UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   (Mark One)


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

                      For the quarter ended March 31, 2004

                                       OR

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

For the transition period from _____________ to ____________

Commission file number 0-32013

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


Nevada                                   91-2037081
----------                               ---------------
(State of other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

2200 Corporate Boulevard, Suite 314
Boca Raton, Florida                                     33431
-----------------------------------------               --------
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code: 561-999-9011

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.001 per share

Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1034 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in rule 12b-2 of the Exchange Act). Yes [ ] No [X].

Registrant had 11,741,122 shares of Common Stock, $.001 par value per share,
outstanding as of May 10, 2004.


<PAGE>



                              Spear & Jackson, Inc.


                                      INDEX



PART I.  FINANCIAL INFORMATION
                                                                Page Number
Item 1   Financial Statements (Unaudited)

         Consolidated Balance Sheets - March 31, 2004
          and September 30, 2003 (audited)                            3

         Consolidated Statements of Operations - Three and
          Six Months ended March 31, 2004 and 2003                    4

         Consolidated Statements of Comprehensive Income (Loss)
          - Three and Six Months ended March 31, 2004
          and 2003                                                    5

         Consolidated Statements of Cash Flows - Six Months
          ended March 31, 2004 and 2003.                              6

         Notes to Consolidated Financial Statements                   7

Item 2   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                         19

Item 3   Quantitative and qualitative disclosures about
          market risk                                                 41

Item 4   Controls and Procedures                                      44

PART II  OTHER INFORMATION

Item 1   Legal Proceedings                                            45

Item 2   Changes in Securities and Use of Proceeds                    46

Item 3   Defaults Upon Senior Securities                              46

Item 4   Submission of Matters to a Vote of Security Holders          46

Item 5   Other Information                                            46

Item 6   Exhibits and Reports on Form 8-K                             47

SIGNATURES                                                            49


                                       2
<PAGE>


                              SPEAR & JACKSON, INC.

                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

                                         At March 31,         At September 30,
                                            2004                    2003
                                         -------------         ---------------
                                          (Unaudited)
                       ASSETS
Current assets:
 Cash and cash equivalents               $      3,740          $        9,191
 Trade receivables, net                        20,445                  15,432
 Inventories                                   25,444                  23,350
 Other current assets                           1,603                     999
                                          -----------          ---------------
Total current assets                           51,232                  48,972

Property, plant and equipment, net             27,219                  19,561
Deferred taxation                              11,666                  10,919
Investments                                       163                     148
                                          -----------          ---------------
Total assets                             $     90,280          $       79,600
                                          ==========           ===============


                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Notes payable                           $      2,180          $          304
 Trade accounts payable                         9,850                   7,552
 Accrued expenses and other liabilities        14,631                  12,793
 Foreign taxes payable                            101                      50
                                          -----------          ---------------
Total current liabilities                      26,762                  20,699
Other liabilities                               1,470                   1,787
Pension liability                              27,109                  25,262
                                          -----------          ---------------
Total liabilities                              55,341                  47,748
                                          -----------          ---------------
Stockholders' equity:
 Common stock                                      12                      12
 Additional paid in capital                    51,590                  51,590
 Accumulated other comprehensive income:
  Pension additional minimum liability        (33,337)                (30,204)
  Foreign currency translation
   adjustment                                  13,402                   7,406
  Unrealized losses on derivative
   instruments                                     (4)                    (15)
 Retained earnings                              3,816                   3,603
 Less 270,000 common stock held in
  treasury at cost                               (540)                   (540)
                                          -----------          ---------------
                                               34,939                  31,852
                                          -----------          ---------------
Total stockholders' equity               $     90,280          $       79,600
                                          ==========           ===============


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




                                       3


<PAGE>



                              SPEAR & JACKSON, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                                 (in thousands)


<TABLE>
<CAPTION>

                                                For the Three Months Ended           For the Six Months Ended
                                                   March 31,        March 31,          March 31,        March 31,
                                                    2004             2003              2004              2003
                                              ----------------- ----------------  ---------------- -----------------
                                                                   (Restated)                         (Restated)
<S>                                           <C>               <C>               <C>              <C>
Net sales                                     $     27,427      $    25,034       $    50,409      $     47,220
Cost of goods sold                                  18,721           16,840            34,528            32,090
                                              ----------------- ----------------  ---------------- -----------------
Gross profit                                         8,706            8,194            15,881            15,130

Operating costs and expenses:
Selling, general and administrative expenses         8,401            6,162            15,077            11,542
                                              ----------------- ----------------  ---------------- -----------------
Operating income                                       305            2,032               804             3,588

Other income (expense)
Royalties                                             -                -                 -                   12
Rental income                                           46               37                82                70
Interest and bank charges (net)                        (63)             (57)             (141)              (89)
                                               ---------------- ----------------  ---------------- -----------------
Income from continuing operations
 before income taxes                                   288            2,012               745             3,581
Provision for income taxes                            (356)            (573)             (532)             (959)
                                               ---------------- ----------------  ---------------- -----------------
(Loss) income from continuing operations               (68)           1,439               213             2,622
                                               ---------------- ----------------  ---------------- -----------------

Discontinued operations:

Income from operations of Megapro
 screwdriver division (including taxation
 of $0)                                               -                   5              -                   33
                                               --------------- -----------------  ---------------- -----------------
Income from discontinued operations                   -                   5              -                   33
                                               --------------- -----------------  ---------------- -----------------

Net (loss) income                             $        (68)     $     1,444       $       213      $      2,655
                                               =============== =================  ================ =================

Basic and diluted (loss) earnings per share:

From continuing operations                          $(0.01)           $0.12             $0.22             $0.22

From discontinued operations                          0.00             0.00              0.00              0.00
                                               --------------- -----------------  ---------------- -----------------
Total                                               $(0.01)           $0.12             $0.22             $0.22
                                               =============== =================  ================ =================

Weighted average shares outstanding             12,011,122       12,011,122        12,011,122        12,011,122
                                               =============== =================  ================ =================

</TABLE>





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

                                       4
<PAGE>




                              SPEAR & JACKSON, INC.

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                   (Unaudited)
                                 (in thousands)


<TABLE>
<CAPTION>
                                                  For the Three    For the Three       For the Six       For the Six
                                                  Months Ended      Months Ended       Months Ended     Months Ended
                                                    March 31,        March 31,          March 31,         March 31,
                                                      2004              2003               2004             20023
                                                  --------------   ---------------    ---------------   --------------
                                                                    (Restated)                            (Restated)

<S>                                                <C>              <C>                 <C>               <C>
Total net (loss) income                            $        (68)    $      1,444        $        213      $     2,655

Other comprehensive income (loss)

 Additional minimum pension liability                      (758)             652              (3,133)            (242)
 Foreign currency translation adjustments                 1,183             (711)              5,996            1,228
 Unrealized losses on derivative instruments                 11               (3)                 11              (12)
                                                  --------------   ---------------    ---------------   --------------
Total comprehensive income (loss)                  $        368     $      1,382        $      3,807      $     3,629
                                                  ==============   ===============    ===============   ==============

</TABLE>


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


                                       5

<PAGE>



                              SPEAR & JACKSON, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                 For the Six Months Ended
                                                                                 March 31,         March 31,
                                                                                    2004              2003
                                                                              ----------------- -----------------
                                                                                                  (Restated)

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                            <C>                <C>
Net income                                                                     $          213     $       2,655
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation                                                                            1,508             1,431
Profit on sale of plant, property and equipment                                            14              (173)
Deferred income taxes                                                                     470               938
Changes in operating assets and liabilities, excluding the effects
of acquisitions and dispositions:
Increase in trade receivables                                                          (3,232)             (115)
Increase in inventories                                                                    68            (3,285)
Decrease in other current assets                                                         (291)              178
Contributions paid to pension plan                                                     (1,424)           (1,414)
(Decrease) increase in other non-current liabilities                                      650               (94)
Increase in trade accounts payable                                                      1,175             2,624
Increase in accrued expenses and other liabilities                                        674               644
Increase (decrease) in foreign taxes payable                                                3                17
Increase (decrease) in other liabilities                                                 (466)              947
                                                                             ----------------- -----------------
NET CASH  PROVIDED BY  OPERATING ACTIVITIES                                              (638)            4,353
                                                                             ----------------- -----------------

INVESTING ACTIVITIES:
Purchases of property, plant and equipment                                             (6,838)           (2,611)
Proceeds from sale of property, plant and equipment                                      -                  170
                                                                              ----------------- -----------------

NET CASH USED IN INVESTING ACTIVITIES                                                  (6,838)           (2,441)
                                                                              ----------------- -----------------

FINANCING ACTIVITIES:
Repayment of long-term debt                                                              -                   (4)
Repayment of in  overdraft                                                              1,844            (1,004)
Repayment of shareholder loan                                                            -                  (60)
                                                                              ----------------- -----------------
NET CASH  (USED IN) PROVIDED BY FINANCING ACTIVITIES                                    1,844            (1,068)
                                                                              ----------------- -----------------

Effect of exchange rate changes on cash and cash equivalents                              181              -
                                                                              ----------------- -----------------

CHANGE IN CASH AND CASH EQUIVALENTS                                                    (5,451)              844

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                        9,191             6,486
                                                                              ----------------- -----------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                     $        3,740     $       7,330
                                                                              ================= =================

SUPPLEMENTAL CASH FLOW INFORMATION
    Cash paid for interest                                                     $          197     $           5
                                                                              ================= =================
    Cash paid for taxes                                                        $           59     $           4
                                                                              ================= =================



</TABLE>


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

                                       6

<PAGE>
                             SPEAR & JACKSON, INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          (in thousands except shares)

Note 1--Basis of Presentation

              These 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 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. and Societe Neill France S.A.

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.

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

The accompanying unaudited consolidated 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
consolidated financial position as of March 31, 2004 and September 30, 2003, and
the consolidated statements of operations for the three and six month periods
ended March 31, 2004 and March 31, 2003 and consolidated statements of cash
flows for the six month periods ended March 31, 2004 and March 31, 2003 have
been included and that the disclosures are adequate to make the information
presented not misleading. The balance sheet at September 30, 2003 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 annual report on Form 10-KSB for the year ended September 30, 2003.

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, 2003 included in the Company's annual report
filed on Form 10-KSB for the period then ended.

The consolidated financial statements of Spear & Jackson, Inc. are denominated
in US dollars. Changes in exchange rates between UK sterling and the US dollar
will affect the translation of the UK 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 have 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 the three and six month periods ended March 31,
2004 are not necessarily indicative of the results to be expected for the full
year.

Certain reclassifications have been made to prior period amounts to conform to
current period presentation.

                                       7

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO 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 - Recently Issued Accounting Standards

In December 2003, the FASB revised SFAS No. 132, "Employers' Disclosures about
Pensions and other Postretirement Benefits," ("SFAS No. 132") establishing
additional annual disclosures about plan assets, investment strategy,
measurement date, plan obligations and cash flows.

In addition, the revised standard established interim disclosure requirements
related to the net periodic benefit cost recognized and contributions paid or
expected to be paid during the current fiscal year. The new annual disclosures
are effective for financial statements with fiscal years ending after December
15, 2003 and the interim period disclosures are effective for interim periods
beginning after December 15, 2003. The Company will adopt the annual disclosures
for its fiscal year ending September 30, 2004 and the interim disclosures for
its fiscal quarter ending March 31, 2004. The adoption of the revised SFAS No.
132 will have no impact on the Company's results of operation or financial
condition.

