##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2003

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

From the transition period from
 to

Commission File Number 333-102296

Easy Gardener Products, Ltd.




(Exact name of registrant as specified in its charter)


|                                  |  |                        
|--------------------------------- |  | -----------------------
|Texas                             |  | 37-1433686             
|(State or other jurisdiction      |  | IRS Employer           
|of incorporation or organization) |  | (Identification Number)

|                                         |  |           
|---------------------------------------- |  | ----------
|3022 Franklin Avenue                     |  |           
|Waco, Texas                              |  | 76710     
|                                         |  |           
|(Address of Principal Executive Offices) |  | (Zip Code)

(254) 753-5353




(Registrants Telephone Number, Including Area Code)


Indicate by check 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 [  ]

Indicate by check whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act).

Yes[  ]       No [X]

Indicate the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date.

Not applicable, registrant is a limited partnership





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TABLE OF CONTENTS



|                                             |                                                                                              |                                            |  |  |  |  |  | 
|-------------------------------------------- | -------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|                                             |                                                                                              | Consolidated Balance Sheets               
|                                             |                                                                                              | Consolidated Statements of Operations     
|                                             |                                                                                              | Consolidated Statements of Operations     
|                                             |                                                                                              | Consolidated Statements of Cash Flows     
|                                             |                                                                                              | Notes to Consolidated Financial Statements
|                                             | Item 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                             | Item 3. Quantitative and Qualitative Disclosures About Market Risk                          
|                                             | Item 4. Controls and Procedures                                                             
|PART II  OTHER INFORMATION                 
|                                             | Item 2. Changes of Securities and Use of Proceeds                                           
|                                             | Item 5. Other Information                                                                   
|                                             | Item 6. Exhibits and Reports on Form 8-K                                                    
|SIGNATURES                                  
|Certification of CEO Pursuant to Section 302
|Certification of CFO Pursuant to Section 302
|Certification of CEO Pursuant to Section 906
|Certification of CFO Pursuant to Section 906



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##### Table of Contents



|                                                                                                                                                                                                               |  |  |       | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ----- | 
|Part I.  Financial Information                                                                                                                                                                                |  |  |       | 
|Item 1.  Consolidated Financial Statements                                                                                                                                                                    |  |  |       | 
|Consolidated balance sheets as of December 31, 2003 (Unaudited)
and June 30, 2002 (Predecessor)                                                                                                                |  |  | 1-2   | 
|Consolidated statements of operations for the two months ended
December 31, 2003 and the one month ended October 31, 2003
(Predecessor) and the three months ended December 31, 2002
(Predecessor) (Unaudited) |  |  | 3     | 
|Consolidated statements of operations for the two months ended
December 31, 2003 and the four months ended October 31, 2003
(Predecessor) and the six months ended December 31, 2002
(Predecessor) (Unaudited) |  |  | 4     | 
|Consolidated statements of cash flows for the two months ended
December 31, 2003 and the four months ended October 31, 2003
(Predecessor) and the six months ended December 31, 2003
(Predecessor) (Unaudited) |  |  | 5-6   | 
|Notes to consolidated financial statements                                                                                                                                                                     |  |  | 7-13  | 
|Item 2.  Managements Discussion and Analysis of Financial
Condition and Results of Operations                                                                                                                |  |  | 14-23 | 
|Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                           |  |  | 24    | 
|Item 4.  Controls and Procedures                                                                                                                                                                              |  |  | 24    | 
|Part II.  Other Information                                                                                                                                                                                   |  |  |       | 
|Item 2.  Changes of Securities and Use of Proceeds                                                                                                                                                            |  |  | 24    | 
|Item 5.  Other Information                                                                                                                                                                                    |  |  | 24    | 
|Item 6.  Exhibits and Reports on Form 8-K                                                                                                                                                                     |  |  | 24    | 
|Signatures                                                                                                                                                                                                     |  |  | 25    | 





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##### Table of Contents






Easy Gardener Products, Ltd. and Subsidiaries

Consolidated Balance Sheets

|                            |                                                                                                  |   |                   |            |               |   |               |            | 
|--------------------------- | ------------------------------------------------------------------------------------------------ | - | ----------------- | ---------- | ------------- | - | ------------- | ---------- | 
|                            |                                                                                                  |   | December 31, 2003 |            |               |   |              
|                            |                                                                                                  |   | (Unaudited)       |            | June 30, 2003
|                            |                                                                                                  |   |                   |            |              
|                            |                                                                                                  |   |                   |            |               |   | (Predecessor)
|Assets                      |                                                                                                  |   |                   |            |               |   |               |           
|Current                     |                                                                                                  |   |                   |            |               |   |               |           
|                            | Cash and cash equivalents                                                                        |   | $                 | 981,000    |               |   | $             | 822,000    | 
|                            | Accounts receivable, less allowance for doubtful
accounts of $247,000 and $630,000               |   |                   | 9,779,000  |               |   |               | 24,467,000 | 
|                            | Inventories                                                                                      |   |                   | 6,512,000  |               |   |               | 9,138,000  | 
|                            | Prepaid expenses and other current assets                                                        |   |                   | 678,000    |               |   |               | 721,000    | 
|                            | Refundable income taxes                                                                          |   |                   |           |               |   |               | 137,000    | 
|                            | Deferred tax asset                                                                               |   |                   |           |               |   |               | 385,000    | 
|                            | Current assets of discontinued operations                                                        |   |                   |           |               |   |               | 62,000     | 
|                            |                                                                                                  |   |                   |            |               |   |               |            | 
|Total Current Assets        |                                                                                                  |   | 17,950,000        |            |               |   | 35,732,000    |           
|Property and Equipment, net |                                                                                                  |   | 4,534,000         |            |               |   | 4,018,000     |           
|Intangible Assets           |                                                                                                  |   |                   |            |               |   |               |           
|                            | Goodwill                                                                                         |   |                   | 52,002,000 |               |   |               | 49,878,000 | 
|                            | Deferred financing costs, net of accumulated
amortization of $66,000 and $969,000                |   |                   | 1,553,000  |               |   |               | 3,975,000  | 
|                            | Non-compete agreements, net of accumulated
amortization of $89,000 and $855,000                  |   |                   | 1,785,000  |               |   |               | 744,000    | 
|                            | Package tooling costs, net of accumulated
amortization of $75,000 and $1,956,000                 |   |                   | 1,064,000  |               |   |               | 1,204,000  | 
|                            | Product rights, patents and trademarks, net of
accumulated amortization of $206,000 and $213,000 |   |                   | 17,900,000 |               |   |               | 467,000    | 
|                            |                                                                                                  |   |                   |            |               |   |               |            | 
|Total Intangible Assets     |                                                                                                  |   | 74,304,000        |            |               |   | 56,268,000    |           
|Officer Receivables         |                                                                                                  |   |                  |            |               |   | 512,000       |           
|Other Assets                |                                                                                                  |   | 38,000            |            |               |   | 29,000        |           
|                            |                                                                                                  |   |                   |            |               |   |               |            | 
|Total Assets                |                                                                                                  | $ | 96,826,000        |            |               | $ | 96,559,000    |           
|                            |                                                                                                  |   |                   |            |               |   |               |            | 

See accompanying notes to consolidated financial statements.

1



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##### Table of Contents



Easy Gardener Products, Ltd. and Subsidiaries

Consolidated Balance Sheets

|                                                                                                                                |                                                                                          |   |              |            |               |   |               |             |  
|------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | - | ------------ | ---------- | ------------- | - | ------------- | ----------- | -
|                                                                                                                                |                                                                                          |   | December 31, |            |               |   |              
|                                                                                                                                |                                                                                          |   | 2003         |            |               |   |              
|                                                                                                                                |                                                                                          |   | (Unaudited)  |            | June 30, 2003
|                                                                                                                                |                                                                                          |   |              |            |              
|                                                                                                                                |                                                                                          |   |              |            |               |   | (Predecessor)
|Liabilities and Partners Capital/Stockholders (Deficit)                                                                       |                                                                                          |   |              |            |               |   |               |            
|Current                                                                                                                         |                                                                                          |   |              |            |               |   |               |            
|                                                                                                                                | Revolving credit facility                                                                |   | $            | 1,235,000  |               |   | $             | 15,085,000  |  
|                                                                                                                                | Accounts payable                                                                         |   |              | 8,070,000  |               |   |               | 8,954,000   |  
|                                                                                                                                | Accrued rebates                                                                          |   |              | 925,000    |               |   |               | 1,433,000   |  
|                                                                                                                                | Accrued commissions                                                                      |   |              | 402,000    |               |   |               | 1,074,000   |  
|                                                                                                                                | Accrued co-op advertising                                                                |   |              | 285,000    |               |   |               | 774,000     |  
|                                                                                                                                | Accrued expenses                                                                         |   |              | 1,010,000  |               |   |               | 1,786,000   |  
|                                                                                                                                | Current portion of long-term debt                                                        |   |              | 1,250,000  |               |   |               | 12,142,000  |  
|                                                                                                                                | Current liabilities of discontinued operations                                           |   |              |           |               |   |               | 16,000      |  
|                                                                                                                                |                                                                                          |   |              |            |               |   |               |             |  
|Total Current Liabilities                                                                                                       |                                                                                          |   | 13,177,000   |            |               |   | 41,264,000    |            
|Revolving Credit Facility                                                                                                       |                                                                                          |   | 6,000,000    |            |               |   |              |            
|Long-Term Debt                                                                                                                  |                                                                                          |   | 26,504,000   |            |               |   |              |            
|Deferred Tax Liability                                                                                                          |                                                                                          |   | 9,237,000    |            |               |   | 239,000       |            
|Company Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary Trust Holding
Solely Junior Subordinated Debentures |                                                                                          |   | 40,705,000   |            |               |   | 57,092,000    |            
|                                                                                                                                |                                                                                          |   |              |            |               |   |               |             |  
|Total Liabilities                                                                                                               |                                                                                          |   | 95,623,000   |            |               |   | 98,595,000    |            
|                                                                                                                                |                                                                                          |   |              |            |               |   |               |             |  
|Partners Capital/Stockholders (Deficit)                                                                                       |                                                                                          |   |              |            |               |   |               |            
|                                                                                                                                | Preferred stock, 1,000,000 shares authorized and unissued                                |   |              |           |               |   |               |            |  
|                                                                                                                                | Common stock, $0.001 par value - shares authorized,
75,000,000; 21,642,000 shares issued |   |              |           |               |   |               | 22,000      |  
|                                                                                                                                | Additional paid-in capital                                                               |   |              |           |               |   |               | 52,470,000  |  
|                                                                                                                                | Partners Capital                                                                        |   |              | 2,675,000  |               |   |               |            |  
|                                                                                                                                | Partners loss/ Retained deficit                                                         |   |              | (1,472,000 | )             |   |               | (41,700,000 | )
|                                                                                                                                |                                                                                          |   |              |            |               |   |               |             |  
|                                                                                                                                |                                                                                          |   | 1,203,000    |            |               |   | 10,792,000    |            
|Less: Treasury Stock, 3,890,000 shares at cost                                                                                  |                                                                                          |   |             |            |               |   | (12,828,000   | )          
|                                                                                                                                |                                                                                          |   |              |            |               |   |               |             |  
|Total Partners Capital/Stockholders (Deficit)                                                                                 |                                                                                          |   | 1,203,000    |            |               |   | (2,036,000    | )          
|                                                                                                                                |                                                                                          |   |              |            |               |   |               |             |  
|Total Liabilities and Capital                                                                                                   |                                                                                          | $ | 96,826,000   |            |               | $ | 96,559,000    |            
|                                                                                                                                |                                                                                          |   |              |            |               |   |               |             |  

See accompanying notes to consolidated financial statements.

