<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q
-------------
(MARK ONE)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended: MARCH 31, 1997
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 134
WOODLAND HILLS, CALIFORNIA 91364-2357
(Address of principal executive offices)
TELEPHONE NUMBER: (818) 227-3370
(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
--- ---
As of May 9, 1997 there were 20,806,429 shares of the Registrant's Common Stock
outstanding.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 2,389,033 $ 1,587,395
Trade Receivables 811,020 820,856
Inventory 239,854 296,539
Prepaid Expenses and Deposits 173,442 260,984
------------ ------------
Total Current Assets 3,613,349 2,965,774
Fixed Assets, Net (Note 3) 710,999 622,856
Intangible Assets (Note 4) 497,170 451,733
Other Assets 102,653 100,832
------------ ------------
$ 4,924,171 $ 4,141,195
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 256,382 $ 403,870
Accrued Liabilities 246,906 333,152
Advances from Related Parties (Note 5) 112,500 112,500
Notes Payable 80,464 23,800
------------ ------------
Total Current Liabilities 696,252 873,322
------------ ------------
Shareholders' Equity:
Preferred shares, $.01 par value, 1,000,000
shares authorized, no shares issued or
outstanding -- --
Common shares, $.01 par value, 50,000,000
shares authorized, 20,806,429 and
shares issued and outstanding at March 31,
1997 and December 31, 1996, respectively 208,064 191,154
Additional Paid-In Capital 40,497,750 38,527,775
Accumulated Deficit (36,477,895) (35,451,056)
------------ ------------
Total Shareholders' Equity 4,227,919 3,267,873
------------ ------------
$ 4,924,171 $ 4,141,195
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
1
<PAGE> 3
SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTH PERIOD ENDED
----------------------------------
MARCH 31, MARCH 31,
1997 1996
------------ -------------
<S> <C> <C>
Revenues:
Product Revenues $ 120,747 $ 82,929
Licensing Revenues 397,715 345,635
------------ ------------
518,462 428,564
Cost of Revenues 64,255 30,720
------------ ------------
454,207 397,844
------------ ------------
Operating Expenses:
General and Administrative 573,098 547,466
Research and Development 568,829 227,186
Sales and Marketing 341,358 415,000
------------ ------------
1,483,285 1,189,652
------------ ------------
Operating Loss (1,029,078) (791,808)
Interest and Other Income 9,459 42,271
Interest and Other Expense (4,320) (4,057)
------------ ------------
5,139 38,214
Loss Before Income Taxes $ (1,023,939) $ (753,594)
Income Taxes (2,898) (800)
Net Loss $ (1,026,839) $ (754,394)
============ ============
Net Loss Per Common Share $ (0.08) $ (0.06)
============ ============
Weighted Average Common Shares Outstanding 13,120,862 11,777,889
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE> 4
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------
MARCH 31, MARCH 31,
1997 1996
----------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss $(1,026,839) $ (754,394)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and Amortization 56,857 18,170
Net Change in Assets and Liabilities:
Trade Receivable 9,836 (85,045)
Inventory 56,685 (24,095)
Prepaid Expenses and Deposits 87,542 (8,622)
Accounts Payable (147,488) 149,207
Accrued Liabilities (86,246) (90,346)
----------- -----------
Net Cash Used in Operating Activities (1,049,653) (795,125)
----------- -----------
Cash Flows from Financing Activities:
Issuance of Common Shares. net 1,986,885 157,978
Due to Related Parties -- (212,561)
Issuance of Notes Payable 59,532 --
Repayments of Notes Payable (2,868) (1,725)
----------- -----------
Net Cash Provided by Financing Activities 2,043,549 (56,308)
----------- -----------
Cash Flows from Investing Activities:
Purchase of Fixed Assets (145,000) (69,229)
Increase in Intangible Assets (47,258) (54,038)
----------- -----------
Net Cash Used in Investing Activities (192,258) (123,267)
----------- -----------
Increase (Decrease) in Cash and Cash
Equivalents 801,638 (974,700)
Cash and Cash Equivalents, Beginning
of Period
1,587,395 3,113,057
=========== ===========
Cash and Cash Equivalents, End of
Period $ 2,389,033 $ 2,138,357
=========== ===========
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for:
Interest $ 4,320 $ 4,057
Income Taxes $ 2,898 $ 800
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 5
SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
(unaudited)
<TABLE>
<CAPTION>
COMMON SHARES
------------------------------------------ TOTAL
NUMBER OF ADDITIONAL ACCUMULATED SHAREHOLDERS'
SHARES PAR VALUE PAID-IN-CAPITAL DEFICIT EQUITY
---------- --------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 19,115,429 $191,154 $38,527,775 $(35,451,056) $3,267,873
Options Exercised 23,500 235 20,507 20,742
Private Placements, Net (Note 6) 1,667,500 16,675 1,949,468 1,966,143
Net Loss (1,026,839) (1,026,839)
---------- -------- ----------- ------------ ----------
Balance, March 31, 1997 20,806,429 $208,064 $40,497,750 $(36,477,895) $4,227,919
========== ======== =========== ============ ==========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 6
SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) NATURE OF BUSINESS
Spatializer Audio Laboratories, Inc. and subsidiaries (the "Company")
is in the business of technology development and licensing.
