U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
(Mark One)

[X] Quarterly Report Pursuant To Section 13 or 15(d) of The Securities Exchange
    Act of 1934

                  For the quarterly period ended March 31, 2007

                                       or

[ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange
    Act of 1934

                    For the transition period from N/A to N/A

                         COMMISSION FILE NUMBER: 0-32013

                              SPEAR & JACKSON, INC.
                              ---------------------
             (Exact name of registrant as specified in its charter)

                 Nevada                                    91-2037081
                 ------                                    ----------
      (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                  Identification No.)

        12012 Southshore Boulevard, Suite 103, Wellington, Florida 33414
        ----------------------------------------------------------------
          (Address of principal executive offices, including Zip Code)

                                 (561) 793 7233
                                 --------------
               Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Exchange Act:   NONE.

Securities registered pursuant to Section 12(g) of the Exchange Act:

                    COMMON STOCK, PAR VALUE $0.001 PER SHARE.
                    -----------------------------------------
                                (TITLE OF CLASS)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 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 mark whether the registrant is a well-known seasoned user (as
defined in Rule 405 of the Securities Act). Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer [ ]   Accelerated filer [ ]   Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act), Yes [ ] No [X]

The number of shares of registrant's common stock outstanding as of May 15, 2007
was 5,735,561.

<PAGE>

                                TABLE OF CONTENTS


PART I.  FINANCIAL INFORMATION


ITEM 1.  Financial Statements  (Unaudited)

         Condensed Consolidated Statements of Operations - Three and
         Six Months ended March 31, 2007 and 2006 .........................    1

         Condensed Consolidated Balance Sheets - March 31, 2007
         And September 30, 2006 (audited) .................................    2

         Condensed Consolidated Statement of Cash flows - Three and Six
         Months ended March 31, 2007 and 2006 .............................    3

         Notes to Condensed Consolidated Financial Statements .............    4


ITEM 2.  Management's Discussion and Analysis of Financial Condition ......   22
         And Results of Operations


ITEM 3.  Quantitative and Qualitative Disclosure about Market Risk ........   54


ITEM 4.  Controls and Procedures ..........................................   55



PART II. OTHER INFORMATION ................................................   56


ITEM 1.  Legal Proceedings ................................................   56


ITEM 6.  Exhibits .........................................................   58


SIGNATURES ................................................................   59


Certification of Principal Executive Officer and
  Chief Administrative Officer pursuant to Section 302 ....................EX 31


Certification of Principal Executive Officer and
   Chief Administrative Officer pursuant to Section 906 ...................EX 32

<PAGE>

                                     PART I

ITEM 1.  FINANCIAL STATEMENTS
<TABLE>
                                   SPEAR & JACKSON, INC. AND SUBSIDIARIES
                               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                 (UNAUDITED)
                                   (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
                                                               FOR THE THREE MONTHS     FOR THE SIX MONTHS
                                                                      ENDED                   ENDED
                                                              MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,
                                                                 2007        2006        2007        2006
                                                              ---------   ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>         <C>
Net sales .................................................   $  29,172   $  27,572   $  53,985   $  50,498
Cost of goods sold ........................................      18,925      19,078      35,396      34,975
                                                              ---------   ---------   ---------   ---------
Gross profit ..............................................      10,247       8,494      18,589      15,523

Operating costs, income and expenses:
   Selling, general and administrative expenses ...........       9,926       9,305      19,692      18,423
   Gain on sale of land and buildings .....................        (224)          -        (312)          -
   Manufacturing and other reorganization costs ...........          88       1,228          98       1,228
                                                              ---------   ---------   ---------   ---------
Operating income (loss) ...................................         457      (2,039)       (889)     (4,128)

Other income
   Rental and other income ................................          42          37          82          74
   Interest (net) .........................................          18          42          25          13
   Share of net earnings of investment in joint venture ...          76           -          76           -
                                                              ---------   ---------   ---------   ---------
Income (loss) from continuing operations before income
   taxes ..................................................         593      (1,960)       (706)     (4,041)

Income tax (provision) benefit ............................         (45)       (103)        (95)        313
                                                              ---------   ---------   ---------   ---------

Income (loss) from continuing operations ..................         548      (2,063)       (801)     (3,728)
                                                              ---------   ---------   ---------   ---------
Discontinued operations:

Loss from discontinued operations .........................           -         (66)          -         (87)
   Adjustments to previously recorded losses on disposal
      of discontinued operations ..........................           -           2           -           9
                                                              ---------   ---------   ---------   ---------
   Loss from discontinued operations ......................           -         (64)          -         (78)
                                                              ---------   ---------   ---------   ---------

Net income (loss) .........................................   $     548   $  (2,127)  $    (801)  $  (3,806)
                                                              =========   =========   =========   =========
Basic and diluted income (loss) per share:

From continuing operations ................................   $    0.10   $   (0.36)  $   (0.14)  $   (0.65)
From discontinued operations ..............................        0.00       (0.01)       0.00       (0.01)
                                                              ---------   ---------   ---------   ---------
                                                              $    0.10   $   (0.37)  $   (0.14)  $   (0.66)
                                                              =========   =========   =========   =========

                 The accompanying notes are an integral part of these financial statements.

                                                      1
</TABLE>
<PAGE>
<TABLE>
                                   SPEAR & JACKSON, INC. AND SUBSIDIARIES
                                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                        (IN THOUSANDS EXCEPT SHARES)
<CAPTION>
                                                                          AT MARCH 31,     AT SEPTEMBER 30,
                                                                              2007              2006
                                                                        ----------------   ----------------
                                                                          (UNAUDITED)
<S>                                                                     <C>                <C>
                                ASSETS

Current assets:
   Cash and cash equivalents ........................................   $          7,205   $          9,930
   Trade receivables, net of allowances for doubtful debts of $1,167
      and $1,635 ....................................................             21,471             15,983
   Inventories ......................................................             24,343             22,853
   Foreign taxes recoverable ........................................                200                215
   Deferred income tax asset, current portion .......................              2,289              2,182
   Other current assets .............................................              1,624              1,425
                                                                        ----------------   ----------------
      Total current assets ..........................................             57,132             52,588

Property, plant and equipment, net ..................................             17,051             15,594
Deferred income tax asset ...........................................             15,288             14,570
Investments .........................................................                586                508
                                                                        ----------------   ----------------
      Total assets ..................................................   $         90,057   $         83,260
                                                                        ================   ================

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Trade accounts payable ...........................................   $         10,132   $          7,766
   Accrued expenses and other liabilities ...........................             11,408             12,234
   Foreign taxes payable ............................................                202                155
      Total current liabilities .....................................             21,742             20,155
                                                                        ----------------   ----------------
Other liabilities ...................................................              1,136                699
Pension liability ...................................................             44,800             40,565
                                                                        ----------------   ----------------
      Total liabilities .............................................             67,678             61,419
                                                                        ----------------   ----------------
Stockholders' equity:
Common stock, 25,000,000 shares authorized $0.001 par value;
   12,011,122 issued and 5,735,561 shares outstanding ...............                 12                 12
Additional paid in capital ..........................................             51,590             51,590
Accumulated other comprehensive income (loss):
   Minimum pension liability adjustment, net of tax .................            (46,660)           (44,447)
   Foreign currency translation adjustment, net of tax of $nil ......             18,139             14,581
   Unrealized loss on derivative instruments ........................                (16)               (10)
(Accumulated Deficit) retained earnings .............................               (146)               655
Less: 6,275,561 common stock held in treasury, at cost ..............               (540)              (540)
                                                                        ----------------   ----------------
      Total stockholders' equity ....................................             22,379             21,841
                                                                        ----------------   ----------------

                                                                        ----------------   ----------------
      Total liabilities and stockholders' equity ....................   $         90,057   $         83,260
                                                                        ================   ================

                 The accompanying notes are an integral part of these financial statements.

                                                      2
</TABLE>
<PAGE>
<TABLE>
                                   SPEAR & JACKSON, INC. AND SUBSIDIARIES
                               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 (UNAUDITED)
                                               (IN THOUSANDS)
<CAPTION>
                                                                                    FOR THE SIX MONTHS ENDED
                                                                                    MARCH 31,      MARCH 31,
                                                                                       2007          2006
                                                                                    ---------      ---------
<S>                                                                                 <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss ..................................................................      $   (801)      $ (3,806)
   Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation ...........................................................           937          1,084
      Gain on sale of land and buildings .....................................          (312)             -
         (Profit) loss on sale of plant, property and equipment ..............            (4)             2
         Deferred income taxes ...............................................             -           (566)
         Equity earnings in joint venture ....................................           (76)             -
   Changes in operating assets and liabilities:
      Increase in trade receivables ..........................................        (4,457)        (3,979)
      (Increase) decrease in inventories .....................................          (277)         1,725
      Increase in other current assets .......................................          (190)           (64)
      Contributions paid to pension plan .....................................        (1,883)        (1,829)
      Increase in other non-current liabilities ..............................         4,066          4,060
      Increase in trade accounts payable .....................................         1,908          1,641
      (Decrease) increase in accrued expenses and other liabilities ..........        (2,359)           742
      Increase (decrease) in foreign taxes payable ...........................            80           (116)
      Increase in other liabilities ..........................................           402             55
                                                                                    --------       --------
NET CASH USED IN OPERATING ACTIVITIES ........................................        (2,966)        (1,051)
                                                                                    --------       --------
INVESTING ACTIVITIES:
   Purchases of property, plant and equipment ................................          (863)          (638)
   Proceeds from sale of property, plant and equipment .......................           428             44
   Purchase of equity investment .............................................             -           (229)
                                                                                    --------       --------
NET CASH USED IN INVESTING ACTIVITIES ........................................          (435)          (823)
                                                                                    --------       --------
FINANCING ACTIVITIES:
   Increase in overdraft .....................................................             -            678
                                                                                    --------       --------
NET CASH PROVIDED BY FINANCING ACTIVITIES ....................................             -            678
                                                                                    --------       --------
Effect of exchange rate changes on cash and cash equivalents .................           676           (113)
                                                                                    --------       --------
CHANGE IN CASH AND CASH EQUIVALENTS ..........................................        (2,725)        (1,309)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............................         9,930          7,289
                                                                                    --------       --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................................      $  7,205       $  5,980
                                                                                    ========       ========
SUPPLEMENTAL CASH FLOW INFORMATION
   Cash paid for interest ....................................................      $    162       $     92
                                                                                    ========       ========
   Cash paid for taxes .......................................................      $     46       $    369
                                                                                    ========       ========

                 The accompanying notes are an integral part of these financial statements.

                                                      3
</TABLE>
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION

         These condensed consolidated financial statements are expressed in U.S.
dollars and have been prepared in accordance with accounting principles
generally accepted in the United States. The condensed consolidated financial
statements include the accounts of Spear & Jackson, Inc. (the Company) and its
wholly owned subsidiaries, Mega Tools Ltd., Mega Tools USA, Inc., Megapro Tools,
Inc., S and J Acquisition Corp., Spear & Jackson plc and Bowers Group plc. Both
Spear & Jackson plc and Bowers Group plc are sub-holding companies and their
business is carried out by the following directly and indirectly owned
subsidiaries: Bowers Metrology Limited, Bowers Metrology (UK) Limited, Coventry
Gauge Limited, CV Instruments Limited, Eclipse Magnetics Limited, Spear &
Jackson (New Zealand) Limited, James Neill Canada Inc., James Neill Holdings
Limited, James Neill U.S.A. Inc., Spear & Jackson (Australia) Pty Ltd., Magnacut
Limited, Neill Tools Limited, Spear & Jackson Garden Products Limited, Spear &
Jackson Holdings Limited, Spear & Jackson France S.A., Societe Neill France
S.A , CV Instruments Europe BV and Bowers Eclipse Equipment Shanghai Co.
Limited.

         As further explained in note 4, below, the purchase of Spear & Jackson
plc and Bowers Group plc by Megapro Tools, Inc. (now Spear & Jackson, Inc.),
which was completed on September 6, 2002, was treated as a reverse acquisition.
The results and assets of discontinued operations are presented in accordance
with Statement of Financial Accounting Standards ("SFAS") 144.

         All significant intercompany accounts and transactions have been
eliminated on consolidation.

         The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial statements pursuant to both the rules and regulations of the
Securities and Exchange Commission and with instructions to Form 10-Q.
Accordingly, certain information and footnote disclosures required for annual
financial statements have been condensed or omitted. The Company's management
believes that all adjustments necessary to present fairly the Company's
financial position as of March 31, 2007 and September 30, 2006, and the results
of operations for the three and six month periods ended March 31, 2007 and March
31, 2006 and cash flows for the three and six month periods ended March 31, 2007
and March 31, 2006 have been included and that the disclosures are adequate to
make the information presented not misleading. The balance sheet at September
30, 2006 has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's and Subsidiaries' annual report on Form 10-K
for the year ended September 30, 2006.

         It is suggested that these financial statements be read in conjunction
with the audited consolidated financial statements and related footnotes of the
Company for the year ended September 30, 2006 included in the Company's annual
report filed on Form 10-K for the period then ended.

         The condensed consolidated financial statements of Spear & Jackson,
Inc. are denominated in US dollars. Changes in exchange rates between UK
sterling, the Euro, the Australian dollar, the New Zealand dollar, the Chinese
Yuan and the US dollar will affect the translation of the Company's UK, French,
Dutch, Chinese, New Zealand and Australian subsidiaries' financial results into
US dollars for the purposes of reporting the consolidated financial results. The
process by which each foreign subsidiary's financial results are translated into
US dollars is as follows: income statement accounts are translated at average
exchange rates for the period; balance sheet asset and liability accounts are
translated at end of period exchange rates; and equity accounts are translated
at historical exchange rates. Translation of the balance sheet in this manner
affects the stockholders' equity account, referred to as the accumulated other
comprehensive income account. Management has decided not to hedge against the
impact of exposures giving rise to these translation adjustments as such hedges
may impact upon the Company's cash flow compared to the translation adjustments
which do not affect cash flow in the medium term.

         The results of operations for any interim periods are not necessarily
indicative of the results to be expected for the full year, or any subsequent
periods.

                                        4
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION - CONTINUED

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

NOTE 2 - RECLASSIFICATION

         Certain reclassifications have been made to the consolidated financial
statements for the three and six months ended March 31, 2006 in order to conform
to current year presentation. Gains arising on the sale of property and
manufacturing and other reorganization costs have been reclassified so that such
gains and costs are now shown as a component of "Operating Costs, Income and
Expense". These items that are further described in Notes 10 and 11, were
previously captioned as "Unusual or Infrequent Items" and were presented after
the Operating profit (loss) for the period. These reclassifications impact only
on the presentation of the Consolidated Statement of Operations and do not have
any impact on previously reported net income or loss.

NOTE 3 - RECENTLY ISSUED ACCOUNTING STANDARDS

         In February 2006, FASB issued statement No. 155, Accounting for Certain
Hybrid Financial Instruments, as an amendment to Statement No. 133, Accounting
for Derivatives Instruments and Hedging Activities, and Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities. Statement No. 155 amends Statement No. 133 to narrow the scope
exception for interest-only and principal-only strips on debt instruments to
include only such strips representing rights to receive a specified portion of
the contractual interest or principle cash flows. Statement No. 155 amends
Statement No. 140 to allow qualifying special purpose entities to hold a passive
derivative financial instrument pertaining to beneficial interests that itself
is a derivative instrument. Statement No. 155 is effective for all financial
instruments acquired or issued in fiscal years beginning after September 15,
2006. The adoption of Statement No. 155 has not had a material impact on the
Company's condensed consolidated financial statements.

         In March 2006, the FASB issued Statement No. 156, Accounting for
Servicing of Financial Assets as an amendment to Statement No. 140. Statement
No. 156 requires that all separately recognized servicing rights be initially
measured at fair value, if practicable. In addition, this statement permits an
entity to choose between two measurement methods (amortization method or fair
value measurement method) for each class of separately recognized servicing
assets and liabilities. This new accounting standard is effective for reporting
periods beginning after September 15, 2006.The adoption of SFAS 156 has not had
a material impact on our results of operations or financial condition.

         In July 2006, FASB issued FIN 48, "Accounting for Uncertainty in Income
Taxes" as an interpretation of Statement No. 109. This interpretation clarifies
the application of Statement No. 109 by defining a criterion than an individual
tax position must meet for any part of the benefit of that position to be
recognized in an enterprise's financial statements and also provides guidance on
measurement, derecognition, classification, interest and penalties, accounting
in interim periods and disclosure. FIN 48 is effective for our fiscal years
beginning after December 15, 2006. At this time, we have not completed our
review and assessment of the impact of adoption of FIN 48.

         In September 2006, the SEC staff issued SAB 108, Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements ("SAB 108"). SAB 108 was issued in order to eliminate
the diversity in practice surrounding how public companies quantify financial
statement misstatements. SAB 108 requires that registrants quantify errors using
both a balance sheet and income statement approach and evaluate whether either
approach results in a misstated amount that, when all relevant quantitative and
qualitative factors are considered, is material. SAB 108 must be implemented by
the end of the Company's 2007 fiscal year. The Company is currently assessing
the potential effect of SAB 108 on its financial statements.

                                        5
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED

         In September 2006, the FASB issued SFAS 157, Fair Value Measurements
(SFAS 157). SFAS 157 provides a common definition of fair value and establishes
a framework to make the measurement of fair value in generally accepted
accounting principles more consistent and comparable. SFAS 157 also requires
expanded disclosures to provide information about the extent to which fair value
is used to measure assets and liabilities, the methods and assumptions used to
measure fair value, and the effect of fair value measures on earnings. SFAS 157
is effective for the Company's 2009 fiscal year, although early adoption is
permitted. The Company is currently assessing the potential effect of SFAS 157
on its financial statements.

         In September 2006, the FASB issued SFAS No. 158, Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106, and 132(R) ("SFAS 158"). This statement requires
recognition of the overfunded or underfunded status of defined benefit pension
and other postretirement plans as an asset or liability in the statement of
financial position and also requires in the funded status to be recognized in
comprehensive income in the year in which such changes occur. SFAS 158 also
requires measurement of the funded status of a plan as of the date of the
statement of financial position. The recognition and disclosure provisions of
SFAS 158 are effective as of the end of the fiscal year ending after December
16, 2006, while the measurement date provisions are effective for fiscal years
ending after December 15, 2008. If SFAS 158 were applied as at March 31, 2007,
using the Company's September 30, 2006 actuarial valuation and rolling this
forward, we would have recorded an additional pre-tax charge to accumulated
other comprehensive income totaling $8.2 million ($5.7 million after tax)
representing the difference between the funded status of the plans based on the
project benefit obligation and the amounts recorded on our balance sheet at
March 31, 2007.

         In February 2007, the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities - Including an Amendment of FASB
Statement No. 115 ("SFAS 159"). SFAS 159 permits entities to choose to measure
many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. SFAS 159 permits all entities
to choose, at specified election dates, to measure eligible items at fair value
(the "fair value option"). A business entity shall report unrealized gains and
losses on items for which the fair value option has been elected in earnings at
each subsequent reporting date. Upfront costs and fees related to items for
which the fair value option is elected shall be recognized in earnings as
incurred and not deferred. SFAS 159 also establishes presentation and disclosure
requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities.
SFAS 159 is effective as of the beginning of an entity's first fiscal year that
begins after November 15, 2007. The Company is currently evaluating the impact
this statement will have on its financial position and results of operations

NOTE 4 - CRITICAL ACCOUNTING POLICIES

         A summary of our critical accounting policies is included in Note 2 to
the audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended September 30, 2006. Management believes
that the application of these policies on a consistent basis enables the Company
to provide useful and reliable financial information about the Company's
operating results and financial condition.

         As disclosed in the annual report on Form 10-K for the fiscal year
ended September 30, 2006, the discussion and analysis of our financial condition
and results of operations are based upon our consolidated financial statements.
These have been prepared in conformity with accounting principles generally
accepted in the United States. The preparation of the financial statements
requires us to make estimates and assumptions and adopt accounting policies that
affect the reported amounts of assets, liabilities, revenues and expenses as
disclosed in those financial statements. These judgments can be subjective and
complex, and consequently actual results could differ from those estimates. Our
most critical accounting policies relate to revenue recognition; foreign
exchange risk; inventory, the computation of deferred income taxes, the
recognition of deferred income tax assets and pension and other post retirement
benefit costs. Since September 30, 2006, there have been no changes in our
critical accounting policies and no significant changes to the assumptions and
estimates related to them.

                                        6
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 5 - NATURE OF BUSINESS - CONTINUED

         The Company was incorporated in the State of Nevada on December 17,
1998 and was inactive until the acquisition of Mega Tools Ltd. and Mega Tools
USA, Inc. via reverse acquisition on September 30, 1999. The Company was engaged
in the manufacture and sale of a patented multi-bit screwdriver. The Company
entered into an exclusive North American license agreement with the patent
holder of a retracting cartridge type screwdriver. This license agreement gave
the Company unrestricted use of the patent in Canada and the United States until
November 8, 2005. The Company's wholly owned subsidiaries, Mega Tools USA, Inc.
and Mega Tools Ltd. manufactured and marketed the drivers to customers in the
United States and Canada. With effect from September 30, 2003 the Company exited
its screwdriver operations following the sale of the trade and net assets of
Mega Tools USA, Inc. and Mega Tools Ltd. The historical results of operations
for this business have been reclassified to earnings (loss) from discontinued
operations on the Company's Consolidated Statements of Operations.

         On September 6, 2002 the Company acquired the entire issued share
capital of Spear & Jackson plc and Bowers Group plc. These companies, through
their principal operating entities, as disclosed in note 1, manufacture and
distribute a broad line of hand tools, lawn and garden tools, industrial magnets
and metrology tools primarily in the United Kingdom, Europe, Australia, North
and South America, Asia and the Far East.

         Following recommendations by the SEC, the acquisition of Spear &
Jackson plc and Bowers Group plc ("S&J") by Megapro Tools, Inc. was accounted
for as a reverse acquisition for financial reporting purposes. The reverse
acquisition is deemed a capital transaction and the net assets of S&J (the
accounting acquirer) were carried forward to Megapro Tools, Inc. (the legal
acquirer and the reporting entity) at their carrying value before the
combination. Although S&J was deemed to be the acquiring corporation for
financial accounting and reporting purposes, the legal status of Megapro Tools,
Inc. as the surviving corporation does not change. The relevant acquisition
process utilizes the capital structure of Megapro Tools, Inc. and the assets and
liabilities of S&J are recorded at historical cost.

         In these financial statements, S&J is the operating entity for
financial reporting purposes and the financial statements for all periods
presented represent S&J's financial position and results of operations. The
equity of Megapro Tools Inc. is the historical equity of S&J retroactively
restated to reflect the number of shares issued in the S&J acquisition.

         On November 7, 2002 the Company changed its name from Megapro Tools,
Inc. to Spear & Jackson, Inc.

         Following formal approval by the SEC and the U.S. District Court for
the Southern district of Florida of the settlement of the litigation captioned
SEC v. Dennis Crowley, Spear & Jackson, Inc., International Media Solutions,
Inc., Yolanda Velazquez and Kermit Silva (Case No: 04-80354-civ-Middlebrooks),
the Company entered into a Stock Purchase Agreement with PNC Tool Holdings LLC
("PNC") and Dennis Crowley, the sole member of PNC and former Chief Executive
Officer and Chairman of the Company. The Stock Purchase Agreement was effected
on April 8, 2005.

         Under the Stock Purchase Agreement, the Company acquired, for $100, and
other good and valuable consideration, 6,005,561 common shares of the Company
held by PNC which represented approximately 51.1% of the outstanding common
shares of the Company at December 31, 2004, and which constituted 100% of the
common stock held by such entity. The parties also executed general releases in
favor of each other subject to the fulfillment of the conditions of the Stock
Purchase Agreement.

         As a result of the stock purchase, the stockholders of the Company had
their percentage stock interest increase correspondingly. Jacuzzi Brands, Inc.
("Jacuzzi"), which, at that time was a beneficial owner of 3,543,281 shares of
common stock, had its interest in the Company increase to approximately 61.8% of
the outstanding common stock.

