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 quarterly period ended December 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 organisation)


 6001 Park of Commerce Boulevard, Suite 2,
 Boca Raton, Florida                                     33487
 -----------------------------------------               -----
 (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 reports), 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 February 17, 2005.

<PAGE>
                              SPEAR & Jackson, Inc.

                                      INDEX

                                                                           Page
                                                                          Number
PART I.  FINANCIAL INFORMATION

Item 1   Financial Statements (Unaudited) ................................   1

         Condensed Consolidated Balance Sheets -
         December 31, 2004 and September 30, 2004 (audited) ..............   1

         Condensed Consolidated Statements of Operations -
         Three Months ended December 31, 2004 and 2003 ...................   2

         Condensed Consolidated Statements of Cash Flows -
         Three Months ended December 31, 2004 and 2003 ...................   3

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

Item 2   Management's Discussion and Analysis of Financial Condition
         and Results of Operations .......................................  15

Item 3   Quantitative and Qualitative Disclosures about Market Risk ......  42

Item 4   Controls and Procedures .........................................  43


PART II  OTHER INFORMATION

Item 1   Legal Proceedings ...............................................  45

Item 6   Exhibits and Reports on Form 8-K ................................  47


SIGNATURES ...............................................................  48

Certifications of Acting Chief Executive Officer and
 Chief Financial Officer pursuant to Section 302 ......................... EX 31

Certifications of Acting Chief Executive Officer and
 Chief Financial Officer pursuant to Section 906 ......................... EX 32

<PAGE>

ITEM 1 Financial Statements (Unaudited)

<TABLE>
                               SPEAR & JACKSON, INC. AND SUBSIDIARIES

                               CONDENSED CONSOLIDATED BALANCE SHEETS
                                    (IN THOUSANDS EXCEPT SHARES)
<CAPTION>

                                                              At December 31,     At September 30,
                                                                    2004                2004
                                                              ---------------     ----------------
                                                                (Unaudited)
                         ASSETS

Current assets:
<S>                                                               <C>                 <C>
    Cash and cash equivalents .........................           $  6,194            $  5,090
    Trade receivables, net ............................             19,449              18,843
    Inventories .......................................             26,021              21,988
    Assets held for sale ..............................              3,174               3,190
    Deferred income tax asset, current portion ........              2,328               2,128
    Other current assets ..............................              1,711               1,310
                                                                  --------            --------
            Total current assets ......................             58,877              52,549

Property, plant and equipment, net ....................             23,240              22,114
Deferred income tax asset .............................             11,938              10,933
Investments ...........................................                171                 160
                                                                  --------            --------
            Total assets ..............................           $ 94,226            $ 85,756
                                                                  ========            ========


          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Notes payable .....................................           $     71            $     68
    Trade accounts payable ............................             11,473               8,562
    Accrued expenses and other liabilities ............             14,402              12,948
    Foreign taxes payable .............................                 52                  22
                                                                  --------            --------
            Total current liabilities .................             25,998              21,600
Other liabilities .....................................              1,204               1,172
Pension liability .....................................             36,113              33,545

                                                                  --------            --------
            Total liabilities .........................             63,315              56,317
                                                                  --------            --------
Stockholders' equity:
Common stock ..........................................                 12                  12
Additional paid in capital ............................             51,590              51,590
Accumulated other comprehensive income (loss):
    Minimum pension liability adjsutment, net of tax ..            (40,617)            (38,030)
    Foreign currency translation adjustment, net of tax             17,095              12,429
    Unrealized loss on derivative instruments .........                (20)                (61)
Retained earnings .....................................              3,391               4,039
Less: 270,000 common stock held in treasury, at cost ..               (540)               (540)
                                                                  --------            --------
            Total stockholders' equity ................             30,911              29,439
                                                                  --------            --------

                                                                  --------            --------
            Total liabilities and stockholders' equity            $ 94,226            $ 85,756
                                                                  ========            ========

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

                                                 1
</TABLE>
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


                                                    For the Three Months Ended

                                                   December 31,    December 31,
                                                       2004            2003
                                                   ------------    ------------

Net sales ......................................   $     25,107    $     22,982
Cost of goods sold .............................         16,984          15,807
                                                   ------------    ------------
Gross profit ...................................          8,123           7,175

Operating costs and expenses:
  Selling, general and administrative expenses .          8,825           6,676

                                                   ------------    ------------
Operating (loss) income ........................           (702)            499

Other income (expense)
  Rental income ................................             40              36
  Interest and bank charges (net) ..............            (29)            (78)

                                                   ------------    ------------

(Loss) income before income taxes ..............           (691)            457
Provision for income taxes .....................             43            (176)
                                                   ------------    ------------

Net (loss) income ..............................   $       (648)   $        281
                                                   ============    ============


Basic and diluted (loss) earnings per share: ...   $      (0.06)   $       0.02
                                                   ============    ============


Weighted average shares outstanding ............     11,741,122      11,741,122
                                                   ============    ============

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

                                        2
<PAGE>
<TABLE>
                               SPEAR & JACKSON, INC. AND SUBSIDIARIES

                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            (UNAUDITED)
                                           (IN THOUSANDS)
<CAPTION>
                                                                       For the Three Months Ended
                                                                      December 31,     December 31,
                                                                           2004            2003
                                                                      ------------     ------------
<S>                                                                      <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ...............................................        $  (648)        $   281
Adjustments to reconcile net income to net cash provided by
  (used in) operating activities:
    Depreciation ................................................            717             681
    Amortization of asset held for sale .........................             16               -
    Loss on sale of plant, property and equipment ...............             11              14
    Deferred income taxes .......................................           (115)            109
Changes in operating assets and liabilities, excluding the
  effects of acquisitions and dispositions:
    Decrease (increase) in trade receivables ....................            748            (317)
    Increase in inventories .....................................         (2,467)           (655)
    Increase in other current assets ............................           (401)           (269)
    Contributions paid to pension plan ..........................           (729)           (698)
    Increase in other non-current liabilities ...................          1,008             318
    Increase in trade accounts payable ..........................          2,446             934
    Increase (decrease) in accrued expenses and other liabilities            551            (639)
    Increase in foreign taxes payable ...........................             48              44
    Decrease in other liabilities ...............................            (43)            (38)
                                                                         -------         -------
NET CASH  PROVIDED BY (USED IN)  OPERATING ACTIVITIES ...........          1,142            (235)
                                                                         -------         -------

INVESTING ACTIVITIES:
  Purchases of property, plant and equipment ....................           (338)         (3,425)
  Proceeds from sale of property, plant and equipment ...........             15               -
                                                                         -------         -------
NET CASH USED IN INVESTING ACTIVITIES ...........................           (323)         (3,425)
                                                                         -------         -------

FINANCING ACTIVITIES:
  Repayment of overdraft ........................................              -           1,228
  Increase in overdraft .........................................             (2)              -
                                                                         -------         -------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES .............             (2)          1,228
                                                                         -------         -------

Effect of exchange rate changes on cash and cash equivalents ....            287              68
                                                                         -------         -------

CHANGE IN CASH AND CASH EQUIVALENTS .............................          1,104          (2,364)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................          5,090           9,191
                                                                         -------         -------

CASH AND CASH EQUIVALENTS AT END OF PERIOD ......................        $ 6,194         $ 6,827
                                                                         =======         =======

SUPPLEMENTAL CASH FLOW INFORMATION
  Cash paid for interest ........................................        $    29         $    71
                                                                         =======         =======
  Cash paid for taxes ...........................................        $    24         $    23
                                                                         =======         =======

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

                                                 3
</TABLE>
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION

         These 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., Societe Neill France S.A and CV
Instruments Europe BV.

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 condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
statements pursuant to both the rules and regulations of the Securities and
Exchange Commission and with instructions to Form 10-Q. Accordingly, certain
information and footnote disclosures required for annual financial statements
have been condensed or omitted. The Company's management believes that all
adjustments necessary to present fairly the Company's financial position as of
December 31, 2004 and September 30, 2004, and the results of operations for the
three month periods ended December 31, 2004 and December 31, 2003 and cash flows
for the three month periods ended December 31, 2004 and December 31, 2003 have
been included and that the disclosures are adequate to make the information
presented not misleading. The balance sheet at September 30, 2004 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's and Subsidiaries' annual report on Form 10-K for the year ended
September 30, 2004.

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, 2004 included in the Company's annual report
filed on Form 10-K 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 any interim periods are not necessarily indicative
of the results to be expected for the full year, or any subsequent periods.

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

                                       4
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION - CONTINUED

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

NOTE 2 - RECENTLY ISSUED ACCOUNTING STANDARDS

SFAS No. 123 (Revised 2004), "Share-Based Payment," issued in December 2004, is
a revision of FASB Statement 123, "Accounting for Stock-Based Compensation" and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," and
its related implementation guidance. The Statement focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123 (Revised 2004) requires a public
entity to measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award
(with limited exceptions). That cost will be recognized over the period during
which an employee is required to provide service in exchange for the award. This
statement is effective as of the beginning of the first interim or annual
reporting period that begins after June 15, 2005 and the Company will adopt the
standard in the third quarter of fiscal 2005. The Company is currently
evaluating the effect that the adoption of SFAS 153 will have on its
consolidated results of operations and financial condition.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
of ARB No. 43, Chapter 4," which clarifies the types of costs that should be
expensed rather than capitalized as inventory. This statement also clarifies the
circumstances under which fixed overhead costs associated with operating
facilities involved in inventory processing should be capitalized. The
provisions of SFAS No. 151 are effective for fiscal years beginning after June
15, 2005 and the Company will adopt this standard in fiscal 2006. The Company is
currently evaluating the effect that the adoption of SFAS 153 will have on its
consolidated results of operations and financial condition but does not expect
it to have a material impact.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets--An Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions" ("SFAS 153"). SFAS 153 eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, "Accounting for Nonmonetary Transactions," and
replaces it with an exception for exchanges that do not have commercial
substance. SFAS 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is effective for the fiscal
periods beginning after June 15, 2005 and is required to be adopted by the
Company in the first quarter of fiscal 2006, beginning on October 1, 2005. The
Company is currently evaluating the effect that the adoption of SFAS 153 will
have on its consolidated results of operations and financial condition.

