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, 2004

                                       OR

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

          For the transition period from _____________ to ____________

                         Commission file number 0-32013

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

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

6001 Park of Commerce Boulevard, Suite 2,
Boca Raton, Florida                                      33487

------------------------------------------------        --------
(Address of principal executive offices)                (Zip Code)

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

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

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

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

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

Registrant had 11,741,122 shares of Common Stock, $.001 par value per share,
outstanding as of September 24, 2004.

STATEMENT CONCERNING FINANCIAL STATEMENTS
NOT REVIEWED BY INDEPENDENT AUDITOR

<PAGE>

The Company's independent public accountant, Sherb & Co., LLP ("Sherb & Co."),
advised the Company of its resignation as auditor in a letter to the Company
dated August 13, 2004. The Company subsequently filed a Form 8-K with the
Securities and Exchange Commission on August 18, 2004 to report Sherb & Co.'s
resignation.

The reports of Sherb & Co on the financial statements of the Company for the
past two fiscal years contained no adverse opinion or disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.

Further, in connection with the audits for the two most recent fiscal years and
in connection with Sherb & Co.'s review of the subsequent interim period
preceding resignation on August 13, 2004, there have been no disagreements
between the Company and Sherb & Co. on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
would have caused Sherb & Co., to make a reference thereto in its report on the
Company's financial statements for these fiscal years and interim period

The Company is seeking to retain an independent public accounting firm as Sherb
& Co.'s successor in as expedient a manner as possible. At the time of its
resignation, Sherb & Co had not completed its review of the Company's financial
statements for the three and nine month periods ended June 30, 2004. Due to the
timing of the resignation it has not been possible for the Company to appoint
new auditors and have the requisite review performed within the relevant
reporting deadlines. Therefore, the Company's interim third quarter financial
statements presented herewith on Form 10-Q have not been reviewed by an
independent accounting firm as required. The Company will re-file these
statements via an amended Form 10-Q/A as promptly as practicable following its
engagement of a successor accounting firm and that firm's completion of the
required review.

<PAGE>

<TABLE>
<CAPTION>
                              Spear & Jackson, Inc.

                                      INDEX

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

<S>           <C>                                                                   <C>
              Consolidated Balance Sheets -  June 30, 2004                          1
              and September 30, 2003 (audited)

              Consolidated Statements of Operations - Three and Nine Months         2
              ended June 30, 2004 and 2003

              Consolidated Statements of Comprehensive Income (Loss) - Three        3
              and Nine Months ended June 30, 2004 and 2003

              Consolidated Statements of Cash Flows -Nine Months ended June
              30, 2004 and 2003.                                                    4

              Notes to Consolidated Financial Statements                            5-17

Item 2        Management's Discussion and Analysis of Financial Condition           18-48
              and Results of Operations

Item 3        Quantitative and qualitative disclosures about market risk            48-50

Item 4        Controls and Procedures                                               50-51

PART II       OTHER INFORMATION

Item 1        Legal Proceedings                                                     52-53

Item 2        Changes in Securities, Use of Proceeds and Issuer Purchases           53
              of Equity Securities

Item 3        Defaults Upon Senior Securities                                       53

Item 4        Submission of Matters to a Vote of Security Holders                   53

Item 5        Other Information                                                     53

Item 6        Exhibits and Reports on Form 8-K                                      53-54

SIGNATURES                                                                          55
</TABLE>

<PAGE>

                             SPEAR & JACKSON, INC.

                          CONSOLIDATED BALANCE SHEETS
                          (IN THOUSANDS EXCEPT SHARES)

<TABLE>
<CAPTION>
                                                               AT JUNE 30,   AT SEPTEMBER 30,
                                                                  2004            2003
                                                              ------------   ----------------
                                                              (UNAUDITED)
<S>                                                             <C>            <C>
                              ASSETS
Current assets:
Cash and cash equivalents                                       $  3,685       $  9,191
Trade receivables, net                                            20,021         15,432
Inventories                                                       22,946         23,350
Assets held for sale                                               3,211             --
Other current assets                                               1,359            999
                                                                --------       --------
Total current assets                                              51,222         48,972

Property, plant and equipment, net                                23,336         19,561
Deferred taxation                                                 11,415         10,919
Investments                                                          163            148
                                                                --------       --------
Total assets                                                    $ 86,136       $ 79,600
                                                                ========       ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Notes payable                                               $     33       $    304
    Trade accounts payable                                         8,353          7,552
    Accrued expenses and other liabilities                        15,361         12,793
    Foreign taxes payable                                             71             50
                                                                --------       --------
Total current liabilities                                         23,818         20,699
Other liabilities                                                  1,422          1,787
Pension liability                                                 26,690         25,262

                                                                --------       --------
Total liabilities                                                 51,930         47,748
                                                                --------       --------
Stockholders' equity:
Common stock                                                          12             12
Additional paid in capital                                        51,590         51,590
Accumulated other comprehensive income:
    Pension additional minimum liability                         (33,243)       (30,204)
    Foreign currency translation adjustment                       12,873          7,406
    Unrealized losses on derivative instruments                      (15)           (15)
Retained earnings                                                  3,529          3,603
Less: 270,000 common stock held in treasury, at cost                (540)          (540)
                                                                --------       --------
                                                                  34,206         31,852
                                                                --------       --------
Total stockholders' equity                                      $ 86,136       $ 79,600
                                                                ========       ========
</TABLE>

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

                                       1
<PAGE>

                             SPEAR & JACKSON, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                          (IN THOUSANDS EXCEPT SHARES)

<TABLE>
<CAPTION>
                                                                FOR THE THREE MONTHS ENDED       FOR THE NINE MONTHS ENDED

                                                                  JUNE 30,        JUNE 30,        JUNE 30,        JUNE 30,
                                                                    2004            2003            2004            2003
                                                               ------------    ------------    ------------    ------------
                                                                                (RESTATED)                       (RESTATED)

<S>                                                            <C>             <C>             <C>             <C>
Net sales                                                      $     26,407    $     24,787    $     76,816    $     72,003
Cost of goods sold                                                   18,359          16,734          52,887          48,824
                                                               ------------    ------------    ------------    ------------
Gross profit                                                          8,048           8,053          23,929          23,179

Operating costs and expenses:
  Selling, general and administrative expenses                        8,067           5,278          23,144          16,816
                                                               ------------    ------------    ------------    ------------
Operating (loss) income                                                 (19)          2,775             785           6,363

Other income (expense)
  Royalties                                                              --               2              --              14
  Rental income                                                          58              38             140             108
  Interest and bank charges (net)                                       (92)            (69)           (233)           (158)
                                                               ------------    ------------    ------------    ------------

(Loss) income from continuing operations before income taxes            (53)          2,746             692           6,327
Provision for income taxes                                             (234)           (832)           (766)         (1,791)
                                                               ------------    ------------    ------------    ------------
(Loss) income from continuing operations                               (287)          1,914             (74)          4,536
                                                               ------------    ------------    ------------    ------------
Discontinued operations:

Income from operations of Megapro screwdriver division                   --              12              --              45
(including taxation of $Nil)
                                                               ------------    ------------    ------------    ------------
Income from discontinued operations                                      --              12              --              45
                                                               ------------    ------------    ------------    ------------
Net (loss) income                                              $       (287)   $      1,926    $        (74)   $      4,581
                                                               ============    ============    ============    ============
Basic and diluted (loss) earnings per share:

From continuing operations                                     ($      0.02)   $       0.16    ($      0.01)   $       0.38

From discontinued operations                                           0.00            0.00            0.00            0.00
                                                               ------------    ------------    ------------    ------------
Total                                                          ($      0.02)   $       0.16    ($      0.01)   $       0.38
                                                               ============    ============    ============    ============
Weighted average shares outstanding                              11,741,122      12,011,122      11,741,122      12,011,122
                                                               ============    ============    ============    ============
</TABLE>


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

                                       2
<PAGE>

                             SPEAR & JACKSON, INC.