                                        7
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 5 - NATURE OF BUSINESS - CONTINUED

         On April 21, 2005, Jacuzzi adopted a plan of disposition of the
Company's common stock. On March 23, 2006, "Jacuzzi" and its subsidiary
undertaking, USI American Holdings, Inc. ("USI" and, together with Jacuzzi, the
"Seller") entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement") with United Pacific Industries Limited ("UPI"), a Bermuda
Corporation, to sell its entire holding of 3,543,281 shares of the common stock
(the "Shares") of Spear & Jackson, Inc. ("SJI") to UPI for $1.40 per share for
an aggregate purchase price of $4,960,593. Such shares constituted all of the
shares of SJI owned by the Seller.

         The representations, warranties and covenants made by Jacuzzi and UPI
were typical for this type of transaction. UPI agreed that it or any of its
affiliates would not purchase any additional Common Stock during the period from
the signing date of the Stock Purchase Agreement through one year following the
closing at a price less than $1.40 per share.

         The Seller and UPI then announced that they had entered into Amendment
No. 1 dated 4 May 2006, ("Amendment No. 1 to the Stock Purchase Agreement") to
extend the date by which the Seller and UPI were required to lodge the clearance
application with the UK Pensions Regulator. The Seller and UPI subsequently
received a comfort letter, dated July 5, 2006, issued by the UK Pensions
Regulator (the "Comfort Letter").

         The trustees of Spear & Jackson, Inc.'s UK Pension Plan confirmed by a
letter dated July 6, 2006 their acceptance of the UK Pensions Regulator's
determination. The Seller and UPI then entered into Amendment No. 2 dated July
10, 2006, ("Amendment No. 2 to the Stock Purchase Agreement") to waive their
respective requirements for a clearance from the UK Pensions Regulator and to
accept in its place the Comfort Letter which states the UK Pensions Regulator is
of the view, based on the information supplied to him in connection with the
clearance application, that the change of control as a result of the sale by the
Seller of all of its shares of Spear & Jackson, Inc. to UPI is not detrimental
to the UK pension plan and the UK Pensions Regulator believes that a clearance
is not necessary for the transaction.

         In addition, pursuant to Amendment No. 2 to the Stock Purchase
Agreement UPI agreed, subject to the Closing having occurred, to indemnify the
Seller and JBI Holdings Limited (the "Jacuzzi Indemnified Parties") should the
UK Pensions Regulator, regardless of the Comfort Letter, require any of the
Jacuzzi Indemnified Parties to make a contribution or provide financial support
in relation to the potential pension plan liabilities of SJI or its
subsidiaries. In addition, UPI has also agreed that for a period of twelve
months from the Closing Date, UPI will not, and will use its best efforts to
ensure that neither SJI nor any of its subsidiaries will, take any action or
omit to take any action that causes the UK Pensions Regulator, as a result of
such action or omission, to issue a contribution notice against the Jacuzzi
Indemnified Parties in relation to any UK pension plan in which SJI or any
subsidiary of SJI is an employer. Further, UPI agreed that for a period of
twelve months from the Closing Date, that it will not (and will use its best
efforts to ensure that neither SJI nor any subsidiary of SJI will) engage in any
action or inaction which in relation to any such UK pension plan would fall
within the UK Pension Regulation clearance guidance note dated April 2005 as a
'Type A' event unless UPI procures that clearance is issued by the UK Pensions
Regulator in relation to such event in terms which confirm that no Jacuzzi
Indemnified Party shall be linked to a financial support direction or
contribution notice in respect of such event.

Closing occurred on July 28, 2006.

                                        8
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 6 - DISCONTINUED OPERATIONS

         The following table presents the results of the Company's operations
that have been reclassified as discontinued and the (loss) income that has been
recorded in connection with the disposal of these businesses:
<TABLE>
<CAPTION>
                                                      FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                                                      MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,
                                                        2007             2006             2007             2006
                                                   --------------   --------------   --------------   --------------
                                            NOTE   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                                         <C>    <C>              <C>              <C>              <C>
Revenues reclassified to discontinued
   operations:
Thread gauge measuring division .........   (a)    $            -   $          235   $            -   $          590
                                                   --------------   --------------   --------------   --------------
                                                   $            -   $          235   $            -   $          590
                                                   ==============   ==============   ==============   ==============

Loss from discontinued operations:
Loss from operations of thread gauge
   measuring division ...................   (a)                 -   $          (66)               -   $          (87)
                                                   --------------   --------------   --------------   --------------
                                                   $            -   $          (66)  $            -   $          (87)
                                                   ==============   ==============   ==============   ==============

Adjustment to previously recorded loss on
   disposal of discontinued operations:
   Megapro screwdrivers division ........   (b)                 -   $            2                -   $           11
                                                   --------------   --------------   --------------   --------------
                                                   $            -   $            2   $            -   $           11
                                                   ==============   ==============   ==============   ==============

                                                   --------------   --------------   --------------   --------------
Loss from discontinued operations, net of
   taxes ................................          $            -   $          (64)  $            -   $          (76)
                                                   ==============   ==============   ==============   ==============
</TABLE>

         (a) During the fourth quarter of fiscal 2005, the Company began
marketing for sale certain assets associated with its Coventry Gauge thread
gauge measuring business that is located in the United Kingdom. On February 28,
2006, the Company concluded the sale of these assets for a nominal
consideration. The assets sold comprised plant and equipment, inventories and
goodwill. The acquirer paid (pound)1 and assumed certain liabilities in respect
of the leased premises from which the trade operates. The carrying values of the
assets relating to this entity were written down to the lower of depreciated
cost or estimated fair value after consideration of selling costs in the
quarters ended March 31, 2005 and September 30, 2005. No further losses or gain
on disposal are required to be recognized in the current period. The assets and
liabilities of discontinued operations held for sale have not been reported
separately in the consolidated balance sheets of the Company, as the net book
amounts involved are not considered material.

         (b) During the year ending September 30, 2003, the directors of Spear &
Jackson, Inc. carried out a strategic review of the Company's loss making
Megapro screwdriver division ("Megapro"). It was determined that the division
was no longer a core activity of the group and various divestment strategies
were considered.

         With effect from September 30, 2003, the trade and assets of the
division's principal operating companies, Mega Tool USA, Inc. and Mega Tools
Limited, were transferred by prior subsidiary management, and without prior
authorization, at their net book value of $384 to the division's former managing
director. The transfer proceeds were in the form of $284 of loan notes and other
receivables and the discharge of a loan of $100 owed by the company to the
Megapro managing director.

         Having considered the future financial position of Megapro, the
directors of Spear & Jackson, Inc. provided $97 against the recoverability of
the balance of the sales proceeds which was outstanding at September 30, 2003. A
further $187 was provided against this debt in the year ended September 30,
2004. It was then agreed with Megapro that it would pay Canadian $54
(approximately $41) in settlement of those debts and this was repaid in monthly
installments of Canadian $5 (approximately $4).

                                        9
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 7 - RETIREMENT BENEFIT PLAN

         The Company operates a contributory defined benefit pension plan
covering certain of its employees in the United Kingdom based subsidiaries of
Spear & Jackson plc. The benefits covered by the Plan are based on years of
service and compensation history. Plan assets are primarily invested in
equities, fixed income securities and Government Stocks.

         Pension costs amounted to $2,053 for the quarter ending March 31, 2007
and $2,033 for the same quarter last year. Pension costs for the six months
ended March 31 2007 were $4,066 compared with $4,060 with the comparable period
last year. The net periodic costs include the following components:
<TABLE>
<CAPTION>
                                       FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                                       MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,
                                         2007             2006             2007             2006
                                    --------------   --------------   --------------   --------------
                                    (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                                 <C>              <C>              <C>              <C>
Service cost ....................   $          413   $          524   $          818   $        1,049
Interest cost ...................            3,031            2,609            6,002            5,209
Expected return on plan assets ..           (2,829)          (2,466)          (5,602)          (4,925)
Recognition of actuarial loss ...            1,438            1,366            2,848            2,727
                                    --------------   --------------   --------------   --------------
Total Benefit cost ..............   $        2,053   $        2,033   $        4,066   $        4,060
                                    ==============   ==============   ==============   ==============
</TABLE>

         The Company's funding policy with respect to the Plan is to contribute
annually not less than the minimum required by applicable UK law and pension
regulations. Amounts payable are determined on the advice of the Plan's
actuaries and in agreement with the Plan's Trustees. The Company has contributed
$949 to the Plan in the quarter to March 31, 2007 (2006 $945) and $1,883 in the
six month period ended on that date (2006 $1,829). In the year ended September
30, 2006 the Company paid $3.4 million into the Plan. In the ten month period to
July 31, 2007 the level of contributions will be approximately $3.1 million.
Contributions after that date will be determined after consultation between the
Company, the actuary and the Plan trustees. Following the introduction of new UK
pension legislation it is anticipated that, post July 31, 2007, Company
contributions will increase to approximately $5.9 million per annum.

         Accounting standards require a minimum pension liability be recorded
when the value of pension assets is less than the accumulated benefit obligation
("ABO") at the annual measurement date. As of September 30, 2006, our most
recent measurement date for pension accounting, the value of the ABO exceeded
the market value of investments held by the pension plan by approximately $40.56
million. In accordance with accounting standards, the charge against
stockholders' equity will be adjusted in the fourth quarter to reflect the value
of pension assets compared to the ABO as of the end of September 2007. If the
level of pension assets exceeds the ABO as of a future measurement date, the
full charge against stockholders' equity would be reversed.

                                       10
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 8 - PROPERTY, PLANT AND EQUIPMENT, NET

                                              AT MARCH 31,     AT SEPTEMBER 30,
                                                  2007               2006
                                             --------------    ----------------
                                             (IN THOUSANDS)     (IN THOUSANDS)
Assets held and used at cost:
   Land and buildings .................      $       15,971    $         15,269
   Machinery, equipment and vehicles ..              24,817              29,299
   Furniture and fixtures .............                 912                 867
   Computer hardware ..................               2,616               1,834
   Computer software ..................                 379                 361
   Assets held under finance leases ...  (a)          2,544               2,433
                                             --------------    ----------------
                                                     47,239              50,063
   Accumulated Depreciation ...........             (30,188)            (34,469)
                                             --------------    ----------------
   Net ................................      $       17,051    $         15,594
                                             ==============    ================

(a) Included in property, plant and equipment at March 31, 2007 are capital
leases with a net book value of $1.41 million (September 30, 2006 $0.86
million). The cost of these assets held under capital leases was $2.54 million
(September 30, 2006 $2.43 million) and the accumulated depreciation relating to
these assets was $1.13 million (September 30, 2006 $1.57 million).

NOTE 9 - INVENTORIES

                                              AT MARCH 31,     AT SEPTEMBER 30,
                                             --------------    ----------------
                                                  2007               2006
                                             --------------    ----------------
                                             (IN THOUSANDS)     (IN THOUSANDS)

Finished products .....................      $       21,960    $         19,329
In-process products ...................               4,091               4,443
Raw materials .........................               5,578               6,191
Less: allowance for slow moving
   and obsolete inventories ...........              (7,286)             (7,110)
                                             --------------    ----------------
                                             $       24,343    $         22,853
                                             ==============    ================

NOTE 10 - GAIN ON SALE OF LAND AND BUILDINGS

The gain on the sale of land and buildings comprises the following:
<TABLE>
<CAPTION>
                                       FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                                       MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,
                                         2007             2006             2007             2006
                                    --------------   --------------   --------------   --------------
                                    (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                                 <C>              <C>              <C>              <C>
Gain on sale of land and buildings             224                -              312                -
                                    ==============   ==============   ==============   ==============
</TABLE>

         (a) The $224 gain in the quarter to March 31, 2007 represents the sale,
on March 27, 2007 of land at the Company's Atlas site in Sheffield, England that
was surplus to current requirements. Sale proceeds were $294 and the cost of the
land plus attributable expenses amounted to $70.

         (b) On July 27, 2006 the Company completed the sale of the remaining
element of its industrial site at St. Paul's Road, Wednesbury, England for
$4,756. The conditions of the sale agreement stipulated that the Company could
occupy the site, for a peppercorn rent, until November 30, 2006. In the
financial statements for the year ended September 30, 2006 $88 of the gain on
the sale of the site was deferred. This deferral represented

                                       11
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 10 - GAIN ON SALE OF LAND AND BUILDINGS - CONTINUED

the fair value of rentals during the period of occupation from the sale of the
site until November 30, 2006, the planned closure dates. The Wednesbury site was
vacated on schedule and the deferred element of the gain was released to the
profit and loss account in the three month period to December 31, 2006 and
accordingly included in the gain reported in the six month period ended March
31, 2007.

NOTE 11 - MANUFACTURING AND OTHER REORGANIZATION COSTS
<TABLE>
<CAPTION>
                                       FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                                       MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,
                                         2007             2006             2007             2006
                                    --------------   --------------   --------------   --------------
                                    (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                                 <C>              <C>              <C>              <C>
Manufacturing and other
   reorganization costs ..........              88            1,228               98            1,228
                                    ==============   ==============   ==============   ==============
</TABLE>

      (i) Manufacturing and other reorganization costs of $88 and $98 have been
incurred in the three and six months periods ended March 31, 2007, respectively.
These are analyzed as follows:

         (a) On January 25, 2006, the Company announced the closure of the
remaining element of its manufacturing site at Wednesbury, England. All
warehouse and distribution operations previously performed at this location have
now been transferred to the Company's principal UK manufacturing site in
Sheffield. The manufacturing and assembly functions formerly carried out at this
site have now been out sourced to suppliers based outside the UK.

         (b) The closure and relocation of the Wednesbury facility was completed
by November 30, 2006 and the costs of this exercise, including employee
severance payments, site closure expenses, factory reorganization expenses, were
provided for in the year ended September 30, 2006. Certain costs totaling $12
however, were not provided at that date and provision has been made for them in
the quarter ended March 31, 2007. Additionally, that element of employee
severance costs relating to the payment of loyalty bonuses for those employees
staying until the site vacation in November 2006 was not provided for at
September 30, 2006 and $10 has been expensed to the profit and loss in the
quarter to December 31, 2006 in respect of such bonuses.

         (c) Additionally, in the quarter to September 30, 2006, the Company's
UK subsidiary, Eclipse Magnetics Limited ("Eclipse"), announced the cessation of
certain manufacturing activities at its site in Sheffield, England. Eclipse also
announced that it would be relocating the remaining elements of its business to
the group's Sheffield, Atlas site. Provisions were made at September 30, 2006 in
respect of severance, relocation and empty property rentals and the cessation of
manufacturing and site relocation were completed by December 31, 2006. In the
quarter to March 31, 2007 further provisions of $76 were made with regard to
increases in the amounts previously provided re empty property rentals.

      (ii) Summary of Movements on Provisions in respect of the UK Manufacturing
and Reorganization Program

         A noted above, in January 2006 the company announced the closure of the
remaining element of its manufacturing site at Wednesbury, England. With effect
from November 30, 2006 all warehouse and distribution operations performed at
this operation were transferred to the Company's principal UK manufacturing site
in Sheffield. The manufacturing and assembly functions formerly carried out at
this site have now been out sourced to suppliers based outside the UK. Provision
for the costs of closure, including employee severance costs, site closure
expenses, factory reorganization expenses, and plant transfer costs were made in
the quarter ended March 31, 2006.

                                       12
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 11 - MANUFACTURING AND OTHER REORGANIZATION COSTS - CONTINUED

         In addition to the above, in the quarter ended June 30, 2006, the
Company announced that certain manufacturing operations carried out at its Atlas
site in Sheffield would also cease. Provision for employee severance and
reorganization costs in respect of the closure of these manufacturing operations
were made in that quarter.

         As mentioned above, on August 11, 2006, The Company's UK subsidiary,
Eclipse Magnetics Limited ("Eclipse"), announced the cessation of certain
manufacturing activities at its site in Sheffield, England. Eclipse also
announced that it would be relocating the remaining elements of its business to
the Sheffield, Atlas site. The cessation of manufacturing and site relocation
were completed by December 31, 2006 and provisions were made at September 30,
2006 in respect of severance, relocation and empty property rentals.

         The Wednesbury site closure, the production rationalization at Atlas
and the restructuring at Eclipse form part of the Company's UK manufacturing
reorganization program which has been initiated to regenerate and modernize key
areas of the hand and garden tools business. The closures will enable the
Company to consolidate its two UK hand and garden tool manufacturing sites and
will allow the Company to develop a modern manufacturing, warehouse and
distribution facility which will be well placed to meet the current and future
needs of its customers.

         As at September 30, 2006 provisions of $3,730 were included within
accrued expenses and other liabilities as follows:

         (a)      $1,387 was provided for in respect of severance, site closure
                  costs and factory reorganization costs in relation to the
                  Wednesbury site closure and Atlas reorganization.

         (b)      $299 was provided in respect of severance costs relating to
                  the cessation of certain manufacturing activities at Eclipse
                  and costs in connection with the relocation of its remaining
                  business to the Atlas site.

         (c)      The Company also had a further provision of $2,044 in respect
                  of other UK manufacturing reorganization costs that was set up
                  in previous years.

Additionally, asset impairments write-downs of $1,767 were made at September 30,
2006 in respect of plant and machinery at the restructured operations.

         The movements in the provisions balance between October 1, 2006 and
March 31, 2007 are as follows:

Included in Accrued Expenses and Other Liabilities:
<TABLE>
<CAPTION>
                                AT SEPTEMBER 30,                                                       AT MARCH 31,
                                ----------------      EXCHANGE          AMOUNTS          AMOUNTS      --------------
                                      2006            MOVEMENTS        PROVIDED       PAID/UTILISED        2007
                                ----------------   --------------   --------------   --------------   --------------
                                 (IN THOUSANDS)    (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                             <C>                <C>              <C>              <C>              <C>
Other UK reorganization costs              2,044              100               74             (176)           2,042
Wednesbury / Atlas costs ....              1,387               43              (17)          (1,232)             181
Eclipse move ................                299               15                -             (292)              22
                                ----------------   --------------   --------------   --------------   --------------
                                $          3,730   $          158   $           57   $       (1,700)  $        2,245
                                ================   ==============   ==============   ==============   ==============

Included in Property, Plant
   and Equipment:

Asset impairments ...........   $          1,767   $           87   $          (47)  $         (446)  $        1,361
                                ================   ==============   ==============   ==============   ==============

Total .......................   $          5,497   $          245   $           10   $       (2,146)  $        3,606
                                ================   ==============   ==============   ==============   ==============
</TABLE>

                                       13
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 11 - MANUFACTURING AND OTHER REORGANIZATION COSTS - CONTINUED

         The movements in the provisions balance between January 1, 2007 and
March 31, 2007 are as follows:

(a) Included in Accrued Expenses and Other Liabilities:
<TABLE>
<CAPTION>
                                 AT DECEMBER 31,                                                       AT MARCH 31,
                                ----------------      EXCHANGE          AMOUNTS          AMOUNTS      --------------
                                      2006            MOVEMENTS        PROVIDED       PAID/UTILISED        2007
                                ----------------   --------------   --------------   --------------   --------------
                                 (IN THOUSANDS)    (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                             <C>                <C>              <C>              <C>              <C>
Other UK reorganization costs              2,057                3               74              (92)           2,042
Wednesbury / Atlas costs ....                327               (2)              61             (205)             181
Eclipse move ................                112                -                -              (90)              22
                                ----------------   --------------   --------------   --------------   --------------
                                $          2,496   $            1   $          135   $         (387)  $        2,245
                                ================   ==============   ==============   ==============   ==============

(b) Included in Property,
    Plant and Equipment:

Asset impairments ...........   $          1,575   $            3   $          (47)  $         (170)  $        1,361
                                ================   ==============   ==============   ==============   ==============

Total .......................   $          4,071   $            4   $           88   $         (557)  $        3,606
                                ================   ==============   ==============   ==============   ==============
</TABLE>

NOTE 12 - INCOME TAXES

         Spear & Jackson is subject to income taxes in the US and in the other
overseas tax jurisdictions where its principal trading subsidiaries operate. The
(provision)/ benefit for US and foreign income taxes arising on its continuing
operations consists of:
<TABLE>
<CAPTION>
                               FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                               MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,
                                 2007             2006             2007             2006
                            --------------   --------------   --------------   --------------
                            (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                         <C>              <C>              <C>              <C>
Current tax charge ......   $          (45)  $         (103)  $          (95)  $         (253)
Deferred tax credit .....                -                -                -              566
                            --------------   --------------   --------------   --------------
                            $          (45)  $         (103)  $          (95)  $          313
                            ==============   ==============   ==============   ==============
</TABLE>

         A reconciliation of the net (provision) benefit for income taxes
compared with the amounts arising at the US federal rate is as follows:
<TABLE>
<CAPTION>
                                                        FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                                                        MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,
                                                          2007             2006             2007             2006
                                                     --------------   --------------   --------------   --------------
                                                     (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                                                  <C>              <C>              <C>              <C>
Tax at US federal statutory income tax rate ......   $         (207)  $          708   $          247   $        1,441
Overseas tax at  rates different to effective rate               59             (189)              17             (336)
Adjustment to prior year overseas tax provisions .                -                -                -              (89)
Gain on sale of UK property covered by losses
   brought forward ...............................               67                -               67                -
Permanent differences ............................              (52)             (36)             (92)             (72)
Valuation allowance ..............................               88             (586)            (334)            (631)
                                                     --------------   --------------   --------------   --------------
                                                     $          (45)  $         (103)  $          (95)  $          313
                                                     ==============   ==============   ==============   ==============
</TABLE>

                                       14
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 12 - INCOME TAXES - CONTINUED

         The Company follows the provisions of SFAS No. 109, "Accounting for
Income Taxes", which requires the Company to recognize deferred tax liabilities
and assets for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns using the
liability method. Under this method, deferred tax liabilities and assets are
determined based on the temporary differences between the financial statement
carrying amounts and tax bases of assets and liabilities using enacted rates in
effect in the years in which the differences are expected to reverse.

         Deferred income tax expense or benefit is based on the changes in the
asset or liability from period to period. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
The Company reviews the recoverability of its deferred tax assets and, based on
such periodic reviews, the Company could recognize a change in the valuation
allowance relating to its deferred tax assets in the future should, for example,
estimates of forecast taxable income be reduced or other favorable or adverse
events occur.

         In the six month period ended March 31, 2007, the potential income tax
benefit relating to the Company's U.S. and non-U.S. subsidiary losses arising in
the period has been offset by a valuation allowance. In assessing the Company's
ability to realize its deferred tax assets, management considered the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax
and other strategic planning initiatives. Future reversal of the valuation
allowance will be achieved either when the tax benefit is realized or when it
has been determined that it is more likely than not that the benefit will be
realized through offset against future taxable income.

         The majority of the Group's deferred tax asset relates to timing
differences originating in its UK subsidiaries. Such deferred tax balances have
been provided at 30%. Legislation currently awaiting government approval will
reduce the rate to 28% from April 1, 2008 onwards. If this new tax legislation
had been formally enacted, the effect on the Group' condensed consolidated
financial statements for the six months ended March 31, 2007 would have been as
follows:

         (i)      The income tax provision would have been reduced by $165
                  resulting in an income tax benefit for the period of $70.

         (ii)     The deferred tax asset of $17,577 would reduce by $1,168 to
                  $16,409.

         (iii)    The net of tax minimum pension liability adjustment of $46,660
                  would increase by $1,333 to $47,993.

                                       15
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 13 - COMPREHENSIVE INCOME

         Comprehensive income represents net income and other revenues,
expenses, gains and losses that are excluded from net income and recognized
directly as a component of stockholder's equity. Comprehensive income and its
components comprise the following:
<TABLE>
<CAPTION>
                                                 FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED
                                                 MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,
                                                   2007             2006             2007             2006
                                              --------------   --------------   --------------   --------------
                                              (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                                           <C>              <C>              <C>              <C>
Net income (loss) .........................   $          548   $       (2,127)  $         (801)  $       (3,806)

Other comprehensive income (loss)

   Additional minimum pension liability ...             (100)            (445)          (2,213)             849
   Foreign currency translation adjustments              391              434            3,558           (1,546)
   Unrealized gains (losses) on derivative
      instruments .........................                7               24               (6)              38
                                              --------------   --------------   --------------   --------------
Total comprehensive income (loss) .........   $          846   $       (2,114)  $          538   $       (4,465)
                                              ==============   ==============   ==============   ==============
</TABLE>

NOTE 14 - SEGMENT DATA

         The Company's principal operations relate to the manufacture and
distribution of a broad line of hand tools, lawn and garden tools, industrial
magnets and metrology tools. These operations are conducted through business
divisions located primarily in the United Kingdom, France, the Netherlands, USA,
Australasia and China.

