<PAGE>


                          United States
               Securities and Exchange Commission
                     Washington, D.C.  20549


                            FORM 10-Q

(Mark One)

[X]    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities 
       Exchange Act of 1934

                 For the Quarterly Period Ended July 31, 1996

                                     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 0-22532

                          ULTIMATE ELECTRONICS, INC.
            (Exact name of registrant as specified in its charter)


                 DELAWARE                              84-0585211
     (State or other jurisdiction of                (I.R.S. employer
      incorporation or organization)                 identification no.)


               321A WEST 84TH AVENUE, THORNTON, COLORADO  80221
              (Address of principal executive offices, zip code)

                               (303) 412-2500
            (Registrant's telephone number, including area code)


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
                                     ---            ---

The number of outstanding shares of Common Stock as of August 31, 1996 was 
6,995,000.


<PAGE>



                          ULTIMATE ELECTRONICS, INC.

                                  FORM 10-Q

                                    INDEX



PART I.   FINANCIAL INFORMATION

<TABLE>
                                                                                 Page No.
<S>        <C>                                                                    <C>
Item 1.   Financial Statements (Unaudited):

          Condensed Balance Sheets as of July 31, 1996 and January 31, 1996 . . . .   3

          Statements of Operations for the three and six months ended July 31, 
          1996 and July 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . .   4

          Condensed Statements of Cash Flows for the six months ended July 31, 
          1996 and July 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . .   5

          Notes to Condensed Financial Statements . . . . . . . . . . . . . . . . .   6

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 7-9


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

Item 2.   Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . .  10

Item 3.   Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . .  10

Item 4.   Submission of Matters to a Vote of Security Holders . . . . . . . . . . .  10

Item 5.   Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

Item 6.   Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . .  11
</TABLE>



                                     2


<PAGE>

ITEM 1.


                          ULTIMATE ELECTRONICS, INC.
                           CONDENSED BALANCE SHEETS

                            (amounts in thousands)

<TABLE>
                                                                 (Unaudited)
                                                                    July 31,     January 31,
                                                                     1996           1996
                                                                 -----------     -----------
<S>                                                              <C>               <C>
ASSETS:
Current assets:
  Cash and cash equivalents                                      $      174      $     979
  Accounts receivable                                                12,641         16,406
  Merchandise inventories                                            39,935         38,053
  Other assets                                                        1,066          1,147
                                                                 ----------      ---------
      Total current assets                                           53,816         56,585

Property and equipment, net                                          42,513         41,503
Property under capital leases, including related parties, net         1,151          1,283
Other assets                                                          1,052          1,095
                                                                 ----------      ---------
Total assets                                                     $   98,532      $ 100,466
                                                                 ----------      ---------
                                                                 ----------      ---------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
  Accounts payable                                               $   16,897      $  16,972
  Other current liabilities                                           5,273          8,618
                                                                 ----------      ---------
      Total current liabilities                                      22,170         25,590

Notes payable                                                        20,000         18,000
Bonds payable                                                        13,000         13,000
Term loans                                                            1,062            996
Capital lease obligations, including related parties                  1,155          1,295
Deferred tax liability                                                  700            667

Commitments

Stockholders' equity:
  Preferred Stock, par value $.01 per share
    Authorized shares 10,000,000 
    No shares issued and outstanding                                      -              -
  Common Stock, par value $.01 per share
    Authorized shares - 10,000,000
    Issued and outstanding shares, 6,995,000
    at July 31, 1996 and January 31, 1996                                70             70
  Additional paid-in capital                                         31,009         31,009
  Retained earnings                                                   9,366          9,839
                                                                 ----------      ---------
      Total stockholders' equity                                     40,445         40,918
                                                                 ----------      ---------
Total liabilities and stockholders' equity                       $   98,532      $ 100,466
                                                                 ----------      ---------
                                                                 ----------      ---------
</TABLE>


See accompanying notes.


