<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 October 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, $.01 par value, as of 
December 6, 1996 was 6,995,000.
<PAGE>
                                       
                          ULTIMATE ELECTRONICS, INC.

                                   FORM 10-Q

                                    INDEX



PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited):                              Page No.

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

         Statements of Operations for the three and
         nine months ended October 31, 1996 and
         October 31, 1995................................................   4

         Condensed Statements of Cash Flows for the
         nine months ended October 31, 1996 and
         October 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................................  10



                                       2
<PAGE>

ITEM 1.

                                       
                           ULTIMATE ELECTRONICS, INC.
                            CONDENSED BALANCE SHEETS

                             (amounts in thousands)


                                                 October 31,    January 31,
                                                    1996           1996
                                                 -----------    -----------
                                                 (Unaudited)
ASSETS:

Current assets:
  Cash and cash equivalents                       $  1,283       $    979
  Accounts receivable                               14,103         16,406
  Merchandise inventories                           42,868         38,053
  Other assets                                       1,037          1,147
                                                  --------       --------
    Total current assets                            59,291         56,585

Property and equipment, net                         44,674         41,503
Property under capital leases,
 including related parties, net                      1,085          1,283
Other assets                                         1,083          1,095
                                                  --------       --------
Total assets                                      $106,133       $100,466
                                                  --------       --------
                                                  --------       --------


LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:
  Accounts payable                                $ 22,898       $ 16,972
  Other current liabilities                          5,771          8,618
                                                  --------       --------
    Total current liabilities                       28,669         25,590

Notes payable                                       21,000         18,000
Bonds payable                                       13,000         13,000
Term loan                                              995            996
                                                     1,083          1,295
Capital lease obligations, including
 related parties                                       752            667
Deferred tax liability

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 October 31, 1996 and January 31, 1996            70             70
  Additional paid-in capital                        31,009         31,009
  Retained earnings                                  9,555          9,839
                                                  --------       --------
    Total stockholders' equity                      40,634         40,918
                                                  --------       --------
 Total liabilities and stockholders' equity       $106,133       $100,466
                                                  --------       --------
                                                  --------       --------


  See accompanying notes.



                                       3
<PAGE>
                                       
                           ULTIMATE ELECTRONICS, INC.
                            STATEMENTS OF OPERATIONS
                                 (UNAUDITED)

                 (amounts in thousands, except per share data)


<TABLE>
                                                Three Months Ended      Nine Months Ended
                                                    October 31,            October 31,
                                                ------------------    --------------------
                                                  1996       1995       1996        1995
                                                -------    -------    --------    --------
<S>                                             <C>        <C>        <C>         <C>
Net sales                                       $60,772    $62,547    $177,531    $163,340
Cost of goods sold                               44,468     45,537     130,591     118,640
                                                -------    -------    --------    --------
Gross profit                                     16,304     17,010      46,940      44,700

Selling, general and administrative expenses     15,161     14,538      44,950      39,633
                                                -------    -------    --------    --------
Income from operations                            1,143      2,472       1,990       5,067
Interest expense on debt and capital leases         841        551       2,438       1,326
                                                -------    -------    --------    --------
Income (loss) before income taxes                   302      1,921        (448)      3,741
Provision (benefit) for income taxes                112        709        (165)      1,382
                                                -------    -------    --------    --------
Net income (loss)                               $   190    $ 1,212    $   (283)   $  2,359
                                                -------    -------    --------    --------
                                                -------    -------    --------    --------

Pro forma information:
  Historical income before effect of change in
    accounting method                                      $ 1,212                $  2,359
  Pro forma effect of change in accounting 
    method, net of taxes                                       (18)                     46
                                                           -------                --------
  Pro forma net income                                     $ 1,194                $  2,405
                                                           -------                --------
                                                           -------                --------

Earnings (loss) per share of Common Stock       $   .03    $   .22    $   (.04)   $    .42
Pro forma earnings per share of Common Stock       -           .21        -            .43
Weighted average shares outstanding               6,995      5,585       6,995       5,563
</TABLE>

See accompanying notes.



                                       4
<PAGE>
                                       
                          ULTIMATE ELECTRONICS, INC.
                      CONDENSED STATEMENTS OF CASH FLOWS
                                 (UNAUDITED)

                            (amounts in thousands)


                                                      Nine Months Ended
                                                         October 31,
                                                    -------------------
                                                      1996        1995
                                                    -------     -------

CASH FLOWS FROM OPERATING ACTIVITIES:

Net cash provided by (used in) operating
  activities                                        $ 3,723     $(8,877)


CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment                  (6,287)    (21,367)
Proceeds from sales of property and equipment          -          5,875
                                                    -------     -------
Net cash used in investing activities                (6,287)    (15,492)


CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from note payable                        3,000      10,250
Net proceeds from bonds payable                        -         13,000
Proceeds from term loans                                225        -
Principal payments on term loans and
  capital lease obligations                            (357)       (313)
                                                    -------     -------
Net cash provided by financing activities             2,868      22,937
                                                    -------     -------
Net increase (decrease) in cash and cash
  equivalents                                           304      (1,432)
Cash and cash equivalents at beginning of period        979       2,238
                                                    -------     -------
Cash and cash equivalents at end of period            1,283         806
                                                    -------     -------
                                                    -------     -------


See accompanying notes.



