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Spatializer's New Software Synthesizes a Surround Sound Effect From Any Two-Channel Input, Including Stereo Soundtracks and Compressed Internet Audio

Reduced Price Spatializer Solution Also Lowers Overall Cost by Allowing Manufacturer to Forgo Multi-Channel Royalties

Spatializer VirtualSurround VBX is a surround sound enhancement technology optimized for 2-channel sound. Since Spatializer VirtualSurround VBX receives and processes a two channel, rather than 5.1 channel stream, manufacturers may be able to reduce decoder royalties paid to third parties. It provides the listener with an extremely wide soundstage without coloring the sound. Spatializer VirtualSurround VBX is derived from our extensive research into head-related transfer function modeling and cross-talk cancellation. By taking the salient features from these technologies, Spatializer has developed a simplified topology that provides an extremely pleasing surround effect. In addition to enhancing DVD-Video playback, Spatializer VirtualSurround VBX is ideal for enhancing MP3 encoded music as well as DVD-Audio. With the availability of Spatializer VirtualSurround VBX, joining Spatializer N-2-2 and Spatializer N-2-2 Ultra, no one offers a wider array of virtual surround sound solutions for each market segment than Spatializer Audio Laboratories Inc.

Spatializer VirtualSurround VBX is also designed as a customizable and flexible product offering. Additional modules, as processor resources and cost constraints allow, can easily be added to enhance the listener's audio experience. These modules include Spatializer PCE(TM), which polishes and enhances the clarity of the audio experience, Spatializer Vi.B.E.(TM) which delivers the perception of enhanced bass response and Spatializer Natural Headphone(TM), which creates a personal virtual surround sound experience through headphones or earphones. The software can be further upgraded up through the Company's flagship technology, Spatializer N-2-2 Ultra(TM), the industry's new standard in true, multi-channel virtual surround sound.

``Spatializer VirtualSurround VBX is a sensible virtual surround sound solution for low-cost DVD player models from respected global OEMs who must compete with very low cost offerings, primarily from less recognized regional manufacturers,'' explains Henry R. Mandell, Spatializer Chairman and Chief Executive Officer. ``To better compete, some OEMs must forgo offering virtual surround or adopt primitive and unimpressive solutions offered for free by some chip companies. The need for a solution to this problem is real and our mission is to provide such solutions that meet our customer's needs and exceeds their expectations. Now, all manufacturers have a real, high quality solution for low-cost applications that has real impact, with the prestige of the Spatializer brand name, while at the same time, further reducing their third party royalty costs. This is a win-win-win solution for manufacturers, their customers and for us.''

About Spatializer

Spatializer Audio Laboratories Inc. is a leading developer, licensor and marketer of next-generation technologies for the consumer electronics, computing and entertainment industries. The company's advanced audio technology is incorporated into consumer electronics audio, video and DVD products from global brand leaders including Toshiba, JVC, Panasonic, Hitachi, Samsung, Acer, Sharp, Sanyo, LG, Zenith, Sonicblue and RCA, in PC multimedia systems and peripherals from Apple, in silicon from Matsushita and running on processors from Texas Instruments, Cirrus Logic, Zoran, Motorola, LSI Logic, Tvia, VM Labs and Acer Laboratories Inc. Spatializer stock is traded on the OTC Bulletin Board under the symbol: SPAZ. The company is headquartered in Santa Clara, CA, with marketing offices in Tokyo, Japan. Further information may be obtained from the company's web site, www.spatializer.com , Spatializer's SEC filings, and by contacting the company's Investor Relations Department at 408-296-0600 ext.4 or by writing to investor@spatializer.com.

Safe Harbor Act Statement Under the Private Securities Litigation Reform Act of 1995: Certain information in this background news release, including the comments by Mr. Mandell in this press release are forward-looking statements that are based on management's belief, as well as assumptions made by, and information currently available to management. While the company believes that its expectations are based upon reasonable assumptions, there can be no assurances that the company's financial goals will be realized. Numerous uncertainties and risk factors may affect the company's actual results and may cause results to differ materially from those expressed in forward-looking statements made by or on behalf of the company. These uncertainties and risk factors include, but are not limited to the continued need for additional capital, dependence on new technology and intellectual property, dependence on the PC and consumer electronics industries, dependence on product shipments of third-party licensees, competition and pricing pressures, and other risks detailed from time to time in the company's periodic reports filed with the Securities and Exchange Commission.

NOTE: Desper Products Inc. is a wholly owned subsidiary of Spatializer Audio Laboratories Inc. Spatializer® is a registered trademark and Spatializer VirtualSurround VBX(TM), Spatializer N-2-2(TM), Spatializer N-2-2 Ultra(TM), Spatializer Natural Headphone(TM), and Spatializer PCE(TM) are trademarks of Desper Products Inc. All other trademarks are the property of their respective owners.

SOURCE: Spatializer Audio Laboratories Inc.