Note 3 - Critical Accounting Policies

         A summary of significant accounting policies is included in Note 2 to
the audited consolidated financial statements included in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 2003. 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-KSB for the fiscal year
ended September 30, 2003, 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 judgements 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 and pension and other postretirement benefit costs.
Since September 30, 2003, there have been no changes in our critical accounting
policies and no significant changes to the assumptions and estimates related to
them.

Note 4 - Nature of Business

         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 but this was terminated in May 2003. 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. In connection with this disposition, the Company is

                                       8

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 4 - Nature of Business - continued

currently evaluating the circumstances of the transaction and has retained
counsel to evaluate whether appropriate procedures were followed and whether
full consideration was received for the disposition.

         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.

         The acquisition was originally presented in the Company's Form 10-KSB
filing for the year ended September 30, 2002, as filed on January 13, 2003, as a
purchase by Megapro Tools, Inc. of Spear & Jackson plc and Bowers Group plc
("S&J"). Following review by, and subsequent recommendations from, the SEC, the
Company accounted for the acquisition of S&J as a reverse acquisition for
financial reporting purposes. The Company's 10-KSB was accordingly revised and
re-submitted on May 28, 2003. 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 7 November 2002 the Company changed its name from Megapro Tools,
Inc. to Spear & Jackson, Inc.

Note 5 - 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 $332 for the quarter ending March 31, 2004
and $66 for the same quarter last year. Pension costs for the six months ending
March 31, 2004 were $650 compared with $132 for the equivalent prior year
period. The net periodic costs include the following components:

<TABLE>
<CAPTION>
                                      For the Three   For the Three    For the Six     For the Six
                                       Months Ended    Months Ended    Months Ended   Months Ended
                                       March 31,      March 31,        March 31,      March 31,
                                          2004           2003            2004            2003
                                      -------------  -------------    ------------   -------------
<S>                                          <C>            <C>             <C>             <C>
Sevice cost                                  $ 387          $ 348           $ 762           $ 689
Interest cost                                2,289          1,933           4,507           3,826
Expected return on plan assets                (2,779)      (2,398)         (5,473)         (4,743)
Recognition of actuarial (gain) loss             435          183             854             360
                                      -------------  -------------    ------------   -------------
Total Benefit cost                           $ 332           $ 66           $ 650           $ 132
                                      =============  =============    ============   =============
</TABLE>

                                       9

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 5 - Retirement Benefit Plans - continued

         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. The Company has contributed $0.7 million to the funds in the quarter
ending March 31, 2004 (2003 $0.7 million) and $1.4 million in the six month
period ending on that date (2003 $1.4 million). The Company anticipates that
contributions of $2.8 million will be made in the year ending September 30, 2004
(2003 $2.8 million).

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, 2003, our most recent
measurement date for pension accounting, the value of the accumulated pension
benefit obligation (ABO) exceeded the value of pension investments by
approximately $25.2 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 2004.
If the level of pension assets exceeds the ABO as of a future measurement date,
the full charge against stockholders' equity would be reversed.


Note 6 - Property, Plant and Equipment, net

                                              At March 31,    At September 30,
                                              -------------   ------------------
                                                  2004            2003
                                              -------------   ------------------
                                              (in thousands)   (in thousands)
     Land and buildings                          $ 19,739        $ 11,839
     Machinery, equipment and vehicles              5,770           5,603
     Furniture and fixtures                            86             160
     Computer hardware                               -                 74
     Computer software                               -                 35
     Assets held under finance leases               1,624           1,850
                                               ------------   ---------------
                                                 $ 27,219        $ 19,561
                                               ============   ===============

         Included in machinery and equipment at March 31, 2004 are capital
leases with a net book value of $1.6 million (September 30, 2003 $1.9 million).
The cost of these assets held under capital leases was $2.7 million (September
30,2003 $2.5 million) and the accumulated depreciation relating to the assets
was $1.1 million (September 30, 2003 $0.6 million). In the six months ended
March 31,2004, the Company has spent $6.5million on the acquisition of its
manufacturing site in Wednesbury, England and a warehouse and office facility in
Boca Raton, Florida

Note 7 - Inventories

                                        At March 31,         At September 30,
                                       -------------        ------------------
                                            2004                  2003
                                       -------------        ------------------
                                       (in thousands)         (in thousands)
     Finished products                    $ 20,836               $ 18,747
     In-process products                     5,285                  4,894
     Raw materials                           5,544                  5,464
     Less: allowance for slow
      moving and obsolete inventories       (6,221)                (5,755)
                                       -------------        ------------------
                                          $ 25,444               $ 23,350
                                       =============        ==================

                                       10

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 8--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 for US and foreign income taxes attributable to continuing operations
consists of:

<TABLE>
<CAPTION>
                                    For the Three   For the Three      For the Six     For the Six
                                    Months Ended     Months Ended     Months Ended     Months Ended
                                      March 31,       March 31,         March 31,       March 31,
                                        2004             2003             2004             2003
                                   ---------------- ---------------  ---------------- ---------------
<S>                                         <C>             <C>               <C>             <C>
     Current tax  credit (charge)           $    5          $  (46)           $  (62)         $  (21)
     Deferred tax (charge)                    (361)           (527)             (470)           (938)
                                   ---------------- ---------------  ---------------- ---------------
                                            $ (356)         $ (573)           $ (532)         $ (959)
                                   ================ ===============  ================ ===============
</TABLE>


         A reconciliation of the provision for income taxes compared with the
amounts provided at the US federal rate is as follows:

<TABLE>
<CAPTION>
                                   For the Three    For the Three     For the Six       For the Six
                                    Months Ended     Months Ended      Months Ended      Months Ended
                                      March 31,        March 31,        March 31,         March 31,
                                        2004             2003              2004              2003
                                   -------------- ---------------- ----------------- -----------------
     Tax at US federal statutory
<S>                                   <C>              <C>               <C>             <C>
      income tax rate                 $ (101)          $ (706)           $ (373)         $ (1,265)
     Overseas tax at rates different
      to effective rate                  (26)              55                87               160
     Permanent differences               (36)             (34)              (75)              (67)
     Valuation allowance                (191)             115              (171)              213
     Miscellaneous                        (2)              (3)                -                 -
                                    ----------       -----------       -------------      -----------
                                      $ (356)          $ (573)           $ (532)          $  (959)
                                    ==========       ===========       =============      ===========
</TABLE>



Note 9 - 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, USA and Australasia.

         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. 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 periodically reviewed by the Company's Board of Directors.

                                       11

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 9--Segment Data - continued

 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.

         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     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,
                           2004       2003        2004        2003         2004        2003          2004        2003
                        --------- -----------  ----------- -----------  ----------- ------------  ----------- -----------

<S>                     <C>       <C>          <C>         <C>           <C>        <C>           <C>         <C>
  Hand & garden tools   $ 21,033  $   19,328   $   10,005  $    6,922    $  38,151  $    36,025   $   10,005  $    6,922
  Metrology tools          4,104       3,587        2,932       2,674        7,687        6,914        2,932       2,674
  Magnetic products        2,290       2,119          984       1,068        4,571        4,281          984       1,068
  Screwdrivers              -            271         -            163         -             606         -            163
  Corporate                 -           -          13,298       8,771         -            -          13,298       8,771
                        --------- -----------  ----------- -----------  ----------- ------------  ----------- -----------
     Total              $ 27,427  $   25,305   $   27,219  $   19,598   $   50,409  $    47,826   $   27,219  $   19,598
                        ========= ===========  =========== ===========  =========== ============  =========== ===========

Attributable to:
Continuing operations   $ 27,427  $   25,034   $   27,219  $   19,435   $   50,409  $    47,220   $   27,219  $   19,435
Discontinued operations     -            271         -            163         -             606         -            163
                        --------- -----------  ----------- -----------  ----------- ------------  ----------- -----------
                        $ 27,427  $   25,305   $   27,219  $   19,598   $   50,409  $    47,826   $   27,219  $   19,598
                        ========= ===========  =========== ===========  =========== ============  =========== ===========

                              Depreciation       Capital expenditure          Depreciation          Capital expenditure
                        ---------------------  -----------------------  ------------------------  -----------------------
                          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,
                           2004       2003        2004        2003         2004        2003          2004        2003
                        ---------  ----------  ----------- -----------  ----------- ------------  ----------- -----------

  Hand & garden tools   $    564   $     474   $      142  $    1,515   $      999  $       960   $    3,418  $    1,680
  Metrology tools            121          95           16         525          220          196          161         543
  Magnetic products           95          93           23         333          171          155           25         333
  Screwdrivers               -            22         -          -               -            24         -           -
  Corporate                   47          47        3,232          55          118           96        3,234          55
                        ---------  ----------  ----------- -----------  ----------- ------------  ----------- -----------
     Total              $    827   $     731   $    3,413  $    2,428   $    1,508  $     1,431   $    6,838  $    2,611
                        =========  ==========  =========== ===========  =========== ============  =========== ===========

Attributable to:
Continuing operations   $    827   $     709   $    3,413  $    2,428   $    1,508  $     1,407   $    6,838  $    2,611
Discontinued operations      -            22         -          -               -            24         -           -
                        ---------  ----------  ----------- -----------  ----------- ------------  ----------- -----------
                        $    827   $     731   $    3,413  $     2,428  $    1,508  $     1,431   $    6,838  $    2,611
                        =========  ==========  =========== ===========  =========== ============  =========== ===========

                           Operating Income    Net Interest                Operating 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,
                           2004       2003        2004        2003         2004        2003          2004        2003
                        ---------  ----------  ------------ ----------- ----------- ------------  ----------- -----------

  Hand & garden tools   $    408   $   1,566   $      (63)  $     (81)  $      711  $     2,669   $     (123)  $    (111)
  Metrology tools            351         351           (5)         -           640          649           (9)         (5)
  Magnetic products          270         364           (3)         (3)         543          710           (6)         (3)
  Screwdrivers                -           11           -           (6)          -            46           -           (2)
  Corporate                 (724)       (249)           8          27       (1,090)        (440)          (3)         21
                        ---------  ----------  ----------- -----------  ----------- ------------  ----------- -----------
     Total              $    305   $   2,043   $      (63) $      (63)  $      804  $     3,634   $     (141) $     (102)
                        =========  ==========  =========== ===========  =========== ============  =========== ===========
Attributable to:
Continuing operations   $    305   $   2,032   $      (63) $      (57)  $      804  $     3,588   $     (141) $      (89)
Discontinued operations       -           11           -           (6)          -            46           -          (13)
                        ---------  ----------  ----------- -----------  ----------- ------------  ----------- -----------
                        $    305   $   2,043   $      (63) $      (63)  $      804  $     3,634   $     (141) $     (102)
                        =========  ==========  =========== ===========  =========== ============  =========== ===========