2



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##### Table of Contents






Easy Gardener Products, Ltd. and Subsidiaries

Consolidated Statements of Operations

|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |   |            |  
|------------------------------------------------- |  | --------------------------------- | ---------- | ---------------- | ---------- | --------------- | ---------- | ------------------ | --------- | ------------- | ---------- | - | ---------- | -
|                                                  |  |                                   |            | Two Months Ended |            | One Month Ended |            | Three Months Ended
|                                                  |  |                                   |            | December 31,     |            | October 31,     |            | December 31,      
|                                                  |  |                                   |            | 2003             |            | 2003            |            | 2002              
|                                                  |  |                                   |            | Unaudited        |            | Unaudited       |            | Unaudited         
|                                                  |  |                                   |            |                  |            |                 |            |                   
|                                                  |  |                                   |            |                  |            |                 |            | (Predecessor)      |           | (Predecessor)
|Gross Sales                                       |  | $                                 | 9,452,000  |                  |            | $               | 3,827,000  |                    |           | $             | 14,591,000 |  
|Sales Adjustments                                 |  |                                   | 1,954,000  |                  |            |                 | 871,000    |                    |           |               | 2,240,000  |  
|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|Net Sales                                         |  |                                   | 7,498,000  |                  |            |                 | 2,956,000  |                    |           |               | 12,351,000 |  
|Cost of Sales                                     |  |                                   | 4,740,000  |                  |            |                 | 2,169,000  |                    |           |               | 7,167,000  |  
|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|Gross Profit                                      |  |                                   | 2,758,000  |                  |            |                 | 787,000    |                    |           |               | 5,184,000  |  
|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|Operating Expenses                                |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|                                                  |  | Selling and shipping              |            |                  | 2,147,000  |                 |            |                    | 1,201,000 |               |            |   | 3,400,000  |  
|                                                  |  | General and administrative        |            |                  | 867,000    |                 |            |                    | 740,000   |               |            |   | 1,848,000  |  
|                                                  |  | Depreciation and amortization     |            |                  | 381,000    |                 |            |                    | 72,000    |               |            |   | 409,000    |  
|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|Total Operating Expenses                          |  |                                   | 3,395,000  |                  |            |                 | 2,013,000  |                    |           |               | 5,657,000  |  
|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|Loss from Continuing Operations                   |  |                                   | (637,000   | )                |            |                 | (1,226,000 | )                  |           |               | (473,000   | )
|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|Other Expenses                                    |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|                                                  |  | Refinancing and transaction costs |            |                  |           |                 |            |                    |          |               |            |   | (3,869,000 | )
|                                                  |  | Interest expense, net             |            |                  | (1,593,000 | )               |            |                    | (680,000  | )             |            |   | (1,826,000 | )
|Loss from Continuing Operations Before Income Tax |  |                                   | (2,230,000 | )                |            |                 | (1,906,000 | )                  |           |               | (6,168,000 | )
|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|Income Tax Benefit (Expense)                      |  |                                   | 758,000    |                  |            |                 | (49,000    | )                  |           |               | (108,000   | )
|Loss from Continuing Operations                   |  |                                   | (1,472,000 | )                |            |                 | (1,955,000 | )                  |           |               | (6,276,000 | )
|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|Discontinued Operations -                         |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|                                                  |  | Loss from discontinued operations |            |                  |           |                 |            |                    | (1,000    | )             |            |   | (215,000   | )
|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |  
|Net Loss                                          |  | $                                 | (1,472,000 | )                |            | $               | (1,956,000 | )                  |           | $             | (6,491,000 | )
|                                                  |  |                                   |            |                  |            |                 |            |                    |           |               |            |  

See accompanying notes to consolidated financial statements.

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##### Table of Contents






Easy Gardener Products, Ltd. and Subsidiaries

Consolidated Statements of Operations

|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |            |  
|------------------------------------------------- | --------------------------------- | - | ------------ | ---------- | ----------- | - | ------------- | ---------- | ------------- | - | ----------- | ---------- | -
|                                                  |                                   |   | Two Months   |            | Four Months |   | Six Months   
|                                                  |                                   |   | Ended        |            | Ended       |   | Ended        
|                                                  |                                   |   | December 31, |            | October 31, |   | December 31, 
|                                                  |                                   |   | 2003         |            | 2003        |   | 2002         
|                                                  |                                   |   | (Unaudited)  |            | (Unaudited) |   | (Unaudited)  
|                                                  |                                   |   |              |            |             |   |              
|                                                  |                                   |   |              |            |             |   | (Predecessor) |            | (Predecessor)
|Gross Sales                                       |                                   | $ | 9,452,000    |            |             | $ | 21,702,000    |            |               | $ | 30,652,000  |           
|Sales Adjustments                                 |                                   |   | 1,954,000    |            |             |   | 4,229,000     |            |               |   | 5,150,000   |           
|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |           
|Net Sales                                         |                                   |   | 7,498,000    |            |             |   | 17,473,000    |            |               |   | 25,502,000  |           
|Cost of Sales                                     |                                   |   | 4,740,000    |            |             |   | 10,953,000    |            |               |   | 15,353,000  |           
|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |           
|Gross Profit                                      |                                   |   | 2,758,000    |            |             |   | 6,520,000     |            |               |   | 10,149,000  |           
|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |           
|Operating Expenses                                |                                   |   |              |            |             |   |               |            |               |   |             |           
|                                                  | Selling and shipping              |   |              | 2,147,000  |             |   |               | 5,838,000  |               |   |             | 7,556,000  |  
|                                                  | General and administrative        |   |              | 867,000    |             |   |               | 2,557,000  |               |   |             | 4,080,000  |  
|                                                  | Depreciation and amortization     |   |              | 381,000    |             |   |               | 431,000    |               |   |             | 836,000    |  
|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |           
|Total Operating Expenses                          |                                   |   | 3,395,000    |            |             |   | 8,826,000     |            |               |   | 12,472,000  |           
|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |           
|Loss from Continuing Operations                   |                                   |   | (637,000     | )          |             |   | (2,306,000    | )          |               |   | (2,323,000  | )         
|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |           
|Other Expenses                                    |                                   |   |              |            |             |   |               |            |               |   |             |           
|                                                  | Refinancing and transaction costs |   |              |           |             |   |               | (159,000   | )             |   |             | (4,063,000 | )
|                                                  | Interest expense, net             |   |              | (1,593,000 | )           |   |               | (2,868,000 | )             |   |             | (3,660,000 | )
|Loss from Continuing Operations
Before Income Tax |                                   |   | (2,230,000   | )          |             |   | (5,333,000    | )          |               |   | (10,046,000 | )         
|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |           
|Income Tax Benefit (Expense)                      |                                   |   | 758,000      |            |             |   | (44,000       | )          |               |   | (108,000    | )         
|Loss from Continuing Operations                   |                                   |   | (1,472,000   | )          |             |   | (5,377,000    | )          |               |   | (10,154,000 | )         
|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |           
|Discontinued Operations -                         |                                   |   |              |            |             |   |               |            |               |   |             |           
|                                                  | Loss from discontinued operations |   |              |           |             |   |               | (75,000    | )             |   |             | (1,193,000 | )
|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |           
|Net Loss                                          |                                   | $ | (1,472,000   | )          |             | $ | (5,452,000    | )          |               | $ | (11,347,000 | )         
|                                                  |                                   |   |              |            |             |   |               |            |               |   |             |           

See accompanying notes to consolidated financial statements.

