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 March 31, 2005

                                       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 or other jurisdiction of        (I.R.S. Employer Identification Number)
 incorporation or organisation)


 401 South Lasalle Street, Suite 201
 Chicago, Illinois                                       60605
 ----------------------------------------                -----
 (Address of principal executive offices)                (Zip Code)


Registrant's telephone number, including area code: 312-765-0680


        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 5,736,061 shares of Common Stock, $.001 par value per share,
outstanding as of May 16, 2005.

<PAGE>
                              Spear & Jackson, Inc.

                                      INDEX

                                                                           Page
                                                                          Number
PART I.  FINANCIAL INFORMATION

Item 1   Financial Statements (Unaudited)

         Condensed Consolidated Balance Sheets - March 31, 2005
         and September 30, 2004 (audited) ................................     1

         Condensed Consolidated Statements of Operations -
         Three and Six Months ended March 31, 2005 and 2004 ..............     2

         Condensed Consolidated Statements of Cash Flows -
         Six Months ended March 31, 2005 and 2004 ........................     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 ......    45

Item 4   Controls and Procedures .........................................    47


PART II  OTHER INFORMATION

Item 1   Legal Proceedings ...............................................    48

Item 6   Exhibits ........................................................    49

SIGNATURES ...............................................................    50

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 STATEMENTS OF OPERATIONS

                                                  (UNAUDITED)

                                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>

                                                      For the Three Months Ended     For the Six Months Ended
                                                        March 31,      March 31,      March 31,      March 31,
                                                          2005           2004           2005           2004
                                                      ------------   ------------   ------------   ------------
<S>                                                   <C>            <C>            <C>            <C>
Net sales ..........................................  $     28,201   $     27,427   $     53,308   $     50,409
Cost of goods sold .................................        18,916         18,721         35,900         34,528
                                                      ------------   ------------   ------------   ------------
Gross profit .......................................         9,285          8,706         17,408         15,881

Operating costs and expenses:
  Selling, general and administrative expenses .....         8,130          8,401         16,955         15,077

                                                      ------------   ------------   ------------   ------------
Operating  income ..................................         1,155            305            453            804

Other income (expense)
  Rental income ....................................            39             46             79             82
  Interest and bank charges (net) ..................           (12)           (63)           (41)          (141)

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

Income before unusual or infrequent items ..........         1,182            288            491            745

Profit on sale of land and buildings, net of related
 reorganization costs ..............................         2,503              -          2,503              -

                                                      ------------   ------------   ------------   ------------
Income before income taxes .........................         3,685            288          2,994            745

Provision for income taxes .........................          (491)          (356)          (448)          (532)
                                                      ------------   ------------   ------------   ------------

Net income (loss) ..................................  $      3,194   $        (68)  $      2,546   $        213
                                                      ============   ============   ============   ============

Basic and diluted earnings (loss) per share: .......  $       0.27   ($      0.01)  $       0.22   $       0.02
                                                      ============   ============   ============   ============

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

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

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

                                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                          (IN THOUSANDS EXCEPT SHARES)
<CAPTION>
                                                                            At March 31,       At September 30,
                                                                                2005                2004
                                                                            ------------       ----------------
                                                                             (Unaudited)
<S>                                                                           <C>                  <C>
                              ASSETS
Current assets:
  Cash and cash equivalents ..............................................    $  9,924             $  5,090
  Trade receivables, net .................................................      22,005               18,843
  Inventories ............................................................      26,636               21,988
  Assets held for sale ...................................................           -                3,190
  Deferred income tax asset, current portion .............................       2,179                2,128
  Other current assets ...................................................       1,852                1,310
                                                                              --------             --------
    Total current assets .................................................      62,596               52,549

Property, plant and equipment, net .......................................      20,094               22,114
Deferred income tax asset ................................................      11,196               10,933
Investments ..............................................................         168                  160
                                                                              --------             --------
    Total assets .........................................................    $ 94,054             $ 85,756
                                                                              ========             ========


               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable ..........................................................    $     81             $     68
  Trade accounts payable .................................................       9,574                8,562
  Accrued expenses and other liabilities .................................      14,063               12,948
  Foreign taxes payable ..................................................          76                   22
                                                                              --------             --------
    Total current liabilities ............................................      23,794               21,600
Other liabilities ........................................................       1,049                1,172
Pension liability ........................................................      35,821               33,545

                                                                              --------             --------
    Total liabilities ....................................................      60,664               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 .......................     (39,959)             (38,030)
  Foreign currency translation adjustment, net of tax ....................      15,706               12,429
  Unrealized loss on derivative instruments ..............................          (4)                 (61)
Retained earnings ........................................................       6,585                4,039
Less: 270,000 common stock held in treasury, at cost .....................        (540)                (540)
                                                                              --------             --------
    Total stockholders' equity ...........................................      33,390               29,439
                                                                              --------             --------

                                                                              --------             --------
    Total liabilities and stockholders' equity ...........................    $ 94,054             $ 85,756
                                                                              ========             ========

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

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

                                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                  (UNAUDITED)

                                                 (IN THOUSANDS)
<CAPTION>
                                                                                  For the Six Months Ended
                                                                               March 31,            March 31,
                                                                                  2005                 2004
                                                                               ---------            ---------
<S>                                                                             <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income ................................................................   $ 2,546              $   213
  Adjustments to reconcile net income to net cash used in
   operating activities:
    Depreciation ............................................................     1,523                1,508
    Amortization of asset held for sale .....................................        22                    -
    Profit on sale of land and buildings ....................................    (2,503)                   -
    Loss on sale of plant and equipment .....................................        11                   14
    Deferred income taxes ...................................................       349                  470
  Changes in operating assets and liabilities, excluding the
   effects of acquisitions and dispositions:
    Increase in trade receivables ...........................................    (2,186)              (3,232)
    (Increase) decrease in inventories ......................................    (3,665)                  68
    Increase in other current assets ........................................      (472)                (291)
    Contributions paid to pension plan ......................................    (1,456)              (1,424)
    Increase in other non-current liabilities ...............................     2,027                  650
    Increase in trade accounts payable ......................................       782                1,175
    (Decrease) increase in accrued expenses and other liabilities ...........      (183)                 674
    Increase in foreign taxes payable .......................................        46                    3
    Decrease in other liabilities ...........................................      (182)                (466)
                                                                                -------              -------
NET CASH USED IN  OPERATING ACTIVITIES ......................................    (3,341)                (638)
                                                                                -------              -------

INVESTING ACTIVITIES:
  Purchases of property, plant and equipment ................................      (642)              (6,838)
  Proceeds from sale of property, plant and equipment net
   of costs of disposal .....................................................     8,631                    -
                                                                                -------              -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES .........................     7,989               (6,838)
                                                                                -------              -------

FINANCING ACTIVITIES:
  Increase in overdraft .....................................................        10                1,844
                                                                                -------              -------
NET CASH  PROVIDED BY FINANCING ACTIVITIES ..................................        10                1,844
                                                                                -------              -------

Effect of exchange rate changes on cash and cash equivalents ................       176                  181
                                                                                -------              -------

CHANGE IN CASH AND CASH EQUIVALENTS .........................................     4,834               (5,451)

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................................   $ 9,924              $ 3,740
                                                                                =======              =======

SUPPLEMENTAL CASH FLOW INFORMATION
  Cash paid for interest ....................................................   $    61              $   197
                                                                                =======              =======
  Cash paid for taxes .......................................................   $    53              $    59
                                                                                =======              =======

                   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)

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 C.V.
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
March 31, 2005 and September 30, 2004, and the results of operations for the
three and six month periods ended March 31, 2005 and March 31, 2004 and cash
flows for the six month periods ended March 31, 2005 and March 31, 2004 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)

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 of the Company's first fiscal year beginning on or after June
15, 2005. The Company will accordingly adopt the standard in the first quarter
of fiscal 2006. The Company has not determined the impact, if any, that this
statement will have on its consolidated financial position or results of
operations.

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
has not determined the impact, if any, that this statement will have on its
consolidated financial position or results of operations.

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 but does
not expect it to have a material impact.

NOTE 3 - CRITICAL ACCOUNTING POLICIES

         A summary of significant accounting policies is included in Note 2 to
the audited consolidated financial statements included in the Company's Annual
Report on Form 10-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

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                  IN THOUSANDS)

NOTE 3 - CRITICAL ACCOUNTING POLICIES - CONTINUED

disclosed in those financial statements. These judgements can be subjective and
complex, and consequently actual results could differ from those estimates. Our
most critical accounting policies relate to revenue recognition; foreign
exchange risk; inventory and pension and other postretirement benefit costs.
Since September 30, 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 (together "S&J") by Megapro Tools, Inc. was
accounted for as a reverse acquisition for financial reporting purposes. The
reverse acquisition is deemed a capital transaction and the net assets of S&J
(the accounting acquirer) were carried forward to Megapro Tools, Inc. (the legal
acquirer and the reporting entity) at their carrying value before the
combination. Although S&J was deemed to be the acquiring corporation for
financial accounting and reporting purposes, the legal status of Megapro Tools,
Inc. as the surviving corporation does not change. The relevant acquisition
process utilizes the capital structure of Megapro Tools, Inc. and the assets and
liabilities of S&J are recorded at historical cost.