</TABLE>

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

                                       12

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 9 - 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       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,
                          2004        2003         2004       2003          2004       2003         2004        2003
                        ---------  ----------  ----------- -----------  ----------- ------------  ----------- -----------
<S>                     <C>        <C>         <C>         <C>          <C>         <C>           <C>         <C>
  United Kingdom        $ 12,507   $  12,885   $   22,221  $   17,553   $   22,532  $    23,528   $   22,221  $   17,553
  Europe                   6,234       4,384        1,255       1,196       10,292        8,294        1,255       1,196
  Australasia              3,927       4,598          520         678        8,746        9,736          520         678
  North America            1,740       2,412        3,223         171        3,177        4,309        3,223         171
  Other                    3,019       1,026         -           -           5,662        1,959         -           -
                        ---------  ----------  ----------- -----------  ----------- ------------  ----------- -----------
     Total              $ 27,427   $  25,305   $   27,219  $   19,598   $   50,409  $    47,826   $   27,219  $   19,598
                        =========  ==========  =========== ===========  =========== ===========   =========== ===========
Attributable to:
Continuing operations   $ 27,427   $  25,034   $   27,219  $   19,435   $   50,409  $   47,220    $   27,219  $   19,435
Discontinued operations     -            271         -            163         -            606          -            163
                        ---------  ----------  ----------- -----------  ----------- -----------   ----------- -----------
                        $ 27,427   $  25,305   $   27,219  $   19,598   $   50,409  $   47,826    $   27,219  $   19,598
                        =========  ==========  =========== ===========  =========== ===========   =========== ===========

                        Depreciation             Capital expenditure            Depreciation        Capital expenditure
                        ---------------------  -----------------------  -----------------------------------------------
                           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,
                          2004        2003          2004       2003           2004       2003         2004        2003
                        ---------  ----------  ----------- -----------  -----------------------  ------------ -----------
  United Kingdom        $    699   $     632   $      159  $    2,085   $    1,297  $    1,251   $     3,570  $    2,121
  Europe                      36          42            3        -              46          57             3           3
  Australasia                 76          56           19         343          147         121            31         477
  North America               16           1        3,232        -              18           2         3,234          10
                        ---------  ----------  ----------- -----------   ---------- -----------  ------------ -----------
     Total              $    827   $     731   $    3,413  $    2,428    $   1,508  $    1,431   $     6,838  $    2,611
                        =========  ==========  =========== ===========   ========== ===========  ============ ===========
Attributable to:
Continuing operations   $    827   $     709   $    3,413  $    2,428    $   1,508  $    1,407   $     6,838  $    2,611
Discontinued operations       -           22         -           -            -             24          -           -
                        ---------  ----------  ----------- -----------   ---------- -----------  ------------ -----------
                        $    827   $     731   $    3,413  $    2,428    $   1,508  $    1,431   $     6,838  $    2,611
                        =========  ==========  =========== ===========   ========== ===========  ============ ===========

                            Operating income     Net Interest                Operating 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,
                          2004        2003          2004       2003           2004       2003         2004        2003
                        --------- ------------  ---------- -----------   ----------------------  ------------ -----------

  United Kingdom        $    587   $    1,772   $     (27)  $     (17)   $   1,172  $    3,332   $      (75) $       (37)
  Europe                     332          250         (52)        (49)         197         170          (99)         (73)
  Australasia               (217)         229           8         -            (70)        531           15           (7)
  North America             (397)        (208)          8           3         (495)       (399)          18           15
                        ---------  -----------  ---------- -----------   ---------- -----------  ----------- ------------
     Total              $    305   $    2,043   $     (63) $      (63)   $     804  $    3,634   $     (141) $      (102)
                        =========  ===========  ========== ===========   ========== ============ =========== ============
Attributable to:
Continuing operations   $    305   $    2,032   $     (63)  $     (57)   $     804  $    3,588   $     (141) $       (89)
Discontinued operations      -             11         -            (6)        -             46          -            (13)
                        ---------  -----------  ---------- -----------   ---------- ------------ ----------- ------------
                        $    305   $    2,043   $     (63)   $    (63)   $     804  $    3,634   $     (141) $      (102)
                        =========  ===========  ========== ===========   ========== ============ =========== ============

</TABLE>


(a) Sales are attributed to geographic areas based on the location of the
customers.
(b) Represents property, plant and equipment, net.

                                       13

<PAGE>
                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                          (in thousands except shares)

Note 10 - Commitments and Contingencies

         The Company is currently involved in a legal action with the former
managing director of Spear & Jackson plc concerning the amount of severance
compensation payable following his dismissal as managing director as part of a
management reorganization program in November 2002. The outcome of this action
will not be known until later in 2004 but the Company is confident that the
amounts provided in respect of the dispute will be adequate to cover any amounts
payable should the Company's defense be unsuccessful.

During the 2003 fiscal year, the Company carried out a strategic review of its
Megapro screwdriver division, which was operating at a loss. It was determined
that the division was no longer a core activity of the Company, and various
divestment strategies were considered. Disposition of the assets was undertaken
by Neil Morgan, who was heading up Megapro, to a separate group, which included
Mr. Morgan, and in exchange for which Spear & Jackson, Inc. received promissory
notes and other receivables from management of $284,000, as well as discharge of
a loan in the amount of approximately $100,000 owed by the Company to Neil
Morgan. The assets disposed of had a net book value of approximately $384,000.

While the Company was evaluating the disposition of this non-core activity, no
specific authorization was afforded to prior management to formally dispose of
the operations of the Megapro assets pending approval by the Board of Directors
of the Company. Management is reviewing the terms of the transaction as well as
evaluating the receivable and the assets purportedly conveyed to consider its
course of action in this matter and whether it will require adjustment of the
consideration received in addition to the $97,000 already provided as
potentially irrecoverable in the Company's financial statements for the year
ended September 30, 2003.

         From time to time, the Company is also 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
operation of the Company.

Note 11 - Subsequent Events

         On April 15, 2004, the U.S. Securities and Exchange Commission filed
suit in the U.S. District Court for the Southern District of Florida, against
the Company and its 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 Dennis Crowley, our principal executive officer, to accurately report
his ownership of the Company's stock, and his alleged manipulation of the price
of the Company's stock through the 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.

         In addition, the Court has appointed a Corporate Monitor to oversee the
Company's operations. In addition to Crowley consenting to a preliminary
injunction, the Court's Order also temporarily bars Crowley as serving as an
officer or director of a public Company and prohibits him from voting or
disposing of Company stock. The Company's Board of Directors has also suspended
Crowley from all positions he occupied as an officer or director. The Company is
cooperating with the Corporate Monitor and the continuing SEC investigation.




                                       14
<PAGE>


                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                          (in thousands except shares)

Note 11 - Subsequent Events - continued

Subsequent to the SEC action, a number of class action lawsuits have
been initiated in the U.S. District Court for the Southern District of Florida
by Company shareholders against the Company and certain of its directors,
officers, and accounting firm including Crowley, William Fletcher, the Company's
CFO, and Sherb & Co. LLP, the Company's external auditor. These suits allege
essentially the same claims as the SEC suit, and seek unspecified damages. The
Company has not yet responded to the suits, and likely will not until they have
been consolidated and lead counsel appointed for the Class. It is impossible at
this time to ascertain the ultimate legal and financial liability or whether
these actions and the SEC action will have a material adverse effect on the
Company's financial condition.

Note 12 - Restatement of Previously Issued Financial Statements

On March 8, 2004 the Company filed form 10-QSB (Amendment 1) relating to the
period ended March 31,2003. Explained in detail, below, are the adjustments made
to the Company's original Form 10-QSB for the period ended March 31, 2003 which
was filed on May 9, 2003. In summary, the principal correcting item referred to
the revision of the presentation, under SFAS 87, of the Company's defined
benefit pension scheme. This revision followed the identification by the
scheme's actuaries of a material error in their calculations supporting the SFAS
87 disclosure used in the Company's financial statements for the year ended
September 30, 2002, as included in Form 10-KSB/A (Amendment 1) filed on May 28,
2003.

The Company's original form 10-KSB for the year ended September 30, 2002 was
filed on January 13, 2003 and was amended and the purchase of Spear & Jackson
plc and Bowers Group plc by Megapro Tools, Inc. was presented as a reverse
takeover and not as an acquisition by Megapro Tools, Inc. of the two other
entities.

On January 13, 2003, Spear & Jackson Inc. ("the Company") filed its annual
report on Form 10-KSB for the fiscal year ended September 30, 2002. On May 28,
2003 the Company filed Amendment No. 1 to the Annual Report on Form 10-KSB for
the fiscal year ended September 30, 2002. The amendment restated the original
Form 10-KSB in order to re-present the acquisition of Spear & Jackson plc and
Bowers Group plc by Megapro Tools, Inc. as a reverse takeover.

Amendment No. 2 to the Annual Report on Form 10-KSB for the year to September
30, 2002 was filed on December 29, 2003 in order to amend and restate the
consolidated financial statements for both the year ended September 30, 2002 and
the year ended September 30, 2001. Adjustments that impacted on the Consolidated
Statement of Operations, the Consolidated Balance Sheet and the Consolidated
Statement of Changes in Shareholders' Equity for the year ended September 30,
2002 also affected the previously filed forms 10-QSB and 10-QSB/A for the
quarters ended December 31, 2002, March 31, 2003 and June 30, 2003. These
quarterly returns were accordingly re-stated and were filed in February, 2004.

Amendments made to the original form 10-QSB, as filed on May 9, 2003, for the
three and six month periods ended March 31, 2003 and March 31, 2002 in respect
of the above adjustments, specifically comprise the following:

1.       The presentation of the Company's UK defined benefit pension plan has
         been restated. The adjustments required arose from errors and omissions
         in the calculations that were prepared by the Company's actuaries when
         producing the pension plan disclosures that were originally included in
         Amendment 1 to Form 10-KSB for the year ended September 30, 2002. The
         errors and omissions comprised:

         a)       Overstatements in the calculation of the market related value
                  of assets, which meant that additional unrecognized actuarial
                  losses should have been amortized in the consolidated income
                  statement for the years ended September 30, 2002 and September
                  30, 2001.
         b)       At September 30, 2002, no comparison of the fair value of plan
                  assets to the accumulated benefit obligation ("ABO") was
                  performed. Consequently a pension prepayment was incorrectly
                  recognized in the consolidated balance despite the ABO being
                  in excess of the fair value of plan assets. The 2002
                  consolidated balance sheet was therefore amended to properly
                  record an additional minimum pension liability equivalent to
                  the shortfall of plan assets compared to the plan's ABO.
         c)       The pension disclosures at September 30, 2001 were also
                  reconsidered and an additional minimum pension liability was
                  recognized in respect of that year also.


                                       15

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 12 - Restatement of Previously Issued Financial Statements - continued

         At September 30, 2002, item (a) impacted the previously reported figure
         for Selling, General and Administrative (SGA) expenses, and also the
         tax charge for the year. Item (b) resulted in the previously disclosed
         pension asset of $14,962 being presented as a pension liability of
         $20,442 with corresponding debit entries being made to deferred
         taxation of $10,621 and to the "Other

         Comprehensive Income (Loss)" caption within shareholders' equity of
         $24,343. The 2001 ABO pension adjustments, item (c), were reflected in
         the consolidated statement of changes in shareholders' equity for the
         year ended September 30, 2001. They also affected the SFAS 87 charges
         for 2002 and subsequent years. These adjustments also impact on the
         previously submitted financial statements for the three and six months
         ended March 31, 2003 as follows. Item (a) reduced the figure for
         retained profits brought forward at October 1, 2002, as originally
         stated, by $440 with $628 being credited to the brought forward pension
         liability and $188 being debited to the deferred tax asset at October
         1, 2002. Items (b) and (c) resulted in the previously disclosed pension
         asset of $16,654 being presented as a pension liability of $19,098 with
         corresponding debit entries being made to deferred taxation of $10,537
         and to the "Other Comprehensive Income (Loss)" caption within
         shareholders' equity of $24,585

2.       The fair value of the consideration for the deemed acquisition of
         Megapro Tools, Inc. was revised. This resulted in goodwill of $1,138
         being recognized which was then written off following a goodwill
         impairment review. With regard to the financial statements for the six
         months ended March 31, 2003, retained profits brought forward at
         October 1, 2002 were correspondingly reduced by this amount.

