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[Vaio]

Hallo Leute und willkommen in der Welt von Spatializer ...


Profil:
SPATIALIZER AUDIO LABS INC - OTC BB: SPAZ

Exchange: OTC BB
Shares Outstanding: 46,661,003
Market Cap: 17.3 Million
Short Interest: Exchange provides no short interest data.
52-Week EPS: 0.02
52-Week High: 2.375 on Tuesday, March 21, 2000
52-Week Low: 0.20 on Thursday, December 21, 2000
P/E Ratio: 18.50
Average Price: 0.4182 (50-day) 0.5434 (200-day)
Average Volume: 187,800 (50-day) 176,400 (200-day)


Business Summary:
Spatializer Audio Laboratories, Inc. is a developer, licensor and marketer of next-generation technologies for the consumer electronics, personal computing, enterprise computing and entertainment industries. The Company conducts its audio business through its parent company and its wholly owned subsidiary, Desper Products, Inc. (DPI). DPI has developed a full complement of patented and proprietary 3-D or virtual audio signal processing technologies directed to the consumer electronics and multimedia PC markets. As of December 31, 1999, more than 17 million licensed units had been shipped covering all of these applications. The Company currently offers five types of licensed products: Spatializer 3D Stereo, Spatializer Encompass, Spatializer N-2-2 Digital Virtual Surround, Spatializer Vi.B.E and Spatializer Streamfx.

Financial Summary
SPAZ develops and licenses proprietary advanced audio signal processing technologies and products for use in consumer electronics and professional recording. For the nine months ended 9/30/00, revenues rose 71% to $1.7 million. Net income totalled $386 thousand, up from $47 thousand. Revenues reflect the running royalties earned and the income from a license agreement. Earnings also benefitted from the efficiencies associated with higher level of revenue.

Location
20700 Ventura Boulevard, Suite 140
Woodland Hills, CA 91364 Phone: [phone]
Fax: [phone]
Email: [e-mail]
Employees (last reported count): 13


Homepage: http://www.spatializer.com





Spatializer Audio Laboratories (OTC BB : SPAZ) News vom 03.05.2000 bis 27.02.2001 nicht einmal ein Jahr ist Vergangen und so viele neue Kunden das sollte sich erst recht mal auf den Kurz auswirken.
Zum Beispiel der Samsung Vertrag kann sich doch erst richtig im Q4-2000 auswirken da er erst ab 16.07.2000 greifen...
Tja sollte jeder mal nachdenken wenn der diesem Thread hier weiter durchgeht.

Quelle der New’s:
http://www.bigcharts.com/news/SymbolSearch/symbolnews.asp?b…


TUESDAY, FEBRUARY 27, 2001
Spatializer Chairman/CEO Speaks at Intel Developer Forum Conference February 28 - PRNewswire 11:24 AM Spatializer Audio Laboratories and LinkUp Systems Partnership Offers Spatializer Digital OntheGoFX(TM) Audio Enhancement Software to Licensees Of the LinkUp Systems L72XX Processors - PRNewswire 6:30 AM

THURSDAY, JANUARY 25, 2001
CES 2001 Innovations Design and Engineering Showcase Awards Given to Two Toshiba DVD Players With Spatializer N-2-2(TM) Virtual Surround Sound Technology - PRNewswire 6:30 AM WEDNESDAY,

JANUARY 24, 2001
C-Cube Microsystems Confirms Spatializer as the Preferred Provider Of Virtual Surround Sound Technology in C-Cube`s Existing Semiconductor Products - PRNewswire 6:30

TUESDAY, JANUARY 16, 2001
/C O R R E C T I O N -- Spatializer Audio Laboratories Inc./ - PRNewswire 9:28 PM

MONDAY, JANUARY 08, 2001
Organization Profile: Spatializer Audio Laboratories Inc. (OTC Bulletin Board: SPAZ) - PRNewswire 4:30 AM

FRIDAY, JANUARY 05, 2001
Tvia Selects Spatializer N-2-2(TM) Virtual Surround Sound Technology for Use In Their Streaming Media Processors - PRNewswire 8:45

TUESDAY, DECEMBER 12, 2000
SPATIALIZER APPOINTS INTERNIX TO SELL SOFTWARE SOLUTIONS IN JAPAN –
Asia Pulse 6:33 PM

MONDAY, NOVEMBER 20, 2000
EquityAlert.com Announces Investment Opinion, No. 3 - BusinessWire 9:20

TUESDAY, NOVEMBER 14, 2000 Spatializer Audio Laboratories and 4Front Technologies Provide Linux Users With Improved Internet and MP3 Audio Capabilities - PRNewswire 8:02 AM

TUESDAY, NOVEMBER 07, 2000
Management`s Discussions: 10-Q, SPATIALIZER AUDIO LABORATORIES INC - Edgar Online 3:38 PM
EquityAlert.com Announces Investment Opinion, No. 6 - BusinessWire 11:03 AM
Spatializer Audio Laboratories Inc. Reports 3rd Quarter Revenues Increase 94% - PRNewswire 8:00

THURSDAY, OCTOBER 26, 2000
Spatializer N-2-2 Virtual Surround Sound Technology In C-Cube`s New ZiVA-5 DVD System Processor - PRNewswire 8:08

THURSDAY, OCTOBER 05, 2000
Spatializer N-2-2 Virtual Surround Sound Technology Incorporated in LG DVD-RW Recorder –
PRNewswire 8:01

TUESDAY, OCTOBER 03, 2000
EquityAlert.com Announces Investment Opinion, #7 - BusinessWire 12:32 PM
Spatializer Audio Laboratories and MIPS Technologies Align to Provide MIPS32 And MIPS64-based Designers With Advanced Audio Enhancement Technologies – PRNewswire 8:03

AM MONDAY, SEPTEMBER 25, 2000
EquityAlert.com Announces Investment Opinion, No. 7 (OTCBB:EINC) – BusinessWire 12:11 PM
Spatializer N-2-2 Virtual Sound Technology Incorporated Into Samsung`s `All-in-one` Entertainment Station Delivers Rich Surround Sound for DVD Videos and NUON-based Interactive Features Using Only Two Speakers - PRNewswire 8:03

WEDNESDAY, SEPTEMBER 20, 2000
Hitachi DVD Players Incorporate Industry Leading Spatializer N-2-2(TM) For Virtual Surround Sound Introduction of Two New DVD Players Brings Total Product Line Up to Five For The Global Market - PRNewswire 8:02

WEDNESDAY, AUGUST 16, 2000
Spatializer N-2-2(TM) Included in Revolutionary SD2300 NUON(TM)-Enhanced DVD Player From Toshiba Corporation Toshiba to Feature Spatializer`s Premier N-2-2 Virtual Surround Sound Software On the NUON Interactive Home Entertainment Platform Product Launch –
PRNewswire 8:30

TUESDAY, AUGUST 01, 2000
EquityAlert.com Announces Investment Opinion, No. 5 of 5 – BusinessWire 10:02
Spatializer Audio Laboratories, Inc. Reports Sixth Consecutive Quarter of Profitability Revenues and Net Income Increase 80% and 833% Respectively Over Prior Year Comparable Quarter – PRNewswire 8:30

MONDAY, JULY 31, 2000
Spatializer Engages Marken Communications to Launch Media Relations Campaign To Increase Spatializer Brand and Corporate Awareness – PRNewswire 8:30

WEDNESDAY, JULY 26, 2000
EquityAlert.com Announces Investment Opinion, No. 4 of 5 –BusinessWire 9:21
Spatializer N-2-2 Included in Two New Portable DVD Players From Toshiba Corporation Latest Design Wins Debut Spatializer N-2-2 Virtual Surround Sound in the Portable DVD Player Market – PRNewswire 8:31

TUESDAY, JULY 25, 2000
Spatializer Announces New Family of Comprehensive Digital Audio Enhancement Solutions for Television, MP3 Player, PDA, AV Receiver, PC and Car Audio Markets Spatializer DigitalFX(TM) Series Offers Wide Array of DSP-Based Audio Enhancement Algorithms Specifically Optimized for Efficient and Cost Effective Implementation on Targeted Platforms –
PRNewswire 8:32

THURSDAY, JULY 20, 2000
Spatializer CEO Henry R. Mandell Outlines Growth Initiatives on CEOcast.com –PRNewswire 2:17

TUESDAY, JULY 11, 2000
Spatializer and Samsung Agree to Enter Into Strategic Alliance for The Development and Deployment of Audio Enhancement Technologies Spatializer N-2-2(TM) to Be Promoted and Used as Samsung`s Preferred Virtual Surround Sound Technology for DVD Players and in Other Digital Multimedia Products in the Future - PRNewswire 8:03

TUESDAY, JUNE 27, 2000
MongoMusic Hires Chief Operations Officer to Bolster Already Impressive Executive Team Michael Bolcerek Brings Financial and Operations Knowledge to Digital Music Infrastructure Leader MongoMusic –
PRNewswire 8:04

MONDAY, JUNE 05, 2000
New Japan Radio Corporation Licenses Spatializer N-2-2 for Next Generation DSPs First Shipments of Two New DSPs Expected in Late Summer 2000 License Agreement Includes Right to Incorporate Spatializer 3-D Stereo Technology into Future ICs - PRNewswire 8:00

WEDNESDAY, MAY 24, 2000
Spatializer Selected by Akai Electric Co., Ltd. to Provide Virtual Surround Sound For Next Generation DVD Players Spatializer N-2-2 Virtual Surround Sound Included in Six New Products For the Global DVD Player Market - PRNewswire 8:03 AM

THURSDAY, MAY 11, 2000
Spatializer Audio Laboratories, Inc. Names New Vice President, Sales and Marketing to Aggressively Develop Strategic Relationships, Enter New Markets and Enhance Licensing Revenue –PRNewswire 8:00

TUESDAY, MAY 09, 2000
Management`s Discussions: 10-Q, SPATIALIZER AUDIO LABORATORIES INC – Edgar Online 8:54 PM
Spatializer Audio Laboratories, Inc. Announces Significantly Improved First Quarter 2000 Results Revenues Increase 41%, Running Royalties Increase 299% and Net Income Increases to $171,000 as Compared to $2,000 in the Comparable Period Last Year – PRNewswire 8:01

MONDAY, MAY 08, 2000
MongoMusic Lands World Class Audio Engineering Team Former Apple Audio and Signal Processing Architect Ted Tanner and His Audio Team Join Digital Music`s Leading Innovator, MongoMusic –
PRNewswire 8:04

WEDNESDAY, MAY 03, 2000
Spatializer Engages MDC Group, Inc.; Launches Financial Public Relations Campaign to Position Company as the De Facto Standard In Positional Audio Enhancement Technology - PRNewswire 9:01 AM


Historie:

History 1996 1997 1998 1999
Earnings Per Share($) -2 -0.22 -0.28 0.01
Equity Per Share($) 0.15 0.04 0 0.01
Revenue(Mil.$) 2.02 2.78 1.68 1.66
Dividends($) 0 0 0 0
5 Year Growth (%) 183.50



Spatializer Audio Laboratories – Prognose der Geschäftsentwicklung, der Ertragslage für den Zeitraum Q4/2000 bis Q4/2002 und der mittelfristigen bis langristigen Kursentwicklung von Belami aus dem WO-Board


Diese Prognose basiert auf Zahlen und Fakten aus den vergangenen SEC-Filings, den auf www.thedegitalbits.com veröffentlichten DVD-Verkaufszahlen bis 11/2000 und den Prognosen der DVD-Verkaufszahlen für 12/2000, veröffentlicht von der DVD-Entertainment Group (DEG), den vom Unternehmen publizierten Informationen vom 08.01.2001 inklusive den darin enthaltenen Prognosen zur Entwicklung des Gesamtmarktes im Bereich Consumer Electronics, herausgegeben von den jeweiligen offiziellen Verbänden.


Rückblick auf Q1-Q3/2000

In den ersten 3 Quartalen des vergangenen Geschäftsjahres standen für das Unternehmen 3 Kernpunkte im Fokus die ich hier nur kurz anreissen möchte:

1. Perfektionierung der Produktlinie „Spatializer N-2-2“ für das DVD-Segment
2. Entwicklung von Audio-Lösungen für die Bereiche:
a) Internet-Anwendungen
b) PDAs
c) MP3-Players
d) Digital-Fernseher
e) AV-Receivers
f) Auto-Audio

3. Verkauf marktreifer Produkte und Abschluss von Lizenzverträgen

Wie Henry Mandell, Chairman und Chief Executive Officer der Firma, im Rahmen der Hauptversammlung im März letzten Jahres ankündigte, mussten für die Verwirklichung o.a. Ziele, eine grosse Reihe an Investitionen in Personal, Forschung und Infrastruktur getätigt werden. Er sagte, dass die Firma 1 bis 2 Quartale geringere Rentabilität in Kauf nehmen müsse, um die Grundlage für künftiges Wachstum zu schaffen.

Wie alles, was Mandell ankündigte, wurden seine Worte in den Quartalen 2 und 3/2000 Wahrheit.
Die Umsatzrentabilität sank von anfangs 35 % auf 16 % im 3.Quartal. Die Kostern für die Entwicklung o.a. Produkte, die Perfektionierung bestehender Produktlinien und die Marketing-Maßnahmen auf der Verkaufsseite schlugen zu Buche.
Allerdings wurde der Umsatz gegenüber dem Vorjahreszeitraum durch bereits abgeschlossene Verträge auf dem DVD-Markt um 71 % gesteigert, was für diesen Zeitpunkt als absolut zufriedenstellend zu klassifizieren ist.
Auch der Brutto-Cash-Flow wurde um über 730 % gegenüber dem Vorjahr auf rund 431.000,-- USD gesteigert – eine beeindruckende Zwischenbilanz trotz durch Investitionen in die Zukunft verminderter Umsatzrentabilität.
Den Umsatz i.H.v. USD 1,67 Mio. erzielte man bei DVD-Verkaufszahlen von rund 5,1 Millionen Stück bis 09/2000.
Hieraus ergibt sich auch meine Prognose für die Ergebnisse für das 4.Quartal 2000 wie folgt:


Ergebnis des 4.Quartals

Im 4.Quartal wurden nach offiziellen Angaben rund 4,8 Millionen DVDs verkauft (ein enormer Anstieg ausgelöst durch das Weihnachtsgeschäft) .
Geht man davon aus, dass SPAZ bei DVD-Verkaufszahlen in Höhe von 5,1 Millionen Stück einen Umsatz von USD 1,67 Millionen erzielte, gelangt man durch einfache Dreisatzrechnung auf folgenden sensationellen Umsatz für das 4.Quartal:

USD 1.500.000,00 – dies entspricht einem Anstieg von 138 % gegenüber dem Vorquartal und einem Anstieg von 119 % gegenüber dem 4.Quartal/1999.


Für das Geschäftsjahr 2000 ergäbe sich hieraus folgend dieses Ergebnis:

Umsatz: USD 3,2 Millionen (+ 92 % gg. Vj.)
Gewinn nach Steuern: USD 800.000,00 (bei einer unterstellten Umsatzrentabilität von 25 % = Jahresmittelwert bis 9/00), entspricht einem Anstieg von 125 % gg. dem Vorjahresergebnis
Gewinn pro Aktie: 0,02 USD (+ 100 % gg. Vj.)


Was sagen uns diese Zahlen:

Diese Zahlen zeigen uns, dass das Unternehmen ein sehr gesundes stetiges Umsatzwachstum ausweisen kann, obwohl längst nicht alle abgeschlossenen Lizenzverträge in 2000 umsatzwirksam waren.
Zum anderen zeigen sie uns, dass trotz hoher Investitionstätigkeit profitabel gearbeitet werden konnte und die erhöhten Aufwendungen bei konstanter Zahl herausgegebener Aktien aus dem Cash-Flow bezahlt wurden.


Die Zahlen geben m.E. auch einen Hinweis auf den Erlös pro abgesetzem Stück – ein viel diskutiertes Thema, aber ich widerspreche hiermit den bisher gemachten Vermutungen, dass sich der Lizenzerlös pro abgesetztem Stück bei USD 0,10 bis USD 0,25 bewegt.