             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                               FOR THE THREE      FOR THE THREE     FOR THE NINE      FOR THE NINE
                                                MONTHS ENDED      MONTHS ENDED       MONTHS ENDED     MONTHS ENDED
                                                 JUNE 30,         JUNE 30,            JUNE 30,          JUNE 30,
                                                   2004             2003                2004              2003
                                              ---------------  ---------------     ---------------   -------------
                                                                 (RESTATED)                            (RESTATED)

<S>                                              <C>               <C>               <C>               <C>
Total net (loss) income                          $    (287)        $   1,926         $     (74)        $   4,581

Other comprehensive income (loss)

   Additional minimum pension liability                 94            (1,275)           (3,039)           (1,517)
   Foreign currency translation adjustments           (529)            3,220             5,467             4,445
   Unrealized gains (losses) on derivative             (11)               (2)               --               (14)
   instruments
                                                 ---------         ---------         ---------         ---------
Total comprehensive (loss) income                $    (733)        $   3,869         $   2,354         $   7,495
                                                 =========         =========         =========         =========
</TABLE>


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

                                       3
<PAGE>

                             SPEAR & JACKSON, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             FOR THE NINE MONTHS ENDED
                                                                            JUNE 30,            JUNE 30,
                                                                              2004                2003
                                                                          ------------       ------------
                                                                                              (RESTATED)
<S>                                                                       <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income                                                       $        (74)      $      4,581
  Adjustments to reconcile net (loss) income to net cash provided by
    operating activities:
      Depreciation                                                               2,207              2,137
      Loss (profit) on sale of plant, property and equipment                        14               (170)
      Deferred income taxes                                                        673              1,726
  Changes in operating assets and liabilities, excluding the effects
    of acquisitions and dispositions:
      (Increase) decrease in trade receivables                                  (2,940)             1,064
      Decrease (increase) in inventories                                         2,329             (3,543)
      (Increase) decrease in other current assets                                  (51)               507
      Contributions paid to pension plan                                        (2,096)            (2,101)
      Decrease (increase) in other non-current assets                              973               (206)
      Increase in trade accounts payable                                           126              1,477
      Increase (decrease) in accrued expenses and other liabilities              1,222               (609)
      Decrease in foreign taxes payable                                            (25)                (5)
      (Decrease) increase in other liabilities                                    (531)               768
                                                                          ------------       ------------
NET CASH  PROVIDED BY  OPERATING ACTIVITIES                                      1,827              5,626
                                                                          ------------       ------------
INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                                    (7,071)            (2,690)
  Proceeds from sale of property, plant and equipment                               81                170
                                                                          ------------       ------------
NET CASH USED IN INVESTING ACTIVITIES                                           (6,990)            (2,520)
                                                                          ------------       ------------
FINANCING ACTIVITIES:
  Repayment of long-term debt                                                       --                (23)
  Repayment of overdraft                                                          (302)            (1,163)
  Promissory notes repaid                                                           --               (235)
  Repayment of shareholder loan                                                     --                (60)
                                                                          ------------       ------------
NET CASH USED IN FINANCING ACTIVITIES                                             (302)            (1,481)
                                                                          ------------       ------------

Effect of exchange rate changes on cash and cash equivalents                       (41)               196
                                                                          ------------       ------------

CHANGE IN CASH AND CASH EQUIVALENTS                                             (5,506)             1,821

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                $      3,685       $      8,307
                                                                          ============       ============
SUPPLEMENTAL CASH FLOW INFORMATION
    Cash paid for interest                                                $        219       $        174
                                                                          ============       ============
    Cash paid for taxes                                                   $        118       $         65
                                                                          ============       ============
</TABLE>


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

                                       4
<PAGE>

                             SPEAR & JACKSON, INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1--BASIS OF PRESENTATION

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

As further  explained in note 4, below,  the purchase of Spear & Jackson plc and
Bowers Group plc by Megapro Tools, Inc. (now Spear & Jackson,  Inc.),  which was
completed on September 6, 2002, was treated as a reverse acquisition.

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

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

It is suggested that these financial  statements be read in conjunction with the
audited  consolidated  financial statements and related footnotes of the Company
for the year ended  September 30, 2003  included in the Company's  annual report
filed on Form 10-KSB for the period then ended.

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

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

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


                                       5
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                          (IN THOUSANDS EXCEPT SHARES)


NOTE 1--BASIS OF PRESENTATION - CONTINUED


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


NOTE 2 - RECENTLY ISSUED ACCOUNTING STANDARDS

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

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

NOTE 3 - CRITICAL ACCOUNTING POLICIES

      A summary of significant  accounting policies is included in Note 2 to the
audited  consolidated  financial  statements  included in the  Company's  Annual
Report on Form 10-KSB for the year ended September 30, 2003. Management believes
that the application of these policies on a consistent basis enables the Company
to  provide  useful  and  reliable  financial  information  about the  Company's
operating results, results of cashflows, and financial condition.

      As disclosed in the annual report on Form 10-KSB for the fiscal year ended
September 30, 2003, the  discussion and analysis of our financial  condition and
results of  operations  are based upon our  consolidated  financial  statements.
These have been  prepared in conformity  with  accounting  principles  generally
accepted in the United  States.  The  preparation  of the  financial  statements
requires us to make estimates and assumptions and adopt accounting policies that
affect the  reported  amounts of assets,  liabilities,  revenues and expenses as
disclosed in those financial statements.  These judgements can be subjective and
complex, and consequently actual results could differ from those estimates.  Our
most  critical  accounting  policies  relate  to  revenue  recognition;  foreign
exchange  risk;  inventory and pension and other  postretirement  benefit costs.
Since September 30, 2003, there have been no changes in our critical  accounting
policies and no significant  changes to the assumptions and estimates related to
them.


NOTE 4 - NATURE OF BUSINESS

      The Company was  incorporated  in the State of Nevada on December 17, 1998
and was inactive  until the  acquisition  of Mega Tools Ltd. and Mega Tools USA,
Inc. via reverse  acquisition  on September 30, 1999. The Company was engaged in
the  manufacture  and sale of a  patented  multi-bit  screwdriver.  The  Company
entered into an  exclusive  North  American  license  agreement  with the patent
holder of a retracting  cartridge type screwdriver.  This license agreement gave
the Company unrestricted use of the patent in Canada and the United States until
November 8, 2005. 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 transfer of the trade,  property and
other net assets of Mega Tools USA,  Inc.  and Mega Tools Ltd. to the  principal

                                       6
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                          (IN THOUSANDS EXCEPT SHARES)

NOTE 4 - NATURE OF BUSINESS - CONTINUED

executive of these  companies.  The Company was evaluating the  circumstances of
the disposition at the time the SEC proceedings commenced in April 2004, and had
previously  referred the matter to British Columbia counsel for possible action.
The feasibility of pursuing  litigation  against its former  executive and third
party  purchaser  is being  considered  by current  management.  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.

NOTE 5 - RETIREMENT BENEFIT PLAN

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

      Pension  costs  amounted to $323 for the quarter  ending June 30, 2004 and
$67 for the same quarter  last year.  Pension  costs for the nine months  ending
June 30, 2004 were $973 compared with $199 for the equivalent prior year period.
The net periodic costs include the following components:

<TABLE>
<CAPTION>
                                         FOR THE THREE      FOR THE THREE     FOR THE NINE      FOR THE NINE
                                          MONTHS ENDED       MONTHS ENDED     MONTHS ENDED      MONTHS ENDED
                                            JUNE 30,          JUNE 30,          JUNE 30,          JUNE 30,
                                              2004              2003              2004              2003
                                          -----------       -----------       -----------       -----------
<S>                                       <C>               <C>               <C>               <C>
Service cost                              $       380       $       350       $     1,142       $     1,039
Interest cost                                   2,252             1,944             6,759             5,770
Expected return on plan assets                 (2,735)           (2,411)           (8,208)           (7,154)
Recognition of actuarial (gain) loss              426               184             1,280               544
                                          -----------       -----------       -----------       -----------
Total Benefit cost                        $       323       $        67       $       973       $       199
                                          ===========       ===========       ===========       ===========
</TABLE>


                                       7
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                          (IN THOUSANDS EXCEPT SHARES)

NOTE 5 - RETIREMENT BENEFIT PLANS - CONTINUED

      The  Company's  funding  policy with respect to the Plan is to  contribute
annually  not less than the minimum  required by  applicable  UK law and pension
regulations.  Amounts  payable  are  determined  on the  advice  of  the  Plan's
actuaries.  The Company has contributed $0.7 million to the funds in the quarter
ending  June 30,  2004 (2003 $0.7  million)  and $2.1  million in the nine month
period ending on that date (2003 $2.1  million).  The Company  anticipates  that
contributions of $2.8 million will be made in the year ending September 30, 2004
(2003 $2.8 million).

Accounting  standards  require a minimum pension  liability be recorded when the
value of pension assets is less than the accumulated  benefit obligation ("ABO")
at the annual  measurement  date.  As of  September  30,  2003,  our most recent
measurement date for pension  accounting,  the value of the accumulated  pension
benefit   obligation  (ABO)  exceeded  the  value  of  pension   investments  by
approximately $25.2 million. In accordance with accounting standards, the charge
against  stockholders'  equity will be adjusted in the fourth quarter to reflect
the value of pension assets compared to the ABO as of the end of September 2004.
If the level of pension assets exceeds the ABO as of a future  measurement date,
the full charge against stockholders' equity would be reversed.


NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET

                                                AT JUNE 30,   AT SEPTEMBER 30,
                                                ----------    ----------------
                                           NOTE     2004            2003
                                                ----------      ----------
                                              (in thousands)   (in thousands)
ASSETS HELD AND USED
   Land and buildings                           $   16,237      $   11,839
   Machinery, equipment and vehicles                 5,473           5,603
   Furniture and fixtures                               81             160
   Computer hardware                                    --              74
   Computer software                                    --              35
   Assets held under finance leases         (a)      1,545           1,850
                                                ----------      ----------
                                                $   23,336      $   19,561
                                                ==========      ==========
ASSETS HELD FOR RESALE
   Land and buildings                       (b) $    3,211      $       --
                                                ==========      ==========


(a) Included in machinery and equipment at June 30, 2004 are capital leases with
a net book value of $1.5million  (September 30, 2003 $1.9 million).  The cost of
these assets held under capital leases was $2.8 million  (September 30,2003 $2.5
million)  and the  accumulated  depreciation  relating  to the  assets  was $1.3
million (September 30, 2003 $0.6 million).

(b) In the nine months ended June 30,  2004,  the Company has spent $6.5 million
on the  acquisition  of its  manufacturing  site in  Wednesbury,  England  and a
warehouse and office facility in Boca Raton, Florida. Following the removal from
office of the Company's  former CEO, the current board, in conjunction  with the
Corporate  Monitor,  has  performed  a  detailed  review  of  its US  sales  and
distribution  strategy.  As a result,  the original  initiative  of setting up a
central  distribution  unit in Florida has been deferred.  The warehouse has now
been offered for sale and is  accordingly  presented as an asset held for resale
in the consolidated balance sheet of the Company at June 30, 2004. The directors
believe that the  ultimate  sales  proceeds  for the property  will not be below
original cost and the land and  buildings  are  therefore  included at their net
book carrying value.


                                       8
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                          (IN THOUSANDS EXCEPT SHARES)

NOTE 7 - INVENTORIES

<TABLE>
<CAPTION>
                                                              AT JUNE 30,     AT SEPTEMBER 30,
                                                              -----------     ----------------
                                                                  2004              2003
                                                              -----------       -----------
                                                            (in thousands)     (in thousands)
<S>                                                           <C>               <C>
Finished products                                             $    18,174       $    18,747
In-process products                                                 5,327             4,894
Raw materials                                                       5,723             5,464
Less: allowance for slow moving and obsolete inventories           (6,278)           (5,755)
                                                              -----------       -----------
                                                              $    22,946       $    23,350
                                                              ===========       ===========
</TABLE>

NOTE 8--INCOME TAXES

      Spear & Jackson  is  subject  to  income  taxes in the US and in the other
overseas tax jurisdictions where its principal trading subsidiaries operate. The
provision for US and foreign income taxes attributable to continuing  operations
consists of:

<TABLE>
<CAPTION>
                                                      FOR THE THREE      FOR THE THREE    FOR THE NINE       FOR THE NINE
                                                       Months Ended       Months Ended     Months Ended      Months Ended
                                                         June 30,           June 30,        June 30,           June 30,
                                                           2004               2003            2004               2003
                                                       -----------       -----------       -----------       -----------
<S>                                                    <C>               <C>               <C>               <C>
Current tax  credit (charge)                           $       (31)      $       (44)      $       (93)      $       (65)
Deferred tax (charge)                                         (203)             (787)             (673)           (1,726)
                                                       -----------       -----------       -----------       -----------
                                                       $      (234)      $      (831)      $      (766)      $    (1,791)
                                                       ===========       ===========       ===========       ===========
</TABLE>

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

<TABLE>
<CAPTION>
                                                      FOR THE THREE      FOR THE THREE    FOR THE NINE       FOR THE NINE
                                                       Months Ended       Months Ended     Months Ended      Months Ended
                                                         June 30,           June 30,        June 30,           June 30,
                                                           2004               2003            2004               2003
                                                       -----------       -----------       -----------       -----------
<S>                                                    <C>               <C>               <C>               <C>
Tax at US federal statutory income tax rate            $        19       $      (965)      $      (242)      $    (2,230)
Overseas tax at rates different to effective rate              (33)              143               (58)              303
Permanent differences                                          (38)              (71)             (113)             (138)
Valuation allowance                                           (182)               18              (353)              231
Miscellaneous                                                    0                43                --                43
                                                       -----------       -----------       -----------       -----------
                                                       $      (234)      $      (832)      $      (766)      $    (1,791)
                                                       ===========       ===========       ===========       ===========
</TABLE>

The principal  reconciling items therefore relate to differences  between the US
federal rate and rates effective in certain of the overseas regions in which the
Company  operates;  permanent  timing  differences  in respect of costs incurred
which are not allowable deductions for tax purposes;  and losses incurred in the
period in certain  subsidiaries for which no utilization  against future trading
income is anticipated.

NOTE 9 - SEGMENT DATA

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

      Given below are  summaries  of the  significant  accounts  and balances by
business  segment and by geographical  location,  reconciled to the consolidated
totals. In both periods,  transactions and balances  applicable to the Company's


                                       9
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9--SEGMENT DATA - CONTINUED

distribution companies in France, Australia and New Zealand have been aggregated
with the hand and garden product  businesses since these products  represent the
most significant proportion of the distribution companies' trades. The summaries
also provide an analysis of the accounts and  balances  between  continuing  and
discontinued operations.

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

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

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

<TABLE>
<CAPTION>
                                   SALES             LONG-LIVED ASSETS (a)             SALES             LONG-LIVED ASSETS (a)
                           ---------------------     ---------------------     ---------------------     ---------------------
                             THREE MONTHS ENDED        THREE MONTHS ENDED        NINE MONTHS ENDED         NINE MONTHS ENDED
                           JUNE 30,      JUNE 30,     JUNE 30,     JUNE 30,    JUNE 30,     JUNE 30,     JUNE 30,     JUNE 30,
                             2004          2003         2004         2003        2004         2003         2004         2003
                           --------     --------     --------     --------     --------     --------     --------     --------
<S>                        <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
  Hand & garden tools      $ 20,146     $ 19,229     $  9,622     $  6,898     $ 58,297     $ 55,254     $  9,622     $  6,898
  Metrology tools             3,912        3,502        2,812        2,705       11,599       10,412        2,812        2,705
  Magnetic products           2,349        2,056          901        1,049        6,920        6,337          901        1,049
  Screwdrivers                   --          263           --          180           --          869           --          180
  Corporate                      --       10,001        9,198           --           --       10,001        9,198
                           --------     --------     --------     --------     --------     --------     --------     --------
     Total                 $ 26,407     $ 25,050     $ 23,336     $ 20,030     $ 76,816     $ 72,872     $ 23,336     $ 20,030
                           ========     ========     ========     ========     ========     ========     ========     ========

Attributable to:
Continuing operations      $ 26,407     $ 24,787     $ 23,336     $ 19,850     $ 76,816     $ 72,003     $ 23,336     $ 19,850
Discontinued operations          --          263           --          180           --          869           --          180
                           --------     --------     --------     --------     --------     --------     --------     --------
                           $ 26,407     $ 25,050     $ 23,336     $ 20,030     $ 76,816     $ 72,872     $ 23,336     $ 20,030
                           ========     ========     ========     ========     ========     ========     ========     ========

<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,
                             2004          2003         2004         2003        2004         2003         2004         2003
                           --------     --------     --------     --------     --------     --------     --------     --------
<S>                        <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
  Hand & garden tools      $    465     $    488     $    218     $     41     $  1,464     $  1,448     $  3,636     $  1,721
  Metrology tools                90          101            7           --          310          297          168          543
  Magnetic products              78           51            3           --          249          206           28          333
  Screwdrivers                   --           12           --           --           --           36           --           --
  Corporate                      66           54            5           38          184          150        3,239           93
                           --------     --------     --------     --------     --------     --------     --------     --------
     Total                 $    699     $    706     $    233     $     79     $  2,207     $  2,137     $  7,071     $  2,690
                           ========     ========     ========     ========     ========     ========     ========     ========

Attributable to:
Continuing operations      $    699     $    694     $    233     $     79     $  2,207     $  2,101     $  7,071     $  2,690
Discontinued operations          --           12           --           --           --           36           --           --
                           --------     --------     --------     --------     --------     --------     --------     --------
                           $    699     $    706     $    233     $     79     $  2,207     $  2,137     $  7,071     $  2,690
                           ========     ========     ========     ========     ========     ========     ========     ========

