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Fiscal 2001 Operating Results Cap a Year of Technology Portfolio Expansion and Emerging Market Penetration

Revenues for the twelve months ended December 31, 2001 were $1,604,000, compared to $2,202,000 in the prior year. Net loss for the year ended December 31, 2001 was ($240,000), or ($0.01) per share, compared to net income of $382,000, $0.01 per share in the prior year. The net loss in the current fiscal year included $139,000 of depreciation and amortization, compared with $86,000 in the prior fiscal year.

Spatializer's working capital at December 31, 2001 was $1,124,000 compared with working capital of $1,195,000 at December 31, 2000. At December 31, 2001, Spatializer had $869,000 in cash and cash equivalents, compared to $1,468,000 at December 31, 2000. The decrease in cash and cash equivalents is attributed to elimination of all non-Desper Trust related party notes payable, reduction in liabilities and cash components of the net loss.

``It has been a year of challenge and advancement in several key areas,'' stated Henry R. Mandell, Chairman and CEO of Spatializer Audio Laboratories, Inc. ``While our competitors continue to report very significant losses, we're encouraged by our profitable fourth quarter operating results. However, our satisfaction can only be derived from continuing this trend and maintaining a profitable and growing operation for our shareholders.''

Mandell continued, ``Like other operating enterprises, the events of September 11, 2001 in the United States brought a degree of uncertainty to our operations and hindered our ability to plan and meet with our contractual partners outside the United States in this dynamic environment. We saw certain segments of the consumer electronics market, specifically the DVD player market, move rapidly toward commodity pricing, with encouragement from retailers for low priced ''door-busters``. The volume growth this year in the DVD market was driven mostly by very inexpensive unbranded imports from China, that have not yet embraced quality virtual surround technology. The PC market also continued to be sluggish. Manufacturers continue to be under relentless pressure to reduce their manufacturing costs. While our software applications deliver what we and most manufacturers who listen to it believe is a significantly superior audio experience, the competitive market forces that pressure manufacturers to reduce their costs creates resistance to new technology adoption or use and had an impact on our business.''

``Nevertheless, we accomplished a great deal in 2001. We welcomed two first-rate DVD manufacturers to the Spatializer N-2-2 licensee list this year ... SANYO and Sharp. With the addition of these two manufacturers to our licensee list, Spatializer N-2-2 is indeed the DVD virtual surround standard, in terms of brands, cumulative shipment and prestige in the DVD player market. We brought to market a record five new products in 2001. I said last year that we were going to put the 'Laboratories' back in our name and these new products speak for themselves. We entered emerging markets for portable digital players as well as laid the ground work for expansion for direct to consumer e-commerce. Lastly, we realigned our Pacific Rim licensing operation, with particular success in Japan. As such, we expect to build upon this success in 2002,'' stated Mandell.

    2001 Success

    -- Launch of Spatializer e-store Consumer Direct Software Initiative on
       Yahoo!

    -- Addition of SANYO Electric Co., Ltd. as Licensee of Spatializer N-2-2,
       the Global Standard for DVD Virtual Surround

    -- Launch of Spatializer N-2-2 ULTRA(TM), the Most Comprehensive and
       Immersive 5.1 Channel Virtual Surround Sound on the Market Today

    -- Introduces Spatializer VirtualSurround VBX(TM) as a Low Cost and Cost
       Saving Two Channel Virtual Surround Solution

    -- Introduces Spatializer VSP-11(TM) Universal PC Audio Sound Processor

    -- Launch of Spatializer PCE(TM) Voice and Dialog Enhancement Technology

    -- Expands Kenwood Relationship to DVD Car Audio

    -- Licenses Spatializer N-2-2(TM) to SONICblue for GoVideo  VCR/DVD Player

    -- Licenses Spatializer Vi.B.E(TM) to SANYO for Latest Portable Music
       Player

    -- Extends DVD Virtual Surround Dominance by Adding Sharp DVD to
       Spatializer N-2-2 Licensee List

    -- Spatializer Joins Texas Instruments Third Party Developer Network

    -- Spatializer Audio Laboratories and Cirrus Logic Team Up to Enhance
       Portable and Internet Audio

    -- Spatializer Introduces Spatializer Natural Headphone(TM)

    -- Spatializer Launches Pacific Rim Distribution Initiative

Mandell says that he remains committed in the belief that the audio enhancement market holds great potential for Spatializer. ``While the need for audio enhancement technology is greater than ever, we believe the need and motivation of OEMs has changed. Pleasurable audio is no longer the only selling point. Providing comprehensive audio solutions that enable the manufacturer to actually lower their costs is today's ticket. Further, savvy manufacturers realize that they cannot compete on price alone. They have to surpass their customer's expectations by offering a powerful combination of design, quality, performance and feature set that will differentiate their product from low end competitors. This is our philosophy and that is what Spatializer technology delivers.''