3.       Sales rebates totaling $915 in the three months ended March 31, 2003
         and $756 in the three months ended March 31, 2002, and rebates of
         $1,729 in the six months ended March 31, 2003 and $1,458 in the six
         months ended March 31, 2002, which were previously presented as a
         component of S, G and A expense, have been reanalyzed and are now shown
         as a reduction to sales.

4.       Expanded disclosures were included in "Other Comprehensive Income" in
         respect of unrealized gains and losses on derivative instruments to
         provide the quantified disclosures required by paragraphs 45-47 of SFAS
         133.

5.       Additional detailed segmental analysis disclosure.

6.       Additional contingencies disclosure. This has been done to supplement
         the original presentation and to ensure consistency with the footnote
         included in the financial statements for the year ended September 30,
         2002 which were included in Form 10-KSB/A (Amendment No 2) which was
         filed on December 29, 2003.

In addition to the above, following the disposal of the Company's Megapro
screwdriver division in September 2003, the results of that business were
re-classified as discontinued operations in the Company's Consolidated Statement
of Operations for the year ended September 30, 2003. The Consolidated Statements
of Operations for the quarters ended December 31, 2002, March 31, 2003 and June
30, 2003 have also been revised to incorporate a similar re-classification of
operations.

To summarize, the adjustments made to the original 10-QSB submission related to
balance sheet revisions and the reanalysis of amounts between profit and loss
account revenue and expense captions. There was, therefore, no change to the
previously recorded amounts for "Total Net Income" in the Consolidated Statement
of Operations for the three and six month periods ended March 31, 2003.

The following tables present the Consolidated Statements of Operations for the
three and six months ended March 31, 2003 as previously reported and as
restated. The financial information is presented in thousands, except for per
share data.

                                       16

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 12 - Restatement of Previously Issued Financial Statements - continued

Spear & Jackson, Inc.
Consolidated Statement of Operations
<TABLE>
<CAPTION>

                                                                          For the Three Months Ended
                                                                                March 31, 2003
                                                        -----------------------------------------------------------------
                                                        As Previously     As Restated      Discontinued    As Restated
                                                          Reported     Before Disclosure    Operations   After Disclosure
                                                                        Of Discontinued                   Of Discontinued
                                                                          Operations                        Operations
                                                        -------------- ------------------ ------------- -----------------
<S>                                                          <C>       <C>                      <C>     <C>
Net sales                                               $      26,220  $          25,305   $      (271) $         25,034
Cost of goods sold                                             17,008             17,008          (168)           16,840
                                                        -------------- ------------------ ------------- -----------------
Gross profit                                                    9,212              8,297          (103)            8,194

Operating costs and expenses:
Selling, general and administrative expenses                    7,169              6,254           (92)            6,162
                                                        -------------- ------------------ ------------- -----------------
Operating income (loss) from continuing operations              2,043              2,043           (11)            2,032

Other income (expense)

Rental income                                                      37                 37          -                   37
Interest and bank charges (net)                                   (63)               (63)            6               (57)
                                                        -------------- ------------------ ------------- -----------------
Income (loss) from continuing operations before taxation        2,017              2,017            (5)            2,012
Provision for income taxes                                       (573)              (573)         -                 (573)
                                                        -------------- ------------------ ------------- -----------------
Income (loss) from continuing operations                        1,444              1,444            (5)            1,439
                                                        -------------- ------------------ ------------- -----------------

Discontinued operations:
 Income from operations of Megapro screwdriver
 division                                                        -                  -                5                 5
                                                        -------------- ------------------ ------------- -----------------
Income from discontinued operations                              -                  -                5                 5
                                                        -------------- ------------------ ------------- -----------------

Net income                                              $       1,444  $           1,444   $      -     $          1,444
                                                        ============== ================== ============= =================

Basic and diluted earnings per share:

From continuing operations                                      $0.12              $0.12         $0.00             $0.12
From discontinued operations                                     0.00               0.00          0.00              0.00
                                                        -------------- ------------------ ------------- -----------------
Total                                                           $0.12              $0.12         $0.00             $0.12
                                                        ============== ================== ============= =================

Weighted average shares outstanding                        12,011,122         12,011,122    12,011,122        12,011,122
                                                        ============== ================== ============= =================


</TABLE>

                                       17

<PAGE>




                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 12 - Restatement of Previously Issued Financial Statements - continued


Spear & Jackson, Inc.
Consolidated Statement of Operations

<TABLE>
<CAPTION>

                                                                           For the Six Months Ended
                                                                                March 31, 2003
                                                        -----------------------------------------------------------------
                                                        As Previously     As Restated    Discontinued     As Restated
                                                          Reported     Before Disclosure  Operations   After Disclosure
                                                                        Of Discontinued                 Of Discontinued
                                                                          Operations                      Operations
                                                        -------------- --------------------------------------------------
<S>                                                     <C>            <C>                <C>           <C>
Net sales                                               $      49,555  $          47,826  $       (606) $         47,220
Cost of goods sold                                             32,484             32,484          (394)           32,090
                                                        -------------- ------------------ ------------- -----------------
Gross profit                                                   17,071             15,342          (212)           15,130

Operating costs and expenses:
Selling, general and administrative expenses                   13,437             11,708          (166)           11,542
                                                        -------------- ------------------ ------------- -----------------
Operating income (loss) from continuing operations              3,634              3,634           (46)            3,588

Other income (expense)
Royalties (net)                                                    12                 12          -                   12
Rental income                                                      70                 70          -                   70
Interest and bank charges (net)                                  (102)              (102)           13               (89)
                                                        -------------- ------------------ ------------- -----------------
Income (loss) from continuing operations before taxation        3,614              3,614           (33)            3,581
Provision for income taxes                                       (959)              (959)         -                 (959)
                                                        -------------- ------------------ ------------- -----------------
Income (loss) from continuing operations                        2,655              2,655           (33)            2,622
                                                        -------------- ------------------ ------------- -----------------
Discontinued operations:
 Income from operations of Megapro screwdriver
 division                                                        -                  -               33                33
                                                        -------------- ------------------ ------------- -----------------
Income from discontinued operations                              -                  -               33                33
                                                        -------------- ------------------ ------------- -----------------
Net income                                              $       2,655  $           2,655  $       -     $          2,655
                                                        ============== ================== ============= =================

Basic and diluted earnings per share:

From continuing operations                                      $0.22              $0.22         $0.00             $0.22
From discontinued operations                                     0.00               0.00          0.00              0.00
                                                        -------------- ------------------ ------------- -----------------
                                                                $0.22              $0.22         $0.00             $0.22
                                                        ============== ================== ============= =================

Weighted average shares outstanding                        12,011,122         12,011,122    12,011,122        12,011,122
                                                        ============== ================== ============= =================

</TABLE>

                                       18

<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 thereto and other information set forth in this
report.

Forward Looking Statements

The information in this discussion contains forward-looking statements within
the meaning of Section 27A of the Securities 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. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may", "will", "should",
"potential" or "continue", the negative of such terms or other comparable
terminology. 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. Factors that could
cause actual results to differ from expectations include, without limitation:

- achieving planned revenue and profit growth in each of the Company's business
  units;
- renewal of material contracts in the Company's business units consistent with
  past experience;
- successful and timely integration of any significant businesses acquired by
  the Company and realization of anticipated synergies;
- increasing price, products and services competition;
- emergence of new competitors or consolidation of existing competitors;
- the timing of orders and shipments;
- continuing availability of appropriate raw materials and factored products;
- maintaining and improving current product mix;
- changes in customer requirements and in the volume of sales to principal
  customers;
- changes in governmental regulations in the various geographical regions where
  the Company operates;
- the timely implementation of the Company's restructuring programs and
  financial plans;
- general economic and political conditions, including the global economic
  slowdown and interest rate and currency exchange rate fluctuation;
- continuing development and maintenance of appropriate business continuity
  plans for the Company's processing systems;
- absence of consolidation among key customers;
- attracting and retaining qualified key employees;
- no material breach of security of any of the Company's systems;
- the ability of the Company to control manufacturing and operating costs;
- continued availability of financing, and financial resources on the terms
  required to support the Company's future business strategies; and

                                       19

<PAGE>

- the outcome of pending and future litigation and governmental or regulatory
  proceedings.

In evaluating these statements, you should consider various factors, including
those summarized above, and, from time to time, in other reports the Company
files with the SEC. These factors may cause the Company's actual results to
differ materially from any forward-looking statement. The Company disclaims any
obligation to publicly update these statements, or disclose any difference
between its actual results and those reflected in these statements. The
information constitutes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.

CORPORATE ORGANIZATION

Overview

We currently conduct our business operations through our 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

Megapro Tools, Inc. was incorporated 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 Ms 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

                                       20

<PAGE>

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. Neill 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  the
Company with anything of value.  Mr. Neill 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.

The 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. 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 (approximately $235,000). The transaction closed
on September 6, 2002.

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,

                                       21

<PAGE>

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 shall be 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'
Agreement"), USI Mayfair Limited, PNC and Crowley (the "Stockholders") agreed
that, other than certain "unrestricted transfers", , they would not transfer any
Company Securities for 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.

Since the date of the acquisition, 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 our
change in business and would promote public recognition and more accurately
reflect our 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.

                                       22
<PAGE>



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

Spear & Jackson, Inc., through its principal operating entities, as disclosed in
note 1 to the financial statements, manufactures and distributes 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. 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;
*        Coventry Gauge - air and other gauges;
*        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 disposal 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's four principal business units and their product offerings can be
summarized as:

1)       Neill Tools, which consists of Spear & Jackson Garden Tools and Neill
         Tools, manufactures, among other products, hand hacksaws, hacksaw
         blades, hacksaw frames, builders' tools, riveter guns, wood saws and
         lawn, garden and agricultural tools, all non-powered. In addition,
         Neill Tools has supplemented its UK manufactured products with factored
         products from Far Eastern suppliers. Neill Tools product offering now
         includes a full range of hand power tools.

2)       Eclipse Magnetics' key products are permanent magnets (cast alloy),
         magnetic 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 in the form of
         sales of complete factored items to end-customers as well as sales of
         component 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.


                                       23
<PAGE>



3) The Company's metrology division comprises:

         Moore & Wright and Coventry Gauge which manufacture a wide variety of
         products. These products 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.

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 products are either own manufacture or sourced as fully complete
factored products or semi finished components.