         Given below are summaries of the significant accounts and balances by
business segment and by geographical location, reconciled to the consolidated
totals. In both periods, transactions and balances applicable to the Company's
distribution companies in France, Australia and New Zealand have been aggregated
with the hand and garden product businesses since these products represent the
most significant proportion of the distribution companies' trades. Those
transactions relating to the Company's distribution entities in the Netherlands
and China have been included in the Metrology division disclosures. The
summaries also provide an analysis of the accounts and balances between
continuing and discontinued operations.

         The financial information of the segments is regularly evaluated by the
corporate operating executives in determining resource allocation and assessing
performance and is reviewed by the Company's Board of Directors.

         The Company's senior management evaluates the performance of each
business segment based on its operating results and, other than general
corporate expenses, allocates specific corporate overhead to each segment.
Accounting policies for the segments are the same as those for the Company.

                                       16
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 14 - SEGMENT DATA - CONTINUED

         The following is a summary of the significant accounts and balances (in
thousands) by business segment, reconciled to the consolidated totals.
<TABLE>
<CAPTION>
                                     SALES           LONG-LIVED ASSETS (a)             SALES            LONG-LIVED ASSETS (a)
                            --------------------    -----------------------   -----------------------   ---------------------
                              THREE MONTHS ENDED              AT                 SIX MONTHS ENDED                AT
                            MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,     MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,
                              2007        2006         2007        2006          2007         2006        2007        2006
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>
Hand & garden tools .....  $   20,807  $   20,795   $    3,583  $     5,003   $   38,296  $    37,053   $   3,583  $    5,003
Metrology tools .........       5,528       4,203        3,091        2,825        9,904        8,624       3,091       2,825
Magnetic products .......       2,837       2,809          368          244        5,785        5,411         368         244
Corporate ...............           -           -       10,009        9,110            -            -      10,009       9,110
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
  Total .................  $   29,172  $   27,807   $   17,051  $    17,182   $   53,985  $    51,088   $  17,051  $   17,182
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========
Attributable to:
  Continuing operations .  $   29,172  $   27,572   $   17,051  $    17,182   $   53,985  $    50,498   $  17,051  $   17,182
  Discontinued operations  $        -  $      235   $        -  $         -   $        -  $       590   $       -  $        -
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
                           $   29,172  $   27,807   $   17,051  $    17,182   $   53,985  $    51,088   $  17,051  $   17,182
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

<CAPTION>
                                DEPRECIATION        CAPITAL EXPENDITURE (b)        DEPRECIATION         CAPITAL EXPENDITURE(b)
                           ----------------------   -----------------------   -----------------------   ----------------------
                             THREE MONTHS ENDED       THREE MONTHS ENDED         SIX MONTHS ENDED          SIX MONTHS ENDED
                            MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,     MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,
                              2007        2006         2007        2006          2007         2006         2007       2006
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>
Hand & garden tools .....  $      267  $      356   $    1,102  $       175   $      592  $       734   $   1,331  $      538
Metrology tools .........          83          14          130          327          174           99         157         537
Magnetic products .......          (7)         69          160            -           60          150         280           7
Corporate ...............          57          51            -            -          111          101           -           -
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
  Total .................  $      400  $      490   $    1,392  $       502   $      937  $     1,084   $   1,768  $    1,082
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========
Attributable to:
  Continuing operations .  $      400  $      490   $    1,392  $       502   $      937  $     1,084   $   1,768  $    1,082
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

<CAPTION>
                           OPERATING INCOME(LOSS)        NET INTEREST         OPERATING (LOSS) INCOME       NET INTEREST
                           ----------------------   -----------------------   -----------------------   ---------------------
                             THREE MONTHS ENDED       THREE MONTHS ENDED        SIX MONTHS ENDED          SIX MONTHS ENDED
                            MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,     MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,
                              2007        2006         2007        2006          2007         2006         2007       2006
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>
Hand & garden tools .....  $      221  $   (1,534)  $      (38) $         2   $   (1,206) $    (3,762)  $     (81) $      (36)
Metrology tools .........         578         217            3           (3)         904          612          (8)        (13)
Magnetic products .......          13         119           (3)          (1)         206          195          (4)         (3)
Corporate ...............        (355)       (905)          56           44         (793)      (1,251)        118          65
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
  Total .................  $      457  $   (2,103)  $       18  $        42   $     (889) $    (4,206)  $      25  $       13
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========
Attributable to:
  Continuing operations .  $      457  $   (2,039)  $       18  $        42   $     (889) $    (4,128)  $      25  $       13
  Discontinued operations  $        -  $      (64)  $        -  $         -   $        -  $       (78)  $       -  $        -
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
                           $      457  $   (2,103)  $       18  $        42   $     (889) $    (4,206)  $      25  $       13
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========
</TABLE>
(a)   Represents property, plant and equipment, net.

(b)   Capital expenditure for the three months to March 31, 2007 includes $616
      (2006- $124) in respect of assets under finance leases. Capital
      expenditure or for the six months to March 31, 2007 includes $905 (2006-
      $444) in respect of assets under finance leases.

                                       17
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 14 - SEGMENT DATA - CONTINUED

The following table presents certain data by geographic areas (in thousands):
<TABLE>
<CAPTION>
                                  SALES (a)          LONG-LIVED ASSETS (b)           SALES (a)          LONG-LIVED ASSETS (b)
                           ----------------------   -----------------------   -----------------------   ---------------------
                             THREE MONTHS ENDED               AT                  SIX MONTHS ENDED               AT
                            MARCH 31    MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31   MARCH 31
                              2007        2006         2007         2006         2007         2006         2007       2006
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>
United Kingdom ..........  $   11,446  $   12,901   $   15,106  $    15,341   $   20,963  $    22,509   $  15,106  $   15,341
Europe ..................       8,011       6,580        1,230        1,130       13,488       11,255       1,230       1,130
Australasia .............       3,711       3,334          395          411        8,238        7,067         395         411
North America ...........       2,385       1,735            -            -        4,263        3,524           -           -
China and Rest of
  World .................       3,619       3,257          320          300        7,033        6,733         320         300
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
  Total .................  $   29,172  $   27,807   $   17,051  $    17,182   $   53,985  $    51,088   $  17,051  $   17,182
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========
Attributable to:
  Continuing operations .  $   29,172  $   27,572   $   17,051  $    17,182   $   53,985  $    50,498   $  17,051  $   17,182
  Discontinued operations  $        -  $      235   $        -  $         -   $        -  $       590   $       -  $        -
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
                           $   29,172  $   27,807   $   17,051  $    17,182   $   53,985  $    51,088   $  17,051  $   17,182
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

<CAPTION>
                                DEPRECIATION        CAPITAL EXPENDITURE (c)        DEPRECIATION         CAPITAL EXPENDITURE(c)
                           ----------------------   -----------------------   -----------------------   ---------------------
                             THREE MONTHS ENDED        THREE MONTHS ENDED         SIX MONTHS ENDED         SIX MONTHS ENDED
                            MARCH 31    MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31   MARCH 31
                              2007        2006         2007         2006         2007         2006         2007       2006
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>
United Kingdom ..........  $      218  $      403   $    1,169  $       359   $      651  $       902   $   1,490  $      849
Europe ..................         109          36          171            7          148           73         195          34
Australasia .............          61          48           29           20          116          106          60          20
China and Rest of
  World .................          12           3           23          116           22            3          23         179
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
  Total .................  $      400  $      490   $    1,392  $       502   $      937  $     1,084   $   1,768  $    1,082
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========
Attributable to:
  Continuing operations .  $      400  $      490   $    1,392  $       502   $      937  $     1,084   $   1,768  $    1,082
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

<CAPTION>
                           OPERATING INCOME (LOSS)        NET INTEREST        OPERATING (LOSS) INCOME       NET INTEREST
                           ----------------------   -----------------------   -----------------------   ---------------------
                             THREE MONTHS ENDED        THREE MONTHS ENDED         SIX MONTHS ENDED         SIX MONTHS ENDED
                            MARCH 31    MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31   MARCH 31
                              2007        2006         2007         2006         2007         2006         2007       2006
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>
United Kingdom ..........  $       89  $   (2,242)  $       26  $        (9)  $   (1,172) $    (4,177)  $      39  $      (32)
Europe ..................         600         399          (49)          (4)         489          360         (91)        (42)
Australasia .............         (26)        (11)          20           13          142          (15)         40          25
North America ...........         (69)       (137)          15           42         (162)        (250)         31          62
China and Rest of
  World .................        (137)       (112)           6            -         (186)        (124)          6           -
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
  Total .................  $      457  $   (2,103)  $       18  $        42   $     (889) $    (4,206)  $      25  $       13
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========
Attributable to:
  Continuing operations .  $      457  $   (2,039)  $       18  $        42   $     (889) $    (4,128)  $      25  $       13
  Discontinued operations  $        -  $      (64)  $        -  $         -   $        -  $       (78)  $       -  $        -
                           ----------  ----------   ----------  -----------   ----------  -----------   ---------  ----------
                           $      457  $   (2,103)  $       18  $        42   $     (889) $    (4,206)  $      25  $       13
                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========
</TABLE>
(a)   Sales are attributed to geographic areas based on the location of the
      customers.

(b)   Represents property, plant and equipment, net.

(c)   Capital expenditure for the three months to March 31, 2007 includes $616
      (2006- $124) in respect of assets under finance leases. Capital
      expenditure or for the six months to March 31, 2007 includes $905
      (2006-$444) in respect of assets under finance leases.

                                       18
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 15 - LEGAL PROCEEDINGS

         On April 15, 2004, the US Securities and Exchange Commission filed suit
in the U.S. District Court for the Southern District of Florida against the
Company and Mr. Dennis Crowley, its then current Chief Executive
Officer/Chairman, among others, alleging violations of the federal securities
laws. Specifically with regard to the Company, the SEC alleged that the Company
violated the SEC's registration, anti-fraud and reporting provisions. These
allegations arise from the alleged failure of Mr. Crowley to accurately report
his ownership of the Company's stock, and his alleged manipulation of the price
of the Company's stock through dissemination of false information, allowing him
to profit from sales of stock through nominee accounts. On May 10, 2004, the
Company consented to the entry of a preliminary injunction, without admitting or
denying the allegations of the SEC complaint. The SEC is continuing its
investigation into pension issues. The Company is offering its full cooperation.

         As a further measure, the Court appointed a Corporate Monitor to
oversee the Company's operations. In addition to Mr. Crowley consenting to a
preliminary injunction the Court's order also temporarily barred Mr. Crowley
from service as an officer or director of a public company, and prohibited him
from voting or disposing of Company stock. Although Soneet Kapila has continued
to serve as Corporate Monitor for the Company, on January 10, 2007, he applied
to the Court to terminate the role of Corporate Monitor having determined that
his function was no longer necessary. As discussed below, on January 22, 2007
the Court entered the order to relieve the Corporate Monitor of his duties.

         Following Mr. Crowley's suspension the Board appointed Mr. J.R.
Harrington, a member of its Board of Directors, to serve as the Company's
interim Chairman. Mr. William Fletcher, a fellow member of the Company's Board
of Directors, who, until October 27, 2004, was the Company's Chief Financial
Officer, and who is a director of Spear & Jackson plc, based in Sheffield, UK,
is serving as acting Chief Executive Officer. Following extensive settlement
negotiations with the SEC and Mr. Crowley, the Company reached a resolution with
both parties. On September 28, 2004, Mr. Crowley signed a Consent to Final
Judgment of Permanent Judgment with the SEC, without admitting or denying the
allegations included in the complaint, which required a disgorgement and payment
of civil penalties by Mr. Crowley consisting of a disgorgement payment of
$3,765,777 plus prejudgment interest in the amount of $304,014, as well as
payment of a civil penalty in the amount of $2,000,000. In May 2005, the SEC
applied to the Court for the appointment of an administrator for the
distribution of these funds as well as funds collected from co-defendants
International Media Solutions, Inc., Yolanda Velazquez and Kermit Silva who are
not affiliated with the Company, to the victims of their actions, pursuant to
the Fair Funds provisions of the Sarbanes-Oxley Act of 2002.

         On November 18, 2004, the Company signed a Consent to Final Judgment of
Permanent Injunction with the SEC pursuant to which the Company, without
admitting or denying the allegations included in the Complaint filed by the
Commission, consented to a permanent injunction from violation of various
sections and rules under the Securities Act of 1933 and the Securities Exchange
Act of 1934. No disgorgement or civil penalties were sought from, or ordered to
be paid by, the Company.

         Additionally, the Company entered into a Stock Purchase Agreement with
PNC Tool Holdings LLC ("PNC") and Mr. Crowley, the sole member of PNC. Under the
Stock Purchase Agreement, the Company acquired, for $100, and other good and
valuable consideration, 6,005,561 common shares of the Company held by PNC,
which represented approximately 51.1% of the outstanding common shares of the
Company at December 31, 2004, and which constituted 100% of the common stock
held by such entity. The parties also executed general releases in favor of each
other subject to the fulfillment of the conditions of the Stock Purchase
Agreement. The Stock Purchase Agreement was effected on April 8, 2005, following
formal approval by the SEC on February 10, 2005 and, on February 15, 2005 by the
U.S. District Court for the Southern District of Florida of the settlement of
the litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc.,
International Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case
No: 04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further
conditioned on, among other things, the disgorgement and civil penalty funds
being paid by Mr. Crowley. These monies have now been received and are being
administered for the benefit of the victims of the alleged fraud by a court
appointed administrator pursuant to the Fair Funds provision of the
Sarbanes-Oxley Act of 2002.

                                       19
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 15 - LEGAL PROCEEDINGS - CONTINUED.

         With the return of the Spear & Jackson shares to the Company by PNC,
the stockholders of the Company have had their percentage stock interest
increase correspondingly. Jacuzzi Brands, Inc. ("Jacuzzi"), which is a
beneficial owner of 3,543,281 shares of common stock, had its interest in the
Company increased to approximately 61.8% of the outstanding common stock.

         Subsequent to the SEC action a number of class action lawsuits were
initiated in the U.S. District Court for the Southern District of Florida by
Company stockholders against the Company, Sherb & Co. LLP, the Company's former
independent auditor, and certain of the Company's directors and officers,
including Mr. Crowley, the Company's former Chief Executive Officer/Chairman,
and Mr. Fletcher, the Company's former CFO and current acting Chief Executive
Officer. These suits alleged essentially the same claims as the SEC suit
discussed above.

         These various class action suits were subsequently consolidated.
Thereafter, the defendants filed certain Motions to Dismiss with regard to the
Complaint and on October 19, 2005, the U.S. District Court for the Southern
District of Florida in Re Spear & Jackson Securities Litigation entered its
Order regarding these Motions. The Order denied the Company's motion as well as
that of Mr. Crowley, the former Chief Executive Officer of Spear & Jackson. The
Court granted the Motion to Dismiss on behalf of Mr. Fletcher, the Company's
interim Chief Executive Officer, and also granted the Motion to Dismiss on
behalf of the Company's former independent auditor, Sherb & Co., LLP. The class
plaintiff has subsequently filed an appeal regarding the trial court's decision
to dismiss the case against Sherb & Co., LLP, which appeal is presently pending.
No appeal was filed with respect to the decision to dismiss the case against Mr.
Fletcher.

         On July 7, 2006 the Company, Dennis Crowley and the Class Plaintiff
reached a Memorandum of Understanding ("MOU") which confirmed that the
plaintiffs, the Company and Dennis Crowley had reached an agreement in principle
for the settlement of this litigation, subject to Court approval. According to
the terms of the MOU, the Company deposited $650,000 into a Qualified Settlement
Fund, for disbursement to the Settlement Class pending approval of the Court.
Subsequent to this Sherb & Co. also agreed to the terms of the Settlement
agreeing to contribute an additional $125,000.

         On November 9, 2006, the Stipulation of Settlement was filed with the
Court for preliminary approval. On January 31, 2007, the Court entered its Order
Preliminarily Approving Settlement and Providing for Notice and Setting Class
Action Statutory Settlement Hearing. The Order, for purposes of the proposed
settlement certified a "Settlement Class" of persons (with certain exceptions)
who purchased the Company's common stock between February 1, 2002 and April 15,
2004. The Order also approved as to form and content the Notice of Pendency and
Proposed Settlement of Class Action and Summary Notice. The Settlement Hearing
was set for May 11, 2007 at 11:30 a.m. at the West Palm Beach, Florida Federal
District Courthouse to determine whether the terms of the Settlement are fair,
just reasonable and adequate to the Settlement Class, and should be approved by
the Court; whether a final judgment should be entered dismissing the litigation;
whether the proposed plan of allocation should be approved; and to determine the
amount of fees and expenses to be awarded to plaintiffs' lead counsel. The Order
also appointed a claims administrator and provided for notice to those who
sought exclusion from the Settlement Class.

         On May 11, 2007, the U.S. District Court for the Southern District of
Florida, sitting in West Palm Beach Florida, heard the Plaintiff's motion for
Final Approval of the Class Action Settlement and Plan of Allocation, to which
there were no objectors or class members that opted out of, the settlement. On
May 14, 2007, the Court signed the Final Judgment thus forever extinguishing all
of the class claims against the Company, and barring any claims for contribution
by third parties. The Final Judgment made clear that the settlement was not an
admission of wrongdoing or liability by the Company.

         To facilitate the distribution of the funds from the class suit to the
class shareholders and keep administrative costs to a minimum, the SEC Claim's
Administrator applied to the Court on January 9, 2007 for permission to combine
the class action funds with the funds derived in the SEC litigation, and allow
for the SEC's Claim's Administrator to disburse the collective funds.

                                       20
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                          (IN THOUSANDS EXCEPT SHARES)

NOTE 15 - LEGAL PROCEEDINGS - CONTINUED.

         On September 6, 2005, the Company was served with a Shareholder
Derivative Complaint, Hapka v. Crowley, et al. Case No: CA005068, filed on June
1, 2004 in the Circuit Court for Palm Beach County, Florida. The suit names the
Company as nominal defendant. Also named as defendants were former directors,
Robert Dinerman, William Fletcher and John Harrington, in addition to Dennis
Crowley and the Company's prior independent auditors, Sherb & Co. LLP. The suit
contains essentially the same factual allegations as the SEC suit, which was
filed in April 2004 in the U. S. District Court for the Southern District of
Florida, and the series of class actions claims initiated in the U.S. District
Court, but additionally alleges state law claims of breaches of fiduciary duty,
abuse of control, gross mismanagement, waste of corporate assets, unjust
enrichment and lack of reasonable care by various or all the defendants.

         Due to ongoing settlement discussions with the plaintiff's attorney,
the Company had not responded to the Complaint. In August 2006 the Company
entered into a settlement agreement with the plaintiff by agreeing to accept
certain changes to its corporate governance procedures and the payment of
$70,000 in legal fees. The settlement was filed with the Court in early November
2006, and if approved by the Court, will result in a dismissal of the suit and
release the Company and the former director defendants, Messrs Robert Dinerman,
William Fletcher and John Harrington. Dennis Crowley and Sherb & Co. continue as
defendants in this suit.

         On February 2, 2007, the Circuit Court entered a Preliminary Approval
Order preliminarily approving the partial settlement pursuant to the Stipulation
of Settlement between plaintiff and the Company, including its former directors
William Fletcher, John Harrington, and Robert Dinerman. The Court has set May
29, 2007 at 8a.m. at the West Palm Beach County Courthouse, for the final
Settlement Hearing to determine (i) whether the terms of the Partial Settlement
are fair, just reasonable and adequate to the derivative stockholders and to the
Company, and should be approved by the Court; (ii) whether a final judgment
should be entered dismissing the litigation and releasing the defendants Spear &
Jackson, as described in the Stipulation; and (iii) to determine the amount of
fees and expenses to be awarded to plaintiffs' counsel. The Order approved as to
form and contents the Notice of Partial Settlement and the mailing and
distribution process. The Order also provided for notice to those who sought
exclusion from the settlement.

         There can be no assurance that the Court will approve the terms of this
settlement.

         Additionally, the Company is, from time to time, subject to legal
proceedings and claims arising from the conduct of its business operations,
including litigation related to personal injury claims, customer contract
matters, employment claims and environmental matters. While it is impossible to
ascertain the ultimate legal and financial liability with respect to contingent
liabilities including lawsuits, the Company believes that the aggregate amount
of such liabilities, if any, in excess of amounts accrued or covered by
insurance, will not have a material adverse effect on the consolidated financial
position or results of operations of the Company.

NOTE 16 - SUBSEQUENT EVENTS

         On May 14, 2007, the Company issued a press release reporting that it
had received an offer letter from its majority shareholder, United Pacific
Industries Limited ("UPI"), in which UPI proposes to acquire for $1.483 per
share in cash (the "Offer") the remaining 2,192,280 outstanding shares of common
stock (the "Shares") of the Company that it does not already own.

         The Company's Board of Directors has delegated to the Finance Committee
chaired by the Company's independent director, Dr. J. Preston Jones, the
authorization to analyze, review and negotiate the Offer. The Finance Committee
will, with the assistance of financial and legal advisors, review the proposal.
The Finance Committee has not yet determined if the Offer is in the best
interests of the Company and its shareholders.

                                       21
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

GENERAL

The following information should be read in conjunction with the consolidated
financial statements and notes hereto and other information set forth in this
report.

FORWARD LOOKING STATEMENTS

This report (including the information in this discussion) contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements involve risks and uncertainties,
including statements regarding the Company's capital needs, business strategy
and expectations, and are being made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Any statements contained
herein that are not statements of historical facts may be deemed to be
forward-looking statements. Terminology such as "may", "will", "should",
"believes", "estimates", "plans", "expects", "attempts", "intends",
"anticipates", "could", "potential" or "continue", the negative of such terms,
or other comparable terminology, are intended to identify forward-looking
statements.

In evaluating any forward-looking statements, you should consider various risk
factors, including those summarized under "Risk Factors", below, and those
described in other sections of this report, in the other reports the Company
files with the SEC and in the Company's press releases. Such factors may cause
the Company's actual results to differ materially from any forward-looking
statement. The Company disclaims any obligation to publicly update the
statements, or disclose any difference between its actual results and those
reflected in the statements. With respect to all such forward-looking
statements, the Company seeks the protection afforded by the Private Securities
Litigation Reform Act of 1995.

RISK FACTORS

Historically, Spear & Jackson, Inc. ("Spear & Jackson", "the Company", "we") has
achieved growth by the development of new products, strategic acquisitions and
expansion of the Company's sales organization. There can be no assurance that
the Company will be able to continue to develop new products, effect corporate
acquisitions or expand sales to sustain rates of revenue growth and
profitability in future periods. Any future success that the Company may achieve
will depend upon many factors including factors which may be beyond the control
of the Company or which cannot be predicted at this time.

Although we believe that our expectations are based on reasonable assumptions
within the bounds of our knowledge of our business and operations, actual
results may differ materially from our expectations. Uncertainties and factors
which could cause actual results or events to differ materially from those set
forth or implied include, without limitation:

THE COMPANY IS SUBJECT TO A NUMBER OF SIGNIFICANT RISKS THAT MIGHT CAUSE THE
COMPANY'S ACTUAL SALES TO VARY MATERIALLY FROM ITS FORECASTS, TARGETS, OR
PROJECTIONS, INCLUDING:

      -  achieving planned revenue and profit growth in each of the Company's
         business units;

      -  changes in customer requirements and in the volume of sales to
         principal customers;

      -  renewal of material contracts in the Company's business units
         consistent with past experience;

      -  the timing of orders and shipments;

      -  emergence of new competitors or consolidation of existing competitors;

      -  continued absence of consolidation among key customers;

      -  industry demand fluctuations.

                                       22
<PAGE>

Our expectations for both short- and long-term future net revenues are based on
our own estimates of future demand. Orders from our principal customers are
ultimately based on demand from end-users and such prospective end-user demand
can be difficult to measure. Low end-user demand would negatively affect orders
we receive from distributors and other principal customers and this would mean
that our revenues in any fiscal period could be adversely impacted. If our
estimates of sales are not accurate and we experience unforeseen variability in
our revenues and operating results, we may be unable to adjust our expense
levels accordingly and our profit margins will be adversely affected.