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

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

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 5 - RETIREMENT BENEFIT PLAN

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

         Pension costs amounted to $1,019 for the quarter ending March 31, 2005
and $332 for the same quarter last year. Pension costs for the six months ending
March 31, 2005 were $2,027 compared with $650 for the equivalent period last
year. The net periodic costs include the following components:
<TABLE>
<CAPTION>
                                           For the Three     For the Three      For the Six       For the Six
                                            Months Ended      Months Ended      Months Ended      Months Ended
                                             March 31,         March 31,         March 31,         March 31,
                                                2005              2004              2005              2004
                                           --------------    --------------    --------------    --------------
                                           (in thousands)    (in thousands)    (in thousands)    (in thousands)
<S>                                           <C>               <C>               <C>               <C>
Sevice cost .............................     $   460           $   387           $   916           $   762
Interest cost ...........................       2,570             2,289             5,114             4,507
Expected return on plan assets ..........      (2,704)           (2,779)           (5,378)           (5,473)
Recognition of actuarial loss ...........         693               435             1,375               854

                                              -------           -------           -------           -------
Total benefit cost ......................     $ 1,019           $   332           $ 2,027           $   650
                                              =======           =======           =======           =======
</TABLE>

         The Company's funding policy with respect to the Plan is to contribute
annually not less than the minimum required by applicable UK law and pension
regulations. Amounts payable are determined on the advice of the Plan's
actuaries.

         The pension plan actuarial advisors carried out an actuarial valuation
of the Plan as at December 31, 2004. This valuation showed an increase in the
Plan's deficit compared to that calculated at April 5, 2002, the date of the
last full actuarial valuation. Following discussions between the Company and the
Trustees of the Plan, it has been agreed that, on or before September 30, 2005,
the Company will make a special contribution to the Plan of (pound)4 million
(approximately $7.6 million). Also, from May, the Company's annual pension
contributions will increase from (pound)1.5 million (approximately $2.8 million)
to (pound)1.9 million (approximately $3.6 million).

         The Company has contributed $727 to the Plan in the quarter to March
31, 2005 (2004 $726) and $1,456 in the six month period ending on that date
(2004 $1,424). Taking into account the increase in annual contributions referred
to above, the Company anticipates that ongoing employer contributions of $3.2
million will be made in the year ending September 30, 2005 (2004 $2.7 million)
in addition to the lump sum contribution of $7.6 million (2004 $nil).

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)

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET

                                                 At March 31,   At September 30,
                                                     2005             2004
                                                --------------  ----------------
                                                (in thousands)   (in thousands)
Assets held and used:
  Land and buildings, at cost ..............       $ 16,876         $ 18,177
  Machinery, equipment and vehicles, at cost         37,109           35,101
  Furniture and fixtures, at cost ..........          1,339            1,241
  Computer hardware, at cost ...............          1,328            1,264
  Computer software, at cost ...............            366              348
  Assets held under finance leases, at cost  (a)      2,991            2,828
                                                   --------         --------
                                                     60,009           58,959
  Accumulated Depreciation .................        (39,915)         (36,845)
                                                   --------         --------
  Net ......................................       $ 20,094         $ 22,114
                                                   ========         ========

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

(a) Included in property, plant and equipment at March 31, 2005 are capital
leases with a net book value of $1.3 million (March 31, 2004 $1.6 million). The
cost of these assets held under capital leases was $3.0 million (March 31, 2004
$2.7 million) and the accumulated depreciation relating to these assets was $1.7
million (March 31, 2004 $1.1 million).

(b) The asset held for resale relates to the Company's warehouse and office
facility in Boca Raton, Florida. These premises were sold in February 2005.
Details of the disposition are provided in note 7, below.

NOTE 7 - SALE OF LAND AND BUILDINGS

On January 28, 2005 the Company completed the sale of part of its industrial
site at St. Paul's Road, Wednesbury, England, and on February 15, 2005 the
Company also concluded the disposal of its warehouse and office facility in Boca
Raton, Florida. Details of these sales are as follows:
<TABLE>
<CAPTION>
                                                            Wednesbury          Boca Raton           Total
                                                             England             Florida
                                                          --------------      --------------     --------------
                                                          (in thousands)      (in thousands)     (in thousands)
<S>                                                           <C>                 <C>                 <C>
Sale proceeds net of selling, professional and
 other costs  ..........................................      $5,174              $3,427              $8,601
Less: net book value ...................................       2,223               3,168               5,391
                                                              ------              ------              ------
Gross profit on disposal ...............................       2,951                 259               3,210

Less: related reorganisation costs (see below) .........         707                   -                 707
                                                              ------              ------              ------
                                                              $2,244              $  259              $2,503
                                                              ======              ======              ======
</TABLE>

Following the sale of the surplus element of the Wednesbury facility, provision
has been made for costs to be incurred in connection with the consolidation of
the current manufacturing operation into the smaller site. These costs
principally comprise office and factory refurbishment, factory reorganization
and departmental relocations within the site.

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 8 - INVENTORIES
                                                 At March 31,   At September 30,
                                                     2005             2004
                                                --------------  ----------------
                                                (in thousands)   (in thousands)

Finished products ............................     $ 21,146         $ 16,779
In-process products ..........................        6,309            5,211
Raw materials ................................        5,652            5,944
Less: allowance for slow moving and obsolete
 inventories .................................       (6,471)          (5,946)
                                                   --------         --------
                                                   $ 26,636         $ 21,988
                                                   ========         ========

NOTE 9 - 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:
<TABLE>
<CAPTION>
                                           For the Three     For the Three      For the Six       For the Six
                                            Months Ended      Months Ended      Months Ended      Months Ended
                                             March 31,         March 31,         March 31,         March 31,
                                                2005              2004              2005              2004
                                           --------------    --------------    --------------    --------------
                                           (in thousands)    (in thousands)    (in thousands)    (in thousands)
<S>                                            <C>               <C>               <C>               <C>

Current tax (charge)/credit ...............    $ (51)            $   5             $ (99)            $ (62)
Deferred tax charge .......................     (440)             (361)             (349)             (470)

                                               -----             -----             -----             -----
                                               $(491)            $(356)            $(448)            $(532)
                                               =====             =====             =====             =====
</TABLE>

         A reconciliation of the provision for income taxes compared with the
amounts provided at the US federal rate is as follows:
<TABLE>
<CAPTION>
                                           For the Three     For the Three      For the Six       For the Six
                                            Months Ended      Months Ended      Months Ended      Months Ended
                                             March 31,         March 31,         March 31,         March 31,
                                                2005              2004              2005              2004
                                           --------------    --------------    --------------    --------------
                                           (in thousands)    (in thousands)    (in thousands)    (in thousands)
<S>                                           <C>               <C>               <C>               <C>
Tax at US federal statutory income tax rate   $(1,290)          $(101)            $(1,048)          $(373)
Overseas tax at rates different to
 effective rate ...........................       165             (26)                122              87
Permanent differences .....................       (40)            (36)                (79)            (75)
Gain on sale of UK property covered by
 capital losses brought forward ...........       885               -                 885               -
Valuation allowance .......................      (211)           (191)               (328)           (171)
Miscellaneous .............................         -              (2)                  -               -

                                              -------           -----             -------           -----
                                              $  (491)          $(356)            $  (448)          $(532)
                                              =======           =====             =======           =====
</TABLE>
                                                      9
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 10 - COMPREHENSIVE INCOME

         Comprehensive income represents net income and other revenues,
expenses, gains and losses that are excluded from net income and recognized
directly as a component of stockholder's equity. Comprehensive income and its
components comprise the following:
<TABLE>
<CAPTION>
                                           For the Three     For the Three      For the Six       For the Six
                                            Months Ended      Months Ended      Months Ended      Months Ended
                                             March 31,         March 31,         March 31,         March 31,
                                                2005              2004              2005              2004
                                           --------------    --------------    --------------    --------------
                                           (in thousands)    (in thousands)    (in thousands)    (in thousands)
<S>                                           <C>               <C>               <C>               <C>
Total net  income (loss) ..................   $ 3,194           $   (68)          $ 2,546           $   213

Other comprehensive income (loss)

  Additional minimum pension liability ....       658              (758)           (1,929)           (3,133)
  Foreign currency translation adjustments     (1,389)           (1,183)            3,277             5,996
  Unrealized gains on derivative
   instruments ............................        16                11                57                11

                                              -------           -------           -------           -------
Total comprehensive income ................   $ 2,479           $   368           $ 3,951           $ 3,087
                                              =======           =======           =======           =======
</TABLE>

NOTE 11 - 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.

