<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

FOR THE FISCAL YEAR ENDED MARCH 30, 1997

                                       or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

 For the transition period from _____to _____

Commission File Number: 0-14729

                                POLK AUDIO, INC.
             (Exact name of registrant as specified in its charter)

                MARYLAND                                   52-0954180
      (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                  Identification No.)

               5601 METRO DRIVE
             BALTIMORE, MARYLAND                               21215
    (Address of principal executive offices)                 (Zip Code)

              Registrant's telephone number, including area code:
                                 (410) 358-3600

Securities registered pursuant to Section 12(b) of the Act:  NONE

Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $0.01
PAR VALUE PER SHARE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

The aggregate market value of the voting stock held by non-affiliates of the
registrant based upon the closing bid price for the registrant's common stock,
as reported by the American Stock Exchange as of June 16, 1997, was $7,894,556.

Number of shares of Common  Stock of the  registrant  outstanding  as of 
June 16, 1997: 1,823,035 SHARES

                            TOTAL NUMBER OF PAGES: 64
                        EXHIBIT INDEX STARTS ON PAGE: 20


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                       DOCUMENTS INCORPORATED BY REFERENCE


<TABLE>
<CAPTION>
         LOCATION IN FORM 10-K                    INCORPORATED DOCUMENT
<S>                                             <C>

PART II:
Item 5 - Market for Registrant's                1997 Annual Report to
          Common Equity and Related             Stockholders for the Fiscal
          Stockholder Matters                   Year ended March 30, 1997

Item 6 - Selected Financial Data                1997 Annual Report
                                                to Stockholders for the Fiscal
                                                Year ended March 30, 1997

Item 7 - Management's Discussion                1997 Annual Report
          and Analysis of Financial             to Stockholders for the Fiscal
          Condition and Results of              Year ended March 30, 1997
          Operation

Item 8 - Financial Statements and               1997 Annual Report
          Supplementary Data                    to Stockholders for the Fiscal
                                                Year ended March 30, 1997

PART III:
Item 10 - Directors and Executive               Proxy Statement for the
           Officers of the Registrant           1997 Annual Meeting
                                                of Stockholders to be filed
                                                within 120 days of the end of
                                                the Company's fiscal year

Item 11 - Executive Compensation                Proxy Statement for the
                                                1997 Annual Meeting
                                                of Stockholders to be filed
                                                within 120 days of the end of
                                                the Company's fiscal year

Item 12 - Security Ownership of                 Proxy Statement for the
             Certain Beneficial                 1997 Annual Meeting
             Owners and Management              of Stockholders to be filed
                                                within 120 days of the end of
                                                the Company's fiscal year

Item 13 - Certain Relationships                 Proxy Statement for the
           and Related Transactions             1997 Annual Meeting
                                                of Stockholders to be filed
                                                within 120 days of the end of
                                                the Company's fiscal year
</TABLE>



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                                     PART I

ITEM 1. BUSINESS

      Polk Audio, Inc. ("Polk" or the "Company") was organized under the laws of
Maryland in 1972. Polk engineers, manufactures and markets high quality
loudspeaker systems intended for use in home audio and video entertainment
systems and in after-market automotive audio systems. The Company's loudspeaker
systems are marketed under the brand names Polk Audio and Eosone.

     An electronic home entertainment system may consist of audio components
(such as record players, compact disc players, receivers, cassette decks, other
supporting electronics and loudspeakers) video components (such as televisions,
video-cassette recorders and videodisc players) or both audio and video
components combined in an integrated system which may incorporate technologies
such as Dolby(R) Pro-Logic(R), Dolby AC-3(R) and DSS(R) Satellite. The Company
emphasizes superior sound quality in promoting its products. The Company intends
to continue to both refine and improve its existing product lines and add new
models.


      MARKETS

      The Company believes that total sales to United States dealers of home
loudspeaker systems in 1997 were in excess of $300 million and that the total
sales to United States dealers of after-market automotive speaker systems (i.e.,
excluding products installed as original equipment in new cars) were in excess
of $350 million in 1997. The Company believes that significant markets for
loudspeaker systems exist outside of the United States, particularly in the
advanced industrial nations including Canada, Western Europe, Japan, Australia
and certain other East Asian nations. The Company does not possess reliable data
on the size of the market for loudspeakers installed as original equipment in
automobiles.

      Loudspeaker systems vary widely in price and performance, from inexpensive
products, available for as low as $70 per pair or less, offering modest
performance, to very expensive products costing $10,000 or more, which reproduce
recorded material as accurately as is technically feasible. Also, complete audio
component systems include the Company's loudspeakers and electronic components
from other manufacturers, typically ranging in retail price from as little as
$200 to more than $10,000.



      PRODUCT LINES

      Polk Audio

      The Company manufactures, markets and sells eleven separate lines of
loudspeaker systems under the Polk Audio brand name.

