<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, 1998
                                          
                                         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 September 4, 1998 was
8,152,148.

<PAGE>

                                          
                             ULTIMATE ELECTRONICS, INC.
                                          
                                     FORM 10-Q
                                          
                                       INDEX
                                          

PART I.   FINANCIAL INFORMATION

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

<S>       <C>                                                              <C>
          Condensed Consolidated Balance Sheets as of July 31, 1998 and
          January 31, 1998 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  3
                                                                             
          Consolidated Statements of Operations for the three and            
          six months ended July 31, 1998 and July 31, 1997  .  .  .  .  .  .  4
                                                                             
          Condensed Consolidated Statements of Cash Flows for the six       
          months ended July 31, 1998 and July 31, 1997.  .  .  .  .  .  .  .  5
                                                                             
          Notes to Condensed Consolidated Financial Statements .  .  .  .  .  6
                                                                             
Item 2.   Management's Discussion and Analysis of Financial Condition and    
          Results of Operations  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  7


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>

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)


                           ULTIMATE ELECTRONICS, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS


                   (amounts in thousands, except share data)

<TABLE>
<CAPTION>
                                                       (Unaudited)
                                                        July 31,     January 31,
                                                          1998          1998
                                                       -----------   ----------- 
<S>                                                    <C>           <C>
ASSETS:
Current assets:                                                               
   Cash and cash equivalents                           $     2,503   $     2,006
   Accounts receivable                                      14,777        19,826
   Merchandise inventories                                  43,895        43,908
   Other assets                                              2,099         1,362
                                                       -----------   ----------- 
      Total current assets                                  63,274        67,102

Property and equipment, net                                 48,518        50,855
Property under capital leases, including related             
  parties, net                                               1,899         2,068
Goodwill, net                                                2,388         2,385
Other assets                                                   994         1,036
                                                       -----------   ----------- 
Total assets                                           $   117,073   $   123,446
                                                       -----------   ----------- 
                                                       -----------   ----------- 

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:                                                           
   Revolving line of credit                            $    26,291   $    26,564
   Accounts payable                                         22,119        25,550
   Other current liabilities                                 9,891         9,410
                                                       -----------   ----------- 
      Total current liabilities                             58,301        61,524

Bonds payable                                               13,000        13,000
Term loans                                                     490           642
Capital lease obligations, including related parties         1,888         2,049
Deferred tax liability                                         810         1,510

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, 8,150,748
      at July 31, 1998 and 8,139,548 at
      January 31, 1998                                          82            81
   Additional paid-in capital                               33,883        33,868
   Retained earnings                                         8,619        10,772
                                                       -----------   ----------- 
      Total stockholders' equity                            42,584        44,721
                                                       -----------   ----------- 
Total liabilities and stockholders' equity             $   117,073   $   123,446
                                                       -----------   ----------- 
                                                       -----------   ----------- 
</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements.


                                       3

<PAGE>

                            ULTIMATE ELECTRONICS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

                  (amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                 Three Months Ended              Six Months Ended
                                                                       July 31,                       July 31,
                                                              -------------------------     ------------------------- 
                                                                  1998         1997             1998          1997
                                                              -----------   -----------     -----------   ----------- 
<S>                                                           <C>           <C>             <C>           <C>
Net sales                                                     $    71,182   $    61,944     $   142,064   $   117,452 
Cost of goods sold                                                 49,279        45,030         101,901        86,088 
                                                              -----------   -----------     -----------   ----------- 
Gross profit                                                       21,903        16,914          40,163        31,364 
Selling, general and administrative expenses                       20,675        16,615          41,373        30,775 
                                                              -----------   -----------     -----------   ----------- 
Income (loss) from operations                                       1,228           299          (1,210)          589 
Interest expense, net                                               1,127           971           2,198         1,754 
                                                              -----------   -----------     -----------   ----------- 
Income (loss) before income taxes                                     101          (672)         (3,408)       (1,165)
Income tax expense (benefit)                                           43          (250)         (1,255)         (432)
                                                              -----------   -----------     -----------   ----------- 
Net income (loss)                                             $        58   $      (422)    $    (2,153)  $      (733)
                                                              -----------   -----------     -----------   ----------- 
                                                              -----------   -----------     -----------   ----------- 

Income (loss) per share of common stock - basic and diluted   $       .01   $     (. 06)    $      (.26)  $      (.10)
Weighted average shares outstanding - basic                         8,151         7,327           8,145         7,164 
Weighted average shares outstanding - diluted                       8,221         7,327           8,145         7,164 
</TABLE>


See accompanying notes to Condensed Consolidated Financial Statements.