Von 5,1 Millionen abgesetzter DVD-Player bis 09/2000 würde bei einem unterstellten Marktanteil von etwa 50% eine Stückzahl von 2,55 Millionen auf spazifizierte Produkte entfallen.
Bei einem Umsatz von USD 1,67 Millionen würde dies doch bedeuten, dass SPAZ pro abgesetzem Gerät USD 0,65 erlösen würde. Bereinigt man das Umsatzvolumen um die nicht im DVD-Bereich erzielten Umsätze, kommt man auf einen Unit-Preis von ca. USD 0,50.



Die Zukunft

Märkte:
Der weltweite Consumer-Electronics-Markt birgt in den nächsten Jahren gigantische Wachstumsaussichten. Keine andere Branche wird schneller wachsen als die Marktsegmente DVD-Player, Internet-Anwendungen inkl. Set-top- boxes, Handys und Spielekonsolen, PDAs, MP3-Payer u.v.m. !!
Folgende Wachstumszahlen sind für die nächsten Jahre von offiziellen Verbänden genannt worden:
a) DVD-Markt:
2000: 9 Millionen Stück (neusten Zählungen zufolge 9,8 Mio.)
2001: 16 Millionen Stück
2002: 28 Millionen Stück

Offensivere Schätzungen sehen bereits auch schon 30 Millionen Stück im Jahre 2001 !!!

b) Internet-Anwendungen:
2000: 20 Millionen Einheiten
2001: 45 Millionen Einheiten
2002: 60 Millionen Einheiten
2003: 75 Millionen Einheiten
2004: 89 Millionen Einheiten
Diese Unit-Zahlen entsprächen einer Erhöhung des Umsatzvolumen auf dem Gesamtmarkt von USD 2,4 Milliarden im Jahre 2000 auf 17.8 Milliarden im Jahre 2004.

c) MP3-Players:
2000: 10 Millionen Stück
2001: 20 Millionen Stück
2002: 32 Millionen Stück

Darüberhinaus kann Spatializer mit seinen Produkten in weiteren Marktsegmenten wie Digital-TV, AV-Receiver und Auto-Audio inkl. Navigationssysteme, die Bedürfnisse der Verbraucher nach immer optimaleren Klanglösungen befriedigen.



Auswirkungen auf das Unternehmen

Spatializer Audio Laboratories hat für alle o.a. Marktsegmente im Laufe der letzten Jahre bzw. des Jahres 2000 marktreife Produkte entwickelt.

Henry Mandell sagte im Rahmen des press-releases vom 08.01.2001 folgendes:
Er erwartet, dass die von Spatializer entwickelten Produkte ähnlich dominante Stellungen in anderen Marktsegmenten einnehmen werden, wie es das Produkt „Spatializer N-2-2“ auf dem DVD-Markt bereits inne hat. Hier liegt der weltweite Marktanteil spazifizierter Produkte bei über 50% !!!!!!!!!!!!!!!!
Mandell sagt weiterhin, dass die Entwicklungsarbeit abgeschlossen wurde, dass Verbindungen und Kontakte geknüpft -und Verträge geschlossen wurden, um in neue Märkte einzudringen. Die benötigte Infrastruktur ist geschaffen worden. Nun ist der Zeitpunkt gekommen, das Unternehmen wachsen zu lassen und das höchst mögliche Potential auszuschöpfen.
Ferner nimmt er nochmals Stellung zu der Grundlagenarbeit, die im Jahre 2000 im Fokus der Firma stand. Er sagt, dass jetzt die Grundlagenarbeit erledigt ist, dass für die Aufgaben der Zukunft kein Bedarf an zusätzlichen Arbeitskräften besteht und damit eine spürbare Erhöhung der Kosten nicht erfolgen wird.

Dies bedeutet für künftige Unternehmensergebnisse: Eine signifikante Erhöhung der Umsatzrentabilität !!!!!
Der Umsatz wird in den nächsten Jahren im dreistelligen Bereich steigen, die Kosten bleiben konstant – grandiose Aussichten.

Ausgedrückt in Zahlen wird sich m.E. folgendes Szenario ergeben:

Geschäftsjahr 2001:

DVD-Marktsegment:
Verkaufszahlen: 16 Millionen Stück (vorsichtige Schätzung, andere Quellen sprechen von nahezu doppelt so hohen Zahlen)
Umsatzerlöse: (bis 09/2000: DVD-VK von 5,1 Mio. = Umsatz von 1,67 Mio.)
bei einem DVD-VK von 16 Mio. ergibt sich demnach ein Umsatz von USD 5,234 Mio.

andere Marktsegmente:
Wenn wir einen Lizenzerlös pro verkauftem Stück von USD 0,25 (pessimistische Schätzung) zugrunde legen und von einem Marktanteil von 20% im Jahre 2001 ausgehen, ergeben sich für folgende Marktsegmente die folgenden Zahlen:

Internet-Anwendungen:
Verkaufszahlen: 45 Millionen Einheiten
20% - SPAZ: 9 Millionen
SPAZ-Umsatz- Anteil: USD 2,25 Mio.

MP3-Player:
Verkaufszahlen: 10 Millionen Einheiten
20% - SPAZ: 2 Millionen
SPAZ-Umsatz-Anteil: USD 500.000,00

TV und andere Segmente (grobe Schätzung)
SPAZ-Umsatz: USD 500.000,00


Daraus folgt folgendes Geschäftsergebnis für das Jahr 2001:
Umsatz: USD 8,484 Mio. = plus 165 % gg. Vj.
Gewinn nach Steuern: USD 3 Mio. (bei unterstellter Umsatzrentabilität von 35 %, Vj. 25%) = plus 275% gg. Vj.
Gewinn pro Aktie: 0,06 USD (bei 47 Mio. Aktien) = plus 200% gg. Vj.



Geschäftsjahr 2002:

DVD-Marktsegment:
Verkaufszahlen: 28 Millionen Stück (vorsichtige Schätzung)
Umsatzerlöse: (bis 09/2000: DVD-VK von 5,1 Mio. = Umsatz von 1,67 Mio.)
bei einem DVD-VK von 28 Mio. ergibt sich demnach ein Umsatz von USD 9,16 Mio.

andere Marktsegmente:
Wenn wir einen Lizenzerlös pro verkauftem Stück von USD 0,50 zugrunde legen und von einem Marktanteil von 30% im Jahre 2001 ausgehen, ergeben sich für folgende Marktsegmente die folgenden Zahlen:

Internet-Anwendungen:
Verkaufszahlen: 60 Millionen Einheiten
30% - SPAZ: 18 Millionen
SPAZ-Umsatz- Anteil: USD 9 Mio.

MP3-Player:
Verkaufszahlen: 10 Millionen Einheiten
30% - SPAZ: 3 Millionen
SPAZ-Umsatz-Anteil: USD 1.500.000,00

TV und andere Segmente (grobe Schätzung)
SPAZ-Umsatz: USD 1.000.000,00


Daraus folgt folgendes Geschäftsergebnis für das Jahr 2002:
Umsatz: USD 20,66 Mio. = plus 143 %
Gewinn nach Steuern: USD 10,3 Mio. (bei unterstellter Umsatzrentabilität von 50 %, Vj. 35%) = plus 243 %
Gewinn pro Aktie: 0,22 USD (bei 47 Mio. Aktien) = plus 267 % gg. Vj.



Kursentwicklung

Die nun folgenden Aussagen zur Kursentwicklung basieren auf den oben angeführten, bereits teilweise durch verschiedene Veröffentlichungen belegten Zahlenwerken.
Natürlich ist diese Schätzung dennoch subjektiv und hegt keinen Anspruch auf Realisierung – sie stellt lediglich meine Meinung dar.

Kurzfristig (6 Monate)

Die kurzfristige Kursentwicklung steht ganz im Zeichen der anstehenden 4.Q-Zahlen. Erstmals in der Geschichte der Firma wird die magische Marke von 1.000.000,00 USD beim erzielten Umsatz überschritten, und das m.E. deutlich (siehe oben) !!!
Es wurde somit trotz hoher Investitionen ein deutlicher Umsatz- und Gewinnanstieg erwirtschaftet, was für die unternehmerische Kompetenz der handelnden Personen spricht.

Bei einem prognostizierten Gewinn pro Aktie von USD 0,02 und einem aktuellen Kurs von USD 0,50 ist die Aktie m.E. mit einem KGV von 25 völlig unterbewertet.
An der Börse wird die Zukunft gehandelt. In naher Zukunft erwirtschaftet SPAZ einen Gewinn von USD 0,06 pro Aktie.
Dies würde m.E. auch einen Kurs von USD 2,00 im Moment rechtfertigen.


Mittelfristig (bis Ende 2001)

Die mittelfristige Entwicklung bis zum Jahresende wird geprägt sein von ständig neuen Nachrichten über neue Lizenznehmer in den anderen Marktsegmenten als den DVD-Markt. Gleichzeitig werden die Quartalszahlen meine Gewinnprognosen untermauern.
Bei entsprechendem Börsenumfeld, das m.E. bis Ende des Jahres einen deutlichen turnaround erleben wird, und der Phantasie des Relistings an der Nasdaq wird der Kurs zum Jahresende Bereiche um die 4,00 bis 6,00 USD erreichen können.
Das Nasdaq-Listing wäre somit u.U. bereits zum Jahresende 2001 keine Utopie mehr.


Langfristig (bis zum Frühjahr 2003)

Das volle Potential der Firma wird sich im Jahre 2002 entfalten. Die Verbreitung des Spatializer-Soundes in allen Marktsegmenten wird fortschreiten und sich zum Standard in der Audio-Welt entwickeln.
Die o.a. Umsatz- und Gewinnentwicklungen werden Kurse von USD 10,00 bis USD 12,00 rechtfertigen.

Die 10-Euro-Party kann m.E. spätestens im Frühjahr 2003 stattfinden.



Fazit

SPAZ hat im Jahr 2000 alle Grundlagen geschaffen und abgeschlossen, um mit seinen Produkten Standard und damit Marktführer in der expansivsten Branche weltweit zu werden.
Trotz hoher Aufwendungen in den Bereichen Produktentwicklung, Infrastruktur und Marketing hat die Firma einen enormen Umsatz- und Gewinnanstieg erwirtschaftet, der sich in den Zahlen für das 4.Quartal/2000 wiederfinden wird.
Diese hervorragenden Zahlen für das Jahr 2000 werden jedoch nicht das Ende, sondern vielmehr der Startschuss für eine kontinuierliche dreistellige Erhöhung der Umsatzerlöse und Gewinne für die nächsten Jahre sein.

SPAZ ist m.E. die konservativste Versuchung seit es die OTC-BB gibt. Das Chancen-/Risikoverhältnis für Mittel- und Langfristinvestoren ist bei keinem Wert so einseitig chancenlastig wie bei SPAZ.
Der Firma gehört die Zukunft und allen Anlegern ebenso. In diesem Sinne Grüsse an alle SPAZ-Investierten und an die, die es werden wollen.



Haftungsausschluß:
Dieses Posting reflektiert lediglich meine persönliche Meinung und soll keinerlei Kauf-, bzw. Verkaufsempfehlung für Wertpapiere jeglicher Art darstellen.
Vor einem Wertpapierengagement sollte extensives eigenes fundamentales, sowie charttechnisches Research stehen. Ich behaupte keineswegs, daß das von mir skizzierte Szenario eintrifft - es stellt lediglich eine Möglichkeit dar.
....................................................................................................................................................................................


Und jeder der Zeit und die Muse hat sollte mal darüber nach denken ob es nicht Sinn macht immer etwas Spatializer im Depo zu haben.


Eine Spekulation kann man nur im nachhinein Analysieren und sich sicher sein ob die Entscheidung die man vor Zeiten getroffen hatte richtig oder Falsch war. Wie gesagt hinterher ist jeder schlauer aber wer sich Informiert kann dieses RISIKO für seine Investition versuchen möglichst gering zu halten...

Euch allen noch ein schönes Wochenende

Ciao
Vaio

[visitor]

Hi

Gratulation Vaio, gutes posting!
Selbst wenn man deine Zahlen nocheinmal um das 4-fache nach unten revidiert, wäre ein Kurs von ca. 1US Dollar bis Ende Jahr auf jeden Fall gererchtfertigt!

DAS HEISST, DASS SPATIALIZER IM MOMENT EINE MINIMUM KURSCHANCE VON 100% HAT! (vorrausgesetzt die allgemein-Börsen gehen nicht ganz den Bach ab, und wenn, dann verschiebt sich das Kursziel aus diesem Grunde nur etwas nach hinten!)

Noch eines, ich bin vorsichtig geworden, wir haben schon vor einem Jahr solche Rechnungen aufgestellt, diese gingen leider nicht in Erfüllung -- ABER ich glaube auch das mit den ganzen Verträgen, die zum Teil erst jetzt ins laufen gekommen sind und ins laufen kommen werden es eine andere Situation ist! Ich will auch nicht Spekulieren aber sobald Intel, Sony oder sonst noch andere großen Spatializer einbauen ist die Sache gelaufen, Spatializer ist ja jetzt schon der defacto standard bei DVD!

Aber wie du auch schreibst, wir sind alle keine Hellseher, nur eines glaube ich Henry, er hat das Ziel an die NASDAQ (SC)zu gehen und was das für den Kurs bedeuten muß ist wohl auch klar!

vis

[andy@spazy]

Hi Vaio
Ich hab`s mal geklaut für meine HP
cu
andy

next week news from sony ??
i think ................ ???

[Snare]

Hut ab - Vaio ..

Gruß, Snare

[Snare]

Acer - nicht neu aber immer wieder nett .

http://elife2.acer.com.tw/dvd.htm

Snare

wie blaeut man den Link ein ?

[CologneCroko]

@Snare

[ url ].....[ /url ]

So glaube ich.(ohne Leerzeichen in den Klammern)

Schönen Sonntag - croko

[Snare]

Danke Croko ...

Gruß, Snare

[Vaio]

Up

noch mal so... für alle neuen Investoren
(oder solche die es werden wollen)


Ciao
Euer Vaio

[Maybaum]

@Vaio
Erstmal noch ein Kompliment für Deine ausführliche Prognose.
Leider sind Deine und unsere Erwartungen nicht eingetroffen.
Ich bin mir nicht ganz sicher ob SPAZ auf dem richtigen Weg ist. Ich denke nicht, daß es ausreicht ein gutes Produkt zu entwickeln und dann damit kein Geld zu verdienen.
Sieht die Strategie so aus, erstmal viele Kunden zu gewinnen und später damit Geld zu verdienen oder läuft es nach dem Motto:
"Lieber Minus gemacht als gar kein Geschäft"
Da ich mir nicht sicher bin habe ich einen Teil meiner Aktien verkauft.
Irgendwer hat mal vorausgesagt, daß wir die 20 Cent sehen,
ich glaube jetzt auch daran.

Gruß!
Maybaum

[CologneCroko]

Ich fasse es nicht,habe tagelang nur mitgelesen.

Was sind 20% Minus für Spaz bei einer solchen(schlechten?) News ??????

NICHTS !

Geht doch wieder am Neuen Markt zocken,und schreibt BITTE nicht mehr LONG hinter Euren Namen.

Schließe mich andy an,vielen Dank für die schönen Kurse.

Croko

[Michiko]

Cologne!

Schimpfst Du jetzt nicht mit den falschen Leuten?

Ich bin natürlich auch enttäuscht, aber als echte Long hat sich
für mich grundsätzlich nichts geändert, außer dass die Euphorie
stark gebremst wurde.
Der Zeitrahmen hat sich für mich verschoben, sonst nichts.

Sonst nichts?

Hoffentlich nicht Folgendes: Wir haben uns falsche Vorstellungen
darüber gemacht, welche Lizenzgebühren pro unit möglich sind.
Oder: Wir haben Henry und Co cleverer eingeschätzt, als sie
wirklich sind.
DAS wäre wirklich ein Problem.

Auf jeden Fall werde ich JETZT nicht verkaufen, sondern erstmal
abwarten, bis sich der Pulverdampf gelegt hat.