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##### Table of Contents






Easy Gardener Products, Ltd. and Subsidiaries

Consolidated Statements of Cash Flows

|                                                    |                                                                                                            |                                                                        |                                           |            |              |          |             |            |               |            |               |             |           |            |  
|--------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ----------------------------------------- | ---------- | ------------ | -------- | ----------- | ---------- | ------------- | ---------- | ------------- | ----------- | --------- | ---------- | -
|                                                    |                                                                                                            |                                                                        |                                           |            | Two Months   |          | Four Months |            | Six Months   
|                                                    |                                                                                                            |                                                                        |                                           |            | Ended        |          | Ended       |            | Ended        
|                                                    |                                                                                                            |                                                                        |                                           |            | December 31, |          | October 31, |            | December 31, 
|                                                    |                                                                                                            |                                                                        |                                           |            | 2003         |          | 2003        |            | 2002         
|                                                    |                                                                                                            |                                                                        |                                           |            | Unaudited    |          | Unaudited   |            | Unaudited    
|                                                    |                                                                                                            |                                                                        |                                           |            |              |          |             |            |              
|                                                    |                                                                                                            |                                                                        |                                           |            |              |          |             |            | (Predecessor) |            | (Predecessor)
|Cash Flows from Operating Activities:               |                                                                                                            |                                                                        |                                           |            |              |          |             |            |               |            |               |            
|                                                    | Net loss from continuing operations                                                                        |                                                                        | $                                         | (1,472,000 | )            |          | $           | (5,377,000 | )             |            | $             | (10,154,000 | )        
|                                                    | Adjustments to reconcile net loss from continuing
operations to net cash provided by operating
activities: |                                                                        |                                           |            |              |          |             |            |               |            |               |             |          
|                                                    |                                                                                                            | Depreciation and amortization                                          |                                           |            | 630,000      |          |             |            | 886,000       |            |               |             | 1,610,000 |           
|                                                    |                                                                                                            | Trust Preferred interest applied
against option price and PIK interest |                                           |            | 202,000      |          |             |            | 75,000        |            |               |             |          |           
|                                                    |                                                                                                            | Write-off of deferred finance costs and discounts                      |                                           |            |             |          |             |            |              |            |               |             | 1,928,000 |           
|                                                    |                                                                                                            | Compensation related to stock options                                  |                                           |            |             |          |             |            | 40,000        |            |               |             | 60,000    |           
|                                                    |                                                                                                            | Changes in operating assets and liabilities:                           |                                           |            |              |          |             |            |               |            |               |             |           |           
|                                                    |                                                                                                            |                                                                        | Accounts receivable                       |            |              | (199,000 | )           |            |               | 14,509,000 |               |             |           | 14,188,000 |  
|                                                    |                                                                                                            |                                                                        | Inventories                               |            |              | 6,000    |             |            |               | 492,000    |               |             |           | (2,416,000 | )
|                                                    |                                                                                                            |                                                                        | Deferred taxes                            |            |              | (763,000 | )           |            |               |           |               |             |           |           |  
|                                                    |                                                                                                            |                                                                        | Prepaid expenses and other current assets |            |              | (63,000  | )           |            |               | 51,000     |               |             |           | (37,000    | )
|                                                    |                                                                                                            |                                                                        | Accounts payable and accrued expenses     |            |              | 563,000  |             |            |               | (3,511,000 | )             |             |           | (318,000   | )
|                                                    |                                                                                                            |                                                                        | Other assets                              |            |              | (31,000  | )           |            |               | 50,000     |               |             |           |           |  
|                                                    |                                                                                                            |                                                                        |                                           |            |              |          |             |            |               |            |               |             |          
|Net Cash Provided By (Used in) Operating Activities |                                                                                                            |                                                                        | (1,127,000                                | )          |              |          | 7,215,000   |            |               |            | 4,861,000     |            
|                                                    |                                                                                                            |                                                                        |                                           |            |              |          |             |            |               |            |               |             |          
|Cash Flows from Investing Activities:               |                                                                                                            |                                                                        |                                           |            |              |          |             |            |               |            |               |            
|                                                    | Payments related to purchase of business                                                                   |                                                                        |                                           |           |              |          |             |           |               |            |               | (17,000     | )        
|                                                    | Purchase of property and equipment                                                                         |                                                                        |                                           | (51,000    | )            |          |             | (91,000    | )             |            |               | (565,000    | )        
|                                                    | Purchase of intangibles                                                                                    |                                                                        |                                           | (57,000    | )            |          |             | (76,000    | )             |            |               | (208,000    | )        
|                                                    |                                                                                                            |                                                                        |                                           |            |              |          |             |            |               |            |               |             |          
|Net Cash Used in Investing Activities               |                                                                                                            |                                                                        | (108,000                                  | )          |              |          | (167,000    | )          |               |            | (790,000      | )          
|                                                    |                                                                                                            |                                                                        |                                           |            |              |          |             |            |               |            |               |             |          

See accompanying notes to consolidated financial statements.

5



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##### Table of Contents



Easy Gardener Products, Ltd. and Subsidiaries

Consolidated Statements of Cash Flows

|                                                                     |                                            |   |              |           |             |   |               |            |               |   |            |            |  
|-------------------------------------------------------------------- | ------------------------------------------ | - | ------------ | --------- | ----------- | - | ------------- | ---------- | ------------- | - | ---------- | ---------- | -
|                                                                     |                                            |   | Two Months   |           | Four Months |   | Six Months   
|                                                                     |                                            |   | Ended        |           | Ended       |   | Ended        
|                                                                     |                                            |   | December 31, |           | October 31, |   | December 31, 
|                                                                     |                                            |   | 2003         |           | 2003        |   | 2002         
|                                                                     |                                            |   | Unaudited    |           | Unaudited   |   | Unaudited    
|                                                                     |                                            |   |              |           |             |   |              
|                                                                     |                                            |   |              |           |             |   | (Predecessor) |            | (Predecessor)
|Cash Flows from Financing Activities:                                |                                            |   |              |           |             |   |               |            |               |   |            |           
|                                                                     | Deferred finance costs                     |   | $            | (8,000    | )           |   | $             | (227,000   | )             |   | $          | (1,863,000 | )
|                                                                     | Net (payments) proceeds on lines-of-credit |   |              | 1,965,000 |             |   |               | (6,736,000 | )             |   |            | (4,426,000 | )
|                                                                     | Proceeds from long-term debt               |   |              |          |             |   |               |           |               |   |            | 12,020,000 |  
|                                                                     | Principal payments on long-term debt       |   |              | (208,000  | )           |   |               | (21,000    | )             |   |            | (8,616,000 | )
|                                                                     |                                            |   |              |           |             |   |               |            |               |   |            |            |  
|Net Cash Provided by (Used In) Financing Activities                  |                                            |   | 1,749,000    |           |             |   | (6,984,000    | )          |               |   | (2,885,000 | )         
|                                                                     |                                            |   |              |           |             |   |               |            |               |   |            |            |  
|Net increase in cash and cash equivalents from
Continuing operations |                                            |   | 514,000      |           |             |   | 64,000        |            |               |   | 1,186,000  |           
|Cash provided by (used in) discontinued operations                   |                                            |   |             |           |             |   | (14,000       | )          |               |   | (286,000   | )         
|                                                                     |                                            |   |              |           |             |   |               |            |               |   |            |            |  
|Net increase (decrease) in cash and cash equivalents                 |                                            |   | 514,000      |           |             |   | 50,000        |            |               |   | 900,000    |           
|Cash and Cash Equivalents, beginning of period                       |                                            |   | 467,000      |           |             |   | 822,000       |            |               |   | 219,000    |           
|                                                                     |                                            |   |              |           |             |   |               |            |               |   |            |            |  
|Cash and Cash Equivalents, end of period                             |                                            | $ | 981,000      |           |             | $ | 872,000       |            |               | $ | 1,119,000  |           
|                                                                     |                                            |   |              |           |             |   |               |            |               |   |            |            |  
|Supplemental Disclosure of Cash Flow
Information                     |                                            |   |              |           |             |   |               |            |               |   |            |           
|                                                                     | Cash paid for interest                     |   | $            | 1,506,000 |             |   | $             | 3,960,000  |               |   | $          | 3,599,000  |  
|                                                                     | Cash received for taxes - net              |   |              | 78,000    |             |   |               | 36,000     |               |   |            | 180,000    |  
|                                                                     |                                            |   |              |           |             |   |               |            |               |   |            |            |  

See accompanying notes to consolidated financial statements.

6



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##### Table of Contents






Easy Gardener Products, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements

General

Effective November 1, 2003, Easy Gardener Products, Ltd., the Company,
acquired substantially all of the assets and assumed substantially all of the
liabilities of U.S. Home & Garden Inc., the Seller. These assets comprised
approximately 99% of the consolidated sales, 98% of the consolidated assets and
99% of the consolidated liabilities of the Seller and represent all of the
operations of the Company.

The Company is a Texas limited partnership. The Company is 1% owned by a
general partner, EG Product Management, L.L.C., and is 99% owned by a limited
partner, EG, L.L.C. EG Product Management, L.L.C. and EG, L.L.C. are wholly
owned subsidiaries of EYAS International, Inc.

Basis of Presentation

The Company effectively began operations on November 1, 2003 with the
acquisition of operations from U. S. Home & Garden Inc. In accordance with the
requirements of purchase accounting, the opening balance sheet reflects all
acquired assets and liabilities at their respective fair values at the date of
purchase. The consolidated financial statements of the Company include the
accounts of the Company and its subsidiaries, Weatherly Consumer Products
Group, Inc., Easy Gardener U.K., NBU Group, LLC and Easy Gardener Products
Trust I.

The accompanying consolidated financial statements included the
consolidated balance sheet of the Company at December 31, 2003 and the
consolidated statement of operations, and cash flows for the two months ended
December 31, 2003. The consolidated statement of cash flows for the two months
ended December 31, 2003 does not include the acquisition of assets and the
assumption of liabilities and the incurring of debt described in footnote 5.
The accompanying consolidated financial statements also include the previously
issued consolidated balance sheet of U.S. Home & Garden Inc. at June 30, 2003
and the consolidated statements of operations and cash flows for the six months
ended December 31, 2002. The accompanying consolidated financial statements
also include the consolidated statement of operations for the month of October
2003 for U. S. Home & Garden Inc. before transaction costs and the gain on the
sale of the operations and the consolidated statements of operations and cash
flows for the four months ended October 31, 2003. The U.S. Home & Garden Inc.
consolidated financial statements described above and included herein are
referred to as Predecessor financial statements.



|1. |  | The accompanying consolidated financial statements at December 31, 2003
and for the two months ended December 31, 2003 are unaudited, but, in the
opinion of management, include all adjustments necessary for a fair
presentation of consolidated financial position and results of operations
for the periods presented. The results for the two months ended December
31, 2003 are not necessarily indicative of the results of operations for a
full year.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Please refer to the audited consolidated financial statements of U.S.
Home & Garden Inc. for the year ended June 30, 2003, for details of
accounting policies and detailed notes to the predecessor consolidated
financial statements.                                                                                                                                                                                                                        

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##### Table of Contents



Easy Gardener Products, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements



|3. |  | Inventories consist of:
|-- |  | -----------------------

|               |  |                   |           |               |  |               |           | 
|-------------- |  | ----------------- | --------- | ------------- |  | ------------- | --------- | 
|               |  | December 31, 2003 |           | June 30, 2003
|               |  |                   |           |              
|               |  |                   |           |               |  | (Predecessor)
|Raw materials  |  | $                 | 1,745,000 |               |  | $             | 4,834,000 | 
|Finished goods |  |                   | 4,767,000 |               |  |               | 4,304,000 | 
|               |  |                   |           |               |  |               |           | 
|               |  | $                 | 6,512,000 |               |  | $             | 9,138,000 | 
|               |  |                   |           |               |  |               |           | 



|4. |  | All shipping and handling expenses are included in the selling and
shipping caption and totaled approximately $756,000, $385,000 and
$1,061,000 for the two months ended December 31, 2003, one month ended
October 31, 2003 and three months ended December 31, 2002, respectively,
and $2,075,000 and $2,433,000 for the four months ended October 31, 2003
and six months ended December 31, 2002, respectively.                                                                                                                                                                                                              
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|5. |  | Effective November 1, 2003 the Company acquired substantially all of the
operating assets and liabilities of U.S. Home & Garden, Inc. These
operations have been included in the consolidated financials statements of
the Company since that date.                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | The operations consist of the manufacturing and marketing of a broad range
of brand-name consumer lawn and garden products in the United States,
Canada, and in Europe and other minor international locations. Management
of the Company believes in the fundamentals of the business and in its
ability to grow the business internally at acceptable growth rates.                                                                                                                                                                                                                                                            
|  
|   |  | The aggregate purchase price was $14,414,000 which includes expenses of
$1,670,000, the cost of a not agree to talk agreement of $1,250,000 and
$11,494,000 to the seller of which $1,600,000 was a subordinated note. The
Company also assumed debt of the Seller having a fair value of
$67,196,000 and accounts payable and accrued expenses of the Seller of
$11,122,000 and recorded deferred taxes on certain fair value adjustments
of $3,809,000. Deferred taxes related to the fair value of assumed debt
have been included in that caption. The total purchase price including
the assumption of debt was $96,541,000.