The Company's wholly owned subsidiary Desper Products, Inc. ("DPI") is
in the business of developing proprietary advanced audio signal
processing technologies and products for consumer electronics,
entertainment, and multimedia computing.
The Company's wholly owned subsidiary, MultiDisc Technologies, Inc.
("MDT") is in the business of developing scaleable, modular compact
disc/DVD server technologies for licensing. Currently the development
focus is on technologies associated with a network based compact
disc/DVD server for internet and intranet applications.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States.
Basis of Consolidation
The consolidated financial statements include the accounts of
Spatializer Audio Laboratories, Inc. and its wholly owned subsidiaries,
Desper Products, Inc. and MultiDisc Technologies, Inc. All material
inter-company transactions have been eliminated.
Research and Development Expenditures
The Company expenses research and development expenditures as incurred.
(3) FIXED ASSETS
Fixed assets, at cost, as of March 31, 1997 and December 31, 1996
consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ----------
<S> <C> <C>
Office Computers, Software, Equipment and Furniture $ 737,244 $ 595,993
Test Equipment 97,928 97,928
Tooling Equipment 44,136 44,136
Trade Show Booth and Demonstration Equipment 131,568 130,846
Leasehold Improvements 48,782 45,756
---------- ----------
1,059,659 914,659
Less Accumulated Depreciation and Amortization 348,660 291,803
---------- ==========
$ 710,999 $ 622,856
========== ==========
</TABLE>
5
<PAGE> 7
(4) INTANGIBLE ASSETS
Intangible assets, as of March 31, 1997 and December 31, 1996 consist
of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Capitalized patent and technology costs 362,947 309,222
Capitalized patent costs in association with MDT Asset
Acquisition 200,000 200,000
------- -------
562,947 509,222
Less Accumulated Amortization 65,777 57,489
------- -------
497,170 451,733
======= =======
</TABLE>
(5) ADVANCES FROM RELATED PARTIES
The Company was indebted to certain related parties for amounts
totaling $112,500 at March 31, 1997 and December 31, 1996,
respectively. Amounts bear interest at a fixed 10% annually and are due
on demand.
(6) SHAREHOLDERS' EQUITY
During the three-month period ended March 31, 1997, shares of common
stock were issued as follows:
During the 1st quarter 1997, the Company completed a private placement
of 1,600,000 units at a price of $1.25 US per unit comprised of one
common share of the Company's stock and one-half of one, one-year
non-transferable common stock purchase warrant. One warrant entitles
the holder to purchase one additional share of common stock in the
capital of the Company on or before April 7, 1998 at the price of $1.75
US per share.
The Company received proceeds of $1,966,143 from the private placement
of the Company's common stock during 1997, net of finders fees of
$33,857 in cash and 67,500 shares of common stock valued at $1.75 US
per share.
6
<PAGE> 8
ITEM 2. 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 three-month period ended March 31, 1997, compared with
the three-month period ended March 31, 1996.
RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1997, COMPARED TO THE THREE-MONTH
PERIOD ENDED MARCH 31, 1996
REVENUES
The Company reported an increase in revenues of 21% or $89,000, for a total of
$518,000 from the three-month period ended March 31, 1997, compared to $429,000
for the three-month period ended March 31, 1996. Revenues include sales of
professional recording systems, consumer products, license issuance fees and
royalties pertaining to the Spatializer(R) analog integrated circuit ("IC").
The increase in revenues is attributed to increases in both recurring royalties
and product sales for the period ended March 31, 1997 from the same period in
1996. The Company increased product sales through sales of its first consumer
product, the HTMS-2510(TM) which inventory is expected to be depleted over the
next couple of quarters. Due to unsatisfactory sales performance, the Company
plans to move away from such hardware products and to concentrate on the
higher-margin software products such as PT-3D(TM). The Company expects the
majority of revenues to continue to come from licensing activities.