Gruß an alle echten Longs, die Trader können mir gestohlen bleiben.

Michi

[Vaio]

los los verkauft nur alle...

ich bin und bleibe ein long!!!

und werde halt noch 1-2 Jahre warten.

Ciao
Vaio

P.S.: Muß mir mal die Zahlen genauer anschauen ... so extrem schlecht finde ich Sie garnicht.

[CologneCroko]

Sorry,es geht um DIE,die heute auf 500% und mehr gewartet haben.

Henry & co sind nicht clever&cool - sie sind ehrlich !!!

Aber mal muss es mal von der guten Seite sehen,das Zockerpack ist raus(dennoch nur 20% im Minus).

Viele Longs halten ihre shares gerade deswegen weiterhin,ich für meinen Teil kaufe nächste Woche nach,wenn cash da ist.

Um es anderen recht zu machen,Spatializer ist eine kleine Klitsche wenig Umsatz,unbekannt und abhängig von den "Großen" - aber sie schreiben mit SCHWARZEM Stift,das alleine zählt für mich.

cu Croko - go Spaz

[andy@spazy]

CC
ja man ist schwer entäuscht da man die andere richtung vermutet hat
statt 0,29 $ hatte ich mit 0,75$ gerechnet
was solls
ein hoffnungsschimmer habe ich noch
bei Q3 hatte henry VORHER eine super SAMSUNG news gebracht
Bei Q4 vielleicht danach ?
cu
andy

[karo1]

Bin gerade nach Hause ups, würg...Naja Spekulazius hatte mich ja schon vorgewarnt.

Seh es wie Michiko, das Modell von SPAZ sieht von aussen immer noch gut aus, wie fähig die Mannschaft um H.M. wirklich ist, werden wir in 1-2 Jahren wirklich sehen.

Und auch wenn es momentan so aussieht, SPAZ ist nicht mit einer Bäckerei zu vergleichen.
Das wir Probleme im Bereich der LIzenzgebühren pro Unit haben wissen wir schon seit dem 2.Q 2000. Dass dies so stark aussfallen wird überrascht mich unangenehn.


Ich schau mir dass jetzt erstmal in Ruhe an und verkaufe nicht. Der Kurs wird garantiert nicht ewig unten bleiben.

Karo

[Vaio]

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<SEC-DOCUMENT>0000950150-01-000098.txt : 20010329
<SEC-HEADER>0000950150-01-000098.hdr.sgml : 20010329
ACCESSION NUMBER: 0000950150-01-000098
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010328

FILER:

COMPANY DATA:
COMPANY CONFORMED NAME: SPATIALIZER AUDIO LABORATORIES INC
CENTRAL INDEX KEY: 0000890821
STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674]
IRS NUMBER: 954484725
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231

FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 000-26460
FILM NUMBER: 1581809

BUSINESS ADDRESS:
STREET 1: 20700 VENTURA BOULEVARD SUITE 140
CITY: WOODLAND HILLS
STATE: CA
ZIP: 91364
BUSINESS PHONE: [phone]

MAIL ADDRESS:
STREET 1: 20700 VENTURA BLVD SUITE 140
CITY: WOODLAND HILLS
STATE: CA
ZIP: 91364
</SEC-HEADER>
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<DESCRIPTION>FORM 10-K405 FOR PERIOD ENDING 12/31/00
<TEXT>

<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-K

------------------------
(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE PERIOD ENDED: DECEMBER 31, 2000

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 33-90532

SPATIALIZER AUDIO LABORATORIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 95-4484725
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

20700 VENTURA BOULEVARD, SUITE 140
WOODLAND HILLS, CALIFORNIA 91364-2357
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

TELEPHONE NUMBER: [phone]
(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 [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant`s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of
the registrant at March 8, 2001 was approximately $18,500,000.

As of March 8, 2001, there were 47,401,939 shares of the Registrant`s
Common Stock outstanding.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

PART I

ITEM 1. BUSINESS

Overview

Spatializer Audio Laboratories, Inc. ("The Company" or "we") is a leading
developer, licensor and marketer of next generation technologies for the
consumer electronics, personal computing, enterprise computing and entertainment
industries. Our position as a leading developer of next generation technologies
is based on our strong relationships with brand leaders, such as Apple, Toshiba
and Hitachi. We conduct our audio business through our parent company and our
wholly owned subsidiary, Desper Products, Inc. ("DPI"). DPI has developed a full
complement of patented and proprietary 3-D or virtual audio signal processing
technologies directed to the consumer electronics and multimedia PC markets. We
continue to expand our product offerings to take advantage of the emerging
digital audio marketplace specifically for consumer products like Digital
Versatile Disc ("DVD") players, portable mp3 players, digital televisions and
digital home, portable and auto entertainment devices. As of December 31, 2000,
more than 25 million licensed units had been shipped covering all of these
applications. DPI`s virtual audio signal processing technologies are currently
incorporated in products offered by global brand leaders including in consumer
electronics, Toshiba, Panasonic, JVC, Hitachi, Mitsubishi, Samsung, Sanyo, LG
Electronics, Zenith, Sharp and Proton, in the PC multimedia marketplace by Apple
Computer, among others, and on the Internet through software plug-ins for the
WinAmp and Linux-based XMMS mp3 players. We are focused on broadening
recognition for the Spatializer brand name through association with these and
other globally recognized consumer electronics and multimedia computer brand
leaders, and on broadening our audio technology and software base to position
ourselves for continued growth. We believe that with the accelerating growth in
the digital audio/video marketplace, the market for virtual audio technologies,
and therefore for our products, is entering a new phase of opportunity.

Our other wholly owned subsidiary, MultiDisc Technologies, Inc., ("MDT")
formed in June 1996 when we acquired development stage optical disc storage and
robotics assets and technologies from Home Theater Products, International,
Inc., a debtor in possession, is now inactive. In September 1998, we announced
our plan to refocus our business on the exploitation of our core audio
technologies, suspend research and development at MDT and to properly position
the MultiDisc assets for sale. Therefore, MDT has been accounted for as a
discontinued operation. Since 1998 we have been unsuccessful in identifying a
purchaser for this technology. This repositioning strategy recognized that the
capital investment required to properly commercialize the MDT technology was
beyond our current capacity. We believe this strategy provides a better
opportunity to further solidify our position as a leading provider of virtual
audio solutions, based on available capital resources.

In December 1999, we completed the placement of $1 million of Common Stock,
at no discount from market, the conversion of $1 million of short-term debt to
new Series B Redeemable Convertible Preferred Stock and the restatement of
$225,000 of existing secured debt to secured long-term debt (the "December
Transactions"). The December Transactions significantly strengthened our balance
sheet and restored working capital and shareholder`s equity. The resulting
liquidity allowed us to emerge from turnaround mode and to pursue growth and
operating stability in 2000.

Our executive offices are located at 20700 Ventura Boulevard, Suite 140,
Woodland Hills, California 91364, Telephone [phone]. We maintain a
Website at www.spatializer.com. We were incorporated in the State of Delaware in
February, 1994.

DESPER PRODUCTS, INC. -- VIRTUAL AUDIO SIGNAL PROCESSING TECHNOLOGIES

DPI has developed a suite of proprietary advanced audio signal processing
technologies for the entire spectrum of applications falling under the general
category of virtual audio. The objective in each product category is to create
or simulate the effect of a multi-speaker sonic environment using two ordinary
speakers (or headphones) for playback. The market for virtual audio is segmented
into five broad categories of technology as identified in the listing below.
Each of these technologies utilizes different underlying scientific principles
in accomplishing its design objectives and is targeted to a specific class of
consumer electronics or multimedia computer depending on the intended product
use and functional capability of the product. DPI currently has other audio
signal processing technologies under development which will serve to expand its
market scope and partner product capabilities.


2
<PAGE> 3

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CATEGORY OF TECHNOLOGY PRODUCT CATEGORIES VIRTUAL AUDIO ENHANCEMENT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
3-D Stereo Consumer electronics products Surround Sound enhancement from an
(Spatializer(R) 3-D Stereo) providing stereo playback -- DVD ordinary stereo signal
Players, Stereo TV`s, VCR`s,
Stereo Components and Systems, Car
Audio, Laptop and Desktop
Multimedia Computers, Set-top
Boxes
- ----------------------------------------------------------------------------------------------------------
Two-Speaker Virtualization Products incorporating Creation of spatially accurate
(Spatializer N-2-2(TM)) multi-channel audio sources like multi- speaker cinematic audio
Digital Virtual Surround Dolby Digital(R) (AC-3), Dolby experience from two speakers, and
ProLogic(R) or MPEG-2. Home headphones utilizing discrete
Theater, DVD-Video, Multimedia multi-channel audio information.
Computers utilizing DVD/MPEG and
decoding.
- ----------------------------------------------------------------------------------------------------------
Bass Enhancement Consumer electronics products Simulation of lower frequency
(Vi.B.E.(TM)) providing stereo playback -- DVD response from speakers with
Players, Stereo TV`s, VCR`s, relatively high low frequency
Stereo Components and Systems, Car capability
Audio, Laptop and Desktop
Multimedia Computers and Speakers
- ----------------------------------------------------------------------------------------------------------
Internet Audio Enhancement Laptop and Desktop Multimedia Surround Sound and bass
(Spatializer(R) Computers and portable music enhancement to playback of
StreamFX(TM)) devices running MP3 media player ordinary MP3 files
Software
- ----------------------------------------------------------------------------------------------------------
Headphone Virtualization Products incorporating Creation of spatially accurate
(Spatializer Natural multi-channel audio sources like multi- speaker cinematic audio
Headphone(TM)) Dolby Digital(R) (AC-3), Dolby experience from headphones
Digital Virtual Surround ProLogic(R), MPEG-2 or stereo. utilizing discrete multi-channel
Home Theater, DVD-Video, audio information.
Multimedia Computers utilizing
DVD/MPEG Decoding or stereo.
- ----------------------------------------------------------------------------------------------------------
</TABLE>

LICENSED PRODUCTS

Our current technology product applications are directed to (1) two-speaker
and headphone virtualization of multi-channel audio for DVD players and home
theater applications, (2) stereo and bass enhancement in consumer electronics
products and multimedia PCs, and (3) downloadable software, purchased directly
by consumers, delivering audio enhancement applications for PCs .

1. SPATIALIZER(R) 3D STEREO. Based upon proprietary and patented methods of
stereo signal processing, the Company`s Spatializer(R) 3-D Stereo
technology 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 the
Company`s unique DDP(TM) (Double Detect and Protect(TM)) algorithm.
DDP(TM) 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 four chip foundries (Matsushita, ESS
Technologies, Inc., OnChip Systems and Luxsonor) 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 Stereo
effect in a simplified, lower cost package.

2. SPATIALIZER(R) N-2-2(TM) DIGITAL VIRTUAL SURROUND. In September 1996,
DPI introduced Spatializer N-2-2, which the Company considers a "core",
and "enabling" technology for DVD based home theater products and
personal computers. Through outstanding performance and continuous
enhancement, Spatializer N-2-2 has emerged as the "de facto standard"
for virtual surround sound as measured by most brand adoptions and
market share of such brands in the DVD player market. DVD is considered
by many to be the single most important and fastest adopted consumer
audio/computer technology ever introduced. The audio standards for DVD
(based upon geographic region) are multi-channel audio formats (Dolby
Digital(R) (AC-3) and MPEG-2) which carry six (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


3
<PAGE> 4

effects. The Spatializer N-2-2 software- 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-2-2
runs in real-time on general purpose Digital Signal Processing ("DSP")
hardware platforms like those offered by C-Cube, Acer Labs, Inc.,
Motorola, VM Labs and Zoran; may be integrated with host based
software-only MPEG-2 or DVD decoders (like WinDVD and DVDExpress,
offered by Intervideo and Mediamatics, respectively, for the Intel(R)
Pentium(R) 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-2-2 has been
approved by Dolby Laboratories and qualifies Spatializer licensees to
use the newly created Dolby Digital VIRTUAL(TM) trademark on products
incorporating the technology. We believe our Spatializer N-2-2 process
will serve 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.

3. SPATIALIZER(R) VI.B.E(TM). 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. SPATIALIZER(R) STREAMFX(TM). First introduced by DPI in 1999,
Spatializer StreamFX creates a dramatic and enveloping sound experience
out of any pair of regular speakers or headphones when playing MP3 music
files. Spatializer StreamFX utilizes Spatializer 3-D Stereo and is a
long-time favorite of both movie and sound studios in addition to
numerous audio product manufacturers. Combined with Vi.B.E., this
product widens and deepens the soundfield to surround the listener with
rich and ambient enhanced audio. A headphone option generates the same
equally immersive experience over headphones creating a dramatic audio
experience.

5. SPATIALIZER(R) NATURAL HEADPHONE(TM). Spatializer 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.

In addition to these technologies, we offer a series of products introduced
by DPI under the Spatializer DigitalFX(TM) brand, first introduced in early
2000. The Spatializer DigitalFX series is a comprehensive audio enhancement
software solution based on the Company`s Spatializer N-2-2 virtual surround
sound technology and Spatializer Vi.B.E., the Company`s virtual bass enhancement
technology, combined with additional audio effects tailored and optimized for
specific product applications. This powerful combination of technologies in a
single product targeted for specific product applications provides a highly
efficient and cost effective solution for the television, portable MP3, PDA, AV
Receiver, PC and car audio markets.

Spatializer Digital TVFX(TM) is a customized application of Spatializer
technology optimized for digital and analog televisions with an on board digital
signal processor. Spatializer integrates its original, patented 3D Stereo and
N-2-2 technologies with speaker-compensation and Vi.B.E. bass enhancement
algorithms. The digital processing of the stereo signal provides a striking and
immersive audio experience while the virtual bass enhancement creates apparently
deeper bass response from the small speakers utilized by most televisions.
Optional reverb and equalizer features further enhance the audio experience. The
result is a dramatic improvement to the overall audio soundfield provided by the
television. Spatializer Digital TVFX is 100% digital, and applicable to any TV
system with an embedded DSP.

Spatializer Digital OntheGoFX(TM) is targeted specifically for portable MP3
player devices, including Personal Data Assistants (PDAs). According to industry
analysts, the portable MP3 player market is expected to grow to 32 million units
sold by 2003. Spatializer Digital OntheGoFX shares the same core 3D stereo
technology as other members of the Spatializer DigitalFX series, but includes a
highly effective headphone algorithm which produces an expanded headphone audio
experience.. In addition, the included Vi.B.E technology is particularly
effective in improving the limited bass response of inexpensive lightweight
stereo headphones often incorporated into these devices. The algorithms are
highly efficient, utilizing a minimal amount of MIPS any standard embedded DSP.



4
<PAGE> 5

Spatializer Digital PCFX(TM) combines the entire suite of respected
Spatializer audio technologies into a single, comprehensive and cost effective
software audio solution for the Wintel platform. Since the product runs on the
host CPU, with minimal CPU utilization, no discrete chip is required.
Spatializer Digital PCFX provides Spatializer 3-D stereo, Spatializer N-2-2
virtual surround sound for DVD playback, Vi.B.E virtual bass enhancement and
enCompass(TM), Spatializer`s positional audio technology for computer games
utilizing the Microsoft DirectXTM API. Spatializer technology has been utilized
by Apple Computer across their product platforms since October 1999.

Spatializer Digital AVFX(TM) is tailored for AV Receivers equipped with a
Dolby Digital decoder.. Spatializer Digital AVFX provides Spatializer 3-D
stereo, Spatializer N-2-2 virtual surround sound for DVD audio or video
playback, Vi.B.E virtual bass enhancement and in the future, extensive room
modeling and customized effects.

Spatializer Digital AutoFX(TM) enhances the audio performance of DSP-based
car stereo systems by delivering Spatializer`s acclaimed 3-D stereo, bass
enhancement, equalizer and reverb technology in a single solution. Optional
positional audio voice cues for on board GPS and navigation systems, virtual
surround sound for on board DVD player systems and space modeling will be
offered as per customer requirements.