                                     3


<PAGE>

                            ULTIMATE ELECTRONICS, INC.
                             STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                   (amounts in thousands, except per share data)

                                      Three Months Ended      Six Months Ended
                                            July 31,              July 31,
                                      ------------------    --------------------
                                        1996       1995       1996        1995
                                      -------    -------    --------    --------
Net sales                             $57,144    $52,398    $116,759    $100,793
Cost of goods sold                     41,410     37,746      86,123      73,104
                                      -------    -------    --------    --------
Gross profit                           15,734     14,652      30,636      27,689
Selling, general and                                        
 administrative expenses               14,594     13,302      29,789      25,094
                                      -------    -------    --------    --------
Income (loss) from operations           1,140      1,350         847       2,595
Interest expense on debt and                                
 capital leases                           854        466       1,597         775
                                      -------    -------    --------    --------
Income (loss) before income taxes         286        884        (750)      1,820
Provision (benefit) for income taxes      106        327        (277)        673
                                      -------    -------    --------    --------
Net income (loss)                     $   180    $   557    $   (473)   $  1,147
                                      -------    -------    --------    --------
                                      -------    -------    --------    --------
                                                            
Pro forma information:                                      
  Historical income before effect                           
   of change in accounting method                $   557                $  1,147
  Pro forma effect of change in                             
   accounting method, net of taxes                   110                      65
                                                 -------                --------
  Pro forma net income                           $   667                $  1,212
                                                 -------                --------
                                                 -------                --------
                                                            
Earnings (loss) per share of                                
 common stock                         $   .03    $   .10    $   (.07)   $    .21
Pro forma earnings per share of                             
 common stock                               -        .12           -         .22
Weighted average shares                                     
 outstanding                            6,995      5,559       6,995       5,551


   See accompanying notes.
                              
                                     4
                              
<PAGE>

                         ULTIMATE ELECTRONICS, INC.
                     CONDENSED STATEMENTS OF CASH FLOWS
                              (UNAUDITED)

                        (amounts in thousands)

                                                         Six Months Ended
                                                            July 31,
                                                       -------------------
                                                         1996       1995
                                                       -------    --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by (used in)
 operating activities                                  $   362    $ (6,928)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment                     (3,161)    (11,305)
Proceeds from sales of property
 and equipment                                               -       5,454
                                                       -------    --------
Net cash used in investing activities                   (3,161)     (5,851)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from note payable                           2,000       3,245
Net proceeds from bonds payable                              -      13,000
Proceeds from term loans                                   225           -
Principal payments on term loans and capital
 lease obligations                                        (231)       (202)
                                                       -------    --------
Net cash provided by financing activities                1,994      16,043
                                                       -------    --------
Net increase (decrease) in cash and cash equivalents      (805)      3,264

Cash and cash equivalents at beginning of period           979       2,238
                                                       -------    --------
Cash and cash equivalents at end of period             $   174    $  5,502
                                                       -------    --------
                                                       -------    --------


    See accompanying notes.

                                     5
<PAGE>

                         ULTIMATE ELECTRONICS, INC.

                  NOTES TO CONDENSED FINANCIAL STATEMENTS
                                 (UNAUDITED)

                                JULY 31, 1996


1.  ACCOUNTING POLICIES

    The Company's unaudited interim financial statements have been prepared 
    by the Company in accordance with generally accepted accounting 
    principles for interim financial reporting and the regulations of the 
    Securities and Exchange Commission for quarterly reporting. Accordingly, 
    they do not include all information and footnotes required by generally 
    accepted accounting principles for complete financial statements. In the 
    opinion of the Company, the statements include all adjustments, 
    consisting only of normal recurring adjustments, which are necessary for 
    a fair presentation of the financial position, results of operations and 
    cash flows for the interim periods. Operating results for the six month 
    period ended July 31, 1996 are not necessarily indicative of the results 
    that may be expected for the year ending January 31, 1997. Seasonal 
    fluctuations in sales of the Company's products result primarily from the 
    purchasing patterns of individual consumers during the Christmas holiday 
    season. These patterns tend to moderately concentrate sales in the latter 
    half of the year, particularly in the fourth quarter. For further 
    information, refer to the financial statements and footnotes thereto 
    included in the Company's Annual Report to Stockholders for the year 
    ended January 31, 1996.