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 11 - SEGMENT DATA - CONTINUED
<TABLE>
<CAPTION>
                              Sales           Long-lived Assets (a)           Sales           Long-lived Assets (a)
                     -----------------------  ---------------------  -----------------------  ---------------------
                        Three Months Ended                              Six Months Ended
                     March 31,     March 31,  March 31,   March 31,  March 31,     March 31,  March 31,   March 31,
                        2005          2004       2005       2004       2005           2004       2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                  <C>           <C>        <C>         <C>        <C>           <C>        <C>         <C>
Hand & garden tools  $ 20,891      $ 21,033   $  6,633    $ 10,005   $ 39,315      $ 38,151   $  6,633    $ 10,005
Metrology tools         4,383         4,104      2,601       2,932      8,400         7,687      2,601       2,932
Magnetic products       2,927         2,290        737         984      5,593         4,571        737         984
Corporate                   -                   10,123      13,298          -                   10,123      13,298
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total             $ 28,201      $ 27,427   $ 20,094    $ 27,219   $ 53,308      $ 50,409   $ 20,094    $ 27,219
                     =========     =========  =========   =========  =========     =========  =========   =========

<CAPTION>
                           Depreciation        Capital expenditure        Depreciation         Capital expenditure
                     -----------------------  ---------------------  -----------------------  ---------------------
                       Three Months Ended       Three Months Ended      Six Months Ended         Six Months Ended
                     March 31,     March 31,  March 31,   March 31,  March 31,     March 31,  March 31,   March 31,
                        2005          2004       2005        2004       2005           2004      2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                  <C>           <C>        <C>         <C>        <C>           <C>        <C>         <C>
Hand & garden tools  $    483      $    564   $    294    $    142       $ 945     $    999   $    572    $  3,418
Metrology tools           172           121         10          16         285          220         66         161
Magnetic products          88            95          -          23         172          171          4          25
Corporate                  63            47          -       3,232         121          118          -       3,234
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total             $    806      $    827   $    304    $  3,413     $ 1,523     $  1,508   $    642    $  6,838
                     =========     =========  =========   =========  =========     =========  =========   =========

<CAPTION>
                     Operating Income (Loss)       Net Interest      Operating Income (Loss)      Net Interest
                     -----------------------  ---------------------  -----------------------  ---------------------
                       Three Months Ended       Three Months Ended      Six Months Ended         Six Months Ended
                     March 31,     March 31,  March 31,   March 31,  March 31,     March 31,  March 31,   March 31,
                        2005          2004       2005        2004       2005          2004       2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                  <C>           <C>        <C>         <C>        <C>           <C>        <C>         <C>
Hand & garden tools  $    850      $    408   $    (58)   $    (63)     $ 153      $    711   $   (103)   $   (123)
Metrology tools           311           351         (4)         (5)       603           640         (7)         (9)
Magnetic products         318           270         (2)         (3)       541           543         (5)         (6)
Corporate                (324)         (724)        52           8       (844)       (1,090)        74          (3)
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total             $  1,155      $    305   $    (12)   $    (63)     $ 453      $    804   $    (41)   $   (141)
                     =========     =========  =========   =========  =========     =========  =========   =========

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

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 11 - SEGMENT DATA - CONTINUED

The following table presents certain data by geographic areas (in thousands):
<TABLE>
<CAPTION>
                            Sales (a)         Long-lived Assets (b)         Sales (a)         Long-lived Assets (b)
                     -----------------------  ---------------------  -----------------------  ---------------------
                        Three Months Ended                              Six Months Ended
                     March 31,     March 31,  March 31,   March 31,  March 31,     March 31,  March 31,   March 31,
                        2005          2004       2005       2004       2005           2004       2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                  <C>           <C>        <C>         <C>        <C>           <C>        <C>         <C>
United Kingdom       $ 11,971      $ 12,507   $ 18,145    $ 22,221   $ 22,621      $ 22,532   $ 18,145    $ 22,221
Europe                  7,035         6,234      1,272       1,255     11,760        10,292      1,272       1,255
Australasia             3,404         3,927        677         520      7,402         8,746        677         520
North America           1,898         1,740          -       3,223      3,519         3,177          -       3,223
Other                   3,893         3,019          -           -      8,006         5,662          -           -
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total             $ 28,201      $ 27,427   $ 20,094    $ 27,219   $ 53,308      $ 50,409   $ 20,094    $ 27,219
                     =========     =========  =========   =========  =========     =========  =========   =========

<CAPTION>
                           Depreciation        Capital expenditure        Depreciation         Capital expenditure
                     -----------------------  ---------------------  -----------------------  ---------------------
                       Three Months Ended       Three Months Ended      Six Months Ended         Six Months Ended
                     March 31,     March 31,  March 31,   March 31,  March 31,     March 31,  March 31,   March 31,
                        2005          2004       2005        2004       2005           2004      2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                  <C>           <C>        <C>         <C>        <C>           <C>        <C>         <C>
United Kingdom       $    707      $    699   $    269    $    159   $  1,335      $  1,297   $    368    $  3,570
Europe                     32            36         20           3         56            46         40           3
Australasia                67            76         15          19        132           147        234          31
North America               -            16          -       3,232          -            18          -       3,234
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total             $    806      $    827   $    304    $  3,413   $  1,523      $  1,508   $    642    $  6,838
                     =========     =========  =========   =========  =========     =========  =========   =========

<CAPTION>
                     Operating Income (Loss)       Net Interest      Operating Income (Loss)      Net Interest
                     -----------------------  ---------------------  -----------------------  ---------------------
                       Three Months Ended       Three Months Ended      Six Months Ended         Six Months Ended
                     March 31,     March 31,  March 31,   March 31,  March 31,     March 31,  March 31,   March 31,
                        2005          2004       2005        2004       2005          2004       2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                  <C>           <C>        <C>         <C>        <C>           <C>        <C>         <C>
United Kingdom       $    830      $    587   $     26    $    (27)  $    506      $  1,172   $     17    $    (75)
Europe                    478           332        (61)        (52)       355           197       (102)        (99)
Australasia                47          (217)        11           8        117           (70)        29          15
North America            (200)         (397)        12           8       (525)         (495)        15          18
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total             $  1,155      $    305   $    (12)   $    (63)  $    453      $    804   $    (41)   $   (141)
                     =========     =========  =========   =========  =========     =========  =========   =========

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

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

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 12 - LEGAL PROCEEDINGS

         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 former independent auditor,
and certain of the Company's directors and officers, including Mr. Dennis
Crowley, the Company's then Chief Executive Officer/Chairman, and Mr. William
Fletcher, the Company's then CFO and now acting Chief Executive Officer.

         These suits allege essentially the same claims as an SEC suit which was
filed on April 15, 2004, in the U.S. District Court for the Southern District of
Florida. This suit, filed against the Company and Mr. Crowley, among others,
alleged violations of the federal securities laws. The allegations arose 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. The suit was settled on February
15, 2005 following approval by the US District Court.

         Lead counsel has now been appointed for the class action suits and an
amended consolidated complaint has been filed. The Company, and the other
defendants, have filed a motion to dismiss the complaint, and are currently
awaiting the court's ruling on these motions. It is impossible at this time to
ascertain the ultimate legal and financial liability or whether this action will
have a material adverse effect on the Company's financial condition and results
of 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 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, 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 13 - SUBSEQUENT EVENTS

         On April 27, 2005 a settlement was reached with the former Managing
Director of Spear & Jackson plc in respect of the amount of severance
compensation payable following his dismissal as part of a management
reorganization program in November 2002. The total amount payable to the former
employee (including his legal costs) will be $781 of which $562 has already been
paid in prior periods. The balance will be paid on July 27, 2005. These amounts
are less than the estimated settlement costs previously provided.

         As previously disclosed in the Company's periodic reports, as part of
settlement of the SEC lawsuit referred to above in note 12, the Company entered
into a Stock Purchase Agreement with PNC Tool Holdings LLC and Dennis Crowley
under which Mr Crowley agreed to return to the Company 6,005,561 shares of
common stock of Spear & Jackson, Inc. from PNC Tool Holdings LLP. These shares
were returned on April 8, 2005 for a nominal consideration. As of this date, the
number of the Company's shares outstanding reduced from 11,741,122 to 5,736,061,
and Jacuzzi Brands, Inc. ("Jacuzzi"), with its ownership of 3,543,281 shares now
holds a majority capital stock interest in the Company of 61.8%.

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 13 - SUBSEQUENT EVENTS - CONTINUED

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

         On April 21, 2005, Jacuzzi adopted a plan of disposition of the
Company's' Common Stock (the "Plan of Disposition"), under which Jacuzzi intends
to: investigate the strategic alternatives with respect to the sale of the
Common Stock held by them; take such further actions as will result in the
Jacuzzi disposing of the Common Stock within a one-year period; and engage
investment banking, legal, and other advisors as necessary to assist in the
disposition of the Company's Common Stock. Jacuzzi may dispose of their Common
Stock in one or more transactions of all or a portion of their shares of Common
Stock in the open market, in privately negotiated transactions or otherwise.

         At this time, no decision has been made by Jacuzzi to either change the
composition of the Company's Board of Directors, or assert an expanded role in
the management of the Company. Jacuzzi intends to monitor and evaluate their
investment in the Company on a continuing basis, or formulate other purposes,
plans or proposals regarding the Company or the Common Stock held by Jacuzzi in
addition to those discussed above.

         Jacuzzi retains the right to change their investment intent.

                                       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;
-  maintaining and improving current product mix;

                                       15
<PAGE>

-  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;
-  costs incurred in respect of compliance with Section 404 of the
   Sarbanes-Oxley Act of 2002;
-  the outcome of pending and future litigation; and
-  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. 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.

