
    
    (353,541
    )
    
    
    (90,350
    )
    
    
    (151,777
    )Interest Income
    
    
    6,730
    
    
    
    13,230
    
    
    
    4,982Interest Expense
    
    
    (2,266
    )
    
    
    (5,269
    )
    
    
    (10,295
    )Other Income (Expense), Net
    
    
    1,251
    
    
    
    0
    
    
    
    05,715
    
    
    
    7,961
    
    
    
    (5,313
    )Loss Before Income Taxes
    
    
    (347,826
    )
    
    
    (82,389
    )
    
    
    (157,090
    )Income Taxes
    
    
    (4,800
    )
    
    
    874
    
    
    
    (400
    )Net Loss
    
    $
    (352,626
    )
    
    $
    (81,515
    )
    
    $
    (157,490
    )Basic and Diluted Loss per Share:
    
    $
    (.01
    )
    
    $
    (.00
    )
    
    $
    (.00
    )Weighted-Average Shares Outstanding
    
    
    48,763,385
    
    
    
    46,990,059
    
    
    
    46,975,363
  27




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##### Table of Contents



SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Cash Flows from Operating Activities:Net Loss
    
    $
    (352,626
    )
    
    $
    (81,515
    )
    
    $
    (157,490
    )Adjustments to Reconcile Net Loss to Net Cash Provided (Used) by Operating
Activities:Depreciation
    
    
    14,926
    
    
    
    16,401
    
    
    
    11,942Amortization
    
    
    22,303
    
    
    
    31,030
    
    
    
    46,915Stock and Options Issued for Services
    
    
    
    
    
    
    1,000Net Compensation Expense on Vested Options
    
    
    11,725Net Change in Assets and Liabilities:Accounts Receivable
    
    
    80,405
    
    
    
    170,479
    
    
    
    19,699Prepaid Expenses, Deposits and Other Assets
    
    
    9,031
    
    
    
    36,836
    
    
    
    (35,510
    )Accounts Payable
    
    
    17,941
    
    
    
    (57,678
    )
    
    
    50,407Accrued Expenses and Other Liabilities
    
    
    (109,612
    )
    
    
    18,274
    
    
    
    16,581Deferred Revenue
    
    
    0
    
    
    
    (391,395
    )
    
    
    391,395Net Cash Provided (Used) by Operating Activities
    
    
    (305,907
    )
    
    
    (256,568
    )
    
    
    343,939Cash Flows from Investing Activities:Purchase of Property and Equipment
    
    
    (0
    )
    
    
    (5,277
    )
    
    
    (4,007
    )Intangible Assets
    
    
    (15,013
    )
    
    
    (2,868
    )
    
    
    (16,580
    )Net Cash Used by Investing Activities
    
    
    (15,013
    )
    
    
    (8,145
    )
    
    
    (20,587
    )Cash Flows from Financing Activities:Notes Payable
    
    
    (773
    )
    
    
    (55,809
    )
    
    
    66,252Notes and Amounts Due to (from) Related Parties
    
    
    0
    
    
    
    0
    
    
    
    (108,246
    )Net Cash Used by Financing Activities.
    
    
    (773
    )
    
    
    (55,809
    )
    
    
    (41,994
    )Increase (Decrease) in Cash and Cash Equivalents
    
    
    (321,693
    )
    
    
    (320,522
    )
    
    
    281,358Cash and Cash Equivalents, Beginning of Year
    
    
    550,633
    
    
    
    871,155
    
    
    
    589,797Cash and Cash Equivalents, End of Year
    
    $
    228,940
    
    
    $
    550,633
    
    
    $
    871,155Supplemental Disclosure of Cash Flow Information:Cash Paid During the Year for:Interest
    