<CAPTION>
                             OPERATING 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,
                             2004          2003         2004         2003        2004         2003         2004         2003
                           --------     --------     --------     --------     --------     --------     --------     --------
<S>                        <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
  Hand & garden tools      $    (70)    $  1,863     $    (56)    $    (77)    $    641     $  4,532     $   (179)    $   (175)
  Metrology tools               406          449           (5)          (6)       1,046        1,098          (14)         (11)
  Magnetic products             296          490           (4)          (4)         839        1,200          (10)          (9)
  Screwdrivers                   --           15           --           (3)          --           61           --          (18)
  Corporate                    (651)         (27)         (27)          18       (1,741)        (467)         (30)          39
                           --------     --------     --------     --------     --------     --------     --------     --------
     Total                 $    (19)    $  2,790     $    (92)    $    (72)    $    785     $  6,424     $   (233)    $   (174)
                           ========     ========     ========     ========     ========     ========     ========     ========
Attributable to:
Continuing operations      $    (19)    $  2,775     $    (92)    $    (69)    $    785     $  6,363     $   (233)    $   (158)
Discontinued operations          --           15           --           (3)          --           61           --          (16)
                           --------     --------     --------     --------     --------     --------     --------     --------
                           $    (19)    $  2,790     $    (92)    $    (72)    $    785     $  6,424     $   (233)    $   (174)
                           ========     ========     ========     ========     ========     ========     ========     ========
</TABLE>

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


                                       10
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9 - SEGMENT DATA - CONTINUED

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

<TABLE>
<CAPTION>
                                  SALES (a)          LONG-LIVED ASSETS (b)            SALES (a)          LONG-LIVED ASSETS (b)
                           ---------------------     ---------------------     ---------------------     ---------------------
                             THREE MONTHS ENDED       THREE MONTHS ENDED         NINE MONTHS ENDED        NINE MONTHS ENDED
                           JUNE 30        JUNE 30    JUNE 30       JUNE 30      JUNE 30     JUNE 30      JUNE 30      JUNE 30
                             2004          2003        2004         2003         2004        2003          2004        2003
                           --------     --------     --------     --------     --------     --------     --------     --------
<S>                        <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
  United Kingdom           $ 12,477     $  7,460     $ 21,556     $ 17,881     $ 35,009     $ 29,242     $ 21,556     $ 17,881
  Europe                      4,659        5,548        1,224        1,288       14,951       14,187        1,224        1,288
  Australasia                 3,717        5,456          556          681       12,463       16,599          556          681
  North America               2,035          982           --          180        5,212        5,281           --          180
  Other                       3,519        5,604           --           --        9,181        7,563           --           --
                           --------     --------     --------     --------     --------     --------     --------     --------
     Total                 $ 26,407     $ 25,050     $ 23,336     $ 20,030     $ 76,816     $ 72,872     $ 23,336     $ 20,030
                           ========     ========     ========     ========     ========     ========     ========     ========
Attributable to:
Continuing operations      $ 26,407     $ 24,787     $ 23,336     $ 19,850     $ 76,816     $ 72,003     $ 23,336     $ 19,850
Discontinued operations          --          263           --          180           --          869           --          180
                           --------     --------     --------     --------     --------     --------     --------     --------
                           $ 26,407     $ 25,050     $ 23,336     $ 20,030     $ 76,816     $ 72,872     $ 23,336     $ 20,030
                           ========     ========     ========     ========     ========     ========     ========     ========

<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
                             2004          2003        2004         2003         2004        2003          2004        2003
                           --------     --------     --------     --------     --------     --------     --------     --------
<S>                        <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
  United Kingdom           $    575     $    572     $     10     $     74     $  1,872     $  1,798     $  3,580     $  2,387
  Europe                         27           27           --            5           73           84            3            8
  Australasia                    80           92          218           --          227          213          249          285
  North America                  17           15            5           35           42        3,239           10
                           --------     --------     --------     --------     --------     --------     --------     --------
     Total                 $    699     $    706     $    233     $     79     $  2,207     $  2,137     $  7,071     $  2,690
                           ========     ========     ========     ========     ========     ========     ========     ========
Attributable to:
Continuing operations      $    699     $    694     $    233     $     79     $  2,207     $  2,101     $  7,071     $  2,690
Discontinued operations          --           12           --           --           --           36           --           --
                           --------     --------     --------     --------     --------     --------     --------     --------
                           $    699     $    706     $    233     $     79     $  2,207     $  2,137     $  7,071     $  2,690
                           ========     ========     ========     ========     ========     ========     ========     ========

<CAPTION>
                              OPERATING 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
                             2004          2003        2004         2003         2004        2003          2004        2003
                           --------     --------     --------     --------     --------     --------     --------     --------
<S>                        <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
  United Kingdom           $    737     $  2,700     $    (55)    $    (32)    $  1,909     $  6,032     $   (130)    $    (61)
  Europe                         22          (10)         (44)         (54)         219          160         (143)        (127)
  Australasia                  (207)         297            3           (4)        (277)         828           18           (8)
  North America                (571)        (197)           4           18       (1,066)        (596)          22           22
                           --------     --------     --------     --------     --------     --------     --------     --------
     Total                 $    (19)    $  2,790     $    (92)    $    (72)    $    785     $  6,424     $   (233)    $   (174)
                           ========     ========     ========     ========     ========     ========     ========     ========
Attributable to:
Continuing operations      $    (19)    $  2,775     $    (92)    $    (69)    $    785     $  6,363     $   (233)    $   (158)
Discontinued operations          --           15           --           (3)          --           61           --          (16)
                           --------     --------     --------     --------     --------     --------     --------     --------
                           $    (19)    $  2,790     $    (92)    $    (72)    $    785     $  6,424     $   (233)    $   (174)
                           ========     ========     ========     ========     ========     ========     ========     ========
</TABLE>

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


                                       11
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 10 - COMMITMENTS AND CONTINGENCIES

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

      On April 15, 2004, the U.S.  Securities and Exchange Commission filed suit
in the U.S.  District  Court for the Southern  District of Florida,  against the
Company and Mr.  Dennis  Crowley,  its then  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  its   registration,   anti-fraud  and  reporting   provisions.   These
allegations arise from the alleged failure of Mr. Crowley,  to accurately report
his ownership of the Company's stock, and his alleged  manipulation of the price
of the Company's stock through the dissemination of false information,  allowing
him to profit from sales of stock through nominee accounts.  On May 10,2004, the
Company consented to the entry of a preliminary injunction, without admitting or
denying the allegations of the SEC complaint.

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

      On July 19,  2004,  the Monitor  filed a Motion to expand the scope of his
role as Monitor and included his Report on Findings  and  Recommendations  dated
July 16, 2004.  The motion  provides that the Monitor is seeking an expansion of
his role because of his  criticisms of the capability  and  independence  of the
Company's  current Board and senior  executive  management to achieve  corporate
objectives and pursue  potential  claims.  The Company has filed a memorandum in
opposition to the request of the Monitor based on what the Company  perceives to
be  mischaracterization  by the  Monitor of  developments  to date,  efforts and
substantial  accomplishments by the Board and management,  and potential harm to
the Company's  shareholders based upon a more encompassing role for the Monitor.
The Company has also filed a Motion  requesting the Court to reconsider that the
SEC's charges were not systemic throughout the Company's operations.

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

      The  Company  is  pursuing  settlement  negotiations  with the SEC and Mr.
Crowley to reach a resolution with the SEC as well as Mr. Crowley.

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


                                       12
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 11 - SUBSEQUENT EVENTS


On July 22,  2004,  the Company  received a  preliminary  offer to purchase  the
Company's principal corporate subsidiaries, Spear & Jackson plc and Bowers Group
plc, from the Company's subsidiary  management,  including William Fletcher, the
Company's Chief Financial Officer, a director and acting CEO and Chief Operating
Officer.  The proposed purchase (based on current exchange rates),  which is for
acquisition  of the issued share capital of these  subsidiaries,  contemplates a
cash purchase amount of approximately  $26,000,000,  with the Company  retaining
existing cash and  non-subsidiary  real estate assets currently  estimated to be
approximately $5,000,000. The proposal also contemplates forgiveness of existing
inter-company receivables due from the parent.

The offer is based on various  assumptions  including that the subsidiaries will
be free of third party net debt and  satisfactory  resolution of certain pension
issues as a result of changing  pension  legislation in the United Kingdom.  The
purchase  price  is  based  on  minimum  net  assets  of  the   subsidiaries  of
approximately  $12,161,700  (based on current  exchange  rates)  and  subject to
downward  adjustment on the basis of the prospective  purchaser's  evaluation of
the impact of such pension legislation.

The Company  will engage the services of an  investment  banking firm or similar
organizations to assist in evaluating this proposal,  as well as to consider any
other proposals  relevant to the Company and its subsidiaries.  The Company will
also  require  the  evaluation  and  approval of its  court-appointed  Corporate
Monitor as part of the approval process.

NOTE 12 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

On March 8, 2004 the  Company  filed form 10-QSB  (Amendment  1) relating to the
period ended June 30, 2003. Explained in detail, below, are the adjustments made
to the  Company's  original Form 10-QSB for the period ended June 30, 2003 which
was filed on August 5, 2003. In summary,  the principal correcting item referred
to the revision of the  presentation,  under SFAS 87, of the  Company's  defined
benefit pension plan. This revision  followed the  identification  by the Plan's
actuaries  of a  material  error in their  calculations  supporting  the SFAS 87
disclosure  used  in the  Company's  financial  statements  for the  year  ended
September 30, 2002, as included in Form 10-KSB/A  (Amendment 1) filed on May 28,
2003.