A number of our products are sold through distributors and large retailers. No
assurances can be given that any or all such distributors or retailers will
continue their relationship with us. Distributors and other significant retail
customers cannot easily be replaced and the loss of revenues and our inability
to reduce expenses to compensate for the loss of revenues could adversely affect
our net revenues and profit margins.

With the growing trend toward retail trade consolidation, especially in the
developed US, European and Australasian markets, certain of our product groups
are sold to key retailers whose bargaining strength is growing. Accordingly, we
face greater pressure from such significant retail trade customers to provide
more favorable trade terms with, accordingly, the risk of margin dilution. We
can also be negatively affected by changes in the policies of our material
retail trade customers, particularly with regard to the reduction of trade
inventory levels, access to shelf space, and other conditions.

The market for certain of the Company's products is subject to economic
conditions affecting the industrial manufacturing sector, including the level of
capital spending by industrial companies and the general movement of
manufacturing to low cost foreign countries where the Company may not have a
competitive market presence. Accordingly, economic weakness in the industrial
manufacturing sector may result in decreased demand for certain of the Company's
products, which will impact negatively on the Company's trading performance.
Economic weakness in the consumer market will also have a detrimental effect on
the Company's profitability. In the event that demand for any of the Company's
products declines significantly, the Company could be required to recognize
certain costs as well as asset impairment charges on long-lived assets related
to those products.

RISKS ASSOCIATED WITH THE SUCCESSFUL AND TIMELY INTEGRATION OF ANY SIGNIFICANT
BUSINESSES ACQUIRED BY THE COMPANY AND REALIZATION OF ANTICIPATED SYNERGIES:

The Company has made, and in the future may make, acquisitions of, or
significant investments in, businesses with complementary or aligned products
and services or in new start up businesses. Acquisitions involve numerous risks,
including but not limited to: (1) diversion of management's attention from other
operational matters; (2) inability to complete acquisitions along anticipated
timescales, or at all; (3) lack of success in realizing anticipated synergies
from acquisitions and investments (4) weaknesses in acquired company's internal
controls; (5) worse-than-expected performance of the acquired company or its
product offerings; (6) unknown, underestimated and/or undisclosed commitments or
liabilities; (7) failure to integrate and retain key employees; and (8)
unsuccessful integration of operations. The Company's inability to effectively
manage these risks could materially and adversely affect the Company's business,
financial condition and results of operations.

RISKS ASSOCIATED WITH MAJORITY STOCKHOLDER

As detailed in the footnotes to the consolidated financial statements, on July
28, 2006, the Company's majority stockholder, Jacuzzi Brands, Inc. ("Jacuzzi"),
completed the sale of its 61.8% stockholding in Spear & Jackson, Inc. to United
Pacific Industries Limited, a Bermuda corporation, and its wholly-owned
subsidiary Pantene Global Holdings Limited (collectively, "UPI"). This change in
ownership and control of the Company may have a significant impact on its future
strategy, the way that it conducts its operations and the size and composition
of its earnings and net assets, since UPI can influence substantially all
matters requiring stockholder approval by simple majority in excess of 50%,
including the election of directors, the approval of significant corporate
transactions, such as acquisitions, the ability to block an unsolicited tender
offer and any other matter requiring a vote of shareholders.

                                       23
<PAGE>

Additionally, based on its majority ownership, UPI is in position to complete a
merger or other transaction involving the Company, subject to compliance with
applicable regulatory requirements, which could result in the elimination of
minority stockholders. UPI paid Jacuzzi $1.40 per share for its shares of common
stock of the Company. UPI has agreed that for a one-year period following the
closing of its acquisition of the majority interest in the Company, should UPI
or any of its affiliates acquire any additional shares of the Company, the
purchase price per share will not be less than $1.40.

On May 14, 2007, the Company issued a press release reporting that it had
received an offer letter from UPI, in which UPI proposes to acquire for $1.483
per share in cash the remaining 2,192,280 outstanding shares of common stock of
the Company that it does not already own.

RISKS CONCERNING THE CONTINUING AVAILABILITY OF APPROPRIATE RAW MATERIALS AND
FACTORED PRODUCTS:

The Company's business units source raw materials, component parts and factored
goods from a wide range of domestic and foreign suppliers. If the business units
experience difficulties in obtaining sufficient supplies of such items as a
result of component prices becoming unreasonable, interruptions in supply due to
natural disaster, economic or political difficulties, changes in regulatory
requirements and tariffs, quarantines or other restrictions, the Company would
experience resultant delays in the shipping of its products to customers which
would have a negative impact on our revenues.

RISKS CONCERNING THE MAINTAINING AND IMPROVEMENT OF CURRENT PRODUCT MIX:

If we fail to appropriately manage our cost structure to allocate resources to
areas that will provide the best long-term benefits to our customers and
shareholders, our reporting results will be adversely affected. For instance, we
may experience unfavorable shifts in product mix or reductions in demand for a
product or products that could dilute margins or limit our ability to spread
manufacturing costs over normal levels of sales volume.

RISKS RELATING TO INCREASING PRICE, PRODUCTS AND SERVICES COMPETITION:

The markets for our products are characterized by intense competition and
pricing pressures. We compete with businesses having substantially greater
financial, research and development, manufacturing, marketing, and other
resources. If we are not able to continually design, manufacture, and
successfully introduce new or enhanced products or services that are comparable
or superior to those provided by our competitors and at comparable or better
prices, we could experience pricing pressures and reduced sales, profit margins,
profits, and market share, each of which could have a materially adverse effect
on the Company's sales and margins.

RISKS IN CONNECTION WITH CHANGES IN COMPANY INVENTORY LEVELS:

Our inventory is subject to risks of changes in market demand for particular
products. Our inability to obtain critical parts and supplies or any resulting
excess and/or obsolete inventory could have an adverse impact on our results of
operations.

RISKS CONCERNING THE TIMELY IMPLEMENTATION OF THE COMPANY'S RESTRUCTURING
PROGRAMS AND FINANCIAL PLANS:

The Company continues to evaluate plans to consolidate and reorganize some of
its manufacturing and distribution operations. There can be no assurance that
the Company will be successful in these efforts or that any consolidation or
reorganization will result in revenue increases or cost savings to the Company.
The implementation of these reorganization measures may disrupt the Company's
manufacturing and distribution activities, could adversely affect operations,
and could result in asset impairment charges and other costs that will be
recognized if and as these reorganization or restructuring plans are implemented
or the related obligations are incurred.

RISKS INHERENT IN OUR DEPENDENCE ON INTERNATIONAL SALES AND FOREIGN OPERATIONS:

Our principal business locations are situated in the UK, France, the
Netherlands, Australasia and China and we generate sales from many areas of the
world involving transactions denominated in a variety of currencies. The Company
is subject to currency exchange rate risk to the extent that its costs are
denominated in currencies other than those in which its revenues are derived. In
addition, since our financial statements are denominated in U.S. dollars,
changes in currency exchange rates between the U.S. dollar and other currencies
have had, and will continue to have, an impact on our earnings and net assets.
Accordingly, we cannot be certain that currency exchange rate fluctuations will
not adversely affect our future results of operations and financial condition.

                                       24
<PAGE>

As explained above, a significant proportion of sales are made by our
businesses, particularly those in the UK, into foreign export markets. We
anticipate that the portion of our total revenue from international sales will
continue to increase as we further enhance our focus on developing new products,
establishing new business partners and strengthening our presence in key growth
areas. These overseas interests will therefore be subject to various financial
and operating risks that arise from conducting business internationally,
including:

      -  unexpected changes in, or the imposition of, additional legislative or
         regulatory requirements in the various geographical regions where the
         Company operates ;

      -  fluctuating exchange rates;

      -  tariffs and other barriers;

      -  difficulties in staffing and managing foreign sales operations;

      -  import and export restrictions;

      -  greater difficulties in accounts receivable collection and longer
         payment cycles;

      -  potentially adverse tax consequences;

      -  potential hostilities and changes in diplomatic and trade
         relationships.

RISKS CONCERNING THE CONTINUING DEVELOPMENT AND MAINTENANCE OF APPROPRIATE
BUSINESS CONTINUITY PLANS FOR THE COMPANY'S PROCESSING SYSTEMS:

Our results could be adversely affected if we are unable to implement
improvements in our reporting systems without significant interruptions in our
accounting, order entry, billing, manufacturing and other customer support IT
functions.

Additionally, should employee time and advisory costs to be incurred in respect
of compliance with Section 404 of the Sarbanes-Oxley Act 2002 be higher than
management's expectations, this may also have a negative impact on Company
earnings.

RISKS IN CONNECTION WITH ATTRACTING AND RETAINING QUALIFIED KEY EMPLOYEES:

The success of the Company's efforts to grow its business depends on the
contributions and abilities of key executive and operating officers and other
personnel. The Company must therefore continue to recruit, retain and motivate
management and operating personnel sufficient to maintain its current business
and support its projected growth. A shortage of these key employees might
jeopardize the Company's ability to meet its growth targets.

RISKS RELATING TO MATERIAL BREACHES OF SECURITY OF ANY OF THE COMPANY'S SYSTEMS:

The Company's management is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over
financial reporting is a process to provide reasonable assurance regarding the
reliability of financial reporting for external purposes in accordance with
accounting principles generally accepted in the United States of America.
Internal control over financial reporting includes: maintaining records that in
reasonable detail accurately and fairly reflect the Company's transactions;
providing reasonable assurance that transactions are recorded as necessary for
preparation of the financial statements; providing reasonable assurance that
receipts and expenditures of the Company's assets are made in accordance with
management authorization; and providing reasonable assurance that unauthorized
acquisition, use or disposition of the Company assets that could have a material
effect on the financial statements would be prevented or detected on a timely
basis. Because of its inherent limitations, internal control over financial
reporting is not intended to provide absolute assurance that a misstatement of
the Company's financial statements would be prevented or detected. Any failure
to maintain an effective system of internal control over financial reporting
could limit the Company's ability to report its financial results accurately and
timely or to detect and prevent fraud.

                                       25
<PAGE>

RISKS CONCERNING SIGNIFICANT INCREASES IN THE COST OF PROVIDING PENSION BENEFITS
TO EMPLOYEES AND RETIREES:

The Company has a defined benefit pension plan ("The Pension Plan", "The Plan")
covering certain of its UK employees, former employees and retirees. The Pension
Plan assets are invested primarily in equity securities and fixed-income
government and corporate securities. At present, the Pension Plan has pension
liabilities that exceed its assets. Under applicable law, we are required to
make cash contributions to an under funded pension plan to the extent necessary
to comply with minimum funding requirements imposed by regulatory demands. The
amount of such cash contributions is based on an actuarial valuation of the
Plan.

A number of statistical and other factors which attempt to anticipate future
events are used by the actuaries in calculating the expense and liability
related to the Plan. These factors include assumptions about the discount rate,
expected return on plan assets and rate of future compensation increases as
determined by us, within certain guidelines, and in conjunction with our
actuarial consultants and auditors. Our actuarial consultants also use
subjective factors such as withdrawal and mortality rates to estimate the
expense and liability related to the Plans. The actuarial assumptions used by us
may differ significantly, either favorably or unfavorably, from actual results
due to changing market and economic conditions, higher or lower withdrawal rates
or longer or shorter life spans of participants.

The funding status of the Plan can therefore alter as a result of changes in the
actuarial assumptions used, changes in market conditions and a number of other
factors. We cannot provide assurance that the value of the Pension Plan assets,
or the investment returns on those Plan assets, will continue to be sufficient
in the future. It is therefore possible that we may be required to make
significant additional cash contributions to the Plan which would reduce the
cash available for other business requirements, or that we will have to
recognize a significant pension liability adjustment which would decrease the
net assets of the Company.

RISKS RELATED TO RAW MATERIAL AND ENERGY COSTS:

The prices of many of the Company's raw materials vary with market conditions.
In addition, the price of many of the Company's finished goods that are sourced
from overseas' suppliers are impacted by changes in currency rates, freight
costs and raw materials at the point of production.

We purchase the majority of our raw materials for our products on the open
market and we also rely on third parties for the sourcing of certain finished
goods and component parts and assemblies. Accordingly, our cost of products may
be affected by changes in the market price of raw materials, sourced components
or finished goods.

Gas, electricity and other utility prices have become increasingly volatile in
the UK, where we have a significant manufacturing presence. This situation has
been exacerbated by price increases for certain of our raw materials,
particularly steel, cobalt, nickel and plastics. For example, the movements on
cobalt and nickel prices since September 30, 2006 have been as follows:

Cobalt : September 30, 2006 $18/1lb
         March 31, 2007, $30/1lb
         Increase 67%

Nickel : September 30, 2006 $32,250 /tonne
         March 31, 2007, $52,400/ tonne
         Increase 62%

We do not generally engage in commodity hedging transactions for raw materials.

Significant increases in the prices of raw materials, sourced components,
finished goods or other commodities could require us to increase the prices of
our products, which may reduce consumer demand for our products or make us more
susceptible to competition. The Company's ability to pass these increases on to
its customers varies depending on the product line and the rate and magnitude of
any increase. There may be periods of time during which increases in these costs
cannot be recovered and our profitability will be adversely affected.

RISKS ASSOCIATED WITH FOREIGN SUPPLIERS:

We purchase a growing portion of our products from foreign suppliers based in
India and the Far East. In line with the those risks, outlined above, associated
with our foreign operations and international selling, our use of foreign
suppliers also causes increased risk to our business due to:

                                       26
<PAGE>

      -  increases in transportation costs;

      -  new or increased import duties;

      -  transportation delays;

      -  foreign work stoppages;

      -  potential war, terrorism and political unrest;

      -  exchange rate fluctuations that could increase the cost of foreign
         manufactured goods.

RISKS CONCERNING THE CONTINUED AVAILABILITY OF FINANCING, AND FINANCIAL
RESOURCES ON THE TERMS REQUIRED TO SUPPORT THE COMPANY'S FUTURE BUSINESS
STRATEGIES:

We believe that our existing balances of cash, cash equivalents, our cash flow
from operations, and the existing credit facilities negotiated for the Company's
UK and other operations will be sufficient to meet our cash needs for working
capital and capital expenditures for at least the next 12 months. We may,
however, require additional financing to fund our operations in the future.
Although we expect existing debt financing arrangements and cash flows generated
from operating activities to be sufficient to fund operations at the current and
projected levels in the future, there is no assurance that our operating plan
will be achieved. We may need to take actions to reduce costs and to seek
alternative financing arrangements.

RISKS RELATING TO THE OUTCOME OF PENDING AND FUTURE LITIGATION AND GOVERNMENTAL
OR REGULATORY PROCEEDINGS:

As discussed in the footnotes to the condensed consolidated financial
statements, we are, and have been, involved in various pending litigation
matters arising out of main and Derivative Class Action claims and also from the
ordinary routine conduct of our business, including, from time to time,
litigation relating to such items as commercial transactions, contracts, and
environmental matters. The final outcome of such matters cannot always be
determined with certainty and such actions may therefore have a material adverse
effect on the Company's financial position and its results of operations or cash
flows.

RISKS ASSOCIATED WITH OUR ACCOUNTING POLICIES AND ESTIMATES THAT MAY HAVE A
MATERIAL EFFECT ON THE COMPANY'S FINANCIAL RESULTS:

Significant accounting policies and estimates have material effects on our
calculations and estimations of amounts in our financial statements. Our
operating results and balance sheets may be adversely affected either to the
extent that actual results prove to be adversely different from previous
accounting estimates or to the extent that accounting estimates are revised
adversely. We base our critical accounting policies, including our policies
regarding revenue recognition, reserves for returns, rebates, and bad debts,
deferred tax asset recognition, pension plan assumptions and inventory
valuation, on various estimates and subjective judgments that we may make from
time to time. The judgments made can significantly affect net income and our
balance sheets. Our judgments, estimates and assumptions are subject to change
at any time. In addition, our accounting policies may change at any time as a
result of changes in GAAP as it applies to us or changes in other circumstances
affecting us. Changes in accounting policy have affected and could further
affect, in each case materially and adversely, our results of operations or
financial position.

RISK FACTORS THAT MAY NEGATIVELY IMPACT OUR STOCK PRICE:

Our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors particular to the Company, its industry and
the markets in which it operates. Not all of these factors are in our control.
These factors may include: sales falling below anticipated levels because of the
timing of orders or weakening demand; adverse sales mixes; regional economic and
governmental conditions; raw material price volatility; profit volatility
arising from the seasonality of the garden product trade and benefits from
restructuring initiatives falling below forecast. Such factors may therefore
cause our operating results for future periods to be below the expectations of
management and the Company's advisers and this may cause a decline in the price
of our common stock.

There has been no material change in our risk factors from those described on
pages 12 to 16 in our Form 10-K for the fiscal year ended September 30, 2006.

                                       27
<PAGE>

CORPORATE ORGANISATION

Spear & Jackson, Inc. ("Spear & Jackson", the "Company" or "we") currently
conducts its business operations through its wholly owned subsidiaries, Spear &
Jackson plc and Bowers Group plc, and, until September 30, 2003, Mega Tools Ltd
and Mega Tools USA, Inc. A brief summary of our corporate organizational history
is as follows:

Incorporation of Megapro Tools, Inc.

The Company was incorporated under the name Megapro Tools, Inc., on December 17,
1998 under the laws of the State of Nevada. The Company was inactive until the
acquisition of Mega Tools Ltd and Mega Tools USA, Inc., by means of a reverse
acquisition, on September 30, 1999.

Incorporation of Mega Tools Ltd and Mega Tools USA, Inc.

Mega Tools Ltd was incorporated in British Columbia, Canada, on January 7, 1994.
Mega Tools USA Inc. was incorporated under the laws of the State of Washington
on April 18, 1994. Prior to the acquisition by Megapro Tools, Inc., Mega Tools
USA Inc. was operated as a subsidiary of Mega Tools Ltd.

The acquisition of Mega Tools Ltd and Mega Tools USA, Inc. by Megapro Tools,
Inc.

On September 30, 1999 Mega Tools Ltd was acquired from Mrs. Maria Morgan,
Envision Worldwide Products Ltd, Mr. Robert Jeffrey, Mr. Lex Hoos and Mr. Eric
Paakspuu in exchange for the issue of 6,200,000 restricted shares in the common
stock of Megapro Tools, Inc. These shares were valued at $275 for accounting
purposes, representing the total paid-in-capital of the Mega Tools Ltd shares
acquired. Mega Tools USA, Inc. was acquired from Mega Tools Ltd in exchange for
the payment of $340,000 which was satisfied by the issuance of a promissory note
to Mega Tools Ltd. The acquisition of Mega Tools USA, Inc. was completed
immediately prior to the acquisition of Mega Tools Ltd. Megapro Tools, Inc. had
no business assets prior to the acquisition of the two companies.

Prior to the acquisition of Mega Tools Ltd and Mega Tools USA, Inc., each of
Mrs. Maria Morgan, Mr. Robert Jeffery, Mr. Lex Hoos and Mr. Eric Paakspuu were
shareholders of Mega Tools Ltd. Neither Mrs. Maria Morgan, Mr. Robert Jeffery,
Mr. Lex Hoos nor Mr. Eric Paakspuu was a director or officer of Mega Tools Ltd
or Mega Tools USA and neither individual had any management role with Mega Tools
Ltd or Mega Tools USA, either before or after the acquisition. Envision
Worldwide Products Ltd owned 24.8% of the shares of Mega Tools Ltd prior to the
acquisition of this interest by Megapro Tools, Inc.

The former stockholders of Mega Tools Ltd acquired a proportionate interest in
Megapro Tools, Inc. upon completion of the acquisition of Mega Tools Ltd and
Mega Tools USA. Mr. Neil Morgan, husband of Mrs. Maria Morgan, was sole promoter
upon inception. Other than the issue of stock to Mrs. Maria Morgan upon the
acquisition of Mega Tools Ltd, Mr. Morgan did not enter into any agreement with
the Company in which he was to receive from or to provide to the company
anything of value. Mr. Neil Morgan was the legal and beneficial owner of the
interest in Mega Tools Ltd held by Mrs. Maria Morgan. Mrs. Morgan acquired the
interest previously held by Mr. Morgan on April 16, 1999. Prior to the
acquisition of Mega Tools Ltd and Mega Tools USA, Mr. Neil Morgan was the
president and chief executive officer of Megapro Tools, Inc. and each of Mega
Tools Ltd and Mega Tools USA. Mr. Morgan continued as president and CEO of
Megapro Tools, Inc. upon completion of this acquisition.

Acquisition of Spear & Jackson plc and Bowers Group plc by Megapro Tools, Inc.

On August 23, 2002, USI Mayfair Limited, a corporation organized under the laws
of England and a wholly owned subsidiary of USI Global Corp., Megapro Tools,
Inc. ("Megapro") and S and J Acquisitions Corp. (a company incorporated on
August 22, 2002 under the laws of the State of Florida and a wholly owned
subsidiary of Megapro Tools, Inc.) executed a Stock Purchase Agreement to
acquire all of the issued and outstanding shares of Spear & Jackson plc and its
affiliate, Bowers Group plc, owned by USI Mayfair Limited. The purchase price
comprised 3,543,281 shares of common stock of Megapro and promissory notes in
the principal amount of (pound)150,000 pounds sterling ($232,860) ("the
Transaction"). The Transaction closed on September 6, 2002.

                                       28
<PAGE>

Concurrently with the closing of the Transaction, and as a condition precedent
thereto, Megapro closed a Private Placement pursuant to which it agreed to issue
6,005,561 shares of the common stock of Megapro to PNC Tool Holdings, LLC, a
Nevada limited liability company ("PNC"), in consideration for $2,000,000 (the
"Private Placement"). Mr. Dennis Crowley ("Crowley"), who became CEO of the
company, was the sole owner of PNC.

In connection with the closing of the Transaction, certain principal
shareholders of Megapro, including Envision Worldwide Products, Ltd, Neil Morgan
and Maria Morgan contributed an aggregate of 4,742,820 shares of their common
stock of Megapro to the capital of Megapro, and agreed to a two-year lock-up
with respect to their remaining 192,480 shares of common stock of Megapro. The
stockholders did not receive any consideration in connection with their
contribution of shares. As a result of the closing of the Transaction and the
Private Placement, and upon the effectuation of all post closing matters,
Megapro had 12,011,122 shares of common stock outstanding, 6,005,561 shares of
which were beneficially owned by PNC. The shares issued to PNC were subject to
the terms of a Stockholder's Agreement and a Registration Rights Agreement.

In the Stockholders' Agreement dated as of September 6, 2002 by and among
Megapro Tools, Inc., USI Mayfair Limited, PNC and Crowley (the "Stockholders")
it was agreed that, other than certain "unrestricted transfers", the parties
involved would not transfer any Company securities for the two years beginning
on September 6, 2002. On September 6, 2002, under an unrestricted transfer
relating to the transfer of stock from a permitted affiliate, USI Mayfair
Limited, transferred all of the Company securities owned by it, along with all
of its rights under the Stockholders' Agreement, to USI Global Corp.

Since the date of the Transaction, the Company has not issued any shares of its
stock except under a limited number of options and has not engaged in any
financing using its stock.

Change of Name to Spear & Jackson, Inc.

On October 1, 2002, the Board of Directors unanimously executed a written
consent authorizing and recommending that the stockholders approve a proposal to
effect the change of name to Spear & Jackson, Inc. On October 2, 2002, company
stockholders holding a majority of the voting power of the Company executed a
written consent authorizing and approving the proposal to effect the name
change.

The Board believed that the new name, Spear & Jackson, Inc., would reflect the
change in business and would promote public recognition and more accurately
reflect the Company's intended business focus.

On November 7, 2002, the name of the Company was changed from Megapro Tools,
Inc. to Spear & Jackson, Inc. through the filing of a Certificate of Amendment
to the Company's Articles of Incorporation with the Secretary of State of the
State of Nevada.