    $
    2,266
    
    
    $
    5,269
    
    
    $
    10,295Income Taxes
    
    $
    4,800
    
    
    $
    0
    
    
    $
    400
  28




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##### Table of Contents



SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 10% Series B Convertible
    
    
    CommonPreferred Shares
    
    
    Shares
    
    
    Common SharesAdditional
    
    
    
    
    
    
    TotalNumber of
    
    
    Par
    
    
    Number of
    
    
    Par
    
    
    Paid-In-
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Value
    
    
    Shares
    
    
    Value
    
    
    Capital
    
    
    Deficit
    
    
    EquityBalance, December 31, 2003
    
    
    -0-
    
    
    $
    -0-
    
    
    
    47,015,865
    
    
    $
    470,159
    
    
    $
    46,428,461
    
    
    $
    (45,943,395
    )
    
    $
    955,225Cancellation of Unissued Performance Shares
    
    
    
    
    
    
    
    
    
    
    (40,500
    )
    
    
    (405
    )
    
    
    405Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157,490
    )
    
    
    (157,490
    )Balance, December 31, 2004
    
    
    -0-
    
    
    $
    -0-
    
    
    
    46,975,365
    
    
    $
    469,754
    
    
    $
    46,428,866
    
    
    $
    (46,100,885
    )
    
    $
    797,735Conversion of Series B-1 Pfd
to Common Shares
    
    
    
    
    
    
    
    
    
    
    1,788,018
    
    
    
    18
    
    
    
    1,164
    
    
    
    
    
    
    
    1,182Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81,515
    )
    
    
    (81,515
    )Balance, December 31, 2005
    
    
    -0-
    
    
    $
    -0-
    
    
    
    48,763,383
    
    
    $
    469,772
    
    
    $
    46,430,030
    
    
    $
    (46,182,400
    )
    
    $
    717,402Net Compensation Expense on
Vested Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,725
    
    
    
    
    
    
    
    11,725Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (352,626
    )
    
    
    (352,626
    )Balance, December 31, 2006
    
    
    -0-
    
    
    $
    -0-
    
    
    
    48,763,383
    
    
    $
    469,772
    
    
    $
    46,441,755
    
    
    $
    (46,535,026
    )
    
    $
    376,501
  29




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##### Table of Contents



SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1) Ability to Continue as a Going Concern, Sale of All or Substantially All of the Assets of
Spatializer Audio Laboratories, Inc. and Desper Products, Inc. and Dissolution of Spatializer
     This called into
question the ability of the Company to operate as a going concern.
 30




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##### Table of Contents



(2) Significant Accounting Policies
 31




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##### Table of Contents



Basis of Consolidation 
 Revenue Recognition 
 Concentration of Credit Risk 
    Cash and Cash Equivalents 
 Customers
Outside of the U.S. 
 Major Customers 
 Research and Development Costs 
 Advertising Costs 
 Property and Equipment 
 Intangible Assets 
 Earnings Per Share  Earnings Per Share
 32




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##### Table of Contents



Stock Option Plan  Accounting for Stock-Based Compensation ,as amended
  Impairment of Long-Lived Assets and Assets to be Disposed of Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of,
 Segment Reporting Disclosures about Segments of an Enterprise
and Related Information
 Income Taxes
 Recent Accounting Pronouncements
 Use of Estimates
 Fair Value of Financial Instruments
 33




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##### Table of Contents



(3) Property and Equipment
  2006
    
    
    2005Office Computers, Software, Equipment and Furniture
    
    $
    337,145
    
    
    $
    337,145Test Equipment
    
    
    73,300
    
    
    
    73,300Tooling Equipment
    
    
    45,539
    
    
    
    45,539Trade Show Booth and Demonstration Equipment
    
    
    174,548
    
    
    
    174,548Automobiles
    
    
    7,000
    
    
    
    7,000Total Property and Equipment
    
    
    637,531
    
    
    
    637,531Less Accumulated Depreciation and Amortization
    
    
    634,054
    
    
    