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

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

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


                                       13
<PAGE>

Amendments  made  herewith to form 10-QSB,  as filed on August 5, 2003,  for the
three and nine month periods ended June 30, 2003 and June 30, 2002 in respect of
the above adjustments, specifically comprise the following:


                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                          (IN THOUSANDS EXCEPT SHARES)

NOTE 12 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS - CONTINUED

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

      a)    Overstatements  in the  calculation  of the market  related value of
            assets,  which meant that additional  unrecognized  actuarial losses
            should have been amortized in the consolidated  income statement for
            the years ended September 30, 2002 and September 30, 2001.

      b)    At  September  30,  2002,  no  comparison  of the fair value of plan
            assets to the accumulated  benefit obligation ("ABO") was performed.
            Consequently a pension prepayment was incorrectly  recognized in the
            consolidated  balance  despite  the ABO  being in excess of the fair
            value  of plan  assets.  The 2002  consolidated  balance  sheet  was
            therefore  amended to properly record an additional  minimum pension
            liability equivalent to the shortfall of plan assets compared to the
            plan's ABO.

      c)    The pension disclosures at September 30, 2001 were also reconsidered
            and an  additional  minimum  pension  liability  was  recognized  in
            respect of that year also.

      At September 30, 2002,  item (a) impacted the previously  reported  figure
      for Selling,  General and Administrative (SG&A) expenses, and also the tax
      charge for the year. Item (b) resulted in the previously disclosed pension
      asset of $14,962  being  presented as a pension  liability of $20,442 with
      corresponding debit entries being made to deferred taxation of $10,621 and
      to the "Other  Comprehensive  Income (Loss)" caption within  shareholders'
      equity of  $24,343.  The 2001 ABO  pension  adjustments,  item  (c),  were
      reflected in the consolidated statement of changes in shareholders' equity
      for the year ended  September  30,  2001.  They also  affected the SFAS 87
      charges for 2002 and subsequent years.

      These  adjustments  also  impact  on the  previously  submitted  financial
      statements  for the three and nine months  ended June 30, 2003 as follows.
      Item (a)  reduced  the  figure for  retained  profits  brought  forward at
      October 1, 2002, as originally stated, by $440 with $628 being credited to
      the  brought  forward  pension  liability  and $188  being  debited to the
      deferred  tax asset at October 1, 2002.  Items (b) and (c) resulted in the
      previously disclosed pension asset of $18,202 being presented as a pension
      liability  of  $19,370  with  corresponding  debit  entries  being made to
      deferred  taxation  of  $11,084  and to the  "Other  Comprehensive  Income
      (Loss)" caption within shareholders' equity of $25,860.

2.    The fair value of the consideration for the deemed  acquisition of Megapro
      Tools,  Inc.  was  revised.  This  resulted in  goodwill  of $1,138  being
      recognized  which was then  written off  following  a goodwill  impairment
      review. With regard to the financial  statements for the nine months ended
      June 30, 2003,  retained  profits  brought forward at October 1, 2002 were
      correspondingly reduced by this amount.


3.    Sales  rebates  totaling  $906 in the three months ended June 30, 2003 and
      $800 in the three months ended June 30, 2002, and rebates of $2,635 in the
      nine months  ended June 30, 2003 and $2,258 in the nine months  ended June
      30, 2002, which were previously  presented as a component of SG&A expense,
      have been reanalyzed and are now shown as a reduction to sales.

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


                                       14
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                          (IN THOUSANDS EXCEPT SHARES)

NOTE 12 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS - CONTINUED

5.    Additional detailed segmental analysis disclosure.


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

In addition  to the above,  following  the  disposal  of the  Company's  Megapro
screwdriver  division  in  September  2003,  the results of that  business  were
re-classified as discontinued operations in the Company's Consolidated

Statement of Operations for the year ended September 30, 2003. The  Consolidated
Statements of Operations  for the quarters  ended  December 31, 2002,  March 31,
2003  and June 30,  2003  have  also  been  revised  to  incorporate  a  similar
re-classification  of operations.  The following tables present the Consolidated
Statements  of  Operations  for the three and nine months ended June 30, 2003 as
previously reported and as restated.  The financial  information is presented in
thousands, except for per share data.


                                       15
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                          (IN THOUSANDS EXCEPT SHARES)


NOTE 12 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS - CONTINUED

SPEAR & JACKSON, INC.
CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                   FOR THE THREE MONTHS ENDED
                                                                                           JUNE 30, 2003
                                                                 ------------------------------------------------------------------
                                                                 AS PREVIOUSLY      AS RESTATED      DISCONTINUED    AS RESTATED
                                                                   REPORTED      BEFORE DISCLOSURE    OPERATIONS   AFTER DISCLOSURE
                                                                                  OF DISCONTINUED                  OF DISCONTINUED
                                                                                     OPERATIONS                       OPERATIONS
                                                                 ------------------------------------------------------------------
<S>                                                              <C>              <C>              <C>              <C>
Net sales                                                        $     25,956     $     25,050     $       (263)    $     24,787
Cost of goods sold                                                     16,886           16,886             (152)          16,734
                                                                 ---------------------------------------------------------------
Gross profit                                                            9,070            8,164             (111)           8,053

Operating costs and expenses:
Selling, general and administrative expenses                            6,280            5,374              (96)           5,278
                                                                 ---------------------------------------------------------------
Operating income (loss) from continuing operations                      2,790            2,790              (15)           2,775

Other income (expense)
Royalty Income                                                              2                2               --                2
Rental income                                                              38               38               --               38
Interest and bank charges (net)                                           (72)             (72)               3              (69)
                                                                 ---------------------------------------------------------------

Income (loss) from continuing operations before taxation                2,758            2,758              (12)           2,746
Provision for income taxes                                               (832)            (832)              --             (832)
                                                                 ---------------------------------------------------------------
Income (loss) from continuing operations                                1,926            1,926              (12)           1,914
                                                                 ---------------------------------------------------------------
Discontinued operations:
       Income from operations of Megapro screwdriver division              --               --               12               12
                                                                 ---------------------------------------------------------------
Income from discontinued operations                                        --               --               12               12
                                                                 ---------------------------------------------------------------
Net income                                                       $      1,926     $      1,926     $         --     $      1,926
                                                                 ===============================================================
Basic and diluted earnings per share:

From continuing operations                                       $       0.16     $       0.16     $       0.00     $       0.16
From discontinued operations                                             0.00             0.00             0.00             0.00
                                                                 ---------------------------------------------------------------
Total                                                            $       0.16     $       0.16     $       0.00     $       0.16
                                                                 ===============================================================

Weighted average shares outstanding                                12,011,122       12,011,122       12,011,122       12,011,122
                                                                 ===============================================================
</TABLE>


                                       16
<PAGE>

                             SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                          (IN THOUSANDS EXCEPT SHARES)


NOTE 12 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS - CONTINUED

SPEAR & JACKSON, INC.
CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                   FOR THE NINE MONTHS ENDED
                                                                                          JUNE 30, 2003
                                                                 ------------------------------------------------------------------
                                                                 AS PREVIOUSLY      AS RESTATED      DISCONTINUED    AS RESTATED
                                                                   REPORTED      BEFORE DISCLOSURE    OPERATIONS   AFTER DISCLOSURE
                                                                                  OF DISCONTINUED                  OF DISCONTINUED
                                                                                     OPERATIONS                       OPERATIONS
                                                                 ------------------------------------------------------------------
<S>                                                              <C>              <C>              <C>              <C>
Net sales                                                        $     75,507     $     72,872     $       (869)    $     72,003
Cost of goods sold                                                     49,370           49,370             (546)          48,824
                                                                 ---------------------------------------------------------------
Gross profit                                                           26,137           23,502             (323)          23,179

Operating costs and expenses:
Selling, general and administrative expenses                           19,713           17,078             (262)          16,816
                                                                 ---------------------------------------------------------------
Operating income (loss) from continuing operations                      6,424            6,424              (61)           6,363

Other income (expense)
Royalties (net)                                                            14               14               --               14
Rental income                                                             108              108               --              108
Interest and bank charges (net)                                          (174)            (174)              16             (158)
                                                                 ---------------------------------------------------------------

Income (loss) from continuing operations before taxation                6,372            6,372              (45)           6,327
Provision for income taxes                                             (1,791)          (1,791)              --           (1,791)
                                                                 ---------------------------------------------------------------

Income (loss) from continuing operations                                4,581            4,581              (45)           4,536
                                                                 ---------------------------------------------------------------
Discontinued operations:
       Income from operations of Megapro screwdriver division              --               --               45               45
                                                                 ---------------------------------------------------------------
Income from discontinued operations                                        --               --               45               45
                                                                 ---------------------------------------------------------------