8



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##### Table of Contents



Easy Gardener Products, Ltd. and
Subsidiaries

Notes to Consolidated Financial
Statements



| |  | The following table summarized the estimated fair values of assets
acquired and liabilities assumed and new debt incurred at the date of the
acquisition.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  |                       |   |             |            | 
|------------------------------------------------- | --------------------- | - | ----------- | ---------- | 
|Current assets                                    |                       | $ | 17,176,000  |           
|Property and equipment                            |                       |   | 4,701,000   |           
|Intangible assets acquired                        |                       |   | 21,063,000  |           
|Deferred financing costs                          |                       |   | 1,592,000   |           
|Goodwill                                          |                       |   | 52,002,000  |           
|Other assets                                      |                       |   | 7,000       |           
|                                                  |                       |   |             |           
|                                                  | Total assets acquired |   |             | 96,541,000 | 
|                                                  |                       |   |             |           
|Accounts Payable & Accruals assumed               |                       |   | 11,122,000  |           
|Deferred taxes                                    |                       |   | 3,809,000   |           
|Debt assumed                                      |                       |   | 67,196,000  |           
|                                                  |                       |   |             |           
|Purchase Price                                    |                       |   | 14,414,000  |           
|Accounts Payable & Accruals assumed paid at close |                       |   | 988,000     |           
|Debt incurred, net                                |                       |   | (12,727,000 | )         
|                                                  |                       |   |             |           
|Cash                                              |                       | $ | 2,675,000   |           
|                                                  |                       |   |             |           



| |  | The Company incurred additional debt of $12,727,000 and raised capital of
$2,675,000 to pay for the net assets acquired and certain of the expenses
assumed at the closing of the purchase.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Of the $21,063,000 of intangible assets acquired, which are assets subject
to amortization, $16,000,000 was assigned to brand values having an
estimated useful life of fifteen years, $1,650,000 was assigned to
trademarks and patents having an estimated useful life of twelve years,
$1,875,000 was assigned to non-compete agreements having a weighted
average useful life of 8 years, $1,082,000 was allocated to package
design having a useful life of three years and $456,000 was allocated to
product rights with a useful life of fifteen years. The Company did not
acquire or write off any research and development assets.
|
| |  | The Company assumed no residual value in the computation of the
amortization of these intangible assets. Total amortization was $412,000,
$89,000, and $421,000 for the two months ended December 31, 2003 and one
month ended October 31, 2003 and three months ended December 31, 2002,
respectively and $531,000 and $772,000 for the four months ended October
31, 2003 and six months ended December 31, 2002, respectively. Estimated
amortization expense for each of the five succeeding fiscal years is as
follows:                                                                                                                

|                    |  |        |           | 
|------------------- |  | ------ | --------- | 
|Year ended June 30, |  | Amount
|                    |  |       
|2004                |  | $      | 1,752,000 | 
|2005                |  |        | 2,252,000 | 
|2006                |  |        | 2,169,000 | 
|2007                |  |        | 2,169,000 | 
|2008                |  |        | 2,169,000 | 

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##### Table of Contents



Notes to Consolidated Financial Statements



|   |  | The Company assigned $52,002,000 of the purchase price of the acquired
operations to goodwill which is not being amortized but will be subject to
testing for impairment losses. The Company did not recognize an
impairment loss or include goodwill in the disposal of the operations
relating to the single segment in which the Company operates. Of the
total goodwill balance, the Company expects approximately two-thirds to be
deductible for tax purposes.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The amounts assigned to assets and liabilities acquired and the related
computation of amortization are based on preliminary estimates and are
subject to change when the Company completes its valuation of these assets
and liabilities.                                                                                                                                                                                                                          
|  
|6. |  | The following unaudited pro forma financial information presents a
summary of the consolidated results of operations of the Company as if the
purchase of the operations had occurred at the beginning of the periods
presented.                                                                                                                                                                                                                                    

|                     |  |               |            |               |  |               |            |               |  |   |            |   |  |   |            |  
|-------------------- |  | ------------- | ---------- | ------------- |  | ------------- | ---------- | ------------- |  | - | ---------- | - |  | - | ---------- | -
|                     |  | One Month     |            | Four Months   |  | Three Months  |            | Six Months   
|                     |  | Ended         |            | Ended         |  | Ended         |            | Ended        
|                     |  | October 31,   |            | October 31,   |  | December 31,  |            | December 31, 
|                     |  | 2003          |            | 2003          |  | 2002          |            | 2002         
|                     |  |               |            |               |  |               |            |              
|                     |  | (Predecessor) |            | (Predecessor) |  | (Predecessor) |            | (Predecessor)
|Net Sales            |  | $             | 2,890,000  |               |  | $             | 17,258,000 |               |  | $ | 12,266,000 |   |  | $ | 25,255,000 |  
|Gross Margin         |  |               | 737,000    |               |  |               | 6,367,000  |               |  |   | 5,133,000  |   |  |   | 9,973,000  |  
|Loss from operations |  |               | (1,057,000 | )             |  |               | (1,774,000 | )             |  |   | (37,000    | ) |  |   | (1,370,000 | )
|Net loss             |  | $             | (1,912,000 | )             |  | $             | (5,000,000 | )             |  | $ | (2,582,000 | ) |  | $ | (6,338,000 | )



| |  | These unaudited pro forma results have been prepared for comparative
purposes only and primarily include adjustments to reflect only the
operations acquired and adjustments for interest expense and amortization
of intangible assets acquired in the purchase. Excluded from the pro
forma net loss are the expenses of the Seller related to its refinancing
of debt and costs associated with sale of $159,000 and $4,063,000 for the
four months ended October 31, 2003 and six months ended December 31, 2003,
respectively. Also excluded from the pro forma net loss are the costs of
the Seller related to discontinued operations which were not acquired by
the Company of $1,000, $75,000 and $1,193,000 for the one month ended
October 31,2003, four months ended October 31, 2003 and six months ended
December 31, 2003, respectively.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | These results do not purport to be indicative of the results of operations
which actually would have resulted had the purchase occurred at the
beginning of each of the periods presented or of the future operations of
the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

10



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##### Table of Contents



Easy Gardener Products, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements



|7. |  | The Company and its parent, EYAS International, Inc., and their material
subsidiaries entered into four credit arrangements on October 29, 2003 to
finance the acquisition of the operations and to provide working capital.
The Company also assumed from the Seller a Mandatorily Redeemable
Preferred Securities Trust Holding Solely Junior Subordinated Debentures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The first credit facility is the amended and restated Loan and Security
Agreement with Wells Fargo Foothill, Inc., which is a three year asset
based lending revolving credit facility. This facility has a maximum
borrowing level of $25 million, which is limited based upon having
eligible accounts receivable and inventory. Interest is at variable
annual rates based upon the prime rate plus 0.5% or LIBOR plus 2.75%, but
not less than 5.25%. The facility has various covenants including EBITDA,
minimum EBITDA to pay Trust Preferred interest, a Funded Senior Debt
Ratio, a Fixed Charge Coverage Ratio, and limits on Capital Expenditures.
The facility has a term ending October 29, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | The second credit facility is with CapitalSource Finance LLC and includes
two term loans. Term Loan A in the amount of $14,315,000 of which
$14,000,000 has been borrowed and Term Loan B in the amount of $9,713,750
of which $9,500,000 has been borrowed. Both Term Loans A and B mature on
October 29, 2008 and are secured by all of the assets of the Company.
Term Loan A bears interest at the greater of 5.75% over the prime rate or
10% and has monthly repayment of principal of $104,167 per month in year
one growing to $312,500 per month in year five. The principal repayment
schedule has the loan principal fully repaid at maturity. Term Loan B
bears interest at the greater of 8.75% over the prime rate or 13% plus
7.0% of non-cash interest which is to be paid at the maturity of Term Loan
B. Term Loans A and B also require mandatory pre-payments of the excess
cash flow as defined in the loan agreements. The principal reduction
ranges from 25% to 50% of the excess flow generated by the Company. The
facility has covenants identical to those of the revolving credit facility
described above.                                                                                                                                                                                                                                        
|  
|   |  | The Company also entered into two subordinated loan agreements, one with
the Seller aggregating $1,600,000 and one with another party aggregating
$2,675,000. The subordinated Seller note is the more junior of the
subordinated notes. Both of these subordinated loans bear interest at 9%
per annum and mature on April 29, 2008. The Seller note has a repayment
feature based upon excess cash flow as defined in the second credit
facility described in the preceding paragraph. The $2,675,000
subordinated note gives the holder of the note the right to convert the
note plus accrued interest into a 49% ownership interest in the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | The Mandatorily Redeemable Preferred Securities Trust Holding Solely
Junior Subordinated Debentures assumed from the Seller includes 78,000
common securities with a liquidation value of $25 per common share and
2,530,000 of 9.40% Cumulative Trust Preferred Securities with a
liquidation value of $25 per security due April 15, 2008. The Seller had
previously redeemed 251,981 shares of such securities. The previously
redeemed shares were acquired by the Company leaving 2,278,019 shares
outstanding with a face value of $57,092,000. The Company has entered
into two agreements with a prior lender of U.S. Home & Garden, Inc. giving
the prior lender the rights to acquire up to 189,750 of such redeemed
shares. Under the first agreement, the prior lender can purchase up to
94,875 shares of the redeemed shares at an exercise price of $9.00 per
share. Under the second agreement, the prior lender is forgoing monthly
cash interest on an additional 94,875 of the redeemed shares until the
exercise price of such shares is reduced to $0 at which point the
underlying securities will be transferred to the prior lender and cash
interest will begin being paid to the prior lender on such securities.
The exercise price on these securities at the date of purchase of the
operations was $4.30 and is reduced by approximately $.20 each