    619,128Property and Equipment, Net
    
    $
    3,477
    
    
    $
    18,403
 (4) Intangible Assets
  2006
    
    
    2005Capitalized Patent, Trademarks and Technology Costs
    
    $
    540,708
    
    
    $
    525,695Less Accumulated Amortization
    
    
    409,450
    
    
    
    387,147Intangible Assets, Net
    
    $
    131,258
    
    
    $
    138,548
  2007
    
    $
    131,2582008
    
    $
    02009
    
    $
    02010
    
    $
    0Thereafter
    
    $
    0$
    131,258
 (5) Notes Payable
  (6) Shareholders Equity
 During the year ended December 31, 2005, shares were issued or converted as follows:
   34




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##### Table of Contents



Capitalization
 Series B-1 Redeemable Convertible Preferred Stock:
 (7) Stock Options
  Weighted-AverageExercisable
    
    Number
    
    Exercise PriceOptions outstanding at December 31, 2003
    
    
    2,540,000
    
    
    
    3,035,000
    
    
    $
    0.18Options granted
    
    
    
    
    
    
    200,000
    
    
    $
    0.09Options exercised
    
    
    
    
    
    
    
    
    
    
    Options forfeited
    
    
    
    
    
    
    (600,000
    )
    
    $
    0.43Options outstanding at December 31, 2004
    
    
    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, 2005
    
    
    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, 2006
    
    
    1,750,000
    
    
    
    1,750,000
    
    
    $
    0.09
   35




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##### Table of Contents



2005
    
    2004NET INCOME (LOSS):As Reported
    
    $
    (81,515
    )
    
    $
    (157,490
    )Pro Forma
    
    $
    (89,715
    )
    
    $
    (172,770
    )BASIC AND DILUTED LOSS:As Reported
    
    $
    (0.00
    )
    
    $
    (0.00
    )Pro Forma
    
    $
    (0.00
    )
    
    $
    (0.00
    )
       (8) Income Taxes
  2006
    
    
    2005
    
    
    2004State franchise tax
    
    $
    4,800
    
    
    $
    400
    
    
    $
    400Federal taxes
    
    
    (0
    )
    
    
    (1,274
    )
    
    
    (0
    )Total
    
    $
    4,800
    
    
    $
    (874
    )
    
    $
    400
    36




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##### Table of Contents



(9) Commitments and Contingencies
  Operating Lease Commitments
  (10) Profit Sharing Plan
  (11) Quarterly Financial Data (unaudited)
  Quarter Ended2006
    
    March 31
    
    June 30
    
    September 30
    
    December 31Net Revenues
    
    $
    100,488
    
    
    $
    92,868
    
    
    $
    67,744
    
    
    $
    72,101Gross Margin
    
    $
    90,299
    
    
    $
    83,580
    
    
    $
    60,970
    
    
    $
    97,455Net Income (Loss)
    
    $
    (173,391
    )
    
    $
    (62,989
    )
    
    $
    (61,798
    )
    
    $
    (54,448
    )Basic (Loss) Per Share
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    (0.00
    )
 Quarter Ended2005
    
    March 31
    
    June 30
    
    September 30
    
    December 31Net Revenues
    
    $
    331,950
    
    
    $
    428,912
    
    
    $
    270,914
    
    
    $
    160,670Gross Margin
    
    $
    298,078
    
    
    $
    386,022
    
    
    $
    258,162
    
    
    $
    144,122Net Income (Loss)
    
    $
    10,014
    
    
    $
    57,566
    
    
    $
    36,545
    
    
    $
    (186,514
    )Basic (Loss) Per Share
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    (0.00
    )
 (12) Subsequent Events and Management Plans (unaudited)
  37




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
  
 Item 9B. Other Information
  
 PART III
 
 Item 10. Director, Executive Officers and Corporate Governance
 Directors and Officers
   Section 16(a) Beneficial Ownership Reporting Compliance
  38