NOTE 3 - SIGNIFICANT 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-K for the year ended September 30, 2004. Management believes
that the application of these policies on a consistent basis enables the Company
to provide useful and reliable financial information about the Company's
operating results and financial condition.

         As disclosed in the annual report on Form 10-K for the fiscal year
ended September 30, 2004, 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

                                       5
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

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 valuation; pension and other post retirement benefit costs and
accounting for income taxes. Since September 30, 2004, 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. The Company's wholly owned subsidiaries, Mega Tools USA, Inc.
and Mega Tools Ltd. manufactured and marketed the drivers to customers in the
United States and Canada. With effect from September 30, 2003 the Company exited
its screwdriver operations following the sale of the trade and net assets of
Mega Tools USA, Inc. and Mega Tools Ltd. The historical results of operations
for this business have been reclassified to earnings (loss) from discontinued
operations on the Company's Consolidated Statements of Operations.

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

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

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

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

                                       6
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

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 Bonds.

         Pension costs amounted to $1,008 for the quarter ending December 31,
2004 and $318 for the same quarter last year. The net periodic costs include the
following components:

                                                 For the Three    For the Three
                                                 Months Ended     Months Ended
                                                  December 31,     December 31,
                                                      2004             2003
                                                 -------------    -------------
                                                 (in thousands)   (in thousands)

Sevice cost ..................................      $   456          $   373
Interest cost ................................        2,544            2,204
Expected return on plan assets ...............       (2,674)          (2,677)
Recognition of actuarial loss ................          682              418

                                                    -------          -------
Total Benefit cost ...........................      $ 1,008          $   318
                                                    =======          =======

         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 $729 to the funds in the quarter to
December 31, 2004 (2003 $698). The Company anticipates that contributions of
$2.7 million will be made in the year ending September 30, 2005 (2004 $2.7
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, 2004, our most recent
measurement date for pension accounting, the value of the ABO exceeded the
market value of investments held by the pension plan by approximately $33.5
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 2005. If the
level of pension assets exceeds the ABO as of a future measurement date, the
full charge against stockholders' equity would be reversed.

                                       7
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET

                                               At December 31,  At September 30,
                                                    2004             2004
                                               ---------------  ----------------
                                               (in thousands)    (in thousands)
Assets held and used:
  Land and buildings, at cost ................    $ 19,414         $ 18,177
  Machinery, equipment and vehicles, at cost .      37,498           35,101
  Furniture and fixtures, at cost ............       1,345            1,241
  Computer hardware, at cost .................       1,350            1,264
  Computer software, at cost .................         372              348
  Assets held under finance leases, at cost .. (a)   3,010            2,828
                                                  --------         --------
                                                    62,989           58,959
  Accumulated Depreciation ...................     (39,749)         (36,845)
                                                  --------         --------
        Net ..................................    $ 23,240         $ 22,114
                                                  ========         ========

Assets held for sale
  Assets held for sale at cost ............... (b)$  3,228         $  3,228
  Accumulated Depreciation ...................         (54)             (38)
                                                  --------         --------
        Net ..................................    $  3,174         $  3,190
                                                  ========         ========

(a) Included in property, plant and equipment at December 31, 2004 are capital
leases with a net book value of $1.4 million (September 30, 2004 $1.3 million).
The cost of these assets held under capital leases was $3.0 million (September
30, 2004 $2.8million) and the accumulated depreciation relating to these assets
was $1.6 million (September 30, 2004 $1.5 million).

(b) In the year ended September 30, 2004, the Company spent $3.2 million on a
warehouse and office facility in Boca Raton, Florida. Following the removal from
office of the Company's former CEO, the current board, in conjunction with the
independent Corporate Monitor, performed a detailed review of its U.S. sales and
distribution strategy. As a result, the original initiative of setting up a
central distribution unit in Florida was deferred. The Boca Raton warehouse was
subsequently offered for sale and the property has been accordingly presented as
an asset held for sale in the consolidated balance sheet of the Company at
December 31, 2004 and September 30, 2004 at its net book carrying value. The
sale of the warehouse and offices was completed on February 15, 2005 for $3.4
million (net of sales commission, and other disposal costs).

NOTE 7 - INVENTORIES

                                               At December 31,  At September 30,
                                               ---------------  ----------------
                                                    2004              2004
                                               ---------------  ----------------
                                               (in thousands)    (in thousands)

Finished products ............................    $ 20,599         $ 16,779
In-process products ..........................       5,725            5,211
Raw materials ................................       6,029            5,944
Less: allowance for slow moving and obsolete
  inventories ................................      (6,332)          (5,946)
                                                  --------         --------
                                                  $ 26,021         $ 21,988
                                                  ========         ========

                                       8
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED 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 consists of:

                                                  For the Three    For the Three
                                                  Months Ended     Months Ended
                                                  December 31,     December 31,
                                                      2004            2003
                                                  -------------    -------------
                                                  in thousands     in thousands

Current tax charge ..............................    $ (48)          $  (67)
Deferred tax  credit (charge) ...................       91             (109)

                                                     -----           ------
                                                     $  43           $ (176)
                                                     =====           ======

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

                                                  For the Three    For the Three
                                                  Months Ended     Months Ended
                                                  December 31,     December 31,
                                                      2004             2003
                                                  -------------    -------------
                                                  in thousands     in thousands

Tax at US federal statutory income tax rate .....    $ 242           $ (160)
Overseas tax at rates different to effective rate      (43)              46
Permanent differences ...........................      (39)             (36)
Valuation allowance .............................     (117)             (26)

                                                     -----           ------
                                                     $  43           $ (176)
                                                     =====           ======

                                       9
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9 - COMPREHENSIVE INCOME

         Comprehensive income represents net income and other revenues,
expenses, gains and losses that are excluded from net income and recognized
directly as a component of stockholder's equity. Comprehensive income and its
components comprise the following:

                                                For the Three     For the Three
                                                Months Ended      Months Ended
                                                December 31,      December 31,
                                                    2004              2003
                                                --------------   --------------
                                                (in thousands)   (in thousands)

Total net (loss) income .......................    $  (648)          $   281

Other comprehensive income (loss)

   Additional minimum pension liability .......     (2,587)           (2,375)
   Foreign currency translation adjustments ...      4,666             4,813
   Unrealized gains (losses) on derivative
   instruments ................................         41                 -
                                                   -------           -------
Total comprehensive income                         $ 1,472           $ 2,719
                                                   =======           =======

NOTE 10 - 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 reviewed by the Company's Board of Directors.

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

         The following is a summary of the significant accounts and balances (in
thousands) by business segment, reconciled to the consolidated totals.

                                       10
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 10 - SEGMENT DATA - CONTINUED

                                 Sales                  Long-lived Assets (a)
                      ---------------------------   ----------------------------
                           Three Months Ended            Three Months Ended
                      December 31,   December 31,   December 31,    December 31,
                         2004            2003           2004            2003
                      ------------   ------------   ------------    ------------

Hand & garden tools     $ 18,422       $ 17,118      $  9,240        $  6,783
Metrology tools            4,019          3,583         2,808           2,959
Magnetic products          2,666          2,281           838           1,025
Corporate                      -                       10,354          13,350
                      ------------   ------------   ------------    ------------
   Total                $ 25,107       $ 22,982      $ 23,240        $ 24,117
                      ============   ============   ============    ============


                             Depreciation               Capital expenditure
                      ---------------------------   ----------------------------
                           Three Months Ended            Three Months Ended
                      December 31,   December 31,   December 31,    December 31,
                         2004            2003           2004            2003
                      ------------   ------------   ------------    ------------

Hand & garden tools     $    462       $    435       $   278        $     76
Metrology tools              113             99            56             145
Magnetic products             84             76             4               2
Corporate                     58             71             -           3,202
                      ------------   ------------   ------------    ------------
   Total                $    717       $    681       $   338        $  3,425
                      ============   ============   ============    ============


                        Operating (Loss) Income            Net Interest
                      ---------------------------   ----------------------------
                           Three Months Ended            Three Months Ended
                      December 31,   December 31,   December 31,    December 31,
                         2004            2003           2004            2003
                      ------------   ------------   ------------    ------------

Hand & garden tools     $   (698)      $    304       $   (46)       $    (61)
Metrology tools              292            289            (3)             (4)
Magnetic products            223            272            (3)             (2)
Corporate                   (519)          (366)           23             (11)
                      ------------   ------------   ------------    ------------
   Total                $   (702)      $    499       $   (29)       $    (78)
                      ============   ============   ============    ============

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

                                       11
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 10 - SEGMENT DATA - CONTINUED

The following table presents certain data by geographic areas (in thousands):

                               Sales (a)               Long-lived Assets (b)
                      ---------------------------   ----------------------------
                           Three Months Ended            Three Months Ended
                      December 31,   December 31,   December 31,    December 31,
                         2004            2003           2004            2003
                      ------------   ------------   ------------    ------------

United Kingdom          $ 10,651       $ 10,025       $ 21,152        $ 22,208
Europe                     4,725          4,058          1,344           1,335
Australasia                3,998          4,819            744             567
North America              1,620          1,437              -               7
Other                      4,113          2,643              -               -
                      ------------   ------------   ------------    ------------
   Total                $ 25,107       $ 22,982       $ 23,240        $ 24,117
                      ============   ============   ============    ============


                             Depreciation               Capital expenditure
                      ---------------------------   ----------------------------
                           Three Months Ended            Three Months Ended
                      December 31,   December 31,   December 31,    December 31,
                         2004            2003           2004            2003
                      ------------   ------------   ------------    ------------

United Kingdom             $ 628          $ 598           $ 99         $ 3,411
Europe                        24             10             20               -
Australasia                   65             71            219              12
North America                  -              2              -               2
                      ------------   ------------   ------------    ------------
   Total                   $ 717          $ 681          $ 338         $ 3,425
                      ============   ============   ============    ============


                        Operating (Loss) Income            Net Interest
                      ---------------------------   ----------------------------
                           Three Months Ended            Three Months Ended
                      December 31,   December 31,   December 31,    December 31,
                         2004            2003           2004            2003
                      ------------   ------------   ------------    ------------

United Kingdom            $ (322)         $ 586           $ (9)          $ (48)
Europe                      (124)          (135)           (41)            (47)
Australasia                   69            146             18               7
North America               (325)           (98)             3              10
                      ------------   ------------   ------------    ------------
   Total                  $ (702)         $ 499          $ (29)          $ (78)
                      ============   ============   ============    ============

(a) Sales are attributed to geographic areas based on the location of the
    customers.