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Easy Gardener Products, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements



|   |  | month. The options expire on May 19, 2009. The fair value of the total
189,750 options granted have been reflected at the average quoted market
price of $17.00 per share. The $17.00 per share calculation is described
in the following paragraph. The total difference between the option
exercise prices and the $17.00 per share is $1,964,000. This amount has
been included in the value of mandatorily redeemable trust preferred
securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The fair value of the mandatorily redeemable preferred securities at
the acquisition date was approximately $38,726,000 based on the average
quoted market prices of $17.00 on the five days before and five days after
the acquisition date. The securities have been reflected in the opening
balance sheet of the Company at fair value and the discount from the face
value is being amortized using the constant yield to maturity method of
amortization over 25 years to the maturity date. Deferred taxes have been
recorded on the discount amount.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | Distributions of interest on the Trust Securities are payable monthly
in arrears by the Trust.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | The Subordinated Debentures are unsecured obligations of the Company and
are subordinate and junior in right to certain other indebtedness of the
Company. Currently, the company does not have any indebtedness outstanding
which rank equal to or junior to such securities. The Company may and its
more senior lenders will, if certain their loan covenants are not met,
require the deferral of the payment of interest on the Subordinated
Debentures. The deferral of interest can be done for a period not to
exceed 60 consecutive months with no change in the rights of the lenders.
If interest payments on the Subordinated Debentures are so deferred,
distributions on the Trust Securities will also be deferred. During any
such deferral period, interest on the Subordinated Debentures and
distributions on the Trust Securities will accrue and compound monthly
and, subject to certain exceptions, the Company may not declare or pay
distributions on its capital or debt securities that rank equal to or
junior to the Subordinated Debentures.
|  
|   |  | The Trust Securities are subject to mandatory redemption upon the
repayment of the Subordinated Debentures at a redemption price equal
to the aggregate liquidation amount of the securities plus any
accumulated and unpaid distributions. The Subordinated Debentures
mature in total on April 15, 2028, but may be redeemed at the option
of the Company at any time. The Company effectively provides a full
and unconditional guarantee of the Trusts obligations under the
Trust Securities to the extent that the Trust has funds sufficient to
make such payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|8. |  | In June 2002, U.S. Home & Garden Inc., the Predecessor company,
announced that it was discontinuing the operations conducted through its
subsidiary Weed Wizard Acquisition Corp. (Weed Wizard) effective
September 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | Revenues for Weed Wizard for the three months and six months ended
December 31, 2002 were not material. U.S. Home & Garden Inc. had a net
loss from the discontinued operations of Weed Wizard of $1,000 and $74,000
for the one month ended and four months ended October 31, 2003,
respectively and the net losses were $215,000 and $1,193,000 for the three
months and six months ended December 31, 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | In June 2001, U.S. Home & Garden Inc. announced that it was discontinuing
its e-commerce initiative, which it was conducting through its subsidiary,
Egarden, Inc. (Egarden), effective June 30, 2001. All severance payments
were made by June 30, 2002. No adjustments were required to the liability
recorded for severance payments since June 30, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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##### Table of Contents



Easy Gardener Products, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements



| |  | The Company did not acquire any assets or assume any liabilities
related to either Weed Wizard or Egarden.                                                                  
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The assets and liabilities of discontinued Egarden operations
reported in the consolidated balance sheets of U.S. Home & Garden
Inc. (Predecessor) consist of the following:

|                          |  |               |        | 
|------------------------- |  | ------------- | ------ | 
|                          |  | June 30, 2003
|                          |  |              
|                          |  | (Predecessor)
|                          |  | Total        
|                          |  |              
|Current Assets:           |  |               |        | 
|Cash and cash equivalents |  | $             | 62,000 | 
|                          |  |               |        | 
|Total Current Assets      |  | $             | 62,000 | 
|                          |  |               |        | 
|Current Liabilities:      |  |               |        | 
|Accrued expenses          |  | $             | 16,000 | 
|                          |  |               |        | 
|Total Current Liabilities |  | $             | 16,000 | 
|                          |  |               |        | 

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Item 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor
for forward-looking statements. Certain information included in this Report
contains statements that are forward-looking, such as statements relating to
plans for the Companys future activities. Such forward-looking information
involves important known and unknown risks and uncertainties that could
significantly affect actual results, performance or achievements in the
future and, accordingly, such actual results, performance or achievements may
materially differ from those expressed or implied in any forward-looking
statements made by or on behalf of the Company.

These risks and uncertainties include, but are not limited to, those relating
to the Companys growth strategy, customer concentration, outstanding
indebtedness, changes in interest rates, ability to service debt, dependence
on weather conditions, seasonality, expansion and other activities of
competitors, ability to successfully introduce new products and product
lines, changes in federal or state environmental laws and the administration
of such laws, protection of trademarks and other proprietary rights, and the
general condition of the economy and its effect on the securities markets and
other risks detailed in the Companys other filings with the Securities and
Exchange Commission. The words believe, expect, anticipate, intend
and plan and similar expressions identify forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date the statement was made.

General

Easy Gardener Products, Ltd., (the Company), manufactures and markets a
broad range of brand-name consumer lawn and garden products through its owned
operations and through its wholly owned subsidiaries, Weatherly Consumer
Products Group, Inc. and Easy Gardener UK. These operations were acquired
from U.S. Home & Garden Inc. effective November 1, 2003. In accordance with
the requirements of purchase accounting, all acquired assets and liabilities
were restated to reflect their respective fair values at the date of
purchase. As a result of the acquisition, the Company recorded $21,063,000
of acquired intangible assets, $16,000,000 was assigned to brand values
having an estimated useful life of fifteen years, $1,650,000 was assigned to
trademarks and patents having an estimated useful life of twelve years,
$1,875,000 was assigned to non-compete agreements having a weighted
average useful life of 8 years, $1,082,000 was allocated to package
design having a useful life of three years and $456,000 was allocated to
product rights with a useful life of fifteen years.

The acquisition of the operations comprised approximately 99% of the
consolidated sales, 98% of the consolidated assets and 99% of the
consolidated liabilities of the Seller, U. S. Home & Garden Inc. The
accompanying consolidated financial statements also include the previously
issued consolidated balance sheet of U. S . Home & Garden Inc. at June 30,
2003 and the consolidated statements of operations and cash flows for the
three and six months ended December 31, 2002. The accompanying consolidated
financial statements also include the consolidated statement of operations of
U.S. Home & Garden, Inc. for the month of October 2003 before transaction
costs and the gain on the sale of the operations and the consolidated
statements of operations and cash flows for the four months ended October 31,
2003. The U.S. Home & Garden Inc. consolidated financial statements
described above and included herein are referred to as Predecessor
financial statements.

The consumer lawn and garden market continues to become more
consolidated with fewer retailers accounting for an increasing percentage of
all lawn and garden products sold. This increasing concentration leverage
provides the largest retailers with greater leverage over their suppliers,
such as the Company. This leverage can result in decreased margins for
suppliers, including the Company, who may be required to make greater price
concessions to their large retail accounts without being able to reduce the
costs of the products sold by them to the retailers. This leverage by the
large retailers can also increase sales volatility for the Company as well as
other suppliers of lawn and garden products. There also continues to be a
consolidation of the vendors supplying the fewer retailers.

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##### Table of Contents



Seasonality

The Companys sales are seasonal due to the nature of the lawn and garden
business. The Companys seasonality generally parallels the annual growing
season. The Companys sales and shipping are usually most active from late
March through May when home lawn and garden customers are purchasing supplies
for spring planting and retail stores are replenishing their inventory of
lawn and garden products. These patterns are effected by a number of events;
weather being the largest single event. The buying pattern of retailers,
including the Companys retail customers, is changing. Retailers are buying
enough product to begin the season just prior to the beginning of the season
and stores are replenishing their inventory when sales are made by them
rather than buying large quantities of inventory in advance of the selling
season. Sales typically decline in mid-summer.

Results of Operations

The following table sets forth, for the periods indicated, certain selected
financial data as a percentage of net sales:

|                                                    |  |              |       |             |  |              |       |              |  |             |       |              |  |             |       |             |  |  |       |    |  |  |       |   
|--------------------------------------------------- |  | ------------ | ----- | ----------- |  | ------------ | ----- | ------------ |  | ----------- | ----- | ------------ |  | ----------- | ----- | ----------- |  |  | ----- | -- |  |  | ----- | --
|                                                    |  | Two Months   |       | One Month   |  | Three Months |       | Two Months   |  | Four Months |       | Six Months  
|                                                    |  | Ended        |       | Ended       |  | Ended        |       | Ended        |  | Ended       |       | Ended       
|                                                    |  | December 31, |       | October 31, |  | December 31, |       | December 31, |  | October 31, |       | December 31,
|                                                    |  | 2003         |       | 2003        |  | 2002         |       | 2003         |  | 2003        |       | 2002        
|                                                    |  |              |       |             |  |              |       |              |  |             |       |             
|                                                    |  |              |       |             |  | Predecessor  |       | Predecessor  |  |             |       |              |  | Predecessor |       | Predecessor
|Gross sales                                         |  |              | 126.1 | %           |  |              | 129.5 | %            |  |             | 118.1 | %            |  |             | 126.1 | %           |  |  | 124.2 | %  |  |  | 120.2 | % 
|Net sales                                           |  |              | 100.0 |             |  |              | 100.0 |              |  |             | 100.0 |              |  |             | 100.0 |             |  |  | 100.0 |    |  |  | 100.0 |   
|Cost of sales                                       |  |              | 63.2  |             |  |              | 73.4  |              |  |             | 58.0  |              |  |             | 63.2  |             |  |  | 62.7  |    |  |  | 60.2  |   
|                                                    |  |              |       |             |  |              |       |              |  |             |       |              |  |             |       |             |  |  |       |    |  |  |       |   
|Gross profit                                        |  |              | 36.8  |             |  |              | 26.6  |              |  |             | 42.0  |              |  |             | 36.8  |             |  |  | 37.3  |    |  |  | 39.8  |   
|Selling and shipping expenses                       |  |              | 28.6  |             |  |              | 40.7  |              |  |             | 27.5  |              |  |             | 28.6  |             |  |  | 33.4  |    |  |  | 29.6  |   
|General and administrative expenses                 |  |              | 11.6  |             |  |              | 25.0  |              |  |             | 15.0  |              |  |             | 11.6  |             |  |  | 14.6  |    |  |  | 16.0  |   
|Depreciation and amortization                       |  |              | 5.1   |             |  |              | 2.4   |              |  |             | 3.3   |              |  |             | 5.1   |             |  |  | 2.5   |    |  |  | 3.3   |   
|                                                    |  |              |       |             |  |              |       |              |  |             |       |              |  |             |       |             |  |  |       |    |  |  |       |   
|Loss from operations                                |  |              | (8.5  | )           |  |              | (41.5 | )            |  |             | (3.8  | )            |  |             | (8.5  | )           |  |  | (13.2 | )  |  |  | (9.1  | ) 
|Refinance and transaction costs                     |  |              |      |             |  |              |      |              |  |             | (31.3 | )            |  |             |       |             |  |  | (0.9  | )  |  |  | (15.9 | ) 
|Interest expense, net                               |  |              | (21.2 | )           |  |              | (23.0 | )            |  |             | (14.8 | )            |  |             | (21.2 | )           |  |  | (16.4 | )  |  |  | (14.4 | ) 
|                                                    |  |              |       |             |  |              |       |              |  |             |       |              |  |             |       |             |  |  |       |    |  |  |       |   
|Loss from continuing operations
before income taxes |  |              | (29.7 | )           |  |              | (64.5 | )            |  |             | (49.9 | )            |  |             | (29.7 | )           |  |  | (30.5 | )  |  |  | (39.4 | ) 
|Income taxes                                        |  |              | 10.1  |             |  |              | (1.7  | )            |  |             | (0.9  | )            |  |             | 10.1  |             |  |  | (0.3  | )  |  |  | (0.4  | ) 
|                                                    |  |              |       |             |  |              |       |              |  |             |       |              |  |             |       |             |  |  |       |    |  |  |       |   
|Loss
from continuing operations                     |  |              | (19.6 | )           |  |              | (66.2 | )            |  |             | (50.8 | )            |  |             | (19.6 | )           |  |  | (30.8 | )  |  |  | (39.8 | ) 
|Loss from discontinued operations                   |  |              |      |             |  |              | 0.0   |              |  |             | (1.7  | )            |  |             |      |             |  |  | (0.4  | )  |  |  | (4.7  | ) 
|                                                    |  |              |       |             |  |              |       |              |  |             |       |              |  |             |       |             |  |  |       |    |  |  |       |   
|Net loss                                            |  |              | (19.6 | %)          |  |              | (66.2 | %)           |  |             | (52.5 | %)           |  |             | (19.6 | %)          |  |  | (31.2 | %) |  |  | (44.5 | %)
|                                                    |  |              |       |             |  |              |       |              |  |             |       |              |  |             |       |             |  |  |       |    |  |  |       |   