LICENSING ACTIVITIES

We have traditionally licensed our technologies through semiconductor
manufacturing and distribution licenses ("Foundry Licenses") with semiconductor
foundries ("Foundries"). In turn, these Foundries manufacture and distribute
integrated circuits ("ICs") or digital signal processors ("DSPs") incorporating
Spatializer technology to manufacturers of consumer electronics and multimedia
computer products ("OEMs").

The terms of many of the Foundry Licenses are negotiated on an
individual basis requiring the payment of a per unit running royalty according
to sliding scales based upon cumulative volume. Some of the licenses call for
the payment of an up-front license issuance fee either in lieu of, or in
addition to the running royalty. Other agreements require the OEM customer,
rather than the foundry, to pay the royalty. Per unit royalties are payable in
the quarter following shipment from the Foundry to the OEM.

OEMs who desire to incorporate these ICs into their products are required
to enter into a license ("OEM Licenses") with us before they may purchase the
ICs in quantity. Foundry Licenses generally have limited the sale of Spatializer
ICs to OEMs who have entered into an OEM License with us. OEM licenses generally
provide for the payment of a further per unit royalty by the OEM for OEM
products incorporating a Spatializer IC ("Licensed Products") payable in the
quarter following shipment by the OEM of its Licensed Products.

In mid-1996, we modified our licensing program to ease the licensing
process and accelerate cash flow by offering Foundries an alternative "Bundled
Royalty" arrangement which permits the IC foundry to make a traditional
component IC sale to an OEM without requiring the OEM to negotiate a separate
royalty license agreement with the Company. In these situations, the IC Foundry
is authorized to sell Spatializer ICs to OEMs, which enter into a simplified
Logo Usage Agreement ("LUA"), or to be authorized customers in consideration for
a higher ("bundled") per unit royalty from the IC Foundry. This license
structure has relieved much of the licensing burden from the IC foundries and
has resulted in an increase in License signings.

In 2000, we began offering IC and DSP foundries the option of entering into
a non-royalty bearing distribution agreement with us. Under this business model,
the foundry offers Spatializer technology as an optional feature, promotes our
technology in their sales materials and cooperates with the Spatializer sales
force in closing license agreements for Spatializer technology with the OEM
customer. This business model provides the foundry with an additional selling
feature at no additional cost to the foundry. The OEM can obtain use of the
technology directly from Spatializer without any additional mark-up from the
foundry.

In early 2001, we agreed with C-Cube Semiconductor II to unbundle the
royalty on their DSPs in order to facilitate the licensing of multiple
technologies to OEM manufacturers and to help ensure that their products
remained highly competitive in the market. As such, on April 1, 2001, C-Cube`s
customers using Spatializer technology will enter into direct licenses with us.
These agreements, with Samsung Electronics and LG Electronics have been closed.

Because the Spatializer N-2-2 technology may be fully implemented in
software to run in host based (Intel Pentium(R)) or general purpose DSP
environments, no IC Foundry may be involved, as is the licensing arrangement
with Apple Computer, Inc. In these



5
<PAGE> 6

situations, we will enter into royalty bearing licenses directly with the OEM.
However, we may still pursue bundled agreements with DSP providers, if
appropriate.

We are currently negotiating new IC/DSP Foundry and OEM licenses for
Spatializer N-2-2, Spatializer Vi.B.E., Spatializer 3-D stereo and combinations
and optimizations of these technologies under the Spatializer DigitalFX series.

IC/DSP Foundry Licenses

In 2000 and early 2001, VM Labs, Inc., MIPS Technologies, New Japan Radio
Corporation ("NJRC"), Tvia, Inc. and Link Up Systems. entered into Foundry
License or Distibution Agreements for Spatializer N-2-2 and or DigitalFX. All
but the NJRC agreements were non-royalty bearing distribution agreements, with
per unit royalties to be paid by the OEM customer.

As of December 31, 2000, we have entered into eleven non-exclusive Foundry
Licenses for its Virtual Audio Signal Processing technologies with Matsushita
Electronics Corporation ("MEC"), ESS Technology, Inc. ("ESS"), OnChip Systems,
Inc. ("OnChip"), C-Cube Technologies, Inc. ("C-Cube"), Acer Labs, Inc. ("Ali"),
Luxsonor, VM Labs, Inc., MIPS Technologies, NJRC, Tvia, Inc. and Link Up
Systems. Many Foundry Licenses generally require the payment of per unit running
royalties based upon a sliding scale computed on the number of Spatializer ICs
or DSPs sold.

As of December 31, 2000, more than 25 million ICs and DSPs incorporating
Spatializer 3-D audio signal processing and N-2-2 digital virtual surround sound
technology had been manufactured and sold.

OEM Licensees and Customers

As of December 31, 2000, our technology has been incorporated in products
offered by over 90 separate OEM Licensees and customers on various economic and
business terms. Some of these OEM Licenses required a license issuance fee
and/or a separate per unit royalty, while others were licensed under the LUA or
were authorized customers under bundled royalty licenses with the IC foundries.
The OEM licensees and customers offer a wide range of products, which include
DVDs, car stereo systems, direct view TVs, wide screen and projection TVs, VCRs,
powered speakers, portable audio systems ("Boomboxes"), HiFi stereo systems and
components, computer sound cards and graphics accelerator cards, multimedia
desktop personal computers, notebook computers, LCD projectors, multimedia
computer monitors, and arcade pinball and video games.

The following table is a partial list of the OEM Licensees and authorized
customers as of December 31, 2000:

<TABLE>
<CAPTION>
- --------------------------------------------- ---------------------------------------------
PARTIAL LIST OF OEM LICENSEES OR CUSTOMERS LISTING -- CONTINUED
- --------------------------------------------- ---------------------------------------------
<S> <C>
Apple Computer Inc. NEC
Compaq Computer Corp. Panasonic TV & VCR (Matsushita Kotobuki
Dell Computer Corp. Electronics Industries, Ltd.)
Digital Technology Systems Of California, Panasonic Car Audio (Matsushita
Inc. Communications Industrial Co., Ltd.)
Emerson Proton Electronic Industrial Co., Ltd.
Fujitsu Computer Corp. Samsung
Hewlett Packard Seiko Epson Corp.
Hitachi, Ltd. Sanyo Corp.
Iiyama Electric Co., Ltd. Sharp Corp.
Gateway Computer Corp. Toshiba DVD
Golden Regent Toshiba TV
LG Electronics Taisei Electric, Inc.
JVC Taiyo Electric Company, Ltd.
Labtec Enterprises, Inc. Texas Instruments
Mag Monitors Theta Digital
Marantz VM Labs, Inc.
Micron Computer Corp Zenith
Mitsubishi Image and Information Works
- --------------------------------------------- ---------------------------------------------
</TABLE>



6
<PAGE> 7

HARDWARE PRODUCTS

Sales of our professional and consumer hardware products to date have not
generated significant revenues and we do not plan to manufacture these products
in the future. Instead, we are focusing our attention on licensing these product
designs to third parties and concentrating on software-only products and
"plug-ins" for use with MP3 players for PC platforms and portable audio devices.

MultiDisc Technologies, Inc. -- Network Based Modular, Scalable Compact Disc/DVD
Servers

As its first effort to broaden our technology portfolio and capitalize on
our strong relationships with manufacturers of consumer electronics and personal
computer peripheral products, we acquired certain developmental stage
technologies and assets from Home Theatre Products ("HTP"), for approximately
$1,062,000 in June 1996 and formed a subsidiary, MDT. The MultiDisc transaction,
which was implemented through a court-approved sale in the HTP bankruptcy
proceeding, included an array of compact disc server robotics and software
technologies in various stages of completion. The MultiDisc transaction was
intended to position us for long term growth in a significant new market. Our
intention was to license this technology or enter into third party manufacturing
arrangements for sale of MDT CD/DVD changer products to OEMs.

The MultiDisc transaction brought a unique combination of proprietary
electromechanical designs, robotics, operating software, firmware, intellectual
property, and engineering know-how and five patent applications acquired in the
asset acquisition. MDT added an additional forty-seven patent applications filed
with the United States Patent & Trademark Office ("USPTO") to bring the total to
fifty-two patent applications filed.

On September 25, 1998, we announced our plan to refocus our business on the
exploitation of its core audio technologies and to properly position the
MultiDisc assets for sale. The repositioning strategy recognized that the
capital investment required to properly commercialize the MDT technology was
beyond the Company`s capacity. As a result, all operations, including research
and development activities, were suspended and the Company has accounted for MDT
as a discontinued operation. The Company has explored the sale of the business
or the patent portfolio with interested parties, but to date, no transaction has
been consummated.

Revenues and Expenses

We generate revenues in its audio business from royalties pursuant to its
Foundry, OEM, and other licenses, and from non-recurring engineering fees to
port our technologies to specific licensees` applications. The Company`s
revenues, which totaled $2,201,812 in 2000, were derived almost entirely from
Foundry and OEM license fees and royalties.

We seek to maximize return on our intellectual property base by
concentrating our efforts in very high margin licensing and software products
and have eliminated our hardware product operations. Licensing operations have
been managed internally by our personnel and through use of an international
sales rep force.

We had three major customers, C-Cube Technologies, Inc., Apple Computer,
Inc. and Toshiba Corporation in 2000, each of whom accounted for greater than
10% of our total 2000 revenues. One OEM accounted for 36%, another accounted for
35% and one accounted for 14% of our royalty revenues during 2000. Two other
accounts comprised 9% and 7% of total 2000 revenues. All other OEM`s accounted
for less than 1% of royalty revenues individually.

In September, 1998, the U.S. Court of Appeals for the Federal Court upheld
the U.S District Court`s ruling of August 1996, in which we prevailed in a
22-month legal battle over its 3-D Stereo intellectual property when the U.S.
District Court granted the Company`s motion for summary judgment against a
competitor`s assertions of patent infringement.. (See ITEM 3 -- LEGAL
PROCEEDINGS, Page 8, for further detail). The uncertainties caused by the patent
litigation had hindered our corporate results, particularly since licensing
revenue depends upon OEM unit shipments, which follow three to four quarter
production cycles. The resolution of this litigation contributed to the
Company`s ability to attract new licensing and financing arrangements and to
reposition the Company for positive growth in profitability.

In September 1998, we implemented cost cutting measures in conjunction with
the suspension of our research and development activities at MDT and to further
rationalize the overhead of DPI and the overall corporate structure in response
to lower levels of operating performance. The result of these initiatives was to
reduce 1999 operating costs from 1998 levels, which enabled the Company to
achieve profitable operating results in 1999 and to remain profitable in 2000.



7
<PAGE> 8

Competition

VIRTUAL AUDIO SIGNAL PROCESSING MARKETPLACE

We compete with a number of entities that produce various audio enhancement
processes, technologies and products, some utilizing traditional two-speaker
playback, others utilizing multiple speakers, and others restricted to headphone
listening. These include the consumer versions of multiple speakers, matrix and
discrete digital technologies developed for theatrical motion picture exhibition
(like Dolby Digital(R), Dolby ProLogic(R), and DTS(R)), as well as other
technologies designed to create an enhanced stereo image from two or more
speakers.

Our principal competitors in the field of virtual audio are QSound Labs,
Inc. ("QSound") and SRS Labs, Inc In addition, some DSP foundries and OEMs have
proprietary virtual audio technologies. In the future, our products and
technologies also may compete with audio technologies and product applications
developed by other companies including entities that have business relationships
with the Company.

We believe that we will favorably compete in this market because we offer a
single source, complete suite of patented and proprietary 3D Stereo, interactive
positional, and speaker virtualization technologies. By virtue of our
specialized engineering and OEM support, we can offer a "turn-key" audio
solution to OEMs who do not possess this expertise internally. In addition, the
strength of our IC Foundry and OEM relationships and the Spatializer brand name
recognition in the industry are other key differentiators between both our
branded and unbranded competition.

Patents, Trademarks and Copyrights

Our core signal processing technology is covered by our U.S. patent
5,412,731, issued May 2, 1995. On July 15, 1997, the Company filed a patent in
the U.S. Patent office on our N-2-2(TM) intellectual property with the U.S.
Patent Office. On March 20, 1998, we filed a patent on our enCompass V 2.0
technology with the U.S. Patent Office covering the Company`s enCompass 2.0
positional audio gaming technology. In June 2000, we filed an additional patent
application for our reduced cost/higher performance 3-D Stereo circuit design.
Much of our intellectual property consists of trade secrets. We possess
copyright protection for its principal software applications and has U.S. and
foreign trademark protection for its key product names and logo marks.

The MultiDisc transaction brought a unique combination of proprietary
electromechanical designs, robotics, operating software, firmware, intellectual
property, and engineering know-how and five patent applications acquired in the
asset acquisition. MDT added an additional forty-seven patent applications filed
with the United States Patent & Trademark Office ("USPTO") to bring the total to
fifty-two patent applications filed. However, due to the absence of working
capital and suspension of all operating activities of MDT, MDT cannot pursue
these applications and some applications have lapsed. The core MDT data storage
technology is covered by U.S. patents 5,774,431, 5,822,283, 5,886,960 and
5,886,974. MDT have either obtained or applied for U.S. trademark protection for
its principal product names and logo marks.

On September 25, 1998, we announced our plan to refocus our business on the
exploitation of our core audio technologies and to properly position the
MultiDisc assets for sale. The repositioning strategy recognized that the
capital investment required to properly commercialize the MDT technology was
beyond our capacity. As a result, operations, including all research and
development activities were suspended and we have accounted for MDT as a
discontinued operation.

Employees

We began 2000 with five full-time and six part-time employees and sales
representatives and increased our staff to six full time and twelve part-time
employees, consultants and sales representatives by December 31, 2000. At
year-end, there were three full-time employees and two consultants engaged in
research and development. We employ the services of outside professional
consultants, particularly in the engineering area, due to the tight labor market
for such professionals in Silicon Valley as well as the need for specialized
expertise in the course of our business. None of our employees are represented
by a labor union or are subject to a collective bargaining agreement. We
consider our relations with our employees and consultants to be satisfactory.



8
<PAGE> 9

PART II

ITEM 2. PROPERTIES

Our executive office is located in Woodland Hills, California where we
occupy approximately 900 square feet with an annual rent of approximately
$32,000. The lease term on this space is month to month. During 2000, we also
had leased facilities in Santa Clara, CA.

Our operations office in Santa Clara, CA, is the primary location for our
audio technology division, ("DPI"). We occupy approximately 2,700 square feet
with an annual rent on a full service basis of approximately $75,000. The lease
expires on November 30, 2002.

We lease an apartment in Santa Clara, CA for use by the chief executive
officer when away from the executive office. The annual rent on this apartment
is approximately $18,000. The lease expires on June 30, 2001.

We lease our space at rental rates and on terms which management believes
are consistent with those available for similar space in the applicable local
area. Our properties are well maintained, considered adequate and are being
utilized for their intended purposes.

ITEM 3. LEGAL PROCEEDINGS

In February 1999, a complaint was filed in the Superior Court of Los
Angeles County, Northwest District, by I.N. Associates, Inc., against the
Company`s wholly owned subsidiary, MultiDisc Technologies, Inc. ("MDT"),
alleging breach of contract and fraud, and claiming $499,954 in damages,
attorneys fees, interest and the costs of suit. MDT has answered and denied the
claims. The matter was subject to a mediation preceding in March 2000, and has
been settled. The settlement specifies that I.N. will be entitled to a cashless
exercise of warrants for the 125,000 shares originally issued to them in 1997
and 1998, or a cash payment of $50,000 if the warrants remained unexercised. In
January 2001, the cash payment was made and no further liabilities or
contingencies exist.