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

       Name/Location                              Products Manufactured
       -------------                              ---------------------
A      UK

a)     Neill Tools                                Hand tools
       Atlas Site, Sheffield

b)     Spear & Jackson Garden Products            Garden tools
       Wednesbury, West Midlands

c)     Robert Sorby                               Wood turning tools
       Sheffield

d)     Eclipse Magnetics                          Magnetic products
       Vulcan Road, Sheffield

e)     Bowers Metrology                           Precision measuring tools
       Bradford

f)     Coventry Gauge                             Precision measuring tools
       Poole

                                       24

<PAGE>

B      France

a)     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.

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:

(a)      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.

(b)      Continuous product improvement and innovation.

(c)      Increasing market share by offering highly competitive product
         offerings.

(d)      The launch of new and innovative product and product ranges.

(e)      Significantly increasing our US penetration via large "Big Box"
         outlets.

                                       25

<PAGE>

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
magnet to a computer controlled materials handling system.

The Company's product offering is supported by a pipeline of new products and
range extensions. In the period from January 1, 2004 to March 31, 2004
announcements concerning new product ranges and other significant business
issues have included:

Neill Tools effected two key launches:

o    The `Predator' woodsaw which, in independent tests comparing it to its
     major competitors, has been proven to be the leader in its field.

o    Soft feel builders' tools which feature a new ergonomically designed handle
     which improves both the grip and the comfort of the product.

Eclipse Magnetics have developed:

o The `Optimag' range of magnets designed for modular clamping.

o    A lightweight depalletising head for use in the robotics industry.

o    Specialist magnetic clamping systems used in the refurbishment of floor
     panels of large ocean vessels.

The previously launched Metrology `SmartPlug' range of gauges was expanded in
March with the introduction of a wide range of options and accessories.
Additional distribution routes are being researched for this product consistent
with its target market of automotive component manufacturers worldwide.

Sorby launched `Stebcentre', a unique drive woodworking tool. The market
reaction has been very positive and initial sales order expectations have been
exceeded.

In Australia our new Managing Director continues to consolidate the company
following recent management changes, with emphasis on the promotion of the Spear
& Jackson brand and the increased sale of more product sourced from the UK.

France launched a number of new lawn and garden products mainly sourced from the
UK range. We have also recruited a new marketing manager to improve the
company's marketing expertise and the quality of its promotional literature.

DISCUSSION OF CRITICAL ACCOUNTING POLICIES

We prepare our consolidated financial statements in accordance with accounting
principles generally accepted in the United States. As such, we are required to
make certain estimates, judgements 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.

                                       26

<PAGE>

Management's Discussion and Analysis or Plan of Operations in the Company's
10-KSB filing for the year ended September 30, 2003 included a detailed
discussion which addressed our most critical accounting policies. The quarterly
financial statements for the period ended March 31, 2004, 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 judgements, 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 and inventory valuation.

In addition, the Company operates a contributory defined benefit plan covering
certain of its employees in the United Kingdom based subsidiaries of Spear &
Jackson plc. Several statistical and other factors which attempt to anticipate
future events are used in calculating the expense and liability related to the
plans. 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
these 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.

Since September 30, 2003 there have been no changes in our critical accounting
policies and no significant change to the assumptions and estimates related to
them.

OVERVIEW

In general, the results for the quarter ending March 31, 2004 were disappointing
when compared to the operating results for the equivalent period last year.

Although sales revenues in quarter 2 increased by $2,393 over last year, this
gain was primarily attributable to favorable currency exchange fluctuations in
the current year. As previously expressed, sales volumes were adversely affected
by the sluggish demand for garden tools in our UK markets, the continued impact
of the loss, in late 2003, of a major Australian customer, the negative impact
in export markets of the weakening US dollar and the soft domestic and
manufacturing economic environments. Disappointingly, the increased overhead
expenditure incurred in quarter one on enhancing and expanding the sales and
marketing function in both our UK and US operations has not yet resulted in the
budgeted sales increases that had been anticipated.

Following the trend highlighted in our overview for the quarter ended December
31, 2003, margins were also depressed by increases in raw material prices and

                                       27

<PAGE>

this, in conjunction with increased overhead charges, resulted in operating
profit falling to $288 in the period ended March 31, 2004 from $2,012 in the
same period last year.

The Company is addressing the fall in profitability by the launch of new
products (power garden tools and an extended wood saws range) to re-establish
our competitive edge over cheap imports. Additionally, we will continue to buy
in finished and semi finished components as a cost efficient alternative to own
manufacture.

The results discussed below compare the quarter ended March 31, 2004 and the six
month period ended on that date with the three and six month periods ended March
31, 2003. As explained in note 4 to the financial statements, the acquisition of
Spear & Jackson plc and Bowers Group plc ("S&J") by Megapro Tools, Inc. (now
Spear & Jackson, Inc.) has been accounted for as a reverse acquisition. In these
financial statements, S&J is the operating entity for financial reporting
purposes and the financial statements for all periods represent S&J's financial
position and results of operations. The operating results and net assets of
Megapro Tools, Inc. and its subsidiary companies are included in the
consolidated financial statements from September 6, 2002, the date of its deemed
acquisition until September 30, 2003, the effective date of the disposal of the
Megapro screwdriver division.

The disposal of the Megapro companies followed a review of the screwdriver
division by the directors of Spear & Jackson, Inc. from which it was determined
that the screwdriver division was not a core activity. As a result of the sale,
the Megapro business was disclosed in the consolidated financial statements for
the years ended September 30, 2003 and September 30, 2002 as a discontinued
operation. The Consolidated Statement of Operations for the three and six months
ended March 31, 2003 included within the attached financial statements
accordingly adopt this presentation.

The disposition of the assets was undertaken by Neil Morgan, who was heading up
Megapro, to a separate group, which included Mr. Morgan, and in exchange for
which Spear & Jackson, Inc. received promissory notes and other receivables from
management of $284, as well as discharge of a loan in the amount of
approximately $100 owed by the Company to Neil Morgan. The assets disposed of
had a net book value of approximately $384.

While the Company was evaluating the disposition of this non-core activity, no
specific authorization was afforded to prior management to formally dispose of
the operations of the Megapro assets pending approval by the Board of Directors
of the Company. Management is reviewing the terms of the transaction as well as
evaluating the receivable and the assets purportedly conveyed to consider its
course of action in this matter and whether it will require adjustment of the
consideration received in addition to the $97 already provided as potentially
irrecoverable in the Company's financial statements for the year ended September
30, 2003.

RESULTS OF OPERATIONS

All figures are expressed in $'000 unless otherwise stated.

                                       28

<PAGE>

Sales revenues increased by $3,189 from $47,220 in the six months ended March
31, 2003 to $50,409 for the six months period ended March 31, 2004. Sales of
$27,427 for the quarter ended March 31, 2004 were $2,393 higher than sales of
$25,034 recorded for the comparable period last year.

The net increase in revenues for both the six months and three months ended
March 31, 2004 is analyzed as follows:

                                               Six Months              Quarter
                                               ended                   ended
                                               March 31                March 31
                                               2004                    2004
                                     Note      $m                      $m

Effect of exchange rate movements   (a)        7.8                     4.6

Sales volumes decreases             (b)       (4.3)                   (2.1)

Increased rebates                   (c)       (0.3)                   (0.1)
                                              -----                   -----
                                               3.2                     2.4
                                              =====                   =====

Notes:

(a)    The functional currency of the majority of the group's revenues is
       sterling and the variation in the US$/(pound) cross rate in the three and
       six month periods ending March 31, 2004 compared to the comparable
       periods last year has had a significant impact on the US dollar value of
       the group's sales. The average cross rates in the periods under review
       can be summarized as:

                               Average Cross Rates

                                    2004             2003             % Movement

       6 months ended March 31      1.772            1.588            + 11.6%

       3 months ended March 31      1.8402           1.605            + 14.7%

(b)    Business conditions in most of our end markets remained challenging as a
       result of depressed demand, the intense competition from competing
       suppliers in a number of our product ranges and the weakening of the US
       dollar. Additionally, although the Company strategy to aggressively
       promote our product continues, increased expenditure in the current year
       on expanding and strengthening the sales and marketing infrastructure has
       not yet produced the anticipated revenue growth.

       Despite these difficult trading conditions both the Neill Tools and
       Robert Sorby divisions showed sales volume increases for both the quarter
       ($0.7m) and six months ($0.3m) ended March 31 2004 compared to the
       comparable periods last year. Furthermore, the Neill Tools 2004 sales
       volume increase is all the more creditable given that the 2003 half year
       sales for this division included $2.8 million of sales made to a major UK
       wholesaler, Toolbank, with whom the company ceased to trade in April
       2003.

                                       29

<PAGE>

       However, the volume increases achieved in Neill Tools and Robert Sorby
       were exceeded by volume decreases in the group's other UK and French
       divisions ($0.4 million in the quarter ended March 31, 2004 and $0.5
       million in the six months ended on that date) and, in particular, in
       Australia and New Zealand (a $2.3 million shortfall in quarter 2, 2004
       and a $4.2 fall for 2004 year to date). The Australian sales shortfall in
       2004 compared to 2003 is primarily attributable to the loss of a major
       customer to whom significant sales were made in the first two quarters of
       2003.

(c)    The level of rebates has increased in 2004 as a result of increased sales
       and changes in customer profile within the Neill Tools division together
       with the benefits experienced in 2003 which accrued from certain
       customers not triggering higher rebate levels.

Although gross profit has increased in absolute terms in both quarter 2, 2004
and the six months ended March 31, 2004 in comparison to the amounts generated
in the equivalent prior year periods, the gross margin percentages have declined
in both the quarter and the six months ended March 31, 2004 when compared to the
same periods in the prior year. This reflects the adverse impact caused by the
weakening US dollar and increases in certain raw material prices which we have
been unable to pass on to our customers.

In conjunction with the erosion of gross margins, overheads incurred in the
quarter and the six months ended March 31, 2004 have increased when compared to
the overheads charged in the three and six months ended March 31, 2003. Reasons
for these increases include significant movements in the US dollar/sterling
exchange cross rate, additional head office costs relating to legal and other
professional fees, higher distribution costs associated with the Company's new
direct trading route and certain one-time savings experienced in 2003 which have
not been repeated in 2004.

As a result of the combined effects of diluted margins and increased overheads,
operating income in the quarter ended March 31, 2004 has fallen by $1,727 to
$305 from the $2,032 recognized in the three months to March 31, 2003.
Similarly, operating income for the six months ended March 31, 2004 has fallen
to $804, a decrease of $2,784 when compared to the operating income earned in
the comparable period for 2003.

The Company's management has already implemented a number of initiatives to
improve profitability and further strategies are being considered. Emphasis will
continue to be placed on biasing our sales mix towards higher margin products,
restructuring of the UK manufacturing cost base is ongoing and the Company's
sales and marketing functions have been augmented to ensure the Company derives
maximum advantage from the new UK direct trading route.

As previously reported, a new managing director is in place to lead our
Australian operations. His immediate responsibility will be to regain market

                                       30

<PAGE>

share through the establishment of new customer contacts so that the adverse
effect on sales revenues of the loss of a major customer can be mitigated as far
as possible.

These restructuring costs and other initiatives, together with continued
investment in new capital equipment in the UK, are anticipated to achieve
improved efficiencies and reduced labor costs with corresponding improvements in
the ongoing profitability of the Company.

In addition to the above reorganization programs, the Company has also invested
significantly in the acquisition of land and buildings in the UK and US in the
six months ended March 31, 2004. In October 2003 we acquired, for $3.2 million,
the land and buildings occupied by our garden tools division in Wednesbury,
England. This will secure operations there and will enable us to plan future UK
garden tool strategies with certainty.