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Overview

Due to changes in the Companys customers buying patterns, where products are
now purchased closer to the expected sales to the consumer, the Companys
sales for the December 31, 2003 quarter end are down. Continued pricing
pressure from the Companys customers resulted in additional discounts and
returns, rebates and allowances. Due primarily to a significant customer
mandating the freight carriers we are required to use for shipping product to
them and the decreasing average order size of their shipments, the Company
continues to have increases in outbound freight costs. The Company has and
is continuing to find ways to reduce or eliminate the increase in outbound
freight costs. Interest expense is a significant expenditure for the
Company. Interest expense is based upon variable interest rates for a
substantial portion of the Companys debt. An increase in interest rates
would have a negative impact on the Companys operating performance and cash
flows.

Weather during the gardening season has the greatest impact on the Companys
financial performance. Due to the seasonality of the Companys business as
described above, a substantial portion of the Companys sales and cash flows
are generated in the peak growing season of the year which are the March 31
and June 30 quarters.

The Company is focused on the consumers demand for the products and works to
enhance the current product offering and to introduce new products, which
meet consumer needs. As a new Company with limited recent experience in new
product development and with limited financial resources, the Companys
ability to execute an aggressive new product development strategy to enhance
operating results and cash flows is unknown.

Two Months Ended December 31, 2003 and One Month Ended October 31, 2003
(Predecessor) Combined, Compared to Three Months Ended December 31, 2002
(Predecessor)

Net sales. Net sales were $7,498,000 for the two months ended December
31, 2003 and $2,956,000 for the one month ended October 31, 2003, for a
combined three month amount of $10,454,000, a decrease of $1,897,000 or 15.4%
from the three months ended December 31, 2002 of $12,351,000. The decrease
in net sales was the result of a shift in customers buying patterns from
buying before the growing season in December to closer to the beginning and
throughout the gardening season year which are the March 31 and June 30
quarters. Product that was historically purchased in December is now
expected to be purchased in the following two quarters. Gross sales were
$13,279,000 for the three months, a decrease of $1,312,000 or 9.0% as
compared to the three months ended December 31, 2002 of $14,591,000.
Increased discounts and returns, rebates and allowances of $585,000, which
are adjustments to arrive at net sales, also contributed to the reduced net
sales for the combined three month period ended December 31, 2003. A
significant customer reached a higher sales level late in December 2003,
allowing them an increase in rebate levels for all sales made to them in
calendar year 2003. This higher rebate level of approximately $430,000 was
recorded in the three months ended December 31, 2003 while most of the sales
were recorded in earlier quarters. This higher rebate level is expected to
continue to be applicable to all sales made to this customer in future
quarters.

Cost of sales.Cost of sales of $4,740,000 for the two months ended December
31, 2003 and $2,169,000 for the one month ended October 31, 2003 for a
combined three month amount of $6,909,000, a decrease of $258,000, or 3.6%
from the three months ended December 31, 2002 of $7,167,000. Cost of sales
declined as a result of the reduction in gross and net sales and were
partially offset by increased material variance costs of $197,000, primarily
purchase price variance, on a number of petroleum based products. Cost of
sales as a percentage of net sales increased to 66.1% during the three months
ended December 31, 2003 from 58.0% during the comparable period in 2002 due
to the increase in sales adjustments which reduced net sales.

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Gross profit.Gross profit was $2,758,000 for the two months ended December
31, 2003 and $787,000 for the one month ended October 31, 2003, for a
combined three month amount of $3,545,000 a decrease of $1,639,000, or 22.9%
from the three months ended December 31, 2002 of $5,184,000. Gross profit as
a percentage of net sales decreased to 33.9% during the three months ended
December 31, 2002, from 42.0% during the comparable period in 2002. This
decrease in gross profit dollars and as a percentage of net sales results
from the decreased sales volume, increased discounts and returns, rebates and
allowances and increased cost of goods sold as noted above.

Selling and shipping expenses.Selling and shipping expenses were $2,147,000
for the two months ended December 31, 2003 and $1,201,000 for the one month
ended October 31, 2003 for a combined three month amount of $3,348,000, a
decrease of $52,000, or 1.5% from the three months ended December 31, 2002 of
$3,400,000. This decrease in selling and shipping expenses was primarily
attributable to decreased sales levels. The decrease was offset by $80,000
in increased outbound freight costs on the lower sales levels. Other costs
decreased including marketing expenses of $62,000 and other selling and
shipping expenses of $70,000. As a percentage of net sales, selling and
shipping expenses increased to 32.0% of net sales during the three months
ended December 31, 2003 from 27.5% during the comparable period in 2002.

General and administrative expenses.General and administrative expenses
were $867,000 for the two months ended December 31, 2003 and $740,000 for the
one month ended October 31, 2003, for a combined three month amount of
$1,607,000, a decrease of $241,000, or 0.4% from the three months ended
December 31, 2002 of $1,848,000. This decrease is a result of the elimination
of the Sellers administrative costs for the two months ended December 31,
2003, which were not assumed by the Company, offset by slightly higher
retained costs. For the months of November and December 2002, expenses of the
Seller not assumed by the Company aggregated $394,000. As a percentage of
net sales, general and administrative expenses increased to 15.4% during the
three months ended December 31, 2003 from 15.0% during the comparable period
in 2002.

Depreciation and amortization.Depreciation and amortization expenses were
$381,000 for the two months ended December 31, 2003 and $72,000 for the one
month ended October 31, 2003 for a combined three month amount of $453,000,
an increase of $44,000 or 10.8% from the three months ended December 31, 2002
of $409,000. This increase is primarily due to additional amortization of
$231,000 related to the identifiable intangible assets acquired in the
acquisition including product rights, patents and trademarks and a
non-compete agreement that the Company began amortizing in November 2003,
offset in part by some property and equipment becoming fully depreciated
during the 2003 period. As a percent of net sales, depreciation and
amortization expenses increased to 4.3% during the three months ended
December 31, 2003 from 3.3% during the comparable period in 2002.

Loss from continuing operations.Loss from continuing operations was
$637,000 for the two months ended December 31, 2003 and $1,226,000 for the
one month ended October 31, 2003 for a combined three month amount of
$1,863,000, an increase of $1,390,000 or 293.9% from the three months ended
December 31, 2002 of $473,000. The increased loss from continuing operations
was primarily due to decreased sales volume, increased discounts, rebates and
allowances and increased operating expenses as noted above. As a percentage
of net sales, loss from operations increased to 17.8% for the three months
ended December 31, 2003 from 3.8% during the comparable period in 2002.

Refinancing and transaction costs.The Seller incurred $3,869,000 in
refinancing and transaction costs during the three months ended December 31,
2002. Included in such prior year costs is a write-off of $1,928,000 for
deferred financing costs and discounts and $1,668,000 of fees and expenses
related to the replaced financing agreements entered into in October 2002 and
$273,000 of transaction costs related to the sale of operations to the
Company. The transaction costs incurred in October 2003 by the Seller were
reflected in the gain on the sale of the transaction and not reflected in the
income statement presented herein, which is prior to the transaction costs
and gain on the sale.

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Interest expense.Net interest expense was $1,593,000 for the two months
ended December 31, 2003 and $680,000 for the one month ended October 2003 for
a combined three month amount of $2,273,000, an increase of $447,000, or
24.5% from the three months ended December 31, 2002 of $1,826,000. The
increase in interest expense is related to an increase in debt due to the
purchase of operations. The prior comparable period included a one-time
payment of $254,000 in additional interest expense paid to a subordinated
lender. Of the interest expense incurred during the two months ended
December 31, 2003, $407,000 is deferred and not currently due in cash. A
substantial portion of the Companys interest expense is based upon variable
interest rates. Increases in such interest rates would have a negative
impact on operating performance and cash flow.

Income taxes. Income tax benefit of $758,000 for the two months ended
December 31, 2003 and tax expense of $49,000 incurred during the one month
ended October 2003 for a combined tax benefit of $709,000 increased $817,000
from the three months ended December 31, 2002 income tax expense of $108,000.

Discontinued Operations.Loss from discontinued operations which related to
the Sellers Weed Wizard operations decreased to $1,000 for the one month
ended October 31, 2003, a decrease of $214,000 or 99.5% from the three months
ended December 31, 2002 of $215,000. The decrease in loss from discontinued
operations is primarily due to the completion of the discontinuation of the
Weed Wizard product line.

Net loss.Net loss was $1,472,000 for the two months ended December 31, 2003
and $1,956,000 for the one month ended October 31, 2003 for a combined three
month amount of $3,428,000, a decrease of $3,063,000, from the three months
ended December 31, 2002 of $6,491,000. The decrease in net loss is due to
the reduced refinancing and transaction costs and discontinued operations
recorded in the three months ended December 31, 2002 and an increase in tax
benefits, offset in part by an increased loss from continuing operations as
noted above.