During the first quarter, the Company began full-scale promotion at the Winter
Consumer Electronic Show ("CES") of its premier Dolby(R) certified N-2-2(TM)
virtualization technologies for multi-channel DVD, HDTV and Home Theater
applications. In addition, it launched enCompass(TM), a real-time, interactive
positional audio technology for both headphone and speaker playback in
multimedia gaming applications in the Windows(TM) DirectSound(TM) environment.
Both technologies serve to significantly broaden the company's advanced audio
technology base and are the direct result of the Company's investment in
Research & Development. Revenues from these new technologies are expected as
early as the second quarter 1997.
Gross profit for the three-month period ended March 31, 1997, was approximately
88% as compared with 93% for same period in 1996. Profit margins decreased
slightly due to the increase in product sales.
OPERATING EXPENSES
The operating expenses for the three-month period ended March 31, 1997,
increased approximately 25% or $293,000, for a total of $1,483,000 compared to
$1,190,000 for the same period in 1996. This increase is attributed primarily to
the added costs of operations related to the Company's new MultiDisc
Technologies, Inc. ("MDT") subsidiary, which was established in June 1996,
offset by decreases in sales and marketing activities.
GENERAL AND ADMINISTRATIVE
General and administrative costs increased 5% or $26,000, to $573,000 for the
three-month period ended March 31, 1997 as compared with $547,000 for the same
period in 1996. The change is primarily the result of increased payroll and
payroll related costs as the Company transitioned consulting and temporary help
to permanent positions as well as additional headcount related to supporting the
efforts of the MDT subsidiary offset by decreased spending in investor relations
and consulting and temporary help.
7
<PAGE> 9
Payroll and Payroll Related
Payroll and payroll related costs increased approximately 81%, or
$152,000, to $339,000 for the three-month period ended March 31, 1997
as compared with $187,000 for the same period in 1996. The increase is
attributed to the increase in staff from seven full-time staff in 1996
to eleven full-time staff and one part-time staff in 1997. The increase
in staff count is related primarily to additional workloads due to
regulatory reporting requirements, the support of pursuing new product
launches, and the support requirements of the Company's subsidiary, MDT
which was established in June 1996. The increase is also reflective of
a transition from temporary staff and consultants to permanent
employees.
Consulting Fees and Temporary Help
Consulting fees and temporary help decreased by approximately 100%, or
$86,000, for a total of $0 for the three-month period ended March 31,
1997, compared to $86,000 for the same year in 1996. The reduction in
costs relates to the completion of multiple consulting projects in 1996
including the analysis of technologies for potential acquisition and
the permanent hire or elimination of temporary staff in the 1996
period.
Professional Services Fees
Professional services include legal fees and accounting fees. The fees
for professional services decreased approximately 4%, or $1,000, for a
total of $67,000 for the three-month period ended March 31, 1997,
compared to $68,000 for the same period in 1996.
Investor Relations
Investor relations related costs decreased by approximately 56%, or
$41,000, for a total of $32,000 in the three-month period ended March
31, 1997 compared with $73,000 in the same period in 1996. This
decrease can be attributed to substantial efforts made in 1996 with the
filing of the Company's first Form 10-K to accommodate increased
interest in the Company as well as efforts in 1997 to control costs.
General Operating
General operating costs remained relatively flat with a minor increase
of approximately 1%, or $2,000, for a total of $135,000 in the
three-month period ended March 31, 1997 to $133,000 in the same period
in 1996. These costs include rent, telephone, office supplies and
stationery, postage, depreciation and similar costs. The consistency
between periods is the direct result of internal cost controls and cost
savings measures taken by the Company despite the increase in permanent
full-time staff.
RESEARCH AND DEVELOPMENT
The research and development activity grew approximately 150% or $342,000, to
$569,000 for the three-month period ended March 31, 1997, compared to $227,000
for the same period in 1996, with the added operations of the Company's new
subsidiary, MDT commencing in June 1996. In addition, the Company continued
efforts to identify, validate, and develop new product ideas through DPI.
Technology introductions over the past twelve months include Spatializer 3-D
Map(TM), enCompass(TM) (positional audio enhancement software for Windows(R)
95), and N22(TM) (Digital Virtual Surround technologies for multi-channel
discrete audio systems in DVD/DVD-ROM and Home Theater products). All research
and development activities and related costs continue to be expensed in the
period incurred.
