[SPATIALIZER LOGO]
CONTACT: INVESTOR RELATIONS
Spatializer Audio Laboratories, Inc.
408-296-0600
E-mail: INVESTOR@SPATIALIZER.COM
FOR RELEASE AUGUST 12, 2003:
SPATIALIZER AUDIO LABORATORIES, INC. ANNOUNCES
SECOND QUARTER OPERATING RESULTS
Transitioning Accounts and Licensee Product Schedules Puts Drag on Q2
Performance Which is Expected to Continue Before Improvement Begins at Year End
Santa Clara, Calif., August 12, 2003 - Spatializer Audio Laboratories,
Inc. (OTC Bulletin Board: SPAZ) today announced its financial results for the
second quarter ended June 30, 2003.
Revenue decreased to $251,000 in the three months ended June 30, 2003
from $471,000 in the comparable period last year, a decrease of 47%. Revenue in
the six-months ended June 30, 2003 decreased to $583,000 from $911,000 in the
comparable period last year.
The Company reported a net loss of ($212,000) (-84% of revenues), $0.00
per share, in the three months ended June 30, 2003, compared to net income of
$3,000 (1% of revenues), $0.00 per share in the comparable period last year. Net
loss increased to ($287,000) (0% of revenue), $0.00 per share, in the six-months
ended June 30, 2003 from net income of $24,000 (3% of revenue), $0.00 per share
in the comparable period last year.
The decline in revenue resulted from the expiration of a licensing
agreement with a major computer account in January 2003 and the effects of
outsourcing by our existing DVD player accounts to manufacturers in China and
other manufacturers who decline to pay for such software or with whom we do not
have licensing arrangements. In addition, replacement revenues from new
licensing arrangements were delayed due to licensee rescheduling of certain new
product introductions with Spatializer technology due to supply-chain issues,
one of which was the disruption to engineering development at customer sites in
China by the SARS epidemic.
The increased net loss for the three and six month periods are primarily
the result of the decrease in revenue. In addition, additional legal and
reporting burdens imposed by the Sarbanes-Oxley Act resulted in higher public
company related expenses over the prior year.
At June 30, 2003, the Company had $788,000 in cash and cash equivalents
as compared to $859,000 at December 31, 2002, a decrease of 8%. The decrease in
cash and cash equivalents is attributed to the net loss,
partially offset by collections of accounts receivable. Working capital was
$891,000 at June 30, 2003 as compared with working capital of $1,125,000 at
December 31, 2002.
"We anticipated, and reported last quarter, a wind down in early 2003 of
our licensing program with a large computer account as that customer completes
its migration to its latest operating system and a general downturn in our
business in the first half of the year", stated Henry R. Mandell, Chairman and
Chief Executive Officer of Spatializer Audio Laboratories. "As also previously
reported, our performance this year is negatively impacted by the effects of
outsourcing by one of our major DVD player accounts to manufacturers in China
and other manufacturers who decline to pay for such software or with whom we do
not have licensing arrangements. While we expect to replace a portion of this
business by entering into direct licensing agreements with some third party
manufacturers, and with other new business development opportunities in the
latter stages of negotiation, design cycle times can be lengthy and subject to
unforeseen delays. As such, although we currently expect some of these new
opportunities to begin generating new revenues in the fourth quarter of 2003,
our ability to generate additional short-term revenues, and our visibility,
remains limited, due to the design cycle lead times and unforeseen delays
outlined above."
Mandell continued, "We are currently experiencing a bubble in our
royalty revenue pipeline that we are aggressively working on rectifying, but
will take time to replenish. We clearly realize that if these conditions
continue, this would negatively impact our cash flow, which if constrained into
2004, will require further reductions in overhead expense and impair our ability
to most effectively compete in the marketplace. We are currently exploring ways
to more efficiently structure our organization while at the same time forging
ahead on revenue generating opportunities that can be fast tracked to revenue
generation. Spatializer Audio Alchemy(TM) and Spatializer Interactive TM are two
such initiatives to generate short-term revenue."
