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 June 30, 2006

                                       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 organization)

   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 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

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

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

Registrant had 5,735,561 shares of Common Stock, $.001 par value per share,
outstanding as of August 14, 2006.

<PAGE>

                              Spear & Jackson, Inc.

                                      INDEX

                                                                         Page
                                                                        Number
                                                                        ------
PART I.  FINANCIAL INFORMATION

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

         Condensed Consolidated Statements of Operations -
         Three and Nine Months ended June 30, 2006 and 2005...........      1

         Condensed Consolidated Balance Sheets - June 30, 2006
         and September 30, 2005 (audited) ............................      2

         Condensed Consolidated Statements of Cash Flows -
         Nine Months ended June 30, 2006 and 2005 ....................      3

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

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

Item 3.  Quantitative and Qualitative Disclosures about Market Risk ..     56

Item 4.  Controls and Procedures .....................................     57

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings ...........................................     57

Item 6.  Exhibits ....................................................     60

SIGNATURES ...........................................................     61

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 I. FINANCIAL STATEMENTS

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                                       FOR THREE MONTHS                FOR THE NINE MONTHS
                                                                             ENDED                             ENDED
                                                                 ----------------------------      ----------------------------
                                                                   JUNE 30,         JUNE 30,         JUNE 30,         JUNE 30,
                                                                     2006             2005             2006             2005
                                                                 -----------      -----------      -----------      -----------
<S>                                                              <C>              <C>              <C>              <C>
Net sales ..................................................     $    24,647      $    25,954      $    75,145      $    78,412
Cost of goods sold .........................................          16,768           17,531           51,743           52,622
                                                                 -----------      -----------      -----------      -----------
Gross profit ...............................................           7,879            8,423           23,402           25,790

Operating costs and expenses:
 Selling, general and administrative expenses ..............           9,360            7,889           27,783           24,431

                                                                 -----------      -----------      -----------      -----------
Operating (loss) income ....................................          (1,481)             534           (4,381)           1,359

Other income (expense)
 Rental income .............................................              37               39              111              118
 Interest and bank charges (net) ...........................             (38)               9              (25)             (32)

                                                                 -----------      -----------      -----------      -----------
(Loss) income from continuing operations before
 unusual or infrequent items and income taxes ..............          (1,482)             582           (4,295)           1,445

Unusual or infrequent items:
 Manufacturing reorganization costs ........................            (592)            (269)          (1,820)            (269)
 Settlement of class action litigation .....................            (650)               -             (650)               -
 Gain on sale of land and buildings net of reorganization
  costs ....................................................               -                -                -            2,503

                                                                 -----------      -----------      -----------      -----------
(Loss) income from continuing operations before
 income taxes ..............................................          (2,724)             313           (6,765)           3,679

Income tax (provision) benefit .............................             (41)            (206)             272             (654)
                                                                 -----------      -----------      -----------      -----------
(Loss) income from continuing operations ...................          (2,765)             107           (6,493)           3,025
                                                                 -----------      -----------      -----------      -----------

Discontinued operations:

 Loss from discontinued operations
  (net of income taxes of $nil in 2006 and 2005)............             (14)             (42)            (101)            (414)
 Adjustment to previously recorded  loss on disposal
   of discontinued operations...............................               3                -               12                -

                                                                 -----------      -----------      -----------      -----------
Loss from discontinued operations ..........................             (11)             (42)             (89)            (414)
                                                                 -----------      -----------      -----------      -----------

Net (loss) income ..........................................     $    (2,776)     $        65      $    (6,582)     $     2,611
                                                                 ===========      ===========      ===========      ===========

Basic and diluted (loss) income per share:

From continuing operations .................................     $     (0.48)     $      0.02      $     (1.13)     $      0.31
From discontinued operations ...............................           (0.00)           (0.01)           (0.02)           (0.04)
                                                                 -----------      -----------      -----------      -----------
                                                                 $     (0.48)     $      0.01      $     (1.15)     $      0.26
                                                                 ===========      ===========      ===========      ===========

Weighted average shares outstanding ........................       5,735,561        6,197,527        5,735,561        9,893,257
                                                                 ===========      ===========      ===========      ===========
</TABLE>

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

                                       1
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                          (IN THOUSANDS EXCEPT SHARES)
<TABLE>
<CAPTION>
                                                                                         AT JUNE 30,       AT SEPTEMBER 30,
                                                                                            2006                 2005
                                                                                        -----------        ----------------
                                                                                        (UNAUDITED)
<S>                                                                                     <C>                <C>
                                       ASSETS

Current assets:
 Cash and cash equivalents .....................................................           $  6,321             $  7,289
 Trade receivables, net of allowance for doubtful accounts
    of $1,458 and $1,525 .......................................................             17,074               16,448
 Inventories ...................................................................             23,989               24,999
 Foreign taxes recoverable .....................................................                201                    -
 Deferred income tax asset, current portion ....................................              2,843                2,623
 Other current assets ..........................................................              1,168                1,316
                                                                                           --------             --------
    Total current assets .......................................................             51,596               52,675

 Property, plant and equipment, net ............................................             17,674               17,568
 Deferred income tax asset .....................................................             13,753               12,690
 Investments ...................................................................                405                  157
                                                                                           --------             --------
    Total assets ...............................................................           $ 83,428             $ 83,090
                                                                                           ========             ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Notes payable .................................................................           $     13             $    752
 Trade accounts payable ........................................................              8,550                8,103
 Accrued expenses and other liabilities ........................................             12,720               11,241
 Foreign taxes payable .........................................................                153                   88
                                                                                           --------             --------
    Total current liabilities ..................................................             21,436               20,184
Other liabilities ..............................................................                756                  749
Pension liability ..............................................................             41,324               35,954

                                                                                           --------             --------
    Total liabilities ..........................................................             63,516               56,887
                                                                                           --------             --------
Stockholders' equity:
Common stock, 25,000,000 shares authorized $0.001 par value; 12,011,122
    issued and 5,735,561 shares outstanding ....................................                 12                   12
Additional paid in capital .....................................................             51,590               51,590
Accumulated other comprehensive income (loss):
    Minimum pension liability adjustment, net of tax ...........................            (45,744)             (43,751)
    Foreign currency translation adjustment, net of tax ........................             14,042               11,765
    Unrealized  gain (loss) on derivative instruments ..........................                  -                   (7)
Retained earnings ..............................................................                552                7,134
Less: 6,275,561 common stock held in treasury, at cost .........................               (540)                (540)
                                                                                           --------             --------
    Total stockholders' equity .........................................                     19,912               26,203
                                                                                           --------             --------
                                                                                           --------             --------
    Total liabilities and stockholders' equity .........................                   $ 83,428             $ 83,090
                                                                                           ========             ========
</TABLE>

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

                                       2
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                          FOR THE NINE MONTHS ENDED
                                                                                          -------------------------
                                                                                          JUNE 30,          JUNE 30,
                                                                                            2006              2005
                                                                                          ---------         --------
<S>                                                                                       <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net (loss) income attributable to continuing and discontinued operations .........       $(6,582)           $ 2,611
 Adjustments to reconcile net (loss) income to net cash provided by (used in)
  operating activities:
   Depreciation ...................................................................         1,775              2,225
   Amortization of asset held for sale ............................................             -                 16
   Gain on sale of land and buildings .............................................             -             (2,503)
   Loss on sale of plant, property and equipment ..................................             2                 11
   Deferred income taxes ..........................................................          (566)               515
 Changes in operating assets and liabilities:
   Decrease in trade receivables ..................................................           104                256
   Decrease (increase) in inventories .............................................         1,681             (4,374)
   Decrease (increase) in other current assets ....................................           208               (394)
   Contributions paid to pension plan .............................................        (2,595)            (5,892)
   Increase in other non-current liabilities ......................................         6,181              3,028
   Increase in trade accounts payable .............................................           109                160
   Increase in accrued expenses and other liabilities .............................         1,144                721
   (Decrease) increase in foreign taxes payable ...................................          (108)                54
   Decrease in other liabilities ..................................................           (26)              (284)
                                                                                          -------            -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ...............................         1,327             (3,850)
                                                                                          -------            -------

INVESTING ACTIVITIES:
  Purchases of property, plant and equipment ......................................        (1,213)              (942)
  Proceeds from sale of property, plant and equipment .............................            86              8,616
  Purchase of equity investment ...................................................          (229)                 -
                                                                                          -------            -------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES ...............................        (1,356)             7,674
                                                                                          -------            -------

FINANCING ACTIVITIES:
 Decrease in overdraft ............................................................          (773)               (67)
                                                                                          -------            -------
 NET CASH  USED IN FINANCING ACTIVITIES ...........................................          (773)               (67)
                                                                                          -------            -------
 Effect of exchange rate changes on cash and cash equivalents .....................          (166)              (303)

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

 CHANGE IN CASH AND CASH EQUIVALENTS ..............................................          (968)             3,454

 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................................         7,289              5,090
                                                                                          -------            -------

 CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................................       $ 6,321            $ 8,544
                                                                                          =======            =======

 SUPPLEMENTAL CASH FLOW INFORMATION
    Cash paid for interest ........................................................       $    82            $    32
                                                                                          =======            =======
    Cash paid for taxes ...........................................................       $   402            $    85
                                                                                          =======            =======

 NON-CASH INVESTING AND FINANCING ACTIVITIES
     Common stock issued for acquisitions .........................................       $     -            $     -
                                                                                          =======            =======
</TABLE>

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

                                       3
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION

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

      As further explained in note 4, below, the purchase of Spear & Jackson plc
and Bowers Group plc by Megapro Tools, Inc. (now Spear & Jackson, Inc.), which
was completed on September 6, 2002, was treated as a reverse acquisition. The
results and assets of discontinued operations are presented in accordance with
Statement of Financial Accounting Standards ("SFAS") 14.

      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 June 30, 2006 and September 30, 2005, and the results
of operations for the three and nine month periods ended June 30, 2006 and June
30, 2005 and cash flows for the nine month periods ended June 30, 2006 and June
30, 2005 have been included and that the disclosures are adequate to make the
information presented not misleading. The balance sheet at September 30, 2005
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, 2005.

      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, 2005 included in the Company's annual
report filed on Form 10-K for the period then ended.

      The condensed consolidated financial statements of Spear & Jackson, Inc.
are denominated in US dollars. Changes in exchange rates between UK sterling,
the Euro, the Australian dollar, the New Zealand dollar, the Chinese Yen and the
US dollar will affect the translation of the UK, French, Dutch, Chinese, New
Zealand and Australian subsidiaries' financial results into US dollars for the
purposes of reporting the consolidated financial results. The process by which
each foreign subsidiary's financial results are translated into US dollars is as
follows: income statement accounts are translated at average exchange rates for
the period; balance sheet asset and liability accounts are translated at end of
period exchange rates; and equity accounts are translated at historical exchange
rates. Translation of the balance sheet in this manner affects the stockholders'
equity account, referred to as the accumulated other comprehensive income
account. Management 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.

                                       4
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION - CONTINUED

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

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

NOTE 2 - RECENTLY ISSUED ACCOUNTING STANDARDS

      In March 2005, the FASB issued Interpretation ("FIN") No. 47, "Accounting
for Conditional Asset Retirement Obligations--an Interpretation of FASB
Statement No. 143." This Interpretation clarifies the timing of liability
recognition for legal obligations associated with an asset retirement when the
timing and (or) method of settling the obligation are conditional on a future
event that may or may not be within the control of the entity. FIN No. 47 is
effective no later than the end of fiscal years ending after December 15, 2005.
We do not believe that the implementation of this statement will have a material
impact on the Company's consolidated results of operation and financial
condition.

      In March 2005, the SEC issued Staff Accounting Bulletin ("SAB") No. 107
regarding the Staff's interpretation of SFAS No. 123(R). This interpretation
provides the Staff's views regarding interactions between SFAS No. 123(R) and
certain SEC rules and regulations and provides interpretations of the valuation
of share-based payments for public companies. The interpretive guidance is
intended to assist companies in applying the provisions of SFAS No. 123(R) and
investors and users of the financial statements in analyzing the information
provided. We believe the adoption of this Statement will not have a material
impact on our financial position or results of operations.

      In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections". SFAS 154 replaces APB Opinion No. 20, "Accounting Changes", and
SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements". SFAS
154 requires that a voluntary change in accounting principle be applied
retrospectively with all prior period financial statements presented on the new
accounting principle. SFAS 154 also requires that a change in method of
depreciating or amortizing a long-lived non-financial asset be accounted for
prospectively as a change in estimate, and correction of errors in previously
issued financial statements should be termed a restatement. SFAS 154 is
effective for accounting changes and correction of errors made in fiscal years
beginning after December 15, 2005 which is effective with our first quarter of
fiscal 2007. We intend to adopt the disclosure requirements upon the effective
date of the pronouncement. We do not believe that the adoption of this
pronouncement will have a material effect on our consolidated financial
position, results of operations or cash flows.

      In June 2005, the EITF reached consensus on Issue No. 05-6, Determining
the Amortization Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6
provides guidance on determining the amortization period for leasehold
improvements acquired in a business combination or acquired subsequent to lease
inception. The guidance in EITF 05-6 will be applied prospectively and is
effective for periods beginning after June 29, 2005. Adoption of this standard
is not expected to have a material impact on our consolidated financial position
or results of operations.

      In October 2005, the FASB issued Staff Position No. 13-1, "Accounting for
Rental Costs Incurred During a Construction Period" ("FSP No. 13-1"). FSP No.
13-1 is effective for the first reporting period beginning after December 15,
2005 and requires that rental costs associated with ground or building operating
leases that are incurred during a construction period be recognized as rental
expense. We do not believe that adoption of FSP No. 13-1 will have a material
impact on our financial statements.

                                       5
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 2 - RECENTLY ISSUED ACCOUNTING STANDARDS - CONTINUED

      In November 2005, the Financial Accounting Standards Board (FASB) issued
FSP No. 123(R)-3, "Transition Election Related to Accounting for the Tax Effects
of Share-Based Payment Awards." This pronouncement provides an alternative
method of calculating the excess tax benefits available to absorb any tax
deficiencies recognized subsequent to the adoption of SFAS No. 123(R). The
company has until November 2006 to make a one-time election to adopt the
transition method. The company is currently evaluating FSP 123(R)-3; this
one-time election will not affect operating income or net earnings.

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

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

      In June 2006, the Financial Accounting Standards Board ratified the
consensus reached by the EITF on EITF Issue No. 05-01, Accounting for the
Conversion of an Instrument That Becomes Convertible Upon the Issuer's Exercise
of a Call Option ("EITF 05-01"). The EITF consensus applies to the issuance of
equity securities to settle a debt instrument that was not otherwise currently
convertible but became convertible upon the issuer's exercise of call option
when the issuance of equity securities is pursuant to the instrument's original
conversion terms. The adoption of EITF 05-01 is not expected to have a material
impact on our results of operations or financial condition.

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

NOTE 3 - CRITICAL ACCOUNTING POLICIES

      A summary of our critical accounting policies is included in Note 2 to the
audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended September 30, 2005. 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, 2005, 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

                                       6
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 3 - CRITICAL ACCOUNTING POLICIES - CONTINUED

requires us to make estimates and assumptions and adopt accounting policies that
affect the reported amounts of assets, liabilities, revenues and expenses as
disclosed in those financial statements. These judgements can be subjective and
complex, and consequently actual results could differ from those estimates. Our
most critical accounting policies relate to revenue recognition; foreign
exchange risk; inventory, the computation of deferred income taxes, the
recognition of deferred income tax assets and pension and other post retirement
benefit costs. Since September 30, 2005, there have been no changes in our
critical accounting policies and no significant changes to the assumptions and
estimates related to them.