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

                                       12
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 11 - 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 managing director as part of a
management reorganization program in November 2002. The outcome of this action
will not be known until later in the year ended September 30, 2005 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 Mr. Dennis Crowley, its then Chief Executive Officer/Chairman,
among others, alleging violations of the federal security laws. Specifically
with regard to the Company, the SEC alleged that the Company violated its
registration, anti-fraud and reporting provisions. These allegations arise from
the alleged failure of Mr. Crowley to accurately report his ownership of the
Company's stock, and his alleged manipulation of the price of the Company's
stock through 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. Further to Mr. Crowley consenting to a preliminary
injunction, the Court's Order also temporarily bars Mr. 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
Mr. Crowley from all positions he occupied as an officer or director. The
Company is cooperating with the Monitor and the continuing SEC investigation.

         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, Sherb & Co. LLP, the Company's
independent auditor, and certain of the Company's directors and officers,
including Mr. Crowley, and Mr. William Fletcher, the Company's CFO. These suits
allege essentially the same claims as the SEC suit, and seek unspecified
damages. Lead counsel has now been appointed and a consolidated complaint has
been filed. The Company is in the process of formulating its response. 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 and results of operations.

         The Company has been pursuing settlement negotiations with the SEC and
Mr. Crowley to reach a resolution with the SEC as well as Mr. Crowley. The
Company has now entered into a Stock Purchase Agreement with PNC Tool Holdings
LLC ("PNC") and Dennis Crowley, the sole stockholder of PNC. Under the Stock
Purchase Agreement, the Company will acquire for a nominal payment of $100
6,005,561 common shares of the Company held by PNC, which represents
approximately 51.1% of the outstanding common shares of the Company. The parties
have also executed general releases in favor of each other subject to the
fulfillment of the conditions of the Stock Purchase Agreement.

         On September 28, 2004, Mr. Crowley signed a Consent to Final Judgment
of Permanent Judgment with the Securities and Exchange Commission, without
admitting or denying the allegations included in the complaint, which requires a
disgorgement and payment of civil penalties by Mr. Crowley consisting of a
disgorgement payment of $3,765,777 plus prejudgment interest in the amount of
$304,014, as well as payment of a civil penalty in the amount of $2,000,000.

         On November 18, 2004, the Company signed a Consent to Final Judgment of
Permanent Injunction with the Securities and Exchange Commission pursuant to
which the Company, without admitting or denying the allegations included in the
complaint filed by the Commission, consented to a permanent injunction from
violations of various sections and rules under the Securities Act of 1933 and
the Securities Exchange Act of 1934.

                                       13
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 11 - LEGAL PROCEEDINGS - CONTINUED

         The Stock Purchase Agreement is not effective until formal approval by
the U.S. District Court for the Southern District of Florida of the settlement
of that certain litigation captioned SEC v. Dennis Crowley, Spear & Jackson,
Inc., International Media Solutions, Inc., Yolanda Velazquez and Kermit Silva
(Case No: 04-80354-civ-Middlebrooks). The Stock Purchase Agreement is also
conditioned on the Company receiving the benefit of the disgorgement and civil
penalty funds paid by Crowley.

         As a result of the contemplated stock purchase, the stockholders of the
Company will have their percentage stock interest increase correspondingly with
the return of the Spear & Jackson shares to the Company by PNC. Jacuzzi Brands,
Inc., which is a beneficial owner of 3,543,281 shares of common stock, will have
its interest in the Company increase to approximately 61.2% of the outstanding
common stock. This increase is not necessarily permanent as, for legitimate
business purposes, the company may subsequently reissue, wholly or in part,
those shares purchased from PNC.

         With effect from September 30, 2003 the Company exited its screwdriver
operations following the disposition of the trade and assets of Mega Tools Ltd
and Mega Tools USA, Inc. The disposition of the screwdriver division was
undertaken by Neil Morgan who was then heading up the division. The Company
believes that no specific authorization was afforded to Mr. Morgan to undertake
that disposition and, following review of the terms and circumstances of the
purported sale, it is the intention of the Company to pursue claims against Mr.
Morgan and the transferee.

         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 12 - SUBSEQUENT EVENTS

         Spear & Jackson, Inc.'s UK subsidiary, Spear & Jackson Garden Products
Limited, signed, on December 9, 2004, a conditional contract for the sale of
part of its industrial site at St. Paul's Road, Wednesbury, England at the price
of (pound)2.8 million (approximately $5.3million) excluding disposal costs. The
agreement was conditional upon the buyer entering into binding contracts for the
acquisition of adjoining property. These conditions were satisfied early in 2005
and the contract for sale was formally completed on January 28, 2005.

         The sale of the Company's office and warehouse facility located in Boca
Raton, Florida, was concluded on February 15, 2005 at a price of $3.4 million,
net of sales commissions and other costs of disposal.

                                       14
<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

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

RISK FACTORS

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

Although we believe that our expectations are based on reasonable assumptions
within the bounds of our knowledge of our business and operations, actual
results may differ materially from our expectations. Uncertainties and factors
that could cause actual results or events to differ materially from those set
forth or implied include:

-  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;

                                       15
<PAGE>

-  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

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

-  the potential acquisition of the Company or its principal assets.

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

CORPORATE ORGANIZATION

OVERVIEW

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

INCORPORATION OF MEGAPRO TOOLS, INC.

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

                                       16
<PAGE>

INCORPORATION OF MEGA TOOLS LTD AND MEGA TOOLS USA, INC.

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

THE ACQUISITION OF MEGA TOOLS LTD AND MEGA TOOLS USA, INC. BY MEGAPRO TOOLS INC.

On September 30, 1999 Mega Tools Ltd was acquired from Mrs. Maria Morgan,
Envision Worldwide Products Ltd, Mr. Robert Jeffrey, Mr. Lex Hoos and Mr. Eric
Paakspuu in exchange for the issue of 6,200,000 restricted shares in the common
stock of Megapro Tools, Inc. These shares were valued at $275 for accounting
purposes, representing the total paid-in-capital of the Mega Tools Ltd shares
acquired. Mega Tools USA, Inc. was acquired from Mega Tools Ltd in exchange for
the payment of $340,000 which was satisfied by the issuance of a promissory note
to Mega Tools Ltd.

The acquisition of Mega Tools USA, Inc. was completed immediately prior to the
acquisition of Mega Tools Ltd. Megapro Tools, Inc. had no business assets prior
to the acquisition of the two companies.

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

The former stockholders of Mega Tools Ltd acquired a proportionate interest in
Megapro Tools, Inc. upon completion of the acquisition of Mega Tools Ltd and
Mega Tools USA. Mr. 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. ("Megapro") and S and J Acquisitions Corp. (a company incorporated on
August 22, 2002 under the laws of the State of Florida and a wholly owned
subsidiary of Megapro.) 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

                                       17
<PAGE>

stock of Megapro and promissory notes in the principal amount of (pound)150,000
pounds sterling (approximately $235,000) ("the Transaction"). 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,
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 are 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, 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 Corp.

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

CHANGE OF NAME TO SPEAR & JACKSON, INC.

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

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

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

                                       18
<PAGE>

EXIT FROM SCREWDRIVER OPERATIONS

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

The disposition of the trade and assets of the screwdriver division was
undertaken by Neil Morgan who was then heading up the division.

The disposition followed a strategic review of the screwdriver division by the
then directors of Spear & Jackson, Inc., from which it was determined that the
screwdriver division was no longer a core activity. The Company believes that no
specific authorization was afforded to Mr. Morgan to undertake that disposition
and, following review of the terms and circumstances of the purported sale, it
is the intention of the Company to pursue claims against Mr. Morgan and the
transferee.

The disposition proceeds were in the form of $284,000 of loan notes and other
receivables and the discharge of a loan of $100,000 owed by the Company to the
managing director of the screwdriver division.

RECENT DEVELOPMENTS

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

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

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

The Company has been pursuing settlement negotiations with both the SEC and Mr.
Crowley to reach a resolution with both parties.

                                       19
<PAGE>

As part of such settlement negotiations the Company has now entered into a Stock
Purchase Agreement with PNC Tool Holdings LLC ("PNC") and Dennis Crowley, the
sole member of PNC. Under the Stock Purchase Agreement, the Company will
acquire, for $100, 6,005,561 common shares of the Company held by PNC which
represents approximately 51.1% of the outstanding common shares of the Company
at December 31, 2004, and which constitute 100% of the common stock held by such
entity. The parties have also executed general releases in favor of each other
subject to the fulfillment of the conditions of the Stock Purchase Agreement.

On September 28, 2004, Mr. Crowley signed a Consent to Final Judgment of
Permanent Judgment with the Securities and Exchange Commission, without
admitting or denying the allegations included in the complaint, which requires a
disgorgement and payment of civil penalties by Mr. Crowley consisting of a
disgorgement payment of $3,765,777 plus prejudgment interest in the amount of
$304,014, as well as payment of a civil penalty in the amount of $2,000,000.