2.  EARNINGS PER SHARE OF COMMON STOCK

    Earnings per share of common stock are based on (A) 6,995,000 and $5,500,000
    outstanding shares for the three and six months ended July 31, 1996, 
    and 1995, respectively, and (B) in order to give effect to the potential 
    exercise of options under the Company's stock option plans, (i) no 
    outstanding shares for the three and six months ended July 31, 1996, 
    respectively, and (ii) 58,919 and 50,891 outstanding shares for the three 
    and six months ended July 31, 1995, respectively.

3.  CHANGE IN ACCOUNTING METHOD FOR PREOPENING EXPENSES

    In the fourth quarter of fiscal 1996, the Company changed its method of 
    accounting for preopening expenses. The Company now expenses preopening 
    costs as incurred rather than capitalizing such costs and amortizing them 
    over twelve months for a new store and over six months for a remodeled 
    store. The Company believes this new method is preferable because it 
    results in a more conservative presentation of the Company's financial 
    position and results of operations and is the most commonly used method 
    of accounting for preopening expenses among other companies in the 
    consumer electronics industry. The quarterly results for the three month 
    and six months ended July 31, 1995 have been restated to reflect this 
    change in accounting method.

                                       6

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

Management's discussion and analysis of financial condition and results of 
operations and the financial statements and accompanying notes contain 
forward-looking information which is subject to risks and uncertainties, 
including, but not limited to, increases in promotional activities of 
competitors, changes in consumer buying attitudes, the presence or absence of 
new products or product features in the Company's merchandise categories, 
changes in vendor support for advertising and promotional programs, changes 
in the Company's merchandise sales mix and economic conditions.

RESULTS OF OPERATIONS

Net sales for the three months ended July 31, 1996 increased 9% to $57.1 
million from $52.4 million for the three months ended July 31, 1995. Net 
sales for the six months ending July 31, 1996 increased 16% to $116.8 million 
from $100.8 million for the six months ended July 31, 1995. The increase in 
sales during this period was due primarily to the opening of new stores in 
Nevada, Utah, Idaho and Oklahoma since April 1995. Comparable store sales 
decreased 16% and 12% for the three and six months ended July 31, 1996, 
respectively, compared to a 12% and 7% increase in comparable store sales for 
the three and six months ended July 31, 1995, respectively. The decrease in 
comparable store sales for the three and six month period ending July 1996 
was due in part to a continuing sluggish retail environment and the grand 
openings of competitors' stores within markets the Company already serves, 
which openings adversely affected sales at existing stores in these markets.

Gross profit for the three months ended July 31, 1996 increased 7% to $15.7 
million (27.6% of net sales) from $14.7 million (28.0% of net sales) for the 
three months ended July 31, 1995. Gross profit for the six months ended July 
31, 1996 increased 10% to $30.6 million (26.2% of net sales) from $27.7 
million (27.5% of net sales) for the six months ended July 31, 1995. The 
decrease in gross profit as a percentage of net sales was primarily 
attributable to a higher mix of sales of discontinued and promotional 
computer products.

Selling, general and administrative expenses for the three months ended July 
31, 1996 increased to $14.6 million (25.5% of net sales) from $13.3 million 
(25.4% of net sales) for the three months ended July 31, 1995. Selling, 
general and administrative expenses for the six months ending July 31, 1996 
increased to $29.8 million (25.5% of net sales) from $25.1 million (24.9% of 
net sales) for the six months ended July 31, 1995. Selling, general and 
administrative expenses increased as a percentage of net sales due primarily 
to higher advertising and promotional costs associated with discontinued and 
promotional computer products. The Company has addressed this trend during 
fiscal year 1997 by reducing support staff where appropriate, changing the 
sales commission structure and reducing variable expenses throughout the 
Company.

As a result of the foregoing, income from operations decreased 16% to $1.1 
million or 2.0% of net sales for the three months ended July 31, 1996, 
compared to income from operations of $1.3 million or 2.6% of net sales for 
the three months ended July 31, 1995. Income from operations decreased 67% to 
$847,000 (.7% of net sales) for the six months ended July 31, 1996 from $2.6 
million (2.6% of net sales) for the six months ended July 31, 1995.