NOTE 4 - NATURE OF BUSINESS

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

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

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

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

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

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

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

                                       7
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 4 - NATURE OF BUSINESS - CONTINUED

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

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

      The representations, warranties and covenants made by Jacuzzi and UPI are
typical for this type of transaction, and include a covenant that restricts
Jacuzzi from soliciting or negotiating with a third party between the signing
date of the Stock Purchase Agreement and the closing date of the transaction.
Jacuzzi has also agreed that in connection with the closing of the transaction,
it will, among other things, cause UPI's designees and one designee of Jacuzzi
to be elected to the Board of Directors of Spear & Jackson, Inc. and will use
commercially reasonable best efforts so that such UPI designees are in
sufficient numbers to give UPI a majority of the Board of Directors of the Spear
& Jackson, Inc. UPI has also agreed that it or any of its affiliates will not
purchase any additional Common Stock during the period from the signing date of
the Stock Purchase Agreement through one year following the closing at a price
less than $1.40 per share.

      The purchase of the Shares by UPI contemplated by the Stock Purchase
Agreement is subject to the receipt of a number of closing conditions, including
approval by UPI's shareholders and the United Kingdom Pensions Regulator, and
the receipt of certain other regulatory approvals as well as other customary
closing conditions.

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

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

      In addition, pursuant to the terms of Amendment No. 2 to the Stock
Purchase Agreement, UPI agreed, subject to the Closing having occurred, to
indemnify the Seller and JBI Holdings Limited (the "Jacuzzi Indemnified
Parties") should the UK Pensions Regulator, regardless of the Comfort Letter,
require any of the Jacuzzi Indemnified Parties to make a contribution or provide
financial support in relation to the potential pension plan liabilities of SJI
or its subsidiaries. In addition, UPI has also agreed that for a period of
twelve months from the Closing Date, UPI will not, and will use its best efforts
to ensure that neither Spear & Jackson, Inc. nor any of its subsidiaries will,
take any action or omit to take any action that causes the UK Pensions
Regulator, as a result of such action or omission, to issue a contribution
notice against the Jacuzzi Indemnified Parties in relation to any UK pension
plan in which Spear & Jackson, Inc. or any subsidiary of Spear & Jackson, Inc.

                                       8
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 4 - NATURE OF BUSINESS - CONTINUED

is an employer. Further, UPI agreed that for a period of twelve months from the
Closing Date, that it will not (and will use its best efforts to ensure that
neither Spear & Jackson, Inc. nor any subsidiary of Spear & Jackson, Inc. will)
engage in any action or inaction which in relation to any such UK pension plan
would fall within the UK Pension Regulation clearance guidance note dated April
2005 as a 'Type A' event unless UPI procures that clearance is issued by the UK
Pensions Regulator in relation to such event in terms which confirm that no
Jacuzzi Indemnified Party shall be linked to a financial support direction or
contribution notice in respect of such event.

      On July 28, 2006 the purchase was formally completed.

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

      Brian C. Beazer, the Chairman of UPI, is a director of Jacuzzi and holds
approximately 24.56% of the shares of UPI. David H. Clarke, the Chairman and
Chief Executive Officer of Jacuzzi, is a director of UPI and holds approximately
22.88% of the shares of UPI. Mr. Clarke also holds approximately 28,350 shares
of common stock of Spear & Jackson, Inc., representing approximately 0.49% of
the shares of Spear & Jackson, Inc. but the shares of Spear & Jackson, Inc.
owned by Mr. Clarke are not being purchased at the time of the sale of the
Shares by the Seller to UPI.

NOTE 5 - DISCONTINUED OPERATIONS

      The following table presents the results of the Company's operations that
have been reclassified as discontinued and the (loss) income that has been
recorded in connection with the disposal of these businesses:
<TABLE>
<CAPTION>
                                                                       FOR THE THREE MONTHS          FOR THE NINE MONTHS
                                                                             ENDED                          ENDED
                                                                  ----------------------------  -----------------------------
                                                                      June 30,       June 30,       June 30,       June 30,
                                                                        2006          2005           2006           2005
                                                                  -------------  -------------  -------------   -------------
                                                           Note   (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)  (IN THOUSANDS)
<S>                                                        <C>    <C>            <C>            <C>             <C>
Revenues reclassified to discontinued operations:
 Thread gauge measuring  division ..................        (a)       $     -        $   376        $   590        $ 1,226
                                                                      -------        -------        -------        -------
                                                                      $     -        $   376        $   590        $ 1,226
                                                                      =======        =======        =======        =======

Loss from discontinued operations:
Loss from operations of thread gauge measuring
 division ..........................................        (a)           (14)       $   (42)          (101)       $  (414)
                                                                      -------        -------        -------        -------
                                                                      $   (14)       $   (42)       $  (101)       $  (414)
                                                                      =======        =======        =======        =======

Adjustment to previously recorded loss on disposal
 of discontinued operations:
  Megapro screwdrivers division ....................        (b)             3        $     -             12        $     -
                                                                      -------        -------        -------        -------
                                                                      $     3        $     -        $    12        $     -
                                                                      =======        =======        =======        =======

                                                                      -------        -------        -------        -------
Total loss from discontinued operations net of taxes                  $   (11)       $   (42)       $   (89)       $  (414)
                                                                      =======        =======        =======        =======
</TABLE>

      Pursuant to SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", the Company's previously issued financial statements and
notes have been reclassified to reflect the discontinued components detailed
above. Accordingly, the assets, liabilities, net operations, and net cash flows
of these business segments have been reported as "Discontinued Operations" in
the accompanying condensed consolidated financial statements.

                                       9
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 5 - DISCONTINUED OPERATIONS - CONTINUED

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

      (b) During the year ending September 30, 2003, the directors of Spear &
Jackson, Inc. carried out a strategic review of the Company's loss making
Megapro screwdriver division ("Megapro"). It was determined that the division
was no longer a core activity of the group and various divestment strategies
were considered. With effect from September 30, 2003, the trade and assets of
the division's principal operating companies, Mega Tool USA, Inc. and Mega Tools
Limited, were transferred by prior subsidiary management, and without prior
authorization, at their net book value of $384 to the division's former managing
director. The transfer proceeds were in the form of $284 of loan notes and other
receivables and the discharge of a loan of $100 owed by the company to the
Megapro managing director.

      Having considered the future financial position of Megapro, the directors
of Spear & Jackson, Inc. provided $97 against the recoverability of the balance
of the sales proceeds which was outstanding at September 30, 2003. A further
$187 was provided against this debt in the year ended September 30, 2004. It has
now been agreed with Megapro that it will pay Canadian $54 (approximately $41)
in settlement of those debts and this is being repaid in monthly installments of
Canadian $5 (approximately $4) of which $27 was received in the year ended
September 30, 2005. A further $12 has been received in the nine months ended
June 30, 2006.

NOTE 6 - RETIREMENT BENEFIT PLAN

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

      Pension costs amounted to $2,121 for the quarter ending June 30, 2006 and
$1,001 for the same quarter last year. Pension costs for the nine months ending
June 30, 2006 were $6,181 compared with $3,028 for the equivalent period last
year. The net periodic costs include the following components:
<TABLE>
<CAPTION>
                                                 FOR THE THREE MONTHS               FOR THE NINE MONTHS
                                                       ENDED                              ENDED
                                          -------------------------------   -------------------------------
                                             JUNE 30,         JUNE 30,         JUNE 30,        JUNE 30,
                                              2006              2005            2006             2005
                                          --------------   --------------   --------------   --------------
                                          (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                                       <C>              <C>              <C>              <C>
Service cost ......................          $   546          $   453          $ 1,595          $ 1,369
Interest cost .....................            2,720            2,526            7,929            7,640
Expected return on plan assets ....           (2,568)          (2,656)          (7,493)          (8,034)
Recognition of actuarial loss .....            1,423              678            4,150            2,053

                                             -------          -------          -------          -------
Total Benefit cost ................          $ 2,121          $ 1,001          $ 6,181          $ 3,028
                                             =======          =======          =======          =======
</TABLE>

                                       10
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 6 - RETIREMENT BENEFIT PLAN  - CONTINUED

      The Company's funding policy with respect to the Plan is to contribute
annually not less than the minimum required by applicable UK law and pension
regulations. Amounts payable are determined on the advice of the Plan's
actuaries. The Company has contributed $766 to the Plan in the quarter to June
30, 2006 (2005 $4,436) and $2,595 in the nine month period ended on that date
(2005 $5,892). The Company anticipates that contributions of $3.3 million will
be made in the year ending September 30, 2006 (2005 $10.2 million of which $3.0
million was in respect of annual ongoing employer contributions and $7.2 million
related to a one-off special contribution into the Plan).

      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, 2005, 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 $35.95
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 2006. If the
level of pension assets exceeds the ABO as of a future measurement date, the
full charge against stockholders' equity would be reversed.

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
                                                                      AT JUNE 30,           AT SEPTEMBER 30,
                                                                        2006                      2005
                                                                    --------------          ----------------
                                                                    (IN THOUSANDS)           (IN THOUSANDS)
<S>                                                         <C>     <C>                     <C>
Assets held and used:
 Land and buildings, at cost .....................                    $ 16,646                  $ 15,799
 Machinery, equipment and vehicles, at cost ......                      31,860                    35,331
 Furniture and fixtures, at cost .................                       1,239                     1,256
 Computer hardware, at cost ......................                       1,445                     1,244
 Computer software, at cost ......................                         318                       342
 Assets held under finance leases, at cost .......          (a)          2,271                     2,883
                                                                      --------                  --------
                                                                        53,779                    56,855
 Accumulated Depreciation ........................                     (36,105)                  (39,287)
                                                                      --------                  --------
        Net ......................................                    $ 17,674                  $ 17,568
                                                                      ========                  ========
</TABLE>

(a) Included in property, plant and equipment at June 30, 2006 are capital
leases with a net book value of $0.8 million (September 30, 2005 $0.9 million).
The cost of these assets held under capital leases was $2.3 million (September
30, 2005 $2.9 million) and the accumulated depreciation relating to these assets
was $1.5 million (September 30, 2005 $2.0 million).

NOTE 8 - INVENTORIES
<TABLE>
<CAPTION>
                                                                      AT JUNE 30,            AT SEPTEMBER 30,
                                                                         2006                       2005
                                                                    --------------            -------------
                                                                    (IN THOUSANDS)            (IN THOUSANDS)
<S>                                                                 <C>                      <C>
Finished products ..............................................       $ 18,799                  $ 19,740
In-process products ............................................          4,577                     6,481
Raw materials ..................................................          5,671                     5,320
   Less: allowance for slow moving and obsolete inventories ....         (5,058)                   (6,542)
                                                                       --------                  --------
                                                                       $ 23,989                  $ 24,999
                                                                       ========                  ========
</TABLE>
                                       11
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9 - UNUSUAL OR INFREQUENT ITEMS

      (a) GAIN ON SALE OF LAND AND BUILDINGS NET OF REORGANIZATION COSTS

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
                                                                ENGLAND         FLORIDA         TOTAL
                                                            --------------  --------------  --------------
                                                            (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 reorganization costs (see below)...........         707               -             707
                                                               ------          ------          ------
                                                               $2,244          $  259          $2,503
                                                               ======          ======          ======
</TABLE>

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

      (b) MANUFACTURING REORGANIZATION COSTS

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

         The closure and relocation of the Wednesbury facility are to be
completed by November 30, 2006 and the costs of this exercise are anticipated to
be approximately $2.1 million. These costs include employee severance payments,
site closure expenses, factory reorganization expenses, plant transfer costs and
associated capital expenditure. In addition to the above, the Company announced
in the current quarter that certain manufacturing operations carried out at its
Atlas site in Sheffield ("Atlas") will also cease. Provision for employee
severance costs in respect of the closure of these manufacturing operations has
been made in the quarter ended June 30, 2006.

         As discussed, below, in footnote 14, "Subsequent Events", on July 27,
2006, Spear & Jackson, Inc.'s UK subsidiary, Spear & Jackson Garden Products
Limited, completed the sale of the remaining element of the Wednesbury site for
(pound)2.6 million sterling (approximately $4.7 million), excluding disposal
costs, which will result in a gain on disposal of approximately $3.5 million..
Funds realized from the disposal are to be used to finance the closure costs
with any excess sale proceeds being reinvested in other operational initiatives.

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

                                       12
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9 - UNUSUAL OR INFREQUENT ITEMS - CONTINUED

         As explained above, a surplus element of the Wednesbury site was sold
in 2005 and provision was made at March 31, 2005 for various site reorganization
costs that were to be incurred as a result of that partial sale. Certain of
these costs will not now be incurred following the decision to close the
remainder of the site and market the property for resale and such excess
provisions have been released in the prior quarter.

         Costs provided in respect of the Wednesbury closure and the Atlas
reorganization as at June 30, 2006 and amounts credited in respect of the
release of excess provisions from prior periods are as follows:
<TABLE>
<CAPTION>
                                                            THREE MONTHS      NINE MONTHS
                                                                ENDED            ENDED
                                                            JUNE 30, 2006    JUNE 30, 2006
                                                           --------------    --------------
                                                           (IN THOUSANDS)    (IN THOUSANDS)
<S>                                                        <C>               <C>
Severance costs .........................................      $   351           $ 1,536
Fixed asset impairments .................................      $   145           $   145
Site closure costs ......................................           96               463
                                                               -------           -------
                                                                   592             2,144

Release of excess provisions accrued in prior periods....            -              (324)

                                                               -------           -------
Net reorganization costs.................................          592             1,820
                                                               =======           =======
</TABLE>

         In addition to the net Wednesbury and Atlas reorganization costs of
$1.8 million charged at June 30, 2006 it is anticipated that a further $0.1
million will be incurred in respect of the Wednesbury site closure on or before
November 30, 2006 for which provision will be made in accordance with applicable
financial reporting standards as and when liabilities for such charges
crystallize.

      (c) SUMMARY OF PROVISIONS IN RESPECT OF THE UK MANUFACTURING AND
REORGANIZATION PROGRAM

         As explained in footnote 4 (b) of the Company's consolidated financial
statements included within the Company's Form 10-K for the year ended September
30, 2005, provisions totaling $1.7 million were set up in respect of a UK
manufacturing reorganization program that was initiated during the course of
that year. The provisions comprised the following:

            (i) As a result of the sale of the surplus element of the Company's
manufacturing site at Wednesbury, England, the Company became contractually
obliged to vacate office and warehouse facilities located on those parts of the
site that had been sold. A provision of $0.5 million was made for costs in
connection with this obligation. The provision principally related to office and
factory refurbishment and reorganization expenses together with expenditure in
respect of departmental relocations within the remainder of the site. Following
the sale, elements of the Wednesbury manufacturing operation were closed or
transferred and costs in connection with these initiatives are dealt with in
(ii) and (iii) below.

            In the final quarter of the year ended September 30, 2005 the
Company performed a review of its UK manufacturing operations and began
implementation of a number of strategies to reduce its ongoing cost base. Costs
provided in connection with the implementation of these initiatives relate to:

            (ii) $0.4 million of severance costs relating to the closure and
down scaling of certain manufacturing processes at the Company's Sheffield and
Wednesbury locations in the UK.

            (iii) $0.8million of impairment write-downs in respect of the plant
and machinery involved in the restructured operations.

                                       13
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9 - UNUSUAL OR INFREQUENT ITEMS - CONTINUED

         As discussed in (b), above, $1.8 million was also provided in respect
of the Wednesbury site closure and Atlas manufacturing reorganization at June
30, 2006.

         The Company also has a further provision of $1.8 million in respect of
other UK manufacturing reorganization and relocation costs that was set up in
periods prior to the year ended September 30, 2005.

         In the period ended June 30, 2006, $0.5 million has been spent in
respect of employee severance costs and other reorganization expenses for which
provision was made at September 30, 2005 and as noted above, additional
provisions of $0.6 million have been made in the period relating to the closure
of the Wednesbury site and the reorganization of the production facilities at
Atlas. The following are summaries of the movements in the quarter and the nine
months ended June 30, 2006.