On November 18, 2004, the Company signed a Consent to Final Judgment of
Permanent Injunction with the Securities and Exchange Commission pursuant to
which the Company, without admitting or denying the allegations included in the
complaint filed by the Commission, consented to a permanent injunction from
violations of various sections and rules under the Securities Act of 1933 and
the Securities Exchange Act of 1934.

The Stock Purchase Agreement is not effective until formal approval by the U.S.
District Court for the Southern district of Florida of the settlement of that
certain litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc.,
International Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case
No: 04-80354-civ-Middlebrooks). The Stock Purchase Agreement is also conditioned
on the Company receiving the benefit of the disgorgement and civil penalty funds
paid by Crowley.

As a result of the contemplated stock purchase, the Company expects that the
stockholders of the Company will have their percentage stock interest increase
correspondingly with the return of the Spear & Jackson shares to the Company by
PNC. Jacuzzi Brands, Inc., which is a beneficial owner of 3,543,281 shares of
common stock, will have its interest in the Company increase to approximately
61.2% of the outstanding common stock.

Such percentage stock increases are not necessarily permanent as the Company may
subsequently reissue these shares, wholly or in part, for legitimate business
purposes.

SUMMARY OF PRINCIPAL OPERATIONS

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, Australasia, North and South America,
Asia and the Far East. These products are manufactured and distributed under
various brand names including:

*        Spear & Jackson - garden tools;
*        Neill - hand tools;
*        Bowers - bore gauges and precision measuring tools;

                                       20
<PAGE>

*        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 disposition of the screwdriver division in September 2003, the Company
also manufactured and sold a range of patented multi-bit screwdrivers under the
"Megapro" brand name.

The Company'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, has
         now been expanded to include a full range of hand power tools.
         Similarly, from January 1, 2005, Spear & Jackson Garden Tools' range
         has been supplemented by a portfolio of electric powered garden tools.

2)       ECLIPSE MAGNETICS whose 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.

3)       The Company's metrology division comprises:

         MOORE & WRIGHT and COVENTRY GAUGE which manufacture a wide variety of
         products including: low technology measuring tools and hand held gauges
         for checking the threads, diameters and tapers of machined components.
         This division has supplemented its manufactured products with a range
         of factored items.

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

         In December 2004, the division also secured the European
         distributorship rights for a range of premier portable hardness testers
         sourced from China.

                                       21
<PAGE>

         The distribution operation will be operated through a specifically
         formed Dutch subsidiary company based in Maastricht, Holland.

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

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

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

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

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

B        France

a)       Spear & Jackson                     Assembly of garden tools
         France

                                       22
<PAGE>

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)      Consideration and implementation of initiatives to increase our US
         penetration.

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.

                                       23
<PAGE>

The Company's policy is to support its core product offering with a pipeline of
new products and range extensions. In the period from October 1, 2004 to
December 31, 2004 new product range launches and other significant product
related business developments have included:

Neill Tools witnessed advances in the following areas :

o    The "Predator" woodsaw launched in the last financial year continues to
     show impressive growth. Investment in new plant and machinery for the
     product line has been approved in the quarter under review to ensure that,
     going forward, the anticipated demand levels can be met.

o    Listings have been secured in a major UK big box retailer for our new
     garden power range which was launched in September 2004.

Eclipse Magnetics introduced extensions to its magnetic assemblies, speciality
magnetic tools and oil filtration product ranges, principally for use in the
automotive and industrial business sectors.

The Metrology Group has established a European distribution outlet for hardness
testers in Holland. The operation is now fully functional and trading throughout
Europe.

Spear & Jackson France has further enhanced its range of garden products and has
actively promoted new products including plastic snow shovels, bird feeders,
weather stations and brass garden ornaments.

In Australia and New Zealand, range reviews are ongoing with a view to delete
unprofitable lines and to introduce new products capable of delivering
incremental sales and improved margins in the remainder of the fiscal year.

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, judgments and assumptions that we believe are reasonable
based upon the information available. These estimates and assumptions affect the
reported amounts of assets and liabilities as of the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the periods presented. Actual results could differ significantly from those
estimates under different assumptions and conditions.

Management's Discussion and Analysis or Plan of Operation in the Company's 10-K
filing for the year ended September 30, 2004 included a detailed discussion
which addressed our most critical accounting policies. The quarterly financial
statements for the period ended December 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 judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain.

                                       24
<PAGE>

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

With regard to pension obligations, 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, 2004 there have been no changes in our critical accounting
policies and no significant change to the assumptions and estimates related to
them.

OVERVIEW

When compared to the equivalent period last year, the results for the quarter
ended December 31, 2004 showed a decrease in operating profitability despite an
increase in sales. The Company's management believes, however, that conditions
are showing signs of improvement in certain sectors of our markets and although
various adverse macro economic factors remain, e.g. the continuing weakness of
the US $ and further raw material cost increases, an operating profit of
approximately $0.4 million is anticipated for the month of January 2005
(excluding net profits arising on the disposal in January 2005 of the excess
portion of the Company's Wednesbury manufacturing site) and continuing
profitability is expected for the remainder of quarter 2 (again excluding the
profits arising on the sale in February 2005 of the Company's warehouse and
office premises in Boca Raton, Florida).

Sales revenues for the quarter ended December 31, 2004 increased by
approximately $2.1 million over the comparable period in the previous year. This
gain was primarily attributable to favorable currency exchange fluctuations in
the current year. Overall sales volumes were flat as a result of growth in the
UK trading divisions and S&J France being neutralised by volume decreases in
Australasia.

Compared to the same period last year, sales volumes were buoyed by strong
Middle and Far East hand tool demand but were adversely affected by the negative
impact in certain export markets of the weak US dollar, adverse weather
conditions in Australasia and the loss of a major Australian customer to whom
significant sales were recorded in the quarter ended December 31, 2003.

Gross profit was $8.1 million for the period ended December 31, 2004 compared to
$7.2 million for the prior year. While direct costs are still being adversely
affected by increases in prices for our principal raw materials of steel,
plastic, cobalt and nickel, and increases in basic utility costs, margins saw
signs of improvement as the various

                                       25
<PAGE>

divisions witnessed favourable sales mixes and benefited from favourable
exchange gains on imported factored products.

Selling, general and administrative expenses have increased by $2.1 million
(32.19%). Key factors include: continuing UK distribution cost overruns; the
impact of movements in the US $/sterling cross rates in the period; general
inflationary increases, and increased FAS 87 pension costs. Corporate head
office costs in the US remain significant as a result of the continuing legal
and professional fees, monitor costs and associated expenses incurred in
connection with the U.S. Securities and Exchange Commission's suit against the
Company and its former Chief Executive Officer. Head office salary costs have
fallen as a result of the removal of the Company's former CEO but this reduction
has not been sufficient to absorb the increases in legal fees in the period.

The Company believes that the level of overheads incurred in the three months
ended December 31, 2004, will be maintained in the short term. Various
initiatives are, however, being implemented to reduce the levels of sales and
distribution costs in future periods. Additionally, on the assumption of a
prompt settlement of the Company's SEC and other related litigation issues,
decreases in administration costs should follow in future periods as a result of
decreases in legal and professional costs.

Overall, the margin improvements have not been sufficient to absorb the increase
SG&A expenses, and this has resulted in an operating loss of $0.7 million for
the period ended December 31, 2004 compared to an operating profit of $0.5
million for the same period last year.

The Company is addressing the decrease in operating profitability by the launch
of new products to re-establish our competitive edge over cheap imports. An
extended woodsaw range has already been introduced to the market and the launch
of powered garden tools is underway. Additionally, the Company anticipates that
it will continue to buy in finished and semi finished components as a cost
efficient alternative to own manufacture.

The Company intends to continue exploring initiatives to reduce its
manufacturing base costs, both in respect of raw materials and processes, in
order to minimize margin erosion. The Company's management has implemented a
number of initiatives to improve profitability with emphasis placed on biasing
sales mix towards higher margin products, restructuring of the UK manufacturing
cost bases and the augmentation of the Company's sales and marketing functions
to ensure the Company derives maximum advantage from the new UK direct trading
route.

Initiatives have now been implemented to reduce warehouse and distribution costs
in the UK hand and tools division. In Australia the new Managing Director,
appointed in the last financial year, is re-establishing sound trading
relationships with certain major customers in order to maximize sales
opportunities. While sales volumes have been disappointing in Australia, the
Company has returned to profitability and it is anticipated that this will
continue in the forthcoming year.

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

                                       26
<PAGE>

The removal by the SEC, in April 2004, of Dennis Crowley as Company CEO and the
initiation of legal proceedings against the Company and certain of its directors
had a debilitating effect on the Company's operating focus.

The Company has been pursuing settlement negotiations with both the SEC and Mr.
Crowley to reach a resolution with both parties.

As part of such settlement negotiations the Company has now entered into a Stock
Purchase Agreement with PNC Tool Holdings LLC ("PNC") and Dennis Crowley, the
sole member of PNC. Under the Stock Purchase Agreement, the Company will
acquire, for $100, 6,005,561 common shares of the Company held by PNC, which
represents approximately 51.1% of the outstanding common shares of the Company
at December 31, 2004, and which constitute 100% of the common stock held by such
entity. The parties have also executed general releases in favor of each other
subject to the fulfilment of the conditions of the Stock Purchase Agreement.

On September 28, 2004, Mr. Crowley signed a Consent to Final Judgment of
Permanent Judgment with the Securities and Exchange Commission, without
admitting or denying the allegations included in the complaint, which requires a
disgorgement and payment of civil penalties by Mr. Crowley consisting of a
disgorgement payment of $3,765,777 plus prejudgment interest in the amount of
$304,014, as well as payment of a civil penalty in the amount of $2,000,000.