In March 2004 we purchased through our wholly-owned subsidiary S&J Acquisitions,
Corp. warehouse premises in Boca Raton, Florida for $3.3 million (including
preliminary fit out costs). The warehouse (including office space) is 30,000
square feet in size and will form the central distribution hub for the expansion
of our North American sales operation. Part of the premises is sublet and the
rental income receivable will help defray the ongoing costs of the sales and
administration function to be installed at the site.

The operating performance of the Company is dealt with in more detail in the
discussion below.

DIVISIONAL REVIEW OF SALES REVENUES

We aim to maintain and develop the revenues of our businesses through the launch
of new products, the enhancement of existing items and the continued marketing
of these companies' brands in order to retain and gain market share.

Summary details are as follows:

Neill Tools
-----------

Sales for the quarter ending March 31, 2004 of $12m showed an improvement of
$1.7m over last year's revenues of $10.3m. This increase was attributable to
favorable exchange movements of $1.5m and increased volumes of $0.6m, offset by
an increase in sales rebates of $0.4m. For the six months ended March 2004 sales
of $21.3m showed an increase of $2.0m from last year's sales of $19.3m. This is
attributable to favorable exchange movements of $2.3m and volume increases of
$0.1m less increased sales rebates of $0.4m.

The sales shortfall arose predominately in two areas, the UK Garden Tool market
and US dollar related export markets.

The cold, wet Spring weather has suppressed the demand for garden tools in the
UK and the supply channels are full waiting for the season to start.

                                       31

<PAGE>

The weakening dollar had a detrimental effect on sales into certain export
markets which are linked to the US dollar. To mitigate the adverse effect of
these currency movements we have reduced margins in return for substantial fixed
volume orders.

Following the deterioration in demand, the hand tool division reduced its
manning levels but maintained the same level of output by sourcing semi finished
product from the Far East.

The company continues to invest in new product development, improved overseas
distribution and the marketing of group product through our overseas
subsidiaries.

The "Predator" woodsaw launch was particularly successful, exceeding all
expectations. The department is now operating on two shifts to meet demand.

Similarly the builders' tool order book is healthy and going forward both
woodsaws and builders' tools will be promoted in export markets once the UK
demand has been satisfied.

Recovery plans and a strategic plan is being developed to improve profitability
of the division.

Eclipse Magnetics
-----------------

Revenues for the quarter showed only a marginal increase over last year's
figures (2004 $2.2m, 2003 $2.1m) with favorable exchange movements of $0.3m
compensating for a volume decline of $0.2m. Likewise, for the 6 months ended
March 2004, revenues showed a marginal $0.3m increase (2004 $4.6m, 2003 $4.3m)
with favorable exchange movements of $0.5m offset by decreased trading volume of
$0.2m.

The standard low technology area of the business continues to be eroded by good
quality imports from our competitors in China and the Far East. This is directly
impacting on our distribution and industrial markets, as reflected in an 18%
reduction in sales generation over last year.

The higher added value area of our business continues to flourish, however,
showing a 25% sales volume growth on last year.

The main challenges to the business remain the retention of our low technology
business with its high quality brand image and to continue to develop the "added
value" side of our business with its higher margin sales.

New product development continues. The `Optimag' range has been designed and
developed for modular clamping across all industries; a new lightweight
depalletising head has been developed, bringing magnetic technology to the
robotics industry; specialized magnetic clamping systems have also been
developed for the refurbishment of the floor panels of large ocean vessels.

                                       32

<PAGE>

Robert Sorby
------------

Revenues for the quarter were $0.3m higher than last year (2004 $1.4m, 2003
$1.1m), attributable to volume growth of $0.1m and favorable exchange movements
of $0.2m. For the 6 months ended March 2004 revenues increased by $0.5m from
$2.1m to $2.6m with the division benefiting from favorable exchange movements of
$0.3m and volume growth of $0.2m.

The second quarter proved a very strong period for Robert Sorby with sales and
margins running ahead of budget. Sales were solid in both domestic and overseas
markets.

Given the adverse impact of the weak US dollar the main thrust was the promotion
of lathes, lathe chisels and lathe chucks in the UK where we have an
increasingly strong position. The introduction of the new DVR lathe in the first
quarter impacted very strongly on second quarter results and we anticipate that
this trend will continue despite a generally weak market.

This introduction was supported by heavy promotional activity including consumer
advertising, consumer literature and in-store demonstrations. Other product
sales flowed through as a consequence of this activity.

Robert Sorby has suffered through the weakness of the US dollar as a high
percentage of business is generated in North America. The position was
exacerbated by the closure of a major customer late in 2003.

The loss of the customer was, however, compensated by an increase in business
with other dealers to the extent that the loss had no adverse impact. In the
long term this broadening of the customer base will prove to be a major benefit
to Robert Sorby.

The second quarter saw the launch of the new range of `Stebcentres', a unique
drive for woodworkers' lathes. Reaction from customers was extremely positive
and initial expectations were quickly exceeded.

While business has been lost as a result, there is no reason to believe that we
have lost market share as sales to other customers have, in part, recovered our
position. In the light of this we continued our program of extensive user
promotion during the second quarter through consumer advertising and the
distribution of a CD which focuses on many of the tools which are unique to
Robert Sorby. In addition, North American customers have readily increased their
product offering.

In mainland Europe we continue to strengthen our distribution network through
promotions and new products.

Bowers Metrology
----------------
Revenues for the quarter show an increase of $0.5m over last year ($3.6m 2003,
$4.1m 2004) due to favorable exchange movements. The revenues for the 6 months
ended March 2004 show a similar position with an increase of $0.8m ($6.9m 2003,
$7.7m 2004) attributable to favorable exchange movements.

                                       33

<PAGE>

Quarter 2 fell short of expectations mainly due to the adverse currency
fluctuations affecting our competitiveness in the overseas markets that are
linked to the US dollar. Additionally the general economic upturn being
experienced in the North American and UK markets was slow in filtering through
to the rest of the European Union, particularly France, Italy, Scandinavia and
the Benelux region. We have seen a marked upturn in activity in the UK, however.
This is mainly related to consumable products as investment on capital products
is still being squeezed. Uncertainty over future interest rate rises seems to be
dampening confidence of major customers, despite full order books.

The main successes of the quarter were the increased activity in the UK
Aerospace sector, with several projects signed with blue-chip manufacturers. The
expanding Systems side of the business shipped specially designed fixtures to
the value of $144 to a major machine tool manufacturer. The new Moore & Wright
brand digital products obtained listings in several of the large UK catalog
distribution companies during the quarter, with more agreed for Quarter 3.

The capital products within the range continue to disappoint, due to the
hesitancy of key customers to invest. Financing options for customers are being
considered to alleviate the up front cost of such products. The fixed limit
products sold under the Coventry Gauge brand continue to face fierce price
competition and steps were taken to further reduce cost in this part of the
business.

The strengthening of the export sales team has led to many new distributors
being appointed in the Middle and Far Eastern markets. Orders for the Moore &
Wright brand products were particularly good from the Middle East during Quarter
2.

The SmartPlug 2-point gauges have now been expanded with a wide range of options
and accessories introduced in March. Additional distribution routes are being
researched for this product as the main focus is on the worldwide automotive
components manufacturers.

S&J France
----------

While revenues for the quarter showed an increase of $0.4m over last year (2003
$3.3m, 2004 $3.7m), in volume terms there was a decrease of $0.2m, and a
favorable exchange movement of $0.6m. For the 6 months, favorable exchange
movements of $0.9m again compensated for volume reductions of $0.2m, giving a
total increase of $0.7m over last year (2003, $4.8m, 2004 $5.5m).

The French economy remains depressed with low consumer spending and increases in
unemployment.

The new products launched in the market were the new Stainless steel range, a
mini power set and single handed shear, all of which were sourced from Neill
Tools in the UK.

Production improvements have been introduced in the assembly and paint area with
the involvement of UK manufacturing management.

                                       34

<PAGE>

It has long been recognized that the French operation is highly seasonal
business since most of its product offering relates to lawn and garden tools. In
the coming months we shall introduce new non-garden products with the assistance
of a recently recruited manager which will substantially broaden our product
portfolio and so reduce the seasonality and keep the business profitable
throughout the year.

Australasia
-----------

Revenues for the quarter for Spear & Jackson Australia and Spear & Jackson New
Zealand were $0.7m lower that last year (2003 $4.6m, 2004 $3.9m). Volume
reductions of $2.3m are only partly compensated by favorable exchange movements
of $1.4m and decreased sales rebates of $0.2m. Similarly, results for the 6
month period show overall revenue reductions of $1.0m (2003 $9.7m, 2004 $8.7m)
being attributable to volume decreases of $4.2m being partly compensated by
favorable exchange movements of $.0m and reduced rebates of $0.1m.

The sales revenues of the Australian subsidiary in the six month period ended
March 31, 2004 showed a considerable fall when compared to the company's sales
performance in the equivalent period last year. This is principally due to the
loss of a major customer in quarter 4 of last year together with the
interruptions to the operations of the business resulting from the resignation
of the Company's Managing Director and the restructuring of the sales and
marketing functions.

In addition, the continuation of the drought throughout Australia has severely
affected the rural trade and farm income resulting in sales of digging and
garden products failing to reach expectations. Compounding this result has been
the decline in power tool sales due to falling price points to the market and
competition from cheap foreign imports.

The outlook going forward should improve with significant progress being made in
expanding our core ranges within major National Retail Groups. We will continue
to focus on expanding our market share of the air tool market and reduce our
slow moving inventory.

COSTS OF GOODS SOLD AND GROSS PROFIT

Costs of goods sold increased to $18,721 in the three month period ended March
31, 2004 from $16,840 in the three months ended March 31, 2003 and increased to
$34,528 in the six months ended March 31, 2004 from $32,090 in the equivalent
period last year.

Information concerning costs of goods sold as a percentage of sales and gross
profit margins in the periods under review are as follows:
<TABLE>
<CAPTION>

                                            Three Months Ended              Six Months Ended
                                          March 31      March 31         March 31      March 31
                                             2004          2003             2004          2003
                                               %             %                %             %

Cost of goods sold as a
<S>                                         <C>           <C>               <C>           <C>
% of sales                                  68.26         67.27             68.5          68.0

Gross Profit Margin                         31.74         32.73             31.5          32.0
</TABLE>

                                       35

<PAGE>

Margins have been negatively impacted in both the quarter ending and the six
months ending March 31, 2004 by a number of raw material price increases
(principally rises in the cost of cobalt, a major raw material of our magnetic
products, and steel), together with increases in the cost of fuel used to
operate our manufacturing processes and higher utility charges. These adverse
variances have, however, been mitigated by exchange gains realized on factored
products bought in US dollars from suppliers located in the Far East.

Following the change in the mix of UK builders' tools products towards a higher
profile of factored or part assembled items, adverse manufacturing variances
have arisen in the period which have eroded margins. The negative impact of
these variances has been addressed post quarter end through a manufacturing
reorganization progress which has reduced manning levels.