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##### Table of Contents



Code of Ethics
  Corporate Governance
  
 Item 11. Executive Compensation
 Compensation Discussion and Analysis
     39




---



##### Table of Contents



Officer Compensation
  SUMMARY COMPENSATION TABLE
 All OtherOptions
    
    CompensationName and Principal Position
    
    Year
    
    Salary($)
    
    Awards($)
    
    ($)
    
    Total ($)Henry R. Mandell, Chairman and Secretary
    
    
    2006
    
    
    $
    90,000
    
    
    
    
    
    
    $
    19,000
    (1)
    
    $
    109,0002005
    
    
    $
    214,200
    
    
    
    8,000
    
    
    $
    16,000
    
    
    $
    238,2002004
    
    
    $
    214,200
    
    
    
    3,820
    
    
    $
    14,000
    
    
    $
    232,020
 
 (1)
    
    Cost of health insurance premiums   OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards
 Number of Securities
    
    Number of SecuritiesUnderlying
    
    UnderlyingUnexercised
    
    Unexercised
    
    Weighted AverageOptions(#)
    
    Options(#)
    
    Option Exercise
    
    Option ExpirationExercisable
    
    Unexercisable
    
    Price($)
    
    Date1,500,000
    
    
    1,500,000
    
    
    $
    0.094
    
    
    
    06/07-2/10
   41




---



##### Table of Contents



Director Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  AMOUNT AND NATURE OF
    
    PERCENT OFNAME
OF BENEFICIAL OWNER
    
    BENEFICIAL OWNERSHIP
    
    CLASSJay Gottlieb(1)(2)
    
    
    4,846,500
    
    
    
    9.1
    %Carlo Civelli(1)(3)
    
    
    5,763,780
    
    
    
    11.75
    %Henry R. Mandell(1)(4)
    
    
    2,162,875
    
    
    
    4.4
    %All directors and executive officers
as a group (2 persons)(1)(3)(4)
    
    
    7,976,655
    
    
    
    16.15
    %
 
 (1)
    
    The persons named in the table have sole voting and investment power with respect to all
shares shown to be beneficially owned by them, subject to community property laws, where
applicable, and the information contained in the footnotes to this table.(2)
    
    Based on Amendment No. 3 to the Schedule 13G filed by Mr. Gottlieb with the Securities and
Exchange Commission on February 12, 2007. Mr. Gottliebs address is 27 Misty Brook Lane, New
Fairfield, Connecticut 06812.(3)
    
    Carlo Civelli controls Clarion Finanz AG, a non-reporting investment company. Holdings of Mr.
Civelli and Clarion Finanz AG are combined, and include all shares of Spatializer held of
record or beneficially by them, and all additional shares over which he either currently
exercises full or partial control, without duplication through attribution. Includes 300,000
options to acquire common stock held by Mr. Civelli, all of which are vested and currently
exercisable. Mr. Civellis address is Gerberstrasse 5 8023, Zurich, Switzerland. (4)
Includes 1,500,000 options held by Mr. Mandell, all of which are vested and are exercisable at
various prices from $0.05 to $0.12. The options have varying expiration dates of which the
final such expiration date is February 21, 2010.  Equity Compensation Plan Information
 Number of securitiesNumber of securities
    
    
    
    
    
    
    remaining available forto be issued
    
    
    Weighted-average
    
    
    future issuance underupon exercise of
    
    
    exercise price of
    
    
    equity compensation plansoutstanding options,
    
    
    outstanding options,
    
    
    (excluding securitiesPlan category
    
    warrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by security
holders
    
    
    1,750,000
    (1)
    
    $
    0.09
    (1)
    
    
    0Equity compensation plans not
approved by security holders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    1,750,000
    
    
    $
    0.09
    
    
    
    0
 42




---



##### Table of Contents



(1)
    