      The Signature Reference Theater "SRT" System was introduced during fiscal
1996 and retails for $9,000 per system. This is Polk Audio's flagship home
theater system that incorporates five proprietary technologies, consists of 35
active drive units housed in seven enclosures, including two 300 watt powered
subwoofers, and a Control Center with a wireless remote.


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      The Reference Theater or "RT" Series, also introduced during fiscal 1996,
consists of 8 models, with 3 replacement models planned during fiscal 1998, and
range in retail price from $280 to $2,100 per pair. These are value-oriented,
high-quality floor-standing, bookshelf and rear channel speaker systems designed
to appeal to the quality-conscious consumer at lower and medium prices. The RT
product line feature both new component subassemblies, developed through a joint
effort with the Johns Hopkins University, and enhanced cosmetic design.

      The M Series, consisting of seven models are known as the
Multi-application Studio Monitor M3II, the M5, the M2, the M1, the All Weather
M3II, the All Weather M5 and the All Weather M2. The M3II, introduced in fiscal
1995, is an improved version of the original M3 introduced during fiscal 1992.
The M5, introduced in 1995, is a larger version of the very popular M3II. The M1
and M2 models are smaller versions of the popular M3 and M5. M series models may
be employed as the primary speaker in a quality high fidelity system, a video
surround speaker, or a remote speaker in a secondary location. These products
range in retail price from $200 to $500 per pair.

      The Center Channel/Video loudspeaker series (CS series) introduced in
fiscal 1992 consists of four models, with 2 replacement models and one new model
scheduled during fiscal 1998. These products are magnetically shielded for use
with video applications and are designed for use in increasingly popular home
theater, 5-channel Dolby(R) Pro Logic(R) surround-sound systems. The CS models
range in retail price from $149 to $450 per speaker.

      The Home Self-Powered (active) Subwoofer series (PSW series), consists of
4 models ranging in retail price from $450 to $800 per unit. A new model is
planned for introduction in fiscal 1998. These systems were introduced during
fiscal 1995 and incorporate patented High Velocity Compression Drive technology.
These products have been very well received and are commonly used as
enhancements in home-theater applications. The PSW models may either be
purchased separately or packaged with the popular RM Series satellites and
center channel speaker.

      The Reference Monitor or "RM" Series includes the RM-3300 Series II
3-piece sub-woofer/satellite system, modified during fiscal 1996, with a retail
price of $800 per set; the RM-5300 4-piece subwoofer/satellite/center channel
system, modified during fiscal 1996, with a retail price of $1,100 per set; and
the RM7300 4-piece active subwoofer/satellite/center channel system, modified in
fiscal 1996, with a retail price of $1,600 per system. The RM satellites, center
channel and subwoofer components may also be purchased separately. These are
compact speaker systems designed to provide big-speaker sound in a compact
package and have shown increasing popularity in recent years.

       The Architectural Reference Series, presently consisting of six models,
range in retail price from approximately $150 to $570 per pair. These products
are designed for installation directly into the walls or ceilings of the
consumers' homes, and are also suitable for certain types of commercial
applications. They are designed to be as unobtrusive so as to avoid clashing
with the other decor of the environment in which they are installed. The Company
provides a line of accessory grilles for these products suitable for outdoor
installation.

      The "f/x" Series or "Surround Effects Series" was introduced during fiscal
1997 and retails for $450 to $600. There are 2 models in this product line with
3 more anticipated to be introduced in fiscal 1998. These models were designed
for specific use as rear channel surround speakers designed to give powerful
surround effects when using Dolby Pro Logic(R) processors.





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      The "R" Series, introduced in fiscal 1997, consists of two models and
retail for $160 and $220 per pair. The "R" Series is a modestly priced line of
small bookshelf speakers designed to produce efficient and high levels of sound
even when using low powered receivers.

      The DB Series, consisting of ten models are high-end, automotive full
range and Subwoofer speakers systems sold in the automotive after-market. The DB
Series are sold as separate units or in combination as systems and range in
retail price from $130 per unit to $450 per system. This product line was
introduced during fiscal 1996 and replaced the popular Mobile Monitor "MM"
Series product line.

      The EX II Series, consisting of thirteen models, replaced the EX Series in
fiscal 1997. The EX II Series are automotive full range and Subwoofer speakers
systems at lower to medium prices also sold in the automotive after-market. The
EX II Series models are sold as separate units or in combination as systems and
range in retail price from $60 to $250 per system. This product category was
introduced to expand the Company's product offerings in the after-market car
stereo market.



      Eosone

      Eosone, founded in 1996, is a new line of home speaker systems
manufactured and marketed by the Company. Many of the systems incorporate
Radiant Surround Field (TM) technology, which uses drive units on the front and
rear of the cabinet enclosure to reproduce sound providing a wider sound field
for the listener.

      The RSF Series, consisting of three models and ranging in retail price
from $800 to $2,200 per pair, are high-end floor standing speaker systems
incorporating Radiant Surround Field Technology. The RSF1000, which is the
flagship model in the RSF Series, incorporates a 120 watt power amplifier for
perfectly matched self amplification. All RSF models are designed for use for
both music and home theater sound reproduction.