Interest expense increased to $854,000 and $1.6 million for the three and six 
months ended July 31, 1996, respectively, from $466,000 and $775,000 for the 
three and six months ended July 31, 1995, respectively, due to higher average 
amounts outstanding under the Company's revolving line of credit used for new 
store expansion over the past year and additional interest expense from the 
Bond Offering (as defined below) used for the construction the Company's 
Thornton Facility (as defined below).


                                       7

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's primary sources of liquidity have been net cash 
from operations and from revolving credit lines and term loans. Over the last 
three years, the Company has expanded its operations outside Colorado and now 
operates stores in six states. The Company has funded this expansion in part 
through two public offerings of its common stock. The Company's initial 
public offering in October 1993 resulted in proceeds of $18.2 million (net of 
underwriting discounts and expenses). The Company completed a second offering 
of its common stock in November 1995 and received proceeds of $12.7 million 
(net of underwriting discounts and expenses).

In March 1995, the Company received proceeds of $12.3 million (net of the 
underwriting discount and other associated costs) from the sale of $13.0 
million aggregate principal amount of 10.25% First Mortgage Bonds (the "Bond 
Offering"). The proceeds of the Bond Offering were used to fund a substantial 
portion of the construction of the Company's warehouse, office, service and 
store facility in Thornton, Colorado (the "Thornton Facility"). Interest on 
the bonds accrues at the rate of 10.25% per year until maturity or earlier 
redemption. The Company is required to redeem $3.25 million aggregate 
principal amount of the bonds annually (reduced to the extent of the bonds 
purchased or redeemed by the Company earlier) on January 31, 2002 and on 
January 31 of each of the three years thereafter, at a redemption price equal 
to par plus accrued interest to the date of redemption. The bonds are not 
redeemable prior to March 31, 2000 and  are  secured  by  the  Thornton  
Facility. 


Net cash provided by operations was $362,000 for the six months ended July 31,
1996 compared to net cash used in operations of $6.9 million for the six months
ended July 31, 1995. The cash used in operations for the six months ending 
July 31, 1996 was due to increased inventory levels resulting from both the 
Company's expansion and increased sales.

As business conditions allow, the Company intends to continue its expansion 
into select metropolitan areas in the Rocky Mountain, Midwest and Southwest 
regions with the larger Ultimate Electronics store format. During the 
remainder of fiscal 1997, the Company intends to relocate and expand two of 
its Colorado stores to the larger Ultimate Electronics store format. In 
fiscal 1998, the Company expects to relocate and expand two to three Colorado 
stores into the larger store format and may continue its expansion into new 
markets.

The Company's primary capital requirements are directly related to 
expenditures for new store openings and the remodeling and upgrading of 
existing store locations. All stores, with the exception of the Thornton 
Facility, opened in the last two fiscal years have been leased. Capital 
expenditures to open these new stores have averaged $1.5 to $2.0 million, 
excluding preopening costs ranging from $300,000 to $600,000. Capital 
expenditures to relocate and expand existing stores in fiscal 1997 are 
expected to average $1.8 to 2.0 million per store, excluding preopening 
expenses ranging from $100,000 to $300,000. Preopening costs include such 
items as advertising prior to opening, recruitment and training of new 
employees and any costs of early termination of store leases. Effective 
February 1, 1995, the Company changed its method of accounting for preopening 
expenses and began expensing preopening costs as incurred prior to the 
opening of a new store or relocation of an existing store. The initial 
inventory requirement for the Company's new larger format stores averages 
approximately $2.0 million per store, approximately $1.0 million of which is 
expected to be financed through trade credit.

The Company executed a revolving line of credit agreement with Norwest Bank 
Colorado, N.A. and First Security Bank of Utah, N.A. on July 24, 1995, 
pursuant to which the banks will lend the Company up to the lesser of $25.0 
million or 65% of the value of the Company's trade inventory through June 30, 
1997. Borrowings under this credit facility in the amount of $20.0 million 
were outstanding as of July 31, 1996.