Two Months Ended December 31, 2003 and Four Months Ended October 31, 2003
(Predecessor) Combined Compared to Six Months Ended December 31, 2002
(Predecessor)

Net sales.Net sales were $7,498,000 for the two months ended December 31,
2003 and $17,473,000 for the four months ended October 31, 2003 for a
combined six month amount of $24,971,000, a decrease of $531,000, or 2.1%, as
compared to the six months ended December 31, 2002 of $25,502,000. Gross
sales were $31,154,000 for the six months ended December 31, 2003, an
increase of $502,000 or 1.6% as compared with the six months ended December
31, 2002 of $30,652,000. Increased discounts and returns, rebates and
allowances of $1,033,000, which are adjustments to arrive at net sales,
resulted in the reduced net sales for the combined six month period ended
December 31, 2003. A significant customer reached a higher sales level late
in December 2003, allowing them an increase in rebate levels for all sales
made to them in calendar year 2003. This higher rebate level of
approximately $430,000 was recorded in the three months ended December 31,
2003 while most of the sales were recorded in earlier quarters. This higher
rebate level is expected to continue to be applicable to all sales made to
this customer in future quarters.

Cost of sales.Cost of sales of $4,740,000 for the two months ended December
31, 2003 and $10,953,000 for the four months ended October 31, 2003, for a
combined six month amount of $15,693,000, an increase of $340,000, or 2.2% as
compared to the six months ended December 31, 2002 of $15,353,000. The
increase in cost of goods sold is primarily due to increased material
variance, primarily purchase price variance on a number of petroleum based
products. Cost of sales as a percentage of net sales increased to 62.8%
during the six months ended December 31, 2003 from 60.2% during the
comparable period in 2002. On a gross sales basis, cost of goods sold were a
minor 0.2% points higher in the six months ended December 31, 2003 as
compared to the comparable period of the prior year.

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Gross profit.Gross profit of $2,758,000 for the two months ended December
31, 2003 and $6,520,000 for the six months ended December 31, 2003 for a
combined six month amount of $9,278,000, a decrease of $871,000, or 8.6%, as
compared to the six months ended December 31, 2002 of $10,149,000. Gross
profit as a percentage of net sales decreased to 37.2% during the six months
ended December 31, 2003, from 39.8% during the comparable period in 2002.
This decrease in gross profit dollars and as a percentage of net sales
resulted from increased costs of certain petroleum based products and
increased discounts and returns, rebates and allowances as noted above.

Selling and shipping expenses.Selling and shipping expenses of $2,147,000
for the two months ended December 31, 2003 and $5,838,000 for the four months
ended October 31, 2003, for a combined six month amount of $7,985,000 an
increase of $429,000, or 5.7% as compared to the six months ended December
31, 2002 of $7,556,000. This increase in expense was attributable to a
$398,000 increase in outbound freight costs and a $311,000 increase in other selling and
shipping costs, offset in part by a decrease in marketing expenses of
$174,000 and other selling and shipping costs of $106,000. As a percentage
of net sales, selling and shipping expenses increased to 31.9% during the six
months ended December 31, 2003 from 29.6% during the comparable period in
2002.

General and administrative expenses.General and administrative expenses
were $867,000 for the two months ended December 31, 2003 and $2,557,000 for
the four months ended October 31, 2003, for a combined six month amount of
$3,424,000, a decreased by $656,000 or 16.1%, from the six months ended
December 31, 2002 of $4,080,000. The decrease is primarily a result of the
elimination of the Sellers administrative costs for the two months ended
December 31, 2003, which were not assumed by the Company and a slight decline
in other general and administrative expenses. For the months of November and
December 2002, expenses of the Seller not assumed by the Company aggregated
$394,000. As a percentage of net sales, general and administrative expenses
decreased to 13.7% during the six months ended December 31, 2003 from 16.0%
during the comparable period in 2002.

Depreciation and amortization.Depreciation and amortization expenses were
$381,000 for the two months ended December 2003 and $431,000 for the four
months ended October 31, 2003 for a combined six month amount of $812,0000, a
decrease of $24,000 or 2.9% from the six months ended December 31, 2002 of
$836,000. This decrease is primarily due to some property and equipment
becoming fully depreciated during the 2003 period, offset in part by
additional amortization of $231,000 related to identifiable intangible assets
acquired in the acquisition including product rights, patents and trademarks
and a non-compete agreement that the Company began amortizing in November
2003. As a percentage of net sales, depreciation and amortization expenses
remained constant at 3.3% during the six months ended December 31, 2003 and
2002.

Loss from continuing operations.Loss from continuing operations was
$637,000 for the two months ended December 2003 and $2,306,000 for the four
months ended October 2003 for a combined six month amount of $2,943,000, an
increase of $620,000 or 26.7% from the six months ended December 31,2003 of
$2,323,000. The increase was primarily due to increased discounts and returns, rebates
and allowances and increased operating expenses as noted above. As a
percentage of net sales, loss from operations increased to 11.8% for the
combined six months ended December 31, 2003 from 9.1% during the comparable
period in 2002.

Refinancing and transaction costs.The Seller incurred $159,000 in
transaction costs during the four months ended October 31, 2003, a decrease
of $3,904,000 or 96.1% as compared to the six months ended December 31, 2002
of $4,063,000. Included in such prior year costs is a write-off of $1,928,000
for deferred financing costs and discounts, $1,668,000 of fees and expenses
related to the replaced financing arrangements entered into in October 2002
and $467,000 of transaction costs related to the sale of the operations to
the Company. The transaction costs incurred in October 2003 by the Seller
were reflected in the gain on the sale of the transaction and not reflected
in the income statement presented herein, which is prior to the transaction
costs and gain on the sale.

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Interest expense.Net interest expense was $1,593,000 for the two months
ended December 2003 and $2,868,000 for the four months ended October 2003, for a combined amount six month amount of $4,461,000, an increase
of $801,000, or 21.9% from the six months ended December 31, 2003, of
$3,660,000. The increase in interest expense is related to an increase in
debt due to the purchase of operations. The prior comparable period included
a one-time payment of $254,000 in additional interest expense paid to a
subordinated lender. Of the increase in interest expenses, $407,000 is
deferred and not currently due in cash. A substantial portion of the
Companys interest expense is based upon variable interest rates. Increases
in such rates will have a negative impact on operating performance and cash
flow.

Income taxes. Income tax benefit of $758,000 for the two months ended
December 31, 2003 and tax expense of $44,000 incurred during the four months
ended October 31, 2003 for a combined tax benefit of $714,000 increased
$822,000 from the six months ended December 31, 2002 of $108,000.

Discontinued Operations.Loss from discontinued operations which related to
the Sellers Weed Wizard operations was $75,000 for the four months ended
October 31, 2003, a decrease of $1,118,000, or 93.7% from the six months
ended December 31, 2002 of $1,193,000. The decrease in loss from
discontinued operations is primarily due to the completion of the
discontinuance of the Weed Wizard product line, and due to legal costs of the
Seller associated with settling the U.S. Consumer Products Safety Commission
(CPSC) and A.A.B.B., Inc. litigation and a write-down of assets in the
prior period.

Net loss.Net loss was $1,472,000 for the two months ended December 31,
2003, and $5,452,000 for the four months ended October 31, 2003 for a
combined six month loss of $6,924,000, a decrease of $4,423,000 from the six
months ended December 31, 2002 of $11,347,000. The decrease in net loss is
due to the decreased refinancing and transaction costs and an income tax
benefit offset by increased interest expense and increased loss from
continuing operations as described above.

Liquidity and Capital Resources

The Company, which effectively commenced operations on November 1, 2003, has
financed its operations through borrowings from lending institutions. As noted
below, the Company may and or its more senior lenders will require, if certain
of their loan covenants are not met, that the Company finance part of its
operations by deferring the interest on the Mandatorily Redeemable Preferred
Securities Trust Holding Solely Junior Subordinated Debentures.

The Companys cash flow is dependent on its sales which as previously noted
are seasonal and significantly impacted by weather conditions during the key
gardening season. A substantial portion of the Companys sales are generated
in the last two quarters of the Companys fiscal year which ends June 30.
Interest expense is a significant expenditure for the Company and a
substantial amount of its interest expense is based upon variable interest
rates. Increases in such interest rates would have a negative impact on
operating performance and cash flow.

The Companys cash flow and liquidity levels are driven by sales and the
resulting accounts receivable and collections thereof and the purchase of
inventory and labor to produce finished inventory and the related payment of
accounts payable and accrued expenses.

The Company has significant fixed expenditures in the form of principal and
interest requirements and believes it will have sufficient cash flow to meet
these obligations as they come due. However, adverse weather and other
factors could leave the Company with insufficient cash flows to meet these and
other obligations.

At December 31, 2003, the Company had consolidated cash and short-term
investments totaling $981,000, and working capital of $4,773,000. At June 30,
2003, U.S. Home & Garden Inc., the Seller, had consolidated cash and
short-term investments totaling $822,000, and a working capital deficit of
$5,532,000. The increase in working capital was primarily attributable to the
financing terms obtained by the Company during the quarter ended December 31,
2003, which resulted in $6,000,000 of the outstanding borrowing under the new
revolving credit facility and $26,504,000 of the term loan and subordinated
debt being classified as long-term liabilities.

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Net cash used in operating activities for the two months ended December 31,
2003 of $1.1 million consisted primarily of the net loss from continuing
operations of $2.2 million, adjusted for non-cash expenses of $0.8 million
and an increase in inventories and accounts payable and accrued expenses of
$0.6 million, offset in part by an increase in accounts receivable, prepaid
expenses and other assets of $0.3 million. The net loss from continuing
operations and the increase in inventory and prepaid expenses is consistent
with the seasonal nature of the Companys business.

Net cash used in investing activities for the two months ended December 31,
2003 of $0.1 million is primarily due to capital purchases of equipment and
intangible assets.

Net cash provided by financing activities for the two months ended December
31, 2003 of $1.7 million is primarily due to proceeds from the credit
facilities used to fund the cash used in operating and investing activities.

The Companys operations are not capital intensive and accordingly funding
capital expenditures does not require high levels of cash flow or significant
financing arrangements. The Company does however require cash flows to
finance new product development.

The Company and its parent, EYAS International, Inc., and their material
subsidiaries entered into four credit arrangements on October 29, 2003 to
finance the acquisition of the operations and to provide working capital. The
Company also assumed from the Seller a Mandatorily Redeemable Preferred
Securities Trust Holding Solely Junior Subordinated Debentures.