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.

                                       16
<PAGE>

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 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.

                                       17
<PAGE>

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

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

In the Stockholders' Agreement dated as of September 6, 2002 by and among
Megapro, USI Mayfair Limited (a subsidiary of US Industries, Inc., now Jacuzzi
Brands, Inc.), 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 and 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 arose 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 barred Mr. Crowley from service
as an officer or director of a public company, and prohibited 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 and Bowers Group plc, UK companies based in
Sheffield, was appointed as acting Chief Executive Officer.

Following extensive settlement negotiations with both the SEC and Mr. Crowley,
the Company has reached a resolution with both parties.

                                       19
<PAGE>

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. In
May 2005, the SEC applied to the Court for the appointment of an administrator
for the distribution of these funds to the victims of Mr. Crowley's action,
pursuant to the Fair Funds provisions of the Sarbanes-Oxley Act of 2002.

On November 18, 2004, the Company signed a Consent to Final Judgment of
Permanent Injunction with the 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.

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

The Stock Purchase Agreement was effected on April 8, 2005 following formal
approval by the SEC on February 10, 2005 and, on February 15, 2005, by the U.S.
District Court for the Southern district of Florida of the settlement of the
litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc., International
Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No:
04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further conditioned
on the disgorgement and civil penalty funds being paid by Crowley, and as noted
above, these monies have now been received.

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

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

                                       20
<PAGE>

On April 21, 2005, Jacuzzi adopted a plan of disposition of the Company's'
Common Stock (the "Plan of Disposition"), under which Jacuzzi intends to:
investigate the strategic alternatives with respect to the sale of the Common
Stock held by them; take such further actions as will result in Jacuzzi
disposing of the Common Stock within a one-year period; and engage investment
banking, legal, and other advisors as necessary to assist in the disposition of
the Company's Common Stock. Jacuzzi may dispose of their Common Stock in one or
more transactions of all or a portion of their shares of Common Stock in the
open market, in privately negotiated transactions or otherwise.

At this time, no decision has been made by Jacuzzi to either change the
composition of the Company's Board of Directors or assert an expanded role in
the management of the Company. Jacuzzi intends to monitor and evaluate their
investment in the Company on a continuing basis or formulate other purposes,
plans or proposals regarding the Company or the Common Stock held by Jacuzzi in
addition to those discussed above.

Jacuzzi retains the right to change their investment intent.

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;
*        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

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.

                                       21
<PAGE>

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

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. This distribution operation is operated through a
         specifically formed Dutch subsidiary company, CV Instruments Europe BV,
         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 11 in the "Notes
to Condensed Consolidated Financial Statements" included within this Quarterly
Report on Form 10-Q. Also included within Note 11 is a detailed geographical
analysis including sales, profit and loss, and total asset information.

                                       22
<PAGE>

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

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.

                                       23
<PAGE>

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)      Improving manufacturing efficiencies and continually reviewing other
         cost saving measures

The Company offers a comprehensive range of tools and these ranges are supported
by a pipeline of new products and range extensions. In the period from January
1, 2005 to March 31, 2005 new product range launches and other significant
product related business developments have included:

Neill Tools secured additional listings for builders tools in a major multiple
retail chain which are expected to result in incremental sales revenues of
approximately $0.5 million per annum.

Eclipse Magnetics launched its new range of magnetic filtration equipment
designed to remove ferrous and carbide contaminations from cutting and
processing fluids in the automotive and precision grinding industries.

In Australia and New Zealand range reviews have been completed to identify and
to delete unprofitable lines and to introduce new products capable of delivering
incremental sales and improved margins in the remainder of the fiscal year.
These new and extended product ranges cover digging, garden, cutting, hand saw,
masonry and air tool ranges, all under the S&J brand. A new range of electrical
generators, battery chargers and drainage products has also been launched.

                                       24
<PAGE>

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 March 31, 2005, attached hereto, should
therefore be read in conjunction with that discussion.

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

Our most critical accounting policies are those relating to revenue recognition,
foreign exchange risk, inventory valuation, pension and post-retirement benefit
obligations and accounting for 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 the Company's actuarial consultants and auditors. The Company's 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 the Company 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 March 31, 2005 show an increase of $0.85 million (278.69%) in operating
income. Despite this, operating income of $0.49 million in the six month period
ended March 31, 2005 was $0.35 million (43.66%) less than that generated in the
comparable period last year. Income before taxes has benefited significantly
from the $2.50 million profit arising on the sale of the surplus element of the
Company's Wednesbury facility and the disposal of its warehouse and office
facility in Boca Raton. Despite the presence of various adverse macro economic
factors, e.g. the continuing weakness of the US $ and further raw material and
utility cost increases, the improved trading conditions prevalent at the end of
the first quarter have continued into the second quarter of fiscal 2005.

                                       25
<PAGE>

Sales revenues for the quarter ended March 31, 2005 increased by approximately
$0.77 million (2.82%) over the comparable period in the previous year. This gain
is primarily attributable to favorable currency exchange fluctuations in the
current year, although sales volumes did improve in the Neill Tools export
division and also in our Metrology and Magnetic products businesses. For the six
months ended March 31, 2005 sales revenues increased by $2.9 million (5.75%),
with the principal element again relating to favourable exchange differences.

Compared to the same period last year, sales were buoyed by strong Middle and
Far East hand tool order levels but sales volumes were adversely affected by the
negative impact in certain export markets of the weak US dollar and by adverse
weather conditions in Australasia.

Gross profit was $9.29 million for the quarter ended March 31, 2005 compared to
$8.71 million for the prior year, an increase of $0.58 million (6.65%). For the
six months ended March 31, 2005 gross profit increased by $1.53 million (9.62%),
from $15.88 million in 2004 to $17.41 million in 2005. 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.
Additionally, the cost of sales was negatively impacted by increased net
realisable value inventory provisions in our Metrology and Australasian
operations. Nevertheless, margins saw signs of improvement as the various
divisions witnessed favourable sales mixes and benefited from favourable
exchange gains on imported factored products.

Selling, general and administrative expenses decreased by $0.27 million (3.23%)
in the quarter to March 31, 2005 when compared to last year but have increased
by $1.88 million (12.46%) in the six month period ended on that date from $15.08
million to $16.96 million. Both the three and six month periods have been
negatively impacted by: continuing high levels of UK distribution costs
following the move to a "direct to market" sales approach; US $/sterling cross
rates in the period; general inflationary increases and increased FAS 87 pension
costs. These adverse effects have, however, been mitigated by the release of the
excess element of a provision relating to severance compensation payable to the
former managing Director of Spear & Jackson plc. In addition, the last quarter
has seen the rewards of local reorganisation programmes and cost cutting
measures which have further reduced expenses.

The Company believes that the level of overheads incurred in the three months
ended March 31, 2005, excluding the positive effects of the provision release as
discussed above, will be maintained in the short term. Various initiatives are
still, however, being implemented to reduce the levels of sales and distribution
costs in future periods. Additionally, settlement of the Company's SEC
litigation suit should result in decreases in administration costs in future
periods following the reduction in legal and professional costs. However, other
head office legal costs associated with the ongoing class action and the role of
the corporate monitor will still be incurred until the resolution of both
matters.

Overall, the margin improvements have been sufficient to absorb the increase
SG&A expenses, and this has resulted in an operating profit of $1.16 million for
the three month period ended March 31, 2005 compared to an operating profit of
$0.31 million for the same period last year. In the six month period ended March
31, 2005 operating profits, while lower than the same period last year ($0.45
million 2005, $$0.8million 2004), have benefited from more favorable trading
results in the last quarter and the settlement provision release.

                                       26
<PAGE>

The Company intends to continue to launch new products and to explore
initiatives to reduce its operational base costs, both in respect of raw
materials and processes, in order to minimize margin erosion and to retain its
competitive edge over cheap foreign imports. The Company's management has
already implemented a number of initiatives to improve profitability with
emphasis placed on biasing sales mix towards higher margin products,
restructuring of the UK operational 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. These strategies will continue
and further opportunities will be explored.

These restructuring costs and other initiatives, together with planned
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.

In the quarter ended March 31, 2005, the actuarial advisers to the Company's
defined benefit pension plan completed an actuarial valuation of the Plan,
effective as at December 31, 2004. This valuation showed an increase in the
Plan's deficit compared to that calculated at April 5, 2002, the date of the
last full actuarial valuation. Following discussions between the Company and the
Trustees of the Plan regarding methods by which the asset shortfall could be
reduced, it was agreed, in early May, that, on or before September 30, 2005, the
Company would make a special contribution to the Plan of (pound)4 million
(approximately $7.6 million). Also, from May 2005, the Company's annual pension
contributions to the Plan will increase from (pound)1.5 million (approximately
$2.8 million) to (pound)1.9 million (approximately $3.6 million). This rate of
annual contribution will remain in place, subject to certain conditions, until
April 2007 when it will be reviewed by the Plan actuary. This agreement with
regard to the future funding commitments of the Plan will enable the Company to
plan future cash flows with certainty and will also avoid any re-negotiation of
contribution rates in September 2005 when new pension legislation is enacted in
the UK.