      The RSP Series, consisting of two models and priced at $550 and $750
respectively, are Home Self-Powered (active) Subwoofer systems. The RSP models
may either be purchased separately or packaged with the RSS Series satellites
and center channel speaker to create a home theater system.

      The Radiant Surround Center, or RSC300, retailing for $280 per speaker, is
a magnetically shielded center channel speaker for use with video applications
and is designed for use in home theater, 5-channel Dolby(R) surround-sound
systems.

      The Radiant Surround Rear, or RSR350, retailing for $430 per pair, are
high-quality rear speaker systems designed for use with video applications and
are designed to maximize performance in use in increasingly popular home theater
technologies including 5-channel Dolby(R) Pro Logic(R) and AC-3(R) Video
surround-sound applications.

      The Radiant Satellite System, or "RSS" Series, includes the RSS-702
3-piece subwoofer/satellite system with a retail price of $750 per set; the
RSS-703 4-piece subwoofer/satellite/center channel system with a retail price of
$1,000 per set; and the RSS-705 6-piece subwoofer/front and rear
satellite/center channel system with a retail price of $1,100 per set. The
satellite speakers are magnetically shielded and are also suitable for use in
home theater surround-sound systems. Each system includes the RSP910 active
subwoofer system.






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      RESEARCH AND DEVELOPMENT

      Many of the Company's Polk Audio products incorporate innovative features
based on technology developed by or under the supervision of Matthew S. Polk,
Jr., the Company's Chairman. In addition, the Eosone product line was designed
jointly with Arnold Nudell, co-founder of Genesis Technologies, Inc.(TM),
pursuant to an engineering consulting agreement.

      The Company is continuously engaged in the development of improved
manufacturing and quality testing technologies with the goal of improving
product quality and containing or reducing production costs. The Company employs
23 persons full time in its product and process engineering programs. The
Company historically has, and may continue to, periodically subcontract for
consulting and design expertise. The Company's expenditures for research and
development were approximately $2,726,000 for the fiscal year ended March 30,
1997, $3,266,000 for the fiscal year ended March 31, 1996 and $2,565,000 for the
fiscal year ended March 26, 1995.


      PATENTS AND TRADEMARKS

      The Company, through its wholly-owned subsidiary, Britannia Investment
Corporation, a Delaware corporation ("BIC"), formerly Polk Investment
Corporation, is the holder of fifteen United States patents relating to various
aspects of loudspeaker design. The Company also holds three Canadian patents,
four United Kingdom patents two German patent and one Japanese patent through
BIC. The Company has patents pending in the U.S., Canada, China, Japan, Brazil
and the European Patent Office and Patent Cooperation Treaty.

      Additionally, BIC holds several registered trademarks including but not
limited to Polk Audio(R), Eosone(R), Stereo Dimensional Array(TM), the Speaker
Specialists(R) and Radiant Surround Field(TM).

      The Company believes that its ultimate growth, competitive position and
success in the marketplace are more dependent on its technical expertise and
marketing skills than upon the ownership of patent and trademark rights. While
the Company believes that the patent and trademark rights owned by BIC are
valuable, there can be no assurance that any such patents or trademark
registrations, as may now or hereafter exist, will ultimately be proven valid if
challenged nor can any assurance be given that any pending patent or trademark
applications will result in the actual granting and issuance of patents or
trademark registrations.


      MARKETING

      The Company's products are differentiated from competing products by their
sound quality, value, proprietary technology and styling. The Company actively
promotes and advertises its Polk Audio and Eosone brand name products to
stimulate consumers to seek out its products at related dealer outlets. The
Company carefully selects its dealers based on their knowledge of audio
products, marketing ability and financial strength, with the objective of
securing their long-term sales support for the Company's product lines.

      The Company is selective in choosing its dealers because of its desire to
contract with dealers who will (1) maintain a high level of knowledge about
Polk's products among its sales staff, (2) enhance the quality image of the
Company's products, and (3) remain loyal by making consistent efforts to sell
the Company's products to consumers.






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      DISTRIBUTION

      Polk Audio

      The Company's home products are selectively distributed in the United
States through approximately 325 dealers (some of which have multiple outlets),
that are typically audio or audio/video specialist retailers. The Company also
sells its DB, and EX II Automotive Series products in the United States through
approximately 425 dealers, including auto-sound specialist retailers and some of
its regular home audio dealers.

