CONTACT:   Stanley Berger SM Berger & Company (216)464-6400   Q.E.P. CO., INC., REPORTS $0.10 EARNINGS PER SHARE IN ITS FISCAL 2007 THIRD QUARTER   SALES WERE THE HIGHEST EVER FOR BOTH A THIRD-QUARTER AND NINE-MONTH PERIOD   BOCA RATON, FLORIDA—January 16, 2007—Q.E.P. CO., INC. (Nasdaq: QEPC), today announced financial results for its fiscal 2007 third quarter and nine months ended November 30, 2006.   Lewis Gould, Q.E.P.’s Chairman and Chief Executive Officer, stated: “Because there will be no conference call highlighting some of the financial results, I have gone into more detail in discussing my comments for this release, which parallels our 10-Q filing. Business conditions continued to be challenging. However, sales stayed firm with the prior quarter and increased 3.1 percent, compared to the same period last year. I am greatly pleased that our sales for the nine-month period increased 4.8 percent to an all-time record of $163,063,000.   “For the fiscal 2007 third quarter, the Company reported net income of $370,000, or $0.10 per diluted share, compared to net income of $345,000, or $0.09 per diluted share for the third quarter last year. After excluding the change in the put warrant liability and other non-recurring items, the Company reported net income of $971,000, or $0.26 per diluted share for the nine months as compared to $829,000, or $0.22 per diluted share during the same period last year.   “I am especially pleased to report that for the third quarter of fiscal 2007, the Company generated $2.4 million of cash from operations, compared to $1.3 million in the third quarter of fiscal 2006. For the first nine months of fiscal 2007, the Company generated $2.5 million of cash from operations, compared to $1.7 million for the same period last year.   “Although, the outlook for the current quarter remains uncertain, the Company is pursuing several new initiatives to offset current market weaknesses.”   On January 10, 2007, the Company reported that as of November 30, 2006, it was in violation of a financial covenant that requires the Company to maintain a certain senior debt to trailing EBITDA ratio. On January 12, 2007, the Company was granted a waiver of the non-compliance with this covenant from the Company’s lenders.

Certain statements in this press release, including statements relating to the success of the Company’s several new initiatives to offset current market weaknesses, are forward-looking statements, which are made pursuant to the safe-harbor provisions of the Securities Litigation Reform Act of 1995. The forward-looking statements are made only as of the date of this report and are subject to risks and uncertainties which could cause actual results to differ materially from those discussed in the forward-looking statements and from historical results of operations. Among the risks and uncertainties that could cause such a difference are our assumptions relating to the expected growth in sales of our products, the continued success of our manufacturing processes, continued increases in the cost of raw materials and finished goods, improvements in productivity and cost reductions, the continued success of initiatives with certain of our customers, the success of our price increases initiatives, and the success of our sales and marketing efforts. A more detailed discussion of risks attendant to the forward-looking statements included in this press release are set forth in the “Forward-Looking Statements” section of our Annual Report on Form 10-K for the year ended February 28, 2006, as amended, filed with the SEC, and in other reports already filed with the SEC.

-Financial Information Follows-

Q.E.P. CO., Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share data)

	November 30, 2006			February 28, 2006
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,111		$	852
Accounts receivable, less allowance for doubtful accounts of approximately $276 and $361 as of November 30, 2006 and February 28, 2006, respectively		31,605			33,258
Inventories		30,347			34,128
Prepaid expenses and other current assets		3,399			3,717
Deferred income taxes		660			617
Total current assets		67,122			72,572
Property and equipment, net		7,265			8,296
Goodwill		9,578			16,799
Other intangible assets, net		2,914			3,109
Other assets		208			310
Total Assets	$	87,087		$	101,086
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade accounts payable	$	17,996		$	24,041
Accrued liabilities		7,795			7,655
Lines of credit		28,463			26,284
Current maturities of long term debt		4,162			4,431
Put warrant liability		978			2,298
Total current liabilities		59,394			64,709
Notes payable		3,030			4,950
Other long-term debt		2,601			4,197
Deferred income taxes		214			213
Total Liabilities		65,239			74,069
Commitments and Contingencies		—			—
SHAREHOLDERS’ EQUITY
Preferred stock, 2,500,000 shares authorized, $1.00 par value; 336,660 shares issued and outstanding at November 30, 2006 and February 28, 2006, respectively		337			337
Common stock; 20,000,000 shares authorized, $.001 par value; 3,513,341 and 3,458,341 shares issued, and 3,430,401 and 3,387,401 shares outstanding at November 30, 2006 and February 28, 2006, respectively		3			3
Additional paid-in capital		9,964			9,539
Retained earnings		15,151			21,205
Treasury stock; 82,940 and 70,940 shares held at cost outstanding at November 30, 2006 and February 28, 2006, respectively		(639	)		(543	)
Accumulated other comprehensive income		(2,968	)		(3,524	)
		21,848			27,017
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	87,087		$	101,086

Q.E.P. CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

(Unaudited)