The first credit facility is the amended and restated Loan and Security
Agreement with Wells Fargo Foothill, Inc., which is a three year asset based
lending revolving credit facility. This facility has a maximum borrowing
level of $25 million, which is limited based upon having eligible accounts
receivable and inventory. Interest is at variable annual rates based upon
the prime rate plus 0.5% or LIBOR plus 2.75%, but not less than 5.25%. The
facility has various covenants including EBITDA, minimum EBITDA to pay Trust
Preferred interest, a Funded Senior Debt Ratio, a Fixed Charge Coverage
Ratio, and limits on Capital Expenditures. The facility has a term ending
October 29, 2006.

The second credit facility is with CapitalSource Finance LLC and includes two
term loans. Term Loan A in the amount of $14,315,000 of which $14,000,000
has been borrowed and Term Loan B in the amount of $9,713,750 of which
$9,500,000 has been borrowed. Both Term Loans A and B mature on October 29,
2008 and are secured by all of the assets of the Company. Term Loan A bears
interest at the greater of 5.75% over the prime rate or 10% and has monthly
repayment of principal of $104,167 per month in year one growing to $312,500
per month in year five. The principal repayment schedule has the loan
principal fully repaid at maturity. Term Loan B bears interest at the
greater of 8.75% over the prime rate or 13% plus 7.0% of non-cash interest
which is to be paid at the maturity of Term Loan B. Term Loans A and B also
require mandatory pre-payments of the excess cash flow as defined in the loan
agreements. The principal reduction ranges from 25% to 50% of the excess flow
generated by the Company. The facility has covenants identical to those of
the revolving credit facility described above.

The Company also entered into two subordinated loan agreements, one with the
Seller aggregating $1,600,000 and one with another party aggregating
$2,675,000. The subordinated Seller note is the more junior of the
subordinated notes. Both of these subordinated loans bear interest at 9% per
annum and mature on April 29, 2008. The Seller note has a repayment feature
based upon excess cash flow as defined in the second credit facility
described in the preceding paragraph. The $2,675,000 subordinated note gives
the holder of the note the right to convert the note plus accrued interest
into a 49% ownership interest in the Company.

The Mandatorily Redeemable Preferred Securities Trust Holding Solely Junior
Subordinated Debentures assumed from the Seller includes 78,000 common
securities with a liquidation value of $25 per common share and 2,530,000 of
9.40% Cumulative Trust Preferred Securities with a liquidation value of $25
per security due April 15, 2008. The Seller had previously redeemed 251,981
shares of such securities. The previously redeemed shares were acquired by
the Company leaving 2,278,019 shares outstanding with a face value of
$57,092,000. The Company has entered into two agreements with a prior lender
of U.S. Home & Garden, Inc. giving the prior lender the rights to acquire up
to 189,750 of such redeemed shares. Under the first agreement, the prior
lender can purchase up to 94,875 shares of the redeemed shares at an exercise
price of $9.00 per share. Under the second agreement, the prior lender is
forgoing monthly cash interest on an

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additional 94,875 of the redeemed shares until the exercise price of such
shares is reduced to $0 at which point the underlying securities will be
transferred to the prior lender and cash interest will begin being paid to
the prior lender on such securities. The exercise price on these securities
at the date of purchase of the operations was $4.30 and is reduced by
approximately $.20 each month. The options expire on May 19, 2009. The fair
value of the total 189,750 options granted have been reflected at the average
quoted market price of $17.00 per share. The $17.00 per share calculation is
described in the following paragraph. The total difference between the
option exercise prices and the $17.00 per share is $1,964,000. This amount
has been included in the value of mandatorily redeemable trust preferred
securities.

The fair value of the mandatorily redeemable preferred securities at the
acquisition date was approximately $38,726,000 based on the average quoted
market prices of $17.00 on the five days before and five days after the
acquisition date. The securities have been reflected in the opening balance
sheet of the Company at fair value and the discount from the face value is
being amortized using the constant yield to maturity method of amortization
over 25 years to the maturity date. Deferred taxes have been recorded on the
discount amount.

Distributions of interest on the Trust Securities are payable monthly in
arrears by the Trust.

The Subordinated Debentures are unsecured obligations of the Company and are
subordinate and junior in right to certain other indebtedness of the Company.
Currently, the company does not have any indebtedness outstanding which rank
equal to or junior to such securities. The Company may and its more senior
lenders will, if certain their loan covenants are not met, require the
deferral of the payment of interest on the Subordinated Debentures. The
deferral of interest can be done for a period not to exceed 60 consecutive
months with no change in the rights of the lenders. If interest payments on
the Subordinated Debentures are so deferred, distributions on the Trust
Securities will also be deferred. During any such deferral period, interest
on the Subordinated Debentures and distributions on the Trust Securities will
accrue and compound monthly and, subject to certain exceptions, the Company
may not declare or pay distributions on its capital or debt securities that
rank equal to or junior to the Subordinated Debentures.

The Trust Securities are subject to mandatory redemption upon the repayment
of the Subordinated Debentures at a redemption price equal to the
aggregate liquidation amount of the securities plus any accumulated and
unpaid distributions. The Subordinated Debentures mature in total on
April 15, 2028, but may be redeemed at the option of the Company at any
time. The Company effectively provides a full and unconditional
guarantee of the Trusts obligations under the Trust Securities to the
extent that the Trust has funds sufficient to make such payments.

Commitments

The Company leases office and warehouse space, certain office equipment and
automobiles under operating leases expiring through 2006. The future minimum
annual lease payments under these non-cancelable operating leases are as
follows:

|                    |  |        |           | 
|------------------- |  | ------ | --------- | 
|Year Ended June 30, |  | Amount
|                    |  |       
|2004                |  | $      | 658,000   | 
|2005                |  |        | 531,000   | 
|2006                |  |        | 185,000   | 
|                    |  |        |           | 
|                    |  | $      | 1,374,000 | 
|                    |  |        |           | 

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Critical Accounting Policies

The preparation of financial statements requires the adoption and
implementation of accounting policies and the use of assumptions and
estimates in their presentation. The accounting policies and uncertainties,
judgments and estimates make it likely that materially different amounts
would be reported under different conditions and different assumptions.

The Company has included below a discussion of the more critical accounting
policies that are affected by the significant judgments and estimates used in
the preparation of the financial statements, how such policies are applied,
and how results differing from the estimates and assumptions would affect the
amounts presented in the financial statements. Other accounting policies
also have a significant effect on the financial statements, and some of these
policies also require the use of estimates and assumptions.

Allowance for Doubtful Accounts Receivable. The Company maintains an
allowance for doubtful accounts receivable, which represents the potential
estimated losses resulting from the inability of customers to make required
payments for amounts owed. The allowance is estimated based on historical
experience of write-offs, the level of past due amounts and information known
about specific customers with respect to their ability to make payments at
the balance sheet date. If the financial condition of the Companys
customers were to change, resulting in an impairment or improvement in their
ability to make payments, additional allowances may be required or allowances
may be reduced.

Inventories. The Company records inventory reserves for estimated
obsolescence of inventory equal to the difference between the cost of
inventory owned and the estimated market value. Market value is based upon
the age of specific inventory on hand and assumptions about future demand and
market conditions. If actual market conditions for the sale of the inventory
are less favorable than those anticipated by management, additional reserves
may be required.

Accrued Expenses. The Company records its estimated costs for customer
rebates and co-op adverting, freight and commission expenses as the related
sales occur during the year. These accruals involve the use of estimates as
to the expected program costs and the expected sales levels. If the program
costs and / or the expected sales levels were to change from the estimates
used in the accrual process, the accrued amounts might be either overstated
or understated.

Goodwill. The Company under the purchase method has incurred costs in excess
of the value of net assets acquired which has been recorded as goodwill.
Goodwill is tested for impairment by comparing the carrying value of the
assets to their fair value. The fair value of the assets could vary
significantly over time and different assumptions and estimates will result
in different valuations.

Deferred Income Taxes. The Company records deferred income taxes based
on enacted income tax rates in effect on the dates temporary differences
between the financial reporting and tax bases of assets and liabilities
reverse. To the extent that available evidence about the future raises doubt
about the realization of a deferred tax asset, a valuation allowance is
established.

Inflation

Inflation has historically not had a material effect on the Companys
operations.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a result of its variable rate revolving credit line and term debt, the
Company is exposed to the risk of rising interest rates. The Company also
has minor exposure to changes in foreign exchange rates. The following
table provides information on the Companys fixed maturity debt as of
December 31, 2003 that are sensitive to changes in interest rates.

|                                                                                                                                  |  |              
|--------------------------------------------------------------------------------------------------------------------------------- |  | -------------
|The Revolving Credit Facility with Wells Fargo Foothill, Inc
had an interest rate of 5.25% for the period ended
December 31, 2003 |  | $7.2 million 
|                                                                                                                                  |  |              
|The Term Loan A with CapitalSource Finance, LLC had
an interest rate of 10.0%for the period ended
December 31, 2003               |  | $13.8 million
|                                                                                                                                  |  |              
|The Term Loan B with CapitalSource Finance, LLC had
an interest rate of 13.0% for the period ended
December 31, 2003              |  | $9.6 million 




Item 4. Controls and Procedures

Within the 90-day period prior to the filing of this report, an evaluation
was carried out under the supervision and with the participation of the
Companys management, including the Chief Executive Officer (CEO) and the
Chief Financial Officer (CFO), of the effectiveness of the Companys
disclosure controls and procedures. Based on that evaluation, the CEO and
CFO have concluded that the Companys disclosure controls and procedures
are effective to ensure that information required to be disclosed by the
Company in reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
Subsequent to the date of their evaluation, there were no significant
changes in the Companys internal controls or in other factors that could
significantly affect the internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.




PART II  OTHER INFORMATION




Item 2. Changes of Securities and Use of Proceeds.




Item 5. Other Information




Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits



31.1 Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14 and 15d-14 implementing Section 302 of the
Sarbanes-Oxley act of 2002.




31.2 Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-14 and 15d-14 implementing Section 302 of the
Sarbanes-Oxley Act of 2002.


32.1 Certification of the Chief Executive Officer pursuant to section
906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of the Chief Financial Officer pursuant to section
906 of the Sarbanes-Oxley Act of 2002

(b)  A report on Form 8-K was filed during the quarter ended
December 31, 2003.

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SIGNATURES

Pursuant to the requirement 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.

|                  |  |  |     |                                                       
|----------------- |  |  | --- | ------------------------------------------------------
|February 17, 2004 |  |  |     |                                                       
|                  |  |  |     | Easy Gardener Products, Ltd.                          
|                  |  |  |     | (Registrant)                                          
|                  |  |  |     |                                                       
|                  |  |  | By: | /s/ Richard M. Grandy

Richard M. Grandy
Manager / CEO
|                  |  |  |     |                                                       
|                  |  |  | By: | /s/ Richard M. Kurz

Richard M. Kurz
Manager/ CFO     

25