      The Company's dealers usually stock and sell a broad variety of audio
components including, in most cases, competing loudspeaker product lines. Often
the Company's dealers also stock and sell automotive sound systems and video
products. The Company seeks dealers who emphasize quality products and are
knowledgeable about home entertainment products. The Company has written dealer
agreements that, among other things, require the dealer to display the Company's
products properly and to employ a sales staff who is knowledgeable about audio
products. Generally, the dealer agreements are nonexclusive and may be
terminated by either party on 30 days notice


      The Company's products are exported through approximately 53 exclusive
distributors to certain foreign countries, including various European, South
American and Asian markets. The Company also maintains a field sales and
distribution operation in the United Kingdom and Germany. The operation was
established to provide enhanced service to the Company's distributors in its
European markets and currently sells directly to approximately 240 retailers in
the United Kingdom, the Netherlands and Germany with more planned during fiscal
1998. In addition, during fiscal 1995, the Company established a field sales
operation in Canada to service its retailer base that was previously serviced
through a distributor. Currently, the Company sells directly to approximately 50
retailers in Canada with more planned during fiscal 1998.

      The Company's sales to foreign customers were approximately $9,538,000,
$8,847,000 and $5,159,000 for the fiscal years ended March 30, 1997, March 31,
1996 and March 26, 1995, respectively.


      Eosone

      Eosone Products are sold in the USA exclusively through Best Buy Co.,
Inc.(R) (Best Buy), a large specialty retailer of consumer electronics with
approximately 272 stores located throughout the United States. These stores
offer a wide range of consumer electronics, personal computers, appliances and
entertainment software.

      Pursuant to a dealer agreement between Best Buy and the Company, Best Buy
will continue to be the exclusive USA retailer of Eosone subject to certain
conditions, including but not limited to, the obligation of purchasing a minimum
quantity of Eosone products during fiscal 1998 and thereafter, and providing
in-store product displays and point-of-purchase sales materials.






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<PAGE>   8
      ADVERTISING AND SALES PROMOTION

      The Company has historically advertised its products primarily in audio
and or video enthusiast-oriented publications such as Stereo Review, Audio,
Video and Home Theater Technology, the readers of which purchase audio products
for themselves and may influence the purchasing decisions of others. In addition
to advertising in magazines, Polk engages in other forms of promotion, including
descriptive literature available in the dealers' showrooms, point of purchase
sales aids, direct mail promotions and reader inquiry fulfillment programs.
Additionally, the Company offers its dealers market development and promotional
ad support to be used for local advertising and promotion. These resources are
used for radio and television advertising, newspaper and local magazine
advertising, direct mail and various other types of sales promotions.

      The Company maintains a salaried sales force who service the Company's
dealers and train their sales personnel in the preferred techniques for selling
the Company's products. The DB and EX Automotive Series product lines are
primarily serviced by commissioned manufacturer's representatives, who typically
represent other manufacturers as well as the Company.



      PRICING AND CREDIT TERMS

      The Company establishes its suggested retail prices after taking into
account production and operating costs and the prices of competitive products.
Pricing to Polk Audio dealers is based on a discount schedule from the suggested
retail prices. The Company will run temporary price promotions to dealers in
order to stimulate demand on certain products or to liquidate slow-moving
products.

      The Company's normal terms of sale for Domestic customers require payment
within 30 days from the invoice date, although the Company does provide extended
terms for promotional purposes of 90 days or more from invoice date. A certain
percentage of sales is financed by dealers through third party floor-planning.
Export transactions outside North America may be on a secured basis, including,
but not limited to, irrevocable letters of credit, or on an unsecured basis
depending on the customer size, financial strength and market volatility.
Payment terms for export transactions generally range from 60 to 90 days or
more. The Company currently insures a portion of its accounts receivable against
the insolvency of the creditor.

      From time to time, the Company has accepted returns of unsold products
from its dealers although, historically, returns of unsold products are
insignificant. The Company generally does not sell to its dealers on a
consignment basis.


      COMPETITION

      The market for branded loudspeaker systems is served by many
manufacturers, both foreign and domestic. Many products are available over a
broad price range and the market is highly fragmented and competitive. The
Company distributes its products primarily through specialty retailers, although
loudspeaker systems can also be purchased by consumers through mass
merchandisers, department stores, mail-order merchants and catalog showrooms.

      The Company's principal competitors are other branded speaker
manufacturers, which compete with the Company for dealer support, display space
and ultimately sales in retail outlets. These competitors






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include such firms as Bose Corporation; JBL and Infinity (divisions of Harman
International Industries, Inc.); Acoustic Research and Advent (Divisions of
International Jensen, Inc.); Boston Acoustics, Inc.; Klipsch and Associates;
Yamaha Corporation and many others. Many of the Company's competitors have
greater technical and financial resources and greater brand recognition than the
Company.