Net income                                                       $      4,581     $      4,581     $         --     $      4,581
                                                                 ===============================================================
Basic and diluted earnings per share:

From continuing operations                                       $       0.38     $       0.38     ($      0.00)    $       0.38
From discontinued operations                                             0.00             0.00             0.00             0.00
                                                                 ---------------------------------------------------------------
                                                                 $       0.38     $       0.38     $       0.00     $       0.38
                                                                 ===============================================================

Weighted average shares outstanding                                12,011,122       12,011,122       12,011,122       12,011,122
                                                                 ===============================================================
</TABLE>


                                       17
<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. Although we believe that our expectations are based on reasonable
assumptions within the bounds of our knowledge of our business and operations,
actual results may differ materially from our expectations. Factors that could
cause actual results to differ from expectations include, without limitation:

-     achieving planned revenue and profit growth in each of the Company's
      business units;
-     renewal of material contracts in the Company's business units consistent
      with past experience;
-     successful and timely integration of any significant businesses acquired
      by the Company and realization of anticipated synergies;
-     increasing price, products and services competition;
-     emergence of new competitors or consolidation of existing competitors;
-     the timing of orders and shipments;
-     continuing availability of appropriate raw materials and factored
      products;
-     maintaining and improving current product mix;
-     changes in customer requirements and in the volume of sales to principal
      customers;
-     changes in governmental regulations in the various geographical regions
      where the Company operates;
-     the timely implementation of the Company's restructuring programs and
      financial plans;
-     general economic and political conditions, including the global economic
      slowdown and interest rate and currency exchange rate fluctuation;
-     continuing development and maintenance of appropriate business continuity
      plans for the Company's processing systems;
-     absence of consolidation among key customers;
-     attracting and retaining qualified key employees;

                                       18
<PAGE>

-     no material breach of security of any of the Company's systems;
-     the ability of the Company to control manufacturing and operating costs;
-     continued availability of financing, and financial resources on the terms
      required to support the Company's future business strategies; and
-     the outcome of pending and future litigation and governmental or
      regulatory proceedings.
-     the potential acquisition of the Company or its principal assets.

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

CORPORATE ORGANIZATION

Overview

We currently conduct our business operations through our wholly owned
subsidiaries, Spear & Jackson plc and Bowers Group plc, and, until September 30,
2003 Mega Tools Ltd and Mega Tools USA, Inc. A brief summary of our corporate
organizational history is as follows:

Incorporation of Megapro Tools, Inc.

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

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

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

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

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

                                       19
<PAGE>

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

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

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

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

On August 23, 2002, USI Mayfair Limited, a corporation organized under the laws
of England and a wholly-owned subsidiary of USI Global Corp., Megapro Tools,
Inc. and S and J Acquisitions Corp. (a company incorporated on August 22, 2002
under the laws of the State of Florida and a wholly owned subsidiary of Megapro
Tools, Inc.) executed a Stock Purchase Agreement to acquire all of the issued
and outstanding shares of Spear & Jackson plc and its affiliate, Bowers Group
plc, owned by USI Mayfair Limited. The purchase price comprised 3,543,281 shares
of common stock of Megapro and promissory notes in the principal amount of
(pound)150,000 pounds sterling (approximately $235,000) ("the Transaction"). 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.


                                       20
<PAGE>

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

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

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

Change of Name to Spear & Jackson, Inc.

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

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

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

Exit From Screwdriver Operations

With effect from September 30, 2003 the Company exited its screwdriver
operations following the disposition of the trade and assets of Mega Tools Ltd
and Mega Tools USA, Inc. The disposition of the screwdriver division was
undertaken by Neil Morgan who was then heading up the division.


                                       21
<PAGE>

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

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

Summary of Principal Operations

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

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

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

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

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

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


                                       22
<PAGE>

3)       The Company's metrology division comprises:

         Moore & Wright and Coventry Gauge which manufacture a wide variety of
         products. These products include: low technology measuring tools and
         hand held gauges for checking the threads, diameters and tapers of
         machined components. This division has supplemented its manufactured
         products with a range of factored items.

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

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

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

The Company's products are either own manufacture or sourced as fully complete
factored products or semi finished components.

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

<TABLE>
<CAPTION>
       Name/Location                                                 Products Manufactured

<S>    <C>                                                           <C>
A      UK

a)     Neill Tools Atlas Site, Sheffield                             Hand Tools

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

c)     Robert Sorby, Sheffield                                       Wood Turning Tools

d)     Eclipse Magnetics Vulcan Road, Sheffield                      Magnetic Products

e)     Bowers Metrology, Bradford                                    Precision Measuring Tools

f)     Coventry Gauge, Poole                                         Precision Measuring Tools
</TABLE>


                                       23
<PAGE>

B      France

a)     Spear & Jackson Assembly of garden tools France

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

These markets chiefly comprise:

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

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

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

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

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

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

(b)      Continuous product improvement and innovation.

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

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

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


                                       24
<PAGE>

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

The Company's policy is to support its core product offering with a pipeline of
new products and range extensions. In the period from April 1, 2004 to June 30,
2004 new product range launches and other significant product related business
developments have included:

Neill Tools witnessed advances in the following areas :

o    Following the success of the `Predator' woodsaw earlier in the year, the
     range was extended with the introduction of other saws under the `Predator'
     name.

o    Significant listings were secured with two major building merchants for
     woodsaws and contractors' tools for deliveries beginning in September 2004.

Eclipse Magnetics continued to develop and grow its "Specials Division". These
bespoke designed solutions represent a significant opportunity since they are
highly specialized and, as such, are not subject to threat from cheap foreign
imports.

The previously launched Metrology `SmartPlug' range of gauges was expanded in
the third quarter with the introduction of additional options and accessories.
Sales penetration is now being gained in the general automotive market and with
Formula 1 racing teams.

Spear & Jackson France successfully launched a new range of brass garden
ornaments and brushes together with extensions to its existing garden tools
ranges.

Robert Sorby continued its drive into North America and was successful in
obtaining its largest ever single order from a US customer of $400k.

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

Spear & Jackson (Australia) tendered for and retained the account of its largest
customer with forecast sales of approximately $5.5 million per annum. Spear &
Jackson (New Zealand) was successful in securing a major new customer in the
third quarter from which annual sales of up to $0.7 million are anticipated in
the forthcoming year.

DISCUSSION OF CRITICAL ACCOUNTING POLICIES

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


                                       25
<PAGE>

Management's Discussion and Analysis or Plan of Operation in the Company's
10-KSB filing for the year ended September 30, 2003 included a detailed
discussion which addressed our most critical accounting policies. The quarterly
financial statements for the period ended June 30, 2004, attached hereto, should
therefore be read in conjunction with that discussion.

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

Our most critical accounting policies are those relating to revenue recognition,
foreign exchange risk, inventory valuation and accounting for income taxes.

With regard to the accounting for income taxes, we are required to recognize a
provision for income taxes based upon the taxable income and temporary
differences for each of the tax jurisdictions in which we operate and for all
discrete reportable income streams within those jurisdictions. This process
requires a calculation of taxes payable and an analysis of temporary differences
between the book and tax bases of our assets and liabilities, including various
accruals, allowances, depreciation and amortization. The tax effect of these
temporary differences and the estimated tax benefit from our tax net operating
losses are reported as deferred tax assets and liabilities in our consolidated
balance sheet.

In accordance with the provisions of Financial Accounting Standard No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), deferred taxes are recognized
for operating losses that are available to offset future taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. To the extent we establish a
valuation allowance or change the allowance in a period, we reflect the change
with a corresponding increase or decrease in our tax provision in our income
statement. Historically, these provisions have adequately provided for our
actual income tax liabilities. However, unexpected or significant future changes
in trends could result in a material impact to future statements of income and
cash flows.

Spear & Jackson, Inc. has approximately twenty income streams within its
subsidiary companies for which individual income tax computations are required.
Certain of these income streams have Net Operating Losses brought forward from
earlier periods that are available for set off against current period earnings
arising within those streams. Aggregating these individual income tax
calculations derives the income tax charge or credit that appears in the
Company's consolidated quarterly and annual financial statements.