                                       5
<PAGE>
                                       
                           ULTIMATE ELECTRONICS, INC.

                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  (UNAUDITED)

                                OCTOBER 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 management, 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 nine month period ended
   October 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 nine months ended October 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 nine months ended October 31, 
   1996, respectively, and (ii) 84,538 and 63,123 outstanding shares for the 
   three and nine months ended October 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 nine 
   months ended October 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, further expansion by competitors into the Company's markets,
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 general economic conditions. Please refer to a 
discussion of these and other factors in the Company's Annual Report on 
Form 10-K and other filings with the Securities and Exchange Commission.
The Company disclaims any interest or obligation to update publically 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 October 31, 1996 decreased 3% to $60.8 
million from $62.5 million for the three months ended October 31, 1995.  Net 
sales for the nine months ending October 31, 1996 increased 9% to $177.5 
million from $163.3 million for the nine months ended October 31, 1995.  The 
increase in sales during this nine month period was due primarily to the 
opening of new stores in Nevada, Utah, Idaho and Oklahoma since April 1995.  
Comparable store sales decreased 20% and 15% for the three and nine months 
ended October 31, 1996, respectively, compared to a 1% and 5% increase in 
comparable store sales for the three and nine months ended October 31, 1995, 
respectively.  The decrease in comparable store sales for the three and nine 
month periods ending October 1996 is due in part to continuing sluggish sales 
of consumer electronics products nationally and the grand openings of 
competitors' stores within markets the Company already serves.  The Company 
expects the current retail environment for consumer electronics companies to 
continue through the balance of the year.

Gross profit for the three months ended October 31, 1996 decreased 4% to 
$16.3 million (26.8% of net sales) from $17.0 million (27.2% of net sales) for 
the three months ended October 31, 1995.  Gross profit for the nine months 
ended October 31, 1996 increased 5% to $46.9 million (26.4% of net sales) 
from $44.7 million (27.4% of net sales) for the nine months ended October 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 
October 31, 1996 increased to $15.2 million (24.9% of net sales) from $14.6 
million (23.3% of net sales) for the three months ended October 31, 1995.  
Selling, general and administrative expenses for the nine months ending 
October 31, 1996 increased to $45.0 million (25.3% of net sales) from $39.6 
million (24.2% of net sales) for the nine months ended October 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.   Management has 
addressed this sales 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 53% to $1.1 
million (1.9% of net sales) for the three months ended October 31, 1996, 
compared to income from operations of $2.4 million (3.9% of net sales) for 
the three months ended October 31, 1995.  Income from operations decreased  
61% to $2.0 million  (1.1% of net sales) for the nine months ended October 
31, 1996 from  $5.1 million (3.1% of net sales) for the nine months ended 
October 31, 1995.

Interest expense increased to $841,000 and $2.4 million for the three and 
nine months ended October 31, 1996, respectively, from $551,000 and $1.3 
million for the three and nine months ended October 31, 1995, respectively, 
due to higher average amounts outstanding under the Company's revolving line 
of credit (Notes payable) 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 Colorado, Idaho, Nevada, New Mexico, Oklahoma and 
Utah.  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 $3.7 million for the nine months ended 
October 31, 1996 compared to net cash used in operations of $8.9 million for 
the nine months ended October 31, 1995.  The cash provided by operations for 
the nine months ending October 31, 1996 was due primarily to decreased 
accounts receivable balances from increasing collection efforts. 

As business conditions allow, and as deemed appropriate, 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.  In November, 1996, the Company relocated and expanded its 
Boulder, Colorado and one of its Littleton, 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 opened in the last two fiscal years, 
with the exception of the Thornton Facility, 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 range from $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 new revolving line of credit agreement with Norwest Bank
Colorado, N.A., on November 21, 1996, pursuant to which the Company may borrow 
up to the lesser of $35.0 million or 70% of the value of the Company's trade 
inventory through September 30, 1998.  Borrowings under the existing credit 
facility, dated July 24, 1995, in the amount of $21.0 million were outstanding 
as of October 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 1998.  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 or that business conditions will be appropriate to open or relocate new
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 1998, the Company may be required to seek additional financing, 
which could 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 
again 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.

         None

ITEM 5.  OTHER INFORMATION.

         None

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

         (a) Exhibits:

             Documents filed with this report:

             10.11 Credit Agreement between Ultimate Electronics, Inc. and
                   Norwest Bank Colorado, N.A. dated November 21, 1996.

             27    Financial Data Schedule

         (b) Reports on Form 8-K:

             None.




                                       10
<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:  December 13, 1996              By:   /s/ Alan E. Kessock
     ---------------------               ------------------------
                                            Alan E. Kessock
                                            Vice President - Finance and 
                                            Administration, Secretary, Treasurer
                                            and a Director (Principal Financial 
                                            Officer)





                                       11