<PAGE>
 
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                                      
                                 FORM 10-K/A      
 
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 (FEE REQUIRED)
 
    For the fiscal year ended December 31, 1996.

                                      OR
 
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 (FEE REQUIRED)
 
    For the transition period from _______________ to _______________
                                   
    Commission file number: 0-18280
 
                           DIGITAL SOUND CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
       <S>                                       <C>
                      CALIFORNIA                     95-3222624
           (STATE OR OTHER JURISDICTION OF        (I.R.S. EMPLOYER)
            INCORPORATION OR ORGANIZATION)       IDENTIFICATION NO.) 
                                                     
               6307 CARPINTERIA AVENUE,                93013
               CARPINTERIA, CALIFORNIA               (ZIP CODE)
       (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
 
       Registrant's telephone number, including area code (805) 566-2000
 
          Securities registered pursuant to Section 12(b) of the Act:
 
                                     None
 
          Securities registered pursuant to Section 12(g) of the Act:
 
                          COMMON STOCK, NO PAR VALUE
                               (TITLE OF CLASS)
 
  INDICATE BY CHECK MARK WHETHER 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 (229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND
WILL NOT BE CONTAINED, TO THE BEST OF 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 Registrant's voting stock held by non-affiliates
of the Registrant as of February 28, 1997 was approximately $23,857,599.
 
  The number of shares outstanding of Registrant's common stock as of February
28, 1997: 20,228,915.
 
Documents Incorporated by Reference:
 
  Parts of the following documents are incorporated by reference to Parts I,
II, III, and IV of the Form 10-K Report: (1) Proxy Statement for Registrant's
1997 Annual Meeting of Stockholders (the "1997 Proxy Statement") and (2)
Registrant's Annual Report to Shareholders for the fiscal year ended December
31, 1996 (the "1996 Annual Report").
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
 
                                  SIGNATURES
 
  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, on March 28,
1997.
 
                                          DIGITAL SOUND CORPORATION
 
                                          By /s/      B. ROBERT SUH
                                          _____________________________________
                                                      B. Robert Suh
                                            Vice President, Finance and Chief
                                                    Financial Officer
 
  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons in
the capacities and on the dates indicated.
 
<TABLE>     
<CAPTION>
                NAME                             TITLE                    DATE
                ----                             -----                    ----
<S>                                  <C>                           <C>
Chief Executive Officer:

/s/       Mark C. Ozur               President, Chief Executive      March 28, 1997
____________________________________  Officer and Director
          Mark C. Ozur

Chief Financial Officer:

/s/      B. Robert Suh               Vice President, Finance         March 28, 1997
____________________________________  Chief Financial Officer
         B. Robert Suh                

Director:

/s/     John D. Beletic              Director                        March 28, 1997
____________________________________
        John D. Beletic

/s/     Bandel L. Carano             Director                        March 28, 1997
____________________________________
        Bandel L. Carano

/s/       J. David Hann              Director                        March 28, 1997
____________________________________
          J. David Hann

/s/    Frederick J. Warren           Director                        March 28, 1997
____________________________________
       Frederick J. Warren
</TABLE>      
 
                                      33