      In addition to competition from other branded loudspeaker manufacturers,
the Company's products must also compete with single-brand "rack", "mini" or
"shelf" systems, which contain all the components needed to form an audio/video
system, such as a receiver, cassette and/or compact disc player and
loudspeakers, which may also include a furniture "rack" to house the components.
Principal suppliers of rack and mini systems include Fisher (an affiliate of
Sanyo), Pioneer, Technics (a brand of Matsushita Electric), Denon, Yamaha
Corporation and many other, principally Asian, suppliers. Rack and mini systems
are generally sold through mass merchandisers and department stores, although
many of the Company's dealers also sell rack and mini systems. The Company's
products are sometimes included in dealer-assembled systems that compete
directly with rack systems in the Company's dealer outlets. The Company believes
that sales of rack and mini systems have been substantial in recent years and
that some of this success has been at the expense of the lower-priced models
offered by branded speaker manufacturers. However, rack and mini system
loudspeakers are typically of a much lower sonic quality than those supplied by
branded manufacturers such as the Company and are designed to appeal to less
demanding consumers. Since the Company is not heavily dependent on a large
portion of its sales and profits on inexpensive products that would compete most
directly with rack and mini systems, and because the Company's sales of its
inexpensive products have generally increased in recent years, the Company
believes that its competitive position relative to rack systems continues to be
good.

      The Company attempts to enhance its competitive position by: (1) producing
technically advanced products which provide unique features and superior price
and performance characteristics, (2) supporting an active engineering and
research program, (3) maintaining an effective and motivated network of dealers
who actively promote the sale of the Company's products to the consumer, and (4)
actively advertising and promoting its products.


      MANUFACTURING PLANTS

      The Company's products are manufactured at facilities located in Tijuana,
B.C., Mexico. Pursuant to a contractual arrangement with Cal Pacifico, Inc. of
San Diego, California ("Cal"), and Cal's Subsidiary, Central de Ensambles, S.A.
de C.V.("CESA"), the Company operates an assembly, woodworking and warehousing
operation located in four separate facilities, totaling approximately 125,000
square feet, within the same industrial park in Tijuana, B.C., Mexico. All of
the Company's manufacturing operations are housed in these Tijuana facilities.
The Company's contract with CPI requires the Company to compensate Cal on a
cost-plus-fee basis for substantially all of the direct costs of operating the
Tijuana facility. The Company has the right at any time to purchase all the
capital stock of CESA, or the assets of CESA, for nominal consideration. CESA is
qualified as a shelter operator under the Mexican Maquiladora (Border
Industries) Program for export industries.


      SUPPLIERS

      The Company purchases parts used in the manufacture and assembly of its
products from approximately 180 suppliers, most of whom are located in the
United States. The other suppliers of parts are located in Europe, South
America, Central America and the Far East. Although Polk has in the past relied,
in some cases, on single suppliers for certain parts, the Company could, if
necessary or desirable, develop






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multiple suppliers for its parts. The Company does not have long-term or
exclusive purchase commitments with its suppliers and no one supplier accounted
for more than 15% of the total purchases made by the Company in fiscal 1997.

      With some exceptions, the Company currently manufactures all the component
subassemblies required for its various home loudspeaker system models, however,
it may elect in the future to purchase part or all of its requirements in
subassemblies from outside sources. The R Series and certain CS products are
purchased as fully assembled products. Also, the Company has imported some fully
assembled DB and EX Series products. Such purchases decreased from 17% of total
purchases in fiscal 1996 to 16% in fiscal 1997. The Company also purchases
certain subassemblies from suppliers in Japan and Taiwan. These subassembly
units are incorporated into select finished products with final testing done by
the Company.


      QUALITY CONTROL

      Polk's manufacturing operation includes a program of quality testing at
each principal stage of production. In some cases the Company utilizes
statistical sampling methods but, in many cases, continues to test 100% of its
component subassemblies and finished products in addition to periodic quality
audits of finished goods in inventory.



      INVENTORY AND BACKLOG

      The Company's current policy is to attempt to maintain sufficient
inventories of finished goods to fill all orders within two business days of
their receipt. However, the Company's backlog of unfilled orders may at times
rise significantly, either as a result of dealer orders following new product
introductions which exceed initial production, dealer orders for products which
are not yet in production, unforeseen fluctuations in demand, supply delays or
production problems. The Company's backlog was approximately $1,022,000 and
$2,057,000 at March 30, 1997 and March 31, 1996, respectively. The Company
anticipates the entire backlog as of March 31, 1997 to be filled during fiscal
1998.


      WARRANTIES

      The Company warrants its Polk Audio and Eosone products (excepting car
stereo products and active subwoofers) to the original retail purchaser to be
free from defects in materials and workmanship for a period of five years from
date of purchase by such original purchaser. The warranty period for DB, EX and
Mobile Monitor automotive products is one year, while the warranty period for
active subwoofer products ranges from one to five years. The warranty is a
"limited warranty" insofar as it (1) imposes certain shipping costs on the
consumer, (2) excludes cosmetic deficiencies, except for those evident when the
product is delivered, and (3) is not transferable. The Company's normal practice
is to have its dealers perform warranty service in the field, using parts
supplied on an exchange basis by the Company. Also, the Company may sometimes
reimburse dealers for their labor in performing warranty service on its
products. If a consumer requiring warranty service does not have ready access to
a dealer, he may ship the product to the Company for warranty service.