                                       4

<PAGE>

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

                          (amounts in thousands)


<TABLE>
<CAPTION>
                                                                      Six Months Ended
                                                                          July 31,
                                                                 ------------------------- 
                                                                     1998         1997
                                                                 -----------   ----------- 
<C>                                                              <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash provided by operating activities                        $     1,589   $     6,903   

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment                                     (543)       (2,503)  
Purchase of Audio King                                                     -          (836)  
                                                                 -----------   -----------   
Net cash used in investing activities                                   (543)       (3,339)  

CASH FLOWS FROM FINANCING ACTIVITIES:



Net paydown on line of credit                                           (273)       (1,172)  
Proceeds from exercise of stock options                                   16             -   
Principal payments on term loans and capital lease obligations          (292)         (292)  
                                                                 -----------   -----------   
Net cash used in financing activities                                   (549)       (1,464)  
                                                                 -----------   -----------   
Net increase in cash and cash equivalents                                497         2,100   
                                                                                 
Cash and cash equivalents at beginning of period                       2,006           764   
                                                                 -----------   -----------   
Cash and cash equivalents at end of period                       $     2,503   $     2,864   
                                                                 -----------   -----------   
                                                                 -----------   -----------   
</TABLE>


See accompanying notes to Condensed Consolidated Financial Statements.


                                       5

<PAGE>

                                   ULTIMATE ELECTRONICS, INC.

                        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                         (UNAUDITED)

                                        JULY 31, 1998


1.   ACCOUNTING POLICIES

     The Company's unaudited condensed consolidated 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, 1998 
     are not necessarily indicative of the results that may be expected for 
     the year ending January 31, 1999.  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, 
     1998.  

2.   PRINCIPLES OF CONSOLIDATION

     The unaudited condensed consolidated financial statements include the 
     accounts of all subsidiaries.  All intercompany accounts and 
     transactions have been eliminated upon consolidation.

3.   MERGER

     On June 27, 1997, the Company completed a merger in which the Company 
     acquired all of the outstanding shares of Audio King Corporation ("Audio 
     King").  Audio King, a consumer specialty electronics company, operated 
     11 retail stores; eight in Minnesota, two in Iowa and one in South 
     Dakota. The purchase price consisted of $2.5 million in cash, 986,432 
     shares of Ultimate's common stock valued at $2.6 million, assumed debt 
     of $7.2 million, and other expenses and severance costs of $1.2 million. 
     The transaction was accounted for as a purchase, whereby the purchase 
     price has been allocated to the acquired assets and liabilities based on 
     estimated fair value at the acquisition date.  The transaction resulted 
     in the Company recording goodwill in the amount of $2.5 million.  The 
     results of operations since the acquisition date are included in the 
     accompanying condensed consolidated financial statements.


                                       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 that 
may cause future results to vary materially.  Such information includes 
reference to future profitability and steps being taken to achieve that 
result.  Factors that may cause these results not to be achieved include, 
without limitation, risks regarding increases in promotional activities of 
competitors, changes in consumer buying, the presence or absence of new 
products or product features in the Company's merchandise categories, changes 
in the distribution strategy of the Company's vendors, changes in vendor 
support for advertising and promotional programs, changes in the Company's 
merchandise sales and mix as well as general economic conditions.  Please 
refer to a discussion of these and other factors in the Company's Annual 
Report on Form 10-K for the year ended January 31, 1998 and other filings 
with the Securities and Exchange Commission.  The Company disclaims any 
intent or obligation to update publicly these forward-looking statements, 
whether as a result of new information, future events or otherwise.


RESULTS OF OPERATIONS

Net sales for the three months ended July 31, 1998 increased 15% to $71.2 
million from $61.9 million for the three months ended July 31, 1997.  Net 
sales for the six months ending July 31, 1998 increased 21% to $142.1 million 
from $117.5 million for the six months ended July 31, 1997.  The increase in 
sales during these periods was due primarily to the acquisition of Audio King 
effective June 27, 1997.  Sales of comparable stores were flat compared to 
the same quarter in the prior year and decreased 1% for the six months ended 
July 31, 1998.  As previously announced, the Company proceeded with its 
planned reduction in sales and mix of computer products.  Excluding the 
computer category, comparable store sales were up 4% for the quarter ending 
July 31, 1998.  