On February 15, 2005 the SEC suit, which was filed on April 15, 2004 in the US
District Court of the Southern District of Florida, was settled following
extensive negotiations. This suit, filed against the Company and Mr. Dennis
Crowley, the Company's former Chief Executive Officer and Chairman, and others,
alleged violations of Federal security laws.

Although the SEC litigation has now been satisfactorily resolved, the class
action lawsuits that 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 still remain.

Lead counsel has now been appointed for the class action suits and an amended
consolidated complaint has been filed. The Company, and the other defendants,
have filed a motion to dismiss the class action complaint, and are currently
awaiting the court's determination . It is impossible at this time to ascertain
the ultimate legal and financial liability or whether this action will have a
material adverse effect on the Company's financial condition and results of
operations.

                                       27
<PAGE>

RESULTS OF OPERATIONS

The following discussion provides a review of results for the three and six
months ended March 31, 2005 versus the three and six months ended March 31,
2004.

Summary Profit and Loss Account Data:

                                     Three Months                Six Months
                                    ended March 31             ended March 31
                                   2005          2004         2005         2004
                                    $m            $m           $m           $m

Net Sales ......................  28.20         27.43        53.31        50.41
Cost of goods sold ............. (18.91)       (18.72)      (35.90)      (34.53)

                                 ------        ------       ------       ------
Gross profit ...................   9.29          8.71        17.41        15.88
Selling, general and
  administrative expenses ......  (8.13)        (8.40)      (16.96)      (15.08)

                                 ------        ------       ------       ------
Operating income ...............   1.16          0.31         0.45         0.80
Other income (expense)..........   0.02         (0.02)        0.04        (0.06)

                                 ------        ------       ------       ------
Income before unusual and ......   1.18          0.29         0.49         0.74
  infrequent events
Profit on sale of land and .....   2.50          -            2.50         -
  buildings
                                 ------        ------       ------       ------
Income before income taxes .....   3.68          0.29         2.99         0.74

Provision for income taxes .....  (0.49)        (0.36)       (0.44)       (0.53)
                                 ------        ------       ------       ------

Net income (loss) ..............   3.19         (0.07)        2.55         0.21
                                 ======        ======       ======       ======

Effective tax rate .............  13.32%       123.61%       14.96%       71.41%
                                 ======        ======       ======       ======

Comparisons as a % of net sales:

Gross profit ...................  32.92%        31.74%       32.66%       31.50%
Selling, general and
  Administration expenses ......  28.83%        30.63%       31.81%       29.91%
Operating income ...............   4.10%         1.11%        0.85%        1.59%
Income before income taxes .....  13.07%         1.05%        5.62%        1.48%
Net income .....................  11.33%        (0.02%)       4.78%        0.04%

Note: The percentages and percentage change data shown above, and in other
percentage data within this narrative, have been calculated from the
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.

                                       28
<PAGE>

NET SALES

Sales increased by $2.9 million (5.75%) from $50.41 million in the six months
ended March 31, 2004 to $53.31 million for the six months ended March 31, 2005.
Sales of $28.2 million in the quarter ended March 31, 2005 were $0.77 million
(2.82%) higher than sales of $27.43 million recorded for the comparable period
last year.

The increase is analyzed as follows:

                                                     Six Months     Three Months
                                                       ended           ended
                                                      March 31,       March 31,
                                                        2005            2005
                                           Note          $m              $m

Effect of exchange rate movements ........ (a)           2.81            0.77

Sales volumes movements .................. (b)           0.29            0.29

Increased rebates ........................ (c)          (0.20)          (0.29)
                                                        -----           -----
                                                         2.9             0.77
                                                        =====           =====

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

                                                     Six Months     Three Months
                                                       ended           ended
                                                      March 31,       March 31,
                                                        2005            2005
                                           Note          $m              $m

i)     Hand and garden tools

       Effect of exchange rate movements . (a)           2.08            0.59
       Sales volume decreases ............ (b)          (0.71)          (0.45)
       Rebates ........................... (c)          (0.20)          (0.29)
                                                        -----           -----
                                                         1.17           (0.15)
                                                        -----           -----

ii)    Metrology tools

       Effect of exchange rate Movements . (a)           0.43            0.10
       Sales volume increases ............ (b)           0.28            0.18
                                                        -----           -----
                                                         0.71            0.28
                                                        -----           -----

iii)   Magnetic products

       Effect of exchange rate movements . (a)           0.30            0.08
       Sales volume increases ............ (b)           0.72            0.56
                                                        -----           -----
                                                         1.02            0.64
                                                        -----           -----

       Total net sales increase ..........               2.9             0.77
                                                        =====           =====

                                       29
<PAGE>

Notes:

(a)    The functional currency of the majority of the group's revenues is
       sterling and the variation in the US$/(pound) cross rate in the three and
       six month periods ending March 31, 2005 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
                                                 -------------------

                                        2005           2004           % Movement

       6 months ended March 31          1.878          1.772          +5.98%
       3 months ended March 31          1.889          1.8402         +2.65%

(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, increasing pressure from
       cheap Far Eastern imports, the weak US dollar and continued unfavourable
       weather conditions in Australia and New Zealand.

       Within the UK and French hand and garden products segment, despite
       challenging trading conditions, Neill Tools and S&J France showed
       aggregate sales volume increases for the quarter of $0.24 million, and
       cumulatively $1.11 million compared to the comparable period last year,
       thanks in the main to buoyant Middle East demand. However, such sales
       volume increases were exceeded by sales volume decreases of $0.61 million
       for the quarter and $1.87 million cumulatively in the Australian and New
       Zealand entities. The Australasian sales shortfall in 2005 compared to
       2004 is primarily attributable to the increased levels of competition, a
       general slowing down of consumer spending and continued drought
       conditions in that country.

       While similar market pressures were prevalent in the metrology and
       magnetic products segments, volume increases of $0.74 million for the
       quarter and $1.01 million cumulatively were still achieved. This was
       attributable to volume growth in the Metrology distribution facility in
       Maastricht and to increases in export sales in Eclipse Magnetics
       following the establishment of new distribution channels.

(c)    The level of rebates has increased overall in 2005 by $0.20 million in
       the three month period and $0.29 million in the six month period when
       compared to 2004. The increases are attributable to increased trading
       volumes in France and in our Neill Tools division as a result of changes
       in customer profiles, which have arisen following the set up of the
       direct to market sales route.

                                       30
<PAGE>

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 March 31, 2005 of $12.4 million showed an
improvement of $0.4 (3.55%) million over last year's sales of $12.0 million.
This increase was attributable to favorable exchange movements of $0.3 million
and increased volumes of $0.1 million. For the six months ended March 31, 2005
sales of $23.3 million showed an increase of $2.0 (9.52%) million from last
year's sales of $21.3 million. This increase comprised favourable exchange
movements of $1.3 million, increased volumes of $0.9 million offset by increased
sales rebates of $0.2 million.

Sales volume improvements in the periods under review were mainly attributable
to achievements in our export markets. Despite the continued weakness of the US
dollar, exports were particularly strong in North Africa, 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 sales performance. Thanks to this buoyant demand, export sales in the
month of March reached $2.0 million.

Although export sales have exceeded expectations, domestic UK trading conditions
have been difficult, especially in the last quarter, due to poor performance in
the multiple retail sector and prolonged inclement weather which included heavy
snowfalls in January and February. Despite shortfalls in the gardening sector,
the "Predator" woodsaw range, which was so successful last year, has continued
to sell strongly in the year and this has been complemented by buoyant hacksaw
blade performance. Investment of approximately $0.9 million in new woodsaw and
hacksaw blade plant has been approved and this is expected to be fully
operational in Quarter 4. This will ensure that the record levels of
productivity can be sustained.

The threat to the business from low-cost, Far Eastern economies continues and
these competitive pressures have been exacerbated by price increases imposed by
our steel, plastics and utility suppliers, and the difficulty, within a
competitive market place, of passing these on to customers. Despite this,
margins have been maintained when compared to the same period last year, as
divisional profitability has benefited from the implementation of a number of
strategic initiatives to reduce the cost of manufacturing and distribution which
were introduced in the last financial year. The cash generated from the sale of
the excess element of the division's manufacturing facility at Wednesbury,
England will allow these operational strategies to be further developed so that
the long term viability of the division can be safeguarded.

Costs and overheads have seen increases following the change to a "direct to
customer" route to market. 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 Logistics Manager.

                                       31
<PAGE>

ECLIPSE MAGNETICS

Sales for the quarter showed a $0.6 million (27.82%) increase over last year's
figures (2005 $2.9 million, 2004 $2.3 million) with favorable exchange movements
of $0.1 million and increased volumes of $0.5 million. Likewise for the six
months ended March 31, 2005 sales showed a 22.36% increase of $1.0 million
(2005, $5.6 million, 2004, $4.6 million) attributable to favourable exchange
movements of $0.3 million and increased volumes of $0.7 million.

Sales of the distribution range of products (chucks, tools, popular range and
lifters) have shown a marked improvement when compared to last year helped by
new distribution channels in Europe. Even though the UK industrial sector has
remained flat, the new "Ultra Lift Plus" permanent lifting magnet, 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 where customers are switching supply sources to the Far East
or re-designing systems and applications to accommodate newer magnetic
materials.