Recent Regulatory Matters

On April 15, 2004, the US Securities and Exchange Commission filed suit in the
U.S. District Court for the Southern District of Florida against the Company and
Mr. Dennis Crowley, its then current Chief Executive Officer/Chairman, among
others, alleging violations of the federal securities laws. Specifically with
regard to the Company, the SEC alleged that the Company violated the SEC's
registration, anti-fraud and reporting provisions. These allegations arise from
the alleged failure of Mr. Crowley to accurately report his ownership of the
Company's stock, and his alleged manipulation of the price of the Company's
stock through dissemination of false information, allowing him to profit from
sales of stock through nominee accounts. On May 10, 2004, the Company consented
to the entry of a preliminary injunction, without admitting or denying the
allegations of the SEC complaint. The SEC is continuing its investigation into
pension issues. The Company is offering its full cooperation.

As a further measure, the Court appointed a Corporate Monitor to oversee the
Company's operations. In addition to Mr. Crowley consenting to a preliminary
injunction the Court's order also temporarily barred Mr. Crowley from service as
an officer or director of a public company, and prohibited him from voting or
disposing of Company stock.

                                       29
<PAGE>

Following Mr. Crowley's suspension the Board appointed Mr. J.R. Harrington, a
member of its Board of Directors, to serve as the Company's interim Chairman.
Mr. William Fletcher, a fellow member of the Company's Board of Directors, who,
until October 27, 2004, was the Company's Chief Financial Officer, and who is a
director of Spear & Jackson plc, based in Sheffield, was elected to serve as
acting Chief Executive Officer.

Following extensive settlement negotiations with the SEC and Mr. Crowley, the
Company reached a resolution with both parties. On September 28, 2004, Mr.
Crowley signed a Consent to Final Judgment of Permanent Judgment with the SEC,
without admitting or denying the allegations included in the complaint, which
required a disgorgement and payment of civil penalties by Mr. Crowley consisting
of a disgorgement payment of $3,765,777 plus prejudgment interest in the amount
of $304,014, as well as payment of a civil penalty in the amount of $2,000,000.
In May 2005, the SEC applied to the Court for the appointment of an
administrator for the distribution of these funds as well as funds collected
from co-defendants International Media Solutions, Inc., Yolanda Velazquez and
Kermit Silva who are not affiliated with the Company, to the victims of their
actions, pursuant to the Fair Funds provisions of the Sarbanes-Oxley Act of
2002.

On November 18, 2004, the Company signed a Consent to Final Judgment of
Permanent Injunction with the SEC pursuant to which the Company, without
admitting or denying the allegations included in the Complaint filed by the
Commission, consented to a permanent injunction from violation of various
sections and rules under the Securities Act of 1933 and the Securities Exchange
Act of 1934. No disgorgement or civil penalties were sought from, or ordered to
be paid by, the Company.

Additionally, the Company entered into a Stock Purchase Agreement with PNC Tool
Holdings LLC ("PNC") and Mr. Crowley, the sole member of PNC. Under the Stock
Purchase Agreement, the Company acquired, for $100, and other good and valuable
consideration, 6,005,561 common shares of the Company held by PNC, which
represented approximately 51.1% of the outstanding common shares of the Company
at December 31, 2004, and which constituted 100% of the common stock held by
such entity. The parties also executed general releases in favor of each other
subject to the fulfillment of the conditions of the Stock Purchase Agreement.

The Stock Purchase Agreement was effected on April 8, 2005, following formal
approval by the SEC on February 10, 2005 and, on February 15, 2005 by the U.S.
District Court for the Southern District of Florida of the settlement of the
litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc., International
Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No:
04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further conditioned
on, among other things, the disgorgement and civil penalty funds being paid by
Mr. Crowley. These monies have now been received and are being administered for
the benefit of the victims of the alleged fraud by a court appointed
administrator pursuant to the Fair Funds provision of the Sarbanes-Oxley Act of
2002.

With the return of the Spear & Jackson shares to the Company by PNC, the
stockholders of the Company had their percentage stock interest increase
correspondingly. Jacuzzi Brands, Inc. ("Jacuzzi"), which at this time was a
beneficial owner of 3,543,281 shares of common stock, had its interest in the
Company increased to approximately 61.8% of the outstanding common stock.

On April 11, 2005, Jacuzzi agreed to the termination of a previous letter
agreement dated September 6, 2002, which supplemented the Stockholders'
Agreement of the same date. The letter agreement required Jacuzzi to vote a
substantial portion of its voting stock in the Company in proportion to the vote
of other stockholders of the Company. At the time the letter was executed,
Jacuzzi was a principal, but a minority shareholder of the Company. As explained
above, with the return to the capital of the Company of the majority shareholder
interest previously held by PNC, Jacuzzi then held a majority capital stock
interest in the Company, and the continuation of the letter agreement was no
longer considered necessary for the fulfillment of its original intent. Jacuzzi
also provided a general release to the Company and its affiliates excepting
Dennis Crowley and his spouse.

                                       30
<PAGE>

Disposal of Majority Interest by Jacuzzi to United Pacific Industries Limited

On April 21, 2005, Jacuzzi adopted a plan of disposition of its interest in the
Company's common stock. On March 23, 2006, Jacuzzi and its subsidiary
undertaking, USI American Holdings, Inc. ("USI" and, together with Jacuzzi, "the
Seller") entered into a Stock Purchase Agreement (the "Stock Purchase Agreement"
with United Pacific Industries Limited ("UPI"), a Bermuda Corporation, whose
shares are traded on the Hong Kong Exchange, to sell its entire holding of
3,543,281 shares of the common stock ("the Shares") of Spear & Jackson, Inc. to
UPI for $1.40 per share for an aggregate purchase price of $4,960,593.

The representations, warranties and covenants made by Jacuzzi and UPI were
typical for this type of transaction. UPI agreed that neither it nor any of its
affiliates would purchase any additional Common Stock during the period from the
signing date of the Stock Purchase Agreement through one year following the
closing at a price less than $1.40 per share.

A copy of the Stock Purchase Agreement is on file with the SEC in connection
with the filing by Jacuzzi of a Schedule 13D/A on March 27, 2006.

The Seller and UPI entered into Amendment No. 1 dated as of May 4, 2006
("Amendment No. 1 to the Stock Purchase Agreement") to extend the date by which
the Seller and UPI were required to lodge the clearance application with the UK
Pensions Regulator. The Seller and UPI subsequently received a comfort letter
dated July 5, 2006 issued by the UK Pensions Regulator (the "Comfort Letter").

The trustees of Spear & Jackson, Inc.'s UK Pension Plan confirmed by a letter
dated July 6, 2006 their acceptance of the UK Pensions Regulator's
determination. The Seller and UPI then entered into Amendment No. 2 dated as of
July 10, 2006 ("Amendment No. 2 to the Stock Purchase Agreement") to waive their
respective requirements for a clearance from the UK Pensions Regulator and to
accept in its place the Comfort Letter which states the UK Pensions Regulator is
of the view, based on the information supplied to him in connection with the
clearance application, that the change of control as a result of the sale by the
Seller of all of its shares of Spear & Jackson, Inc. to UPI is not detrimental
to the UK pension plan and the UK Pensions Regulator believes that a clearance
is not necessary for the transaction.

In addition, pursuant to Amendment No. 2 to the Stock Purchase Agreement, UPI
agreed, subject to the Closing having occurred, to indemnify the Seller and JBI
Holdings Limited (the "Jacuzzi Indemnified Parties") should the UK Pensions
Regulator, regardless of the Comfort Letter, require any of the Jacuzzi
Indemnified Parties to make a contribution or provide financial support in
relation to the potential pension plan liabilities of SJI or its subsidiaries.
In addition, UPI has also agreed that for a period of 12-months from the Closing
Date, UPI will not, and will use its best efforts to ensure that neither SJI nor
any of its subsidiaries will, take any action or omit to take any action that
causes the UK Pensions Regulator, as a result of such action or omission, to
issue a contribution notice against the Jacuzzi Indemnified Parties in relation
to any UK pension plan in which SJI or any subsidiary of SJI is an employer.
Further, UPI agreed that for a period of 12-months from the Closing Date, that
it will not (and will use its best efforts to ensure that neither SJI nor any
subsidiary of SJI will) engage in any action or inaction which in relation to
any such UK pension plan would fall within the UK Pension Regulation clearance
guidance note dated April 2005 as a 'Type A' event unless UPI procures that
clearance is issued by the UK Pensions Regulator in relation to such event in
terms which confirm that no Jacuzzi Indemnified Party shall be linked to a
financial support direction or contribution notice in respect of such event.

Closing occurred on July 28, 2006.

On June 22, 2006, Jacuzzi and UPI filed a preliminary Form 14C with the SEC
announcing notice of change in control and of a majority of directors pursuant
to section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1
thereunder. The 14C indicated that three new directors would be designated by
and elected to the Board of directors by UPI, to serve until the Company's next
annual meeting. The 14C became effective on August 7, 2006, and the three new
directors replaced the incumbent directors on about August 27, 2006. In the
interim, the Board by resolution, appointed the three new directors--Lewis Hon
Ching Ho, Andy Yan Wai Poon and Maria Yuen Man Lam--to the Board effective on
August 9, 2006.

                                       31
<PAGE>

As previously reported by the Company, on July 28, 2006, Jacuzzi Brands, Inc.
together with USI American Holdings, Inc., completed the sale of their shares of
common stock of Spear & Jackson (representing a majority interest) to United
Pacific Industries Limited, which shares are held by United Pacific Industries
Limited's wholly-owned subsidiary Pantene Global Holdings Limited (collectively,
"UPI"). On August 7, 2006, the Company filed with the Securities and Exchange
Commission, and mailed to the Company's stockholders, an Information Statement
pursuant to Sections 14(c) and 14(f) of the Securities Exchange Act of 1934, as
amended, disclosing the intention of UPI to execute a written consent, as
majority stockholder, electing to the Board of Directors the following UPI
nominees: Lewis Hon Ching Ho; Andy Yan Wai Poon; and Maria Yuen Man Lam. On
August 9, 2006, the Board of Directors expanded the Board of Directors from
three members to six members and elected as additional directors Messrs. Ho and
Poon and Ms. Lam. Information concerning the backgrounds of the new Directors is
included in the Information Statement under the heading "Information Regarding
the Executive Officers and New Directors".

The Board of Directors elected the new Directors as a means to facilitate the
transition from the prior Board of Directors to the new Board of Directors.
Messrs. Harrington, Fletcher and Dinerman retired as Directors on or about
August 27, 2006. On November 8, 2006 the Company filed form 8-K to announce
Maria Yuen Man Lam's resignation as a director of the Company. On February 21,
2007 the Company filed form 8-K to announce the appointment of Mr. Patrick J.
Dyson as director and Chairman of the Company with effect from that date. In
addition, the filing contained the announcement of the resignation of Mr. Andy
Yan Wai Poon as a director and secretary of the Company with effect from
February 28, 2007 and the appointment of Mr. Patrick J. Dyson as secretary with
effect from that date. On April 17, 2007 Mr. D. Preston Jones was appointed as
an independent director. Although Soneet Kapila continued to serve as Corporate
Monitor for the Company, on January 10, 2007, he applied to the Court to
terminate his role as Corporate Monitor having determined that his function was
no longer necessary. On January 22, 2007, the US District Court for the Southern
District of Florida entered into its Order and the Corporate Monitor was
relieved of his duties.

Further Changes to Corporate Organization

During the year ended September 30, 2005 the Company set up a new sales and
distribution facility, CV Instruments BV, in Maastricht, Holland. This new
facility specializes in the distribution of portable hardness testing equipment
manufactured in China and the sale of general engineers hand tools.
Additionally, an allied manufacturing, quality control and distribution centre,
Bowers Eclipse Equipment Shanghai Co. Limited, was established in Shanghai,
China and it is expected to become fully operational as a distribution and
manufacturing operation during the third quarter of fiscal 2007.

Exit from Screwdriver and Thread Gauge Measuring Operations

With effect from September 30, 2003 the Company exited its screwdriver
operations following the disposition of the trade and assets of Mega Tools Ltd
and Mega Tools USA, Inc.

The disposition of the trade and assets of the screwdriver division was
undertaken by Neil Morgan who was then heading up the division. The Company
believed that no specific authorization was afforded to Mr. Morgan to undertake
that disposition. The disposition proceeds were in the form of $284,000 of loan
notes and other receivables and the discharge of a loan of $100,000 owed by the
Company to the managing director of the screwdriver division. Full provision was
made in the Company's Financial Statements against the recoverability of these
disposition proceeds. It was subsequently agreed with Megapro that it would pay
Canadian $ 53,900 (approximately $41,000) in settlement of those debts and these
were paid in monthly installments of Canadian $5,000 (approximately $3,800).

During the fourth quarter of fiscal 2005, the Company began marketing for sale
certain assets associated with its UK thread gauge measuring business. On
February 28, 2006, the Company concluded the sale of these assets for a nominal
consideration. The assets sold comprised plant and equipment, inventories and
goodwill. The acquirer paid (pound)1 sterling and assumed certain liabilities in
respect of the leased premises from which the trade operates. The carrying
values of the assets relating to this operation were written down to estimated
fair value and the net operations, cash flows and assets have been presented as
"Discontinued Operations" in accordance with Statement of Financial Accounting
Standards ("SFAS") 144.

                                       32
<PAGE>

Recent Litigation Developments

Subsequent to the SEC action a number of class action lawsuits were initiated in
the U.S. District Court for the Southern District of Florida by Company
stockholders against the Company, Sherb & Co. LLP, the Company's former
independent auditor, and certain of the Company's directors and officers,
including Mr. Crowley, the Company's former Chief Executive Officer/Chairman,
and Mr. Fletcher, the Company's former CFO and former acting Chief Executive
Officer. These suits alleged essentially the same claims as the SEC suit
discussed above.

These various class action suits were subsequently consolidated. Thereafter, the
defendants filed certain Motions to Dismiss with regard to the Complaint and on
October 19, 2005, the U.S. District Court for the Southern District of Florida
in Re Spear & Jackson Securities Litigation entered its Order regarding these
Motions. The Order denied the Company's motion as well as that of Mr. Crowley,
the former Chief Executive Officer of Spear & Jackson. The Court granted the
Motion to Dismiss on behalf of Mr. Fletcher, the Company's interim Chief
Executive Officer, and also granted the Motion to Dismiss on behalf of the
Company's former independent auditor, Sherb & Co., LLP. The class plaintiff
subsequently filed an appeal regarding the trial court's decision to dismiss the
case against Sherb & Co., LLP, which appeal is presently pending. No appeal was
filed with respect to the decision to dismiss the case against Mr. Fletcher.

On July 7, 2006 the Company, Dennis Crowley and the Class Plaintiff reached a
Memorandum of Understanding ("MOU"), which confirmed that the plaintiffs, the
Company and Crowley in the class action had reached an agreement in principle
for the settlement of this litigation, subject to Court approval. According to
the terms of the MOU, the Company deposited the sum of $650,000 into a Qualified
Settlement Fund, for disbursement to the Settlement Class pending approval of
the Court. Subsequent to this, Sherb & Co. also agreed to the terms of the
Settlement agreeing to contribute an additional $125,000.

On November 9, 2006, the Stipulation of Settlement was filed with the Court for
preliminary approval. On January 31, 2007, the Court entered its Order
Preliminarily Approving Settlement and Providing for Notice and Setting Class
Action Statutory Settlement Hearing. The Order, for purposes of the proposed
settlement certified a "Settlement Class" of persons (with certain exceptions)
who purchased the Company's common stock between February 1, 2002 and April 15,
2004. The Order also approved as to form and content the Notice of Pendency and
Proposed Settlement of Class Action and Summary Notice. The Settlement Hearing
was set for May 11, 2007 at 11:30 a.m. at the West Palm Beach, Florida Federal
District Courthouse to determine whether the terms of the Settlement are fair,
just reasonable and adequate to the Settlement Class, and should be approved by
the Court; whether a final judgment should be entered dismissing the litigation;
whether the proposed plan of allocation should be approved; and to determine the
amount of fees and expenses to be awarded to plaintiffs' lead counsel. The Order
also appointed a claims administrator and provided for notice to those who
sought exclusion from the Settlement Class.

On May 11, 2007, the U.S. District Court for the Southern District of Florida,
sitting in West Palm Beach Florida, heard the Plaintiff's motion for Final
Approval of the Class Action Settlement and Plan of Allocation, to which there
were no objectors or class members that opted out of, the settlement. On May 14,
2007, the Court signed the Final Judgment thus forever extinguishing all of the
class claims against the Company, and barring any claims for contribution by
third parties. The Final Judgment made clear that the settlement was not an
admission of wrongdoing or liability by the Company.

To facilitate the distribution of the funds from the class suit to the class
shareholders and keep administrative costs to a minimum, the SEC Claim's
Administrator applied to the Court on January 9, 2007 for permission to combine
the class action funds with the funds derived in the SEC litigation, and allow
for the SEC's Claim's Administrator to disburse the collective funds.

On September 6, 2005, the Company was served with a Shareholder Derivative
Complaint, Hapka v. Crowley, et al. Case No: CA005068 filed on June 1, 2004 in
the Circuit Court for Palm Beach County, Florida. The suit named the Company as
a nominal defendant. Also named as defendants were former directors Robert
Dinerman, William Fletcher and John Harrington, in addition to Dennis Crowley
and the Company's prior independent auditors, Sherb & Co. LLP. The suit contains
essentially the same factual allegations as the SEC suit, which was filed in
April 2004 in the U. S. District Court for the Southern District of Florida, and
the series of class actions claims initiated in the U.S. District Court, but
additionally alleges state law claims of breaches of fiduciary duty, abuse of
control, gross mismanagement, waste of corporate assets, unjust enrichment and
lack of reasonable care by various or all the defendants.

                                       33
<PAGE>

Due to ongoing settlement discussions with the plaintiff's attorney, the Company
had not responded to the Complaint. In August 2006 the Company entered into a
settlement agreement with the plaintiff by agreeing to accept certain changes to
its corporate governance procedures and the payment of $70,000 in legal fees.
The settlement was filed with the Court in early November 2006, and if approved
by the Court, will result in a dismissal of the suit and release the Company and
the former director defendants Messrs. Robert Dinerman, William Fletcher and
John Harrington, would be dismissed. Dennis Crowley and Sherb & Co. continue as
defendants in this suit.

On February 2, 2007, the Circuit Court entered a Preliminary Approval Order
preliminarily approving the partial settlement pursuant to the Stipulation of
Settlement between plaintiff and the Company, including its former directors
William Fletcher, John Harrington, and Robert Dinerman. The Court has set May
29, 2007 at 8a.m. at the West Palm Beach County Courthouse, for the final
Settlement Hearing to determine (i) whether the terms of the Partial Settlement
are fair, just reasonable and adequate to the derivative stockholders and to the
Company, and should be approved by the Court; (ii) whether a final judgment
should be entered dismissing the litigation and releasing the defendants Spear &
Jackson, as described in the Stipulation; and (iii) to determine the amount of
fees and expenses to be awarded to plaintiffs' counsel. The Order approved as to
form and contents the Notice of Partial Settlement and the mailing and
distribution process. The Order also provided for notice to those who sought
exclusion from the settlement.

There can be no assurance that the Courts will approve the terms of this
settlement.

SUMMARY OF PRINCIPAL OPERATIONS

Spear & Jackson, Inc., through its principal operating entities, as disclosed in
note 1 to the financial statements, manufactures, factors and distributes a
broad line of hand tools, lawn and garden tools, industrial magnets and
metrology tools primarily in the United Kingdom, Europe, Australasia, North and
South America, Asia and the Far East. These products are manufactured and
distributed under various brand names including:

      *  Spear & Jackson - garden tools;
      *  Neill - hand tools;
      *  Bowers - bore gauges and precision measuring tools;
      *  CV - precision measuring instruments;
      *  Robert Sorby - wood turning tools;
      *  Moore & Wright - precision tools;
      *  Eclipse - blades and magnetic equipment;
      *  Elliot Lucas - pincers and pliers; and
      *  Tyzack - builders' tools

Until the disposition of the screwdriver division in September 2003, the Company
also manufactured and sold a range of patented multi-bit screwdrivers under the
"Megapro" brand name. The Company also manufactured and sold a rage of thread
gauge measuring equipment under the "Coventry Gauge" logo until the sale of the
principal business assets of that operation in February 2006.

The Company's four principal business units and their product offerings can be
summarized as:

1)    NEILL TOOLS, consisting of Spear & Jackson Garden Tools and Neill Tools,
      manufactures, among other products, hand hacksaws, hacksaw blades, hacksaw
      frames, builder's tools and wood saws, all non-powered. In addition, Neill
      Tools has supplemented its UK manufactured products with factored products
      and bought in components from Far Eastern and Indian suppliers. Neill
      Tools product offering now includes a full range of hand power tools and,
      from January 1, 2005, Spear & Jackson Garden Tools' range has been
      supplemented by a portfolio of electric powered garden tools.

2)    ECLIPSE MAGNETICS' key products are permanent magnets (cast alloy),
      magnetic tools, machine tools, magnetic chucks and turnkey magnetic
      systems. Products range from very simple low-cost items to technically
      complex high value added systems. In addition, Eclipse Magnetics engages
      in the trading of other magnetic material, sourced from the Far East, both
      to end-customers as well as parts to UK manufacturers. Eclipse is also
      involved in applied magnetics and supplies many areas of manufacturing
      with products such as separators, conveyors, lifting equipment and
      material handling solutions.

                                       34
<PAGE>

3)    The Company's metrology division comprises:

      MOORE & WRIGHT which manufactures a wide variety of products. The core
      product ranges principally include low technology measuring tools and hand
      held gauges for checking the threads, diameters and tapers of machined
      components. This division has supplemented its manufactured products with
      a range of factored items.

      BOWERS METROLOGY, which is a manufacturer of high specification metrology
      instruments including precision, bore gauges, which measure the diameter
      of machined components. In addition to the core range of bore gauges, the
      Company also manufactures universal gauges and hardness testing equipment.

      In December 2004, the division secured the European distributorship rights
      for a range of premier portable hardness testers sourced from China. This
      distribution operation is operated through a specifically formed Dutch
      subsidiary company, CV Instruments Europe BV, based in Maastricht,
      Holland. An allied manufacturing, quality control and distribution centre,
      Bowers Eclipse Shanghai Equipment Limited, was established in Shanghai,
      China, during the year ended September 30, 2005.

4)    ROBERT SORBY is a manufacturer of hand held wood working tools and
      complementary products. The products are handcrafted with strong aesthetic
      appeal.

In addition, Spear & Jackson, Inc. has subsidiary companies in France (Spear &
Jackson France SA) and Australasia (Spear & Jackson (Australia) Pty Limited and
Spear & Jackson (New Zealand) Limited) which act as distributors for Spear &
Jackson and Bowers manufactured products and complementary products sourced from
third party suppliers.

The Company's continuing operations can be analyzed into three business
segments, hand and garden tools, magnetic products and metrology tools.

For further detailed financial information by reportable segment, including
sales, profit and loss, and total asset information, see note 12 in the "Notes
to the Condensed Consolidated Financial Statements" included within this
Quarterly Report on Form 10-Q. Also included within note 12 is a detailed
geographical analysis including sales, profit and loss, and total net asset
information.

The Company's product offering comprises both own-manufactured items and
products sourced from third party suppliers as fully complete factored products
or semi finished products.

The Company's principal manufacturing sites can be summarized as:

      Name/Location                     Products Manufactured
      -------------                     ---------------------

A.    UK:

      Neill Tools                       Hand tools
      Atlas Site, Sheffield

      Robert Sorby                      Woodturning tools
      Sheffield

      Bowers Metrology                  Precision measuring tools
      Bradford

Up to the date of their closure in November and December 2006, the Company also
manufactured a range of garden tools at its UK plant in Wednesbury and a range
of magnetic products at its premises in Vulcan Road, Sheffield, England.

B.    France:

      Spear & Jackson                   Assembly of garden tools
      France

We currently sell our products to industrial, commercial and retail markets
throughout the world, with a significant concentration in the United Kingdom,
European Union, Australia, New Zealand and the Far East.

                                       35
<PAGE>

These markets chiefly comprise:

The non-powered hand tool industry in which the Company has hand tool,
engineers' hand tool and garden tool business interests. These products are
typically sold in industrial catalogs, hardware stores, garden centers and
multiple retailers. This industry is highly mature with clearly defined
traditional brand names being joined by a broad base of "house brands" typically
supplied from third world manufacturers.

The magnetic industry. This can be split into magnet manufacturers and magnetic
integrators. The magnet users and integrators utilize the magnetic materials to
produce products such as security sensors, electrical windows and magnetic
filters and lifters.