On November 8, 2004, the Company signed a Consent to Final Judgment of Permanent
Injunction with the Securities and Exchange Commission pursuant to which the
Company, without admitting or denying the allegations included in the complaint
filed by the Commission, consented to a permanent injunction from violations of
various sections and rules under the Securities Act of 1933 and the Securities
Exchange Act of 1934.

The Stock Purchase Agreement is not effective until formal approval by the US
District Court for the Southern District of Florida of the settlement of that
certain litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc.,
International Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case
No: 04-80354-civ-Middlebrooks). The Stock Purchase Agreement is also conditioned
on the Company receiving the benefit of the disgorgement and civil penalty funds
paid by Crowley.

The Company expects that, in the short term, resolution of the remaining
approval issue will enable management to refocus its energies on implementing
the key strategies of the business and will help the Company to move forward
free from the operational uncertainties associated with this legal action.

Subsequent to the SEC action, a number of class action lawsuits were initiated
in the US District Court for the Southern District of Florida by Company
shareholders against the Company, Sherb & Co. LLP, the Company's former
independent auditor, and certain of the Company's directors and officers,
including Mr. Crowley and Mr. William Fletcher, the Company's former CFO. These
suits allege essentially the same claims as the SEC suit, and seek unspecified
damages. Lead counsel has now been appointed for the Class and a consolidated
complaint has been filed. The Company is in the process of formulating its
response. Inevitably, therefore, commercial uncertainties will remain as it is
impossible at this time to ascertain the

                                       27
<PAGE>

ultimate legal and financial liability or whether the class action litigation
will have a material adverse effect on the Company's financial condition and
results of operation.

RESULTS OF OPERATIONS

The following discussion provides a review of results for the three months ended
December 31, 2004 versus the three months ended December 31, 2003.

Summary Profit and Loss Account Data:

                                            Three Months ended December 31
                                            ------------------------------

                                        2004             2003           % Change
                                         $m               $m

Net Sales                               25.10            22.98            +9.25
Cost of goods sold                     (16.98)          (15.80)           +7.45
                                       ------           ------
Gross profit                             8.12             7.18           +13.21
Selling, general and
  administrative expenses               (8.82)           (6.68)          +32.19
                                       ------           ------

Operating (loss) income                 (0.70)            0.50          (240.68)
Other income                             0.01            (0.04)          126.19
                                       ------           ------
(Loss) income before                    (0.69)            0.46          (251.20)
  income taxes
Provision for income taxes               0.04            (0.18)          124.43
                                       ------           ------
Net (loss) income from
  continuing operations                 (0.65)            0.28          (330.60)
                                       ======           ======

Effective tax rate                       6.22%           38.51%
                                       ======           ======

Comparisons as a % of net sales:

Gross profit                            32.35%           31.22%
Selling, general and
  Administration expenses               35.15%           29.05%
Operating (loss) income                 (2.80%)           2.17%
(Loss) income before income taxes       (2.75%)           1.99%
Net (loss) income                       (2.58%)           1.22%

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

Sales increased by $2.1 million from $23 million in the three months ended
December 31, 2003 to $25.1 million for the three months ended December 31, 2004.

                                       28
<PAGE>

The increase is analyzed as follows:
                                                              Three Months ended
                                                               December 31, 2004
                                                   Note               $m

Effect of exchange rate movements                  (a)               2.0
Sales volumes movements                            (b)                 -
Decreased rebates                                  (c)               0.1
                                                                     ---
                                                                     2.1
                                                                     ===

Analysed by principal business segment the net sales increase is as follows:-

                                                              Three Months ended
                                                               December 31, 2004
                                                   Note               $m
i)     Hand and garden tools

       Effect of exchange rate movements           (a)               1.5
       Sales volume decreases                      (b)              (0.3)
       Rebates                                     (c)               0.1
                                                                     ---
                                                                     1.3
                                                                     ---
ii)    Metrology tools

       Effect of exchange rate Movements           (a)               0.3
       Sales volume increases                      (b)               0.1
                                                                     ---
                                                                     0.4
                                                                     ---
iii)   Magnetic products

       Effect of exchange rate movements           (a)               0.2
       Sales volume increases                      (b)               0.2
                                                                     ---
                                                                     0.4
                                                                     ---
       Total net sales increase                                      2.1
                                                                     ===
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
       month period ending December 31, 2004 compared to the comparable period
       last year has had a significant impact on the US dollar value of the
       group's sales. The average cross rates in the period under review can be
       summarized as:

                                                 Average Cross Rates
                                                 -------------------
                                        2004             2003         % Movement

       3 months ended December 31      1.8647           1.7071          +9.23%

                                       29
<PAGE>

(b)    In general, business conditions in many of our end markets remained
       challenging as a result of continuing intense competition from rival
       suppliers in a number of our product ranges, the weak US dollar and
       unfavourable weather conditions in Australia and New Zealand.

       Within the UK and French hand and garden products segment, despite
       challenging trading conditions, Neill Tools, Robert Sorby and S&J France
       showed aggregate sales volume increases for the quarter of $1.0 million
       compared to the comparable period last year. However, such sales volume
       increases were exceeded by sales volume decreases of $1.3 million in the
       Australian and New Zealand entities. The Australasian sales shortfall in
       2004 compared to 2003 is primarily attributable to the loss of a major
       customer at the end of 2003, continued drought conditions in that country
       and delays in the shipping of initial orders to a major New Zealand
       customer.

       Similar market pressures were prevalent in the metrology and magnetic
       products segments but volume increases of $0.3 million were still
       achieved. This was attributable to the continuing strong performance of
       the Smart Plug two point gauge in the Metrology division and increases in
       export sales in Eclipse Magnetics following the establishment of new
       distribution channels.

(c)    The level of rebates has decreased overall in 2004 by $0.1 million when
       compared to 2003. The decreases are attributable to reduced trading
       volumes in Australia, partially offset by increases in our Neill Tools
       division as a result of changes in customer profile which arise following
       the set up of the direct to market sales route. Assuming similar sales
       volumes and customer mix, the Company anticipates that this level of
       rebate will be maintained in future periods.

SEGMENT 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 the Company's brands in order to retain and gain market share.

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

NEILL TOOLS

Sales for the quarter ended December 31, 2004 of $10.9 million showed an
improvement of $1.6 million over last year's sales of $9.3 million. This
increase was attributable to favorable exchange movements of $0.9 million and
increased volumes of $0.8 million, offset by an increase in sales rebates of
$0.1 million.

Sales volume improvements in the quarter were mainly attributable to
achievements in our export markets ($0.7 million). Despite the continued
weakness of the US dollar, exports were particularly strong in the Middle and
Far East. The huge construction programs and rebuilding projects following the
conflicts in the Middle East have increased demand and have assisted our strong
export sale performance.

                                       30
<PAGE>

In September 2004 the Company's range of powered garden tools was launched at
the Glee Exhibition and a considerable amount of interest was shown. The
products are available for delivery from January 2005.

The "Predator" woodsaw range, so successful last year, has continued to deliver
in the first quarter of the year and this has been complemented by strong
hacksaw blade performance. Investment of approximately $0.9 million in a new
woodsaw and HSB plant has been approved and it is expected to be fully
operational in Quarter 4. This will ensure that the record levels of
productivity can be sustained.

While sales have improved in the quarter, divisional management is fully
appreciative of the shrinking UK manufacturing base and the threat from
low-cost, Far Eastern economies. Despite price increases imposed by our steel,
plastics and utility suppliers, and the difficulty within a competitive market
place of passing these on to customers, margins have improved when compared to
the same period last year, as the division has continued implementation of its
strategic plan to reduce the cost of manufacturing and distribution, which was
introduced in the last financial year.

Costs and overheads have seen increases, primarily due to the decision,
implemented in July 2003, to cease trading with its major UK wholesale customer,
and to deal with its customers on a direct basis. The associated increase in
distribution costs as the Company reacted to a change in customer delivery
requirements has now been addressed with the appointment of a new Distribution
Manager. The business is now closer to its customer base than ever before with
strong relationships being developed over the past two years.

ECLIPSE MAGNETICS

Sales for the quarter showed a $0.4 million increase over last year's figures
(2004 $2.7 million, 2003 $2.3 million) with favorable exchange movements of $0.2
million and an increased volumes of $0.2 million.

Sales of the distribution range of products have shown a marked improvement when
compared to last year. Even though the UK industrial sector has remained flat,
the new Ultra Lift + introduced in the last fiscal year has continued to take
market share.

The standard low technology area of the business, however, continues to be
eroded by good quality imports from our competitors in China and the Far East as
previously reported. This is directly impacting on our distribution and
industrial markets.

The higher added value area of our business continues to flourish, however, with
the sales of new product installations secured within the food industry and
export markets. The order book is encouraging, especially overseas, where
forward order schedules have been received for new listings within a major US
industrial catalog.

The increasing raw material price of nickel and cobalt (two major alloys used in
magnet manufacturing) witnessed in the last fiscal year now seems to have
stabilised somewhat. Gross margins, therefore, have remained similar to 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.

                                       31
<PAGE>

ROBERT SORBY

Sales for the first quarter were $0.2 million higher than last year (2004 $1.4
million, 2003 $1.2 million), attributable to volume growth of $0.1 million and
favorable exchange movements of $0.1 million.

The first quarter proved successful for Robert Sorby against the background of a
testing market place and the weak dollar's impact on US consumer prices. Despite
this, international sales grew by 10%, mainly due to increased volume sales into
the USA where a major promotional campaign secured increased listings with a
number of our larger customers. However, management recognises the need to build
upon these successes to under-line its market position and to compensate for the
closure of a major US customer late in 2003. The focus of attention in the
forthcoming quarters will be the introduction of new products, enhanced consumer
marketing and the refinement of our current distribution network.