Because of the streamed approach applied to the Company's earnings for the
purpose of calculating its overall taxation liability, significant movements in
the Company's effective rate of income tax can arise despite consolidated pre
tax earnings remaining constant between one reporting period and the next.
Factors giving rise to such fluctuations include:


                                       26
<PAGE>

(a)   Periodic variations in the geographical location of earnings. For example,
      losses incurred in any of our UK subsidiaries in a period may be set off
      against profits arising in other UK entities in the same period. Where
      individual UK profit streams are in excess of UK losses, all the losses
      can be absorbed. If the UK taxable losses exceed UK taxable profits the
      excess losses cannot, however, be surrendered to non UK companies. A
      situation may therefore arise whereby a reduction in the level of
      profitability of our UK subsidiaries from one reporting period to the next
      could be matched by an increase in earnings in, say, our French affiliate.
      Although the overall total of consolidated pre tax earnings in the two
      periods remains unaltered, a higher effective tax charge may result as a
      consequence of excess UK tax losses arising in the second period which
      cannot be offset against the French earnings. The French earnings thus
      remain unsheltered and attract taxation at the local statutory rate. The
      excess UK losses may not give rise to a taxation credit if a carry forward
      of the losses as a deferred tax asset cannot be justified through doubts
      concerning their ultimate utilization against future profits and a higher
      period two tax charge will follow.

(b)   Variations in the amount of expenses not allowed to be treated as a
      deduction for income tax purposes. The level of such permanently
      disallowable items can vary substantially period to period as a result,
      for example, of the incidence of substantial one-off legal and
      professional fees incurred on non-trading items.

(c)   Higher or lower levels of profit arising in entities having the benefit of
      NOLs which have not been capitalised as a deferred tax asset because of
      doubts concerning their short term realization against future profits.

(d)   Fluctuations in the level of losses incurred in consistently loss making
      subsidiaries which already have significant NOLs against which valuation
      allowances have been previously made.

The interaction of these factors can cause our effective tax rate to vary
significantly. Because of the complex interrelationships involved and variances
between actual and budgeted earnings on both a consolidated and an individual
income stream basis, the impact of these items on the Company's overall taxation
rate cannot always be accurately forecast for future periods.


                                       27
<PAGE>

In addition, the Company operates a contributory defined benefit plan covering
certain of its employees in the United Kingdom based subsidiaries of Spear &
Jackson plc. Several statistical and other factors which attempt to anticipate
future events are used in calculating the expense and liability related to the
plans. These factors include assumptions about the discount rate, expected
return on plan assets and rate of future compensation increases as determined by
us, within certain guidelines, and in conjunction with our actuarial consultants
and auditors. Our actuarial consultants also use subjective factors such as
withdrawal and mortality rates to estimate the expense and liability related to
these plans. The actuarial assumptions used by us may differ significantly,
either favorably or unfavorably, from actual results due to changing market and
economic conditions, higher or lower withdrawal rates or longer or shorter life
spans of participants.

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

OVERVIEW

Overall, the results for the quarter ending June 30, 2004 followed the trends
established in the previous three months and operating profitability shows a
decrease when compared to the results for the equivalent period last year. The
Company's management believes, however, that conditions are showing signs of
improvement in certain sectors of our markets. Garden tools sales in the UK
improved in line with the better weather. Export sales increased despite the
weak dollar as customers were unable to further postpone purchasing in
anticipation of a strengthening of the dollar.

Sales revenues for the quarter ended June 30, 2004 increased by approximately
$1.6 million over the comparable period in the previous year. This gain was
primarily attributable to favorable currency exchange fluctuations in the
current year although improvements in sales volumes were recorded in both the
Neill Tools and Robert Sorby divisions.

In general sales volumes were again adversely affected by the continued impact
of the loss, in late 2003, of a major Australian customer, the negative impact
in certain export markets of the weak US dollar, soft domestic demand and lack
of optimism in the capital goods manufacturing sector.

With regard to overhead expenditure, the additional costs associated with the
set up of the enhanced UK and US sales infrastructure have, disappointedly, not
yet resulted in the anticipated sales increases that had been forecast. The
position has been further exacerbated by continuing UK distribution cost
overruns.

In addition, corporate head office costs in the US have significantly increased
as a result of the legal and professional fees, monitor costs and associated
expenses incurred in connection with the U.S. Securities and Exchange
Commission's suit against the Company and its former Chief Executive Officer.
Head office salary costs have fallen as a result of the removal of the Company's
former CEO but this reduction has not been sufficient to absorb the increases in
legal fees in the period.

Following the trend highlighted in our overview for the quarter ended March 31,
2004, margins were again diluted by increases in prices for our principal raw
materials of steel, plastic, cobalt and nickel. Margins have further been
depressed by a shift in sales which has seen a movement towards lower
contribution factored product in preference to own manufacture items.


                                       28
<PAGE>

The above margin erosions in conjunction with the increased SG&A expenses have
accordingly resulted in an operating loss of $19,000 for the period ended June
30, 2004 compared to a profit of approximately $2.77 million for the same period
last year.

The Company is addressing the decrease in operating profitability by the launch
of new products to re-establish our competitive edge over cheap imports. An
extended woodsaw range has already been introduced to the market and the launch
of a range of powered garden tools is planned for later in the year.
Additionally, the Company anticipates that it will continue to buy in finished
and semi finished components as a cost efficient alternative to own manufacture.
During the quarter ended June 30, 2004, we reduced overhead costs in the trading
units without compromising quality of service or diminishing our presence in the
market place. The Company intends to continue exploring initiatives to reduce
its manufacturing base costs, both in respect of raw materials and processes, in
order to minimize margin erosion.

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

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

The disposition of the screwdriver division was undertaken by Neil Morgan, who
was then heading up the division, to a separate group, which included Mr.
Morgan, and in exchange for which the Company received promissory notes and
other receivables from management of $284,000 as well as discharge of a loan in
the amount of approximately $100,000 owed by the Company to Neil Morgan. The
assets disposed of had a net book value of approximately $384,000.


                                       29
<PAGE>

The Company believes that no specific authorization was afforded to the
Company's management at the time of the disposition to formally dispose of the
Company's screwdriver division assets pending approval by the Board of Directors
of the Company. The Company's current management has reviewed the terms of the
transaction, as well as evaluating the receivable and the assets purportedly
conveyed, to consider its course of action in this matter and whether it will
require adjustment of the consideration received in addition to the $97,000
already provided as potentially irrecoverable in the Company's financial
statements for the year ended September 30, 2003. The Company's evaluation of
the circumstances of the disposition and the potential claims against Mr. Morgan
and the transferee was already underway at the time that the SEC proceedings
commenced in April 2004.

The Company plans to challenge the manner in which the screwdriver division was
disposed of by Mr. Morgan and expects to commence a legal action against Mr.
Morgan and the third party purchaser of the assets of the division.

RESULTS OF OPERATIONS

Sales revenues increased by $4.8 million from $72 million in the nine months
ended June 30, 2003 to $76.8 million for the nine months period ended June 30,
2004. Sales of $26.4 million for the quarter ended June 30, 2004 were $1.6
million higher than sales of $24.8 million recorded for the comparable period
last year.

The net increase in revenues for both the nine months and three months ended
June 30, 2004 is analyzed as follows:

<TABLE>
<CAPTION>
                                                           Nine Months             Quarter
                                                           ended                   ended
                                                           June 30                 June 30
                                                           2004                    2004
                                                 Note      $m                      $m

<S>                                               <C>      <C>                     <C>
Effect of exchange rate movements                (a)       10.8                     3.1

Sales volumes decreases                          (b)       (5.6)                   (1.3)

Increased rebates                                (c)       (0.4)                   (0.2)
                                                           -----                   -----
                                                            4.8                     1.6
                                                           =====                   =====
</TABLE>


                                       30
<PAGE>

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

<TABLE>
<CAPTION>
                                                        Nine Months ended          Quarter ended
                                                        June 30, 2004              June 30, 2004
                                          Note          $m                         $m
<S>                                       <C>           <C>                        <C>
a) Hand and garden tools

    Effect of exchange rate               (a)           8.8                        2.4
    movements
    Sales volume decreases                (b)           (5.4)                      (1.3)
    Rebates                               (c)           (0.4)                      (0.2)
                                                        -----                      -----
                                                         2.8                        0.9
                                                         ---                       -----
b)  Metrology tools

    Effect of exchange rate               (a)           1.2                        0.4
                                                        ---                        ---
    movements

c)  Magnetic products

    Effect of exchange rate               (a)           0.8                        0.3
    movements
    Sales volume decreases                (b)           (0.2)                        -
                                                        ----                       ---
                                                         0.6                        0.3
                                                         ---                       -----
</TABLE>

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, 2004 compared to the comparable
       periods last year has had a significant impact on the US dollar value of
       the group's sales. The average cross rates in the periods under review
       can be summarized as:

                                     Average Cross Rates

                              2004             2003             % Movement

9 months ended June 30        1.786            1.597            +11.8%

3 months ended June 30        1.8050           1.614            +11.8%

(b)    Business conditions in most of our end markets remained challenging as a
       result of depressed demand, the intense competition from competing
       suppliers in a number of our product ranges and the weak US dollar.
       Additionally, although the Company strategy to aggressively promote our
       product continues, increased expenditure in the current year on expanding
       and strengthening the sales and marketing infrastructure, while now
       showing an improvement in the level of sales, is still not sufficient to
       fully absorb the increase in overhead on the previous year.