The metrology industry, which can be split into two main market segments: (i)
low tolerance tools such as tape measures, rulers and protractors and (ii)
surface roughness measuring equipment and laser measuring instruments, etc.,
used in the exact measurement of technologically precise machined components.
The Company's Bowers Metrology Group presently operates in the latter market
segment on a worldwide basis.

The hobbyist and professional wood turning industry. This industry is relatively
small and caters to individuals who have reasonable disposable income, often
retirees, or who are professional wood turners producing craft products.

Our strategy is to maintain and develop the revenues of our businesses through
such methods as:

   o  Maintaining and heightening the profile of our existing quality brand
      names. Such activity will comprise trade, general and TV advertising,
      extensive promotional work at trade shows, the development of corporate
      web sites, etc.

   o  Continuous product improvement and innovation.

   o  Increasing market share by offering highly competitive product offerings.

   o  The launch of new and innovative product and product ranges.

   o  Improving manufacturing efficiencies and continually reviewing other cost
      saving measures.

The Company offers a comprehensive range of tools and equipment ranging from
hacksaw blades to pliers, from secateurs to digging forks and from a simple red
magnet to a computer controlled materials handling system.

The Company's policy is to support its core product offering with a pipeline of
new products and range extensions. In the three months to March 2007 new product
range launches and other significant product related business developments have
included:

   o  Neill Tools has confirmed new listings within major UK builder's merchants
      with a new range of "Ready to go" plasterers tools. Additionally, a new
      range of petrol driven garden tools was launched within the UK retail
      sector complementing the division's existing range of electric powered
      garden tools. The new e-series range of garden digging tools was launched,
      designed to prevent back strain.

   o  The Eclipse Magnetics division has continued to focus on filtration
      products aimed at domestic and industrial boiler systems, consumer
      hydraulic filters and products for filtering petroleum delivered to gas
      stations.

   o  The Bowers division has been preparing for the launch of a range of new
      products including the Bowers "Ultima" high-accuracy bore gauging range
      and the "Eseway" automatic Rockwell hardness testers at the main industry
      trade show to be held in Germany in May 2007.

   o  Our Australasian division has been investigating and reviewing a number of
      product initiatives for release including garden digging products, power
      generators and a S&J apprentice pack comprising S&J masonry and hand tool
      products.

                                       36
<PAGE>

DISCUSSION OF CRITICAL ACCOUNTING POLICIES

We prepare our consolidated financial statements in accordance with accounting
policies generally accepted in the United States. As such, we are required to
make certain estimates, judgments and assumptions that we believe are reasonable
based upon the information available. These estimates and assumptions affect the
reported amounts of assets and liabilities as of the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the periods presented. Actual results could differ significantly from those
estimates under different assumptions and conditions.

Management's Discussion and Analysis or Plan of Operation in the Company's 10-K
filing for the year ended September 30, 2006 included a detailed discussion
which addressed our most critical accounting policies. The quarterly financial
statements for the period ended March 31, 2007, attached hereto, should
therefore be read in conjunction with that discussion.

These policies are those that are most important to the portrayal of our
financial condition and results of operations and which require our most
difficult and subjective judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain.

Our most critical accounting policies are those relating to revenue recognition,
foreign exchange risk, inventory valuation, pension and post-retirement benefit
obligations and accounting for deferred and income taxes.

Since September 30, 2006 there have been no changes in our critical accounting
policies and no significant change to the assumptions and estimates related to
them.

Reclassification

Certain reclassifications have been made to the consolidated financial
statements for the three and six months ended March 31, 2006 in order to conform
to current year presentation. Gains arising on the sale of property and
manufacturing and other reorganization costs have been reclassified so that such
gains and costs are now shown as a component of "Operating Costs, Income and
Expense". These items were previously captioned as "Unusual or Infrequent Items"
and were presented after the Operating profit (loss) for the period. These
reclassifications impact only on the presentation of the Consolidated Statement
of Operations and do not have any impact on previously reported net income or
loss.

OVERVIEW

When compared to the equivalent periods last year, the results for the quarter
and six months ended March 31, 2007 show increases in sales and reductions in
operating losses such that the company returned to operating profitability for
the quarter ended March 31, 2007.

Sales revenues for the quarter ended March 31, 2007 increased by $1.6 million
(5.8%) from $27.57 million in 2006 to $29.17 million in 2007. This increase is
analyzed as favorable currency exchange fluctuations in the period of $2.85
million offset by reduced sales volumes of $1.17 million and increased sales
rebates of $0.08 million. Sales volume improvements were recorded in our
Metrology, Robert Sorby, Australia, New Zealand and French divisions, but these
increases were negated by volume shortfalls in our Neill Tools and Eclipse
Magnetics businesses.

In the second quarter of fiscal 2007 soft retail demand continued in the UK, and
the weak US dollar had an adverse effect on the division's sales into US$
denominated markets. In addition, UK garden product sales in the quarter were
down compared to Q2 of fiscal 2006. This arose as a result of timing differences
on sales of Spear & Jackson electric garden products to a major UK catalog
chain. Sales to this customer were transacted in quarter 2 of 2006 but, in
fiscal 2007, the comparable sales have been rescheduled into later months of the
year.

For the six months to March 31, 2007 sales increased by $3.49 million (6.91%)
from $50.50 million in 2006 to $53.99 million in 2007. The increase comprised
$4.58 million relating to favorable currency exchange variations, offset by
$0.83 million reductions in sales volumes and $0.26 million increased sales
rebates.

                                       37
<PAGE>

Gross profit was $ 10.25 million (35.13%) for the quarter to March 31, 2007
compared to $8.49 million (30.81%) for the prior year. For the six months to
March 31, 2007 the gross profit was $18.59 million (34.43%) compared to $15.52
million (30.74%) in the previous year. The improvement reflects the reduction of
direct costs as a result of the extensive restructuring initiatives in our UK
tool and magnetic products manufacturing operations. Own-manufactured product is
being progressively replaced with factored items sourced from overseas thereby
reducing costs and increasing profitability.

Selling, general and administrative expenses have increased by $0.63 million
(6.67%) in the current quarter and $1.27 million (6.89%) for the year to date.
After eliminating the adverse impact of movements in average US$/sterling cross
rates in the period ($1.85 million in the half year and $1.04 million in the
quarter ended March 31, 2007) and general inflationary increases ($0.44 million
in the six months ended March 31, 2007 and $0.22 million in the quarter ended on
that date) the underlying trend is one of decreased SG&A costs.

The results for the three months and six months to March 31, 2007 include a
$0.22 million and $0.31 million credit respectively relating to gains on
property sales. Reorganization costs in the three months to March 31,2007 were
$0.08 million (2006: $1.23 million) and for the six month period under review
they were $0.10 million (2006: $1.23 million). The $1.23 million loss in 2006
relates to costs in connection with the closure of the company's manufacturing
facility in Wednesbury, England.

As a result of the higher gross profits less increased overhead costs, the
Company's Q2 operating result has improved by $2.5 million (122.4%) from a loss
of $2.04 million in 2006 to an income of $0.46 million in 2007. For the six
months to March 31, 2007 losses have decreased by $3.24 million from $4.13
million in 2006 t $0.89 million in 2007.

The improvements in profitability are principally driven by the various UK
reorganization programs initiated in fiscal 2006. These comprise the closure of
the remaining element of the Company's manufacturing site at Wednesbury, the
transfer of all warehouse and distribution operations previously carried out at
that location to the Company's Atlas site in Sheffield, the closure of certain
manufacturing activities at the Atlas site and the cessation of magnet
production and the relocation of the remaining operations of the Magnetics
division to the Company's Atlas site.

To consolidate these operating profit improvements, the Company's focus
continues to be the launch of new products and the implementation of initiatives
to reduce its operational base costs. Such initiatives may include improved raw
materials and product procurement and the introduction of more efficient
processes in order to minimize margin erosion and to retain a competitive
pricing edge over cheap foreign imports. Opportunities will be explored to make
the Company's manufacturing base more cost efficient. Going forward such
initiatives, together with planned investment in new capital equipment in the
UK, China and elsewhere, if successfully implemented, should further improve the
operating performance of the Company.

Despite consideration of these cost control initiatives, the Company's results
continue to be adversely impacted by the significant non-cash, $8.0 million
annual FAS 87 pension charge. As a result, and as is further explained in the
Outlook section, the Company anticipates that it will suffer an operating loss
in the third quarter of fiscal 2007.

                                       38
<PAGE>

RESULTS OF OPERATIONS

The following discussion provides a review of results for the three and six
months ended March 31, 2007 compared to the three and six months ended March 31,
2006.

Summary Profit and Loss Account Data:
<TABLE>
<CAPTION>
                                           Three Months                          Six Months
                                          Ended March 31,                      Ended March 31,
                                  --------------------------------     --------------------------------
                                   2007        2006       % Change      2007        2006       % Change
                                    $m          $m                       $m          $m
<S>                               <C>         <C>         <C>          <C>         <C>         <C>
Sales ......................       29.17       27.57        +5.80       53.99       50.50        +6.91
Cost of goods sold .........      (18.92)     (19.08)       (0.80)     (35.40)     (34.98)       +1.20
                                  ------      ------                   ------      ------
Gross profit ...............       10.25        8.49       +20.64       18.59       15.52       +19.75
Selling, general and
  administrative expenses ..       (9.93)      (9.30)       +6.67      (19.69)     (18.42)       +6.89
Gain on sale of land
   buildings ...............        0.22        -         +100.00        0.31           -      +100.00
Reorganization costs .......       (0.08)      (1.23)      (92.83)      (0.10)      (1.23)      (92.02)
                                  ------      ------                   ------      ------
Operating income (loss) ....        0.46       (2.04)      +122.4       (0.89)      (4.13)      +78.46

Other income ...............        0.13        0.08       +72.15        0.18        0.09      +110.3
                                  ------      ------                   ------      ------
Income(loss) from continuing        0.59       (1.96)      +130.3       (0.71)      (4.04)      +82.53

Income tax .................       (0.04)      (0.1)       +56.30       (0.09)       0.31      +429.5
                                  ------      ------                   ------      ------
Income(loss) from continuing
 operations after taxes ....        0.55        2.06      +126.56       (0.80)      (3.73)      +78.51

Loss from discontinued
  operations ...............        0.00       (0.07)     +100.00        0.00       (0.08)     +100.00
                                  ------      ------                   ------      ------

Net income (loss) ..........        0.55       (2.13)      +125.7       (0.80)      (3.81)      +78.95
                                  ------      ------                   ------      ------

Effective tax rate (%) .....        7.59       (5.09)                  (13.46)      (7.59)

As a percentage of sales %:

Gross profit ...............       35.13       30.81                    34.43       30.74
Selling, general and
  administration expenses ..       34.06       33.75                    36.48       36.48
Operating income (loss) ....        1.57       (7.40)                   (1.65)      (8.17)
Net income (loss) ..........        1.88       (7.71%)                  (1.48)      (7.54)
</TABLE>

Note: The percentage and percentage change data shown above have been calculated
from the Consolidated Statements of Operations included within the Financial
Statements attached hereto. The financial data shown in the Financial Statements
is given in thousands rather than the millions presentation adopted in the table
above.

                                       39
<PAGE>

SALES

Sales from continuing activities increased by $3.49 million (6.91%) from $50.50
million in the six months ended March 31, 2006 to $53.99 million for the six
months ended March 31, 2007. Sales of $29.17 million in the quarter ended March
31, 2007 were $1.60 million (5.80%) higher than sales of $50.5 million recorded
for the comparable period last year.

The net increase in sales is analyzed as follows:

                                                     Three months     Six months
                                                     Ended            Ended
                                                     March 31,        March 31,
                                                     2007             2007
                                            Note     $m               $m

Effect of exchange rate movements .....     (a)       2.85             4.58
Sales volume decreases ................     (b)      (1.17)           (0.83)
Increased rebates .....................     (c)      (0.08)           (0.26)
                                                     -----            -----
                                                      1.60             3.49
                                                     -----            -----

Analyzed by principal business segment, the net sales increase is reconciled as
follows:

                                                     Three months     Six months
                                                     Ended            Ended
                                                     March 31,        March 31,
                                                     2007             2007
                                            Note     $m               $m
a) Hand and garden tools

   Effect of exchange rate movements ..     (a)       1.92             3.11
   Sales volume increases .............     (b)      (1.84)           (1.60)
   Rebates ............................     (c)      (0.08)           (0.26)
                                                     -----            -----
                                                      0.00             1.25
                                                     -----            -----
b) Metrology tools

   Effect of exchange rate movements ..     (a)       0.63             0.92
   Sales volume increases .............     (b)       0.94             0.95
                                                     -----            -----
                                                      1.57             1.87
                                                     -----            -----
c) Magnetic products

   Effect of exchange rate movements ..     (a)       0.30             0.55
   Sales volume decreases .............     (b)      (0.27)           (0.18)
                                                     -----            -----
                                                      0.03             0.37
                                                     -----            -----

   Total                                              1.60             3.49
                                                     -----            -----

Notes:

(a)   The functional currencies of the group's revenues are UK sterling, the
      Euro, the Australian and New Zealand dollar and the Chinese Yuan. The
      principal functional currency is sterling and the variation in the average
      US$/(pound) cross rate in the three and six month period to March 31, 2007
      compared to the comparable period last year has had a significant
      favorable impact on the US dollar value of the group's sales. The average
      US$/(pound) cross rates in the periods under review can be summarized as:

                                              Average Cross Rates
                                              -------------------
                                        2007        2006       % Movement

      3 months ended March 31,          1.955       1.750         11.72
      6 months ended March 31,          1.934       1.752         10.39


                                       40
<PAGE>

(b)   The general trading environment in our principal markets remains little
      changed from that reported in the previous quarter. Flat consumer demand
      continues, we face ongoing competition from rival suppliers across a
      number of product ranges and the practice of major retail customers
      promoting own label offerings sourced from the Far East at the expense of
      S & J Company product increases. As an additional factor, although the US
      $ value of the Company's sales has increased as a result of the movement,
      in particular, in the US$/Sterling cross rate, this weakening results in
      our products becoming uncompetitive in US$ denominated export markets.

      The Neill Tools division witnessed a decrease in sales due to rescheduling
      of certain electric garden product sales to later months of 2007 when the
      comparable sales in the prior year were transacted in Q2 of 2006. In
      addition, our Eclipse Magnetics division has witnessed poor demand for
      magnetic assemblies and materials and has further suffered as a result of
      low customer investment within the Materials Handling sector.

      Despite the ongoing trading conditions there have been some significant
      sales volume increases. In particular, within the Metrology division there
      has been both continued incremental sales growth via its selling and
      distribution facilities in Maastricht and Shanghai and resurgence in UK
      sales. Likewise, Robert Sorby witnessed strong North American sales and
      our Australian division has benefited from a successful air tools
      promotion.

(c)   Sales rebates charged in the three month period ended March 31, 2007
      amounted to $1.65 million compared to $ 1.45 million in the three month
      period ended March 31, 2006. For the six month period under review rebates
      increased from $2.44 million in 2006 to $2.91 million in 2007. The
      increase is primarily due to increased trading volumes in Australia and
      France and the adverse movement in exchange rates.

SEGMENTAL REVIEW OF SALES

We aim to maintain and develop the sales levels of our businesses through the
launch of new products, the improvement of existing ranges and the continued
marketing of our portfolio of brands in order to retain and gain market share.

Sales and revenue details on a segment basis are as follows:

NEILL TOOLS

Sales for the quarter ended March 31, 2007 of $11.62 million showed a decrease
of $1.11 (8.7%) million over last years sales of $12.73 million. The decrease
was attributable to adverse volumes of $2.32 million, offset by favorable
exchange rates of $1.21 million. In the six months ended March 31, 2007 sales of
$20.90 million were $1.12 million (5.1%) lower than last year's sales of $22.02
million. This decrease comprised adverse volumes of $3.15 million, offset by
favorable exchange movements of $2.0 million and decreased sales rebates of
$0.03 million.

Neill Tools continues to encounter a challenging trading environment in both its
export and home markets.

One again, the UK retail sector has reported a downturn in consumer spending
that has had an adverse impact on our hand and garden tools sales. Additionally,
the division's UK performance in the comparable period to March 2006 benefited
from electrical product sales to a major catalog chain. The customer has
rescheduled comparable sales in fiscal 2007 to the second half of the year.

Despite these difficult trading conditions, the UK garden centre initiative
continues to develop, delivering volumes greater than our original expectations.
A complete new range of garden digging tools was launched in the UK independent
garden market. Following this launch we now have three tiers of product for
customer requirements. During the period under review we launched our new
"E-series" range of Garden digging tools. These are ergonomically designed to
prevent back strain. Initial uptake is encouraging with listings obtained within
both the UK retail and independent sectors.

In export markets, sales have been performing in line with levels experienced
last year. Although demand from the Middle East has softened, this has been
compensated by sales increases in the Far East. The export market continues to
be driven by demand for our hacksaw blades. Sales of these products now
represent 60% of our industrial tools' revenues and strategies continue to be
evaluated to spread this sales concentration risk. The weakening US$ provides
margin challenges within markets where transactions are denominated in that
currency. We are now being approached to offer currency support to mitigate the
adverse effect that the weak dollar has on certain of our customers.

                                       41
<PAGE>

Gross margins have improved considerably when compared to the same period last
year. The main drivers behind the increased margins are the reduction in fixed
production costs arising from the closure of the Company's UK manufacturing
plant at Wednesbury and other reorganization initiatives and the outsourcing of
previously manufactured products.

Going forward, the main challenges for the business remain the continuing review
of the manufacturing cost base and the innovation of new product development in
line with our core brands and competences. The division has now established
links with UK universities to use their specialist design and technology skills
to aid new product development. The outlook for quarter 3 looks positive with
the order book being almost $1 million higher at March 31, 2007 than it was in
the previous year. This places additional challenges on the business to ensure
that these orders are delivered on a timely basis.

ECLIPSE MAGNETICS

Revenues for the quarter showed a marginal $0.03 million increase (1%) over last
year's figures (2007 $2.84 million, 2006 $2.81 million) with favorable exchange
movements of $0.30 million and adverse volumes of $0.27 million. For the six
months ended March 31, 2007 sales showed a 6.95% increase of $0.37 million
(2007, $5.78 million, 2006, $5.41 million) attributable to favorable exchange
variances of $0.55 million offset by adverse volumes of $0.18 million.

The sales shortfalls were driven by poor demand for magnetic assemblies and
materials. Additionally, the lack of capital expenditure investment held back
sales in the materials handling sector. Offsetting these adverse factors were
improvements of 10% in our Separation division, which continues to increase its
market share within the food processing industry.

Trading patterns within the magnetics market continue to reflect global
industrial economic conditions. Our magnetic materials products suffered reduced
demand within both the UK and overseas industrial distribution sectors.
Likewise, a downturn in capital expenditure in the Engineered Products market is
having a negative impact on our project based business.

Competition from the Far East remains the main threat, whether directly or
through agents, as more and more companies emerge in our trading markets who are
able to offer high quality goods at low market price points. The strength of
sterling against the US$ and the Euro is applying increasing pressure on our
margins with the USA being our biggest export market.

Gross margins of 41%, before one -time stock provisioning, have improved since
last year, the main driver being the reduction in fixed production costs. As
previously reported, in August 2006, the company announced both the cessation of
certain manufacturing activities at its site in Sheffield, England and the
relocation of its remaining business to the Atlas site, Sheffield. The
relocation was completed in December 2006. The cost of key primary materials,
steel, nickel and cobalt has continued to increase during the period, with
cobalt and nickel trading at an 8 year high. This increase has and will continue
to put pressure on our margins and, although we were able to pass on this
increase as a surcharge within certain sectors, our main customers will not
accept such surcharges until supply contract renewal dates.

Looking forward, the main challenge remains the distancing of rival Far East
manufacturers from our key customer base. Our commodity-based business is under
threat but to counter this, we continue to promote the attractiveness of our
product by offering added value options to our customers. The materials handling
section of the Engineered Products division is currently facing low quotation
conversions and resource is therefore being focused on other key product groups
to recover those shortfalls.

The continued price increases of neodymium, nickel and cobalt, which are already
having an adverse impact on our margins, will continue to do so if prices keep
increasing. To counter this, management continues to follow a strategy of new
product development as a key driver in increasing market share within key
product segments, active cost control and manufacturing efficiencies.

                                       42
<PAGE>

ROBERT SORBY

Sales for the quarter were $0.34 million (28.4%) more than the comparable period
last year last year (2007 $1.55 million, 2006 $1.21 million), attributable to
favorable exchange variances of $0.16 million and increased volumes of $0.18
million. In the six month period ending March 31, 2007, sales have increased by
$0.55 million (21.78%) from $2.53 million in 2006 to $3.08 million in 2007. This
increase is attributable to favorable exchange variances of $0.29 million and
increases sales volumes of $0.26 million.

The first two quarters of fiscal 2007 have witnessed improvements in both home
and export retail sales when compared to the same period last year.

Growth in the second quarter has come primarily from North America where
long-term marketing initiatives are coming into fruition. These initiatives
include a program of in-store demonstrations in North-Eastern USA and retail
shows across the United States and Canada.

In the UK sales increased by 2% where the success of the "ProEdge" sharpening
system was offset by a downturn in demand for lathes and lathe chucks. Demand
for the "ProEdge" product continues to exceed expectations but it is clear that
sales are generated by dedicated product demonstrations and we will therefore
continue to participate in dealer in-house shows etc. to promote this and other
items.

Our retail operation continued to benefit form the incorporation of an
e-commerce site last summer and this now contributes 15% of the store's
turnover. As a result, further focus will be put on e-commerce in future months.

Gross margins in the period have improved when compared to the same period last
year, mainly attributable to a more favorable mix of product sales. At the same
time overhead costs have been rigorously held in check.

Looking forward the business climate remains uncertain. There will be changes in
our UK distribution of lathes and chucks and the continuing weakness of the US
dollar against the pound sterling will negatively impact margins. The launch of
the new "Pro-edge" sharpening system has created a number of new opportunities,
but given the relative complexities of marketing electrical products in
international markets, the full launch of this product is to be phased in over a
period of time. A European launch will be followed by the product's introduction
into the US market with both launches being completed by the end of fiscal 2007.

BOWERS

Sales for the second quarter have increased by $1.57 million (39.34.%) from
$3.97 million in Q2 of fiscal 2006 to $5.54 million in Q2 of fiscal 2007. This
increase is attributable to favorable exchange rate variances of $0.63 million
and increased volumes of $.94 million. Cumulatively, sales have increased by
$1.87 million (23.28%) from $8.03 million in the six months to March 31, 2006 to
$9.90 million in the six months to March 31, 2007 attributable to favorable
exchange rate variances of $0.92 million and increased sales volumes of $0.95
million.

Quarter 2 has proved to be excellent for the Bowers Group as a whole with all
divisions performing well. In particular, export sales via our UK operations and
sales from our distribution outlet in the Netherlands have been particularly
strong. Additionally, after a disappointing Q1 UK sales performance, the UK
division bounced back strongly with an excellent order intake from all sectors.

The Shanghai facility is currently operating as a quality control and
administration centre for products being shipped to Europe. A further investment
of $0.5 million was made in the operation in the current quarter to fund the
purchase of capital equipment so that manufacturing operations can commence in
quarter 3 of Fiscal 2007.

Gross margins have been in line with expectations with the cost of incentives to
offset the strength of sterling and some higher than expected machinery
maintenance costs being offset by improved margins on imported products due to
the weakness of the US $. Energy costs and raw material costs have now
stabilized but increases in the price of high demand materials such as steel and
aluminium remain possible.

                                       43
<PAGE>

There were no major exhibitions in the latest quarter but, in May 2007, Bowers
will be exhibiting in Germany, at the "Control" industry exhibition. This show
is to be used as a platform to launch a new range of products including the new
Bowers "Ultima" high-accuracy bore gauging range and the new "Eseway" automatic
Rockwell hardness testers. These are two of the largest product launches that
Bowers has seen in more than five years and production of both lines is expected
to commence from June 2007.

The continued recruitment of skilled labor in the UK manufacturing division
continues to be challenging with fewer graduates choosing engineering as a
career. New capital expenditure programs for CNC machinery are currently being
implemented in order to counter this shortage of labor.