	For the Three Months Ended November 30,						For the Nine Months Ended November 30,
	2006			2005			2006			2005
				As Restated						As Restated
Net sales	$	54,455		$	52,822		$	163,063		$	155,641
Cost of goods sold		39,760			38,472			118,238			112,540
Gross profit		14,695			14,350			44,825			43,101
Operating costs and expenses:
Shipping		5,560			5,095			16,665			15,416
General and administrative		4,430			4,721			14,565			13,944
Selling and marketing		3,551			3,555			10,842			10,665
Impairment loss on goodwill and other intangibles		(78	)		—			7,520			—
Other expense (income), net		(38	)		(111	)		(41	)		(1,275	)
Total operating costs and expenses		13,425			13,260			49,551			38,750
Operating income (loss)		1,270			1,090			(4,726	)		4,351
Change in put warrant liability		3			88			1,319			1,050
Interest expense, net		(711	)		(681	)		(2,167	)		(1,811	)
Income (loss) before provision for income taxes		562			497			(5,574	)		3,590
Provision for income taxes		192			152			457			1,003
Net income (loss)	$	370		$	345		$	(6,031	)	$	2,587
Net income (loss) per share:
Basic	$	0.10		$	0.10		$	(1.78	)	$	0.76
Diluted	$	0.10		$	0.09		$	(1.78	)	$	0.69
Weighted-average number of common shares outstanding
Basic		3,423			3,387			3,402			3,387
Diluted		3,623			3,741			3,402			3,756

Net Income (Loss) Compared to Net Income Adjusted for the Change in the

Put Warrant Liability and Non-Recurring Items

(In thousands except per share data)

While Net Income Adjusted for the Change in the Put Warrant Liability and Non-Recurring Items is not a measure of financial performance under generally accepted accounting principles, the Company believes that the measure provides meaningful comparisons of the Company’s current and projected operating performance with its historical results. The Company uses Net Income Adjusted for the Change in the Put Warrant Liability and Non-Recurring Items as an internal measure of its business and believes it is utilized as an important measure of performance by the investment community. Net Income Adjusted for the Change in the Put Warrant Liability and Non-Recurring Items is not meant to be considered a substitute or replacement for Net Income as prepared in accordance with generally accepted accounting principles. The reconciliation of Net Income to Net Income Adjusted for the Change in the Put Warrant Liability and Non-Recurring Items is as follows:

	Net Income Adjusted for the Change in the Put Warrant Liability and Other Non-Recurring Items
	For the Three Months Ended November 30,						For the Nine Months Ended November 30,
	2006			2005			2006			2005
				(As Restated)						(As Restated)
Net income (loss), as reported (a)	$	370		$	345		$	(6,031	)	$	2,587
Add back (deduct):
Impairment loss on goodwill and other intangible assets		(78	)		—			7,520			—
Realization of currency translation loss related to the disposition of certain assets and obligations of the Holland subsidiary		—			—			447			—
Loss related to the disposition of certain assets and obligations of the Holland subsidiary, net of tax benefit		—			—			354			—
Gain on sale of carpet seaming tape business, net of tax		—			—			—			(708	)
Change in put warrant liability		(3	)		(88	)		(1,319	)		(1,050	)
Net income adjusted for the change in the put warrant liability and non-recurring items (b)	$	289		$	257		$	971		$	829
Earnings (loss) per share, as reported:
Basic ((a)/(c))	$	0.10		$	0.10		$	(1.78	)	$	0.76
Diluted ((a)/(d))	$	0.10		$	0.09		$	(1.78	)	$	0.69
Weighted average number of shares outstanding, as reported:
Basic (c)		3,423			3,387			3,402			3,387
Diluted (d)		3,623			3,741			3,402			3,756
Earnings per share adjusted for the change in the put warrant liability and non-recurring items:
Basic ((b)/(e))	$	0.08		$	0.08		$	0.28		$	0.24
Diluted ((b)/(f))	$	0.08		$	0.07		$	0.26		$	0.22
Weighted average number of shares outstanding as adjusted for the change in the put warrant liability and non-recurring items:
Basic (e)		3,423			3,387			3,402			3,387
Diluted (f)		3,623			3,741			3,679			3,756

Q.E.P. CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	For the Nine Months Ended November 30,
	2006			2005
				– As Restated –
Cash flows from operating activities:
Net income (loss)	$	(6,031	)	$	2,587
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,895			3,101
Impairment loss on goodwill and other intangibles		7,520			—
Change in fair value of put warrant liability		(1,319	)		(1,050	)
Write-off of Holland accumulated foreign translation		447			—
Bad debt expense		171			328
Gain on sale of business		—			(1,120	)
Stock-based compensation expense		191			—
Deferred income taxes		(42	)		(234	)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		1,482			(4,552	)
Inventories		3,782			303
Prepaid expenses and other current assets		318			634
Other assets		4			(621	)
Trade accounts payable and accrued liabilities		(5,930	)		2,307
Net cash provided by operating activities		2,488			1,683
Cash flows from investing activities:
Capital expenditures		(485	)		(1,267	)
Acquisitions, net of cash acquired		—			(2,512	)
Net cash used in investing activities		(485	)		(3,779	)
Cash flows from financing activities:
Net borrowings under lines of credit		1,552			900
Borrowings of long-term debt		—			3,224
Repayments of long-term debt		(2,087	)		(1,677	)
Repayments of acquisition debt		(1,834	)		(870	)
Payments related to the purchase of treasury stock		(90	)		(90	)
Proceeds from exercise of stock options		257			10
Dividends		(22	)		(8	)
Net cash (used in) provided by financing activities		(2,224	)		1,489
Effect of exchange rate changes on cash		480			(168	)
Net decrease in cash		259			(775	)
Cash and cash equivalents at beginning of period		852			1,869
Cash and cash equivalents at end of period	$	1,111		$	1,094

##