In a flat UK market, where sales growth has been stagnant, the main thrust has
continued to be the promotion of lathes, lathe chisels and lathe chucks where we
have an increasingly strong position. Continuing focus has been placed on our
mail order business where an improved order and stock control system is under
consideration in order to improve customer service and lead times.

BOWERS METROLOGY

Sales for the first quarter show an increase of $0.4 million over last year
($4.0 million 2004, $3.6 million 2003) due to favorable exchange movements of
$0.3 million and increased volume of $0.1 million.

The main successes of the quarter were the new Smart Plug 2-point bore gauge
product, which secured a significant single order in the railway rolling stock
sector, together with sales into the rapidly expanding Chinese automotive
sector.

Elsewhere, the Moore & Wright and Coventry Gauge divisions have continued to
struggle against the influx of low cost competition from China and the Far East.

Likewise, the continuing weakness of the US dollar has affected our
competitiveness in the overseas markets, particularly Korea and China, that are
linked to the US dollar. In some instances, extra discounts have been offered to
some US and Asian customers in order to preserve our competitiveness.

During the quarter, a new sales and distribution facility was set up in
Maastricht, Holland, following the successful negotiation for the exclusive
European distribution rights to a well-known brand of portable hardness testing
equipment manufactured in China. A separate company and dedicated infrastructure
has been set up in the Netherlands to service this new product. This new
facility, with excellent connections in mainland Europe, has incurred
considerable set-up costs in the period but profitability is anticipated in the
short term.

Going forward, demand for low cost, own manufactured hand tools is expected to
show further erosion but the continuing success of the "Special Products and

                                       32
<PAGE>

Systems" segments of the business continue to flourish. The Company therefore
recognises that it needs to continue to focus the UK manufacturing sites on
producing more high technology products and to explore strategies to make the
Company more competitive in the low technology sectors.

S&J FRANCE

Sales for the quarter increased by $0.3 million from $1.8 million in 2003 to
$2.1 million in 2004. This is attributable to favourable exchange movements of
$0.2 million and volume increase of $0.1 million.

While the French economy has remained depressed, with low consumer spending and
increases in unemployment, and bad weather conditions have prevailed, there have
been a number of encouraging signs in the quarter. Several new listings were
achieved for new products including brass ornaments and weather station ranges
which have offset the slow garden tool sales in the quarter.

Production improvements introduced with the involvement of UK manufacturing
management in the last quarter of the September 2004 fiscal year have begun to
increase productivity rates and efficiencies in the assembly and paint areas.

The French operation is a highly seasonal business since most of its product
offering relates to lawn and garden tools. An additional manager has been
recruited whose remit is to introduce new, non-garden items into our product
ranges. We expect these will substantially broaden our product portfolio and so
reduce the seasonality and keep the business profitable throughout the year.

AUSTRALASIA

Sales for the quarter for Spear & Jackson Australia and Spear & Jackson New
Zealand were $0.8 million lower than last year (2004 $4.0 million, 2003 $4.8
million). Volume reductions of $1.3 million were only partly compensated by
favorable exchange movements of $0.3 million and decreased sales rebates of $0.2
million.

The sales revenues of the Australian subsidiary in the three month period ended
December 31, 2004 showed a considerable fall when compared to the entity's sales
performance in the equivalent period last year. This is principally due to the
loss of a major customer in quarter 1 of last year. In addition the continuation
of the drought and the introduction and subsequent expansion of water
restrictions throughout Australia severely affected the rural and farm trade,
resulting in sales of digging and garden products failing to reach expectations.
Compounding this result was the decline in power tool sales due to falling price
points to the market and competition from cheap foreign imports.

Our Australasian division remains focussed on rebuilding its sales and marketing
infrastructure and to maximize the selling opportunities of the Spear & Jackson
branded products. Management is currently reviewing its product ranges with a
view to deleting unprofitable lines and introducing new product offerings which
will deliver incremental sales growth and improved margins.

                                       33
<PAGE>

COSTS OF GOODS SOLD AND GROSS PROFIT

Costs of goods sold increased to $17.0 million in the three month period ended
December 31, 2004 from $15.8 million in the three months ended December 31,
2003.

Headline information concerning costs of goods sold as a percentage of sales and
gross profit margins in the periods under review is as follows:

                                            Three Months Ended
                                       December 31      December 31
                                           2004             2003
                                            %                %

Cost of goods sold as a
% of sales                                67.65            68.78

Gross Profit Margin                       32.35            31.22

Despite continuing raw material (principally steel and plastic) and utility
price increases, together with increases in the cost of fuel used to operate our
manufacturing processes, gross margins for the period ended December 31, 2004
show an improvement over that for the quarter ended December 31, 2003 as a
result of:

o    exchange gains realized on the purchase of factored products denominated in
     US dollars from suppliers in the Far East.

o    more favourable and advantageous sales mix.

o    Increased beneficial effect of selling directly to customers rather than
     via intermediaries.

We continue to monitor and evaluate means of maintaining and improving current
sales mixes and of further reducing costs of goods sold across all of our
principal trading operations to avoid margin erosion. The highly price sensitive
markets in which we operate make it prohibitive to pass on adverse variances to
certain of our customers. This, and the upward pressure on steel prices caused
by strong demand from China, will continue to have an adverse influence on our
margins in the short term.

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

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

OPERATING COSTS AND EXPENSES

Selling, general and administrative (SG&A) expenses increased by $2.1 million
from $6.7 million in the three months ended December 31, 2003 to $8.8 million in
the three months ended December 31, 2004. Expressed as a percentage of sales,
selling, general and administration expenses were 35.15% of sales for the three
months ended December 31, 2004 (2003 : 29.05%).

                                       34
<PAGE>

The principal reasons for the increase in the level of the current quarter's
selling, general and administrative expenses over its prior year comparative can
be summarized as follows:

                                                 Increases Over Prior Year
                                                    Three Months ended
                                                     December 31, 2004
                                                             $m

a)    Impact of movements in average                         0.4
      US$/sterling cross rates in the period

b)    Increased FAS 87 pension costs                         0.7

c)    Inflationary increases and reduced                     0.2
      foreign exchange gains on trading
      transactions

d)    Increased head office costs relating                   0.2
      to legal and professional fees, monitor fees
      and associated costs

e)    Increased UK warehouse and                             0.4
      distribution costs following the change
      to direct sales

f)    Other net increases                                    0.2
                                                             ---

      Total increase in expenses                             2.1
                                                             ===

Other income and expenses moved from a net expense of $0.04 million in the three
months ended December 31, 2003 to a net credit of $0.01 million in the three
months ended December 31, 2004.

This improvement is attributable to lower 2004 bank interest charges in the
Company's UK businesses. During the quarter to December 2003 the cash balances
in the UK were negatively impacted by the cash outflows relating to the purchase
of land and buildings at Wednesbury, England for $3.2 million. This resulted in
increased interest charges in December 2003. Net trading cash generation over
the last year has improved cash balances thereby reducing interest charges.

(LOSS) INCOME BEFORE INCOME TAXES

Our loss before income taxes in the three months ended December 31, 2004
amounted to $0.7 million. This compares to an income before taxes for the three
months ended December 31, 2003 of $0.4 million. This net decrease in
profitability of $1.1 million is attributable to increased overhead costs of
$2.1 million, net of improvements in gross profit of $1.0 million, as explained
above.

                                       35
<PAGE>

PROVISION FOR INCOME TAXES

An income tax credit of $0.043 million arose in the three months ended December
31, 2004 compared to a $0.176 million income tax charge in the three months
ended December 31, 2003.

Income taxes were 6.22% of losses before tax in the three months ended December
31, 2004 compared to 38.51% of profits in the three months ended December 31,
2003.

Differences between the effective rate and the statutory rate of taxation of 35%
result from income 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.

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

NET (LOSS)/INCOME

Our net loss from continuing activities after income taxes was $0.6 million for
the three months ended December 31, 2004 (2003: $0.3 million profit).

FINANCIAL CONDITION

Liquidity and Capital Resources

Our cash and cash equivalents amounted to $6.2 million at December 31, 2004
($5.1 million at September 30, 2004), working capital (excluding deferred taxes)
totalled $30.6 million at December 31, 2004 ($28.8 million at September 30,
2004) and our stockholders' equity was $30.9 million at December 31, 2004 ($29.4
million at September 30, 2004).

Net cash generated from operating activities in the three month period ended
December 31, 2004 was $1.1 million compared to a $0.2 million outflow in the
three months ended December 31, 2003. This increase of $1.3 million primarily
arises from:

o  increased trading working capital inflows of $0.7 million (note a)

o  increase in net inflows from other assets and liabilities of $1.0 million
   (note b)

                                       36
<PAGE>

Offset by:

o  the reduction in net income (adjusted for depreciation, pension charges and
   deferred taxes) of $0.4 million as dealt with in the commentary on trading
   results above.

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

a)     Trade Working Capital Variances

       The net increase in inflows from trade working capital is attributable
       to:

                                                       Note        $million

       Increased trade receivables inflows             (i)            1.0
       Increase trade payable inflows                  (ii)           1.5
       Reduced inventory inflows                       (iii)         (1.8)
                                                                     ----
       Net increase in trade
       working capital inflows                                        0.7
                                                                     ====

i)     UK sales in August and September 2004 benefited from increased turnover
       of approximately $1.8 million when compared to the equivalent period in
       2003. The inflow from trade receivables in the quarter to December 31,
       2004 of $0.7 million therefore benefits from the cash received from these
       sales.

ii)    The movement in inventories discussed in point (iii) below is also
       reflected in the trade payable inflows. Buoyed by pre-quarter end
       purchasing, especially in the UK hand tools division, France and
       Australia, trade accounts payable inflows increased by $1.5 million.

iii)   In the period ended December 31, 2004 inventories increased by $2.5
       million compared to an increase of $0.7 million in the period ended
       December 31, 2003. Within the UK hand tool division, the quarter to
       December 2003 witnessed a rigorous inventory reduction program. These
       reductions were not repeated in December 2004 and, furthermore, inventory
       levels increased in anticipation of new product launches. Elsewhere, in
       Australia for example, lower than forecast December sales, together with
       pre-season inventory builds left higher inventory levels at the quarter
       end. This pattern was repeated in France which also witnessed higher than
       usual inventory builds in anticipation of the start of the new spring
       season.

b)     Variances in Cash Flows attributable to Other Assets and Liabilities.