         The movements in the liability balance showing the utilization and
other changes to the provisions referred to above that have occurred between
April 1, 2006 and June 30, 2006 are as follows:
<TABLE>
<CAPTION>
                                AT APRIL 1,      EXCHANGE           AMOUNTS           AMOUNTS          AT JUNE 30,
                                  2006           MOVEMENTS          PROVIDED       PAID/UTILIZED         2006
                              --------------   --------------    -------------     ---------------   --------------
                              (IN THOUSANDS)   (IN THOUSANDS)    (IN THOUSANDS)    (IN THOUSANDS)    (IN THOUSANDS)
<S>                           <C>              <C>               <C>               <C>               <C>
(a) Included in Accrued Expenses and Other Liabilities:

Other UK reorganization
costs......................         1,655              109                -                 -             1,764
Wednesbury / Atlas costs...         1,454               53              465              (298)            1,674
Settlement of class
litigation.................             -                -              650                 -               650
                                  -------          -------          -------           -------           -------
                                  $ 3,109          $   162          $ 1,115           $  (298)          $ 4,088
                                  =======          =======          =======           =======           =======

(b) Included in Property, Plant and Equipment:

Asset impairments..........       $   787          $    53          $   127           $   (68)          $   899
                                  =======          =======          =======           =======           =======

Total......................       $ 3,896          $   215          $ 1,242           $  (366)          $ 4,987
                                  =======          =======          =======           =======           =======
</TABLE>

The movements in the liability balance between October 1, 2005 and June 30, 2006
are as follows:
<TABLE>
<CAPTION>
                                AT OCTOBER 1,      EXCHANGE           AMOUNTS           AMOUNTS          AT JUNE 30,
                                    2005           MOVEMENTS          PROVIDED       PAID/UTILIZED          2006
                               --------------    --------------    --------------    --------------    --------------
                               (IN THOUSANDS)    (IN THOUSANDS)    (IN THOUSANDS)    (IN THOUSANDS)    (IN THOUSANDS)

<S>                            <C>               <C>               <C>               <C>               <C>
(a) Included in Accrued Expenses and Other Liabilities:

Wednesbury move costs........     $   444           $    (4)          $  (324)          $  (116)          $     -
Employee severance costs.....         402                (8)                0              (394)                -
Other UK reorganization
costs .......................       1,687                77                 -                 -             1,764
Wednesbury / Atlas costs ....           -                (6)            2,017              (337)            1,674
Settlement of class
 litigation..................           -                 -               650                 -               650
                                  -------           -------           -------           -------           -------
                                  $ 2,533           $    59           $ 2,343           $  (847)          $ 4,088
                                  =======           =======           =======           =======           =======

(b) Included in Property, Plant and Equipment:

Asset impairments............     $   803           $    37           $   127           $   (68)          $   899
                                  =======           =======           =======           =======           =======

Total........................     $ 3,336           $    96           $ 2,470           $  (915)          $ 4,987
                                  =======           =======           =======           =======           =======
</TABLE>

                                       14
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9 - UNUSUAL OR INFREQUENT ITEMS - CONTINUED

      (c) SETTLEMENT OF CLASS ACTION LITIGATION

         As further explained, below, in footnote 13, "Legal Proceedings", on
July 7, 2006, Spear & Jackson, Inc. entered into a Memorandum of Understanding
whereby it agreed to pay $650,000 in settlement of the class action litigation,
referred to in that note, in which it is a defendant. Provision has accordingly
been made in the financial statements for the period ended June 30, 2006 for the
payment of that sum.

NOTE 10 - INCOME TAXES

      Spear & Jackson is subject to income taxes in the US and in the other
overseas tax jurisdictions where its principal trading subsidiaries operate. The
(provision)/ benefit for US and foreign income taxes arising on continuing
operations consists of:
<TABLE>
<CAPTION>
                           FOR THE THREE MONTHS ENDED       FOR THE NINE MONTHS ENDED
                          ----------------------------    -----------------------------
                             JUNE 30,        JUNE 30,        JUNE 30,        JUNE 30,
                               2006            2005            2006            2005
                          ------------    ------------    ------------     ------------
                          IN THOUSANDS    IN THOUSANDS    IN THOUSANDS     IN THOUSANDS
<S>                       <C>             <C>             <C>              <C>
Current tax charge......      $ (41)          $ (40)          $(294)          $(139)
Deferred tax  credit....          -            (166)            566            (515)
                              -----           -----           -----           -----
                              $ (41)          $(206)          $ 272           $(654)
                              =====           =====           =====           =====
</TABLE>

      A reconciliation of the net benefit for income taxes compared with the
amounts arising at the US federal rate is as follows:
<TABLE>
<CAPTION>
                                                                FOR THE THREE MONTHS                 FOR THE NINE MONTHS
                                                                        ENDED                              ENDED
                                                           ------------------------------      ------------------------------
                                                              JUNE 30,          JUNE 30,          JUNE 30,          JUNE 30,
                                                                2006              2005             2006              2005
                                                            ------------     ------------      ------------      ------------
                                                            IN THOUSANDS     IN THOUSANDS      IN THOUSANDS      IN THOUSANDS
<S>                                                         <C>              <C>               <C>               <C>
Tax at US federal statutory income tax rate ........          $   958           $   (95)          $ 2,399           $(1,143)
Overseas tax at rates different to effective rate...             (190)              (13)             (526)             (109)

Adjustment to prior year overseas tax provisions....                -                 -               (89)                -

Gain on sale of UK property covered by losses
  brought forward ..................................                -                 -                 -               885
Settlement of class action litigation
                                                                 (179)                -              (179)                -
Permanent differences ..............................              (40)              (39)             (112)             (118)
Valuation allowance ................................             (590)              (59)           (1,221)             (387)
                                                              -------           -------           -------           -------
                                                              $   (41)          $  (206)          $   272           $  (654)
                                                              =======           =======           =======           =======
</TABLE>

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

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

                                       15
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 10 - INCOME TAXES - CONTINUED

      In the quarter ended June 30, 2006, the income tax benefit relating to the
Company's U.S. and non-U.S. subsidiary losses has been offset by a valuation
allowance based upon an assessment by management of the Company's ability to
realize such benefits. In assessing the Company's ability to realize its
deferred tax assets, management considered the scheduled reversal of deferred
tax liabilities, projected future taxable income and tax and other strategic
planning initiatives. Future reversal of the valuation allowance will be
achieved either when the tax benefit is realized or when it has been determined
that it is more likely than not that the benefit will be realized through offset
against future taxable income.

NOTE 11 - COMPREHENSIVE INCOME

      Comprehensive income represents net income and other revenues, expenses,
gains and losses that are excluded from net income and recognized directly as a
component of stockholder's equity. Comprehensive income and its components
comprise the following:
<TABLE>
<CAPTION>
                                                       FOR THE THREE MONTHS                 FOR THE NINE MONTHS
                                                               ENDED                              ENDED
                                                    JUNE 30,           JUNE 30,          JUNE 30,          JUNE 30,
                                                      2006               2005             2006              2005
                                                  ------------      ------------      ------------      ------------
                                                  IN THOUSANDS      IN THOUSANDS      IN THOUSANDS      IN THOUSANDS
<S>                                               <C>               <C>               <C>               <C>
Total net (loss) income ......................       $(2,776)          $    65           $(6,582)          $ 2,611

Other comprehensive income (loss).............

   Additional minimum pension liability.... ..        (2,842)            2,477            (1,993)              548

   Foreign currency translation adjustments...         3,823            (4,168)            2,277              (891)
   Unrealized gains on derivative
    instruments...............................           (31)              (12)                7                45

                                                     -------           -------           -------           -------
Total comprehensive  (loss) income............       $(1,826)          $(1,638)          $(6,291)          $ 2,313
                                                     =======           =======           =======           =======
</TABLE>

NOTE 12 - SEGMENT DATA

      The Company's principal operations relate to the manufacture and
distribution of a broad line of hand tools, lawn and garden tools, industrial
magnets and metrology tools. These operations are conducted through business
divisions located primarily in the United Kingdom, France, the Netherlands, USA
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. Those
transactions relating to the Company's distribution entities in the Netherlands
and China have been included in the Metrology division disclosures. The
summaries also provide an analysis of the accounts and balances between
continuing and discontinued operations.

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

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

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

                                       16
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)
<TABLE>
<CAPTION>
                                         SALES              LONG-LIVED ASSETS (A)            SALES           LONG-LIVED ASSETS (A)
                               -------------------------  ------------------------  ---------------------  -----------------------
                                  THREE MONTHS ENDED         THREE MONTHS ENDED       NINE MONTHS ENDED        NINE MONTHS ENDED
                                 JUNE 30,     JUNE 30,      JUNE 30,     JUNE 30,    JUNE 30,    JUNE 30,    JUNE 30,     JUNE 30,
                                   2006         2005          2006        2005         2006        2005       2006         2005
                               ----------  -----------    ----------   ----------   ---------   ---------  ----------    ---------
<S>                            <C>         <C>            <C>          <C>          <C>         <C>        <C>           <C>
  Hand & garden tools ......   $   17,580  $    18,989    $    4,886   $    6,022   $  54,632   $  58,304  $    4,886    $   6,022
  Metrology tools ..........        4,103        4,585         2,967        2,383      12,728      12,985       2,967        2,383
  Magnetic products ........        2,964        2,756           159          625       8,375       8,349         159          625
  Corporate ................            -            -         9,662        9,442           -           -       9,662        9,442
                               ----------  -----------    ----------   ----------   ---------   ---------  ----------    ---------
   Total ...................   $   24,647  $    26,330    $   17,674   $   18,472   $  75,735   $  79,638  $   17,674    $  18,472
                               ==========  ===========    ==========   ==========   =========   =========  ==========    =========
Attributable to:
   Continuing operations ...   $   24,647  $    25,954    $   17,674   $   18,472   $  75,145   $  78,412  $   17,674    $  18,472
   Discontinued operations..   $        -  $       376    $        -   $        -   $     590   $   1,226  $        -    $       -
                               ----------  -----------    ----------   ----------   ---------   ---------  ----------    ---------
                               $   24,647  $    26,330    $   17,674   $   18,472   $  75,735   $  79,638  $   17,674    $  18,472
                               ==========  ===========    ==========   ==========   =========   =========  ==========    =========

<CAPTION>
                                     DEPRECIATION            CAPITAL EXPENDITURE         DEPRECIATION        CAPITAL EXPENDITURE
                               -------------------------  -----------------------   ---------------------  -----------------------
                                  THREE MONTHS ENDED         THREE MONTHS ENDED       NINE MONTHS ENDED        NINE MONTHS ENDED
                                 JUNE 30,     JUNE 30,      JUNE 30,     JUNE 30,    JUNE 30,    JUNE 30,    JUNE 30,    JUNE 30,
                                   2006         2005          2006        2005        2006        2005        2006        2005
                               ----------  -----------    ----------   ----------   ---------   ---------  ----------    ---------
<S>                            <C>         <C>            <C>          <C>          <C>         <C>        <C>           <C>
  Hand & garden tools ......   $      478  $       467    $       83   $      247   $   1,215   $   1,412  $      621    $     819
  Metrology tools ..........           77          110            46           53         173         395         583          119
  Magnetic products ........           86           69             2            -         236         241           9            4
  Corporate ................           50           56             -            -         151         177           -            -
                               ----------  -----------    ----------   ----------   ---------   ---------  ----------    ---------
   Total ...................   $      691  $       702    $      131   $      300   $   1,775   $   2,225  $    1,213    $     942
                               ==========  ===========    ==========   ==========   =========   =========  ==========    =========
Attributable to:
   Continuing operations ...   $      691  $       702    $      131   $      300   $   1,775   $   2,225  $    1,213    $    942
                               ==========  ===========    ==========   ==========   =========   =========  ==========    =========

<CAPTION>
                                OPERATING (LOSS) INCOME       NET INTEREST            OPERATING INCOME            NET INTEREST
                               -----------------------   ------------------------   ---------------------  -----------------------
                                  THREE MONTHS ENDED        THREE MONTHS ENDED         NINE MONTHS ENDED      NINE MONTHS ENDED
                                 JUNE 30,     JUNE 30,    JUNE 30,    JUNE 30,       JUNE 30,    JUNE 30,    JUNE 30,    JUNE 30,
                                   2006         2005        2006        2005           2006        2005        2006       2005
                               ----------  -----------    ----------   ----------   ---------   ---------  ----------    ---------
<S>                            <C>         <C>            <C>          <C>          <C>         <C>        <C>           <C>
  Hand & garden tools ......   $   (1,717) $         5    $      (73)  $      (59)  $  (4,237)  $     158  $     (109)   $    (162)
  Metrology tools ..........          343          187            (2)          (2)        941         790         (15)          (9)
  Magnetic products ........          192          346            (1)          (3)        387         887          (4)          (8)
  Corporate ................         (310)         (46)           38           73      (1,561)       (890)        103          147
                               ----------  -----------    ----------   ----------   ---------   ---------  ----------    ---------
   Total ...................   $   (1,492)     $ 492      $      (38)  $        9   $  (4,470)  $     945  $      (25)   $     (32)
                               ==========  ===========    ==========   ==========   =========   =========  ==========    =========
Attributable to:
   Continuing operations ...   $   (1,481) $       534    $      (38)  $        9   $  (4,381)  $   1,359  $      (25)   $     (32)
   Discontinued operations..   $      (11) $       (42)   $        -   $        -   $     (89)  $    (414) $        -    $       -
                               ----------  -----------    ----------   ----------   ---------   ---------- ----------    ---------
                               $   (1,492) $       492    $      (38)  $        9   $  (4,470)  $     945  $      (25)   $     (32)
                               ==========  ==========     ==========   ==========   =========   ========== ==========    =========
</TABLE>

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

                                       17
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

The following table presents certain data by geographic areas (in thousands):
<TABLE>
<CAPTION>
                                        SALES (A)        LONG-LIVED ASSETS (B)         SALES (A)         LONG-LIVED ASSETS (B)
                                 ---------------------  ----------------------   ---------------------   ---------------------
                                    THREE MONTHS ENDED   THREE MONTHS ENDED        NINE MONTHS ENDED      NINE MONTHS ENDED
                                  JUNE 30   JUNE 30      JUNE 30    JUNE 30      JUNE 30      JUNE 30    JUNE 30     JUNE 30
                                   2006       2005        2006        2005         2006        2005       2006        2005
                                 --------   ----------  --------    ----------   --------     --------   --------    ---------
<S>                              <C>        <C>         <C>         <C>          <C>          <C>        <C>         <C>
  United Kingdom...............  $ 10,893   $ 11,851    $ 15,800    $ 16,684     $ 33,402     $ 34,472   $ 15,800    $ 16,684
  Europe.......................     5,668      5,355       1,171       1,169       16,923       17,115      1,171       1,169
  Australasia..................     3,366      3,591         389         619       10,433       10,993        389         619
  North America ...............     1,836      2,097           -           -        5,360        5,616          -           -
  China and Rest of World......     2,884      3,436         314           -        9,617       11,442        314           -
                                 --------   --------    --------    --------     --------     --------   --------    --------
     Total.....................  $ 24,647   $ 26,330    $ 17,674    $ 18,472     $ 75,735     $ 79,638   $ 17,674    $ 18,472
                                 ========   ========    ========    ========     ========     ========   ========    ========
Attributable to:
     Continuing operations.....  $ 24,647   $ 25,954    $ 17,674    $ 18,472     $ 75,145     $ 78,412   $ 17,674    $ 18,472
     Discontinued operations...  $      -   $    376    $      -    $      -     $    590     $  1,226   $      -    $      -
                                 --------   --------    --------    --------     --------     --------   --------    --------
                                 $ 24,647   $ 26,330    $ 17,674    $ 18,472     $ 75,735     $ 79,638   $ 17,674    $ 18,472
                                 ========   ========    ========    ========     ========     ========   ========    ========