In connection with the downsizing of the Company, a number of employees
were terminated and have filed, on various dates since the downsizing in 1998,
various employment and compensation related claims with the various State labor
authorities, all but two of which claims have either been settled or have been
paid as of the date of this report. In February, 2000, an appeal was heard in
the Superior Court of Orange County, California, relating to a claim filed by a
former employee of MDT for back vacation pay and penalties. In March 2000, both
parties agreed to dismiss the action as part of a settlement, which was not
material to the financial statements for the period ended March 31, 2000. In
July 2000, the Labor Commission of the State of California awarded $122,000 to a
claimant arising from a claim for commissions over a three-year period. We
appealed the order to the Superior Court of California, Santa Clara County,
since, under California law, the Labor Commission order will have no effect on
the court`s consideration of the matter. On October 27, 2000, the matter was
settled by mutual release and payment in an amount which was not material to the
financial statements of the Company for the period ended September 30, 2000. Two
former officers and employees of MDT initiated proceedings before the Labor
Commissioner in 2000 seeking amounts allegedly due under their employment
agreements, which claims, if resolved in favor of the claimants, could be
material to the financial statements of the Company. The Labor Commissioner has
postponed those proceedings. In that action, the claimants filed a motion to
strike the MDT complaint under the California "anti-Slapp" legislation. The
Court rejected that motion and the litigation is in the discovery stages.
Separately, MDT has initiated litigation in the Superior Court, Orange County
seeking declaratory relief to bar the labor claims, as well as return of
intellectual property and unspecified damages for breaches of the former
officers` and employees` employment agreements.

We also anticipate that, from time to time, we may be named as a party to
other legal proceedings that may arise in the ordinary course of its business.

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

There were no matters submitted to a vote of the security holders of the
Company either through solicitation of proxies or otherwise in the fourth
quarter of the fiscal year ended December 31, 2000.



9
<PAGE> 10

ITEM 5. MARKET FOR REGISTRANT`S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock trades on the OTC Bulletin Board under the symbol "SPAZ".
The following table sets forth the high and low sales price of our Common Stock
on its principal market for fiscal years 1999 and 2000:

<TABLE>
<CAPTION>
PERIOD: HIGH (U.S. $) LOW (U.S. $)
- ------- ------------- ------------
<S> <C> <C>
1999
First Quarter..................................... $0.44 $0.08
Second Quarter.................................... $0.36 $0.08
Third Quarter..................................... $0.90 $0.20
Fourth Quarter.................................... $0.96 $0.26
2000
First Quarter..................................... $2.56 $0.94
Second Quarter.................................... $1.56 $0.44
Third Quarter..................................... $1.06 $0.50
Fourth Quarter.................................... $0.69 $0.19
</TABLE>

On March 8, 2001, the closing price reported by the OTC Bulletin Board was
U.S. $0.39. Stockholders are urged to obtain current market prices for our
Common Stock. Since April 1, 1997, Computershare Investor Services, through its
purchase of the transfer agent business in 2000 of Harris Trust Company of
California, has been our transfer agent.

RECORD HOLDERS

To our knowledge there were approximately 125 holders of record of the
stock of the Company as of March 8, 2001. However, our transfer agent has
indicated that beneficial ownership is in excess of 3,300 shareholders.

DIVIDENDS

We have not paid any cash dividends on its Common Stock and have no present
intention of paying any dividends. Our current policy is to retain earnings, if
any, for use in operations and in the development of its business. Our future
dividend policy will be determined from time to time by the Board of Directors.



10
<PAGE> 11

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Company`s Consolidated Financial Statements and related
Notes and with "Management`s Discussion and Analysis of Financial Condition and
Results of Operations", included in Item 7. The selected data presented below
under the headings "Consolidated Statement of Operations Data" and "Consolidated
Balance Sheet Data" as of and for the years ended December 31, 1997 and 1996 are
derived from the consolidated financial statements of Spatializer Audio
Laboratories, Inc. and subsidiaries, which consolidated balance sheets have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
selected financial data for the years ended December 31, 2000, 1999 and 1998 are
derived from the Company`s consolidated financial statements which have been
audited by Farber & Hass LLP, independent certified public accountants. The
consolidated statements of operation and cashflows for the year ended December
31, 2000 and the report thereon are included elsewhere in this Report.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues..................... $ 2,024 $ 2,781 $ 1,680 $ 1,660 $ 2,202
Cost Of Revenues............. (186) (230) (134) (49) (248)
----------- ----------- ----------- ----------- -----------
Gross Profit................. 1,838 2,551 1,546 1,611 1,954
Total Operating Expenses..... (27,042)(3) (7,238) (3,490) (1,156) (1,596)
Other Income (Expense),
Net........................ 119 27 (108) (94) 34
Loss from Discontinued
Operations................. (3,702)
Income taxes................. (310) (60) (38) (6) (10)
----------- ----------- ----------- ----------- -----------
Net Income (Loss)............ $ (25,395)(4) $ (4,720) $ (5,792) $ 355 $ 382
----------- ----------- ----------- ----------- -----------
Basic Income (Loss) Per
Share(5)................... $ (2.01) $ (0.23) $ (0.29) $ 0.01 $ 0.01
=========== =========== =========== =========== ===========
Diluted Income (Loss) Per
Share(5)................... $ (2.01) $ (0.23) $ (0.29) $ 0.01 $ 0.01
=========== =========== =========== =========== ===========
Weighted Average Common
Shares..................... 12,644,751 20,604,095 22,180,180 33,805,512 46,736,224
=========== =========== =========== =========== ===========
CONSOLIDATED BALANCE SHEET
DATA:
Cash and Cash Equivalents.... $ 1,587 $ 577 $ 264 $ 1,022 $ 1,468
Working Capital (Deficit).... 2,092 83 (1,975) 395 1,195
Total Assets................. 4,141 3,165 893 2,118 2,457
Advances From Related
Parties.................... 113 113 857 337 337
Total Shareholders` Equity
(Deficit).................. $ 3,268 $ 1,525 $ (1,553) $ 768 $ 1,651
</TABLE>

- ---------------
(1) Not used.

(2) Not used.

(3) Includes two one-time significant changes. Compensation Expense of
$20,218,450 was recorded associated with the transfer of the Company`s
performance shares from Canadian Escrow into a new escrow arrangement which
will provide for the release of the performance shares over the next six
years. Based on the revised escrow arrangement, which primarily converts the
escrow shares release from performance criteria to time-based criteria, the
Company recorded compensation expense on the date the new escrow arrangement
terms were accepted by the Company. Additionally, In-Process Research &
Development ("IPR&D") expense of $679,684 related to the allocation of costs
was incurred as a result of the MultiDisc Technologies, Inc. ("MDT") asset
acquisition in June 1996.

(4) The Company incurred and paid Canadian income taxes in the amount of
$249,000 during the year associated with the liquidation of
Spatializer-Yukon, the Company`s Canadian predecessor.

(5) Loss per share has been calculated based on the weighted average number of
common shares outstanding including escrowed performance shares, which are
factored into the calculation as of December 30, 1996, the date on which the
British Columbia Securities Commission ("BCSC") issued its consent to the
Company`s revised escrow arrangement.



11
<PAGE> 12

ITEM 7. MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis relates to the financial condition
and results of operations of Spatializer Audio Laboratories, Inc. and
subsidiaries (the "Company") for the year ended December 31, 2000 compared to
the year ended December 31, 1999, and the year ended December 31, 1999, compared
with the year ended December 31, 1998.

RESULTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2000, COMPARED TO THE YEAR ENDED DECEMBER 31,
1999

REVENUES

Revenues increased to $2,202,000 for the year ended December 31, 2000
compared to $1,660,000 for the year ended December 31, 1999, an increase of 33%.
Revenues include license issuance fees and royalties pertaining to the licensing
of Spatializer(R) audio signal processing designs and non-recurring engineering
fees.

The increase in revenues is attributed primarily to the inclusion of four
quarters of royalties from a major account for which there was only one quarter
of royalty and a non-recurring engineering fee in the prior year and increases
in Spatializer N-2-2 running royalties from OEM DVD player sales. This increase
in revenues was partially offset by decreases in per unit Spatializer N-2-2
royalties due to a volume-based sliding scale pricing structure with DSP
foundries agreed to in prior years when the original agreements were made. By
the beginning of the third quarter of 2000, pricing levels at the maximum volume
levels were substantially achieved, resulting in a stabilization of the per unit
royalty rate.

Gross profit increased to $1,954,000 for the year ended December 3, 2000
compared to $1,612,000 in the comparable period last year. Gross margin
decreased to 89% of revenue in the year ended December 31, 2000 compared with
97% of revenue for the comparable period last year. The increase in gross profit
results from higher revenues in the current year, partially offset by lower
gross margin. This decrease in the gross margin percentage reflects the
restoration of Japan sales support which were reduced significantly in 1999
during the period of constrained liquidity. The Company maintains a high margin
as the majority of revenues are from licensing and royalty activities, which
have little or no associated direct costs.

OPERATING EXPENSES

Operating expenses for the year ended December 31, 2000 increased to
$1,595,000 (72% of sales) from $1,156,000 (70% of sales) for the year ended
December 31, 1999, an increase of 38%. The increase in operating expenses result
from expansion of the Company`s research and development and sales and marketing
efforts, which were curtailed in most of 1999 to minimal levels as a result of
the period of constrained liquidity. With liquidity restored as a result of the
December 1999 financing, the Company expanded its staff to more normalized
levels and the increase was limited to 200 basis points of sales.

GENERAL AND ADMINISTRATIVE

General and administrative costs increased to $599,000 for the year ended
December 31, 2000 from $516,000 for the year ended December 31, 1999, an
increase of 16%. The increase is primarily due to the retention of an investor
relations firm and a local business tax settlement. General operating costs
include rent, telephone, office supplies and stationery, postage, depreciation
and similar costs.

RESEARCH AND DEVELOPMENT

Research and Development costs increased to $540,000 for the year ended
December 31, 2000, compared to $383,000 for the year ended December 31,1999, an
increase of 41%. The increase in research and development expense was due
additions to headcount throughout the year, search fees paid for certain
engineers hired and expanded use of engineering consultants for specialized
projects.

In addition, the Company continued efforts to identify, validate, and
develop new product ideas at DPI. Specific engineering efforts were directed
toward a new version of Spatializer N-2-2(TM), optimization of technologies for
the DigitalFX(TM) series and development of a new series of headphone
algorithms.

12
<PAGE> 13

SALES AND MARKETING

Sales and marketing costs increased to $456,000 for the year ended December
31, 2000, compared to $257,000 for the year ended December 31, 1999, an increase
of 77%. The increase results from the appointment of a public relations firm,
formal trade show participation, increased customer visits and prospecting,
support staff expansion and revision of marketing collateral materials.

NET INCOME

Net Income increased to $382,000 for the year ended December 31, 2000,
compared to net income of $355,000 for the year ended December 31, 1999, an
increase of 8%. The improvement for the period is primarily the result of higher
interest income and lower interest expense, partially offset by lower operating
profit driven by lower gross margin and slightly higher overhead expenses as a
percentage of sales.

FOR THE YEAR ENDED DECEMBER 31, 1999, COMPARED TO THE YEAR ENDED DECEMBER 31,
1998

REVENUES

Revenues declined to $1,660,000 for the year ended December 31, 1999
compared to $1,680,000 for the year ended December 31, 1998, a decline of 1%.
Revenues include license issuance fees and royalties pertaining to the licensing
of Spatializer(R) audio signal processing designs and non-recurring engineering
fees.

The decrease in revenues is attributed primarily to the settlement in early
1998 of royalty claims from a licensee for which there was no comparable license
settlement in the current fiscal year, competitive market pricing pressure and
decreases in recurring royalties for the licensing of Spatializer audio
technology reflecting weakness in the Japanese 3-D audio market. This was
substantially offset by increases in royalties derived from DSP foundries and
OEMs for the Company`s N-2-2 technology and royalty and engineering fees from a
new licensee in 1999.

Gross profit increased to 97% in the year ended December 31, 1999 compared
with 92% for the comparable period last year. This increase reflects the impact
of the discontinuation of lower margin consumer products sales, and inventory
write-downs on the remaining consumer products inventory to market in 1998, for
which there was no comparable adjustment in 1999. The Company maintains a high
margin as the majority of revenues are from licensing and royalty activities,
which have little or no associated direct costs.

OPERATING EXPENSES

Operating expenses for the year ended December 31, 1999 decreased to
$1,156,000 from $3,490,000 for the year ended December 31, 1998, a decrease of
67%. The decrease in operating expenses result from the rationalization of
overhead, particularly with regard to the corporate office, implemented in late
September 1998, as part of the Company`s strategic repositioning to focus
exclusively on its core audio business.

Based on this strategic refocusing, MultiDisc Technologies, Inc. is being
treated as a discontinued operation for accounting purposes. Operating
expenditures in 1999 were minimal and were accrued in the year ending December
31, 1998. Operating and wind down expenses of MultiDisc Technologies, Inc
totaling $3,000,000 were excluded from 1998 operating expenses and presented
separately as a discontinued operation. Total operating expenses of MultiDisc
Technologies, Inc. for the year ended December 31, 1997 were $3,791,000.

GENERAL AND ADMINISTRATIVE

General and administrative costs decreased to $516,000 for the year ended
December 31, 1999 from $1,732,000 for the year ended December 31, 1998, a
decrease of 70%. The decrease is primarily due to decreased payroll and
payroll-related costs primarily related to the downsizing of the corporate
office as a result of overhead rationalizations implemented beginning in
September 1998. General operating costs include rent, telephone, office supplies
and stationery, postage, depreciation and similar costs.



13
<PAGE> 14

RESEARCH AND DEVELOPMENT

Research and Development costs decreased to $383,000 for the year ended
December 31, 1999, compared to $756,000 for the year ended December 31,1998, a
decrease of 49%. The decrease in research and development expense was due to
headcount attrition and a delay in efforts to fill open positions until
additional working capital became available through the December Transactions.

In addition, the Company continued efforts to identify, validate, and
develop new product ideas at DPI. Specific engineering efforts were directed
toward porting support of N-2-2(TM) -- Digital Virtual Surround technologies to
current and potential licensees during the year and toward development of
StreamFX, an Internet audio enhancement product and Vi.B.E., a virtual bass
enhancement technology.

SALES AND MARKETING

Sales and marketing costs decreased to $257,000 for the year ended December
31, 1999, compared to $1,002,000 for the year ended December 31, 1998, a
decrease of 74%. The decrease results from headcount reductions effected in
September 1998 and suspension of public relations, formal trade show
participation and advertising efforts until the additional working capital
became available through the December Transactions.

LOSS ON DISCONTINUED OPERATION

There was no loss on discontinued operation in the year ended December 31,
1999, compared to a loss on discontinued operation of $3,702,000 for the year
ended December 31, 1998. Expenditures for MDT were minimal in fiscal 1999 and
were accrued in the year ended December 31, 1998. Loss on discontinued operation
was comprised of the reclassification of $2,847,000 of the net MDT expenses and
valuation adjustments of $855,000. The net expense primarily represented general
and administrative, sales and marketing and research and development expenses
for the period January 1 through September 30,1998. The Board of Directors
announced the discontinued operation of MDT on September 25, 1998 and had
preliminary indications from its banker and potential buyers that the sale of
MDT`s assets would not result in a loss to the Company. However, since no
transaction had been consummated for the MDT assets as of the date on which the
Company filed its annual report Form 10-K in April 1999, the Company elected to
reserve for the contingency.

NET INCOME (LOSS)

Net Income increased to $355,000 for the year ended December 31, 1999,
compared to a net loss of $5,792,000 for the year ended December 31, 1998, an
increase of 106%. The improvement for the period is primarily the result of
overhead rationalization and corporate refocusing which began its implementation
in September 1998 and the wind down costs of MDT in 1998, for which there were
no such expenses in the current fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000, we had $1,468,000 in cash and cash equivalents as
compared to $1,022,000 at December 31, 1999. The increase in cash and cash
equivalents is attributed to cash provided by the exercise of warrants and
options. We had working capital of $1,195,000 at December 31, 2000 as compared
with a working capital of $395,000 at December 31, 1999. Our future cash flow
will come primarily from the audio signal processing licensing business` Foundry
and Original Equipment Manufacturers` ("OEM") royalties and from possible common
stock issuances including warrant and option exerci

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COMPANY CONFORMED NAME: SPATIALIZER AUDIO LABORATORIES INC
CENTRAL INDEX KEY: 0000890821
STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674]
IRS NUMBER: 954484725
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231

FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 000-26460
FILM NUMBER: 1581809

BUSINESS ADDRESS:
STREET 1: 20700 VENTURA BOULEVARD SUITE 140
CITY: WOODLAND HILLS
STATE: CA
ZIP: 91364
BUSINESS PHONE: [phone]

MAIL ADDRESS:
STREET 1: 20700 VENTURA BLVD SUITE 140
CITY: WOODLAND HILLS
STATE: CA
ZIP: 91364
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>a70769e10-k405.txt
<DESCRIPTION>FORM 10-K405 FOR PERIOD ENDING 12/31/00
<TEXT>

<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-K

------------------------
(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE PERIOD ENDED: DECEMBER 31, 2000

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 33-90532

SPATIALIZER AUDIO LABORATORIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 95-4484725
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

20700 VENTURA BOULEVARD, SUITE 140
WOODLAND HILLS, CALIFORNIA 91364-2357
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

TELEPHONE NUMBER: [phone]
(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 [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant`s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of
the registrant at March 8, 2001 was approximately $18,500,000.