With regard to the net inflows from other assets and liabilities, the main
contributory factor is $0.8 million of additional legal and professional fees,
monitor costs and related expenses accrued in the US holding company at December
31, 2004. Payment of these fees will crystallise in January 2005 and subsequent
months, and further costs will be incurred until the monitor's duties are
curtailed and the various SEC and other litigation issues are resolved.

Cash outflow from investing activities was $0.3 million in the period ended
December 31, 2004. This compares to an outflow from investing activities in the
period ended

                                       37
<PAGE>

December 31, 2003 of $3.4 million. Net cash used in investing activities in the
three months ended December 31, 2003 includes $3.2 million relating to the
purchase of the land and buildings at Wednesbury, England, which is the base for
our UK garden tools manufacturing operation.

Net cash absorbed by financing activities was $0.002 million in the period ended
December 31, 2004 compared to an inflow of $1.2 million in the period ended
December 31, 2003. The 2003 inflow principally represents the partial
utilization of the UK bank overdraft facility in order to finance the $3.2
million purchase of the Wednesbury property net of the repayment of the
Company's Australian subsidiary's overdraft. These events have not been repeated
in 2004.

BANK FACILITIES

The UK subsidiaries of Spear & Jackson plc and Bowers Group plc maintain a line
of credit of $8.6 million. This is secured by fixed and floating charges on the
assets and undertakings of these businesses. Of the total facility, $5.8 million
relates to bank overdrafts and $2.8 million is available for letters of credit.
These facilities are denominated in British pounds. The overdraft carries
interest at UK base rate plus 0.75%. At December 31, 2004 and September 30, 2004
the Company had no borrowings outstanding under the overdraft line but had $2.4
million in outstanding letters of credit (September 30, 2004: $1.5 million).

The French and Australian subsidiaries of Spear & Jackson plc maintain
short-term credit facilities of $3.3 million denominated in Euros and Australian
dollars. The facilities comprise bank overdraft lines, with interest rates
ranging from 6.8% to 12.6%, together with facilities for letters of credit and
the discount of bills receivable. There was $0.1 million outstanding under the
overdraft lines at December 31, 2004 (September 30, 2004: $0.1 million) and $1.4
million of letters of credit and bills outstanding under these facilities
(September 30, 2004: $0.9 million).

The UK facilities are due for renewal in April 2005 and the Australasian and
French facilities fall for renewal at various dates in Fiscal 2005. These lines
of credit are subject to the Company's and its subsidiaries' continued credit
worthiness and compliance with the applicable terms and conditions of the
various facilities. Assuming that the Company maintains compliance with these
conditions it is anticipated that all the facilities will be renewed on
comparable terms and conditions.

The Company's bank accounts held with the HSBC Bank plc by UK subsidiaries of
Spear & Jackson plc and Bowers Group plc form a pooled fund. As part of this
arrangement the companies involved have entered into a cross guarantee with HSBC
Bank plc to guarantee any bank overdraft of the entities in the pool. At
December 31, 2004 the extent of this guarantee relating to gross bank overdrafts
was $21.3 million (September 30, 2004 $20.5 million). The overall pooled balance
of the bank accounts within the pool at December 31, 2004 was a net cash in hand
balance of $2.5 million (September 30, 2004 $1.6 million).

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

                                       38
<PAGE>

Our business operations have been funded from net operating income supplemented,
where necessary, by utilization of the UK, French and Australian banking
facilities described above.

We believe that we have sufficient capital resources, liquidity and available
credit under our principal banking facilities to sustain our current business
operations and normal operating requirements for the foreseeable future.

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. Such assets
include the excess element of the Company's Wednesbury manufacturing site for
which a sale was agreed on January 28, 2005 for approximately $5.3 million
(excluding legal costs and other transaction charges) and the Company's Florida
warehouse which was sold on February 15, 2005 for $3.4 million (net of sales
commission and other costs of disposal).

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

The Company makes a range of contractual obligations in the ordinary course of
business. The following table summarizes the Company's principal obligations at
December 31, 2004:

 Contractual obligation        Total             Payments due by period ($m)
                               Amount       1 year     1-3      4-5      5 years
                               Committed    or less    years    years    or more
 -------------------------     ---------    -------    -----    -----    -------
 Capital lease obligations     1.6          0.9        0.7      -        -
 Operating leases
 (note a)                      7.4          1.0        1.8      1.8      2.8
                               ---          ---        ---      ---      ---
                               9.0          1.9        2.5      1.8      2.8
                               ---          ---        ---      ---      ---

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

(b)    Excluded from the above tables are the amounts payable by the Company to
       the UK defined benefit pension plan as future funding obligations cannot
       be accurately forecast. The annual contribution rate is set annually by
       the actuary in accordance with the applicable UK regulatory legislation
       and will be next reviewed in May 2005. In the year to September 30, 2005
       the Company anticipates paying approximately $2.7 million into the plan.

(c)    As at December 31, 2004, the Company had letters of credit of $2.7
       million outstanding which are secured by the UK and Australian credit
       facilities. In addition the Company's French subsidiary had discounted
       $1.1 million of bills of exchange with recourse.

At December 31, 2004, the Company had no material off-balance sheet arrangements
other than the non-debt obligations described in contractual obligations, above.

                                       39
<PAGE>

OUTLOOK

The first weeks of quarter 2 have shown signs of improvement in certain sectors
of our markets and, in particular, export sales orders received by our UK
divisions have shown an encouraging increase. Because of the seasonal nature of
sales of garden products in the UK and in Europe, quarter 2 historically
witnesses full productivity levels and a return to profitability. Income before
taxation for the month of January is anticipated to be approximately $0.4
million and similar levels of profitability are expected in each of the two
remaining months of the second quarter. These forecast trading results exclude
the net profit arising on the disposals of the excess element of the Company's
Wednesbury site in the UK and its warehouse and office premises in Boca Raton,
Florida).

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. Demand for the Predator woodsaw remains high and investment in new
plant of approximately $0.7 million is to be commissioned in quarters three and
four so that output can be increased to fulfil customer orders on a timely
basis.

Similarly, demand for hacksaw blades and power tools is strong and it is
expected that this will result in earnings benefits in quarters two and three in
the financial year. The robust performance of these ranges is attributable to
buoyant demand in the Middle East where hand tool sales and orders are strong as
a result of the increased demand for these products as a result of the building
projects which have emerged from the Iraqi conflict.

Our Australasian subsidiaries have continued to experience difficult trading
conditions because of the adverse weather conditions in Australia and New
Zealand and flat demand in certain sectors. In the remainder of 2005 we plan to
continue to pursue a widening of our direct sell UK customer base together with
initiatives to increase our presence in mainland Europe. Such customer gains are
essential in helping to absorb the additional overhead incurred in setting up
the infrastructure for the "direct to market" sale route. As a part of this
process to increase our European profile, the setting up of the hardness tester
sales facility in Maastricht is expected to contribute an additional $1.5
million in incremental sales in the remainder of the year.

The management of the Company anticipates that, in the remainder 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. This will again put
pressure on our margins and overhead costs and, wherever possible, these
increases will be passed on through sales price increases.

We remain confident, however, that new product introductions and major product
reviews completed over the past twelve months will deliver incremental sales
growth and profitability over the remaining quarters of the year.

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

                                       40
<PAGE>

benefits would, however, be diluted by the related increases in the purchase
price of factored product from the Far East.

Increased emphasis will also be placed on promotional campaigns which focus on
high margin product groups in an effort to reverse the dilution of margin caused
by an increasing bias in our recent sales mix towards factored items.

In addition, we plan to continue both to look at initiatives to rationalize
underperforming areas of the business and to monitor the business
infrastructures in the United Kingdom, particularly overhead costs, to ensure
that these are as cost efficient as possible and at a level appropriate to the
needs of the business.

A review of the Company's existing warehouse distribution and supply chain
management and other initiatives are in place to reduce the level of
distribution costs in our hand tools division which have been incurred as a
result of the "direct to market" sales route.

Despite such initiatives, we anticipate that there will continue to be increases
in the level of certain administrative overhead expenses as a result of legal
and professional charges, monitoring fees and related costs associated with the
SEC suit referred to in Part II, Item 1, below. The level of such costs is not
always easy to accurately forecast but the Company is committed to reducing
overhead expenses wherever possible so that the adverse impact of these legal
costs is mitigated.

In the forthcoming quarter we will continue to focus on maximising cash
generation. The sale of part of the Company's Wednesbury manufacturing site in
the UK was concluded on January 28, 2005 for approximately $5.3 million
(excluding transaction costs). Further funds have also now been generated via
the disposal of the Company's warehouse and office premises at Boca Raton,
Florida. A sale of that property was concluded on February 15, 2005 for circa.
$3.4 million (net of sales commissions and other costs of disposal). The
proceeds of such sales will enable us to fund future working capital
requirements and other projects, both domestically and abroad, which will
contribute to increased operational profitability and 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 the remainder of the financial year, therefore, we will continue to promote
our products to penetrate new markets and seek to broaden our customer base
wherever possible. The 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 launches clearly illustrated the benefits of this
strategy and we intend to build on this in the following months with the
introduction of other new products, particularly our new range of power garden
tools for which we anticipate strong demand.