<CAPTION>
                                     DEPRECIATION        CAPITAL EXPENDITURE        DEPRECIATION          CAPITAL EXPENDITURE
                                 ---------------------  ----------------------   ---------------------   ---------------------
                                    THREE MONTHS ENDED   THREE MONTHS ENDED        NINE MONTHS ENDED      NINE MONTHS ENDED
                                  JUNE 30   JUNE 30      JUNE 30    JUNE 30      JUNE 30      JUNE 30    JUNE 30     JUNE 30
                                   2006       2005        2006        2005         2006        2005       2006        2005
                                 --------   ----------  --------    ----------   --------     --------   --------    ---------
<S>                              <C>        <C>         <C>         <C>          <C>          <C>        <C>         <C>
  United Kingdom...............  $    590   $    602    $     89    $    239     $  1,495     $  1,937   $    938    $    607
  Europe.......................        37         33          13          35          110           89         47          75
  Australasia..................        50         67           9          26          156          199         29         260
  China and Rest of World......        14          -          20           -           14            -        199           -
                                 --------   --------    --------    --------     --------     --------   --------    --------
     Total.....................  $    691   $    702    $    131    $    300     $  1,775     $  2,225   $  1,213    $    942
                                 ========   ========    ========    ========     ========     ========   ========    ========
Attributable to:
     Continuing operations.....  $    691   $    702    $    131    $    300     $  1,775     $  2,225   $  1,213    $    942
                                 ========   ========    ========    ========     ========     ========   ========    ========

<CAPTION>
                                   OPERATING (LOSS)
                                      INCOME                NET INTEREST          OPERATING INCOME          NET INTEREST
                                 ---------------------  ----------------------   ---------------------   ---------------------
                                    THREE MONTHS ENDED   THREE MONTHS ENDED        NINE MONTHS ENDED      NINE MONTHS ENDED
                                  JUNE 30   JUNE 30      JUNE 30    JUNE 30      JUNE 30      JUNE 30    JUNE 30     JUNE 30
                                   2006       2005        2006        2005         2006        2005       2006         2005
                                 --------   ----------  --------    ----------   --------     --------   --------    ---------
<S>                              <C>        <C>         <C>         <C>          <C>          <C>        <C>         <C>
  United Kingdom...............  $ (1,250)  $    565    $    (40)   $     23     $ (4,199)    $  1,071   $    (72)   $     40
  Europe.......................        41         95         (45)        (42)         401          450        (87)       (144)
  Australasia..................       (82)       (25)         12           7          (97)          92         37          36
  North America ...............      (155)      (143)         35          21         (405)        (668)        97          36
  China and Rest of World .....       (46)         -           -           -         (170)
                                 --------   --------    --------    --------     --------     --------   --------    --------
     Total.....................  $ (1,492)  $    492    $    (38)   $      9     $ (4,470)    $    945   $    (25)   $    (32)
                                 ========   ========    ========    ========     ========     ========   ========    ========
Attributable to:
     Continuing operations.....  $ (1,481)  $    534    $    (38)   $      9     $ (4,381)    $  1,359   $    (25)   $    (32)
     Discontinued operations...     $ (11)  $    (42)   $      -    $      -        $ (89)    $   (414)  $      -    $      -
                                 --------   --------    --------    --------     --------     --------   --------    --------
                                 $ (1,492)  $    492    $    (38)   $      9     $ (4,470)    $    945   $    (25)   $    (32)
                                 ========   ========    ========    ========     ========     ========   ========    ========
</TABLE>

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

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

                                       18
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 13 - LEGAL PROCEEDINGS

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

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

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

      Following extensive settlement negotiations with both the SEC and Mr.
Crowley, the Company reached a resolution with both parties. On September 28,
2004, Mr. Crowley signed a Consent to Final Judgment of Permanent Judgment with
the SEC, without admitting or denying the allegations included in the complaint,
which required a disgorgement and payment of civil penalties by Mr. Crowley
consisting of a disgorgement payment of $3,765,777 plus prejudgment interest in
the amount of $304,014, as well as payment of a civil penalty in the amount of
$2,000,000. In May 2005, the SEC applied to the Court for the appointment of an
administrator for the distribution of these funds to the victims of Mr.
Crowley's actions, pursuant to the Fair Funds provisions of the Sarbanes-Oxley
Act of 2002.

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

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

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

                                       19
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 13 - LEGAL PROCEEDINGS - CONTINUED

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

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

      The Court denied the motion of Spear & Jackson's Monitor to abate the
litigation for a six-month period pending the administration of the SEC's
restitution fund. The Court also denied the Plaintiff's Motion for Clarification
and established a new cut-off for discovery until December 19, 2005. The case
was initially set on the Court's two-week calendar beginning March 6, 2006 but
the trial date has since been reset for October 2006.

      On July 7, 2006 the US District Court for the Southern District of Florida
issued a Memorandum of Understanding ("MOU") which confirmed that the plaintiffs
and defendants in the class action had reached an agreement in principle for the
settlement of this litigation, subject to Court approval. The MOU outlines the
general terms of the settlement ("the Settlement") and is intended to be
supplemented by a Stipulation and Agreement of Settlement that is to be issued
at a later date.

      In settlement of the class action the defendants will pay a sum of
$650,000 which is to be deposited by S&J into a Qualified Settlement Fund within
thirty days of the date of the MOU.

      Following the execution of the MOU, the lead plaintiffs will commence
discovery procedures to confirm the fairness and reasonableness of the
Settlement. The plaintiffs retain the right to terminate the Settlement if such
discovery reveals that the Settlement is not fair, reasonable and adequate.
Subject to these discovery procedures confirming the adequacy of the Settlement,
all parties have agreed to use their best efforts to finalize an appropriate
Stipulation of Settlement and any other relevant documentation necessary to
obtain approval by the Court of the settlement of this action.

      If the Settlement outlined in the MOU is not approved by the Court or, if
subsequently terminated, the terms of the above Settlement will be without
prejudice, any settlement amounts already paid will be returned and parties will
revert to their litigation positions immediately prior to the MOU.

      On September 6, 2005, the Company was served with a Shareholder Derivative
Complaint filed on June 1, 2004 in the Circuit Court for Palm Beach County,
Florida (Case No. CA005068). The suit names, in addition to the Company, which
is a nominal defendant, present and former directors and the Company's prior
independent auditors, Sherb & Co. LLP., as defendants. The suit contains
essentially the same factual allegations as the SEC suit, which was filed in
April 2004 in the U. S. District Court for the Southern District of Florida, and
the series of class actions claims initiated in the U.S. District Court, but
alleges state law claims of breaches of fiduciary duty, abuse of control, gross
mismanagement, waste of corporate assets, unjust enrichment and lack of
reasonable care by various or all the defendants. The Company will evaluate the
Complaint and file its response at the appropriate time. In addition, the
Company is currently in settlement discussions in an effort to resolve the
matter.

                                       20
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 13 - LEGAL PROCEEDINGS - CONTINUED

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

      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.

NOTE 14 - SUBSEQUENT EVENTS

      On July 27, 2006, Spear & Jackson, Inc.'s UK subsidiary, Spear & Jackson
Garden Products Limited, completed the sale of the remaining element of its
industrial site at St. Paul's Road, Wednesbury, England, for a price of
(pound)2.6 million sterling (approximately $4.7 million), excluding disposal
costs. On the same date Spear & Jackson Garden Products Limited entered into a
lease agreement with the new owners of the Wednesbury property to rent, for a
nominal peppercorn value, the premises until November 30, 2006, by which date
the company is now required to vacate the site. The gain arising on the sale of
the premises will amount to approximately $3.5 million.

      On July 28, 2006, the company's majority 61.8% shareholder, Jacuzzi
Brands, Inc, completed the sale of its holding of 3,543,281 shares of the common
stock of Spear & Jackson, Inc. to United Pacific Industries Limited, a Bermuda
corporation.

                                       21
<PAGE>

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

General
-------

The following information should be read in conjunction with the consolidated
financial statements and notes 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, Spear & Jackson, Inc. ("Spear & Jackson", "the Company", "we") has
achieved growth by the development of new products, strategic acquisitions and
expansion of the Company's sales organization. There can be no assurance that
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:

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

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

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

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

      o  the timing of orders and shipments;

      o  emergence of new competitors or consolidation of existing competitors;

      o  continued absence of consolidation among key customers;

      o  Industry demand fluctuations.

                                       22
<PAGE>

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

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

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

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

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

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

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

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

                                       23
<PAGE>

RISKS CONCERNING THE MAINTAINING AND IMPROVEMENT OF CURRENT PRODUCT MIX:

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

RISKS RELATING TO INCREASING PRICE, PRODUCTS AND SERVICES COMPETITION:

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

RISKS IN CONNECTION WITH CHANGES IN COMPANY INVENTORY LEVELS:

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

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

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

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

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

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

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

      o  fluctuating exchange rates;

                                       24
<PAGE>

      o  tariffs and other barriers;

      o  difficulties in staffing and managing foreign sales operations;

      o  import and export restrictions;

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

      o  potentially adverse tax consequences;

      o  potential hostilities and changes in diplomatic and trade
         relationships.

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

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

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

RISKS IN CONNECTION WITH ATTRACTING AND RETAINING QUALIFIED KEY EMPLOYEES:

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

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

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

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

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

                                       25
<PAGE>

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

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

RISKS RELATED TO RAW MATERIAL AND ENERGY COSTS:

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

Gas, electricity and other utility prices have become increasingly volatile in
the UK, where we have a significant manufacturing presence. This situation has
been exacerbated by price increases for certain of our raw materials,
particularly steel, cobalt and plastics. We do not generally engage in commodity
hedging transactions for raw materials.

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

RISKS ASSOCIATED WITH FOREIGN SUPPLIERS:

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

      o  increases in transportation costs;

      o  new or increased import duties;

      o  transportation delays;

      o  foreign work stoppages;

      o  potential war, terrorism and political unrest;

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

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

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

                                       26
<PAGE>

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

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

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

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

RISKS ASSOCIATED WITH MAJORITY STOCKHOLDER

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

Additionally, based on its majority ownership, UPI is in position to complete a
merger or other transaction involving the Company, subject to compliance with
applicable regulatory requirements, which could result in the elimination of
minority stockholders. UPI paid Jacuzzi $1.40 per share for its shares of common
stock of the Company. UPI has agreed that for a one-year period following the
closing of its acquisition of the majority interest in the Company, if UPI or
any of its affiliates acquire any additional shares of the Company, the purchase
price per share will not be less than $1.40. However, UPI is under no obligation
to acquire any additional shares of the Company and the Company has no
knowledge, of UPI's intention to in this regard.

RISK FACTORS THAT MAY NEGATIVELY IMPACT OUR STOCK PRICE:

Our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors particular to the Company, its industry and
the markets in which it operates. Not all of these factors are in our control.
These factors may include: sales falling below anticipated levels because of the
timing of orders or weakening demand; adverse sales mixes; regional economic and
governmental conditions; raw material price volatility; and

                                       27
<PAGE>

benefits from restructuring initiatives falling below forecast. Such factors may
therefore cause our operating results for future periods to be below the
expectations of management and the Company's advisers and this may cause a
decline in the price of our common stock.

There has been no material change in our risk factors from those described on
pages 12 to 16 in our Form 10-K for the fiscal year ended September 30, 2005
except as in respect of the recent change in control of the Company and the
addition of new directors . 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. currently conducts its business operations through its
wholly owned subsidiaries, Spear & Jackson plc and Bowers Group plc, and, until
September 30, 2003, Mega Tools Ltd and Mega Tools USA, Inc. A brief summary of
our corporate organizational history is as follows:

(a) 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.

(b) 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.

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

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

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

The former stockholders of Mega Tools Ltd acquired a proportionate interest in
Megapro Tools, Inc. upon completion of the acquisition of Mega Tools Ltd and
Mega Tools USA. Mr. Neil Morgan, husband of Mrs. Maria Morgan, was sole promoter
upon inception. Other than the issue of stock to Mrs. Maria Morgan

                                       28
<PAGE>

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

(d) 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 Tools, Inc.) executed a Stock Purchase Agreement to
acquire all of the issued and outstanding shares of Spear & Jackson plc and its
affiliate, Bowers Group plc, owned by USI Mayfair Limited. The purchase price
comprised 3,543,281 shares of common stock of Megapro and promissory notes in
the principal amount of (pound)150,000 pounds sterling ($232,860) ("the
Transaction"). The Transaction closed on September 6, 2002.

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

In connection with the closing of the Transaction, certain principal
shareholders of Megapro, including Envision Worldwide Products, Ltd, Neil Morgan
and Maria Morgan contributed an aggregate of 4,742,820 shares of their common
stock of Megapro to the capital of Megapro, and agreed to a two year lock-up
with respect to their remaining 192,480 shares of common stock of Megapro. The
stockholders did not receive any consideration in connection with their
contribution of shares. As a result of the closing of the Transaction and the
Private Placement, and upon the effectuation of all post closing matters,
Megapro had 12,011,122 shares of common stock outstanding, 6,005,561 shares of
which were beneficially owned by PNC. The shares issued to PNC were subject to
the terms of a Stockholder's Agreement and a Registration Rights Agreement. In
the Stockholders' Agreement dated as of September 6, 2002 by and among Megapro
Tools, Inc., USI Mayfair Limited, PNC and Crowley (the "Stockholders") it was
agreed that, other than certain "unrestricted transfers", the parties involved
would not transfer any Company securities for the two years beginning on
September 6, 2002. On September 6, 2002, under an unrestricted transfer relating
to the transfer of stock from a permitted affiliate, USI Mayfair Limited
transferred all of the Company securities owned by it, along with all of its
rights under the Stockholders' Agreement, to USI Global Corp. Since the date of
the Transaction, the Company has not issued any shares of its stock except under
a limited number of options and has not engaged in any financing using its
stock.

(e) Change of Name to Spear & Jackson, Inc.

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

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

                                       29
<PAGE>

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.

(f) Acquisition of Majority Interest by Jacuzzi Brands, Inc.

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

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

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

Following extensive settlement negotiations with both the SEC and Mr. Crowley,
the Company reached a resolution with both parties. On September 28, 2004 Mr.
Crowley signed a Consent to Final Judgment of Permanent Judgment with the SEC,
without admitting or denying the allegations included in the complaint, which
required a disgorgement and payment of civil penalties by Mr. Crowley consisting
of a disgorgement payment of $3,765,777 plus prejudgment interest in the amount
of $304,014, as well as payment of a civil penalty in the amount of $2,000,000.
In May 2005, the SEC applied to the Court for the appointment of an
administrator for the distribution of these funds to the victims of Mr.
Crowley's actions, pursuant to the Fair Funds provisions of the Sarbanes-Oxley
Act of 2002.

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

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

The Stock Purchase Agreement was effected on April 8, 2005, following formal
approval by the SEC on February 10, 2005 and, on February 15, 2005 by the U.S.
District Court for the Southern District of Florida of the settlement of the
litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc., International
Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No:
04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further

                                       30
<PAGE>

conditioned on, among other things, the disgorgement and civil penalty funds
being paid by Mr. Crowley. These monies have now been received and are being
administered for the benefit of the victims of the alleged fraud by a court
appointed administrator, pursuant to the Fair Funds provisions of the
Sarbanes-Oxley Act of 2002.

With the return of the Spear & Jackson shares to the Company by PNC, the
stockholders of the Company have had their percentage stock interest increase
correspondingly. Jacuzzi Brands, Inc. ("Jacuzzi"), which is a beneficial owner
of 3,543,281 shares of common stock, 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 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 then held a
majority capital stock interest in the company, and the continuation of the
letter agreement was no longer considered necessary for the fulfillment of its
original intent. Jacuzzi also provided a general release to the Company and its
affiliates excepting Mr. Crowley and his spouse.