As of March 8, 2001, there were 47,401,939 shares of the Registrant`s
Common Stock outstanding.

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<PAGE> 2

PART I

ITEM 1. BUSINESS

Overview

Spatializer Audio Laboratories, Inc. ("The Company" or "we") is a leading
developer, licensor and marketer of next generation technologies for the
consumer electronics, personal computing, enterprise computing and entertainment
industries. Our position as a leading developer of next generation technologies
is based on our strong relationships with brand leaders, such as Apple, Toshiba
and Hitachi. We conduct our audio business through our parent company and our
wholly owned subsidiary, Desper Products, Inc. ("DPI"). DPI has developed a full
complement of patented and proprietary 3-D or virtual audio signal processing
technologies directed to the consumer electronics and multimedia PC markets. We
continue to expand our product offerings to take advantage of the emerging
digital audio marketplace specifically for consumer products like Digital
Versatile Disc ("DVD") players, portable mp3 players, digital televisions and
digital home, portable and auto entertainment devices. As of December 31, 2000,
more than 25 million licensed units had been shipped covering all of these
applications. DPI`s virtual audio signal processing technologies are currently
incorporated in products offered by global brand leaders including in consumer
electronics, Toshiba, Panasonic, JVC, Hitachi, Mitsubishi, Samsung, Sanyo, LG
Electronics, Zenith, Sharp and Proton, in the PC multimedia marketplace by Apple
Computer, among others, and on the Internet through software plug-ins for the
WinAmp and Linux-based XMMS mp3 players. We are focused on broadening
recognition for the Spatializer brand name through association with these and
other globally recognized consumer electronics and multimedia computer brand
leaders, and on broadening our audio technology and software base to position
ourselves for continued growth. We believe that with the accelerating growth in
the digital audio/video marketplace, the market for virtual audio technologies,
and therefore for our products, is entering a new phase of opportunity.

Our other wholly owned subsidiary, MultiDisc Technologies, Inc., ("MDT")
formed in June 1996 when we acquired development stage optical disc storage and
robotics assets and technologies from Home Theater Products, International,
Inc., a debtor in possession, is now inactive. In September 1998, we announced
our plan to refocus our business on the exploitation of our core audio
technologies, suspend research and development at MDT and to properly position
the MultiDisc assets for sale. Therefore, MDT has been accounted for as a
discontinued operation. Since 1998 we have been unsuccessful in identifying a
purchaser for this technology. This repositioning strategy recognized that the
capital investment required to properly commercialize the MDT technology was
beyond our current capacity. We believe this strategy provides a better
opportunity to further solidify our position as a leading provider of virtual
audio solutions, based on available capital resources.

In December 1999, we completed the placement of $1 million of Common Stock,
at no discount from market, the conversion of $1 million of short-term debt to
new Series B Redeemable Convertible Preferred Stock and the restatement of
$225,000 of existing secured debt to secured long-term debt (the "December
Transactions"). The December Transactions significantly strengthened our balance
sheet and restored working capital and shareholder`s equity. The resulting
liquidity allowed us to emerge from turnaround mode and to pursue growth and
operating stability in 2000.

Our executive offices are located at 20700 Ventura Boulevard, Suite 140,
Woodland Hills, California 91364, Telephone [phone]. We maintain a
Website at www.spatializer.com. We were incorporated in the State of Delaware in
February, 1994.

DESPER PRODUCTS, INC. -- VIRTUAL AUDIO SIGNAL PROCESSING TECHNOLOGIES

DPI has developed a suite of proprietary advanced audio signal processing
technologies for the entire spectrum of applications falling under the general
category of virtual audio. The objective in each product category is to create
or simulate the effect of a multi-speaker sonic environment using two ordinary
speakers (or headphones) for playback. The market for virtual audio is segmented
into five broad categories of technology as identified in the listing below.
Each of these technologies utilizes different underlying scientific principles
in accomplishing its design objectives and is targeted to a specific class of
consumer electronics or multimedia computer depending on the intended product
use and functional capability of the product. DPI currently has other audio
signal processing technologies under development which will serve to expand its
market scope and partner product capabilities.


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<TABLE>
<CAPTION>
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CATEGORY OF TECHNOLOGY PRODUCT CATEGORIES VIRTUAL AUDIO ENHANCEMENT
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<S> <C> <C>
3-D Stereo Consumer electronics products Surround Sound enhancement from an
(Spatializer(R) 3-D Stereo) providing stereo playback -- DVD ordinary stereo signal
Players, Stereo TV`s, VCR`s,
Stereo Components and Systems, Car
Audio, Laptop and Desktop
Multimedia Computers, Set-top
Boxes
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Two-Speaker Virtualization Products incorporating Creation of spatially accurate
(Spatializer N-2-2(TM)) multi-channel audio sources like multi- speaker cinematic audio
Digital Virtual Surround Dolby Digital(R) (AC-3), Dolby experience from two speakers, and
ProLogic(R) or MPEG-2. Home headphones utilizing discrete
Theater, DVD-Video, Multimedia multi-channel audio information.
Computers utilizing DVD/MPEG and
decoding.
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Bass Enhancement Consumer electronics products Simulation of lower frequency
(Vi.B.E.(TM)) providing stereo playback -- DVD response from speakers with
Players, Stereo TV`s, VCR`s, relatively high low frequency
Stereo Components and Systems, Car capability
Audio, Laptop and Desktop
Multimedia Computers and Speakers
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Internet Audio Enhancement Laptop and Desktop Multimedia Surround Sound and bass
(Spatializer(R) Computers and portable music enhancement to playback of
StreamFX(TM)) devices running MP3 media player ordinary MP3 files
Software
- ----------------------------------------------------------------------------------------------------------
Headphone Virtualization Products incorporating Creation of spatially accurate
(Spatializer Natural multi-channel audio sources like multi- speaker cinematic audio
Headphone(TM)) Dolby Digital(R) (AC-3), Dolby experience from headphones
Digital Virtual Surround ProLogic(R), MPEG-2 or stereo. utilizing discrete multi-channel
Home Theater, DVD-Video, audio information.
Multimedia Computers utilizing
DVD/MPEG Decoding or stereo.
- ----------------------------------------------------------------------------------------------------------
</TABLE>

LICENSED PRODUCTS

Our current technology product applications are directed to (1) two-speaker
and headphone virtualization of multi-channel audio for DVD players and home
theater applications, (2) stereo and bass enhancement in consumer electronics
products and multimedia PCs, and (3) downloadable software, purchased directly
by consumers, delivering audio enhancement applications for PCs .

1. SPATIALIZER(R) 3D STEREO. Based upon proprietary and patented methods of
stereo signal processing, the Company`s Spatializer(R) 3-D Stereo
technology 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 the
Company`s unique DDP(TM) (Double Detect and Protect(TM)) algorithm.
DDP(TM) 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 four chip foundries (Matsushita, ESS
Technologies, Inc., OnChip Systems and Luxsonor) 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 Stereo
effect in a simplified, lower cost package.

2. SPATIALIZER(R) N-2-2(TM) DIGITAL VIRTUAL SURROUND. In September 1996,
DPI introduced Spatializer N-2-2, which the Company considers a "core",
and "enabling" technology for DVD based home theater products and
personal computers. Through outstanding performance and continuous
enhancement, Spatializer N-2-2 has emerged as the "de facto standard"
for virtual surround sound as measured by most brand adoptions and
market share of such brands in the DVD player market. DVD is considered
by many to be the single most important and fastest adopted consumer
audio/computer technology ever introduced. The audio standards for DVD
(based upon geographic region) are multi-channel audio formats (Dolby
Digital(R) (AC-3) and MPEG-2) which carry six (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


3
<PAGE> 4

effects. The Spatializer N-2-2 software- 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-2-2
runs in real-time on general purpose Digital Signal Processing ("DSP")
hardware platforms like those offered by C-Cube, Acer Labs, Inc.,
Motorola, VM Labs and Zoran; may be integrated with host based
software-only MPEG-2 or DVD decoders (like WinDVD and DVDExpress,
offered by Intervideo and Mediamatics, respectively, for the Intel(R)
Pentium(R) 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-2-2 has been
approved by Dolby Laboratories and qualifies Spatializer licensees to
use the newly created Dolby Digital VIRTUAL(TM) trademark on products
incorporating the technology. We believe our Spatializer N-2-2 process
will serve 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.

3. SPATIALIZER(R) VI.B.E(TM). 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. SPATIALIZER(R) STREAMFX(TM). First introduced by DPI in 1999,
Spatializer StreamFX creates a dramatic and enveloping sound experience
out of any pair of regular speakers or headphones when playing MP3 music
files. Spatializer StreamFX utilizes Spatializer 3-D Stereo and is a
long-time favorite of both movie and sound studios in addition to
numerous audio product manufacturers. Combined with Vi.B.E., this
product widens and deepens the soundfield to surround the listener with
rich and ambient enhanced audio. A headphone option generates the same
equally immersive experience over headphones creating a dramatic audio
experience.

5. SPATIALIZER(R) NATURAL HEADPHONE(TM). Spatializer 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.

In addition to these technologies, we offer a series of products introduced
by DPI under the Spatializer DigitalFX(TM) brand, first introduced in early
2000. The Spatializer DigitalFX series is a comprehensive audio enhancement
software solution based on the Company`s Spatializer N-2-2 virtual surround
sound technology and Spatializer Vi.B.E., the Company`s virtual bass enhancement
technology, combined with additional audio effects tailored and optimized for
specific product applications. This powerful combination of technologies in a
single product targeted for specific product applications provides a highly
efficient and cost effective solution for the television, portable MP3, PDA, AV
Receiver, PC and car audio markets.

Spatializer Digital TVFX(TM) is a customized application of Spatializer
technology optimized for digital and analog televisions with an on board digital
signal processor. Spatializer integrates its original, patented 3D Stereo and
N-2-2 technologies with speaker-compensation and Vi.B.E. bass enhancement
algorithms. The digital processing of the stereo signal provides a striking and
immersive audio experience while the virtual bass enhancement creates apparently
deeper bass response from the small speakers utilized by most televisions.
Optional reverb and equalizer features further enhance the audio experience. The
result is a dramatic improvement to the overall audio soundfield provided by the
television. Spatializer Digital TVFX is 100% digital, and applicable to any TV
system with an embedded DSP.

Spatializer Digital OntheGoFX(TM) is targeted specifically for portable MP3
player devices, including Personal Data Assistants (PDAs). According to industry
analysts, the portable MP3 player market is expected to grow to 32 million units
sold by 2003. Spatializer Digital OntheGoFX shares the same core 3D stereo
technology as other members of the Spatializer DigitalFX series, but includes a
highly effective headphone algorithm which produces an expanded headphone audio
experience.. In addition, the included Vi.B.E technology is particularly
effective in improving the limited bass response of inexpensive lightweight
stereo headphones often incorporated into these devices. The algorithms are
highly efficient, utilizing a minimal amount of MIPS any standard embedded DSP.



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Spatializer Digital PCFX(TM) combines the entire suite of respected
Spatializer audio technologies into a single, comprehensive and cost effective
software audio solution for the Wintel platform. Since the product runs on the
host CPU, with minimal CPU utilization, no discrete chip is required.
Spatializer Digital PCFX provides Spatializer 3-D stereo, Spatializer N-2-2
virtual surround sound for DVD playback, Vi.B.E virtual bass enhancement and
enCompass(TM), Spatializer`s positional audio technology for computer games
utilizing the Microsoft DirectXTM API. Spatializer technology has been utilized
by Apple Computer across their product platforms since October 1999.

Spatializer Digital AVFX(TM) is tailored for AV Receivers equipped with a
Dolby Digital decoder.. Spatializer Digital AVFX provides Spatializer 3-D
stereo, Spatializer N-2-2 virtual surround sound for DVD audio or video
playback, Vi.B.E virtual bass enhancement and in the future, extensive room
modeling and customized effects.

Spatializer Digital AutoFX(TM) enhances the audio performance of DSP-based
car stereo systems by delivering Spatializer`s acclaimed 3-D stereo, bass
enhancement, equalizer and reverb technology in a single solution. Optional
positional audio voice cues for on board GPS and navigation systems, virtual
surround sound for on board DVD player systems and space modeling will be
offered as per customer requirements.

LICENSING ACTIVITIES

We have traditionally licensed our technologies through semiconductor
manufacturing and distribution licenses ("Foundry Licenses") with semiconductor
foundries ("Foundries"). In turn, these Foundries manufacture and distribute
integrated circuits ("ICs") or digital signal processors ("DSPs") incorporating
Spatializer technology to manufacturers of consumer electronics and multimedia
computer products ("OEMs").

The terms of many of the Foundry Licenses are negotiated on an
individual basis requiring the payment of a per unit running royalty according
to sliding scales based upon cumulative volume. Some of the licenses call for
the payment of an up-front license issuance fee either in lieu of, or in
addition to the running royalty. Other agreements require the OEM customer,
rather than the foundry, to pay the royalty. Per unit royalties are payable in
the quarter following shipment from the Foundry to the OEM.

OEMs who desire to incorporate these ICs into their products are required
to enter into a license ("OEM Licenses") with us before they may purchase the
ICs in quantity. Foundry Licenses generally have limited the sale of Spatializer
ICs to OEMs who have entered into an OEM License with us. OEM licenses generally
provide for the payment of a further per unit royalty by the OEM for OEM
products incorporating a Spatializer IC ("Licensed Products") payable in the
quarter following shipment by the OEM of its Licensed Products.

In mid-1996, we modified our licensing program to ease the licensing
process and accelerate cash flow by offering Foundries an alternative "Bundled
Royalty" arrangement which permits the IC foundry to make a traditional
component IC sale to an OEM without requiring the OEM to negotiate a separate
royalty license agreement with the Company. In these situations, the IC Foundry
is authorized to sell Spatializer ICs to OEMs, which enter into a simplified
Logo Usage Agreement ("LUA"), or to be authorized customers in consideration for
a higher ("bundled") per unit royalty from the IC Foundry. This license
structure has relieved much of the licensing burden from the IC foundries and
has resulted in an increase in License signings.

In 2000, we began offering IC and DSP foundries the option of entering into
a non-royalty bearing distribution agreement with us. Under this business model,
the foundry offers Spatializer technology as an optional feature, promotes our
technology in their sales materials and cooperates with the Spatializer sales
force in closing license agreements for Spatializer technology with the OEM
customer. This business model provides the foundry with an additional selling
feature at no additional cost to the foundry. The OEM can obtain use of the
technology directly from Spatializer without any additional mark-up from the
foundry.

In early 2001, we agreed with C-Cube Semiconductor II to unbundle the
royalty on their DSPs in order to facilitate the licensing of multiple
technologies to OEM manufacturers and to help ensure that their products
remained highly competitive in the market. As such, on April 1, 2001, C-Cube`s
customers using Spatializer technology will enter into direct licenses with us.
These agreements, with Samsung Electronics and LG Electronics have been closed.

Because the Spatializer N-2-2 technology may be fully implemented in
software to run in host based (Intel Pentium(R)) or general purpose DSP
environments, no IC Foundry may be involved, as is the licensing arrangement
with Apple Computer, Inc. In these



5
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situations, we will enter into royalty bearing licenses directly with the OEM.
However, we may still pursue bundled agreements with DSP providers, if
appropriate.

