Fiscal 2009 Results of Operations

The Company had net sales of $203.6 million for fiscal 2009 compared to $217.5 million in fiscal 2008. The Company attributes the decrease in sales to the weakening of the economic environment, especially during the latter half of fiscal 2009. The softening of the residential and commercial improvement and construction markets, concerns of a deeper deterioration of the global economic environment and the affects of the strengthening U.S. dollar on the Company's international operations led to a decrease in sales in the latter half of fiscal 2009 by customers in almost all of the markets in which the Company operates. The implementation of inventory management programs by the Company's most significant customers also affected sales.

Gross profit as a percent of sales decreased to 27.5% in fiscal 2009 from 28.9% in fiscal 2008 due to commodity price volatility during fiscal 2009 that resulted in overall higher costs of certain of the Company's finished products and raw material components compared to fiscal 2008, along with certain price concessions and increased rebates and allowances granted to gain new business.

Operating expenses for fiscal 2009 increased by $7.3 million compared to fiscal 2008 due to a non-cash goodwill impairment charge of $7.9 million -- principally resulting from the decline in the Company's market valuation. In fiscal 2009, operating expenses excluding the goodwill impairment charge decreased by $0.6 million compared to the previous year. As a percentage of sales, operating expenses excluding the impairment charge were higher than fiscal 2008 primarily due to additional shipping costs incurred in fiscal 2009 related to the new business rollout.

The Company's net loss for fiscal 2009 was $7.3 million or $2.13 per diluted share compared with net income of $2.2 million or $0.61 per diluted share for fiscal 2008. In addition to the effect of the non-cash goodwill impairment charge in fiscal 2009, the decrease resulted from the reduction in sales due to the global economic downturn partially offset by the fiscal 2008 expense for the settlement of the Company's put warrant obligation.

In response to the weakening economic environment, during the latter half of fiscal 2009 the Company took significant steps to reduce expenses and adjust its operating plans. The Company's cash management and cost reduction measures included tighter purchasing, inventory and working capital management, workforce reductions, work schedule adjustments for manufacturing and distribution personnel, business restructurings, reductions in planned expenses, and the restructuring of the Company's credit facilities.

Fiscal 2010 First Quarter Results of Operations

Late in the last quarter of fiscal 2009 and continuing into the first quarter of fiscal 2010, the Company realized significant improvements in its operations as a result of both modestly improving economic circumstances and the working capital and expense control measures implemented, although it is extremely difficult to project how the global economic environment will perform and whether the recently experienced improvements in the Company's operations will continue. On or about June 23, 2009, the Company expects to issue a press release reporting its financial results for the three months ending May 31, 2009, the first quarter of its fiscal 2010 year.

NASDAQ Listing and SEC Registration

The Company has decided to delist its common stock from the NASDAQ Global Market and deregister its common stock under the Securities Exchange Act of 1934.

Consistent with other cash management and cost reduction measures implemented by the Company, the independent members of the Company's Board of Directors concluded that the costs of compliance, the demands on management time, and the Company resources required to maintain its listed and registered status outweigh the benefits the Company receives from that status given the low trading volume in its stock, the Company's low market capitalization and the limited analyst coverage of the Company.

The Company expects to file a Form 25, Notification of Removal from Listing and/or Registration under Section 12(b) of the Exchange Act, with the Securities and Exchange Commission and NASDAQ on or before July 2, 2009. Upon filing of the Form 25 or shortly thereafter, the Company anticipates that its common stock will be quoted in the over-the-counter market on the Pink Sheets, a centralized electronic quotation service for over-the-counter securities. The Company expects its common stock will continue to trade on the Pink Sheets, so long as market makers continue to make a market in the Company's common stock.

The Company also intends to deregister its common stock with the SEC and become a non-reporting company under the Exchange Act. On the effective date of the NASDAQ delisting, expected to be on or before July 13, 2009, the Company expects to file a Form 15, Notice of Termination of Registration and Suspension of Duty to File, with the Securities and Exchange Commission to terminate its reporting obligations under the Exchange Act. When the Form 15 has been filed, the Company's obligation to file reports and other information under the Exchange Act, such as Forms 10-K, 10-Q and 8-K, will immediately be suspended, although the Company currently intends to continue reporting certain quarterly financial results, as well as its annual audited financial results, in press releases and on its website.

Q.E.P. Co., Inc., founded in 1979, is a leading worldwide manufacturer, marketer and distributor of a broad line of flooring tools and accessories for the home improvement market.