(g) Disposal of Majority Interest by Jacuzzi to United Pacific Industries
Limited

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

The representations, warranties and covenants made by Jacuzzi and UPI are
typical for this type of transaction, and include a covenant that restricts
Jacuzzi from soliciting or negotiating with a third party between the signing
date of the Stock Purchase Agreement and the closing date of the transaction.
Jacuzzi has also agreed that, in connection with the closing of the transaction,
it will, among other things, cause UPI's designees and one designee of Jacuzzi
to be elected to the Board of Directors of Spear & Jackson, Inc. and will use
commercially reasonable best efforts so that such UPI designees are in
sufficient numbers to give UPI a majority of the Board of Directors of the Spear
&Jackson, Inc. UPI has also agreed that neither it nor any of its affiliates
will purchase any additional Common Stock during the period from the signing
date of the Stock Purchase Agreement through one year following the closing at a
price less than $1.40 per share.

The purchase of the Shares by UPI contemplated by the Stock Purchase Agreement
is subject to the satisfaction of a number of closing conditions, including
approval by UPI's shareholders and the United Kingdom Pensions Regulator, and
receipt of certain other regulatory approvals as well as other customary closing
conditions. A copy of the Stock Purchase Agreement is on file with the SEC in
connection with the filing by Jacuzzi of a Schedule 13D/A on March 27, 2006.

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

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

                                       31
<PAGE>

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

Closing occurred on July 28, 2006.

On June 22, 2006, Jacuzzi and UPI filed a preliminary Form 14C with the SEC
announcing notice of change in control and of a majority of directors pursuant
to section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1
thereunder. The 14C indicated that three new directors would be designated by
and elected to the Board of directors by UPI, to serve until the Company's next
annual meeting. The 14C became effective on August 7, 2006, and the three new
directors will replace the incumbent directors on about August 27, 2006. In the
interim, the Board by resolution, appointed the three new directors--Lewis Hon
Ching Ho, Andy Yan Wai Poon and Maria Yuen Man Lam--to the Board effective
August 9, 2000.

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

The Board of Directors elected the new Directors as a means to facilitate the
transition from the prior Board of Directors to the new Board of Directors. At
the present time, Messrs. Harrington, Fletcher and Dinerman will continue to
serve as Directors together with the newly elected Directors. No new officers
have been elected as yet by the Company. Soneet Kapila will continue to serve as
Corporate Monitor for the Company.

Brian C. Beazer, the Chairman of UPI, is a director of Jacuzzi and holds
approximately 24.56% of the shares of UPI. David H. Clarke, the Chairman and
Chief Executive Officer of Jacuzzi, is a director of UPI and holds approximately
22.88% of the shares of UPI. Mr. Clarke also holds approximately 28,350 shares
of common stock of Spear & Jackson, Inc., representing approximately 0.49% of
the shares of Spear & Jackson, Inc. but the shares of Spear & Jackson, Inc.
owned by Mr. Clarke are not being purchased at the time of the sale of the
Shares by the Seller to UPI.

FURTHER CHANGES TO CORPORATE ORGANIZATION

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

                                       32
<PAGE>

EXIT FROM SCREWDRIVER AND THREAD GAUGE MEASURING OPERATIONS

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

The disposition of the trade and assets of the screwdriver division was
undertaken by Neil Morgan who was then heading up the division. The Company
believed that no specific authorization was afforded to Mr. Morgan to undertake
that disposition. The disposition proceeds were in the form of $284,000 of loan
notes and other receivables and the discharge of a loan of $100,000 owed by the
Company to the managing director of the screwdriver division. Full provision was
made in the Company's financial statements against the recoverability of these
disposition proceeds. It has now been agreed with Megapro that it will pay
Canadian $ 53,900 (approximately $41,000) in settlement of those debts and this
is being paid in monthly installments of Canadian $5,000 (approximately
$3,800).$27,000 was received in the year ended September 30, 2005 and a further
$12,000 has been received in the nine months to June 30, 2006.

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

SUMMARY OF PRINCIPAL OPERATIONS

Spear & Jackson, Inc., through its principal operating entities, as disclosed in
footnote 1 to the condensed consolidated 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;
   *  CV - precision measuring instruments;
   *  Robert Sorby - wood turning tools;
   *  Moore & Wright - precision tools;
   *  Eclipse - blades and magnetic equipment;
   *  Elliot Lucas - pincers and pliers; and
   *  Tyzack - builders' tools

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

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 and bought in components
from Far Eastern and Indian suppliers. Neill Tools product offering now includes
a full range of hand power tools and, from January 1, 2005, Spear & Jackson
Garden Tools' range has been supplemented by a portfolio of electric powered
garden tools.

2) ECLIPSE MAGNETICS' key products are permanent magnets (cast alloy), magnetic
tools, machine tools, magnetic chucks and turnkey magnetic systems. Products
range from very simple low-cost items to technically complex high value added
systems. In addition, Eclipse Magnetics engages in the trading of other

                                       33
<PAGE>

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 which manufactures 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 that measure the diameter of
machined components. In addition to the core range of bore gauges, the Company
also manufactures universal gauges and hardness testing equipment.

In December 2004, the division secured the European distributorship rights for a
range of premier portable hardness testers sourced from China. This distribution
operation is operated through a specifically formed Dutch subsidiary company, CV
Instruments Europe BV, based in Maastricht, Holland. An allied manufacturing,
quality control and distribution centre, Bowers Eclipse Shanghai Equipment
Limited, was established in Shanghai, China, during the year ended September 30,
2006.

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

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

The Company's continuing operations can be analyzed into three business
segments, hand and garden tools, magnetic products and metrology tools. For
further detailed financial information by reportable segment, including sales,
profit and loss, and total asset information, see Note 12 in the "Notes to the
condensed consolidated financial statements" included within this Quarterly
Report on Form 10-Q. Also included within Note 12 is a detailed geographical
analysis including sales, profit and loss, and total asset information.

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

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

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

a) Neill Tools                               Hand tools
   Atlas Site, Sheffield

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

c) Robert Sorby                              Wood turning tools
   Sheffield

d) Eclipse Magnetics                         Magnetic products
   Vulcan Road, Sheffield

e) Bowers Metrology                          Precision measuring tools
   Bradford

B  France

a) Spear & Jackson                           Assembly of garden tools
   France

                                       34
<PAGE>

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

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

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

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

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

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

(a) Maintaining and heightening the profile of our existing quality brand names.

    Such activity will comprise trade, general and TV advertising, extensive
    promotional work at trade shows, the development of corporate web sites,
    etc.

(b) Continuous product improvement and innovation.

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

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

(e) Improving manufacturing efficiencies and continually reviewing other cost
    saving measures.

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

The Company's policy is to support its core product offering with a pipeline of
new products and range extensions. For example, in the current quarter, Bowers
Metrology launched the new "Snapmatic" range of high precision snap gauges at
the biennial MACH tradeshow in May 2006. The first major shipments are forecast
in quarter four of the current financial year.

                                       35
<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 of Financial Condition and Results of
Operations in the Company's 10-K filing for the year ended September 30, 2005
included a detailed discussion which addressed our most critical accounting
policies. The quarterly financial statements for the period ended June 30, 2006,
attached hereto, should therefore be read in conjunction with that discussion.

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

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

Since September 30, 2005 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 periods last year, the results for the quarter
and nine months ended June 30, 2006 show a decrease in both net sales and gross
profit . Allied to this, increases in both selling, general and administrative
expenses and charges in respect of unusual or infrequent items have resulted in
a net loss for the periods under review.

Sales of $24.65 million for the quarter ended June 30, 2006 show a decrease of
$1.30 million (5.04%) when compared to sales of $25.95 million achieved in the
comparable period last year. This decrease is primarily due to lower sales
volumes, adverse currency exchange fluctuations, and increased sales rebates.
Amongst the principal factors behind the decreased volumes were the
disappointing UK and overseas sales in our Neill Tools and Robert Sorby
divisions. For the nine months ended June 30, 2006, sales of $75.14 million were
$3.27 million (4.14%) lower than sales of $78.41 million recorded in the nine
months ended June 30, 2005, with the negative impact of adverse currency
exchange fluctuations being only partially mitigated by sales volume increases.

Gross profit was $7.88 million for the quarter ended June 30, 2006 compared to
$8.42 million for the comparative period last year, a reduction of 6.41%. For
the nine months ended June 30, 2006 gross profit was $23.40 million (2005:
$25.79 million), a decrease of 9.27%.

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
utility costs. Margins were further diluted by the change in sales mix in the
hand and garden division where higher sales of factored garden power tools were
made at the expense of better margins on industrial hand tool product lines.

                                       36
<PAGE>

Selling, general and administrative expenses have increased by $1.47 million
(18.65%) to $9.36 million in the three months ended June 30, 2006. In the nine
month period under review, costs have increased by $3.35 million (13.72%)from
$24.43 million in 2005 to $27.78 million in 2006. This is primarily due to
increases in the non-cash FAS 87 pension charge of $1.12 million and $3.15
million, respectively, for the three and nine month periods ended June 30, 2006.
Additionally, inflationary increases and increased selling and distribution
expenses have further caused these costs to rise. Such increases have been
partially offset, however, by the beneficial movement in the US$/Sterling cross
rate, reduced head office legal costs and the effects of local reorganization
and cost-cutting measures.

While cost reduction programs will continue to be implemented to control the
level of overhead expenses, administrative costs for the full year will show a
significant increase over the prior year largely as a result of the $4.4 million
increase in the FAS 87 pension charge. Additionally, while settlement of the
Company's SEC litigation suit has resulted in decreases in administrative costs,
head office legal expenses associated with the Class and Derivative Action
litigation and the role of the Corporate Monitor will continue to be incurred
until a resolution of those legal issues.

Costs in respect of unusual and infrequent items of $1.24 million have been
incurred in the quarter ended June 30, 2006 (2005: $0.27 million) and $2.47
million in the nine month period ended on that date (2005: credit of $2.23
million). In January 2006 the Company announced the closure of the remaining
element of its manufacturing site at Wednesbury, England. A sale of this site
was concluded on July 27, 2006 at a price of (pound)2.6 million (approximately
$4.5 million). Additionally, the Company announced in the current quarter that
certain manufacturing operations carried out at its Atlas site in Sheffield,
England, will also cease. The site closure and Atlas reorganization form part of
the Company's UK manufacturing restructuring program that has been initiated to
regenerate and modernize key areas of the hand and garden tools business. Costs
provided in respect of the site closure and reorganization for the quarter and
nine month period ended June 30, 2006 were $0.59 million and $1.82 million,
respectively. The charge for the nine months to June 30, 2006 is stated net of a
credit of $0.33 million representing the release of certain provisions
associated with a reorganization of the Wednesbury site that was initiated in
March 2005. As a result of the closure of the site, these provisions are no
longer required and they have accordingly been released.

As further discussed, below, in Part II, Item 1, "Legal Proceedings", on July 7,
2006, Spear & Jackson, Inc. entered into a Memorandum of Understanding whereby
it agreed to pay $0.65 million in settlement of the class action litigation,
referred to in that note, in which it is a defendant. Provision has accordingly
been made in the financial statements for the period ended June 30, 2006 for the
payment of that sum.

fThe results for the nine months ended June 30, 2005 benefited from the gain of
$2.50 million arising on the disposal of part of the company's manufacturing
site at Wednesbury, England. There is no comparable item in fiscal 2006.

As a result of lower margins, higher overhead costs, manufacturing
reorganization provisions, property disposal gains in 2005 that were not
repeated in 2006 and litigation settlement costs, the Company's result from
continuing activities before taxation has moved from an income of $0.31 million
in the quarter to June 30, 2005 to a $2.72 million loss in the quarter to June
30, 2006. Likewise, a $6.77 million loss incurred in the nine months to June 30,
2006 compares to a $3.68 million profit in the same period last year.

RESULTS OF OPERATIONS

The following discussion provides a review of the results for the three and nine
months ended June 30, 2006 versus the three and nine months ended June 30, 2005.

                                       37
<PAGE>

Summary Profit and Loss Account Data:

                                              Three Months        Nine Months
                                              ended June 30      ended June 30
                                            ----------------    ---------------
                                              2006      2005      2006    2005
                                               $m        $m        $m      $m
                                            -------   ------    ------   ------
Net Sales .............................      24.65     25.95     75.14    78.41
Cost of goods sold ....................     (16.77)   (17.53)   (51.74)  (52.62)

                                             -----     -----     -----    -----
Gross profit ..........................       7.88      8.42     23.40    25.79
Selling, general and
  administrative expenses .............      (9.36)    (7.89)   (27.78)  (24.43)

                                             -----     -----     -----    -----
Operating (loss)income ................      (1.48)     0.53     (4.38)    1.36
Other income ..........................       0.00      0.05      0.08     0.09

                                             -----     -----     -----    -----
(Loss)income from continuing operations
 before unusual and infrequent events..      (1.48)     0.58     (4.30)    1.45
Gain on sale of land and
  buildings ...........................          -         -         -     2.50
Manufacturing reorganization costs ....      (0.59)    (0.27)    (1.82)   (0.27)
Settlement of class litigation ........      (0.65)        -     (0.65)       -

                                             -----     -----     -----    -----
(Loss)income from continuing
operations before income taxes ........      (2.72)     0.31     (6.77)    3.68

Income tax (provision) benefit ........      (0.04)    (0.20)     0.28    (0.65)
                                             -----     -----     -----    -----

Net (loss)income from continuing
   operations .........................      (2.76)     0.11     (6.49)    3.03
                                             -----     -----     -----    -----

Net loss from discontinued
Operations ............................      (0.01)    (0.04)    (0.09)   (0.42)
                                             -----     -----     -----    -----

Net (loss)income ......................      (2.77)     0.07     (6.58)    2.61
                                             =====     =====     =====    =====

Effective tax rate ....................      (1.50%)   74.07%    (4.08%)  20.00
                                             =====     =====     =====    =====

Comparisons as a % of net sales:

Gross profit ..........................      31.96%    32.45%    31.14%   32.89%
Selling, general and
  Administration expenses .............      37.97%    30.39%    36.97%   31.16%
Operating (loss) income ...............      (6.01%)    2.06%    (5.83%)   1.73%
(Loss)income from continuing
  operations before income taxes ......     (11.05%)    1.21%    (9.00%)   4.69%
Net (loss)income ......................     (11.26%)    0.25%    (8.76%)   3.33%

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.

NET SALES

Sales decreased by $3.27 million (4.17%) from $78.41 million in the nine months
ended June 30, 2005 to $75.14 million for the nine months ended June 30, 2006.
Sales of $24.65 million in the quarter ended June 30, 2006 were $1.3 million
(5.04%) lower than sales of $25.95 million recorded for the comparable period
last year.

                                       38
<PAGE>

These decreases are analyzed as follows:

                                                Nine Months    Three Months
                                                  ended           ended
                                                 June 30,        June 30,
                                                   2006           2006
                                   Note             $m             $m
                                                -----------    ------------
Effect of exchange rate
movements ....................     (a)            (3.98)          (0.53)

Sales volumes movements ......     (b)             1.02           (0.74)

Increased rebates ............     (c)            (0.31)          (0.03)
                                                  -----           -----
                                                  (3.27)          (1.30)
                                                  =====           =====

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

                                                   Nine Months    Three Months
                                                    ended            ended
                                                   June 30,         June 30,
                                                     2006            2006
                                         Note        $m               $m
                                                   ----------     -----------
i) Hand and garden tools

            Effect of exchange rate
            movements .................   (a)       (2.87)          (0.34)
            Sales volume movements ....   (b)       (0.49)          (1.04)
            Rebates ...................   (c)       (0.31)          (0.03)
                                                    -----           -----
                                                    (3.67)          (1.41)

ii) Metrology tools

            Effect of exchange rate
            movements .................   (a)       (0.67)          (0.14)
            Sales volume movements ....   (b)        1.04            0.04
                                                    -----           -----
                                                     0.37           (0.10)

iii) Magnetic products

            Effect of exchange rate
            movements .................   (a)       (0.44)          (0.05)
            Sales volume increases ....   (b)        0.47            0.26
                                                    -----           -----
                                                     0.03            0.21
                                                    -----           -----

            Total net sales increase ..            (3.27)          (1.30)
                                                    =====           =====

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 nine
month periods ending June 30, 2006 compared to the comparable periods last year
has had a significant impact on the US dollar value of the group's sales. The
average cross rates in the period under review can be summarized as:

                                       39
<PAGE>

                                       Average Cross Rates
                                 -------------------------------
                                 2006        2005     % Movement
                                 ----        ----     ----------
9 months ended June 30           1.774      1.871       -5.18%
3 months ended June 30           1.826      1.857       -1.67%

(b)      In general, business conditions in many of our markets remained
challenging as a result of sluggish consumer demand and continuing intense
competition from rival suppliers across a number of product ranges.