Additionally, the weakness of the US dollar has had a continuing adverse effect
on certain of our $ denominated sales and margins in the period. The highly
price-sensitive markets in which we operate make it prohibitive to pass on the
adverse impact of the weakening dollar to certain of our customers. This has
inevitably resulted in the erosion of margin although the surrender of margin
has enabled us to retain sales volumes where possible.

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

EXPENSES

Selling, general and administrative (S, G and A) expenses increased by $2,239
from $6,162 in the three months ended March 31, 2003 to $8,401 in the quarter
ending March 31, 2004. SG&A expenses for the six months ended March 31, 2004
were $15,077, an increase of $3,535 over the expenses charged in the equivalent
six month period last year.

The principal reasons for the increase in the levels of both the current quarter
and the year to date selling, general and administrative expenses over their
prior year comparatives can be summarized as follows:
<TABLE>
<CAPTION>

                                                              Increases Over Prior Years

                                                    Three Months ended        Six Months ended
                                                       March 31, 2004          March 31, 2004
                                                             $m                        $m

<S>                                                          <C>                       <C>
a)    Impact of movements in average                         0.9                       1.3
      US$/sterling cross rates in the period

                                       36

<PAGE>

b)    Increased FAS87 pension costs                          0.3                       0.5

c)    Inflationary increases and set up                      0.2                       0.3
      costs of Florida US sales infrastructure

d)    Increased head office costs relating                   0.2                       0.3
      to legal charges and other
      professional fees

e)    Increased UK warehouse and                             0.1                       0.2
      distribution costs following the change
      to direct sales

f)    Settlements of senior employees'                       -                         0.3
      severance liabilities in 2002/3 for
      amounts less than anticipated.  There
      are no comparable items in the
      current year

g)    Exceptional bad debt recoveries in                     -                         0.1
      Q1 2002/3 not repeated in 2003/4

h)    One-time car leasing benefits in                       0.3                       0.2
      Q2 2002/3

i)    Exchange losses suffered                               0.1                       0.1

j)    Current year restructuring of                          0.1                       0.2
      UK and Australasian selling
      and administration functions,
      increased property depreciation
      and other costs                                        ___                       ___

      Total increase in expenses                             2.3                       3.5
                                                             ===                       ===
</TABLE>


Expressed as a percentage of sales, selling, general and administration expenses
were 30.6% of revenues for the three months ended March 31, 2004 (2003 : 24.6%)
and 29.9% of revenues for the six months ended on that date (2003 : 24.4%).

Other income and expenses moved from a net expense of $20 in the three months
ended March 31, 2003 to a net expense of $17 in the quarter ended March 31,
2004. In the six months ended March 31, 2004 other income and expenses amounted
to a net expense of $59 compared to a net expense of $7 in the equivalent period
last year.

This adverse movement is attributable to higher 2003 bank interest charges in
the Company's French and UK businesses (principally as a result of the level of
UK borrowings increasing following the purchase of the land and buildings in
Wednesbury) and the receipt of royalty income of $12 in the prior year for which
there is no similar item in the comparable period this year.

                                       37

<PAGE>

INCOME FROM CONTINUING ACTIVITIES BEFORE INCOME TAXES

Our income from continuing activities before income taxes in the three months
ended March 31, 2004 amounted to $288. This compares to an income from
continuing activities before taxes for the three months ended March 31, 2003 of
$2,012. This net decrease in profitability of $1.7 million is attributable to
increased overhead costs of $1.3 million, as explained above, together with
erosions in gross margins of $0.4 million.

Our income from continuing activities before income taxes in the six months
ended March 31, 2004 amounted to $745, compared to $3,581 in the six months
ended March 31, 2003. This net decrease in profitability of $2.8m is due to
increased overhead costs of $3.5 million in association with gross profit
increases of $0.7 million.

INCOME TAX

Income taxes of $356 were provided in the three months ended March 31, 2004
compared to a $573 income tax charge in the three months ending March 31, 2003.

Income taxes of $532 were charged in the six months ended March 2004, and $959
in the six months ending March 31, 2003.

Income taxes were 123.6% of profits before tax in the three months ended March
31, 2004 as opposed to 28.5% in the quarter ended March 31, 2003. Income taxes
were 71.4% of profits before tax in the six months ended March 31, 2004 compared
to 26.7% in the six months ended March 31, 2003.

Differences between the effective rate and the statutory rate of taxation of 35%
result from tax charges in certain overseas subsidiaries within the Spear &
Jackson group being taxed at rates different from the effective rate, the
utilization of tax losses which are not recognized within the deferred tax
computation and permanent differences between accounting and taxable income as a
result of non-deductible expenses and non-taxable income.

In addition, in 2004, the effective tax rate has been further increased as a
result of losses that have been incurred in the United States for which no
utilization against future profits is envisaged in the short term and to which a
valuation allowance has therefore been applied.

Furthermore, the difference between the effective rates of tax used in the
current year as opposed to that used in the quarter ended March 31, 2003 and the
six months ended on that date is also increased as a result of the higher
proportion of profits in those periods which arose in companies having the
benefit of tax losses which had not been recognized as an asset within the group
deferred tax computation.

Because of the availability of tax net operating losses and other tax credits it
is not anticipated that any significant element of the tax charge for the six
months ended March 31, 2004 will result in the payment of income tax.

                                       38

<PAGE>

NET (LOSS)/PROFIT FROM CONTINUING ACTIVITIES

Our net loss from continuing activities after income taxes was $68 for the three
months ended March 31, 2004 (2003 : $1,439 profit). For the six month period our
net profit from continuing activities was $213 (2003 : $2,622).

DISCONTINUED OPERATIONS

The discontinued operations refer to the Megapro screwdriver division of Spear &
Jackson, Inc. which was acquired on September 6, 2002 and which was disposed
with effect from September 30, 2003. The directors of the Company had previously
carried out a goodwill impairment appraisal and a strategic review of the
division and had determined that this division did not represent a continuing
core activity. Various divestment strategies were considered and at September
30, 2003 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.

Total income attributable to discontinued operations was $5 in the quarter ended
March 31, 2003 and $33 for the six months to March 31, 2003. Following the
disposal of the business on September 30, 2003, there is no comparable item in
the quarter ended March 31, 2004 or the six months ended on that date.

FINANCIAL CONDITION

Liquidity and Capital Resources

Our cash position was $3,740 at March 31, 2004 and our net assets were $34,939
at that date.

Net cash used in operating activities in the six month period ended March 31,
2004 was $638 compared to an operating cash generation of $4,353 in the three
six ended March 31, 2003. This decrease of $4,991 in 2004 arises from:

*   the  reduction in net income (adjusted for depreciation and deferred  taxes)
    of $2.8 million as dealt with in the  commentary on results, above,
*   increased trade working capital outflows in the six months March 31, 2004,
    when compared to the period ended March 31, 2003, relating to:
*   decreased receivables collections of $3.1 million
*   increased payables outflow of $1.4 million * decrease in other assets and
    liabilities of $1.1million

    The above adverse variances have been offset by reduced inventory outflows
    of $3.4 million.

The reasons for these working capital variances are summarized below.

In the period ended March 31, 2003 inventories increased by $3,285 in the
quarter while there was an inventory decrease of $68 in 2004. Given the cyclical

                                       39

<PAGE>

nature of the UK garden tool business, inventory increases in Q1 and Q2 are
anticipated as we build inventories prior to the start of the new garden season
in spring. The 2003 increase of $3,285 was, however, particularly high due to
the inclusion of significant inventory purchases, pre quarter-end by our hand
tools division regarding new power tool product tool launches. This pattern of
purchasing activity was not repeated in 2004, thereby reducing the inventory
levels. Additionally, UK inventories show year on year reductions thanks to the
ongoing implementation of the group inventory reduction program.

UK sales revenues in August and September 2002 benefited from increased turnover
of approximately $1.1 million with the UK distributor, Toolbank, as that company
increased sales orders to secure higher rebate levels. This, in turn, increased
the total of trade receivables at September 30, 2002. The trade receivables
outflow in the period ended March 31, 2003 of $0.1 therefore incorporates the
cash received from these sales. There were no similar sales in August and
September of 2003 and the cash flows associated with trade receivables and other
creditors are correspondingly affected. Trade receivables at March 31, 2004 also
contain a higher level of pre-season accounts (with payment terms extended to
May 2004) than was included last year.

The movement in inventories is also reflected in the trade payables cash flows.
Trade payables increased by $2.6 million at March 31, 2003 when compared to
September 30, 2002 thanks to the purchase of significant inventories of power
tool products by our UK hand tool division. This purchasing activity was not
reported in 2004 and the increase in payables between September 30, 2003 and
March 31, 2004 has accordingly reduced to $1.2 million.

With regard to the adverse movement on other assets and liabilities of $1.1
million contributing factors include:

a)     The payment in March 2004 of an interim settlement of $0.4 million re the
       former managing director of Spear & Jackson plc.

b)     The March 2003 comparative creditor figures were enhanced by the
       replacement of the UK car fleet under new capitalized leases. During the
       six months to March 2004 significant repayments have been made against
       the relevant leases.

Cash outflow from investing activities was $6,838 in the period ended March 31,
2004. This compares to an outflow from investing activities in the period ended
March 31, 2003 of $2,441. Net cash used in investing activities in the six
months ended March 31, 2004 includes $6,838 of capital expenditure, $3.2 million
of which relates to the purchase of the land and buildings at Wednesbury,
England which is the base for our UK garden tools manufacturing operation. Prior
to its purchase, this property was being leased from the former owners of Spear
& Jackson plc. A further $3.3 million relates to the purchase of a distribution
outlet at Boca Raton, Florida. Of the outflow in the six months ended March
2003, $2,611 related to capital expenditure, primarily the replacement of the UK
car fleet under capitalized operating leases.

                                       40

<PAGE>

Net cash provided by financing activities was $1,844 in the period ended March
31, 2004 compared to net cash absorbed by financing activities of $1,068 in the
period ended March 31, 2003.

This is due to the utilization of the UK bank overdraft facility in order to
finance the $3,200 purchase of the Wednesbury property in the quarter ended
September 30, 2003. In comparison, the 2003 financing activity outflow includes
the repayment of the Company's Australian subsidiary's overdraft.

The Spear & Jackson and Bowers companies have overdraft facilities with various
UK, French and Australian banks. Our business operations have been funded
primarily from net operating income. We have also utilized bank facilities in
the UK and France.

The financing of new product launches in the Spear & Jackson and Bowers
companies will be funded from their existing banking facilities. Accordingly, we
believe that we have sufficient capital resources and liquidity over both the
short and medium term to sustain our current business operations.

The Company will continue to focus its efforts on improving the competitiveness
of its worldwide operations. Further restructuring of the non-profitable areas
of the Company's divisions and any expansion of the Spear & Jackson or Bowers
operations may, therefore, require additional funding through the negotiation of
increased bank lending facilities or the sale of surplus assets.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company is exposed to market risks which include changes in interest rates
and movements in foreign currency exchange rates as measured against the US
dollar.

The Company is exposed to interest rate changes primarily as a result of
interest payable on its bank borrowings in its UK and Australian subsidiaries.
At March 31, 2004 the Company had borrowings in the form of overdrafts amounting
to $2,180 which are repayable on demand. Management believes that a fluctuation
in interest rates in the near future will not have a material impact on the
Company's consolidated financial statements. The nature and amount of our debt
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.

The Company has operations in the United Kingdom, France, Australia and New
Zealand. 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.