Gross profit for the three months ended July 31, 1998 increased 30% to $21.9 
million (30.7% of net sales) from $16.9 million (27.3% of net sales) for the 
three months ended July 31, 1997.  Gross profit for the six months ended July 
31, 1998 increased 28% to $40.2 million (28.3% of net sales) from $31.4 
million (26.7% of net sales) for the six months ended July 31, 1997.  Margins 
in the first quarter were impacted by significant sales of discontinued 
computers as well as an increase in the Company's reserve for discontinued 
computer inventory of $700,000.  Additionally, the Company liquidated its 
35mm camera inventory and eliminated two audio speaker lines which resulted 
in a reduction of gross profit of $500,000.  The improvement in gross margins 
for the second quarter of fiscal 1999 over the first quarter and the same 
period in the prior year was a direct result of the Company's efforts to 
reduce its exposure to computers and concentrate on the sales of products in 
the higher margin categories of audio, video and mobile electronics where the 
Company believes it has a competitive advantage.  

Selling, general and administrative expenses for the three months ended July 
31, 1998 increased to $20.7 million (29.0% of net sales) from $16.6 million 
(26.8% of net sales) for the three months ended July 31, 1997.  Selling, 
general, and administrative expenses for the six months ending July 31, 1998 
increased to $41.4 million (29.1% of net sales) from $30.8 million (26.2% of 
net sales) for the six months ended July 31, 1997.  Selling, general and 
administrative expenses were impacted by higher store and advertising 
expenses associated with the Company's strategic initiatives to increase the 
sales in the stores acquired through the Audio King merger.     

As a result of the foregoing, income from operations increased to $1.2 
million (1.7% of net sales) for the three months ended July 31, 1998, 
compared to income from operations of $299,000 (0.5% of net sales) for the 
three months ended July 31, 1997.  Loss from operations was $1.2 million 
(0.8% of net sales) for the six months ended July 31, 1998 compared to income 
from operations of $589,000 (0.5% of net sales) for the six months ended July 
31, 1997. 

Interest expense increased to $1.1 million and $2.2 million for the three and 
six months ended July 31, 1998, respectively, from $1.0 and $1.8 million for 
the three and six months ended July 31, 1997. This increase was due 




                                       7

<PAGE>


primarily to higher average amounts outstanding under the Company's revolving 
line of credit that was used for the acquisition of Audio King. 

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's primary sources of liquidity for funding 
expansion and growth have been net cash from operations, revolving credit 
lines, term loans and issuance of common stock. The Company's initial public 
offering in October 1993 resulted in proceeds of $17.8 million (net of all 
offering costs).  The Company completed a second offering of its common stock 
in November 1995 and received net proceeds of $12.5 million (net of all 
offering costs).  With the addition of Audio King, the Company now operates a 
total of 30 stores in nine states.  

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 $1.6 million for the six months ended 
July 31, 1998 compared to net cash provided by operations of $6.9 million 
for the six months ended July 31, 1997.   

The Company intends to continue its expansion into select metropolitan areas 
in the Rocky Mountain, Midwest and Southwest regions with its larger format 
stores.  The Company has begun analyzing new store opportunities in existing 
markets to replace some of the Company's smaller locations.  The Company 
completed the conversion of its County Line store from an outlet store to a 
regular store on September 4, 1998.  The Company expects to relocate and 
expand two to five of its locations within the next three years along with 
the possibility of adding new stores.  At the present time, no firm 
commitments for relocated or new stores have been made.  The Company 
currently anticipates these events to occur after fiscal 1999.  The size of 
these future stores is anticipated to be approximately 24,000 to 36,000 
square feet at a projected cost of $30 to $55 per square foot.  The inventory 
requirement for the Company's new larger format stores averages approximately 
$2.0 million per store, approximately $1.0 million of which is financed 
through credit. 

The Company's primary capital requirements are directly related to 
expenditures for new store openings and the remodeling and upgrading of 
existing store locations.  With the exception of the Thornton Facility, all 
stores are leased.  Capital expenditures to relocate and expand existing 
stores are expected to average $1.3 million per store, excluding preopening 
expenses averaging $250,000.  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.  