    Represents options to acquire the Companys Common Stock under the Companys 1995 Stock Option
Plan and 1996 Incentive Plan approved by the Companys stockholders in 1995 and 1996, respectively.
The 1995 Plan authorizes grants of options to purchase authorized but unissued common stock in an
amount of up to 10% of total common shares outstanding at each calendar quarter or 4,876,338 as at
December 31, 2006. Stock options are granted with an exercise price equal to the stocks fair
market value at the date of grant. Stock options have five-year terms and vest and become fully
exercisable as determined by the committee on date of grant. The 1996 Plan supplements the 1995
Plan by allowing for stock appreciation, incentive shares and similar accruals aggregating not more
than the equivalent of 500,000 shares and the regrant of any Performance Shares that become
available for regrant. See Note 2. Since the Plan expired in 2005, there can be no new issues of
options. 
 Item 13. Certain Relationships and Related Transactions, and Director Independence
    
 Item 14. Principal Accountant Fees and Services
  December 31,2005
    
    
    2006Audit Fees (1)
    
    $
    34,865
    
    
    
    40,900Audit Related Fees (2)
    
    $Tax Fees (3)
    
    
    6,895
    
    
    
    11,400All Other Fees
    
    
    
    
    
    
    Total Fees
    
    $
    41,760
    
    
    
    52,300
 43




---



##### Table of Contents



(1)
    
    Audit Fees are fees for professional services rendered for the annual audit, the reviews of
the Companys financial statements included in Form 10-Qs and services normally provided in
connection with statutory and regulatory filings.(2)
    
    Audit Related Fees are for assurance and related services that are reasonably related to the
performance of the fiscal 2005 audit and not reported under Audit Fees.(3)
    
    Tax Fees are fees for professional services rendered for tax compliance, tax planning and tax
advice.  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
    44




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##### Table of Contents



ExhibitNumber
    
    Description2.1
    
    Arrangement Agreement dated as of March 4, 1994 among Spatializer-Yukon, DPI and
Spatializer-Delaware (Incorporated by reference to the Companys Registration Statement
on Form S-1,Registration No 33-90532, effective August 21, 1995.)2.2
    
    Asset Purchase Agreement dated as of September 18, 2006 among the Company, Desper
Products, Inc., DTS, Inc. and DTS-BVI (incorporated by reference to Exhibit 10.9 to the
Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.)3.1
    
    Certificate of Incorporation of Spatializer-Delaware as filed February 28, 1994.
(Incorporated by reference to the Companys Registration Statement on Form S-1,
Registration No. 33-90532,effective August 21, 1995.)3.2
    
    Amended and Restated Bylaws of Spatializer-Delaware. (Incorporated by reference to the
Companys Registration Statement on Form S-1,Registration No. 33-90532, effective
August 21, 1995.)3.3
    
    Certificate of Designation of Series B 10% Redeemable Convertible Preferred Stock of
the Company as filed December 27, 1999 (Incorporated by reference to the Companys
Annual Report on Form10-K, for the period ended December 31, 1999.)3.4
    
    Certificate of Amendment of Certificate of Incorporation of the Company as filed on
February 25, 2000 (Incorporated by reference to the Companys Annual Report on Form
10-K, for the period ended December 31, 1999.)3.5
    
    Certificate of Designation of Series B-1 Redeemable Convertible Preferred Stock as
filed December 20, 2002 (Incorporated by reference to the Companys Annual Report on
Form 10-K, for the period ended December 31, 2002.)3.6
    
    Certificate of Elimination of Series A Preferred Stock as filed December 26, 2002
(Incorporated by reference to the Companys Annual Report on Form 10-K, for the period
ended December 31,2002.)3.7
    
    Certificate of Elimination of Series B Preferred Stock as filed December 26,2002
(Incorporated by reference to the Companys Annual Report on Form 10-K, for the period
ended December 31,2002.)4.1
    