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, Sharp, Sanyo, SONICblue, Zenith and Kenwood, in PC multimedia systems and peripherals from Apple and Labtec, in silicon from Matsushita, Texas Instruments, Cirrus Logic, New Japan Radio Corporation, Zoran, Motorola, LSI/C-Cube, Tvia, VM Labs, LinkUp and Acer Laboratories Inc, and in MP3 players such as Sanyo and embedded with RISC cores from MIPS Technologies. Spatializer stock is traded on the OTC Bulletin Board under the symbol: SPAZ. The company is headquartered in Santa Clara, CA, with executive and marketing offices in Westlake Village, CA and 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 or by writing to investor@spatializer.com.

                     SPATIALIZER AUDIO LABORATORIES, INC.
                               AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS

                                    ASSETS

                                                 December 31,   December 31,
                                                     2001           2000
     Current Assets:
       Cash and Cash Equivalents                    $869,478     $1,467,988
       Accounts Receivable                           442,555        506,558
       Prepaid Expenses and Deposits                 133,251         26,458
         Total Current Assets                      1,465,284      2,001,004
     Property and Equipment, Net                      50,586        108,061
     Intangible Assets, Net                          255,726        302,789
     Other Assets                                      1,510         45,170
                                                  $1,753,106     $2,457,024

                       LIABILITIES AND STOCKHOLDERS' EQUITY

     Current Liabilities:
       Notes Payable to Related Party                112,500        337,742
       Accounts Payable                               14,872         51,782
       Accrued Wages and Benefits                     72,969         61,390
       Accrued Expenses                               41,197         99,595
       Net Liabilities of Discontinued Operation     100,000        255,840
          Total Current Liabilities                  341,538        806,349
       Commitments and Contingencies
     Stockholders' Equity (Deficit):
       10% Series B Convertible Preferred shares,
        $0.01 par value; 1,000,000 shares authorized;
        87,967 and 102,967 shares issued and
        outstanding at December 31, 2001 and 2000,
        respectively                                     880          1,030

       Common shares, $0.01 par value; 65,000,000
        shares authorized; 47,406,939 and 47,087,971
        shares issued and outstanding at December 31,
        2001 and 2000, respectively                  474,070        470,880
       Additional Paid-In Capital                 46,402,852     46,404,892
       Accumulated Deficit                       (45,466,234)   (45,226,127)
         Total Shareholders' Equity                1,411,568      1,650,675
                                                  $1,753,106     $2,457,024



                     SPATIALIZER AUDIO LABORATORIES, INC.
                               AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                            Year Ended December 31,
                                      2001           2000          1999
     Revenues:
       Product Revenues, Net
       Licensing Revenues
       Royalty Revenues            $1,603,782     $2,201,812   $1,660,371
                                    1,603,782      2,201,812    1,660,371
         Cost of Revenues              96,783        248,217       48,780
                                    1,506,999      1,953,595    1,611,591
     Operating Expenses:
       General and Administrative     707,115        599,291      515,843
       Research and Development       639,223        540,269      383,176
       Sales and Marketing            476,432        455,901      257,017
                                    1,822,770      1,595,461    1,156,036
         Operating Income (Loss)     (315,771)       358,134      455,555
     Interest Income                   41,358         64,857        3,401
     Interest Expense                 (11,250)       (34,112)    (102,468)
     Other Income (Expense), Net       42,691          3,140        4,804
                                       72,799         33,885      (94,263)
         Income (Loss) from
          Operations                 (242,972)       392,019      361,292

       Income (Loss) Before Income
        Taxes                        (242,972)       392,019      361,292
       Income Taxes                     2,865        (10,000)      (6,500)
       Net Income (Loss)            $(240,107)      $382,019     $354,792

       Basic and Diluted Income
        (Loss) per Share:                $.01           $.01         $.01
                                         $.01           $.01         $.01
         Weighted-Average Shares
          Outstanding              47,247,455     46,736,224   33,805,512

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 N-2-2(TM), Spatializer N-2-2 ULTRA(TM), Spatializer VirtualSurround VBX(TM), Spatializer VSP-11.(TM) Spatializer Vi.B.E.(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. Copyright (C) 2002 Spatializer Audio Laboratories, Inc.

SOURCE: Spatializer Audio Laboratories Inc.