Despite this however, there have been sales volume increases in certain of our
operations. The Eclipse Magnetics division has experienced strong UK and
overseas performance. Within the Metrology division, sales growth has been
achieved through our selling and distribution facility in Maastricht and by a
strong export performance in the US, our selling and distribution facility in
Maastricht, together with a strong performance in the US.

(c)      The level of rebates has increased overall in 2006 by $0.03 million in
the three month period and $0.31 million in the nine month period when compared
to 2005. This is primarily due to increased rebates offered by our French and
Australian divisions.

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 June 30, 2006 of $10.76 million showed a decrease of
$0.84 (7.27%) million over last year's sales of $11.60 million. This was
attributable to decreased volumes of $0.81 million and adverse exchange
movements of $0.19 million only partially offset by decreased sales rebates of
$0.16 million. In the nine months ended June 30, 2006 sales of $32.78 million
were $2.15 (6.17%) million less than last year's sales of $34.93 million. This
decrease comprised adverse exchange movements of $1.79 million, decreased sales
volumes of $0.42 million offset by reduced sales rebates of $0.06 million.

Overall, the division's sales for the third quarter were 7.27% worse than last
year and below forecast. Both home and export performances were disappointing.
The UK market witnessed poor sales especially within the retail sector which,
once again, is experiencing a down turn in consumer spending. Major retail
outlets reported sales downturns of between 9% and 19%. This increasingly soft
retail demand has a direct impact on our Hand & Garden sales in the UK and
remains a cause for concern.

Export sales were down on last year, mainly attributable to high stock levels
held by our dealers in the Middle and Far East. Within the industrial tools
business, export markets continue to be driven by demand for our hacksaw blades.
Sales of these products now represent 60% of our industrial tools' revenues and
strategies are being prepared to spread this sales concentration risk through
the development of higher margin product ranges. Continued success within this
sector will depend on increased brand presence and new product development.

Gross margins were again depressed. The main drivers behind this reduction were
a mix switch towards Garden Power products at the expense of the higher margin
hacksaw blade ranges and increases of more than 50% in gas and electricity
supply costs.

Reductions in manufacturing costs continue to be the focus of management in
order to improve competitiveness for penetration into new markets. As previously
reported, in January 2006 the company announced the closure of the remaining
element of its manufacturing site at Wednesbury, England.

                                       40
<PAGE>

The site closure forms another key part of the Company's UK manufacturing
strategy to regenerate and modernize key areas of the hand and garden tools
businesses. All warehouse and distribution operations currently performed at
this location will be transferred to the Atlas site in Sheffield. The
manufacturing and assembly functions formally carried out at this site will now
be outsourced to suppliers based outside the UK. The transfer of operations from
Wednesbury to Sheffield is scheduled to be completed in October and November
2006 and is progressing on time and in line with budgeted cost projections. When
integrated, it will ensure that the UK hand and garden business will deliver
improved customer service and satisfaction.

Additionally, in the current quarter, the company announced that certain
manufacturing operations carried out at its Atlas site will also cease.

The main challenges for the business revolve around reducing the remaining
manufacturing cost base and driving innovation and new product development in
line with our core brands and competences.

Quarter 4's forecast trading performance shows little sign of any up turn in
sales revenues. The demand for the new Woodsaw range (Predator), however,
continues to drive manufacturing as we look to improve our output to satisfy
demand. New export markets are being targeted and new UK sales channels such as
the electrical and grocery sectors are being evaluated as areas for future sales
growth.

ECLIPSE MAGNETICS

Sales for the quarter showed a $0.21 million (7.55%) increase over last year's
figures (2006 $2.97 million, 2005 $2.76 million) with increased volumes of $0.26
million only partially offset by adverse exchange rate variances of $0.05
million. For the nine months ended June 30, 2006 sales showed a marginal
increase of $0.03 million (2006, $8.38 million, 2005, $8.35 million)
attributable to improved volumes $0.47 million mitigated by adverse exchange
variances of $0.44 million.

Overall, sales volumes for the third quarter were higher than the comparable
period last year. Sales into the UK market improved despite sales from the
material handling section being 50% down on the comparable period last year as a
result of a number of one-time projects buoying the 2005 results. Export sales
were also better than last year, mainly due to the new filtration range,
"Micromag", and an increasing market share for our permanent filters. Our US
performance continued to prosper as we increased our US market share through the
introduction of new products and by close key account management.

The Engineered Magnetic Solutions business continued to see growth with new
products and technologies being offered for bespoke industry solutions.

Competition from the Far East remains the main threat, whether directly or
through agents, as we continue to see the emergence of more and more companies
in our trading markets offering high quality goods at low market price points.

Gross margins were lower than in the equivalent period last year due to the mix
in the Industrial sector and higher utility costs. Key primary materials, steel,
nickel and cobalt remained stable during the period.

Looking forward, the main challenge continues to be the distancing of rival Far
East manufacturers from our key customer base. Our commodity-based business is
under continued threat. To counter this, we continue to promote the
attractiveness of our product by offering added value to our customers.
Improvements in product sourcing and reductions in manufacturing costs continue
to be the focus of the management to increase competitiveness in new markets. As
part of this strategy, the division enhanced its presence in China in January
2006 when it paid $0.2 million for a 25% equity participation in a recently
formed Chinese Venture and other initiatives are being evaluated.

                                       41
<PAGE>

In addition, management continues to follow a strategy of new product
development as a further method to increase market share within key product
segments.

ROBERT SORBY

Sales for the quarter decreased by $0.25 (19.65%) million when compared to last
year (2006 $1.03 million, 2005 $1.28 million) as a result of sales volume
decreases of $0.24 million and adverse exchange variances of $0.01 million. In
the nine month period ending June 30, 2006, sales have decreased by $0.48
million (11.91%) from $4.03 million in 2005 to $3.55 million in 2006 primarily
due to reduced volumes of $0.28 million and adverse exchange variances of $0.20
million.

During the quarter Robert Sorby has continued to face a very challenging time
with sales declining amid softening demand, especially in US markets. Reduced
volumes in the quarter, when compared to last year, were almost entirely
attributable to reduced sales volumes in the US. Comparative figures for 2005
also include a significant one-time order which was not repeated in 2006.
Additionally, excess stocks held by one major US customer have had an adverse
effect on the current quarter's sales demand.

In the UK, sales were similar to last year, largely due to successes at wood
working exhibitions and shows. The underlying trend, however, is one of a very
subdued market place. A number of macro economic factors have contributed to
this malaise. Our typical customer is a retiree on a fixed income. Recent
significant increases in utility prices and gasoline have reduced levels of
disposable income and discretional spend on hobby activities is one of the first
areas of expenditure to be reduced.

We have continued to switch our focus from dealer selling to consumer marketing,
especially in-store demonstrations, woodworkers' club events and regional
exhibitions. One innovation has been the introduction of a series of master
classes in the UK and this concept is to be extended to the US in the first
quarter of the next financial year.

Such consumer focused initiatives have taken place in our principal markets of
the USA, UK, Australia and Ireland. Business in these regions becomes ever more
competitive, but the business remains focused on not sacrificing margins for
short term sales gains.

In the light of the sales shortfalls, a tight rein has been kept on
manufacturing, product development and marketing expenditure. Towards the end of
2005 we suffered as a result of the dramatically escalating price of steel,
which is our prime raw material. Those prices have now steadied and it is hoped
that this will ease some of the pressure on margins.

Looking forward, the business climate remains uncertain. UK retail sales, in
general, remain soft and we continue to witness an increase in the number of
competitive entry level turning tools from Asia that are now available in the
market. As yet these have not gained a significant foothold in the market but we
will monitor the market's appetite for these products and react accordingly.

BOWERS METROLOGY

In the quarter ended June 30, 2006, sales from continuing operations show a
decrease of $0.10 million (2.54%) over last year ($4.11 million 2006, $4.21
million 2005) due to adverse exchange variances of $0.14 million being partially
offset by increased sales volumes of $0.04 million. Cumulatively, sales have
increased by $0.37 million (3.21%) from $11.76 million in 2005 to $12.13 million
in 2006. This is attributable to increased volumes of $0.90 million and adverse
exchange movements of $0.53 million.

                                       42
<PAGE>

Export sales continue to show steady growth, with Germany and USA leading the
way. Of our other major export markets, both Italy and France remain depressed,
although the former has begun to show initial signs of recovery. Demand in
Eastern Europe is also strong, particularly with regard to the new testing
instruments being sold via our Maastricht operation. Having our own facility in
the Netherlands is improving sales in that region. Sales of the premium brand
portable hardness testers that are imported from China continue to flourish and,
with several new products coming on line, a further strong sales performance is
anticipated from Maastricht in quarter 4.

The UK remains the main concern, with the double threat of competition from low
cost imports and a shrinking industrial market place. Continuing factory
closures in the automotive market, including Rover and Peugeot, are,
unfortunately, not being offset by expansion in other UK factories such as
Honda, Nissan and Toyota.

On a more optimistic note, however, MACH, the main biennial tradeshow, was held
in May 2006, and witnessed a 9% increase in visitor numbers. Our new "Snapmatic"
range of high precision snap gauges was launched at the show and the first major
shipments are due to be made in Quarter 4. Additionally, several new products
from key suppliers will be launched in the UK in Quarter 4.

The Shanghai facility is now making regular shipments to our European
distribution centre in Maastricht and commenced direct sales to the Asia region
in the quarter. Further capital expenditure is expected during Quarter 4
enabling the first series of bench hardness testers to be produced in Shanghai.
To supplement this activity, we are also applying for a trading license within
China itself. When granted, this will then enable us to distribute the core
Bowers 3-point bore gauge range directly through this market.

SPEAR & JACKSON FRANCE

Overall, sales for the third quarter of $2.49 million show a $0.08 million
decrease (3.07%) over the comparable period last year with higher sales rebates
levels of $0.15 partially offset by sales volume increases of $ 0.05 million and
favorable exchange variances of $0.02 million. For the nine month period ended
June 30, 2006 sales have decreased by $0.46 million (5.40%) from $8.46 million
in 2005 to $8.0 million in 2006. Here, favorable volumes of $0.15 were exceeded
by increased sales rebate levels of $0.15 million and adverse exchange movements
of $0.46 million.

On a macro economic level, the trends of previous quarters' continue. The French
economy remains depressed with increased unemployment rates and the migration of
manufacturing operations to low cost regimes overseas. Lower consumer confidence
and reduced spending levels are also present in the run up to the 2007
presidential elections. Business conditions in the Company's markets have
continued to reflect this depressed retail environment.

Competition remains intense in the French market with a large proportion of
garden product turnover being concentrated in a small number of retail outlets.
This makes price negotiations difficult and can result in additional incentives,
e.g. rebates being offered, as a matter of course, in order to secure orders.
Sales rebate levels were particularly high in the period under review.

We continue to feel the effects from the increasing flow of cheap Asian and Far
Eastern imports which puts pressure on turnover and margins. This margin
dilution could be further exacerbated by the opening of specialist cut-price
garden stores by one of our major customers later in the year. The number of
these stores could rise to over 100 over the next ten years.

                                       43
<PAGE>

In order to combat increased competition from cheap imports and to combat the
negative effects of the seasonality of garden product sales, the Company
concentrates on marketing activity to promote its principal brands and to secure
new listings. The design and presentation of our three key brands (Spear &
Jackson, Laurenty and Forges de Lavieu) have been revamped, a French S&J web set
has been set up and various promotional activities initiated.

In the last quarter the Company has extended a private range of cutting tools
and revised other private range garden, wood and grass tools. To retain margins
we have increased the amount of product sourced from Far Eastern and Indian
suppliers and we continue to press suppliers for rebates as a condition of
purchase.

It is clear, however, that in order to retain our current levels of business and
to increase the success of new product ranges, it is essential that we are able
to offer quality products at lower price points and that we extend our sales
routes to include mail order and internet options.

AUSTRALASIA

Sales for the quarter for Spear & Jackson Australia and Spear & Jackson New
Zealand were $0.24 million (6.67%) lower than last year (2006 $3.30 million,
2005 $3.54 million), due to adverse exchange variances of $0.15 million,
increased sales rebates of $0.06 million and decreased sales volumes of $0.03
million. Cumulatively for the nine months to June 30, 2006 sales have decreased
by $0.58 million (5.33%) from $10.87 million in 2005 to $10.29 million in 2006.
Adverse exchange movements of $0.41 million and increased rebates of $0.24
million were only partially compensated by increased volumes of $0.07 million.

The Australian market recorded unexpected economic growth during the third
quarter despite an increase in domestic interest rates in May 2006 and
escalating fuel costs. The economy also recorded a 30 year low unemployment rate
giving early evidence that the increase in interest rates had a less than
anticipated impact on economic activity. There is strong speculation that the
Reserve bank will be forced to increase interest rates again in Quarter 4 in
order to curb inflationary pressures. This upturn in economic activity and
associated consumer confidence came too late to have any impact on Australian
revenues for the quarter. During the quarter industry and major retail customers
reported declines in sales levels and a number of customers reduced their
purchasing and inventory levels in advance of the Australian financial year end
of June 30.

Likewise, the New Zealand economy showed promising signs in the third quarter
with economic data showing improved retail sales figures and a slightly better
than expected business confidence reading. This upturn however, had little
impact on New Zealand's sales for the quarter which continued to be affected by
a slow down in consumer spending.

Comparing current year sales performance in Quarter 3 with that of the prior
year, sales reductions arising from business lost to cheap Asian import
competition, declining price points, softening consumer demand and the decline
in masonry, metals and garden divisions were partially offset by incremental
sales gains within our air, hand tool and metals categories. In the nine month
period ended June 30, 2006, increased sales in Australia across the air, hand
tools and metals divisions, when compared to the comparable period last year,
were mitigated by reduced sales in New Zealand as a result of the loss of
business with a major retail group.

The Australian and New Zealand markets continue to be extremely price
competitive with many of our retail customers sourcing their "house brands"
directly from Asia in direct competition with S&J. This practice has placed, and
will continue to place, added pressure on our sales, margins and market share.
Despite this, in Australia, we were still able to meet market price points
across all core categories in order to maintain and grow market share. Margin
dilutions were mitigated by improved product

                                       44
<PAGE>

sourcing, new product releases and a favorable AU$. In addition, although 2006
was negatively impacted by the loss of two major customers, these adverse
movements were compensated by incremental gains arising from the introduction of
new lines, improved ranges and increased promotional activity. In New Zealand,
where the same competitive pricing pressures are felt, increased levels of sales
promotions have been initiated to stimulate demand and slow moving inventories
have been reduced. Furthermore, a new range of digging tools developed
specifically for the New Zealand market has been accepted and "core-ranged" into
the largest retail group in New Zealand and three other major accounts and this
should improve margins and sales revenues in the final quarter of fiscal 2006
and beyond.

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

COSTS OF GOODS SOLD AND GROSS PROFIT

Costs of goods sold decreased by 4.35% from $17.53 million in the three month
period ended June 30, 2005 to $16.77 million in the three months ended June 30,
2006. In the nine month period under review, costs of goods sold decreased by
1.67% from $52.62 million in the nine months ended June 30, 2005 to $51.74
million in the nine months ended June 30, 2006.