We are currently negotiating new IC/DSP Foundry and OEM licenses for
Spatializer N-2-2, Spatializer Vi.B.E., Spatializer 3-D stereo and combinations
and optimizations of these technologies under the Spatializer DigitalFX series.

IC/DSP Foundry Licenses

In 2000 and early 2001, VM Labs, Inc., MIPS Technologies, New Japan Radio
Corporation ("NJRC"), Tvia, Inc. and Link Up Systems. entered into Foundry
License or Distibution Agreements for Spatializer N-2-2 and or DigitalFX. All
but the NJRC agreements were non-royalty bearing distribution agreements, with
per unit royalties to be paid by the OEM customer.

As of December 31, 2000, we have entered into eleven non-exclusive Foundry
Licenses for its Virtual Audio Signal Processing technologies with Matsushita
Electronics Corporation ("MEC"), ESS Technology, Inc. ("ESS"), OnChip Systems,
Inc. ("OnChip"), C-Cube Technologies, Inc. ("C-Cube"), Acer Labs, Inc. ("Ali"),
Luxsonor, VM Labs, Inc., MIPS Technologies, NJRC, Tvia, Inc. and Link Up
Systems. Many Foundry Licenses generally require the payment of per unit running
royalties based upon a sliding scale computed on the number of Spatializer ICs
or DSPs sold.

As of December 31, 2000, more than 25 million ICs and DSPs incorporating
Spatializer 3-D audio signal processing and N-2-2 digital virtual surround sound
technology had been manufactured and sold.

OEM Licensees and Customers

As of December 31, 2000, our technology has been incorporated in products
offered by over 90 separate OEM Licensees and customers on various economic and
business terms. Some of these OEM Licenses required a license issuance fee
and/or a separate per unit royalty, while others were licensed under the LUA or
were authorized customers under bundled royalty licenses with the IC foundries.
The OEM licensees and customers offer a wide range of products, which include
DVDs, car stereo systems, direct view TVs, wide screen and projection TVs, VCRs,
powered speakers, portable audio systems ("Boomboxes"), HiFi stereo systems and
components, computer sound cards and graphics accelerator cards, multimedia
desktop personal computers, notebook computers, LCD projectors, multimedia
computer monitors, and arcade pinball and video games.

The following table is a partial list of the OEM Licensees and authorized
customers as of December 31, 2000:

<TABLE>
<CAPTION>
- --------------------------------------------- ---------------------------------------------
PARTIAL LIST OF OEM LICENSEES OR CUSTOMERS LISTING -- CONTINUED
- --------------------------------------------- ---------------------------------------------
<S> <C>
Apple Computer Inc. NEC
Compaq Computer Corp. Panasonic TV & VCR (Matsushita Kotobuki
Dell Computer Corp. Electronics Industries, Ltd.)
Digital Technology Systems Of California, Panasonic Car Audio (Matsushita
Inc. Communications Industrial Co., Ltd.)
Emerson Proton Electronic Industrial Co., Ltd.
Fujitsu Computer Corp. Samsung
Hewlett Packard Seiko Epson Corp.
Hitachi, Ltd. Sanyo Corp.
Iiyama Electric Co., Ltd. Sharp Corp.
Gateway Computer Corp. Toshiba DVD
Golden Regent Toshiba TV
LG Electronics Taisei Electric, Inc.
JVC Taiyo Electric Company, Ltd.
Labtec Enterprises, Inc. Texas Instruments
Mag Monitors Theta Digital
Marantz VM Labs, Inc.
Micron Computer Corp Zenith
Mitsubishi Image and Information Works
- --------------------------------------------- ---------------------------------------------
</TABLE>



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HARDWARE PRODUCTS

Sales of our professional and consumer hardware products to date have not
generated significant revenues and we do not plan to manufacture these products
in the future. Instead, we are focusing our attention on licensing these product
designs to third parties and concentrating on software-only products and
"plug-ins" for use with MP3 players for PC platforms and portable audio devices.

MultiDisc Technologies, Inc. -- Network Based Modular, Scalable Compact Disc/DVD
Servers

As its first effort to broaden our technology portfolio and capitalize on
our strong relationships with manufacturers of consumer electronics and personal
computer peripheral products, we acquired certain developmental stage
technologies and assets from Home Theatre Products ("HTP"), for approximately
$1,062,000 in June 1996 and formed a subsidiary, MDT. The MultiDisc transaction,
which was implemented through a court-approved sale in the HTP bankruptcy
proceeding, included an array of compact disc server robotics and software
technologies in various stages of completion. The MultiDisc transaction was
intended to position us for long term growth in a significant new market. Our
intention was to license this technology or enter into third party manufacturing
arrangements for sale of MDT CD/DVD changer products to OEMs.

The MultiDisc transaction brought a unique combination of proprietary
electromechanical designs, robotics, operating software, firmware, intellectual
property, and engineering know-how and five patent applications acquired in the
asset acquisition. MDT added an additional forty-seven patent applications filed
with the United States Patent & Trademark Office ("USPTO") to bring the total to
fifty-two patent applications filed.

On September 25, 1998, we announced our plan to refocus our business on the
exploitation of its core audio technologies and to properly position the
MultiDisc assets for sale. The repositioning strategy recognized that the
capital investment required to properly commercialize the MDT technology was
beyond the Company`s capacity. As a result, all operations, including research
and development activities, were suspended and the Company has accounted for MDT
as a discontinued operation. The Company has explored the sale of the business
or the patent portfolio with interested parties, but to date, no transaction has
been consummated.

Revenues and Expenses

We generate revenues in its audio business from royalties pursuant to its
Foundry, OEM, and other licenses, and from non-recurring engineering fees to
port our technologies to specific licensees` applications. The Company`s
revenues, which totaled $2,201,812 in 2000, were derived almost entirely from
Foundry and OEM license fees and royalties.

We seek to maximize return on our intellectual property base by
concentrating our efforts in very high margin licensing and software products
and have eliminated our hardware product operations. Licensing operations have
been managed internally by our personnel and through use of an international
sales rep force.

We had three major customers, C-Cube Technologies, Inc., Apple Computer,
Inc. and Toshiba Corporation in 2000, each of whom accounted for greater than
10% of our total 2000 revenues. One OEM accounted for 36%, another accounted for
35% and one accounted for 14% of our royalty revenues during 2000. Two other
accounts comprised 9% and 7% of total 2000 revenues. All other OEM`s accounted
for less than 1% of royalty revenues individually.

In September, 1998, the U.S. Court of Appeals for the Federal Court upheld
the U.S District Court`s ruling of August 1996, in which we prevailed in a
22-month legal battle over its 3-D Stereo intellectual property when the U.S.
District Court granted the Company`s motion for summary judgment against a
competitor`s assertions of patent infringement.. (See ITEM 3 -- LEGAL
PROCEEDINGS, Page 8, for further detail). The uncertainties caused by the patent
litigation had hindered our corporate results, particularly since licensing
revenue depends upon OEM unit shipments, which follow three to four quarter
production cycles. The resolution of this litigation contributed to the
Company`s ability to attract new licensing and financing arrangements and to
reposition the Company for positive growth in profitability.

In September 1998, we implemented cost cutting measures in conjunction with
the suspension of our research and development activities at MDT and to further
rationalize the overhead of DPI and the overall corporate structure in response
to lower levels of operating performance. The result of these initiatives was to
reduce 1999 operating costs from 1998 levels, which enabled the Company to
achieve profitable operating results in 1999 and to remain profitable in 2000.



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Competition

VIRTUAL AUDIO SIGNAL PROCESSING MARKETPLACE

We compete with a number of entities that produce various audio enhancement
processes, technologies and products, some utilizing traditional two-speaker
playback, others utilizing multiple speakers, and others restricted to headphone
listening. These include the consumer versions of multiple speakers, matrix and
discrete digital technologies developed for theatrical motion picture exhibition
(like Dolby Digital(R), Dolby ProLogic(R), and DTS(R)), as well as other
technologies designed to create an enhanced stereo image from two or more
speakers.

Our principal competitors in the field of virtual audio are QSound Labs,
Inc. ("QSound") and SRS Labs, Inc In addition, some DSP foundries and OEMs have
proprietary virtual audio technologies. In the future, our products and
technologies also may compete with audio technologies and product applications
developed by other companies including entities that have business relationships
with the Company.

We believe that we will favorably compete in this market because we offer a
single source, complete suite of patented and proprietary 3D Stereo, interactive
positional, and speaker virtualization technologies. By virtue of our
specialized engineering and OEM support, we can offer a "turn-key" audio
solution to OEMs who do not possess this expertise internally. In addition, the
strength of our IC Foundry and OEM relationships and the Spatializer brand name
recognition in the industry are other key differentiators between both our
branded and unbranded competition.

Patents, Trademarks and Copyrights

Our core signal processing technology is covered by our U.S. patent
5,412,731, issued May 2, 1995. On July 15, 1997, the Company filed a patent in
the U.S. Patent office on our N-2-2(TM) intellectual property with the U.S.
Patent Office. On March 20, 1998, we filed a patent on our enCompass V 2.0
technology with the U.S. Patent Office covering the Company`s enCompass 2.0
positional audio gaming technology. In June 2000, we filed an additional patent
application for our reduced cost/higher performance 3-D Stereo circuit design.
Much of our intellectual property consists of trade secrets. We possess
copyright protection for its principal software applications and has U.S. and
foreign trademark protection for its key product names and logo marks.

The MultiDisc transaction brought a unique combination of proprietary
electromechanical designs, robotics, operating software, firmware, intellectual
property, and engineering know-how and five patent applications acquired in the
asset acquisition. MDT added an additional forty-seven patent applications filed
with the United States Patent & Trademark Office ("USPTO") to bring the total to
fifty-two patent applications filed. However, due to the absence of working
capital and suspension of all operating activities of MDT, MDT cannot pursue
these applications and some applications have lapsed. The core MDT data storage
technology is covered by U.S. patents 5,774,431, 5,822,283, 5,886,960 and
5,886,974. MDT have either obtained or applied for U.S. trademark protection for
its principal product names and logo marks.

On September 25, 1998, we announced our plan to refocus our business on the
exploitation of our core audio technologies and to properly position the
MultiDisc assets for sale. The repositioning strategy recognized that the
capital investment required to properly commercialize the MDT technology was
beyond our capacity. As a result, operations, including all research and
development activities were suspended and we have accounted for MDT as a
discontinued operation.

Employees

We began 2000 with five full-time and six part-time employees and sales
representatives and increased our staff to six full time and twelve part-time
employees, consultants and sales representatives by December 31, 2000. At
year-end, there were three full-time employees and two consultants engaged in
research and development. We employ the services of outside professional
consultants, particularly in the engineering area, due to the tight labor market
for such professionals in Silicon Valley as well as the need for specialized
expertise in the course of our business. None of our employees are represented
by a labor union or are subject to a collective bargaining agreement. We
consider our relations with our employees and consultants to be satisfactory.



8
<PAGE> 9

PART II

ITEM 2. PROPERTIES

Our executive office is located in Woodland Hills, California where we
occupy approximately 900 square feet with an annual rent of approximately
$32,000. The lease term on this space is month to month. During 2000, we also
had leased facilities in Santa Clara, CA.

Our operations office in Santa Clara, CA, is the primary location for our
audio technology division, ("DPI"). We occupy approximately 2,700 square feet
with an annual rent on a full service basis of approximately $75,000. The lease
expires on November 30, 2002.

We lease an apartment in Santa Clara, CA for use by the chief executive
officer when away from the executive office. The annual rent on this apartment
is approximately $18,000. The lease expires on June 30, 2001.

We lease our space at rental rates and on terms which management believes
are consistent with those available for similar space in the applicable local
area. Our properties are well maintained, considered adequate and are being
utilized for their intended purposes.

ITEM 3. LEGAL PROCEEDINGS

In February 1999, a complaint was filed in the Superior Court of Los
Angeles County, Northwest District, by I.N. Associates, Inc., against the
Company`s wholly owned subsidiary, MultiDisc Technologies, Inc. ("MDT"),
alleging breach of contract and fraud, and claiming $499,954 in damages,
attorneys fees, interest and the costs of suit. MDT has answered and denied the
claims. The matter was subject to a mediation preceding in March 2000, and has
been settled. The settlement specifies that I.N. will be entitled to a cashless
exercise of warrants for the 125,000 shares originally issued to them in 1997
and 1998, or a cash payment of $50,000 if the warrants remained unexercised. In
January 2001, the cash payment was made and no further liabilities or
contingencies exist.

In connection with the downsizing of the Company, a number of employees
were terminated and have filed, on various dates since the downsizing in 1998,
various employment and compensation related claims with the various State labor
authorities, all but two of which claims have either been settled or have been
paid as of the date of this report. In February, 2000, an appeal was heard in
the Superior Court of Orange County, California, relating to a claim filed by a
former employee of MDT for back vacation pay and penalties. In March 2000, both
parties agreed to dismiss the action as part of a settlement, which was not
material to the financial statements for the period ended March 31, 2000. In
July 2000, the Labor Commission of the State of California awarded $122,000 to a
claimant arising from a claim for commissions over a three-year period. We
appealed the order to the Superior Court of California, Santa Clara County,
since, under California law, the Labor Commission order will have no effect on
the court`s consideration of the matter. On October 27, 2000, the matter was
settled by mutual release and payment in an amount which was not material to the
financial statements of the Company for the period ended September 30, 2000. Two
former officers and employees of MDT initiated proceedings before the Labor
Commissioner in 2000 seeking amounts allegedly due under their employment
agreements, which claims, if resolved in favor of the claimants, could be
material to the financial statements of the Company. The Labor Commissioner has
postponed those proceedings. In that action, the claimants filed a motion to
strike the MDT complaint under the California "anti-Slapp" legislation. The
Court rejected that motion and the litigation is in the discovery stages.
Separately, MDT has initiated litigation in the Superior Court, Orange County
seeking declaratory relief to bar the labor claims, as well as return of
intellectual property and unspecified damages for breaches of the former
officers` and employees` employment agreements.

We also anticipate that, from time to time, we may be named as a party to
other legal proceedings that may arise in the ordinary course of its business.

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

There were no matters submitted to a vote of the security holders of the
Company either through solicitation of proxies or otherwise in the fourth
quarter of the fiscal year ended December 31, 2000.



9
<PAGE> 10

ITEM 5. MARKET FOR REGISTRANT`S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Common Stock trades on the OTC Bulletin Board under the symbol "SPAZ".
The following table sets forth the high and low sales price of our Common Stock
on its principal market for fiscal years 1999 and 2000:

<TABLE>
<CAPTION>
PERIOD: HIGH (U.S. $) LOW (U.S. $)
- ------- ------------- ------------
<S> <C> <C>
1999
First Quarter..................................... $0.44 $0.08
Second Quarter.................................... $0.36 $0.08
Third Quarter..................................... $0.90 $0.20
Fourth Quarter.................................... $0.96 $0.26
2000
First Quarter..................................... $2.56 $0.94
Second Quarter.................................... $1.56 $0.44
Third Quarter..................................... $1.06 $0.50
Fourth Quarter.................................... $0.69 $0.19
</TABLE>

On March 8, 2001, the closing price reported by the OTC Bulletin Board was
U.S. $0.39. Stockholders are urged to obtain current market prices for our
Common Stock. Since April 1, 1997, Computershare Investor Services, through its
purchase of the transfer agent business in 2000 of Harris Trust Company of
California, has been our transfer agent.

RECORD HOLDERS

To our knowledge there were approximately 125 holders of record of the
stock of the Company as of March 8, 2001. However, our transfer agent has
indicated that beneficial ownership is in excess of 3,300 shareholders.

DIVIDENDS

We have not paid any cash dividends on its Common Stock and have no present
intention of paying any dividends. Our current policy is to retain earnings, if
any, for use in operations and in the development of its business. Our future
dividend policy will be determined from time to time by the Board of Directors.