                                       41
<PAGE>

The removal, in April 2004, of Dennis Crowley, the Company CEO, by the SEC and
the initiation of legal proceedings against the Company and certain of its
directors resulted in a temporary loss of focus on the Company's operating
activities and its long term direction. The SEC announced on February 10, 2005
that it has settled its securities fraud charges against Mr. Crowley, the
Company and others, subject to court approval. Thanks to a dedicated senior
management and work force, the Company has been able to deal with the
significant business disruptions and distractions which the SEC legal action has
caused and its resolution will enable the Company to move forward in a more
focused and structured manner so that both its short and long term strategies
can be formulated and delivered. Inevitably, however, uncertainties will still
impact the Company's operations until the financial effects of the class action
litigation, explained in detail in PART II Item 1 ("Legal proceedings"), below,
are also quantified and settled.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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

INTEREST RATE RISK

The Company is exposed to interest rate changes primarily as a result of
interest payable on its bank borrowings and interest receivable on its cash
deposits. At December 31, 2004 the Company had borrowings in the form of
overdrafts amounting to $0.07 million which are repayable on demand and had cash
and cash equivalents of approximately $6.2 million. Given the current levels of
borrowings, the Company believes that a 1% change in interest rates would not
have a material impact on consolidated income or cash flows. Holding the same
variables constant, a 10% increase in interest rates would again have a
negligible effect on interest payable.

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

EXCHANGE RATE RISK

The Company has operations in the United Kingdom, France, 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.

In the three months ended December 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 $2.0 million, or 8.7%. 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 $0.4
million for the three months ended December 31, 2004 compared to the comparable
prior year period. If the US dollar further weakens in the future, it could
result in the Company

                                       42
<PAGE>

having to suffer reduced margins in order for its products to remain competitive
in the local market place.

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

We manage the risk and attempt to reduce such exposure by periodically entering
into short term forward exchange contracts. At December 31, 2004 the Company
held forward contracts to sell Australian dollars to buy approximately 0.5
million US dollars.

The contract values were not materially different to the period end value of the
contracts. A 10% strengthening or weakening of the US$ against its Australian
counterpart could, however, result in the Company suffering losses or benefiting
from gains of approximately $0.056 million had no forward contracts been taken
out.

COMMODITY PRICE RISK

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

CREDIT RISK

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

At December 31, 2004 the Company had made an allowance of $1.80 million in
respect of doubtful accounts which management believes is sufficient to cover
all known or expected debt non-recoveries.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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
acting Chief Executive Officer (CEO) and our Chief Financial Officer (CFO).

                                       43
<PAGE>

Attached as exhibits to this Quarterly Report are certifications of the acting
CEO and the CFO, which are required in accord with Rule 13a-14 of the Securities
Exchange Act of 1934. 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 other procedures of the Company designed
ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act of 1934, 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 ensure that such
information is accumulated and communicated to our management, including the
Company's principal executive and principal financial officers, as appropriate,
to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Controls

Our management, including the acting CEO and the 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 judgments 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.

Conclusions

Based upon the Disclosure Controls evaluation referenced above, our acting CEO
and our 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.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934)
that occurred during the quarter ended December 31, 2004 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

                                       44
<PAGE>

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
2005 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
defence be unsuccessful.

On April 15, 2004, the US Securities and Exchange Commission filed suit in the
US District Court for the Southern District of Florida, against the Company and
Mr. Dennis Crowley, its then Chief Executive Officer/Chairman, among others,
alleging violations of the federal security laws. Specifically with regard to
the Company, the SEC alleged that the Company violated its registration,
anti-fraud and reporting provisions. These allegations arise from the alleged
failure of Mr. Crowley to accurately report his ownership of the Company's
stock, and his alleged manipulation of the price of the Company's stock through
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. Further to Mr. Crowley consenting to a preliminary
injunction, the Court's Order also temporarily bars Mr. 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
Mr. Crowley from all positions he occupied as an officer or director. The
Company is co-operating with the Monitor and the continuing SEC investigation.

Subsequent to the SEC action, a number of class action lawsuits have been
initiated in the US District Court for the Southern District of Florida by
Company shareholders against the Company, Sherb & Co. LLP, the Company's former
independent auditor, and certain of the Company's directors and officers,
including Mr. Crowley and Mr. William Fletcher, the Company's CFO. These suits
allege essentially the same claims as the SEC suit, and seek unspecified
damages. Lead counsel has now been appointed and a consolidated complaint has
been filed. The Company is in the process of formulating its response. 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 and results of operation.

The Company has been pursuing settlement negotiations with the SEC and Mr.
Crowley to reach a resolution with the SEC as well as Mr. Crowley. The Company
has now entered into a Stock Purchase Agreement with PNC Tool Holdings LLC
("PNC") and Dennis Crowley, the sole member of PNC. Mr. Crowley is the former
Chief Executive Officer, President and Chairman of the Board of the Company.
Under the Stock Purchase Agreement, the Company will acquire, for $100,
6,005,561 common shares of the Company held by PNC, which represents
approximately 51.1% of the outstanding common shares of the Company and which
constitutes 100% of the

                                       45
<PAGE>

common stock held by such entity. The parties have also executed general
releases in favor of each other subject to the fulfilment of the conditions of
the Stock Purchase Agreement.

On September 28, 2004, Mr. Crowley signed a Consent to Final Judgment of
Permanent Judgment with the Securities and Exchange Commission, without
admitting or denying the allegations included in the complaint, which requires a
disgorgement and payment of civil penalties by Mr. Crowley consisting of a
disgorgement payment of $3,765,777 plus prejudgment interest in the amount of
$304,014, as well as payment of a civil penalty in the amount of $2,000,000.

On November 18, 2004, the Company signed a Consent to Final Judgment of
Permanent Injunction with the Securities and Exchange Commission pursuant to
which the Company, without admitting or denying the allegations included in the
complaint filed by the Commission, consented to a permanent injunction from
violations of various sections and rules under the Securities Act of 1933 and
the Securities Exchange Act of 1934.

The Stock Purchase Agreement is not effective until formal approval by the U.S.
District Court for the Southern District of Florida of the settlement of that
certain litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc.,
International Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case
No: 04-80354-civ-Middlebrooks). The Stock Purchase Agreement is also conditioned
on the Company receiving the benefit of the disgorgement and civil penalty funds
paid by Crowley.

As a result of the contemplated stock purchase, the stockholders of the Company
will have their percentage stock interest increase correspondingly with the
return of the Spear & Jackson shares to the Company by PNC. Jacuzzi Brands,
Inc., which is a beneficial owner of 3,543,281 shares of common stock, will have
its interest in the Company increase to approximately 61.2% of the outstanding
common stock.

Such percentage stock increases are not necessarily permanent as the Company may
subsequently reissue these shares, wholly or in part, for legitimate business
purposes.

With effect from September 30, 2003 the Company exited its screwdriver
operations following the disposition of the trade and assets of Mega Tools Ltd
and Mega Tools USA, Inc. The disposition of the screwdriver division was
undertaken by Neil Morgan who was then heading up the division. The Company
believes that no specific authorization was afforded to Mr. Morgan to undertake
that disposition and, following review of the terms and circumstances of the
purported sale, it is the intention of the Company to pursue claims against Mr.
Morgan and the transferee.

Additionally, the Company is, from time to time, subject to legal proceedings
and claims arising from the ordinary conduct of its business operations,
including litigation related to personal injury claims, customer contract
matters and employment claims. 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.

                                       46
<PAGE>

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits


31.1   Certification of acting Chief Executive Officer pursuant to Rule
       13a-14(b) or Rule 15d -14(c) of the Securities Exchange Act of 1934 and
       Section 906 of the Surbanes-Oxley Act of 2002 (18 U.S.C. 350).

31.2   Certification of Chief Financial Officer pursuant to Rule 13a - 14(a) or
       Rule 15(d) - 14(c) of the Securities Exchange Act of 1934 as adopted
       pursuant to Section 302 of the Sabanes-Oxley Act of 2002.

32.1   Certification of acting Chief Executive Officer pursuant to Rule 13a -
       14(b) or Rule 15d - 14(c) of the Securities Exchange Act of 1934 and
       Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.1350).

32.2   Certification of Chief Financial Officer pursuant to Rule 13a - 14(b) or
       Rule 15d - 14(c) of the Securities Exchange Act of 1934 and Section 906
       of the Sarbanes-Oxley Act of 2002 (18 U.S.C.1350).

(b) Reports on Form 8-K

i)     Form 8-K/A was filed on December 16, 2004 in which the Company announced
       the following:

       On November 19, 2004, Chantrey Vellacott DFK was engaged as the
       independent registered public accounting firm for Spear & Jackson, Inc.
       As previously reported, Sherb & Co. LLP resigned as Spear & Jackson's
       independent accountant on August 13, 2004.

       Prior to their appointment as the Company's primary auditor, Chantrey
       Vellacott DFK performed significant auditing procedures relating to the
       Company's non-United States subsidiaries. In connection with these
       auditing procedures, the Company discussed a variety of matters,
       including the application of accounting principles and auditing
       standards. However, these discussions occurred in the normal course of
       the Company's professional relationship with Chantrey Vellacott DFK and
       were not a condition of retaining them as Spear & Jackson's primary
       auditor.

       There have been no disagreements between the Company and the former
       certifying accountant, Sherb & Co. LLP, for which Chantrey Vellacott DFK
       was consulted.

                                       47
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorised.

SPEAR & JACKSON, INC.


February 17, 2005                       /s/ John Harrington, Jr.
                                            --------------------
                                            Interim Chairman



February 17, 2005                       /s/ William Fletcher
                                            ----------------
                                            Acting Chief Executive
                                            Officer
                                            (Principal Executive Officer)



February 17, 2005                       /s/ Patrick J. Dyson
                                            ----------------
                                            Chief Financial Officer
                                            (Principal Financial and
                                            Accounting Officer)




                                       48