The Company's new subsidiary, MDT, which began operations on June 24, 1996,
represented approximately 64% or $365,000 of the department's total costs for
the three-month period ended March 31, 1997.
8
<PAGE> 10
Payroll and Payroll Related
Payroll and payroll related costs for the Research and Development
Department increased approximately 198% or $253,000, to $381,000 for
the three-month period ended March 31, 1997 as compared with $128,000
for the same period in 1996. The increase is attributed to the
increase in staff from eight in 1996 to sixteen in 1997. The increase
in staff includes eight staff members involved in the MDT research
and development efforts as well as additional staff costs of the
Company's DPI subsidiary, which has also transitioned to full-time
employees rather than outside contractors.
Technology and Product - Engineering and Development
Research & engineering costs, other than payroll and payroll related,
increased approximately 89%, or $88,000, to $187,000 for the
three-month period ended March 31, 1997 compared to $99,000 for the
same period in 1996. The increase is primarily related to operations of
the Company's new subsidiary, MDT, as it proceeds towards the
development of its network based compact disc/DVD server technologies.
SALES AND MARKETING
Sales and marketing costs decreased approximately 18%, or $74,000, for a total
of $341,000 for the three-month period ended March 31, 1997, compared to
$415,000 for the same period in 1996. The decrease is attributed to a reduction
in 1996 payroll and payroll related costs and advertising costs associated with
the launch of the Company's consumer product, the HTMS-2510.
Payroll and Payroll Related
Payroll and payroll related costs for the Sales and Marketing
Department decreased approximately 18% or $28,000, to $124,000 for the
three-month period ended March 31, 1997 as compared with $152,000 for
the same period in 1996. The decrease is attributed to the reduction in
staff from seven in 1996 to six in 1997.
Advertising and Trade Show Related
Advertising which includes publicity, public relations, and press
release costs and trade show related costs decreased approximately 29%,
or $48,000, for a total of $117,000 for the three-month period ended
March 31, 1997, compared to $165,000 for the same period in 1996. The
decrease is associated with the reduction is trade show presence in
1997 compared to 1996 and the elimination of a promotional campaign
launched in the 1996 period to promote the Company's consumer product,
the HTMS-2510.
Other Sales and Marketing
Other costs including travel and entertainment, brochure and
promotional literature, outside services and general operating costs
had a minor increase of approximately 2% or $2,000, for a total of
$100,000 for the three-month period ended March 31, 1997, compared to
$98,000 for the same period in 1996.
NET LOSS
In an effort to reduce 1997 operating costs from 1996 levels, the Company
implemented cost cutting measures in the forth quarter of 1996. The net
loss for the three-month period ended March 31, 1997, totaled $1,027,000,
compared to a net loss of $754,000 in the same three-month period in 1996. The
increased net loss is primarily a result of the costs of operations at the
Company's subsidiary, MDT, established in June 1996 partially offset by cost
reductions.
9
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had $2,389,000 in cash and cash equivalents as
compared to $1,587,000 at December 31, 1996. The increase in cash and cash
equivalents is attributed to cash received from operations and common stock
issuances, including private placements and option exercises offset by cash
used for operating activities and the purchase of fixed assets. The Company
had working capital of $2,917,000 at March 31, 1997 as compared with $2,092,000
at December 31, 1996. The Company's future cash flow from operations will come
primarily from Foundry and Original Equipment Manufacturers ("OEM") royalties.
At March 31, 1997 the Company had four Foundry licensees and fifty-one OEM
Licensees as compared with three Foundry licensees and forty-eight OEM
Licensees at December 31, 1996.
The Company continues to have no long-term debt and has no present commitments
or agreements which would require any long-term debt to be incurred. The Company
owed $112,500 to related parties as of March 31, 1997 and at December 31, 1996.
During the first quarter 1997, the Company raised $1,966,143, net if issuance
costs, through a private placement of 1,600,000 units in the Company consisting
of a share of common stock and one-half of one non-transferable share purchase
warrant. The proceeds of the financing are currently expected to be utilized to
finance the Company's research and development activities in its MultiDisc
Technologies ("MDT") business unit and for working capital reserves. However,
such proceeds may be used at the Company's discretion to fund working capital
needs or other obligations as they come due. In addition, the Company has the
ability to curtail certain activities including, but not limited to, MDT related
research and development, if necessary in order to meet its commitments. Funds
generated by these financing activities as well as cash generated from
operations is expected to be sufficient for the Company to meet its obligations
during the next twelve months. However, additional sources of financing
including debt, equity or strategic investments may be required to fund capital
expenditures, acquisitions, research and development and marketing costs related
to such activities.