10
<PAGE> 11

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the Company`s Consolidated Financial Statements and related
Notes and with "Management`s Discussion and Analysis of Financial Condition and
Results of Operations", included in Item 7. The selected data presented below
under the headings "Consolidated Statement of Operations Data" and "Consolidated
Balance Sheet Data" as of and for the years ended December 31, 1997 and 1996 are
derived from the consolidated financial statements of Spatializer Audio
Laboratories, Inc. and subsidiaries, which consolidated balance sheets have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
selected financial data for the years ended December 31, 2000, 1999 and 1998 are
derived from the Company`s consolidated financial statements which have been
audited by Farber & Hass LLP, independent certified public accountants. The
consolidated statements of operation and cashflows for the year ended December
31, 2000 and the report thereon are included elsewhere in this Report.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1998 1999 2000
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues..................... $ 2,024 $ 2,781 $ 1,680 $ 1,660 $ 2,202
Cost Of Revenues............. (186) (230) (134) (49) (248)
----------- ----------- ----------- ----------- -----------
Gross Profit................. 1,838 2,551 1,546 1,611 1,954
Total Operating Expenses..... (27,042)(3) (7,238) (3,490) (1,156) (1,596)
Other Income (Expense),
Net........................ 119 27 (108) (94) 34
Loss from Discontinued
Operations................. (3,702)
Income taxes................. (310) (60) (38) (6) (10)
----------- ----------- ----------- ----------- -----------
Net Income (Loss)............ $ (25,395)(4) $ (4,720) $ (5,792) $ 355 $ 382
----------- ----------- ----------- ----------- -----------
Basic Income (Loss) Per
Share(5)................... $ (2.01) $ (0.23) $ (0.29) $ 0.01 $ 0.01
=========== =========== =========== =========== ===========
Diluted Income (Loss) Per
Share(5)................... $ (2.01) $ (0.23) $ (0.29) $ 0.01 $ 0.01
=========== =========== =========== =========== ===========
Weighted Average Common
Shares..................... 12,644,751 20,604,095 22,180,180 33,805,512 46,736,224
=========== =========== =========== =========== ===========
CONSOLIDATED BALANCE SHEET
DATA:
Cash and Cash Equivalents.... $ 1,587 $ 577 $ 264 $ 1,022 $ 1,468
Working Capital (Deficit).... 2,092 83 (1,975) 395 1,195
Total Assets................. 4,141 3,165 893 2,118 2,457
Advances From Related
Parties.................... 113 113 857 337 337
Total Shareholders` Equity
(Deficit).................. $ 3,268 $ 1,525 $ (1,553) $ 768 $ 1,651
</TABLE>

- ---------------
(1) Not used.

(2) Not used.

(3) Includes two one-time significant changes. Compensation Expense of
$20,218,450 was recorded associated with the transfer of the Company`s
performance shares from Canadian Escrow into a new escrow arrangement which
will provide for the release of the performance shares over the next six
years. Based on the revised escrow arrangement, which primarily converts the
escrow shares release from performance criteria to time-based criteria, the
Company recorded compensation expense on the date the new escrow arrangement
terms were accepted by the Company. Additionally, In-Process Research &
Development ("IPR&D") expense of $679,684 related to the allocation of costs
was incurred as a result of the MultiDisc Technologies, Inc. ("MDT") asset
acquisition in June 1996.

(4) The Company incurred and paid Canadian income taxes in the amount of
$249,000 during the year associated with the liquidation of
Spatializer-Yukon, the Company`s Canadian predecessor.

(5) Loss per share has been calculated based on the weighted average number of
common shares outstanding including escrowed performance shares, which are
factored into the calculation as of December 30, 1996, the date on which the
British Columbia Securities Commission ("BCSC") issued its consent to the
Company`s revised escrow arrangement.



11
<PAGE> 12

ITEM 7. MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis relates to the financial condition
and results of operations of Spatializer Audio Laboratories, Inc. and
subsidiaries (the "Company") for the year ended December 31, 2000 compared to
the year ended December 31, 1999, and the year ended December 31, 1999, compared
with the year ended December 31, 1998.

RESULTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2000, COMPARED TO THE YEAR ENDED DECEMBER 31,
1999

REVENUES

Revenues increased to $2,202,000 for the year ended December 31, 2000
compared to $1,660,000 for the year ended December 31, 1999, an increase of 33%.
Revenues include license issuance fees and royalties pertaining to the licensing
of Spatializer(R) audio signal processing designs and non-recurring engineering
fees.

The increase in revenues is attributed primarily to the inclusion of four
quarters of royalties from a major account for which there was only one quarter
of royalty and a non-recurring engineering fee in the prior year and increases
in Spatializer N-2-2 running royalties from OEM DVD player sales. This increase
in revenues was partially offset by decreases in per unit Spatializer N-2-2
royalties due to a volume-based sliding scale pricing structure with DSP
foundries agreed to in prior years when the original agreements were made. By
the beginning of the third quarter of 2000, pricing levels at the maximum volume
levels were substantially achieved, resulting in a stabilization of the per unit
royalty rate.

Gross profit increased to $1,954,000 for the year ended December 3, 2000
compared to $1,612,000 in the comparable period last year. Gross margin
decreased to 89% of revenue in the year ended December 31, 2000 compared with
97% of revenue for the comparable period last year. The increase in gross profit
results from higher revenues in the current year, partially offset by lower
gross margin. This decrease in the gross margin percentage reflects the
restoration of Japan sales support which were reduced significantly in 1999
during the period of constrained liquidity. The Company maintains a high margin
as the majority of revenues are from licensing and royalty activities, which
have little or no associated direct costs.

OPERATING EXPENSES

Operating expenses for the year ended December 31, 2000 increased to
$1,595,000 (72% of sales) from $1,156,000 (70% of sales) for the year ended
December 31, 1999, an increase of 38%. The increase in operating expenses result
from expansion of the Company`s research and development and sales and marketing
efforts, which were curtailed in most of 1999 to minimal levels as a result of
the period of constrained liquidity. With liquidity restored as a result of the
December 1999 financing, the Company expanded its staff to more normalized
levels and the increase was limited to 200 basis points of sales.

GENERAL AND ADMINISTRATIVE

General and administrative costs increased to $599,000 for the year ended
December 31, 2000 from $516,000 for the year ended December 31, 1999, an
increase of 16%. The increase is primarily due to the retention of an investor
relations firm and a local business tax settlement. General operating costs
include rent, telephone, office supplies and stationery, postage, depreciation
and similar costs.

RESEARCH AND DEVELOPMENT

Research and Development costs increased to $540,000 for the year ended
December 31, 2000, compared to $383,000 for the year ended December 31,1999, an
increase of 41%. The increase in research and development expense was due
additions to headcount throughout the year, search fees paid for certain
engineers hired and expanded use of engineering consultants for specialized
projects.

In addition, the Company continued efforts to identify, validate, and
develop new product ideas at DPI. Specific engineering efforts were directed
toward a new version of Spatializer N-2-2(TM), optimization of technologies for
the DigitalFX(TM) series and development of a new series of headphone
algorithms.

12
<PAGE> 13

SALES AND MARKETING

Sales and marketing costs increased to $456,000 for the year ended December
31, 2000, compared to $257,000 for the year ended December 31, 1999, an increase
of 77%. The increase results from the appointment of a public relations firm,
formal trade show participation, increased customer visits and prospecting,
support staff expansion and revision of marketing collateral materials.

NET INCOME

Net Income increased to $382,000 for the year ended December 31, 2000,
compared to net income of $355,000 for the year ended December 31, 1999, an
increase of 8%. The improvement for the period is primarily the result of higher
interest income and lower interest expense, partially offset by lower operating
profit driven by lower gross margin and slightly higher overhead expenses as a
percentage of sales.

FOR THE YEAR ENDED DECEMBER 31, 1999, COMPARED TO THE YEAR ENDED DECEMBER 31,
1998

REVENUES

Revenues declined to $1,660,000 for the year ended December 31, 1999
compared to $1,680,000 for the year ended December 31, 1998, a decline of 1%.
Revenues include license issuance fees and royalties pertaining to the licensing
of Spatializer(R) audio signal processing designs and non-recurring engineering
fees.

The decrease in revenues is attributed primarily to the settlement in early
1998 of royalty claims from a licensee for which there was no comparable license
settlement in the current fiscal year, competitive market pricing pressure and
decreases in recurring royalties for the licensing of Spatializer audio
technology reflecting weakness in the Japanese 3-D audio market. This was
substantially offset by increases in royalties derived from DSP foundries and
OEMs for the Company`s N-2-2 technology and royalty and engineering fees from a
new licensee in 1999.

Gross profit increased to 97% in the year ended December 31, 1999 compared
with 92% for the comparable period last year. This increase reflects the impact
of the discontinuation of lower margin consumer products sales, and inventory
write-downs on the remaining consumer products inventory to market in 1998, for
which there was no comparable adjustment in 1999. The Company maintains a high
margin as the majority of revenues are from licensing and royalty activities,
which have little or no associated direct costs.

OPERATING EXPENSES

Operating expenses for the year ended December 31, 1999 decreased to
$1,156,000 from $3,490,000 for the year ended December 31, 1998, a decrease of
67%. The decrease in operating expenses result from the rationalization of
overhead, particularly with regard to the corporate office, implemented in late
September 1998, as part of the Company`s strategic repositioning to focus
exclusively on its core audio business.

Based on this strategic refocusing, MultiDisc Technologies, Inc. is being
treated as a discontinued operation for accounting purposes. Operating
expenditures in 1999 were minimal and were accrued in the year ending December
31, 1998. Operating and wind down expenses of MultiDisc Technologies, Inc
totaling $3,000,000 were excluded from 1998 operating expenses and presented
separately as a discontinued operation. Total operating expenses of MultiDisc
Technologies, Inc. for the year ended December 31, 1997 were $3,791,000.

GENERAL AND ADMINISTRATIVE

General and administrative costs decreased to $516,000 for the year ended
December 31, 1999 from $1,732,000 for the year ended December 31, 1998, a
decrease of 70%. The decrease is primarily due to decreased payroll and
payroll-related costs primarily related to the downsizing of the corporate
office as a result of overhead rationalizations implemented beginning in
September 1998. General operating costs include rent, telephone, office supplies
and stationery, postage, depreciation and similar costs.



13
<PAGE> 14

RESEARCH AND DEVELOPMENT

Research and Development costs decreased to $383,000 for the year ended
December 31, 1999, compared to $756,000 for the year ended December 31,1998, a
decrease of 49%. The decrease in research and development expense was due to
headcount attrition and a delay in efforts to fill open positions until
additional working capital became available through the December Transactions.

In addition, the Company continued efforts to identify, validate, and
develop new product ideas at DPI. Specific engineering efforts were directed
toward porting support of N-2-2(TM) -- Digital Virtual Surround technologies to
current and potential licensees during the year and toward development of
StreamFX, an Internet audio enhancement product and Vi.B.E., a virtual bass
enhancement technology.

SALES AND MARKETING

Sales and marketing costs decreased to $257,000 for the year ended December
31, 1999, compared to $1,002,000 for the year ended December 31, 1998, a
decrease of 74%. The decrease results from headcount reductions effected in
September 1998 and suspension of public relations, formal trade show
participation and advertising efforts until the additional working capital
became available through the December Transactions.

LOSS ON DISCONTINUED OPERATION

There was no loss on discontinued operation in the year ended December 31,
1999, compared to a loss on discontinued operation of $3,702,000 for the year
ended December 31, 1998. Expenditures for MDT were minimal in fiscal 1999 and
were accrued in the year ended December 31, 1998. Loss on discontinued operation
was comprised of the reclassification of $2,847,000 of the net MDT expenses and
valuation adjustments of $855,000. The net expense primarily represented general
and administrative, sales and marketing and research and development expenses
for the period January 1 through September 30,1998. The Board of Directors
announced the discontinued operation of MDT on September 25, 1998 and had
preliminary indications from its banker and potential buyers that the sale of
MDT`s assets would not result in a loss to the Company. However, since no
transaction had been consummated for the MDT assets as of the date on which the
Company filed its annual report Form 10-K in April 1999, the Company elected to
reserve for the contingency.

NET INCOME (LOSS)

Net Income increased to $355,000 for the year ended December 31, 1999,
compared to a net loss of $5,792,000 for the year ended December 31, 1998, an
increase of 106%. The improvement for the period is primarily the result of
overhead rationalization and corporate refocusing which began its implementation
in September 1998 and the wind down costs of MDT in 1998, for which there were
no such expenses in the current fiscal year.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000, we had $1,468,000 in cash and cash equivalents as
compared to $1,022,000 at December 31, 1999. The increase in cash and cash
equivalents is attributed to cash provided by the exercise of warrants and
options. We had working capital of $1,195,000 at December 31, 2000 as compared
with a working capital of $395,000 at December 31, 1999. Our future cash flow
will come primarily from the audio signal processing licensing business` Foundry
and Original Equipment Manufacturers` ("OEM") royalties and from possible common
stock issuances including warrant and option exerci

[Vaio]

up

[Vaio]

Digital Video Recorders Will Have Installed Base Of Over 20 Million By End Of 2005, Says The Yankee Group

Integration Of DVR Functions Into Electronic Devices Will Help Drive Penetration



The integration of hard drives and digital video recorder (DVR) software into electronic devices, particularly satellite receivers and cable set-top boxes, will result in 880,000 DVRs being installed in U.S. homes by the end of 2001, according to an upcoming report from the Yankee Group. This figure is projected to grow to over 20 million by the end of 2005.

Year, DVR Installed Base (In Millions)

2000, 0.35
2001, 0.88
2002, 2.40
2003, 5.60
2004, 11.50
2005, 20.20

The report, "Digital Video Recorders: The Revolution Remains On Pause," notes that standalone units have not been able to gain the widespread adoption that was envisaged by the industry one year ago. Less than 350,000 units have sold over the past one and a half years. In contrast, direct broadcast satellite (DBS) sold approximately 1.75 million units in its first year and a half of existence. In a November 1999 report, the Yankee Group recognized that standalone units were less likely to elicit the dramatic consumer adoption the industry was expecting, and that developing integrated products would greatly spur growth.

With leading players, both in the DVR sector and consumer electronics and set-top box manufacturing sectors, now beginning to roll out integrated products, the Yankee Group believes that DVRs will see consumer adoption pick up significantly.

"Is it an electronic device that you buy at retail, or a service that is paid for every month? What exactly does it do, and how does it work?," said Adi Kishore, Analyst with the Media & Entertainment Strategies research and consulting practice at the Yankee Group. "Add to that the high price point for the device, and you have the issues that are confusing consumers and limiting the penetration of DVRs. With the integration of the technology into consumer electronics and set-top devices, the DVR becomes an incremental feature or service. That greatly increases the value proposition for the consumer, and coupled with greater understanding of the service through word of mouth and advertising, it will help drive the adoption of DVRs over the next few years."

Some of the key findings included within the report are:

- The DVR will develop into a feature as the market evolves, and consumers are unlikely to pay significant charges for the basic time-shifting service. Thus, it will be most successful as a bundled or integrated offering, along with an increasing number of interactive, television-based services. A solution aimed at cable MSOs or satellite operators is more likely to find success. DVR vendors that go at it alone will find a tepid market, very high burn rates, and competition from the operators that will offer subscribers an integrated offering that is more cost effective.

- Since the cable and satellite operators will hold most of the cards here, incremental service revenues moving forward, from sponsored channels, interactive advertising, commerce opportunities, and so forth will largely go to them. DVR vendors counting on gaining the lion`s share of those fees should recognize their dependence on the operators and accordingly adapt their business model toward a licensing solution that would bring in lower revenues initially, but ally them with the operators.

- Despite concerns of a shakeout in advertising revenue models and the broadcast industry, DVRs` time-shifting and ad-forwarding capabilities will not effect widespread changes in the next few years. Once DVRs gain sufficient penetration to affect a sizable viewer base, advertisers and programmers will again bring up these issues; but for now the impact will not be significant.

For more information about The Yankee Group, visit www.yankeegroup.com.



Internet Contacts:
http://www.yankeegroup.com

[Vaio]

wo sind meine Einsträge hin WO???????????


Ciao
Vaio

[aIexxI]

warum ist hier nichts drin