The higher technology area of the division, "Applied Magnetic Systems",
continues to flourish, mainly driven by the material handling and separation
business. During the quarter magnetic lifting beam systems were developed and
installed for use in automated bakeries. A high specification magnetic rotor
grid, again for use in the food industry, was also designed and installed.

The rate of increase in the 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. This price stabilisation, together with a
favourable sales mix, has resulted in gross margins improving in the period
under review.

The main challenges to the business continue to be the delivery of a lower
manufacturing cost base and the development of new product through the Applied
Magnetics Systems division.

ROBERT SORBY

Sales for the quarter remained static when compared to last year (2005 $1.4
million, 2004 $1.4 million) with marginal sales volume decreases being
compensated by favourable exchange variances. For the six month period sales
have increased by $0.2 million (7.03%) from $2.6 million in 2004 to $2.8 million
in 2005 primarily due to favourable exchange variances.

The second quarter has proved to be testing for Robert Sorby, especially in the
UK home market, where there has been low demand activity following the Christmas
holiday period. Sales through the division's dealer network have softened
reflecting the general malaise in UK retailing. International sales have shown
growth, mainly due to increased volume sales into the USA where major
promotional campaigns via our website, in store demonstrations, international
advertising and catalog distributions secured incremental sales with our mail
order customers. However, management recognises the need to build upon these
successes to maintain its market position in the US and to increase its presence
in other key markets such as Australasia. In addition forthcoming quarters will
see the introduction of new products, enhanced consumer marketing and the
refinement of our current distribution network. This promotional activity will
be essential in retaining market share and resisting the efforts of competitors
to consolidate their own market positions.

                                       32
<PAGE>

Continuing focus will be placed on our mail order business where improved order
and stock control processes are in force order to improve customer service and
lead times. These improved systems will be a priority as the route to market
appears to be moving away from bulk distribution through dealers to individual
sales via mail order and shows.

BOWERS METROLOGY

Sales for the second quarter show an increase of $0.3 million (6.8%) over last
year ($4.4 million 2005, $4.1 million 2004) due to favourable exchange movements
of $0.1 million, and increased volumes of $0.2 million. Cumulatively sales have
increased by $0.7 million (9.28%) from $7.7 million in 2004 to $8.4 million in
2005. This is attributable to increased volumes of $0.3 million and favourable
exchange movements of $0.4 million.

The main successes in the last quarter have been solid performances by the
Bowers operations in the USA and Germany. In addition, the investment by UK
manufacturers in machine tools has increased and the metrology market has
benefited from this trend, particularly in the aerospace market.

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
and the associated price cutting by competitors to combat the effect of these
cheap imports.

The new sales and distribution facility set up in Maastricht, Holland, in the
first quarter, has helped increase volumes. This new facility, specialising in
the distribution of portable hardness testing equipment manufactured in China
and the sale of general engineers hand tools, has excellent connections in
mainland Europe. It has continued to incur, however, considerable set-up costs
but profitability is anticipated in the short term as sales for the remainder of
the year to September 30, 2005 are anticipated to be approximately $0.9 million.

Going forward, demand for low cost, own manufactured hand tools is expected to
face further pressure from the Far East but the continuing success of the
"Special Products and 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.
Sales of the new SmartPlug 2-point gauge have exceeded initial expectations in
the UK and investment in new plant and machinery is being considered so that
higher demand levels can be satisfied.

S&J FRANCE

Overall, sales for the second quarter of $3.7 million have remained the same as
last year although favourable exchange movements of $0.2 million and volume
increases of $0.1 million have been offset by increased sales rebates of 0.3
million. For the six month period sales have increased by $0.3 million (5.93%)
from $5.6 million in 2004 to $5.9 million in 2005. Favourable volumes of $0.2
million and exchange movements of $0.3 million have been offset by increased
rebates of $0.2 million.

                                       33
<PAGE>

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. New listings have continued to make an
important impact, especially brass ornaments, weather station ranges, cutting
products, extensions to the garden product and hand tool range and plastic snow
tools.

Production improvements introduced with the involvement of UK manufacturing
management in the last quarter of the September 2004 fiscal year have further
increased productivity rates. Efficiencies in the assembly and paint areas have
also been achieved through capital investment in the production process.

It is anticipated that these production efficiencies will continue into
subsequent quarters and further benefits will accrue from the launch of
additional new product ranges including thermometers, a revised children's range
and expanded cutting tool lines.

AUSTRALASIA

Sales for the quarter for Spear & Jackson Australia and Spear & Jackson New
Zealand were $0.6 million (14.06%) lower than last year (2005 $3.3 million, 2004
$3.9 million), due primarily to reduced volumes. Cumulatively for the six months
to March 31, 2005 sales have decreased by $1.4 million (15.78%) from $8.7
million in 2004 to $7.3 million in 2005. Volume reductions of $1.9 million were
only partly compensated by favourable exchange movements of $0.3 million and
decreased sales rebates of $0.2 million.

The sales revenues of the Australian subsidiary have continued to suffer in
comparison to the prior year due to the loss of business with a major Australian
retailer and increased levels of competition in power and air tools. On a
macro-economic level, increases in domestic interest rates have had the effect
of reducing consumer spending which has had a flow-through effect on sales. The
continuation of the drought and water restrictions throughout Australia has
severely affected the rural farm trade, resulting in poor sales of digging and
garden products.

In New Zealand lower than expected levels of sales are attributable to increased
levels of competition from Asian imported products, the loss of business with a
major retail group and, as in Australia, increased domestic interest rates have
slowed consumer demand.

Our Australasian division remains focussed on re-establishing and consolidating
its trading relationships with retail customers and suppliers and on maximizing
the selling opportunities of the Spear & Jackson branded products. In this
regard, management has now developed and introduced a number of new and extended
ranges and promotional programs across the digging, garden, cutting, handsaw,
and air tool ranges that are anticipated to deliver incremental sales and margin
growth in the forthcoming quarters.

                                       34
<PAGE>

COSTS OF GOODS SOLD AND GROSS PROFIT

Costs of goods sold increased by 1.04% from $18.72 million in the three month
period ended March 31, 2004 to $18.91 million in the three months ended March
31, 2005. In the six month period under review costs of goods sold increased by
3.97% from $34.53 million in the six months ended March 31, 2004 to $35.90
million in the six months ended March 31, 2005.

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          Six Months Ended
                                 March 31    March 31       March 31    March 31
                                   2005        2004           2005        2004

Cost of goods sold
as a % of sales ............       67.08       68.26         67.34        68.50

Gross Profit Margin ........       32.92       31.74         32.66        31.50

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 have continued to show improvements over
last year 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.
o      realisation of negotiated price increases.

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.

                                       35
<PAGE>

OPERATING COSTS AND EXPENSES

Selling, general and administrative (SG&A) expenses decreased by $0.27 million
(3.23%) from $8.40 million in the three months ended March 31, 2004 to $8.13
million in the three months ended March 31, 2005. In the six months ended March
31, 2005 costs of $16.96 million have increased by $1.88 million (12.46%) from
$15.08 million in the six months to March 31, 2004.

The principal reasons for the changes in the levels of SG&A expenses in the
three and six month periods ended March 31, 2005 over their prior year
comparatives can be summarized as follows:

                                                Increases Over Prior Year

                                             Six Months            Three Months
                                               ended                  ended
                                           March 31, 2005         March 31, 2005

                                                 $m                      $m

a)     Impact of movements in                   0.80                   0.40
       average US$/sterling cross
       rates in the period

b)     Increased FAS 87 pension costs           1.40                   0.70

c)     Inflationary increases and               0.30                   0.10
       reduced foreign exchange
       gains on trading transactions

d)     Increased/ (decreased) head              0.10                  (0.10)
       office costs relating to legal
       and professional fees, monitor
       fees and associated costs

e)     Increased UK warehouse and               0.50                   0.10
       distribution costs following
       the change to direct sales

f)     Release of excess provision             (0.50)                 (0.50)
       associated with settlement
       of severance compensation
       payable to former Managing
       Director

g)     Other net decreases in
       SG&A expenses                           (0.72)                 (0.97)
                                               -----                  -----

       Total increase/(decrease) in
       SG&A expenses                            1.88                  (0.27)
                                               =====                  =====

                                       36
<PAGE>

OTHER INCOME (EXPENSE)

Other income and expenses moved from a net expense of $0.02 million in the three
months ended March 31, 2004 to a net credit of $0.02 million in the three months
ended March 31, 2005. For the six month period under review other income and
expenses has moved from a $0.06 million charge in the six months to March 31,
2004 to a $0.04 million credit in the six months to March 31, 2005.

This improvement is attributable to higher 2005 bank interest credits in the
Company's UK businesses. During the quarter to March 2004 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 the period to March 2004. Over the last year net
trading cash generation has improved cash balances thereby reducing interest
charges. In addition, the sale of the excess element of the Wednesbury site for
$5.2 million in January 2005 has increased cash balances and generated higher
interest income.