The Company's revolving line of credit agreement with Norwest Bank Colorado, 
N.A. expires on September 30, 1998, at which time all outstanding principal 
borrowings become due.  Accordingly, at July 31, 1998 amounts payable under 
the revolving line of credit agreement have been classified in the accompanying
balance sheet as short term. The Company has signed a letter of intent and 
has received loan approval for a new three year $40 million credit agreement 
with Foothill Capital Corporation (a wholly owned Norwest Bank subsidiary).  
The new facility is expected to close prior to October 1, 1998. Borrowings 
under the Company's existing revolving line of credit are limited to the 
lesser of $35 million or 70% of eligible inventory.  Borrowings under this 
credit facility in the amount of $26.3 million were outstanding as of July 
31, 1998.  Borrowings are secured by accounts receivable, inventories and 
equipment. The Company was in compliance with all covenants at July 31, 1998.


                                       8

<PAGE>


The Company believes that its cash flow from operations and borrowings under 
its new credit facilities will be sufficient to fund the Company's operations 
and debt repayment for fiscal 1999.

To fund the capital requirements for its anticipated expansion plans beyond 
fiscal 1999, the Company may be required to seek additional financing, which 
may take the form of expansion of its new credit facility, or possibly 
additional debt or equity financings.  There can be no assurance that the 
Company will be able to obtain such funds on favorable terms, if at all.

SEASONALITY


The Company's business is affected by seasonal consumer buying patterns.  As 
is the case with many other retailers, the Company's sales and profits have 
been greatest in the fourth quarter (which includes the holiday selling 
season).  Operating results are dependent upon a number of factors, including 
discretionary consumer spending, which is 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.

YEAR 2000 ISSUE

Until recently most computer programs were written to store only two digits 
of date related information in order to more efficiently handle and sort 
data.  As a result, these programs were unable to properly distinguish 
between dates occurring in the year 1900 and dates occurring in the year 
2000.  This is referred to as the "Year 2000 Issue".  During fiscal 1999, the 
Company has begun to review all applications to evaluate the Company's 
exposure to the year 2000 issue.  Management does not believe the Company 
will have to modify or replace any significant portion of its computer 
applications in order for its computer systems to function properly with 
respect to dates in the year 2000 and thereafter.  In addition, the Company 
is coordinating with significant third party entities with which it does 
business to address potential year 2000 issues in order to minimize the 
potential adverse consequences, if any, that could result from failure of 
such entities to address this issue.


                                       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 1998 Annual Meeting of Stockholders of Ultimate Electronics, 
          Inc. was held on June 17, 1998.  At the meeting, Alan E. Kessock 
          and Robert W. Beale were elected as Class I Directors for 
          three-year terms expiring at the 2001 Annual Meeting of 
          Stockholders.  David J. Workman, Randall F. Bellows and William J. 
          Pearse continue their respective terms as Directors of the Company.

          The matters voted upon and passed at the Meeting were the election 
          of the above noted directors and the ratification of the 
          appointment of Ernst & Young LLP as the Company's independent 
          public accountants for the fiscal year ending January 31, 1999.  
          The results of the voting on these matters is outlined in the 
          following table.

<TABLE>
<CAPTION>
                                                 VOTES        VOTES      VOTES    
                        PROPOSAL                  FOR        AGAINST   ABSTAINED  
          ---------------------------------    ---------     -------   ---------- 
          <S>                                  <C>           <C>       <C>
          Election of Directors:
            Alan E. Kessock                    7,260,752          -      60,411   
            Robert W. Beale                    7,267,586          -      53,517   

          Ratification of Ernst & Young LLP    7,299,709     15,884       5,570   
</TABLE>


ITEM 5.   OTHER INFORMATION.

          None 


                                      10

<PAGE>

PART II.  OTHER INFORMATION (CONTINUED)

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

               (a)  Exhibits:

                    Documents filed with this report:

                    10.23  Fifth amendment to Credit Agreement between 
                           Ultimate Electronics, Inc. and Norwest Bank 
                           Colorado, National Association and Norwest 
                           Business Credit, Inc. dated June 30, 1998



                    27     Financial Data Schedule 

               (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 4, 1998           By: /s/ Alan E. Kessock
     -------------------             ------------------------------------------
                                  Alan E. Kessock
                                  Vice President, Chief Financial Officer,
                                  Secretary and a Director (Principal Financial
                                  and Accounting Officer)













                                      12