This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, reflecting management’s current expectations. Examples of such forward-looking statements include our expectations with respect to our strategy. Although we believe that our expectations are based upon reasonable assumptions, there can be no assurances that our financial goals or that any potential transactions herein described will be realized or consummated. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Numerous factors may affect our actual results and may cause results to differ materially from those expressed in forward-looking statements made by or on behalf of our company. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words, “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements. The important factors discussed under Item 1A, Risk Factors, among other factors, could cause actual results to differ materially from those indicated by forward-looking statements made herein and represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations. We assume no obligation to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.

Until 2007, Spatializer Audio Laboratories, Inc. (“Spatializer” or the “Company”) was a developer, licensor and marketer of next generation technologies for the consumer electronics, personal computing, entertainment and cellular telephone markets. Our corporate office is located at 410 Park Avenue – 15th Floor, New York, New York 10022.

The Company’s financial statements have been prepared assuming that it would continue as a going concern. However, substantially all of the Company’s assets were sold during 2007, and it has been a shell company since then. The Company has no plans to dissolve. However, it has been dependent upon sales of common stock  and loans from two stockholder/officers to pay its ongoing general and administrative expenses.

The Company has no employees. It is managed by two stockholder/officers, with assistance from a contract bookkeeper.

We have no source of revenue. Our cash balance has been diminished by general and administrative expenses.

Not applicable.

Stockholders are urged to obtain current market prices for our Common Stock.common stock. Corporate Stock Transfer is our transfer agent and registrar.  To our knowledge, because most shares are held in street name, there were approximately 200 holders of record of the stock of the Company. Our transfer agent has indicated that beneficial ownership is believed to be in excess of 2,000 stockholders.

 

We have no present intention of paying any dividends. Our current policy is to retain earnings, if any, for operations in connection with maintaining our status as a reporting company and selling the Company as a shell corporation and/or merging the Company successfully into a new operating business.  Our future dividend policy will be determined from time to time by the Board of Directors.

 

The Company did not repurchase any equity securities fiscal year ended December 31, 2011.2012.

Not Applicable

 

There was no revenue for the years ended December 31, 20112012 and December 31, 20102011 As we sold all of our operating assets in 2007, we have no means to generate new revenues.

 

Net loss was $33,000$24,621 for the year ended December 31, 20112012 compared to net loss was $39,000of $33,380 for the year ended December 31, 2010.2011.

At December 31, 2011,2012, we had $18,000$1,381 in cash and cash equivalents, as compared to $1,000$18,231 at December 31, 2010.2011. We had working capital of $5,000 at December 31, 2011 as compared with negative working capital of $50,000$20,066 at December 31, 2010.2012 as compared to working capital of $4,555 at December 31, 2011.

The purpose of MD&A is to provide our shareholders and other interested parties with information necessary to gain an understanding of our financial condition, changes in financial condition and results of operations. As such, we seek to satisfy three principal objectives:

We believe the best way to achieve this is to give the reader:

We have had no source of revenue since the beginning of third quarter 2007. Based on current and projected operating levels, we do not believe that we can maintain our liquidity position at a consistent level, on a short-term or long-term basis, without a new business model and outside funding.funding, or continued funding from our stockholder/officers.

             

This discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

 

Our audited financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s current circumstances including the sale of all its revenue-generating assets and significant operating losses, raise substantial doubt about the likelihood that the Company will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company’s financial statements, including the Balance Sheets, the Statements of Operations, the Statements of Cash Flows and the Statements of Stockholders’ Equity (Deficit), should be read in conjunction with the Notesnotes thereto included elsewhere in this report. MD&A explains the key components of each of these financial statements, key trends and reasons for reporting period-to-period fluctuations.

 

 

The Statement of Operations tells the reader whether the Company had a profit or loss. It shows key sources of revenue and major expense categories. It is important to note period-to-period comparisons of each line item of this statement, reasons for any fluctuation and how costs are managed in relation to the overall revenue trend of the business. These statements are prepared using accrual accounting under generally accepted accounting principles in the United States. This is addressed further in MD&A under Revenues and Expenses.

