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Revenues for the three months ended March 31, 2003 were $332,000, compared to revenues of $440,000 in the comparable period last year, a decrease of 25%.

The Company reported a net loss for the quarter of $74,000, ($0.00) basic per share, compared with net income of $21,000 ($0.00) basic and fully diluted per share in the comparable period last year.

The decrease in revenues resulted primarily from the wind down and expiration of a license agreement with a major account and further reductions from a second account which began outsourcing manufacturing to third parties. These reductions were partially offset by increases in royalties from licensees added over the past several months, including a third party manufacturer of an existing customer.

The net loss resulted from decreased revenues, partially offset by reduced operating expenses.

The Company's cash position improved to $894,000 at March 31, 2003 as compared to $859,000 at December 31, 2002. The increase in cash and cash equivalents is attributed to the decreases in accounts receivable. Spatializer had working capital of $1,076,000 at March 31, 2003 as compared with working capital of $1,125,000 at December 31, 2002.

"As we reported two months ago, we expected a sharp downtrend in the first and second quarters, resulting primarily from the expiration of a license agreement with a major account," stated Henry R. Mandell, Chairman and CEO of Spatializer Audio Laboratories, Inc. "In addition, another account began outsourcing manufacturing, which disrupted our royalty revenue stream. While discussions on future use of our technology continue with these accounts as part of our aggressive licensing effort, timing was such that the revenue decline was unavoidable, which frankly was less than we anticipated. This is because of strong performances turned in by some of our newer licensees, including those who are manufacturing for others. This is one case where our aggressive, customer-centric marketing approach over the past nine months has started to pay off."

Henry R. Mandell concluded, "Clearly, we have our work cut out for us in 2003 as we work to compensate for the dynamics in the marketplace. We will compete vigorously with our traditional products and intend to win our fair share of this business. However, we cannot stop there and rest on our laurels. Spatializer is not just a technology licensing company ... we are a laboratory and there holds they keys to the future. We've announced two new technology initiatives, Spatializer Audio Alchemy(TM) and Spatializer Interactive(TM), that we believe will drive the Company into new markets and into areas offering greater growth opportunities. Spatializer Audio Alchemy, with its combination of noise reduction, voice and music enhancement capability, has struck a responsive chord with those prospects who have heard it. It fills a need. It solves a problem. It is not just a nice feature to have ... that's the difference. Spatializer Audio Alchemy serves as a platform that is capable of supporting a broad family of new products for digital recording, cellular communications, PC and Internet-based applications. It is the future and it is here. We look forward to communicating more on these initiatives in the coming months."

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 and video products from global brand leaders including Toshiba, JVC, Panasonic, Hitachi, Samsung, Sharp and Sanyo, among others. Spatializer stock is traded on the OTC Bulletin Board under the symbol: SPAZ. The company is headquartered in Santa Clara, CA, with executive offices in Westlake Village, CA and 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 or by writing to investor@spatializer.com.

Safe Harbor Act Statement Under the Private Securities Litigation Reform Act of 1995: Certain information in this 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, the timing and realizable value of the MDT technology, and other risks detailed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission.

NOTE: Spatializer is a registered and Spatializer Audio Alchemy and Spatializer Interactive are trademarks of Desper Products, Inc. Desper Products, Inc. is a wholly owned subsidiary of Spatializer Audio Laboratories, Inc.

                     SPATIALIZER AUDIO LABORATORIES, INC.
                               AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (unaudited)

                                            For the Three Month Period Ended
                                                March 31,       March 31,
                                                  2003             2002

    Royalty Revenues                             332,378        440,481

    Cost of Revenues                              35,942         28,202
    Gross Profit                                 296,436        412,279

    Operating Expenses:
      General and Administrative                 156,402        135,335
      Research and Development                   109,003        123,603
      Sales and Marketing                        102,139        130,339

    Operating Profit (Loss)                      (71,108)        23,003

    Interest and Other Income                      2,492          3,489
    Interest and Other Expense                    (2,813)        (2,813)

    Income (Loss) Before Income Taxes            (71,429)        23,680

    Income Taxes                                  (3,020)        (2,400)

    Net Income (Loss)                           $(74,449)       $21,280

    Basic and Diluted Income (Loss) Per Share     $(0.00)         $0.00

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


                     SPATIALIZER AUDIO LABORATORIES, INC.
                               AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS

                          ASSETS
                                                March 31,     December 31,
                                                  2003           2002
    Current Assets:
      Cash and Cash Equivalents                 $893,577       $858,725
      Accounts Receivable, net                   345,500        499,023
      Prepaid Expenses and Deposits               91,777         82,920
    Total Current Assets                       1,330,854      1,440,668

    Property and Equipment, net                   59,856         70,842
    Intangible Assets, net                       212,809        225,859
    Other Assets                                   6,853          8,471
    Total Assets                              $1,610,372     $1,745,840

             LIABILITIES AND SHAREHOLDERS' EQUITY

    Current Liabilities:
      Notes Payable to Related Parties           112,500        112,500
      Accounts Payable                            31,993         39,027
      Accrued Wages and Benefits                  76,703        108,771
      Accrued Expenses                            33,765         55,682
    Total Current Liabilties                     254,961        315,980

    Commitments and Contingencies

      Series B-1, Redeemable Convertible
       Preferred shares, $.01 par value,
       1,000,000 shares authorized, 102,762
       shares issued and outstanding at
       March 31, 2003 and December 31, 2002        1,028          1,028
    Shareholders' Equity:
      Common shares, $.01 par value, 65,000,000
       shares authorized, 47,406,939 shares
       issued and outstanding at March 31, 2003
       and December 31, 2002                     474,070        474,070
      Additional Paid-In Capital              46,402,704     46,402,704
      Accumulated Deficit                    (45,522,391)   (45,447,942)
    Total Shareholders' Equity                 1,354,383      1,428,832
                                              $1,610,372     $1,745,840