Additionally, these 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

                                       41

<PAGE>

US dollar equivalent of these sales and purchases is affected by changes in
foreign currency exchange rate.

In the six months ended March 31, 2004 compared to the equivalent period in
2003, the change in exchange rates had the effect of increasing the Company's
consolidated sales by $7.8 million, or 15.5%. Since most of the Company's
international operating expenses are also included in local currencies, the
change in exchange rates had the effect of increasing operating expenses by $1.3
million for the six months ended March 31, 2004 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.

To help reduce exposure to foreign currency fluctuation, management has
periodically used foreign currency hedges and forward contracts. These currency
instruments allow management to hedge or cover currency exposures when these
exposures meet certain discretionary levels. However, it is not possible for the
Company to anticipate and take preventative measures against all adverse changes
in foreign currency exposure currently or in the future.

OUTLOOK

The first weeks of quarter 3 have produced no material improvement in the
sluggish demand in our major markets. In particular, sales of garden products in
the UK remained slow as the poor spring weather continued. Easter normally marks
the start of the UK garden season but, as yet, sales have been depressed because
of the sustained wet conditions. We anticipate, however, that garden product
revenues will return to normal annual levels as soon as more seasonal weather
returns and the major UK retail chains can sell through existing stocks.

Competition remains fierce from cheap foreign imports but our brand strength is
helping us to perform well in our export markets, particularly the Far and
Middle East, and certain macro economic factors in the UK are working to our
advantage. For example, the buoyant UK housing market is continuing to stimulate
demand for our builders' tools and related products.

Our Australasian subsidiaries experienced a poor first half of the year
following the loss of a major customer and upheavals caused by changes to the
management teams. We expect the restructuring of the business to be completed in
quarter 3 and, with the new managing director now exploring a number of
initiatives to drive the operations forward to regain lost market share, we
anticipate increased sales revenues from the operation in quarter 4.

In the third quarter we will continue to pursue a widening of our direct sell UK
customer base together with initiatives to increase our presence in mainland
Europe.

In the second half of the financial year, our businesses will again face the
issues of increased costs and margin erosion as a result of raw material, fuel
and other utility price increases, interest rate increases and a weak dollar.

                                       42

<PAGE>

To mitigate the impact of these factors we will continue both to look at
initiatives to rationalize under performing areas of the business and to monitor
the business infrastructures in the United Kingdom and the United States,
particularly overheads, to ensure that these are as cost efficient as possible
and at a level appropriate to the needs of the business. Despite this we
anticipate that there will be increases in the level of certain administrative
overheads as a result of legal and professional charges and monitoring fees
associated with the SEC suit and class action suits referred to in Part II, Item
1, below.

Any strengthening of the US dollar would impact favorably on the business as
this would ease the pressure on margins and increase our competitiveness. The
overall benefits would, however, be diluted by the related increases in the
purchase price of factored product from the Far East.

In the forthcoming quarter we will also focus on improving cash generation. The
group-wide inventory reduction program is ongoing as we look to maximize our
working capital. We also anticipate that our operating cash inflows will benefit
from the collection of circa $0.5 million of cash from pre-season garden product
sales which were made on extended credit terms. Additionally, further funds
could be released via the sale of significant surplus capital assets and all
such opportunities will be considered in detail. The proceeds of any such sales
will enable us to fund future working capital requirements and other projects
which will contribute to the continued growth of our business.

Going forward, the success factors critical to our business include sales growth
through continued penetration in new and existing markets; the implementation of
strategies to enable us to compete against suppliers based in low cost
manufacturing regimes; emphasis on new product development activities so that we
can exploit our brand equity and technical expertise to differentiate our
product offerings from cheap imports; ensuring that our manufacturing and
overhead bases are as cost efficient as possible; and the maximization of cash
resources so that we are able to fund new initiatives and take advantage of
market opportunities.

In quarter 3 and 4, therefore, we will continue to aggresively promote our
products to penetrate new markets and broaden our customer base. We recently
learned that a major competitor in the hand tools sector has been experiencing
severe trading problems. We have already contacted key customers within that
competitor's distribution network and we are gaining additional sales and market
share as a result.

In the second half of the financial year emphasis will again be placed on the
development and launch of new, high quality products which are clearly
differentiated from the cheap foreign imports which are widely available in our
markets. The recent success of the "Predator" saw launch clearly illustrates the
benefits of this strategy and we intend to build on this in the remainder of the
year with both additions to the Predator range and the introduction of other new
products.

Recent events, including the removal of the Company CEO by the SEC and the
initiation of a number of class action lawsuits against the Company, have
inevitably resulted in a disruption of the Company's operating activities. It is
not possible at this time to ascertain the ultimate financial and legal
liability of these actions or their impact on the financial condition of the
business. Nevertheless, the Company, through its senior management and
workforce, is focused on minimizing any adverse effects on the trading
operations of the business so that its short and long term objectives can still
be realized.


                                       43

<PAGE>

ITEM 4. CONTROLS AND PROCEDURES

Quarterly Controls Evaluation and Related CEO and CFO Certifications

We conducted an evaluation of the effectiveness of the design and operation of
our "disclosure controls and procedures" (Disclosure Controls) as of the end of
the period covered by this Quarterly Report. The controls evaluation was done
under the supervision and with the participation of management, including our
Chief Executive Officer (CEO) and Chief Financial Officer (CFO).

Attached as exhibits to this Quarterly Report are certifications of the CEO and
the CFO, which are required in accord with Rule 13a-14 of the Exchange Act. This
Controls and Procedures section includes the information concerning the controls
evaluation referred to in the certifications and it should be read in
conjunction with the certifications for a more complete understanding of the
topics presented.

Definition of Disclosure Controls

Disclosure Controls are controls and procedures designed to reasonably assure
that information required to be disclosed in our reports filed under the
Exchange Act, such as this Quarterly Report, is recorded, processed, summarized
and reported within the time periods specified in the SEC's rules and forms.
Disclosure Controls are also designed to reasonably assure that such information
is accumulated and communicated to our management, including the CEO and CFO, as
appropriate to allow timely decisions regarding required disclosure. Our
Disclosure Controls include components of our internal control over financial
reporting, which consists of control processes designed to provide reasonable
assurance regarding the reliability of our financial reporting and the
preparation of financial statements in accordance with accounting principles
generally accepted in the United States.

Limitations on the Effectiveness of Controls

Our management, including the CEO and CFO, does not expect that our Disclosure
Controls or our internal control over financial reporting will prevent all error
and all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control system's
objectives will be met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, have been detected. These
inherent limitations include the realities that judgements in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake.
The design of any system of controls is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of changes in
conditions or deterioration in the degree of compliance with policies or
procedures. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

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Conclusions

Based upon the controls evaluation, our acting CEO and CFO have concluded that,
subject to the limitations noted above, as of the end of the period covered by
this Quarterly Report, our Disclosure Controls were effective to provide
reasonable assurance that material information relating to Spear & Jackson, Inc.
and its consolidated subsidiaries is made known to management, including the CEO
and CFO.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as
defined in Rules13a-15(f) and 15d-15(f) of the Exchange Act) that occurred
during the quarter ended March 31, 2004 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is currently involved in a legal action with the former managing
director of Spear & Jackson plc concerning the amount of severance compensation
payable following his dismissal as part of a management reorganization program
in September 2002. The outcome of this action will not be known until later in
2004 but the Company is confident that the amounts provided in respect of the
dispute will be adequate to cover any amounts payable should the Company's
defense be unsuccessful.

On April 15, 2004, the U.S. Securities and Exchange Commission, filed suit in
the U.S. District Court for the Southern District of Florida against the Company
and its 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, antifraud and
reporting provisions. These allegations arise from the alleged failure of Dennis
Crowley, our principal executive officer, to accurately report his ownership of
the Company's stock, and his alleged manipulation of the price of the Company's
stock through the dissemination of false information, allowing him to profit
from sales of the 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.

In addition, the Court has appointed a Corporate Monitor to oversee the
Company's operations. In addition to Crowley consenting to a preliminary
injunction, the Court's Order also temporarily bars Dennis Crowley from serving
as an officer or director of a public company, and prohibits him from voting or
disposing of Company stock. The Company's Board of Directors has also suspended
Crowley from all positions he occupied as an officer or director. The Company is
cooperating with the Corporate Monitor and the continuing SEC investigation.

Subsequent to the SEC action, a number of class action lawsuits have been
initiated in U.S. District Court for the Southern District of Florida by Company
shareholders against the Company and certain of its directors, officers and
accounting firm including Crowley, William Fletcher, the Company's CFO, and
Sherb & Co LLP, the Company's outside auditor. These suits allege essentially

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the same claims as the SEC suit and seek unspecified damages. The Company has
not yet responded to the suits, and likely will not until they have been
consolidated and lead counsel appointed for the Class. It is impossible at this
time to ascertain the ultimate legal and financial liability or whether these
actions as well as the SEC action will have a material adverse effect on the
Company's financial condition.


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 operation of the Company.

Item 2.  Changes in Securities and use of Proceeds

None

Item 3.  Defaults upon Senior Securities

None

Item 4.  Submission of Matters to a Vote of Security Holders

None

Item 5.  Other Information

None

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Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

 31.1 302 Certification of Chairman

 31.2 302 Certification of Chief Accounting Officer

 32.1 906 Certification of Chief Executive Officer and Chief Accounting Officer


(b)      Reports on Form 8-K

i)       Form 8-K was filed on January 16, 2004 in which the Company announced
         that its Board of Directors had authorised the re-purchase of up to
         500,000 common shares of the Company in market or private transactions.

ii)      Form 8-K was filed on February 17, 2004 announcing the Company's Fiscal
         2004 first quarter results.

iii)     Form 8-K was filed on March 11, 2004 in which the Company announced (a)
         that it was cancelling its common stock buy back program. The buy back
         program was not implemented once the Company began serious
         consideration of a possible issuer tender offer. No shares were
         acquired under the program and (b) revisions to its 2004 earnings
         forecasts which were now expected to be in the range of 35-38 cents per
         fully diluted share.

iv)      Form 8-K was filed on April  20, 2004 with a report date of April 15,
         2004 in which the Company announced the following:

         The Company has previously reported that it was the subject of an Order
         of Formal Investigation from the Securities and Exchange Commission. On
         April 15, 2004, the Company was named as a defendant in a complaint
         filed by the SEC in the US District Court for the Southern District of
         Florida along with other defendants, including its Chief Executive
         Officer and principal stockholder, Dennis Crowley (Securities and
         Exchange Commission v. Dennis Crowley, Spear & Jackson, Inc.,
         International Media Solutions, LLC, Yolanda Velazquez and Kermit Silva,
         Case No. 04-80354). The complaint includes allegations that Mr. Crowley

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         engaged in manipulative practices in transactions relating to Spear &
         Jackson common stock, as well as misrepresentations as to the status of
         his stock ownership in the Company. Spear & Jackson was named as a
         defendant for its failure to accurately report the extent of its Chief
         Executive Officer's stock ownership interest in Spear & Jackson and,
         based on the foregoing, violations of the anti-fraud and registration
         provisions of the federal securities laws.




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                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorised.

SPEAR & JACKSON, INC.



By:      /s/John Harrington         Dated: May 21, 2004
         ----------------
         John Harrington
         Chairman



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