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           Nine Months Ended
                                 --------------------         ------------------
                                 June 30      June 30         June 30   June 30
                                   2006        2005            2006      2005
                                 -------      -------         -----     --------
Cost of goods sold
as a % of sales ...........       68.04        67.55           68.86     67.11

Gross Profit Margin .......       31.96        32.45           31.14     32.89

Margins have continued to suffer from competitive price pressures, adverse
currency movements, unfavorable sales mixes, the adverse effects of raw material
(principally steel) and utility price hikes together with increases in the cost
of fuel used to operate our manufacturing processes. In the Neill Tools division
a main driver behind decreased margins has been the mix switch towards factored
garden power tools at the expense of better margins on industrial hand tool
product lines.

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 cost increases 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.

Improvements in manufacturing costs continue to be the focus of the management
to improve competitiveness for new markets. The manufacturing reorganization
program, initiated in the last quarter of 2005, and which has continued in the
second and third quarters of fiscal 2006 with the announcement of the closure of
our UK manufacturing site at Wednesbury and the reorganization of our Atlas
manufacturing site in Sheffield, England, will have a beneficial effect on
margins. The restructuring initiatives will result in own-manufactured product
being progressively replaced with factored items sourced from overseas, thereby
reducing costs and increasing profitability.

                                       45
<PAGE>

OPERATING COSTS AND EXPENSES

Selling, general and administrative (SG&A) expenses increased by $1.47 million
(18.65%) from $7.89 million in the three months ended June 30, 2005 to $9.36
million in the three months ended June 30, 2006. In the nine months ended June
30, 2006 costs of $27.78 million have increased by $3.35 million (13.72%) from
$24.43 million in the nine months to June 30, 2005.

The principal reasons for the changes in the levels of SG&A expenses in the
three and nine month periods ended June 30, 2006 over their prior year
comparatives can be summarized as follows:

                                                 Increases Over Prior Year
                                              -------------------------------
                                               Nine Months       Three Months
                                                  ended             ended
                                              June 30, 2006     June 30, 2006
                                                   $m                $m
                                              -------------     -------------
a)   Impact of movements in
     average US$/sterling cross
     rates in the period ..................      (1.14)            (0.11)

b)   Increased FAS 87 pension costs .......       3.15              1.12

c)   Inflationary increases ...............       0.60              0.20

d)   Decreased head office costs
     relating to legal and professional
     fees, monitor fees and associated
     costs ................................      (0.27)            (0.01)

e)   One-time costs in setting up the
     Metrology Division's China facility ..       0.10              0.00

f)   Other net increases including
     increases in variable selling
     and distribution costs associated
     with increase in March 2006 sales ....       0.91              0.27
                                                 -----              ----

     Total increase in SG&A expenses ......       3.35              1.47
                                                 =====              ====

OTHER INCOME AND EXPENSES

Other income and expenses moved from a net credit of $0.05 million in the three
months ended June 30, 2005 to $nil in the three months ended June 30, 2006. For
the nine month period under review other income and expenses has moved from a
$0.09 million credit in the nine months to June 30, 2005 to a $0.08 million
credit in the nine months to June 30, 2006.

This slight decline is attributable to higher 2006 lease asset interest charges
and higher UK bank charges on bank accounts denominated in foreign currencies
being only partially offset by higher bank interest credits in the Company's
American businesses and lower bank interest charges in the French business.

                                       46
<PAGE>

INFREQUENT AND UNUSUAL ITEMS

(a) MANUFACTURING REORGANIZATION COSTS

                                         Three Months            Nine Months
                                         ended June 30           ended June 30
                                       -----------------      -----------------
                                        2006        2005       2006        2005
                                         $m          $m         $m          $m

Manufacturing reorganization costs     (0.59)      (0.27)     (1.82)      (0.27)
                                       -----       -----      -----       -----

In January 2006, the Company announced the closure of the remaining element of
its manufacturing site at Wednesbury, England. All warehouse and distribution
operations currently performed at this location will be transferred to the
Company's principal UK manufacturing site in Sheffield. The manufacturing and
assembly functions formally carried out at this site will now be relocated to
suppliers based outside the UK.

The closure and relocation of the Wednesbury facility are to be completed by
November 30, 2006 and the costs of this exercise are anticipated to be
approximately $2.1 million. These costs include employee severance payments,
site closure expenses, factory reorganization expenses, plant transfer costs and
associated capital expenditure.

In addition to the above, the Company announced in the current quarter that
certain manufacturing operations carried out at its Atlas site in Sheffield,
England, ("Atlas") will also cease. Provisions for employee severance costs in
respect of the closure of these manufacturing operations has been made in the
quarter ended June 30, 2006.

Subsequent to the quarter end, on July 27, 2006, Spear & Jackson, Inc.'s UK
subsidiary, Spear & Jackson Garden Products Limited, completed, the contract for
the sale of the remaining element of the Wednesbury site for (pound)2.6 million
sterling (approximately $4.7 million), excluding disposal costs. Funds realized
from this disposal will be used to finance the UK manufacturing reorganization
program with any excess sale proceeds being reinvested in other operational
initiatives.

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

Costs provided in respect of the Wednesbury site closure and the Atlas
reorganization were $0.59 million for the quarter ended June 30, 2006 and $2.15
million for the nine month period ended June 30, 2006. In addition to these net
Wednesbury and Atlas reorganization costs it is anticipated that a further $0.1
million will be incurred in respect of the Wednesbury site closure on or before
November 30, 2006 for which provision will be made in accordance with applicable
financial reporting standards as and when liabilities for such charges
crystallize.

As explained in (b), below, a surplus element of the Wednesbury site was sold in
2005 and provision was made at March 31, 2005 for various site reorganization
costs that were to be incurred as a result of that partial sale. Certain of
these costs will not now be incurred following the decision to close the
remainder of the site and such excess provisions, amounting to $0.33 million,
were released in the quarter ended March 31, 2006.

                                       47
<PAGE>

(b) 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
                                     England        Boca Raton
                                        $m           Florida         Total
                                    (Part Sale)         $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 reorganization 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
was made for costs to be incurred in connection with the consolidation of the
current manufacturing operation into the smaller site. These costs comprised
factory refurbishment, factory reorganization and departmental relocations
within the site. Certain of these provisions were no longer be required
following the decision to close the remainder of the site and all excess
provisions were accordingly released in the quarter ended March 31, 2006.

(c) SETTLEMENT OF CLASS ACTION LITIGATION

As further explained, below, in Part II Item 1 "Legal Proceedings", on July 7,
2006, Spear & Jackson, Inc. entered into a Memorandum of Understanding whereby
it agreed to pay $0.65 million in settlement of the class action litigation,
referred to in that note, in which it is a defendant. Provision has accordingly
been made in the financial statements for the quarter to June 30, 2006 for the
payment of that sum.

(LOSS)INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

Our loss before income taxes in the three months ended June 30, 2006 amounted to
$2.72 million compared to an income before taxes for the three months ended June
30, 2005 of $0.31 million. The loss before income taxes in the nine month period
ended June 30, 2006 was $6.77 million compared to a $3.68 million profit last
year.

These adverse movements are attributable to:

                                        Nine Months ended    Three Months ended
                                         June 30, 2006         June 30, 2006
                                               $m                    $m
                                        -----------------    ------------------
Manufacturing reorganization
costs ...............................        (1.55)                (0.32)
Profit on sale of land and
buildings in 2005 ...................        (2.50)                (0.00)
Settlement of class litigation ......        (0.65)                (0.65)
Decreased gross margins .............        (2.39)                (0.54)
Increased pension costs .............        (3.15)                (1.12)
Other increases in SG&A costs .......        (0.20)                (0.35)
Decreased other income ..............        (0.01)                (0.05)
                                            ------                 -----
Total adverse movements .............       (10.45)                (3.03)
                                            ------                 -----

                                       48
<PAGE>

INCOME TAXES

An income tax charge of $0.04 million arose in the three months ended June 30,
2006 compared to a $0.20 million income tax charge in the three months ended
June 30, 2005. For the nine month period to June 30, 2006 an income tax benefit
of $0.28 million arose compared to a $0.65 million charge in the comparative
period last year.

Income taxes were 1.50% of the loss before tax in the three months ended June
30, 2006 compared to 74.07% of the income before tax in the three months ended
June 30, 2005. Income taxes were 4.08% of losses in the nine months ended June
30, 2006 compared to 20.00% of income in the comparable period last year.

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

Other specific factors behind the divergence in effective tax rates in the
periods ended June 30, 2005 and June 30, 2006 were as follows:

1.    Period Ended June 30, 2006

i)    Valuation allowances of $1.22 million have been applied to the costs
      associated with the closure of the Wednesbury site and reorganization of
      the Atlas site and to losses incurred in certain UK and overseas divisions
      in the period.

ii)   A valuation allowance of $0.18 million has also been applied to the costs
      to be incurred in relation to the settlement of the class action.

iii)  Adjustments of $0.09 million in respect of the correction of prior period
      taxation provisions.

2.    Period Ended June 30, 2005

i)    Valuation allowances of $0.39 million have been applied to losses incurred
      in certain UK and overseas divisions in the period.

ii)   The taxation charge has been reduced by $0.89 million in respect of the
      utilization of prior period losses against the gain arising on the sale of
      UK land and buildings.

(LOSS) INCOME FROM CONTINUING OPERATIONS

Our loss from continuing activities was $2.76 million for the three months ended
June 30, 2006 (2005: $0.11 million profit) and for the nine months ended June
30, 2006 it was a $6.49 million loss compared to a $3.03 million profit in the
previous year.

DISCONTINUED OPERATIONS

Discontinued operations relate to the thread gauge measuring division of the
Metrology Division based in the UK, and the Company's Megapro screwdriver
division.

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

                                       49
<PAGE>

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

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

Total losses attributable to discontinued operations were $0.01 million in the
three months ended June 30, 2006 (2005: $0.04 million), and were $0.09 million
in the nine months ended June 30, 2006 (2005: $0.42 million).

FINANCIAL CONDITION

Liquidity and Capital Resources

Our cash and cash equivalents amounted to $6.32 million at June 30, 2006 ($7.29
million at September 30, 2005), working capital (excluding deferred taxes)
totaled $27.32 million at June 30, 2006 ($29.87 million at September 30, 2005)
and our stockholders' equity was $19.91 million at June 30, 2006 ($26.20 million
at September 30, 2005).

Net cash provided by operating activities in the nine month period ended June
30, 2006 was $1.33 million compared to a $3.85 million outflow in the nine
months ended June 30, 2005. This increase in net cash of $5.18 million primarily
arises from:

   o  increased trading working capital inflows of $5.85 million (note a)

   o  increase in net inflows from other assets and liabilities of $7.73 million
      (note b)

Offset by:

   o  the reduction in net income (adjusted for depreciation, and deferred
      taxes) of $8.40 million as explained in the commentary on trading results
      above.

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

a)    Trade Working Capital Variances

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

                                                       Note       $million

Increased inventory inflows .....................      (i)          6.05
Decreased trade payable inflows .................                  (0.05)
Reduced trade receivable inflows ................      (ii)        (0.15)
                                                                   -----
Net increase in trade working capital inflows ...                   5.85
                                                                   =====
i)    In the nine months ended June 30, 2006 inventory inflows increased by
      $1.68 million compared to a decrease of $4.37 million in the period ended
      June 30, 2005. Within most of the UK divisions, and especially in the UK
      hand tool division, the period to June 30, 2006 witnessed a rigorous
      inventory reduction program, whereas in the comparable period last year
      stock levels increased. In 2005 the UK hand tools division saw inventory
      increases in anticipation of new product launches and this has not been
      repeated in 2006. This trend was also mirrored in the Metrology, Magnetics
      and Australasian divisions. Such decreases were offset, however, by higher
      than usual seasonal inventory increases in our French business.

                                       50
<PAGE>

ii)   Trade receivable inflows for the nine months to June 30, 2005 benefited by
      $0.7 million from customer receipts relating to increased sales levels in
      August and September 2004. As this trend was not repeated in August and
      September 2005, cash flows for the nine months to June 30, 2006 did not
      benefit to the same extent from the collection of receivables from prior
      period sales.

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

      With regard to the net inflows from other assets and liabilities, the main
      factors contributing to the $7.73 increased inflows are:

i)    An increase in the non-cash FAS 87 pension charge of $3.15 million;

ii)   The inclusion, at June 30, 2006, of a restructuring provision of $1.67
      million in relation to the closure of the Wednesbury site and the
      reorganization of the Atlas site.

iii)  The inclusion, at June 30, 2006, of a provision of $0.65 million in
      relation to the settlement of then class action litigation.

iv)   While there has been an increase in annual employer contributions of $0.36
      million to the UK pension scheme, in June 2005 there was a special
      contribution of $3.63 million made to the scheme and this was not repeated
      in June 2006.

      The beneficial effect of the above has been diluted by:

i)    Payments of $0.85 million in respect of the UK manufacturing
      reorganization program;

Cash outflow from investing activities was $1.36 million in the period ended
June 30, 2006 compared to an inflow of $7.67 million in the period ended June
30, 2005. The 2005 comparative period included receipts of $8.6 million relating
to the net sale proceeds of the property at Boca Raton, Florida and to the
partial sale of excess land at our Wednesbury manufacturing site. The 2006
figures include purchases of property, plant and equipment relating to the
partial renewal of our UK motor fleet and start up capital expenditure in our
newly formed Chinese operation. Additionally, the 2006 cash outflow also
includes the purchase of a 25% equity participation in a recently incorporated
Chinese magnetic products company.

Net cash used by financing activities was $0.77 million in the period ended June
30, 2006 (2005: $0.07 million). The June 2006 increase represents the partial
repayment of the UK bank overdraft facility which had been utilized at the end
of September 2005 to meet the payment of special pension plan contributions
totaling $7.2 million.

BANK FACILITIES

The UK subsidiaries of Spear & Jackson plc and Bowers Group plc maintain a line
of credit of $8.32 million. This is secured by fixed and floating charges on the
assets and undertakings of these businesses. Of the total facility, $5.55
million relates to bank overdrafts and $2.77 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 June 30, 2006 the Company had
$0.01 million of borrowings outstanding under the overdraft line (September 30,
2005 $0.75 million) and had $0.23 million in outstanding letters of credit
(September 30, 2005: $0.60 million).

As a consequence of the special pension contribution of $7.2 million that was
paid in two installments in June and September 2005, and the additional funding
which will be required to finance the ongoing restructuring initiatives, an
open-ended, on demand bridging loan of $5.55 million was also negotiated with
the Company's UK bankers. The facility is denominated in British pounds

                                       51
<PAGE>

and is secured by a first legal charge over the Company's land and property at
Wednesbury, England. It carries interest at UK base rate plus 1%. This facility
has not yet been utilized and, following the receipt of funds relating to the
sale of the remaining element of the Wednesbury site in July 2007, will now be
cancelled.

The French, Australian and New Zealand subsidiaries of Spear & Jackson plc
maintain short-term credit facilities of $2.86 million denominated in Euros,
Australian dollars and New Zealand 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
nil outstanding under the overdraft lines at June 30, 2006 (September 30, 2005:
nil). At June 30, 2006 there was $0.89 million of letters of credit and bills
were outstanding under these facilities (September 30, 2005: $0.9 million).

The UK facilities were renewed in December 2005, the Australian facilities were
renewed in October 2005, and the French facilities fall due for renewal at
various dates in 2006. 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 June
30, 2006 the extent of this guarantee relating to gross bank overdrafts was
$23.29 million (September 30, 2005 $20.40 million). The overall pooled balance
of the bank accounts within the pool at June 30, 2006 was an overdraft balance
of $0.01 million (September 30, 2005 of $0.75 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
supplemented, where necessary, by temporary increases to sustain our current
business operations and normal operating requirements for the foreseeable
future. As the Company continues to focus its efforts on improving the
competitiveness of its worldwide operations, additional funding may be required
to finance the restructuring of the non-profitable areas of the Company's
divisions and to meet items of significant one-off expenditure. Such expenditure
may include: costs associated with the closure and relocation of the Company's
manufacturing facility in Wednesbury, England; investment in new capital
equipment; further special contribution payments to reduce the pension plan
deficit; further reorganization and set up costs, and investment in our business
ventures in China; and any other expansion of the Spear & Jackson or Bowers
operations. Funding of these initiatives may be obtained through the negotiation
of increased bank lending facilities or the sale of surplus assets.

