Ability to Continue as a Going Concern

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

Note 1 - Ability to Continue as a Going Concern, Sale of All or Substantially All of the Assets of Spatializer Audio Laboratories, Inc.

Spatializer was a developer, licensor and marketer of next generation technologies for the consumer electronics, personal computing, entertainment and cellular telephone markets. Our technology was incorporated into products offered by our licensees and customers on various economic and business terms. We were incorporated in the State of Delaware in February 1994 and are the successor company in a Plan of Arrangement pursuant to which the outstanding shares of Spatializer Audio Laboratories, Inc., a publicly held Yukon, Canada corporation, were exchanged for an equal number of shares of our common stock. Our corporate office is located at 410 Park Avenue--15th Floor, New York, New York 10022.

The 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 and nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. Accordingly, your attention is directed to footnote disclosures found in the December 31, 2010 Annual Report and particularly to Note 2 thereof, which includes a summary of significant accounting policies.

The foregoing financial information has been prepared assuming that the Company will continue as a going concern. As discussed above, the Company’s current circumstances, including significant operating losses, raise substantial doubt about the likelihood that the Company will continue as a going concern. The foregoing financial information does not include any adjustments that might result from the outcome of this uncertainty. Prior to the transactions described below, two of the Company's stockholders, who also serve as its principal officers, had advanced cash to the Company to pay for ongoing expenses.

On August 25, 2011 the Company issued 4,351,677 shares of common stock at the 8/19/11 closing price of $0.0155 per share to repay $64,598 of loans from two of the Company’s Directors (Jay Gottlieb and Gregg Schneider). In addition, 1,290,323 shares were issued to Mr. Schneider at the same price in exchange for $20,000.

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