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Spatializer Hires Investment Banker to Identify and Evaluate Strategic Opportunities

Revenues for the third quarter of fiscal 2002 were $481,000, compared to revenues of $303,000 in the third quarter of fiscal 2001, an increase of 59%. Revenues for the nine-months ended September 30, 2002 were $1,392,000 compared to revenues of $1,215,000 in the comparable nine-month period last year, an increase of 15%.

The Company reported net income for the quarter of $11,000, $0.00 basic and diluted per share, compared with a net loss of $175,000, $0.00 basic and diluted per share, in the comparable period last year. Net income for the nine-months ended September 30, 2002 was $36,000, ($0.00) basic and diluted per share, compared to net loss of $267,000, ($0.01) basic and diluted per share, in the comparable nine-month period last year.

The increase in the revenues reported in the third quarter compared to the comparable period last year resulted primarily from downward revenue adjustments made in the third quarter of 2001 to conform estimated revenues to actual revenues. These adjustments resulted from changes in the reporting procedures from a chip foundry to two of the Company's Asian customers and the resulting delays in reports from those customers to the Company during the transition period. No such adjustment was required in the third quarter of 2002. Revenue in 2002 was also impacted by the continued overall softness in the PC market and the uneven sales throughout the consumer electronics market.

Revenues for the nine months ended September 30, 2002 increased due to the addition of three new accounts in 2002, as compared to the prior year, partially offset by the uneven business performance in the PC and consumer electronics markets noted above.

The net income for the three and nine month periods are primarily the result of the increase in revenue and economies and reductions realized in operating expenses.

"We're satisfied that we were able to continue at a steady, profitable pace through our third quarter, when one considers the uneven business environment in which we compete," stated Henry R. Mandell, Chairman and CEO of Spatializer. "In the past several months, we've been able to achieve new design wins with JVC, Sharp and Orion. These have come on line and we believe will continue to expand. On the other hand, the use of our technology under our licensing arrangement with Apple Computer after the first of the year is highly dependent on their confidential software plans and we are facing new competition for a share of the business with Toshiba."

Mandell continued, "We have a winning strategy to compete in this tough market. We're well positioned through several design wins to benefit from the growth of the recordable DVD market, which is beginning to emerge and whose sales analysts expect will accelerate as retail prices decline. We expect to be announcing new DSP alliances in the fourth quarter to increase the lead Spatializer N-2-2(TM) enjoys as the most widely ported virtual audio solution on the market. Our business with Sanyo continues to develop throughout that organization. We're placing greater emphasis on the notebook PC market and plan to roll out two new products at COMDEX to address the unmet needs of this product category. Finally, our solutions that enhance the audio features of cellular telephones are also getting increased interest."

Mandell concluded, "The difficulty for Spatializer has been to get significant revenue traction in our market due to the dynamics of competitive forces. While many companies which are currently bleeding red ink would be grateful to generate the kind of positive performance like ours, the truth is that we believe that our shareholders deserve better. We need to accelerate growth and to take advantage of these dynamic forces, rather than to be affected by them. To address these objectives, our Board of Directors has retained Neveric Capital, a San Francisco based investment banking firm, to identify and evaluate strategic opportunities. We expect them to explore alternatives to enhance shareholder value and support the Company's growth and overall strategy."

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 products from Toshiba, JVC, Panasonic, Hitachi, Samsung, Sharp, SANYO, Fisher and Kenwood and in PC multimedia systems from Apple. 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.

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(R) is a registered trademark and Spatializer N-2-2(TM) is a trademark of Desper Products Inc. All other trademarks are the property of their respective owners.

                   SPATIALIZER AUDIO LABORATORIES, INC.
                             AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF OPERATIONS
                               (unaudited)

                            For the Three Month      For the Nine Month
                                Period Ended            Period Ended
                           Sept. 30,    Sept. 30,   Sept. 30,   Sept. 30,
                             2002         2001        2002        2001
  Revenues:
    Royalty Revenues       480,851       302,665    1,391,963   1,214,639
                           480,851       302,665    1,391,963   1,214,639

  Cost of Revenues          37,977        12,500      105,898      81,090
  Gross Profit             442,874       290,165    1,286,065   1,133,549

  Operating Expenses:
    General and
     Administrative        211,681       194,770      529,725     553,022
    Research and
     Development            97,532       172,978      340,572     533,681
    Sales and Marketing    122,309       101,462      378,634     330,448
                           431,522       469,210    1,248,931   1,417,151

  Operating Profit (Loss)   11,352     (179,045)       37,134   (283,602)

  Interest Income            2,585         7,220        9,152      36,852
  Interest Expense         (2,813)       (2,813)      (8,438)    (19,363)

  Income (Loss) Before
   Income Taxes             11,124     (174,638)       37,848   (266,113)

  Income Taxes                  --         (682)      (2,400)     (1,182)

  Net Income (Loss)        $11,124    $(175,320)      $35,448  $(267,295)

  Basic/Diluted Earnings
   (Loss) Per Share          $0.00       $(0.00)        $0.00     $(0.01)

  Weighted Average Shares
    Outstanding         47,406,939    47,406,939   47,387,561  47,387,561


                   SPATIALIZER AUDIO LABORATORIES, INC.
                             AND SUBSIDIARIES

                       CONSOLIDATED BALANCE SHEETS

                                  ASSETS

                                               September 30,    December 31,
                                                   2002             2001
                                                (unaudited)
  Current Assets:
    Cash and Cash Equivalents                     $916,692       $869,478
    Accounts Receivable, net                       483,981        442,555
    Prepaid Expenses and Deposits                   61,674        133,251
  Total Current Assets                           1,462,347      1,445,284

  Property and Equipment, net                       91,964         50,586
  Capitalized Patent and Technology Costs, net     236,983        255,726
  Other Assets                                       2,400          1,510

  Total Assets                                  $1,793,694     $1,753,106

                     LIABILITIES AND SHAREHOLDERS' EQUITY

  Current Liabilities:
    Notes Payable to Related Parties               112,500        112,500
    Accounts Payable                                62,492         14,872
    Accrued Wages and Benefits                      62,189         72,969
    Accrued Expenses and Taxes                      37,830         41,197
    Net Liabilities of Discontinued Operation       71,667        100,000
  Total Current Liabilities                        346,678        341,538

  Shareholders' Equity:
    Series B, 10% Redeemable Convertible
     Preferred shares, $.01 par value, 1,000,000
     shares authorized, 87,967 shares issued
     and outstanding at September 30, 2002
     and December 31, 2001, respectively               880            880
    Common shares, $.01 par value, 65,000,000
     shares authorized, 47,406,939 shares issued
     and outstanding at September 30, 2002 and
     December 31, 2001, respectively               474,070        474,070
    Additional Paid-In Capital                  46,402,852     46,402,852
    Accumulated Deficit                        (45,430,786)   (45,466,234)
  Total Shareholders' Equity                     1,447,016      1,411,568

  Total Liabilities and Shareholders' Equity    $1,793,694     $1,753,106

Source: Spatializer Audio Laboratories, Inc.

CONTACT: Investor Relations of Spatializer Audio Laboratories, Inc.,
+1-408-296-0600, or investor@spatializer.com

Web site: http://www.spatializer.com/