The outlook for the remainder of fiscal 2007 remains positive, particularly as
we have rectified the disappointing first quarter sales in the UK domestic
division. Much of the new business relates to the Aerospace market although the
automotive sector is now showing signs of improvement. Recent currency
fluctuations are a cause for concern although there are no signs, at the moment,
of the buoyant US industrial market slowing down.

S&J FRANCE

Sales in the quarter have increased by $0.36 million (10.13%) from $3.58 million
in 2006 to $3.94 million in 2007, the increase being attributable to favorable
exchange rate variances of $0.34 million and increased volumes of $0.04 million
offset by increased rebate levels of $0.02 million. For the six month period
ended March 31, 2007 sales have increased by $0.60 million (10.95%) from $5.52
million in 2006 to $6.12 million in 2007. This is attributable to favorable
exchange variances of $0.49 million and increased volumes of $0.13 less
increased rebates of $0.02 million.

Recently released statistics compiled by French garden product trade
associations indicate that sales of garden products in the French market have
decreased by 4.3% between 2005 and 2006. In addition to this overall decrease in
demand, traditional garden tool sales continue to be negatively affected by
intense competition and the increasing flow of cheap Asian and Far Eastern
imports.

Despite this environment of softening demand for garden tools, sales of new
products and the benefits of an increasingly diversified product offering have
resulted in the company achieving increased sales volumes in the period. As an
additional contributory factor, in comparison to the same period last year, we
have also recorded increased sales to certain of our major customers under their
own label brands albeit at very narrow margins.

Although our success in product diversification is encouraging, our base garden
tool business continues to suffer. The French economy remains subdued and
business conditions in the Company's principal markets have continued to mirror
this depressed retail environment. As noted above, the volume of products sold
is decreasing and the retail price points are being systematically reduced
thanks to the amount of entry level products sourced, typically, from the Far
East. Additionally, competition remains intense in the French garden products
market with a number of suppliers trying to secure business with a shrinking
base of retail outlets. We can also see the trend becoming more widespread of
customers switching to the sale of own label offerings at the expense of premium
branded product. All of these factors inevitably lead to pressure on margins and
the situation is exacerbated by our sales profile where 40% of our turnover is
concentrated on two customers.

In order to relieve these margin pressures the Company continues to look for new
suppliers in China and India in order to drive down product costs. Quality
control and reliability of delivery times remain key criteria to ensure that the
Company's branding, customer service and market reputation are not compromised.

The Company will continue to concentrate on marketing activity to promote its
principal brands and to secure new listings. Such activity has and will continue
to centre on the publication of a new 2007 product catalogue, improvements to
the Company web site, advertising, newsletters, e-marketing, etc.

                                       44
<PAGE>

As sales of traditional product lines decline (forks, hooks, snow tools, etc.)
it is clear that we must offer new product ranges and that we are able to offer
products of the right quality and at appropriate price points. With this in mind
we have tried to launch new products which are competitive in terms of price and
which are not simply garden tools but with which are associated with a more
general garden leisure theme, e.g. bonsai tools, wooden baskets, wooden crates,
repotting tables and decorative wooden wheel barrows. Focus will therefore
continue on new product development as a way of both improving margins and
eliminating the seasonal peaks that are typical of the garden products business.

AUSTRALASIA

Sales have increased by $0.42 million (12.71%) in the current quarter from $3.28
million in Q2 of 2006 to $3.70 million in Q2 of 2007. Volume increases of $0.26
million and favorable exchange rate variances of $.0.19 million were partially
offset by increased sales rebates of $0.03 million. Cumulatively, for the six
months to March 31, 2007 sales have increased by $1.21 million (17.25%) from
$6.99 million in 2006 to $8.20 million in 2007 due to favorable volumes of $1.16
million and exchange variances of $0.33 million, offset by increased rebates of
$0.28 million.

Australia has had a successful quarter following on from a high achieving Q1.
Once again, imported house brands and the ongoing drought have impeded sales of
garden products compared to the previous year but this was offset by improved
sales in masonry, hand tool and particularly air product categories as a result
of promotions with major customers. This increased promotional activity has,
however, incurred higher levels of sales rebates.

In New Zealand there has been a slight dip in Q2 sales levels when compared to
last year due to decreases in air and garden sales and the delisting of an
unprofitable drainage product range being only partially offset by gains in
garden cutting and digging tools. Overall for the six month period sales are
higher than last year due to increased promotional activity within the air tool
category. Customer confidence is at a high in New Zealand with reduced fuel
prices resulting in increased disposable income.

As a result of increased sales levels, improved sourcing, wholesale price
increases and currency price gains, and changes within the sales and customer
mix of the businesses, gross margins have seen a considerable improvement over
the same period last year.

Despite the Q1 and Q2 achievements, competition from imported Asian products and
retailer house brands continue to place sales volumes, margins and market share
under pressure.

Overall, increased sales to our major customers reflect the continued expansion
and domination of the market by the major corporate retailers who continue to
expand their market share at the expense of the traditional independent retail
groups. As such, our sales mix reflects this trend with sales growth continuing
in the corporate sector whilst sales to the independent retailers continue to
decline. Our objective going forward is to spread our exposure to the corporate
sector by increasing our sales and market share in the independent and
industrial markets.

A major focus going forward will be the promotion and marketing of Spear &
Jackson brands to gain incremental sales and profit growth together with
aggressive pricing strategies to maintain and improve market share in all the
categories in which we compete. The division will continue to develop and
introduce new and extended ranges under the S&J brand across the garden digging,
cutting, hand tool, masonry, hammer and air tool ranges. In addition, improved
product procurement and the successful implementation of price increases will
help to ensure our sales and trading margins continue to improve going forward.

                                       45
<PAGE>

COSTS OF GOODS SOLD AND GROSS PROFIT

Summary details regarding costs of goods sold as a percentage of sales and gross
profit margins in the periods under review are as follows:

                            Three months ended           Six months ended
                          March 31,     March 31,     March 31,     March, 31
                             2007          2006          2007          2006
                              %             %             %             %

Cost of goods sold .....    64.87         69.19         65.56         69.26
as a % of sales

Gross profit margin ....    35.13         30.81         34.43         30.74

Costs of goods sold decreased to $18.92 million in the three month period ended
March 31, 2007 from $19.08 million in 2006. In the six month period under review
costs of goods sold have increased from $34.98 million in 2006 to $35.40 million
in 2007.

The increased gross margin in the periods under review and the decrease in the
cost of goods sold as a percentage of sales reflects the improvements in
manufacturing efficiencies and the reduction of direct costs as a result of the
extensive restructuring initiatives in our UK manufacturing operations. The UK
manufacturing reorganization program, initiated in the last quarter of 2005 and
continued in the second and subsequent quarters of Fiscal 2006 with the
announcement of the closure of our manufacturing site at Wednesbury in the UK,
the relocation of the UK central warehouse to the Atlas site in Sheffield and
the cessation of certain manufacturing activities in the UK magnetics division
has had, and will have, a beneficial effect on margins. Own-manufactured product
is being progressively replaced with factored items sourced from overseas
thereby reducing costs and increasing profitability.

We will continue to evaluate means of maintaining and improving current sales
mixes and of further reducing costs of goods sold across all of our principal
trading operations to avoid margin erosion. Improvements in manufacturing
efficiency and the reduction of direct costs continue to be the focus of
management as a means to improve competitiveness in new and existing markets.

Further pressure is exerted on our margins by the weak dollar and, to retain
competitiveness, additional discounts have been offered in certain markets where
our sales are transacted in that currency.

The Company's position is not, however, unique in this respect since the trading
issues crystallized by the weakening value of the dollar are currently faced by
many other UK companies with material export sales interests.

EXPENSES

Selling, general and administrative (SG&A) expenses increased by $0.63 million
(6.67%) from $9.30 million in the quarter ended March 31, 2006 to $9.93 million
in the quarter ended March 31, 2007. In the six months ended March 3, 2007 costs
of $19.69 million have increased by $1.27 million (6.89%) from $18.42 million in
the six months to March 2006.

                                       46
<PAGE>

The principal reasons for the movements are as follows:

                                                   Increase over Prior Year
                                              Quarter ended     Six months ended
                                                March 31,           March 31,
                                                  2007                2007
                                                   $m                  $m

a) Impact of movements in average
   US$/sterling cross rates in the period          1.04               1.85

b) Increased Bowers Shanghai 2007 costs .          0.08               0.20

c) Increased UK distribution costs ......          0.13               0.24

d) Inflationary increases ...............          0.22               0.44

e) Decreased US head office costs .......         (0.07)             (0.08)

f) Other net decreases ..................         (0.77)             (1.38)
                                                  -----              -----

Total net increase in SG&A expenses .....          0.63               1.27
                                                  -----              -----

GAIN ON SALE OF LAND AND BUILDINGS

The credit of $0.22 million in the quarter to March 31, 2007 represents the
sale, on March 27, 2007, of land at the company's Atlas site in Sheffield,
England that was surplus to current requirements. The net credit of $0.31
million in the six month period relates to the gain on the sale of the Atlas
site referred to above together with a credit of $0.9 million in relation to the
deferred element of the gain arising on the sale, in July 2006, of the land and
buildings at the Company's UK manufacturing site Wednesbury.

MANUFACTURING AND OTHER REORGANIZATION COSTS

A net charge of $0.08 million was incurred in the three month period to March
31, 2007 compared to a $1.23 million charge in the previous year. Cumulatively,
to March 31, 2007, a $0.10 million charge was incurred compared to $1.23 million
in the previous year.

On January 25, 2006, the Company announced the closure of the remaining element
of its manufacturing site at Wednesbury, England. The closure and relocation of
the Wednesbury facility was completed by November 30, 2006 and the costs for
this exercise of $1.23 million, including employee severance payments, site
closure expenses, factory reorganization expenses were provided for in the
quarter to March 31, 2006. However, costs of $0.01million, including that
element of employee severance costs relating to the payment of loyalty bonuses,
have been expensed to the profit and loss account in the Quarter to December
2006.

Additionally, in the quarter to September 30, 2006, the Company's UK subsidiary,
Eclipse Magnetics Limited, announced the cessation of certain of its
manufacturing activities and its relocation to the Atlas site in Sheffield,
England. While provision was made for this move at September 30, 2006, further
provisions of $0.08 have been made in the three months to March 31, 2007,
principally in respect of increases in the amounts previously provided re empty
property rentals.

OTHER INCOME AND EXPENSES

Other income and expenses has moved from a net credit of $.08 million in Q2 of
2006 to a net credit of $0.13 million in Q2 of 2007. For the six month period
under review other income and expenses has moved from a net credit of $0.09
million in 2006 to a net credit of $0.18 in 2007.

The increase is primarily due to the inclusion of $0.08 million in Q2 of fiscal
2007 in respect of the Group's share of earnings in Ningbo Hightec Magnetic
Assemblies Co. Ltd., a joint venture company in which the company holds a 25%
stake.

                                       47
<PAGE>

INCOME TAX

An income tax charge of $0.04 million arose in the quarter to March 31, 2007
compared to a charge of $0.1 million in the comparable period last year. For the
six months to March 31, 2007 there was a $0.09 million charge compared to a
$0.31 million credit in the comparable period last year.

Income taxes represented 7.59% of the profit before tax in the three months to
March 31, 2007 and 5.09% of the loss before tax in 2006. For the six months to
March 31, 2007 taxes represented 13.46% of the net loss before tax and 7.59% for
the comparable period last year.

In general, differences between the Company's effective rate of income tax and
the statutory rate of 35% result from such factors as: tax charges in certain
overseas subsidiaries within the Spear & Jackson group being taxed at rates
different from the statutory rate; the utilization of tax losses which are not
recognized within the deferred tax computation, the provision of valuation
allowances against potential deferred tax assets regarded as non-recoverable and
permanent differences between accounting and taxable income as a result of
non-deductible expenses and non-taxable income.

The principal reasons for the significant fluctuations between the effective
rates of tax and the US Federal statutory rate in the periods under review are
summarized below:

      i)    As a result of pre-tax losses in a number of the UK entities in the
            six months to March 2007 and the ongoing benefit of a tax deduction
            (spread over 4 years) in respect of the special contribution of $7.2
            million that was made to the Company Pension Plan in fiscal 2005,
            tax losses have been generated in certain of the UK companies.
            Valuation allowances of approximately $0.19 million have been
            applied to these losses as a recent history of losses and other
            factors has precluded the Company from demonstrating that it is more
            likely than not that the benefits of these operating loss carry
            forwards will be realized.

      ii)   Income within certain overseas subsidiaries within the Spear &
            Jackson Group is taxed at different rates from the effective rate.
            The typical local taxation rate suffered by the Company's non-US
            overseas subsidiaries is approximately 30% compared to a US Federal
            Statutory rate of 35%. The effect of applying a rate of 30%, as
            opposed to 35%, to the Company's results is a tax debit of
            approximately $0.02 million.

      iii)  Permanent differences between accounting and taxable income as a
            result of non-deductible expenses have had the effect of increasing
            the taxation charge by $.0 9 million.

      iv)   In addition, the rate of tax has been increased as a result of
            losses that have been incurred in the United States for which no
            utilization against future income is envisaged in the short term and
            to which a valuation allowance has therefore been applied (tax
            impact $0.07 million).

      v)    The gain of $0.22 arising in the three months to March 31, 2007 on
            the sale of the Company's surplus land at its Atlas site, Sheffield,
            is not subject to taxation due to the availability of capital losses
            brought forward which have not been recognized within the deferred
            tax computation.

The majority of the Group's deferred tax asset relates to timing differences
originating in its UK subsidiaries. Such deferred tax balances have been
provided at 30%. Legislation currently awaiting government approval will reduce
the rate to 28% from April 2008 onwards. If this new tax legislation had been
formally enacted as of Mach 31, 2007, the effect on the Group's condensed
consolidated financial statements for the six months ended March 31, 2007 would
have been as follows:

      i)    The income tax provision would have been reduced by $165 resulting
            in an income tax benefit of $70.

      ii)   The deferred tax asset of $17,577 would reduce by $1,168 to $16,409.

      iii)  The net of tax minimum pension liability adjustment of $46,660 would
            increase by $1,333 to $47,993.

                                       48
<PAGE>

INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES

Our net income from continuing activities after income taxes in the three months
to March 31, 2007 was $0.55 million (2006: $2.06 million loss). In the six
months to March 31, 2007 the loss from continuing activities was $0.80 million
(2006: $3.73 million)

DISCONTINUED OPERATIONS

Discontinued operations in the results for the three and six month periods
ending to March 31, 2006 relate to the Metrology Division's Coventry Gauge
thread gauge measuring division based in the UK, and the Megapro screwdriver
division of Spear & Jackson, Inc.

During the fourth quarter of fiscal 2005, the company began marketing for sale
its thread gauge measuring business located in the United Kingdom. The carrying
values of the assets relating to this entity were initially written down to
estimated fair value in the quarter ended March 31, 2005 and further write-downs
were made in the final quarter of fiscal 2005. On February 28, 2006, the Company
concluded the sale of these assets for a nominal consideration.

The Megapro screwdriver division was disposed with effect from September 30,
2003 when the trade and assets of the principal Megapro companies were
transferred at their net book value to a management buy-in team headed by the
managing director of the Megapro business.

In accordance with SFAS No. 144, "Accounting For the Impairment or Disposal of
Long-Lived Assets", the Company's previously issued Financial Statements have
been reclassified to present separately the net operations, cash flows, assets
and liabilities of these business segments, where material, as "Discontinued
Operations".

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents amounted to $7.21 million at March 31, 2007 ($9.93
million at September 30, 2006), working capital (excluding deferred taxes)
totaled $33.10 million ($30.25 million at September 30, 2006) and our
stockholder's equity was $22.38 at March 31, 2007 ($21.84 million at September
31, 2006).

Net cash used in operating activities in the six month period ended March 31,
2007 was $2.97 million compared to $1.05 million in the six months ended March
31, 2006. This increase of $1.92 million primarily arises from:

   -  increase in trade working capital outflows of $2.21 million (361%)

   -  decrease in net inflows from other assets and liabilities (including
      taxation) of $2.74 million (95.93%)

   -  Reduction in net loss (adjusted for depreciation, gain on sale of land and
      buildings and deferred income taxes, etc) of $3.03 million (92.2%) as
      dealt with in the commentary on results, above.

The reasons for these trade working capital variances and movements in other
assets and liabilities are summarized below:

(a)   Trade working capital variances.

      The net decrease in cash inflows derived from decreases in trade working
      capital is as follows:

                                                   Note          $ million

      Decreased inventory inflows                  (i)             (2.00)
      Increased trade receivable outflows          (ii)            (0.49)
      Increased trade payable inflows              (iii)            0.28
                                                                   -----
                                                                   (2.21)

                                       49
<PAGE>

i)    The inventory inflows for the six months to March 31, 2006 benefited from
      the rigorous inventory reduction program initiated within the UK hand and
      tool division at the beginning of fiscal 2006. By September 30, 2006,
      stock levels across most of the divisions had decreased, especially in
      those operations undergoing manufacturing reorganization programs, where
      lower inventory levels were achieved following the move to factored rather
      than own-manufactured product. As a result, therefore, stock reductions in
      the six months to March 31, 2007 were not as pronounced as in the previous
      period under review. In Eclipse Magnetics, however, where the
      reorganization plans were initiated at a later date, there have been
      significant stock reductions in the six month period to March 31, 2007.

ii)   The increase in trade receivable outflows is primarily due to the
      increased levels of export sales in February and March 2007 in certain of
      our operating divisions when compared to the same period last year. Such
      export sales have longer settlement terms For example, payment dates can
      range from 60 days to 90 days after date of invoice for export based
      customers, compared to 30 to 60 days for home based customers. The
      differing sales profiles can therefore have a significant impact on trade
      receivable levels when comparing one period to another.

iii)  Decreased trade payable outflows of $0.28 million mirror the inventory
      movements discussed in i), above, although the favorable variance has been
      diluted by increasing levels of purchases of factored goods from overseas
      suppliers on reduced settlement terms.

(b)   Variances in cash flows attributable to other assets and liabilities

i)    The major contributory factor is the $1.7 million payment of severance and
      move costs associated with the UK manufacturing reorganization programs at
      the Wednesbury and Atlas sites and the Eclipse Magnetics division. In the
      six month period to March 31, 2007 $ 1.7 million had been defrayed. In the
      six-month period to March 31, 2006 although $0.5 million had been defrayed
      at that date in respect of the UK manufacturing reorganization program,
      this payment was offset, in cash flow terms, by an additional
      restructuring provision of $1.5 million that was made in respect of the
      closure of the Wednesbury site.

ii)   Reduced accrual levels at March 31, 2007 compared to March 31, 2006,
      especially in those restructured trading entities where creditors in
      respect of direct labor costs, previously accrued for in other creditors,
      have been replaced with accruals for factored/bought-in product, that are
      included within trade payables.

Cash used in investing activities in the six months to March 31, 2007 was $0.44
million compared to $0.82 million in 2006. The 2006 comparatives include a $0.23
million investment in Ningbo Hightec Magnetic Assemblies Co. Ltd., a joint
venture company in which the company holds a 25% stake. Additionally, the 2006
figures include higher capital expenditure levels including start up funding in
the Bowers Shanghai operation and new investment in the Bowers UK operations.
The 2007 expenditure mainly comprises the purchase of new computer hardware at
the UK operations Head Quarters at the Atlas site in Sheffield. The six months
to March 31, 2007 also includes an inflow of $294 relating to the sale proceeds
of land at the Atlas site, Sheffield, England.

There was no net cash provided by financing activities in the six month period
to March 31, 2007 compared to $0.68 million in the comparable period last year.
The 2006 figure represents the utilization of the UK bank facility to meet
cyclical trading demands in the UK, increased pension plan contributions and the
payment of restructuring costs associated with the manufacturing reorganization
program. There has been no similar utilization of the UK bank overdraft facility
in the six months to March 31, 2007.

BANK FACILITIES

The UK subsidiaries of Spear & Jackson plc and Bowers Group plc maintain a line
of credit of $8.83 million. This is secured by fixed and floating charges on the
assets and undertakings of these businesses. Of the total facility, $5.88
million relates to bank overdrafts and $2.95 million is available for letters of
credit. These facilities are denominated in British pounds. The overdraft
carries interest at UK base rate plus 1%. At March 31, 2007 and September 30,
2006 the company had $nil outstanding under the overdraft line and at March 31,
2007 $0.04 million in outstanding letters of credit (September 30, 2006: $0.6
million).

                                       50
<PAGE>

The French and Australian subsidiaries of Spear & Jackson plc maintain
short-term credit facilities of $2.86 million denominated in Euros and
Australian dollars. The facilities comprise bank overdraft lines, with interest
rates ranging from 6.8% to 12.6%, together with facilities for letters of credit
and the discount of bills receivable. There was nothing outstanding under the
overdraft lines at both March 31, 2007 and September 30, 2006. $0.22 million of
letters of credit and bills were outstanding under these facilities at March 31,
2007 (September 30, 2006: $0.5 million).

The UK facilities were renewed in December 2006, the Australian facilities were
renewed in October 2006 and the French facilities fall for renewal at various
dates in 2007. These lines of credit are subject to the Company's and its
subsidiaries' continued credit worthiness and compliance with the applicable
terms and conditions of the various facilities. Assuming that the Company
maintains compliance with these conditions it is anticipated that all the
facilities will continue to be renewed on comparable terms and conditions.

The Company's bank accounts held with the HSBC Bank plc by UK subsidiaries of
Spear & Jackson plc and Bowers Group plc form a pooled fund. As part of this
arrangement the companies involved have entered into a cross guarantee with HSBC
Bank plc to guarantee any bank overdraft of the entities in the pool. At March
31, 2007 the extent of this guarantee relating to gross bank overdrafts was
$23.43 million (September 30, 2006 $21.6 million). The overall pooled balance of
the bank accounts within the pool at March 31, 2007 was net cash in hand balance
of $3.56 million (September 30, 2005 $5.4 million).

The bank overdraft and other facilities of Spear & Jackson Australia Pty.
Limited have been guaranteed by its immediate parent, James Neill Holdings
Limited and the bank overdraft and other facilities of Spear & Jackson France SA
have been guaranteed by Spear & Jackson plc.

Historically, our business operations have been funded from net operating income
supplemented, where necessary, by utilization of the UK, French and Australian
banking facilities described above. We believe what we have sufficient capital
resources, liquidity and available credit under our current principal banking
facilities supplemented, where necessary, by temporary increases, to sustain our
current business operations and normal operating requirements for the
foreseeable future.

As the Company continues to focus its efforts on improving the competitiveness
of its worldwide operations, additional funding may be required to finance
restructuring of the non-profitable areas of the Company's divisions and to meet
items of significant one-off expenditure. Such expenditure may include:
investment in new capital equipment; further special contribution payments to
reduce the pension plan deficit; and any expansion of the Spear & Jackson or
Bowers operations.

Funding for these initiatives may be obtained through the negotiation of
increased bank lending facilities or the sale of surplus assets.

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

The Company makes a range of contractual obligations in the ordinary course of
business. The following table summarizes the Company's principal obligations at
March 31, 2007:

                             Total Amount       Payments due by period ($m)
                             Committed      1 year     1-3      4-5      5 years
Contractual obligation       ($m)           or less    years    years    or more

Capital lease obligations    1.5            0.6        0.8      0.1      -
Operating leases
(note a)                     5.5            1.1        1.8      1.3      1.3
                             ---            ---        ---      ---      ---
                             7.0            1.7        2.6      1.4      1.3
                             ---            ---        ---      ---      ---

(a)   Amounts represent the minimum rental commitments under non-cancelable
      operating leases.

                                       51
<PAGE>

(b)   Excluded from the above tables are the amounts payable by the Company to
      the UK defined benefit pension plan as future funding obligations over the
      five year term shown above cannot be accurately forecast. The annual
      contribution rate is set annually by the actuary in accordance with the
      applicable UK regulatory legislation. In the year ended September 30, 2006
      the Company paid $3.4 million into the plan. With regard to the year ended
      September 30, 2007, in the ten month period to July 31, 2007 the level of
      contributions will be approximately $3.1 million. Contributions after that
      date will be determined after consultation between the Company, the
      actuary and the pension plan trustees. Following the introduction of new
      UK pension legislation it is anticipated that, post July 31, 2007, Company
      contributions will increase but the amount of such increase will only be
      established once the Plan's triennial valuation at April 5, 2007 is
      completed by the Plan actuary and discussions between the Company and the
      Plan Trustees are concluded.