PROFIT ON SALE OF LAND AND BUILDINGS

On January 28, 2005 the Company completed the sale of part of its industrial
site at St. Paul's Road, Wednesbury, England, and on February 15, 2005 the
Company also concluded the disposal of its warehouse and office facility in Boca
Raton, Florida. Details of these sales are as follows:

                                          Wednesbury      Boca Raton      Total
                                           England         Florida
                                              $m             $m             $m

Net sale proceeds ....................        5.2            3.4            8.6
Less net book value ..................       (2.3)          (3.1)          (5.4)
                                             ----           ----           ----

Gross profit on disposal .............        2.9            0.3            3.2

Less related reorganisation costs ....       (0.7)           0.0           (0.7)
                                             ----           ----           ----

Net profit on sale ...................        2.2            0.3            2.5
                                             ====           ====           ====

Following the sale of the surplus element of the Wednesbury facility, provision
has been made for costs to be incurred in connection with the consolidation of
the current manufacturing operation into the smaller site. These costs
principally comprise factory refurbishment, factory reorganization and
departmental relocations within the site.

INCOME BEFORE INCOME TAXES

Our income before income taxes in the three months ended March 31, 2005 amounted
to $3.68 million compared to an income before taxes for the three months ended
March 31, 2004 of $0.29 million. The income before income taxes in the six month
period ended March 31, 2005 was $2.99 million compared to $0.74 million last
year.

                                       37
<PAGE>

The increase is attributable to:

                                        Six Months ended      Three Months ended
                                         March 31, 2005         March 31, 2005
                                               $m                     $m

Profit on sale of land and buildings...        2.50                  2.50
Increased gross margins ...............        1.53                  0.58
(Increased)/decreased SG&A costs.......       (1.88)                 0.27
Increased other income ................        0.10                  0.04
                                              -----                  ----
                                               2.25                  3.39
                                              -----                  ----

PROVISION FOR INCOME TAXES

An income tax charge of $0.49 million arose in the three months ended March 31,
2005 compared to a $0.36 million income tax charge in the three months ended
March 31, 2004. For the six month period to March 31, 2005 income taxes
decreased by $0.09 million from $0.53 million in 2004 to $0.44 million in 2005.

Income taxes were 13.32% of income before tax in the three months ended March
31, 2005 compared to 123.61% of profits in the three months ended March 31,
2004. Income taxes were 14.96% of income in the six months ended March 31, 2005
compared to 71.41% of income in the comparable period last year.

Differences between the effective rate and the statutory rate of taxation of 35%
result from the following:

o      The $2.2 million profit on sale of the Company's excess land at
       Wednesbury, England, of is not subject to taxation due to the
       availability of capital tax losses brought forward not recognized within
       the deferred tax computation.

o      Income in certain overseas subsidiaries within the Spear & Jackson group
       is taxed at rates different from the effective rate.

o      The utilization of tax losses which are not recognized within the
       deferred tax computation.

o      Permanent differences between accounting and taxable income as a result
       of non-deductible expenses and non-taxable income.

o      In addition, the effective tax rate has been 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 and six months ended March 31, 2005 will result in the payment
of income tax.

NET INCOME/(LOSS)

Our net profit from continuing activities after income taxes was $3.19 million
for the three months ended March 31, 2005 (2004: $0.07 million loss) and for the
six months ended March 31, 2005 it was $2.55 million compared to $0.21 million
in the previous year.

                                       38
<PAGE>

FINANCIAL CONDITION

Liquidity and Capital Resources

Our cash and cash equivalents amounted to $9.9 million at March 31, 2005 ($5.1
million at September 30, 2004), working capital (excluding deferred taxes)
totalled $36.6 million at March 31, 2005 ($28.8 million at September 30, 2004)
and our stockholders' equity was $33.4 million at March 31, 2005 ($29.4 million
at September 30, 2004).

Net cash used in operating activities in the six month period ended March 31,
2005 was $3.3 million compared to a $0.6 million in the six months ended March
31, 2004. This increased outflow of $2.7 million (423.66%) primarily arises
from:

o      decreased trading working capital inflows of $3.1 million (154.85%) (note
       a)
o      the reduction in net income (adjusted for depreciation, profit on loss on
       sale and deferred taxes) of $0.2 million (9.69%)

Offset by:

o      increase of 68.96% in net inflows from other assets and liabilities of
       $0.6 million (note b)

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

a)     Trade Working Capital Variances

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

                                                         Note        $million

       Increased trade receivables inflows ..........    (i)            1.0
       Reduced trade payable inflows ................    (ii)          (0.4)
       Reduced inventory inflows ....................    (iii)         (3.7)
                                                                       ----
       Net decrease in trade working capital inflows                   (3.1)
                                                                       ====

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 period to March 31, 2005
       therefore benefits from the cash received from these sales.

ii)    Trade payable inflows in 2005 show a reduction compared to 2004 as a
       result of a higher incidence of payments made under letter of credit on
       accelerated settlement terms.

                                       39
<PAGE>

iii)   In the period ended March 31, 2005 inventories increased by $3.7 million
       compared to a decrease of $0.07 million in the period ended March 31,
       2004. Within the UK hand tool division, the period to March 2004
       witnessed a rigorous inventory reduction program. Similar reductions were
       not present at March 31, 2005. Inventory levels increased in anticipation
       of new product launches and levels were also negatively impacted by poor
       UK and Australian second quarter sales, together with pre-season
       inventory builds. Additionally, purchases of stock in the new Metrology
       division in Holland have also had an adverse effect on inventory flows.

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

With regard to the net inflows from other assets and liabilities, a major
contributory factor is $0.4 million of additional legal and professional fees,
monitor costs and related expenses accrued in the US holding company at March
31, 2005. Payment of these fees will crystallise in subsequent months, and
further costs will be incurred until the monitor's duties are curtailed and the
various litigation issues are resolved. In addition a provision of $ 0.7 million
has been made in the last quarter regarding costs in connection with the
consolidation of the current manufacturing operation onto the smaller Wednesbury
site. Payment of these costs will crystallise in the forthcoming months.

Cash inflow from investing activities was $7.9 million in the period ended March
31, 2005 compared to an outflow from investing activities in the period ended
March 31, 2004 of $6.8 million.

The net cash provided by investing activities in the six months ended March 31,
2005 includes $5.2 million relating to the sale of land at Wednesbury, England
and $3.4 million relating to the warehouse and office facility at Boca Raton,
Florida. Purchases of plant and equipment were $0.6 million including $0.3
million on leased vehicles. The net outflow in 2004 relates primarily to $3.2
million relating to the purchase of the land and buildings at Wednesbury,
England, and $3.3 million relating to the warehouse and office facilities at
Boca Raton, Florida.

Net cash provided by financing activities was $0.001 million in the period ended
March 31, 2005 compared to $1.8 million in the period ended March 31, 2004. The
movement in 2004 relates to the utilization of the UK bank overdraft in order to
finance the $3.2 million purchase of the Wednesbury property.

BANK FACILITIES

The UK subsidiaries of Spear & Jackson plc and Bowers Group plc maintain a line
of credit of $8.5 million. This is secured by fixed and floating charges on the
assets and undertakings of these businesses. Of the total facility, $5.7 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 March 31, 2005 and September 30, 2004
the Company had no borrowings outstanding under the overdraft line but had $2.7
million in outstanding letters of credit (September 30, 2004: $1.5 million).

                                       40
<PAGE>

The French and Australian subsidiaries of Spear & Jackson plc maintain
short-term credit facilities of $3.0 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 March 31, 2005 (September 30, 2004: $0.1 million) and $1.5
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 December 2005 and the Australasian and
French facilities fall for renewal at various dates in the remainder of 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 March
31, 2005 the extent of this guarantee relating to gross bank overdrafts was
$22.5 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 $3.9 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.

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, investment in new capital equipment, the funding of
the Company's increased annual pension contribution to its defined benefit
pension plan, the one-off special contribution of $7.6 million to reduce the
plan deficit 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. The company believes that its
principal bankers in the UK will be supportive of any such increases in
borrowing requirements which could result from the implementations of these
initiatives.

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

The Company makes a range of contractual obligations in the ordinary course of
business. The following table summarizes the Company's principal obligations at
March 31, 2005:

                                       41
<PAGE>
<TABLE>
<CAPTION>
Contractual obligation          Total                       Payments due by period ($m)
                                Amount             1 year       1-3           4-5           5 years
                                Committed          or less      years         years         or more
<S>                             <C>                <C>          <C>           <C>           <C>
Capital lease obligations       1.4                0.8          0.6            -             -
Operating leases (note a)       7.1                0.9          1.8           1.7           2.7
                                ---                ---          ---           ---           ---
                                8.5                1.7          2.4           1.7           2.7
                                ---                ---          ---           ---           ---
</TABLE>

(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 the profile of future funding
       obligations in the medium term cannot be accurately forecast. The pension
       plan actuarial advisors carried out an actuarial valuation of the Plan as
       at December 31, 2004. This valuation showed an increase in the Plan's
       deficit compared to that calculated at April 5, 2002, the date of the
       last full actuarial valuation. Following discussions between the Company
       and the Trustees of the Plan, it has been agreed that, on or before
       September 30, 2005, the Company will make a special contribution to the
       Plan of approximately $7.6 million. Also, from May, the Company's annual
       pension contributions will increase from $2.8 million to $3.6 million.
       Taking into account the increase in annual contributions, the Company
       anticipates that ongoing employer contributions of $3.2 million will be
       made in the year ending September 30, 2005 in addition to the special
       contribution of $7.6 million.