10
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Form 10-K for the year ended December 31,
1996 with respect to the Company's litigation with QSound Labs, Inc. No material
developments in such litigation occurred during the three months ended March 31,
1997.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
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 first quarter of the
fiscal year ending March 31, 1997.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
11.1 Computation of Loss Per Common Share
21.1 Schedule of Subsidiaries of the Company
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 13, 1997
SPATIALIZER AUDIO LABORATORIES, INC.
(REGISTRANT)
/s/ STEVEN D. GERSHICK
----------------------------------------
STEVEN D. GERSHICK
President & Chief Executive Officer
/s/ KATHY PARTCH
----------------------------------------
KATHY PARTCH
Acting Chief Financial Officer
12
<PAGE> 1
SPATIALIZER AUDIO LABORATORIES, INC.
EXHIBIT 11.1 COMPUTATION OF LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS FOUR MONTHS FISCAL YEAR
ENDED FISCAL YEAR ENDED ENDED ENDED
----------- ---------------------------- ------------- -------------
MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, AUGUST 31,
1997 1996 1995 1994 1994
----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE:
Weighted Average Common Shares 13,120,862 12,644,751 15,933,516 14,329,235 12,376,579
Weighted Average Escrowed Performance Shares (1) (5,776,700) (5,776,700) (5,485,033)
---------- ---------- ---------- ---------- ----------
Adjusted Weighted Average Common Shares 13,120,862 12,644,751 10,156,816 8,552,535 6,891,546
========== ========== ========== ========== ==========
Net Loss for Period (1,026,839) (25,395,170) (3,241,285) (1,193,261) (1,808,387)
========== ========== ========== ========== ==========
Primary Loss Per Share (0.08) (2.01) (0.32) (0.14) (0.26)
========== ========== ========== ========== ==========
FULLY DILUTED EARNINGS PER COMMON SHARE:
Adjusted Weighted Average Common Shares 13,120,862 12,644,751 10,156,816 8,552,535 6,891,546
Weighted Average Escrowed Performance Shares (1) 0 0 5,776,700 5,776,700 5,485,033
Shares to be issued on Option Exercise (2) 1,273,291 829,856 806,066 621,486 648,838
Shares to be issued on Option Exercise (2) 305,144 15,076 312,704 23,143 0
---------- ---------- ---------- ---------- ----------
Fully Diluted Weighted Average Common Shares 14,699,297 13,489,683 17,052,286 14,973,864 13,025,417
========== ========== ========== ========== ==========
Net Loss for Period (from above) (1,026,839) (25,395,170) (3,241,285) (1,193,261) (1,808,387)
========== ========== ========== ========== ==========
Fully Diluted Loss Per Share (0.07) (1.88) (0.19) (0.08) (0.14)
========== ========== ========== ========== ==========
</TABLE>
(1) Escrowed performance shares were excluded from the determination of
primary loss per share until conditions for release were met on
December 31, 1996 at which time they were released.
(2) Outstanding options and warrants to purchase common shares have not
been included in the calculation of primary loss per share as the
effect of including such securities would be antidilutive. For
purposes of computing the fully diluted loss per share, the treasury
stock method has been used and the shares have been treated as
outstanding for the entire period.
<PAGE> 1
SPATIALIZER AUDIO LABORATORIES, INC.
EXHIBIT 21.1 SCHEDULE OF SUBSIDIARIES OF THE COMPANY
Desper Products, Inc. - California, USA
Multidisc Technologies, Inc. - Delaware, USA
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,389,033
<SECURITIES> 0
<RECEIVABLES> 811,020
<ALLOWANCES> 0
<INVENTORY> 239,854
<CURRENT-ASSETS> 3,613,349
<PP&E> 1,059,659
<DEPRECIATION> 348,660
<TOTAL-ASSETS> 4,924,171
<CURRENT-LIABILITIES> 696,252
<BONDS> 0
0
0
<COMMON> 208,064
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,924,171
<SALES> 518,462
<TOTAL-REVENUES> 518,462
<CGS> 64,255
<TOTAL-COSTS> 1,483,285
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,320
<INCOME-PRETAX> (1,023,939)
<INCOME-TAX> (2,898)
<INCOME-CONTINUING> (1,026,839)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,026,839)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