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      EMPLOYEES

      As of June 3, 1997 the Company had approximately 143 full-time employees
who were engaged as follows:

<TABLE>
<CAPTION>
            Activity                                Number
            --------                                ------
      <S>                                            <C>
      Production and warehousing                      41
      Engineering                                     26
      Sales and marketing                             52
      Administrative                                  24
</TABLE>

      None of the Company's employees are represented by a collective bargaining
unit and the Company believes its relations with its employees are satisfactory.
In addition to their base pay, Company employees receive a variety of fringe
benefits, including health, life and disability insurance, pension or
profit-sharing plan participation, paid vacation, holidays and leave time.

      Except for the Company's one resident operations manager and five managers
representing engineering, quality assurance, manufacturing and general plant
services at the Tijuana facilities, all other employees at the Tijuana
facilities, including assemblers, supervisory and clerical personnel, who
numbered 283 persons in all on June 3, 1997, are CESA employees.




ITEM 2. PROPERTIES

      Since August 1986, the Company has leased a 100,000 square foot facility
located at 5601 Metro Drive, Baltimore, Maryland 21215. As of June 1, 1997, the
Company is leasing 76,000 square feet of this facility where it houses the
Company's engineering, sales and administrative offices.

      In August 1988, the Company and IMEC Corporation, which was the
predecessor of Cal, set up certain subassembly operations in a 23,000 sq. ft.
leased facility located in Parque Industrial La Mesa, Tijuana, B.C. Mexico. In
December 1993, the Company and Cal expanded its operations into an additional
42,000 sq. ft. leased facility located in the same industrial park as the
original Tijuana facility. In November, 1994, the Company expanded its
operations further to include an additional 40,000 sq. ft. leased facility in
the same industrial park as both facilities noted above. In January 1996, the
Company further expanded its operations to include an additional 20,000 sq. ft.
leased facility in the same industrial park as the three facilities noted above.
These facilities house the woodworking, cabinet assembly, transducer and system
assembly and certain warehousing functions of the Company.

      In September 1994, the Company entered into a lease for approximately
33,000 square feet located in San Diego, California. Located in this facility
are the Company's west-coast distribution operations and certain quality
assurance and warehousing operations. Effective April 1, 1996, the Company
expanded its operations in this building to a total of approximately 49,500
square feet. In March 1997, to become effective May, 1997, the Company expanded
its operations further in this building to a total of approximately 65,000
square feet for the purpose of housing the Company's warranty and certain
customer service operations. For additional information regarding these
transactions, refer to "Certain Transactions" in the Polk Audio, Inc. "Notice of
Annual Meeting of Stockholders," dated June 26, 1997.


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ITEM 3. LEGAL PROCEEDINGS

None.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.












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<PAGE>   13
                                          PART II.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
        STOCKHOLDER MATTERS.

Incorporated by reference to the 1997 Annual Report to Stockholders.



ITEM 6. SELECTED FINANCIAL DATA.

Incorporated by reference to the 1997 Annual Report to Stockholders.



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS.

Incorporated by reference to the 1997 Annual Report to Stockholders.



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Incorporated by reference to the 1997 Annual Report to Stockholders; see also
PART IV, Item 14 for a list of the Financial Statements and Schedules filed as a
part of this report.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE.

None.



                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Incorporated by reference to the Company's Proxy Statement with respect to its
1997 Annual Meeting of Stockholders to be filed within 120 days of the end of
the Company's fiscal year.




ITEM 11. EXECUTIVE COMPENSATION.

Incorporated by reference to the Company's Proxy Statement with respect to its
1997 Annual Meeting of Stockholders to be filed within 120 days of the end of
the Company's fiscal year.


                                       13
<PAGE>   14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Incorporated by reference to the Company's Proxy Statement with respect to its
1997 Annual Meeting of Stockholders to be filed within 120 days of the end of
the Company's fiscal year.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Incorporated by reference to the Company's Proxy Statement with respect to its
1997 Annual Meeting of Stockholders to be filed within 120 days of the end of
the Company's fiscal year.





                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
         FORM 8-K.

      (A) DOCUMENTS FILED AS PART OF THE REPORT

      1.    FINANCIAL STATEMENTS (INCORPORATED BY REFERENCE TO THE 1997 ANNUAL
            REPORT TO STOCKHOLDERS, PAGES 5 - 13):

            - Independent Auditors' Report.
            - Consolidated  Balance  Sheets as of March  30,  1997 and March 31,
              1996.
            - Consolidated Statements of Earnings for the fiscal years ended
              March 30, 1997, March 31, 1996 and March 26, 1995.
            - Consolidated Statements of Changes in Stockholders' Equity for the
              fiscal years ended March 30, 1997, March 31, 1996 and March 26,
              1995.
            - Consolidated Statements of Cash Flows for the fiscal years ended
              March 30, 1997, March 31, 1996 and March 26, 1995.
            - Notes to Consolidated Financial Statements.

      2.    FINANCIAL STATEMENT SCHEDULES (INCLUDED IN THIS REPORT):

            - Independent Auditors' Report.
            - Schedule II - Valuation and Qualifying Accounts for the fiscal
              years ended March 30, 1997, March 31, 1996 and March 26, 1995.