(c)    As at March 31, 2005, the Company had letters of credit of $2.8 million
       outstanding which are secured under the UK and Australian credit
       facilities. In addition at the period end the Company's French subsidiary
       had discounted $1.3 million of bills of exchange with recourse.

At March 31, 2005, the Company had no material off-balance sheet arrangements
other than the non-debt obligations described in contractual obligations, above.

OUTLOOK

The first month of quarter 3 has continued the sales and earnings trends
witnessed in the quarter ended March 31, 2005. Income before taxation for the
month of April is anticipated to be approximately $0.3 million and similar
levels of operating profitability are expected in each of the two remaining
months of the third quarter.

Within the hand and garden business, competition remains fierce from cheap
foreign imports but our brand strength and product quality is helping us to
perform well in our export markets, particularly the Far and Middle East.

Here, order activity for hacksaw blades is strong as a result of the building
projects which have emerged from the Iraqi conflict.

Sales of garden power tools have started extremely well, aided by favourable
press reviews of the range. Continued sales growth in these ranges, together
with the planned promotional activity for hand and garden tools in major
multiple chains should enhance earnings performance and help redress the profit
shortfall experienced in quarter 2. Factors which adversely affected trading
performance last quarter, eg poor sales to the multiple retail sector as a
result of high inventory levels in those outlets, extended poor weather and
product launch delays, are not anticipated to recur.

                                       42
<PAGE>

In addition, significant capital investment was approved in the second quarter
to enable woodsaw and hacksaw production to keep pace with demand and future
growth forecasts.

Our Australasian subsidiaries have continued to experience difficult trading
conditions because of the adverse weather conditions in Australia and New
Zealand, flat demand in certain market sectors, increased levels of competition
within the power and air tool segments and reduced consumer spending.

Competition from imported Asian products and the increasing trend of some retail
groups to expand their own import programs has also placed sales and margin
pressures on the Australasian businesses.

To counteract this trend, management of the Australian and New Zealand
operations has developed and introduced a number of new and extended ranges and
promotional programs under the S&J brand across the digging, garden cutting,
hand saw, masonry and air tool ranges and these have been supplemented with new
ranges of electrical generator battery chargers and drainage products. These
ranges should deliver incremental sales and margin growth in the second half of
the year. In addition, significant new business was secured for the air
compressor range with a major New Zealand retail group which should further
bolster sales in the remaining six months of the year.

Having re-established and consolidated Spear & Jackson's Australasian trading
relationships with retail customers and suppliers, the major focus going forward
is to promote, market and grow the Spear & Jackson brand within the local
marketplace to secure incremental sales and profit growth. New ranges and range
extensions have been developed which are currently developing and gaining
acceptance in the marketplace.

The development of new ranges and range extensions has involved an extensive
program of identifying new and obsolete lines, improving the Spear & Jackson
branding and packaging, and competitive product sourcing. With many retailers
moving their support back to recognised brands, Australasian management believes
that the initiatives to date will place the Company's Australia and New Zealand
operations in a positive position going forward.

In the second half of 2005 we plan to continue to pursue a widening of our
direct sell UK customer base and to explore 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 and engineers' hand tool sales operation
in Maastricht is now complete and we expect this facility to contribute an
additional $0.9 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.

                                       43
<PAGE>

Despite these factors, we remain confident 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 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 and on those high added value areas of the Metrology
and Magnetics businesses in an effort to reverse the dilution of margin caused
by an increasing bias in our recent sales mix towards factored items or by those
elements of additional cost which we have not been able to pass on to end users.

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

Outside the UK we would anticipate that the level of legal and professional
charges incurred by our US corporate head office will reduce following the
settlement of the SEC suit on February 10, 2005. Such reductions are dependent,
however, on the amount of professional fees to be incurred in relation to the
class action litigation referred to elsewhere in this report.

In the forthcoming quarter we will continue to focus on maximising cash
generation. The sale of excess element 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 were 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, operational restructuring
initiatives and other capital projects, both domestically and abroad, which will
contribute to increased profitability and to the continued growth of our
business. Additionally, the sales proceeds from the disposal of these two
properties will help finance both the $7.6 million payment into the UK defined
benefit pension plan and the increased annual pension contributions. Such
payments will enable the current deficit in the plan to be reduced and will,
subject to certain conditions, fix our pension payment commitments until April
2007.

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; reorganization of our operational and
overhead bases so that they 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.

                                       44
<PAGE>

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 recently launched range of
power garden tools which has already generated strong demand.

As noted above, the SEC announced on February 10, 2005 that it had settled its
securities fraud charges against Mr. Dennis Crowley, the Company's former CEO
and Chairman, the Company and others. The Company has been able to deal with the
significant business disruptions and distractions which the SEC legal action has
caused and the formal resolution of this litigation 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 resolved.

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 March 31, 2005 the Company had borrowings in the form of overdrafts
amounting to $0.08 million which are repayable on demand and had cash and cash
equivalents of approximately $9.9 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, the Netherlands,
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.

                                       45
<PAGE>

In the six months ended March 31, 2005 compared to the equivalent period in
2004, the change in exchange rates had the effect of increasing the Company's
consolidated sales by $2.8 million, or 5.6%. 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 $0.8
million for the six months ended March 31, 2005 compared to the comparable prior
year period. If the US dollar further weakens in the future, it could result in
the Company having to suffer reduced margins in order for its products to remain
competitive in the local market place.

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

We manage the risk and attempt to reduce such exposure by periodically entering
into short term forward exchange contracts. At March 31, 2005 the Company held
forward contracts to sell Australian and New Zealand dollars to buy
approximately 0.8 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 $0.040 million had no forward contracts been taken
out.

COMMODITY PRICE RISK

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

CREDIT RISK

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

At March 31, 2005 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.

                                       46
<PAGE>

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).

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.

                                       47
<PAGE>

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 period ended March 31, 2005 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

Sarbanes-Oxley Section 404 Compliance

As directed by Section 404 of the Sarbanes-Oxley Act of 2002 the Securities and
Exchange Commission adopted rules requiring public companies to include a report
of management on the company's internal controls over financial reporting in
their annual reports. In addition, the independent registered public accounting
firm auditing a company's financial statements must also attest to and report on
management's assessment of the effectiveness of the company's internal controls
over financial reporting as well as the operating effectiveness of the company's
internal controls. We were not subject to these requirements for the fiscal year
ended September 30, 2004 and we will also not be subject to such requirements
for the current fiscal year ending September 30, 2005. We have begun evaluating
our internal control systems in order to allow our management to report on, and
our independent registered public accounting firm to attest to, our internal
controls as a required part of our Annual Report on Form 10-K beginning with our
report for the fiscal year ending September 30, 2006.

While we have been expending resources in developing the necessary documentation
and testing procedures required by Section 404, there is a risk that we may not
be able to comply with all of the requirements imposed by this rule. At present
there is no precedent available with which to measure compliance adequacy. In
the event we identify significant deficiencies or material weaknesses in our
internal controls that we cannot remediate in a timely manner or we are unable
to receive a positive attestation from our independent registered public
accounting firm with respect to our internal controls, investors and others may
lose confidence in the reliability of our financial statements and our stock
price and ability to obtain equity or debt financing as needed could suffer.

In addition, in the event that our independent registered public accounting firm
is unable to rely on our internal controls in connection with their audit of our
financial statements, and in the further event that they are able to unable to
devise alternative procedures in order to satisfy themselves as to the material
accuracy of our financial statements and related disclosures, it is possible
that we would receive a qualified or adverse audit opinion on those financial
statements which could also adversely affect the market price of our common
stock and our ability to secure additional financing as needed.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

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, the Company's
former Chief Executive Officer/Chairman and Mr. William Fletcher, the Company's
then Chief Financial Officer and now acting Chief Executive Officer.

                                       48
<PAGE>

These suits alleged essentially the same claims as the SEC suit which was filed
on April 15, 2004 in the U.S. District Court for the Southern District of
Florida. This suit, filed against the Company and Mr. Crowley, among others,
alleged violations of the federal securities laws. The allegations arose 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. The suit was settled on February
15, 2005 following approval by the U.S. District Court.

Lead counsel has now been appointed and an amended consolidated complaint has
been filed. The Company and the other defendants have filed a motion to dismiss
the complaint and are currently awaiting the court's ruling on these motions. It
is impossible at this time to ascertain the ultimate legal and financial
liability or whether this action will have a material adverse effect on the
Company's financial condition and results of 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 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.

Item 6.  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).

                                       49
<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.


May 16, 2005                            /s/ John Harrington, Jr.
                                            --------------------
                                            Interim Chairman



May 16, 2005                            /s/ William Fletcher
                                            ----------------
                                            Acting Chief Executive
                                            Officer
                                            (Principal Executive Officer)


May 16, 2005                            /s/ Patrick J. Dyson
                                            ----------------
                                            Chief Financial Officer
                                            (Principal Financial and Accounting
                                            Officer)

                                       50