(c)   As at March 31, 2007 the Company had letters of credit of $0.26 million
      outstanding, which are secured by the UK and Australian credit facilities.

At March 31, 2007 the Company had no material off-balance sheet arrangements
other than the non-debt obligations described in contractual obligations above.

OUTLOOK

We anticipate that an operating profit (before the inclusion of FAS 87 pension
charges) of approximately $1.4 million will be recorded in Quarter 3 of fiscal
2007. After taking into account quarterly pension charges of $2.1 million an
operating loss is forecast for Quarter 3. This result is dependant upon current
forecast sales levels being realized with no significant sales revenue either
being lost or being deferred into future quarters and no dilution of margins.
The trading result for the year is still anticipated to be a loss, as all base
trading profits will be eliminated by the significant non-cash pension charge
calculated in accordance with FAS 87. The Company's actuaries anticipate that
the charge will be $8.0 million for fiscal 2007 compared to $8.4 million for
fiscal 2006. As a result of the level of pension charges, the Company also does
not anticipate returning a net profit after tax for fiscal 2007. Management will
consider all available operational strategies to mitigate the negative impact of
trading losses which arise as a result of these high pension costs.

As previously reported, during the later part of fiscal 2005 and during 2006 the
Company performed a detailed review of its UK manufacturing operations to
identify initiatives to combat declining sales performance and the increase in
low cost imports from Far Eastern markets. In January 2006, the Company
announced the closure of its Wednesbury manufacturing and distribution facility
and the relocation of the central UK warehousing facility to the Atlas site in
Sheffield, England. This was completed by the end of November 2006. In fiscal
2005 the Company had previously sold the excess element of its site and on July
27, 2006 the Company completed the sale of the remaining element of the
Wednesbury property.

In addition, in the third quarter of fiscal 2006, the Company announced the
cessation of certain manufacturing operations at both its Atlas site and the
Eclipse Magnetics UK facility in Sheffield. It was also announced that the
remaining elements of the Magnetics business would be transferred to the Atlas
Site. This reorganization was completed in December 2006.

The Wednesbury site closure, the Atlas reorganization and the Eclipse
restructuring and relocation represent a significant change to the shape and
structure of the UK business and it is therefore probable that, in the short
term, the cost savings that the reorganizations will deliver will be diluted
whilst new procedures and processes are being established. Nevertheless, the
results for the six month period ended March 31, 2007 showed an improvement in
the Company's gross margins over the comparable period in the prior year from
30.74% in 2006 to 34.43% in 2007 which demonstrates that the reorganization
initiatives are already impacting positively on the business.

Given the competitive markets in which we operate, we will continue to look at
further initiatives to rationalize underperforming areas of the business and to
monitor operational infrastructures in the United Kingdom, particularly overhead
costs, to ensure that these are as cost efficient as possible and at a level
appropriate to the needs of the business.

                                       52
<PAGE>

The Company's core UK hand and garden businesses continue to face challenging
trading conditions. The trends highlighted in Q1 of fiscal 2007 remain, with the
key considerations being soft demand in the UK retail sector, fierce competition
from cheap foreign imports and the increasing trend for multiple retailers to
buy and promote own label brands in preference to Company products. The
reorganization program referred to above was implemented to address these issues
and further strategies will be considered to further improve the Company's base
- line profitability.

As with the Company's UK hand and garden tool businesses, and despite strong
trading performances in Quarters 1 and 2, our Australasian and French
subsidiaries continue to experience difficult trading conditions because of flat
retail demand, the ongoing drought in Australia, increased levels of competition
from Far East imports, reduced consumer spending and the increasing trend of
retail groups to consolidate and to increase their promotional activity of house
brands in preference to company branded product.

To counteract such factors, the management of these operations has developed and
introduced a number of new and extended ranges and promotional programs. Going
forward it is anticipated that these ranges should deliver incremental sales and
margin growth. Additionally, overhead reduction programs are ongoing as
management continues to focus on the removal of all excess costs from the
businesses.

Within the Metrology division, the selling and distribution outlet in Maastricht
is now fully operational. In the future, this revenue and earnings growth will
be enhanced by the division's operation in Shanghai, China. In Q2 of fiscal
2007, a further $0.5 million of investment funding has been injected into the
business. These funds will be utilized in acquiring items of plant and
machinery, which will enable the company to set up its own manufacturing
facility. This manufacturing should be operational during the course of Q3

Looking forward, demand for our own manufactured metrology hand tools will
continue to face further pressure from low cost Far East imports. The Company
therefore recognizes the need to focus its UK manufacturing sites on producing
more high technology products and measuring solutions. New products are the key
drivers for growth and several new ranges are due to be launched during the
remainder of fiscal 2007.

We anticipate that our businesses will face the issues of increased costs and
margin erosion as a result of raw material, fuel and other utility price
increases, interest rate increases, the $8.0 million FAS 87 pension charge and a
weak dollar. These factors will again put pressure on our margins and overhead
costs. Wherever possible, these increases will be passed on though sales price
increases or their adverse effects will be mitigated by cost reductions or the
implementation of earning enhancing strategies.

Any strengthening of the US dollar would impact favorably on the business, as
this would ease the pressure on margins and increase our competitiveness.
Current trends, however, indicate no end to a continued weakening which will
place additional pressure on our sales into a number of our US$ denominated
export markets.

In the forthcoming months we will continue to focus on improving cash
generation. In the first half of fiscal 2007 significant costs have been
defrayed in relation to the various restructuring initiatives. These costs have
been funded from existing core UK bank facilities. Further funds have also been
utilized to finance the next stage of the development of the Shanghai business
through the set up of its own manufacturing facility. The Company has commenced
negotiations with the trustees of the pension plan to determine the level of
future employer cash contributions that will become effective in Q4. The
contributions will be calculated in accordance with new UK pension legislation
and after discussions with the Plan trustees. The new contribution rate will not
be known until after the Plan's triennial valuation has been completed by the
Plan actuary and discussions between the Company and the Trustees are concluded.
It is likely, however, that pension payments will increase from July 2007.

To restrict the pressure that this expenditure will have on the Company's bank
facilities, focus will be maintained on the strict control of working capital
and the implementation of strategies to both increase Company profitability and
reduce costs.

                                       53
<PAGE>

Going forward, the success factors critical to our business include sales growth
through penetration in new and existing markets; the implementation of
strategies to enable us to compete against suppliers based in low cost
manufacturing regimes; successful procurement of new and existing products at
favorable prices, emphasis on new product development activities so that we can
exploit our brand equity and technical expertise to differentiate our product
offerings from cheap "me-too" imports; emphasis on promotional campaigns and
demonstration tours which focus on high margin product groups and on those high
added value areas of the Metrology and Magnetics businesses; continued
reorganization of our existing manufacturing and overhead bases so that they are
as cost efficient as possible; the successful development of our operations in
China and elsewhere; and the maximization of cash resources and the negotiation
of additional bank facilities, where required, so that we are able to fund new
initiatives and take advantage of market opportunities.

Much, however, will continue to depend on the level of retail demand in our UK,
French and Australasian markets. Softening demand and a further deterioration in
consumer confidence could significantly impact on our earnings levels in
subsequent periods.

The formal resolution of the SEC legal action in fiscal 2005 and the Class
Action Litigation will enable the Company to move forward with more certainty so
that both short and long term commercial strategies can be formulated and
implemented. The stability of the Company will be further enhanced by the
settlement of the derivative Action litigation. Additionally, the Court's
approval, on January 22, 2007, to the Corporate Monitor's request to be relieved
of his duties is another indication of the significant steps that the Company
has taken in restoring its financial and reputational standing since the
Monitor's original appointment in April 2004.

The sale of Jacuzzi Brands, Inc.'s 61.8% majority shareholding in Spear &
Jackson, Inc. to United Pacific Industries Limited ("UPI") on July 28, 2006
removed another area of uncertainty and has provided a platform for future
business growth. The development of detailed business strategies under our new
ownership structure is in its formative stages but potential synergies and areas
of specific market and commercial expertise, particularly in the Far Eastern
trading arena, have been identified which, going forward, are hoped to be of
benefit to both Spear & Jackson, Inc. and UPI.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The principal market risks to which the Company is exposed comprise interest and
exchange rate fluctuation, changes in commodity prices and credit risk.

INTEREST RATE RISK

The Company is exposed to interest rate changes primarily as a result of
interest payable on its bank borrowings, car finance arrangements classified as
finance leases and interest receivable on its cash deposits. At March 31, 2007
the Company had no borrowings in the form of overdrafts, finance lease
liabilities of $0.84 million and had cash and cash equivalents of approximately
$7.21 million. Given the current levels of borrowings and the amounts
outstanding under finance leases, the Company believes that a 1% change in
interest rates would not have a material impact on consolidated income or cash
flows. Holding the same variables constant, a 10% increase in interest rates
would increase the Company's interest charge by $0.08 million.

The nature and amount of our debt and cash deposits may, however, vary as a
result of future business requirements, market conditions, and other factors.
The definitive extent of our interest rate risk is not therefore quantifiable or
predictable because of the variability of future interest rates and business
financing requirements.

EXCHANGE RATE RISK

The Company has operations in the United Kingdom, France, Holland, Australia,
New Zealand and China. These operations transact business in the relevant local
currency and their financial statements are prepared in those currencies.
Translation of the balance sheets, income statements and cash flows of these
subsidiaries into US dollars is therefore impacted by changes in foreign
exchange rates.

                                       54
<PAGE>

In the six months ended March 31, 2007 compared to the equivalent period in
2006, the change in exchange rates had the effect of increasing the Company's
consolidated sales by $4.58 million or 9.07%. Since most of the Company's
international operating expenses are also denominated in local currencies, the
change in exchange rates had the effect increasing operating expenses by $1.85
million for the six months ended March 31, 2007 compared to the comparable prior
year period. If the US dollar further weakens in the future, it could result in
the Company having to suffer reduced margins in order for its products to remain
competitive in the local market place.

Additionally, our subsidiaries bill and receive payments from some of their
foreign customers and are invoiced and pay certain of their overseas suppliers
in the functional currencies of those customers and suppliers. Accordingly, the
base currency equivalent of these sales and purchases is affected by changes in
foreign currency exchange rate.

We manage the risk and attempt to reduce such exposure by periodically entering
into short-term forward exchange contracts. At March 31, 2007 the Company held
forward contracts to sell Australian and New Zealand dollars to buy
approximately $0.78 million US dollars.

The contract values were not materially different to the period end value of the
contracts. A 10% strengthening or weakening of the US$ against its Australian
and New Zealand counterparts could, however, result in the Company suffering
losses or benefiting from gains of approximately $0.08 million had no forward
contracts been taken out.

COMMODITY PRICE RISK

The major raw materials that we purchase for production are steel, cobalt,
nickel and plastic. We currently do not have a hedging program in place to
manage fluctuations in commodity prices.

CREDIT RISK

Credit risk is the possibility of loss from a customer's failure to make
payments according to contract terms. Prior to granting credit, each customer is
evaluated, taking into consideration the borrower's financial condition, past
payment experience, credit bureau information, and other financial and
qualitative factors that may affect the borrower's ability to repay. Specific
credit reviews are used in performing this evaluation. Credit that has been
granted is typically monitored through a control process that closely monitors
past due accounts and initiates collection actions when appropriate. In
addition, credit insurance is taken out in respect of a substantial proportion
of the Company's non-UK receivables as a means of recovering outstanding debt
where the customer is unable to pay.

At March 31, 2007 the Company had made an allowance of $1.17 million in respect
of doubtful accounts which management believes is sufficient to cover all known
or expected debt non-recoveries.

ITEM 4.  CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") that are designed to ensure that information required to be
disclosed in its reports filed or submitted under the Exchange Act is processed,
recorded, summarized and reported within the time periods specified in the SEC's
rules and forms, and that such information is accumulated and communicated to
the Company's management, including the Company's Principal Administrative
Officer (PAO) and Chief Financial Officer (CFO), as appropriate, to allow for
timely decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
is required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.

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<PAGE>

The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the former acting Chief
Executive Officer (now Chairman and Managing Director of the Company's principal
UK operating subsidiaries), the PAO and CFO, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15(e) as of the end of the period covered by this report.
Based upon that evaluation, the PAO and CFO concluded that the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Company's periodic SEC filings, and
management has concluded that the unaudited consolidated condensed financial
statements included in this Form 10-Q fairly present, in all material respects,
the Company's financial position, results of operations and cash flows for the
periods presented.

There has been no significant change in our internal control over financial
reporting that occurred during the period covered by this report that has
materially affected, or that is reasonably likely to materially affect our
internal control over financial reporting.

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

On April 15, 2004, the US Securities and Exchange Commission filed suit in the
U.S. District Court for the Southern District of Florida against the Company and
Mr. Dennis Crowley, its then current Chief Executive Officer/Chairman, among
others, alleging violations of the federal securities laws. Specifically with
regard to the Company, the SEC alleged that the Company violated the SEC's
registration, anti-fraud and reporting provisions. These allegations arise from
the alleged failure of Mr. Crowley to accurately report his ownership of the
Company's stock, and his alleged manipulation of the price of the Company's
stock through dissemination of false information, allowing him to profit from
sales of stock through nominee accounts. On May 10, 2004, the Company consented
to the entry of a preliminary injunction, without admitting or denying the
allegations of the SEC complaint. The SEC is continuing its investigation into
pension issues. The Company is offering its full cooperation.

As a further measure, the Court appointed a Corporate Monitor to oversee the
Company's operations. In addition to Mr. Crowley consenting to a preliminary
injunction the Court's order also temporarily barred Mr. Crowley from service as
an officer or director of a public company, and prohibited him from voting or
disposing of Company stock. Although Soneet Kapila has continued to serve as
Corporate Monitor for the Company, on January 10, 2007, he applied to the Court
to terminate the role of Corporate Monitor having determined that his function
was no longer necessary. On January 22, 2007, the Court entered the order
relieving the Corporate Monitor of his duties.

Following Mr. Crowley's suspension the Board appointed Mr. J.R. Harrington, a
member of its Board of Directors, to serve as the Company's interim Chairman.
Mr. William Fletcher, a fellow member of the Company's Board of Directors, who,
until October 27, 2004, was the Company's Chief Financial Officer, and who is a
director of Spear & Jackson plc, based in Sheffield, was elected to serve as
acting Chief Executive Officer. Following extensive settlement negotiations with
the SEC and Mr. Crowley, the Company reached a resolution with both parties. On
September 28, 2004, Mr. Crowley signed a Consent to Final Judgment of Permanent
Judgment with the SEC, without admitting or denying the allegations included in
the complaint, which required a disgorgement and payment of civil penalties by
Mr. Crowley consisting of a disgorgement payment of $3,765,777 plus prejudgment
interest in the amount of $304,014, as well as payment of a civil penalty in the
amount of $2,000,000. In May 2005, the SEC applied to the Court for the
appointment of an administrator for the distribution of these funds as well as
funds collected from co-defendants International Media Solutions, Inc., Yolanda
Velazquez and Kermit Silva who were not affiliated with the Company, to the
victims of their actions, pursuant to the Fair Funds provisions of the
Sarbanes-Oxley Act of 2002.

On November 18, 2004, the Company signed a Consent to Final Judgment of
Permanent Injunction with the SEC pursuant to which the Company, without
admitting or denying the allegations included in the Complaint filed by the
Commission, consented to a permanent injunction from violation of various
sections and rules under the Securities Act of 1933 and the Securities Exchange
Act of 1934. No disgorgement or civil penalties were sought from, or ordered to
be paid by, the Company.

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<PAGE>

Additionally, the Company entered into a Stock Purchase Agreement with PNC Tool
Holdings LLC ("PNC") and Mr. Crowley, the sole member of PNC. Under the Stock
Purchase Agreement, the Company acquired, for $100, and other good and valuable
consideration, 6,005,561 common shares of the Company held by PNC, which
represented approximately 51.1% of the outstanding common shares of the Company
at December 31, 2004, and which constituted 100% of the common stock held by
such entity. The parties also executed general releases in favor of each other
subject to the fulfillment of the conditions of the Stock Purchase Agreement.
The Stock Purchase Agreement was effected on April 8, 2005, following formal
approval by the SEC on February 10, 2005 and, on February 15, 2005 by the U.S.
District Court for the Southern District of Florida of the settlement of the
litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc., International
Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No:
04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further conditioned
on, among other things, the disgorgement and civil penalty funds being paid by
Mr. Crowley. These monies have now been received and are being administered for
the benefit of the victims of the alleged fraud by a court appointed
administrator pursuant to the Fair Funds provision of the Sarbanes-Oxley Act of
2002.

With the return of the Spear & Jackson shares to the Company by PNC, the
stockholders of the Company had their percentage stock interest increase
correspondingly. Jacuzzi Brands, Inc. ("Jacuzzi"), which at this time was a
beneficial owner of 3,543,281 shares of common stock had its interest in the
Company increase to approximately 61.8% of the outstanding common stock.

Subsequent to the SEC action a number of class action lawsuits were initiated in
the U.S. District Court for the Southern District of Florida by Company
stockholders against the Company, Sherb & Co. LLP, the Company's former
independent auditor, and certain of the Company's directors and officers,
including Mr. Crowley, the Company's former Chief Executive Officer/Chairman,
and Mr. Fletcher, the Company's former CFO and current acting Chief Executive
Officer. These suits allege essentially the same claims as the SEC suit
discussed above.

These various class action suits were subsequently consolidated. Thereafter, the
defendants filed certain Motions to Dismiss with regard to the Complaint and on
October 19, 2005, the U.S. District Court for the Southern District of Florida
in Re Spear & Jackson Securities Litigation entered its Order regarding these
Motions. The Order denied the Company's motion as well as that of Mr. Crowley,
the former Chief Executive Officer of Spear & Jackson. The Court granted the
Motion to Dismiss on behalf of Mr. Fletcher, the Company's interim Chief
Executive Officer, and also granted the Motion to Dismiss on behalf of the
Company's former independent auditor, Sherb & Co., LLP. The class plaintiff has
filed an appeal regarding the trial court's decision to dismiss the case against
Sherb & Co., LLP, which appeal is presently pending. No appeal was filed with
respect to the decision to dismiss the case against Mr. Fletcher.

On July 7, 2006 the Company, Dennis Crowley and the Class Plaintiff reached a
Memorandum of Understanding ("MOU"), which confirmed that the plaintiffs, the
Company and Crowley in the class action had reached an agreement in principle
for the settlement of this litigation, subject to Court approval. According to
the terms of the MOU, the Company deposited the sum of $650,000 into a Qualified
Settlement Fund for disbursement to the Settlement Class pending approval of the
Court. Subsequent to this, Sherb & Co. also agreed to the terms of the
Settlement agreeing to contribute an additional $125,000.

On November 9, 2006, the Stipulation of Settlement was filed with the Court for
preliminary approval. On January 31, 2007, the Court entered its Order
Preliminarily Approving Settlement and Providing for Notice and Setting Class
Action Statutory Settlement Hearing. The Order, for purposes of the proposed
settlement, certified a "Settlement Class" of persons (with certain exceptions)
who purchased the Company's common stock between February 1, 2002 and April 15,
2004. The Order also approved as to form and content the Notice of Pendency and
Proposed Settlement of Class Action and Summary Notice. The Settlement Hearing
was set for May 11, 2007 at 11:30 a.m. at the West Palm Beach, Florida Federal
District Courthouse to determine whether the terms of the Settlement are fair,
just reasonable and adequate to the Settlement Class, and should be approved by
the Court; whether a final judgment should be entered dismissing the litigation;
whether the proposed plan of allocation should be approved; and to determine the
amount of fees and expenses to be awarded to plaintiffs' lead counsel. The Order
also appointed a claims administrator and provided for notice to those who
sought exclusion from the Settlement Class.

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<PAGE>

On May 11, 2007, the U.S. District Court for the Southern District of Florida,
sitting in West Palm Beach Florida, heard the Plaintiff's motion for Final
Approval of the Class Action Settlement and Plan of Allocation, to which there
were no objectors or class members that opted out of, the settlement. On May 14,
2007, the Court signed the Final Judgment thus forever extinguishing all of the
class claims against the Company, and barring any claims for contribution by
third parties. The Final Judgment made clear that the settlement was not an
admission of wrongdoing or liability by the Company.

To facilitate the distribution of the funds from the class suit to the class
shareholders and keep administrative costs to a minimum, the SEC Claim's
Administrator applied to the Court on January 9, 2007 for permission to combine
the class action funds with the funds derived in the SEC litigation, and allow
for the SEC's Claim's Administrator to disburse the collective funds.

On September 6, 2005, the Company was served with a Shareholder Derivative
Complaint, Hapka v. Crowley, et al. Case No. CA005068, filed on June 1, 2004 in
the Circuit Court for Palm Beach County, Florida. The suit names the Company as
a nominal defendant, and former directors Robert Dinerman, William Fletcher and
John Harrington, in addition to Dennis Crowley and the Company's prior
independent auditors, Sherb & Co. LLP. The suit contains essentially the same
factual allegations as the SEC suit, which was filed in April 2004 in the U. S.
District Court for the Southern District of Florida, and the series of class
actions claims initiated in the U.S. District Court, but additionally alleges
state law claims of breaches of fiduciary duty, abuse of control, gross
mismanagement, waste of corporate assets, unjust enrichment and lack of
reasonable care by various or all the defendants.

Due to ongoing settlement discussions with the plaintiff's attorney, the Company
had not responded to the Complaint. In August 2006 the Company entered into a
settlement agreement with the plaintiff by agreeing to accept certain changes to
its corporate governance procedures and the payment of $70,000 in legal fees.
The settlement was filed with the Court in early November 2006, and if approved
by the Court, will result in a dismissal of the suit and release the Company and
the former director defendants Robert Dinerman, William Fletcher and John
Harrington. Dennis Crowley and Sherb & Co. continue as defendants in this suit.

On February 2, 2007, the Circuit Court entered a Preliminary Approval Order
preliminarily approving the partial settlement pursuant to the Stipulation of
Settlement between plaintiff and the Company, including its former directors
William Fletcher, John Harrington, and Robert Dinerman. The Court has set May
29, 2007 at 8a.m. at the West Palm Beach County Courthouse, for the final
Settlement Hearing to determine (i) whether the terms of the Partial Settlement
are fair, just reasonable and adequate to the derivative stockholders and to the
Company, and should be approved by the Court; (ii) whether a final judgment
should be entered dismissing the litigation and releasing the defendants Spear &
Jackson, as described in the Stipulation; and (iii) to determine the amount of
fees and expenses to be awarded to plaintiffs' counsel. The Order approved as to
form and contents the Notice of Partial Settlement and the mailing and
distribution process. The Order also provided for notice to those who sought
exclusion from the settlement.

There can be no assurance that the Courts will approve the terms of this
settlement.

Additionally, the Company is, from time to time, subject to legal proceedings
and claims arising from the conduct of its business operations, including
litigation related to personal injury claims, customer contract matters,
employment claims and environmental matters. While it is impossible to ascertain
the ultimate legal and financial liability with respect to contingent
liabilities including lawsuits, the Company believes that the aggregate amount
of such liabilities, if any, in excess of amounts accrued or covered by
insurance, will not have a material adverse effect on the consolidated financial
position or results of operations of the Company.

ITEM 6.  EXHIBITS

31.1     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002.

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<PAGE>

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated: May 15, 2007                     SPEAR & JACKSON, INC.

                                        By: /s/ Patrick J. Dyson
                                            --------------------
                                            Patrick J. Dyson
                                            Chairman, Director and
                                            Chief Financial Officer
                                            (Principal Executive Officer)

Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.


Dated: May 15, 2007                     By: /s/ Patrick J. Dyson
                                            --------------------
                                            Patrick J. Dyson
                                            Chairman, Director and
                                            Chief Financial Officer
                                            (Principal Executive Officer)

Dated: May 15, 2007                     By: /s/ Lewis Hon Ching Ho
                                            ----------------------
                                            Lewis Hon Ching Ho
                                            Director and
                                            Chief Administrative Officer
                                            (Principal Administrative Officer)


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