      All other schedules have been omitted because required information is not
present or is not present in amounts sufficient to require submission of
schedules.


                                       14
<PAGE>   15


      3.    EXHIBITS

<TABLE>
      <S>     <C>   <C>
       3.1    (*1)   Articles of Amendment and Restatement of the Company
       3.2    (*1)   By-Laws of the Company
              (*2)   Articles of Amendment of the Company
      10.1    (*5)   1986 Equity Participation Plan as amended August 3, 1992
      10.2    (*1)   Exec-U-Care Medical Reimbursement Insurance Policy
      10.3    (*1)   Summary Description of Wage Continuation Plan
      10.4    (*1)   Agreement between Selling Stockholders and the Company dated May 16, 1986
      10.5    (*1)   Stockholders' Buy-Sell Agreement dated May 22, 1986
      10.6    (*1)   Stockholders' Agreement Regarding Stock Transfers Subsequent to Public
                     Offering dated May 21, 1986
      10.7    (*1)   License Agreement between Carver Corporation and the Company dated
                     May 22, 1986
      10.8    (*1)   License Agreement between Marrs Development, Inc. and the Company dated
                     May 22, 1986
      10.9    (*1)   Lease by and between Klopfer Associates Limited
                     Partnership and the Company dated September 23, 1985.
      10.10   (*3)   Lease Amendment by and between Klopfer Associates
                     Limited Partnership and the Company dated September 23,
                     1993.
      10.11   (*3)   Services Agreement between Cal Pacifico of California
                     and the Company dated January 15, 1993.
      10.12   (*3)   Addendum to Services Agreement between Cal Pacifico of
                     California and the Company dated September 3, 1993.
      10.13   (*3)   Commodatum Agreement between Cal Pacifico of California, Central de
                     Ensambles, S.A. de C.V. and the Company dated August 4, 1993.
      10.14   (*4)   Financing Agreement dated November 30, 1994 by and between NationsBank,
                     N.A. and the Company.
      10.15   (*4)   $2,000,000 Term Note dated November 30, 1994 by and between NationsBank,
                     N.A. and the Company.
      10.16   (*5)   First Amendment to Financing Agreement dated October 15, 1995 by and
                     between NationsBank, N.A. and the Company.
      10.17   (*5)   Second Amendment to Financing Agreement dated March 22, 1996 by and
                     between NationsBank, N.A. and the Company.
      10.18   (*5)   Lease by and between Otay Mesa Woodland Hills
                     Partnership and the Company dated July 1, 1994.
      10.19   (*5)   First Lease Amendment by and between Otay Mesa
                     Woodland Hills Partnership and the Company dated January
                     18, 1995.
      10.20   (*5)   Second Lease Amendment by and between Otay Mesa
                     Woodland Hills Partnership and the Company dated November
                     20, 1995.
      10.21   (*5)   Third Lease Amendment by and between Woodland Hills
                     Partnership and the Company dated November 20, 1995.
      10.22   (*5)   Assignment of Leases as of and between Woodland Hills Properties-W, Inc. and
                     Klopfer Associates dated March 18, 1996.
      10.23   (*5)   Form of full recourse promissory note executed by
                     participants under the 1986 Equity Participation Plan in
                     connection with the receipt of a loan from the Company to
                     Fund a cash exercise of stock options under such plan.
</TABLE>



                                       15
<PAGE>   16
<TABLE>
<S>            <C>   <C>
      10.24  (*5)    Form of pledge agreement executed by participants
                     under the 1986 Equity Participation Plan in connection with
                     promissory note referenced in Exhibit 10.24.
      10.25   *      Assignment of Lease by and among UETA, the Company, and
                     Klopfer Associates LLC dated March 21, 1997.
      10.26   *      Lease Amendment by and between Klopfer Associates Limited
                     Partnership and the Company dated March 27, 1997.
      10.27   *      Third Amendment to Financing Agreement dated October 23, 1996 by and
                     between NationsBank, N.A. and the Company.
      10.28   *      $8,000,000 Revolving Credit Note dated October 23, 1996 by and between
                     NationsBank, N.A. and the Company.
      11.1    *      Statement re computation of per-share earnings
      13.1    *      Annual Report to Stockholders for the fiscal year ended March 30, 1997.
      21.1    *      Subsidiaries of the Registrant
      23.1    *      Consent of KPMG Peat Marwick LLP, Independent Auditors
      27.1    *      Financial Data Schedule

      (*1)  Incorporated by reference to the Company's Registration Statement on
            Form S-1 Number 33-5961) filed with the Securities and Exchange
            Commission on May 23, 1986, as amended.

      (*2)  Incorporated by reference to the Company's Form 10-K for the fiscal
            year ended March 31, 1991 filed with the Securities and Exchange
            Commission on June 25, 1991.

      (*3)  Incorporated by reference to the Company's Form 10-K for the fiscal
            year ended March 27, 1994 filed with the Securities and Exchange
            Commission on June 24, 1994.