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

The Company makes a range of contractual obligations in the ordinary course of
business. The following table summarizes the Company's principal obligations at
June 30, 2006:

                                       52
<PAGE>

Contractual obligation
                                              Payments due by period ($m)
                                          --------------------------------------
                              Total
                              Amount       1 year     1-3       4-5     5 years
                             Committed    or less    years     years    or more
                             ---------    -------    -----     -----    -------
Capital lease obligations      0.89        0.50       0.39         -         -
Operating leases (note a)      6.21        1.04       1.98      1.62      1.57
                               ----        ----       ----      ----      ----
                               7.10        1.54       2.37      1.62      1.57
                               ----        ----       ----      ----      ----

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

(b)   Excluded from the above tables are the amounts payable by the Company to
      the UK defined benefit pension plan as future funding obligations cannot
      be accurately forecast beyond the short term. In the years ended September
      30, 2006 and September 30, 2007, providing that certain criteria are met,
      the annual contributions will be fixed at (pound)1.9 million sterling
      (approximately $3.3 million). In subsequent years advice received from the
      actuaries to the pension plan indicates that the contributions could
      increase to (pound)4 million (approximately $7.6 million) per annum.

(c)   As at June 30, 2006, the Company had letters of credit of $0.40 million
      outstanding which are secured under the UK and Australian credit
      facilities. In addition, the Company's French subsidiary had discounted
      $0.72 million of bills of exchange with recourse.

At June 30, 2006, the Company had no material off-balance sheet arrangements
other than the non-debt obligations described in contractual obligations, above.

OUTLOOK

Current forecasts indicate that the Company will generate a net income from
continuing operations before income taxes of approximately $0.9 million in the
fourth quarter. This is stated after consideration of income and charges arising
from unusual and infrequent items. Such forecasted financial performance
information is subject to a number of factors and uncertainties as described in
the "Forward Looking Statements" and "Risk Factors" sections of this report,
above.

Operating losses were incurred in quarters 1, 2 and 3 and this trend is
anticipated to continue into quarter 4. As in previous quarters, the Company's
base trading profit will be eliminated by the non-cash FAS 87 expense which has
increased significantly over the comparable charge recognized in the period
ended June 30, 2005. As previously explained, based on calculations provided by
the Company's actuaries, the annual pension charge has risen by $4.4 million
from $4.0 million in 2005 to $8.4 million in the year ended September 30, 2006
and this has had a material adverse effect on the Company's earnings.

Base trading profit for the fourth quarter is currently anticipated to be
approximately $0.5 million and after deduction of the quarter's pension charge
of $2.2 million an operating loss (before unusual and infrequent items and
taxation) of $1.7 million is forecast.

Earnings in quarter four will also be negatively impacted by the provision of a
further $0.9 million of costs in connection with the closure of the Company's
manufacturing site in Wednesbury, England and other UK reorganization
initiatives. The negative impact of these costs will, however, be offset by a
gain of approximately $3.5 million arising on the disposal of the company's UK
manufacturing site at Wednesbury that was completed in July 2006.

The loss from continuing operations before taxation sustained in the nine months
ended June 30, 2005 was $6.8 million and, after inclusion of the anticipated
fourth quarter net income before taxation of $0.9 million, the Company therefore
currently forecasts a loss before income taxes of $5.9 million for the year
ended September 30, 2006.

                                       53
<PAGE>

The Company's core UK hand and garden business continued to experience difficult
trading conditions in quarter three and this trend is expected to persist in
quarter 4. Although certain elements of the business have performed
encouragingly, the adverse effects of the general downturn in demand in the UK
retail sector and the fierce competition from cheap foreign imports persist.
Demand from our export markets, particularly the Far and Middle East, has also
softened as the intensive purchasing activity resulting from building projects
in the aftermath of the Iraqi conflict has declined.

As previously discussed, in the light of these increasingly competitive market
conditions, the Company performed a detailed review of its UK manufacturing
operations in quarter four of 2005 to identify initiatives to combat declining
sales performance and the increase in low price point imports from Far Eastern
markets. The implementation of a number of strategies to reduce its ongoing cost
base was started in that quarter. This has continued into quarter three of
fiscal 2006 and will be further developed in quarter four and beyond.

The closure and relocation of the Company's UK manufacturing facility at
Wednesbury, England, are to be completed by the end of November 2006. The costs
of this exercise, which are anticipated to amount to approximately $2.1 million,
comprise employee severance payments, site closure expenses, factory
reorganization expenses, plant transfer costs and associated capital
expenditure. On July 27, 2006 Spear & Jackson, Inc.'s UK subsidiary, Spear &
Jackson Garden Products Limited, completed the sale of the remaining element of
the Wednesbury site for (pound)2.6 million sterling (approximately $4.7
million), excluding disposal costs, which will generate a gain on disposal of
approximately $3.5 million. Funds realized from the disposal are to be used to
finance the closure costs with any excess sale proceeds being applied to other
operational initiatives.

In addition, in quarter 3, the Company announced that certain manufacturing
operations carried out at its Atlas site in Sheffield, England will also cease.

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

We will continue to look at further initiatives to rationalize underperforming
areas of the business and to monitor operational infrastructures in the United
Kingdom, particularly overhead costs, to ensure that these are as cost efficient
as possible and at a level appropriate to the needs of the business. In
conjunction with this, the inventory reduction program that has been implemented
in quarters one to three will continue, although temporary increases in
inventories will occur as a result of inventory builds that will be necessary
during the closure of the Wednesbury manufacturing site.

As with the Company's UK hand and garden tool businesses, our Australasian and
French subsidiaries continue to experience difficult trading conditions because
of flat retail demand, increased levels of competition from Far East imports,
reduced consumer spending and the increasing trend of some retail groups to
expand their own direct import programs.

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

Within the Metrology division the new selling and distribution outlet in
Maastricht is now fully operational, and incremental revenue growth is forecast
for the rest of the fiscal year. In the future, this revenue and earnings growth
will be enhanced by the division's quality control and distribution centre which
has been established in Shanghai, China and which is expected to become fully
functional in quarter one of fiscal 2007. In the short term, however,
profitability will be negatively impacted by the one-time costs associated with
the start up of the business.

Looking forward, demand for low cost, own manufactured metrology hand tools will
continue to face further pressure from the Far East. The Company therefore
recognizes the need to focus its UK manufacturing sites on producing more high
technology products and measuring solutions. In order to make the Company more
competitive in the low technology sectors various, initiatives are being
explored including the start up and establishment of its manufacturing and
distribution centre in Shanghai.

                                       54
<PAGE>

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, the $4.4 million increase in the FAS 87 pension charge and a
weak dollar. This will again put pressure on our margins and overhead costs, and
wherever possible, these increases will be passed on though sales price
increases.

Any strengthening of the US dollar would impact favorably on the business as
this would ease the pressure on margins and increase our competitiveness.
Current trends, however, suggest a continued weakening which will place
additional pressure on our sales into a number of export markets.

The level of overhead expenses, particularly legal and professional costs,
incurred by our US corporate head office has reduced following the settlement of
the SEC suit during 2005. Significant professional costs have continued to be
incurred, however, both in relation to the Class and Derivative Action lawsuits
and in connection with the appraisal of offers from potential acquirers to
purchase all, or part, of the Company's common stock. As discussed under Part
II, Item 1, "Legal Proceedings", a Memorandum of Understanding is now in place
for the settlement of the Class Action and the disposal of Jacuzzi Brands,
Inc.'s majority shareholding in the company was completed on July 28, 2006. This
should therefore reduce the ongoing level of legal and professional fees.

In the forthcoming quarters we will continue to focus on improving cash
generation. As explained above, on January 25, 2006 the Company announced the
closure of the remaining element of its manufacturing site at Wednesbury,
England. In addition, therefore, to normal trading cash requirements, in the
next six months costs will be incurred in the relocation of the Wednesbury
manufacturing operation and its consolidation into the Company's principal UK
manufacturing site in Sheffield and elsewhere. These costs will be funded from
existing core UK bank facilities and from the sale proceeds of approximately
$4.7 million relating to the disposal of the Wednesbury manufacturing site.

Further significant one-time expenditure will be incurred in August 2006
following the Company's agreement under a Memorandum of Understanding to pay
$0.65 million in settlement of the Class Action litigation. This payment will be
met from existing US funds.

To restrict the pressure that the reorganization and litigation settlement costs
will have on the Company's bank facilities, focus will be maintained on the
working capital reduction program that has already been initiated. The benefits
of this initiative can be seen in the favorable inventory movements in the
quarter and emphasis will continue to be placed on strict working capital
control in the forthcoming months.

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

Much will also depend on the level of retail demand in our UK, French and
Australasian markets. The results for quarters one, two and three were adversely
affected by softening demand and a further deterioration in consumer confidence
could significantly impact on our earnings levels in quarter four and subsequent
periods.

As previously reported, the formal resolution of the SEC legal action in fiscal
2005 enabled the Company to move forward so that both short and long term
commercial strategies could be formulated and implemented. The stability of the
company will be further enhanced by the settlement of the Class Action
litigation and by the completion of the sale of Jacuzzi Brands, Inc.'s 61.8%
majority shareholding in Spear & Jackson, Inc. to United Pacific Industries
Limited ("UPI") on July 28, 2006. The development of detailed business
strategies under our new ownership structure is, inevitably, still in its early
stages but potential synergies and areas of specific market and commercial
expertise have been identified which, going forward, are hoped to be of benefit
to both Spear & Jackson, Inc. and UPI. Both UPI and Spear & Jackson, Inc.
welcome the alliance which should lead to the formation of an association of
size and products that will be able to compete effectively in the modern global
trading world.

                                       55
<PAGE>

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 June 30, 2006 the Company had cash and cash equivalents of
approximately $6.32 million and bank borrowings of $0.01 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, reorganization programs, 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, New Zealand and China. These operations transact business in the
relevant local currency and their financial statements are prepared in those
currencies. Translation of the balance sheets, income statements and cash flows
of these subsidiaries into US dollars is therefore impacted by changes in
foreign exchange rates.

In the nine months ended June 30, 2006 compared to the equivalent period in
2005, the change in exchange rates had the effect of decreasing the Company's
consolidated sales by $3.98 million, or 5.08%. Since most of the Company's
international operating expenses are also included in local currencies, the
change in exchange rates had the effect of decreasing operating expenses by
$1.14 million or 4.67% for the nine months ended June 30, 2006 compared to the
comparable prior year period.

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 June 30, 2006 the Company held
forward contracts in place to sell Australian and New Zealand dollars to buy
approximately 0.54 million US dollars.

                                       56
<PAGE>

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 $0.05 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 June 30, 2006, the Company made an allowance of $1.46 million in respect of
doubtful accounts which management believes is sufficient to cover all known or
expected debt non-recoveries.

ITEM 4.  CONTROLS AND PROCEDURES

We carried out an evaluation under the supervision and with the participation of
our management, including the Chief Executive Officer and the Chief Financial
Officer of the effectiveness of our disclosure controls and procedures as of the
end of the period covered by this Quarterly Report. Based on this evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective for recording, processing and
summarizing the information we are required to disclose in the reports we file
under the Securities Exchange Act of 1934, within the time periods specified in
the SEC's rules and forms. Our management necessarily applied its judgment in
assessing the costs and benefits of such controls and procedures, which by their
nature can provide only reasonable assurance regarding management's control
objectives. There were no significant changes in our internal control over
financial reporting during the third quarter of 2006 identified in connection
with the evaluation referred to above, that have materially affected, or are
reasonably likely to materially effect, our internal control over financial
reporting.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

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

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<PAGE>

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, based in Sheffield, is serving as acting Chief
Executive Officer.

Following extensive settlement negotiations with both the SEC and Mr. Crowley,
the Company reached a resolution with both parties. On September 28, 2004, Mr.
Crowley signed a Consent to Final Judgment of Permanent Judgment with the SEC,
without admitting or denying the allegations included in the complaint, which
required a disgorgement and payment of civil penalties by Mr. Crowley consisting
of a disgorgement payment of $3,765,777 plus prejudgment interest in the amount
of $304,014, as well as payment of a civil penalty in the amount of $2,000,000.
In May 2005, the SEC applied to the Court for the appointment of an
administrator for the distribution of these funds to the victims of Mr.
Crowley's actions, pursuant to the Fair Funds provisions of the Sarbanes-Oxley
Act of 2002.

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

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

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

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

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<PAGE>

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

The Court denied the motion of Spear & Jackson's Monitor to abate the litigation
for a six-month period pending the administration of the SEC's restitution fund.
The Court also denied the Plaintiff's Motion for clarification and established a
new cut-off for discovery until December 19, 2005. The case had initially been
set on the Court's two-week calendar beginning 6 March 2006 but the trial date
was then reset for October 2006.

On July 7, 2006 the US District Court for the Southern District of Florida
issued a Memorandum of Understanding ("MOU") which confirmed that the plaintiffs
and defendants in the class action had reached an agreement in principle for the
settlement of this litigation, subject to Court approval. The MOU outlines the
general terms of the settlement ("the Settlement") and is intended to be
supplemented by a Stipulation and Agreement of Settlement that is to be issued
at a later date.

In settlement of the class action the defendants will pay a sum of $650,000
which is to be deposited by S&J into a Qualified Settlement Fund within thirty
days of the date of the MOU.

Following the execution of the MOU, the lead plaintiffs will commence discovery
procedures to confirm the fairness and reasonableness of the Settlement. The
plaintiffs retain the right to terminate the Settlement if such discovery
reveals that the Settlement is not fair, reasonable and adequate. Subject to
these discovery procedures confirming the adequacy of the Settlement, all
parties have agreed to use their best efforts to finalize an appropriate
Stipulation of Settlement and any other relevant documentation necessary to
obtain approval by the Court of the settlement of this action.

If the Settlement outlined in the MOU is not approved by the Court or, if
subsequently terminated, the terms of the above Settlement will be without
prejudice, any settlement amounts already paid will be returned and parties will
revert to their litigation positions immediately prior to the MOU.

In addition to this class action, on September 6, 2005, the Company was served
with a Shareholder Derivative Complaint filed on June 1, 2004 in the Circuit
Court for Palm Beach County, Florida (Case No. CA005068). The suit names, in
addition to the Company, which is a nominal defendant, present and former
directors and the Company's prior independent auditors, Sherb & Co. LLP., as
defendants. The suit contains essentially the same factual allegations as the
SEC suit, which was filed in April 2004 in the U. S. District Court for the
Southern District of Florida, and the series of class actions claims initiated
in the U.S. District Court, but alleges state law claims of breaches of
fiduciary duty, abuse of control, gross mismanagement, waste of corporate
assets, unjust enrichment and lack of reasonable care by various or all the
defendants. The Company will evaluate the Complaint and file its response at the
appropriate time. In addition, the Company is currently in settlement
discussions in an effort to resolve the matter.

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<PAGE>

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

Item 6.  Exhibits

(a)   Exhibits

31.1  Certification of acting Chief Executive Officer pursuant to Rule 13a-14(b)
      or Rule 15d -14(c) of the Securities Exchange Act of 1934 and Section 906
      of the Sarbanes-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 Sarbanes-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).

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                                   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 authorized.

SPEAR & JACKSON, INC.

August 14, 2006                         /s/ John Harrington, Jr.
                                        -----------------------------
                                        John Harrington, Jr.
                                        Interim Chairman

August 14, 2006                         /s/ William Fletcher
                                        -----------------------------
                                        William Fletcher
                                        Acting Chief Executive
                                        Officer
                                        (Principal Executive Officer)

August 14, 2006                         /s/ Patrick J. Dyson
                                        -----------------------------
                                        Patrick J. Dyson
                                        Chief Financial Officer
                                        (Principal Financial and
                                        Accounting Officer)

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