    Performance Share Escrow Agreements dated June 22, 1992 among Montreal Trust Company of
Canada, Spatializer-Yukon and certain shareholders with respect to escrow of 2,181,048
common shares of Spatializer-Yukon. (Incorporated by reference to the Companys
Registration Statement on Form S-1, Registration No. 33-90532,effective August 21,
1995.)4.2
    
    Modification Agreement for Escrowed Performance Shares. (Incorporated by reference to
the Companys Definitive Proxy Statement dated June 28, 1996 and previously filed with
the Commission.)4.3
    
    Form of Exchange Agreement effective December 26, 2002 entered into by holders of
Series B Preferred Stock in connection with exchange of same for Series B-1 Preferred
Stock (Incorporated by reference to the Companys Annual Report on Form 10-K, for the
period ended December 31, 2002.)10.1*
    
    Spatializer-Delaware Incentive Stock Option Plan (1995 Plan). (Incorporated by
reference to the Companys Registration Statement on Form S-1, Registration No.
33-90532, effective August 21,1995.)
 45




---



##### Table of Contents



ExhibitNumber
    
    Description10.2*
    
    Spatializer-Delaware 1996 Incentive Plan. (Incorporated by reference to the Companys
Proxy Statement dated June 25, 1996 and previously filed with the Commission.)10.3*
    
    Form of Stock Option Agreement (Incorporated by reference to Exhibit 10.3 to the
Companys Annual Report on Form 10-K for the period ended December 31, 2005.)10.4
    
    License Agreement dated June 29, 1994 between DPI and MEC. (Incorporated by reference
to the Companys Registration Statement on Form S-1, Registration No. 33-90532,
effective August 21,1995.)10.5*
    
    Employment Agreement dated November 12, 2005, between the Company and Henry Mandell, as
amended. (Incorporated by reference to Exhibit 10.5 to the Companys Annual Report on
Form 10-K for the period ended December 31, 2005.)10.6
    
    Related Party Promissory Note to the Successor Trustee of the Ira A. Desper Marital
Trust dated November 1, 2003. (Incorporated by reference to Exhibit 10.6 to the
Companys Annual Report on Form 10-K, for the period ended December 31, 2005.)10.7
    
    Lease for Office and Research Center in San Jose, CA. (incorporated by reference to )10.8
    
    Lease for Executive Office in Westlake Village, CA. (incorporated by reference to)10.9
    
    License Agreement between Spatializer Audio Laboratories, Inc., Desper Products, Inc.
and Samsung Electronics, effective August 22, 2005. (Incorporated by reference to the
Companys Quarterly Report on Form 10-Q for the period ended September 30, 2005.)10.10*
    
    Employment Agreement dated January 6, 2006, between the Company and Henry Mandell.
(Incorporated by reference to Exhibit 10.10 to the Companys Annual Report on Form 10-K
for the period ended December 31, 2006.)10.11*
    
    Amendment to Employment Agreement between the Company and Henry Mandell21.1
    
    Subsidiaries of the Company23.1
    
    Consent of Ramirez International
Financial and Accounting Services, Inc.23.2
    
    Consent of Farber Hass Hurley McEwen, LLP, Independent Registered Public Accounting Firm31.1
    
    Certificate pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Certification
will not be deemed filed for purposes of Section 18 of the Securities Exchange Act of
1934, as amended)
 
 
    
    Filed Herewith.*
    
    Indicates management contracts or compensatory plans required
to be filed as an exhibit to this report. 46




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##### Table of Contents



SIGNATURES
   SPATIALIZER AUDIO LABORATORIES, INC.
(Registrant)/s/ Henry R. MandellHenry R. MandellChairman & Secretary  Signature
    
    Title
    
    Date/s/ Carlo Civelli
    
    Director
    
    March 26, 2007Carlo Civelli/s/ Henry R. Mandell
    
    Director, Chairman and
Secretary (Principal
executive
    
    March 26, 2007Henry R. Mandell
    
    officer and
principal financial
officer)
 47