Mandell concluded, "We compete in a highly competitive industry and from
time to time, business gets more difficult and less predictable. We are
prudently confident that new deals that we cannot yet announce due to licensee
product schedules will provide a degree of traction toward year end. Further, we
are making excellent progress rolling-out and evangelizing both Spatializer
Natural Headphone(TM) and Spatializer Audio Alchemy. Our value propositions for
these products strongly resonate with our customers as does our service-oriented
business approach. Indeed, the response has been so positive that we are
optimistic that we to carve out a significant position in several market
segments going forward."
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, Sony, Samsung, Sharp and Sanyo,
among others. Spatializer common 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 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 competition and pricing pressures,
delays in new product development, dependence on new technology and intellectual
property, the continued need for additional capital, dependence on the PC and
consumer electronics industries, dependence on product shipments of third-party
licensees, and other risks detailed from time to time in the company's periodic
reports and other filings with the Securities and Exchange Commission. The
company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
NOTE: Desper Products Inc. is a wholly owned subsidiary of Spatializer Audio
Laboratories Inc. Spatializer(R) is a registered trademark and Spatializer
Natural Headphone(TM), Spatializer Interactive(TM) and Spatializer Audio
Alchemy(TM) are trademarks of Desper Products Inc. All other trademarks are the
property of their respective owners. Copyright (C) 2003 Spatializer Audio
Laboratories, Inc.
SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2003 2002
------------ ------------
(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 788,012 $ 858,725
Accounts Receivable 246,248 499,023
Prepaid and Deposits 127,490 82,920
------------ ------------
Total Current Assets 1,161,750 1,440,668
Property and Equipment, net 51,642 70,842
Intangible Assets, Net 200,790 225,859
Other Assets -- 8,471
------------ ------------
Total Assets $ 1,414,182 $ 1,745,840
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable to Related Parties 112,500 112,500
Note Payable 54,992 --
Accrued Wages and Benefits 41,328 108,771
Accrued Expenses and Taxes 62,412 94,709
------------ ------------
Total Current Liabilities
Commitments and Contingencies 271,232 315,980
Series B-1, Redeemable Convertible Preferred shares, $.01 par
value, 1,000,000 shares authorized, 102,762
shares issued and outstanding at June 30, 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 June 30,
2003 and December 31, 2002 474,070 474,070
Additional Paid-In Capital 46,402,704 46,402,704
Accumulated Deficit (45,734,852) (45,447,942)
Total Shareholders' Equity 1,141,922 1,428,832
Total Liabilities and Shareholder's Equity $ 1,414,182 $ 1,745,840
============ ============
SPATIALIZER AUDIO LABORATORIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTH PERIOD ENDED FOR THE SIX MONTH PERIOD ENDED
-------------------------------- ------------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 2002 2003 2002
------------- ------------- ------------ ------------
Revenues:
Royalty and Product
Revenues 250,902 470,631 583,280 911,112
------------ ------------ ------------ ------------
250,902 470,631 583,280 911,112
Cost of Revenues 22,497 39,719 58,439 67,921
------------ ------------ ------------ ------------
Gross Profit 228,405 430,912 524,841 843,191
Operating Expenses:
General and
Administrative 236,135 182,710 392,537 318,044
Research and
Development 102,141 119,437 211,144 243,040
Sales and Marketing 99,553 125,986 201,692 256,325
------------ ------------ ------------ ------------
437,829 428,133 805,373 817,409
Operating Profit
(Loss) (209,424) 2,779 (280,532) 25,782
Interest Income 1,972 3,079 4,464 6,569
Interest Expense (5,009) (2,812) (7,822) (5,624)
------------ ------------ ------------ ------------
(3,037) 267 (3,358) 945
------------ ------------ ------------ ------------
Income (Loss) Before
Income Taxes (212,461) 3,046 (283,890) 26,727
Income Taxes -- -- (3,020) (2,400)
------------ ------------
Net Income (Loss) $ (212,461) $ 3,046 $ (286,910) $ 24,327
============ ============ ============ ============
Basic/Diluted Earnings
(Loss) Per Share $ (0.00) $ 0.00 $ (0.01) $ (0.00)
============ ============ ============ ============
Weighted Average
Shares Outstanding 47,406,939 47,406,939 47,406,939 47,406,939
============ ============ ============ ============