 

 

The following discussion and analysis relates to our results of operations for the year ended December 31, 20112012 compared to the year ended December 31, 2010.2011. The following discussion should be read in conjunction with the Financial Statements and Notesnotes thereto included elsewhere in this report.

There were no revenues for the years ended December 31, 20112012 and December 31, 2010.2011.

 

Operating expenses for the year ended December 31, 20112012 decreased to $31,000$23,000 from $36,000$31,000 for the year ended December 31, 2010, a decrease of 14%.2011.  The decrease in operating expenses resulted from a decrease in general and administrative expenses.

The net loss was $25,000 for the year ended December 31, 2012, compared to a net loss of $33,000 for the year ended December 31, 2011, compared to a net loss of $39,000 for the year ended December 31, 2010.2011.

The Company's two stockholder/officers have been advancing cash to the Company to pay for ongoing expenses.  As a resultThere were $8,000 of the equity transactions described above, there were no outstanding loans at December 31, 2011.2012.

 

At December 31, 2011,2012, we had net operating loss carryforwards for Federal income tax purposes of approximately $9,500,000$9,600,000 which may be available to offset future Federal taxable income, if any, through 2030.2031. These net operating loss carryforwards are subject to an annual limitation of approximately $1,000,000. Utilization of these loss carryforwards is subject to further limitation as a result of change in ownership of the Company, as defined by Federal tax law.

 

We have audited the accompanying balance sheets of Spatializer Audio Laboratories, Inc. (Company) as of December 31, 20112012 and 20102011 and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years ended then. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Spatializer Audio Laboratories, Inc. as of December 31, 20112012 and 2010,2011, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company sold substantially all of its assets in 2007. It is now a shell company and its future plans are uncertain. These factors raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ RAMIREZ JIMENEZ INTERNATIONAL CPA’sCPAs

Irvine, California

Until 2007, Spatializer Audio Laboratories, Inc. (Company) was a developer, licensor and marketer of next generation technologies for the consumer electronics, personal computing, entertainment and cellular telephone markets. The Company’s wholly-owned subsidiary, Desper Products, Inc. (“DPI”), was in the business of developing proprietary advanced audio signal processing technologies and products for consumer electronics, entertainment, and multimedia computing. All Company revenues were generated from DPI. The Company and DPI entered into an Asset Purchase Agreement with DTS, Inc. and a wholly owned subsidiary thereof pursuant to which the Company and DPI agreed to sell substantially all of their intellectual property assets. The Asset Purchase Agreement was consummated with DTS on July 2, 2007. DPI was dissolved during December, 2008.

The foregoing financial statements have been prepared assuming that the Company will continue as a going concern. As a result of the sale of substantially all of the Company’s assets as discussed above, theThe Company is now a shell company and its future plans are uncertain. These circumstances raise substantial doubt about the likelihood that the Company will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company's two stockholder/officers have been advancing cash to the Company on a short-term non-interest bearing basis to pay for ongoing general and administrative expenses.  As of December 31, 2010, $40,000 had been advanced and was reflected as Loans from Stockholders. Additional advances of $27,451 were made during 2011.

On August 25, 2011, the Company converted $67,451 of debt owed to two of the Company’s stockholder/officers (Jay Gottlieb and Gregg Schneider) to shares of common stock based upon the August 19, 2011 closing price of $0.0155 per share. In addition, an investment of $20,000 at the same price was made by Mr. Schneider. The aggregate effect of these transactions resulted in the issuance of 5,642,000 shares of common stock.

Income tax expense for the years ended December 31, 20112012 and 20102011 consisted of the following:

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets is composed primarily of the net loss carry forwards. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable losses, management believes it is more likely than not the Company will not realize the benefits of these deductible differences and has established a valuation allowance to fully reserve the deferred tax assets at December 31, 20112012 and 2010.2011. Additionally, the ultimate realizability of net operating losses may be limited by change of control provisions under Section 382 of the Internal Revenue Code. The Company’s income tax returns remain subject to examination for the years 2009 through 2012 for federal and state purposes.