      (*4)  Incorporated by reference to the Company's Form 10-K for the fiscal
            year ended March 26, 1995 filed with the Securities and Exchange
            Commission on June 19, 1995.

      (*5)  Incorporated by reference to the Company's Form 10-K for the fiscal
            year ended March 31, 1996 filed with the Securities and Exchange
            Commission on June 28, 1996.

      (*)   Filed herewith.
</TABLE>


(b) REPORTS ON FORM 8-K

      A Form 8-K was filed on April 7, 1997 to report the Company's operational
restructuring and the reactivation of its share buyback program.





                                       16
<PAGE>   17
      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, this 26th day of June,
1997.

                                          POLK AUDIO, INC.



                                        By /s/ George M. Klopfer
                                           -------------------------------
                                           George M. Klopfer
                                           Chief Executive Officer




Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
Signature                            Title                                   Date
<S>                            <C>                                        <C>
/s/ George M. Klopfer
------------------------      Chief Executive Officer                     June 26, 1997
George M. Klopfer             and Director


/s/ Matthew S. Polk, Jr.
------------------------      Chairman of the Board,                      June 26, 1997
Matthew S. Polk, Jr.          Vice President and
                              Secretary and Director


/s/ James M. Herd             President                                   June 26, 1997
------------------------    
James M. Herd


/s/ Craig C. Georgi           Vice President and                          June 26, 1997
------------------------      Director
Craig C. Georgi


/s/ Gary B. Davis             Treasurer, Chief Financial Officer          June 26, 1997
------------------------      and Chief Accounting Officer
Gary B. Davis                


/s/ Wilbert H. Sirota         Director                                    June 26, 1997
------------------------      
Wilbert H. Sirota


/s/ Robert B. Barnhill, Jr.   Director                                    June 26, 1997
------------------------ 
Robert B. Barnhill, Jr.
</TABLE>





                                       17



<PAGE>   18


INDEPENDENT AUDITORS' REPORT


The Board of Directors
Polk Audio, Inc.:


Under date of May 14, 1997, we reported on the consolidated balance sheets of
Polk Audio, Inc. and subsidiaries as of March 30, 1997 and March 31, 1996, and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the years in the three-year period ended March 30, 1997. In
connection with our audits of the aforementioned consolidated financial
statements, we have also audited the related financial statement Schedule II
Valuation and Qualifying Accounts for the fiscal years ended March 30, 1997,
March 31, 1996 and March 26, 1995. The financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statement schedule based on our audits.

In our opinion, the financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.



                                          KPMG PEAT MARWICK LLP


Baltimore, Maryland
May 14, 1997






                                       18


<PAGE>   19


                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


                        POLK AUDIO, INC. AND SUBSIDIARIES


<TABLE>
<CAPTION>
                                                                         Additions
                                                                  ------------------------  
                                                 Balance at      Charged to      Charged to                        Balance
                                                  Beginning      Costs and         Other                           at End
Description                                       of Period       Expenses       Accounts(1)    Deductions(2)    of Period
-----------                                       --------        --------       -----------    -------------    ---------
<S>                                               <C>             <C>             <C>             <C>             <C> 
FISCAL YEAR ENDED MARCH 30, 1997:
Allowance for doubtful accounts receivable        $170,396         377,424          35,087         197,800         385,107
                                                  --------        --------        --------        --------        --------


FISCAL YEAR ENDED MARCH 31, 1996:
Allowance for doubtful accounts receivable        $160,287          79,600          66,557         136,048         170,396
                                                  ========        ========        ========        ========        ========


FISCAL YEAR ENDED MARCH 26, 1995:
Allowance for doubtful accounts receivable        $152,879          84,000          10,637          87,229         160,287
                                                  ========        ========        ========        ========        ========
</TABLE>






(1) Recovery of amounts previously charged off.
(2) Amounts charged off.













                                       19
<PAGE>   20



                                 EXHIBITS INDEX


<TABLE>
<CAPTION>
                                                                                      Page


<S>     <C>                                                                            <C>  
10.25   Assignment of Lease by and among UETA, the Company, and Klopfer
         Associates LLC dated March 21, 1997.                                           21

10.26   Lease Amendment by and between Klopfer Associates Limited Partnership
         and the Company dated March 27, 1997.                                          25

10.27   Third Amendment to Financing Agreement dated October 23, 1996 by and
         between NationsBank, N.A. and the Company.                                     28

10.28   $8,000,000 Revolving Credit Note dated October 23, 1996 by and between
          NationsBank, N.A. and the Company.                                            32

11.1    Statement re computation of per-share earnings                                  41

13.1    Annual Report to Stockholders for the fiscal year ended March 30, 1997.         42

21.1    Subsidiaries of the Registrant                                                  62

23.1    Consent of KPMG Peat Marwick LLP, Independent Auditors                          63

27.1    Financial Data Schedule                                                         64
</TABLE>









                                       20