                                       8

<PAGE>

The Company believes that its cash flow from operations and borrowings under 
available credit facilities will be sufficient to fund the Company's 
operations and its store relocation plans for fiscal 1997. There can be no 
assurance that the Company will not experience significant delays, cost 
overruns or completion problems in connection with the relocation of existing 
stores. Moreover, there can be no assurance that the capital requirements for 
the Company's stores will not exceed the Company's current estimates. In 
order to fund the capital requirements for its anticipated expansion plans 
beyond fiscal 1997, the Company will be required to seek additional 
financing, which may take the form of expansion of its existing credit 
facility or possibly additional debt or equity financing. There can be no 
assurance that the Company will be able to obtain such funds on favorable 
terms, if at all.

The Company's business is affected by seasonal consumer buying patterns. As 
is the case with other retailers, the Company's sales and profits have been 
greatest in the fourth quarter (which includes the Christmas selling season). 
If, for any reason, the Company's sales were to be substantially below 
expectations during these months, the Company's annual results would be 
affected in an adverse and disproportionate manner. Operating results are 
dependent upon a number of factors, including discretionary consumer 
spending, which is in turn affected by local, regional or national economic 
conditions affecting disposable consumer income, such as employment, business 
conditions, interest rates and taxation. The Company's quarterly results of 
operations may fluctuate significantly as a result of a number of factors, 
including the timing of new or relocated and expanded store openings and 
related expenses, the success of new stores and the impact of new stores on 
existing stores, among others. As the Company has opened additional stores or 
relocated and expanded stores within markets it already serves, sales at 
existing stores have been adversely affected. Such adverse effects may occur 
in the future. The Company's quarterly operating results also may be affected 
by increases in merchandise costs, price changes in response to competitive 
factors, new and increased competition, product availability and the costs 
associated with the opening of new stores.




















                                       9

<PAGE>

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         From time to time, the Company is a party to certain legal 
         proceedings arising in the ordinary course of its business. 
         Management believes that any resulting liability, individually or in 
         the aggregate, will either be covered by insurance or will not have 
         a material adverse effect on the Company's financial condition.

ITEM 2.  CHANGES IN SECURITIES.

         None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         None

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

         The Annual Meeting of Stockholders of Ultimate Electronics, Inc. was 
         held on June 11, 1996. At the meeting, David J. Workman and Randall 
         F. Bellows were elected as Class II directors for a three-year term 
         expiring at the 1999 Annual Meeting. William J. Pearse, Alan E. 
         Kessock and Robert W. Beale continue their respective terms as 
         directors of the Company

         The matters voted upon and passed at the Meeting were (i) the 
         election of the above noted directors (ii) a proposal to increase 
         the number of shares of common stock authorized for issuance under 
         the Company's Employee Stock Option Plan ("the Employees' Plan") 
         from 700,000 shares to 900,000 shares and (iii) the ratification of 
         the appointment of Ernst & Young LLP as the Company's independent 
         public accountants for the fiscal year ending January 31, 1997. The 
         results of the voting on these matters is outlined in the following 
         table.

                                                   VOTES      VOTES      VOTES
                PROPOSAL                            FOR      AGAINST   ABSTAINED
          ----------------------------------------------------------------------
          Election of  Directors:
            David J. Workman                     6,216,490       -      291,147
            Randall F. Bellows                   6,217,067       -      290,570

          Increase in shares authorized for 
          issuance under the Employees' Plan     5,934,364   627,488     20,785

          Ratification of Ernst & Young LLP      6,483,206    11,370     13,061


ITEM 5.  OTHER INFORMATION.

         None




                                      10

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

        (a)  Exhibits:

             Documents filed with this report:

             None.

        (b)  Reports on Form 8-K:

             None.


















                                      11

<PAGE>


                                 SIGNATURES

Pursuant to the requirements 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.

                                      Ultimate Electronics, Inc.




Date:    September 13, 1996           By: /s/ ALAN E. KESSOCK
     ---------------------------         -----------------------------
                                          Alan E. Kessock
                                          Vice President - Finance and
                                          Administration, Secretary,
                                          Treasurer and a Director 
                                          (Principal Financial Officer)













                                      12