                                       31
<PAGE>

       Within the hand and garden products segment, despite difficult trading
       conditions both the Neill Tools and Robert Sorby divisions showed
       aggregate sales volume increases for both the quarter ($1.6million) and
       nine months ($1.8million) ended June 30 2004 compared to the comparable
       periods last year. Furthermore, the Neill Tools 2004 sales volume
       increase is all the more creditable given that the prior year sales for
       this division included $2.8 million of sales in the nine months ended
       June 30, 2003 and $0.1 million in the quarter ended on that date which
       were made to a major UK wholesaler, Toolbank, with whom the company
       ceased to trade in April 2003.

       However, the sales volume increases achieved in Neill Tools and Robert
       Sorby were exceeded by sales volume decreases in the hand and garden
       product's French division ($0.2 million in the quarter ended June 30,
       2004 and 0.3 million in the nine months ended on that date) and, in
       particular, in Australia and New Zealand (a $2.8 million shortfall in
       quarter 3, 2004 and a $7.0 million fall for 2004 year to date). The
       Australian sales shortfall in 2004 compared to 2003 is primarily
       attributable to the loss of a major customer to whom significant sales
       were made in the first three-quarters of 2003.

       Similar market pressures were prevalent in the metrology and magnetic
       products segments but volumes were largely maintained with only the
       magnetics division sustaining a marginal sales volume shortfall of $0.2
       million in the nine months ended June 30, 2004.

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

       Sales rebates charged in the nine months ended June 30, 2004 amounted to
       $3.1 million and $1.1 million of rebates were expensed in the quarter
       ending on that date. Assuming similar sales volumes and customer mix, the
       Company anticipates that this level of rebate will be maintained in
       future periods.

Gross profit has increased in absolute terms in the nine months ended June 30,
2004 and shows a marginal decrease in the quarter in comparison to the amounts
generated in the equivalent prior year periods. The gross margin percentages
have declined in both the quarter and the nine months ended June 30, 2004 when
compared to the same periods in the prior year. This reflects the adverse impact
caused by the weak US dollar, increases in certain raw material prices which we
have been unable to pass on to our customers and increases in certain utility
costs which form a key part of our manufacturing processes. The upward pressure
on steel prices caused by strong demand from China shows no signs of easing and
is likely, therefore, to remain an adverse influence on our margins in the short
term.

In conjunction with the erosion of gross margins, overhead costs incurred in the
quarter and the nine months ended June 30, 2004 have increased when compared to
the overhead expenses charged in the three and nine months ended June 30, 2003.
Reasons for these increases include significant movements in the US
dollar/sterling exchange cross rate, additional head office costs relating to
legal and other professional fees, higher sales and distribution costs
associated with the Company's new direct trading route. In addition, certain
one-time savings experienced in 2003 have not been repeated in 2004. These
include such items as:-


                                       32
<PAGE>

<TABLE>
<CAPTION>
                                                               Nine Months    Three Months
                                                               ended          ended
                                                               June 30, 2004  June 30, 2004
                                                               $m             $m

<S>                                                            <C>               <C>
i)     Credits arising through settlement of                   0.6               0.3
       senior and other employees' severance
       liabilities in the period ended June 30,
       2003 for amounts less than anticipated

ii)    Exceptional bad debt recoveries in                      0.1                 -
       Q1 2002/3

iii)   One time car leasing credits                            0.2                 -

iv)    Settlement of tax disputes at amounts                   0.2               0.2
                                                               ---               ---
       less than anticipated                                   1.1               0.5
                                                               ===               ===
</TABLE>

The Company anticipates that the level of overheads incurred in the nine months
ended June 30, 2004 will be maintained in the short term. Various initiatives
are, however, being considered to reduce the levels of sales and distribution
costs in future periods. Additionally, on the assumption of a prompt settlement
of the Company's SEC and other related litigation, decreases in administration
costs should follow in future periods as a result of decreases in legal and
professional costs.

As a result of the combined effects of diluted margins and increased overhead
costs, operating income in the quarter ended June 30, 2004 has fallen to a loss
of $(0.02) million from the $2.8 million operating income recognized in the
three months to June 30, 2003. Similarly, operating income for the nine months
ended June 30, 2004 has fallen to $0.8 million, a decrease of $5.6 million when
compared to the operating income earned in the comparable period for 2003.

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

As previously reported, a new managing director has been appointed to lead our
Australasian operations. His initial responsibility has been to regain market
share through increased sales to the existing customer base and the
establishment of new customer contacts so that the adverse effect on sales
revenues of the loss of a major customer can be mitigated as far as possible.
Sound trading relationships with certain major customers have been
re-established with the intention that sales opportunities can be maximized
going forward. A significant new customer has been secured in New Zealand and
the Australian division's largest customer has been retained following a
successful tender process. Sales orders valued at approximately $1 million have
been achieved for special Fathers Day promotions in Australia and it is now
anticipated that the Australasian companies will generate a profit in the
forthcoming quarter after incurring a succession of losses in the first nine
months of the year.


                                       33
<PAGE>

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

In addition to the above reorganization programs, the Company has also invested
significantly in the acquisition of land and buildings in the UK and US in the
nine months ended June 30, 2004. In October 2003, we acquired, for $3.2 million,
the land and buildings occupied by our garden tools division in Wednesbury,
England. This will secure operations there and will enable us to plan future UK
garden tool strategies with more certainty.

In March 2004, we purchased through our wholly-owned subsidiary S&J
Acquisitions, Corp. warehouse premises in Boca Raton, Florida for $3.3 million
(including preliminary fit out costs). Following the removal of the Company's
former CEO, the current board, in consultation with the Corporate Monitor has
performed a detailed review of its US sales and distribution strategy. As a
result, the original initiative of setting up a central distribution unit in
Florida for the company's North American sales operations has been deferred. The
warehouse has been placed for sale and is accordingly presented as an asset held
for resale in the Company's consolidated balance sheet. The directors do not
anticipate that the sale will result in any significant loss to the Company and
the sales proceeds derived from the sale will be available for investment in
alternative US sales strategies.

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

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 these companies' 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 ending June 30, 2004 of $12.9 million showed an
improvement of $2.3 million over last year's revenues of $10.6 million. This
increase was attributable to favorable exchange movements of $1.3 million and
increased volumes of $1.3 million, offset by an increase in sales rebates of
$0.3 million. For the nine months ended June 30, 2004 sales of $34.2 million
showed an increase of $4.3 million from last year's sales of $30 million. This
is attributable to favorable exchange movements of $3.6 million and volume
increases of $1.4 million less increased sales rebates of $0.7 million.

Sales improvements in the quarter were partly attributable to the successful
launch of new products in the woodsaws, builders' tools, power tools and leather
and hand tools lines.


                                       34
<PAGE>

The cold, wet spring weather which had suppressed the demand for garden tools in
the UK market in the previous quarter, gave way to improved weather conditions
which greatly enhances sales of garden products.

While the weakening dollar still continues to have a detrimental effect on sales
into certain export markets which are linked to the dollar, margins have been
reduced in some areas in order to achieve substantial fixed volume orders. In
the Middle East we saw increased orders for metal cutting blades due to one of
our major competitors in the market experiencing some financial difficulties.

Similarly the large construction programs in Dubai and the rebuildling projects
following the recent conflicts in the area have also increased demand.

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

The "Predator" woodsaw range was further enhanced in the quarter, exceeding all
expectations. The woodsaws department is now operating twenty-four hours per day
to meet demand and investment in new plant will be undertaken in the forthcoming
quarter to ensure that this level of output can be sustained.

The division has successfully secured business with two major UK builders'
merchants for woodsaws and contractors tools for deliveries in September and
onwards.

As previously mentioned recovery plans and a strategic plan to reduce the cost
of manufacturing and distribution are well under way in order to improve the
division's profitability.

Eclipse Magnetics

Revenues for the quarter showed only a marginal increase over last year's
figures (2004 $2.3 million, 2003 $2.1 million) with favorable exchange movements
of $0.2 million and a flat volume movement. Likewise, for the 9 months ended
June 30, 2004, revenues showed a marginal $0.6 million increase (2004 $6.9
million, 2003 $6.3 million) with favorable exchange movements of $0.8 million
offset by decreased trading volume of $0.2 million.

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

The higher added value area of our business continues to flourish, however,
showing a third quarter 16% sales volume growth over the same quarter the prior
year.

There has been an encouraging improvement in export markets in the last quarter
with a listing in a major European catalogue having been secured.

Eclipse has witnessed a 60% increase in the raw material prices of nickel and
cobalt, two major alloys used in magnet manufacturing, which has resulted in
margin erosion, especially in the last quarter. Restructuring plans are being
implemented to minimize the effect of such increases on the overall
profitability of the division. Overhead costs have therefore increased
reflecting these ongoing restructuring charges but the Company expects that cost
savings will be derived next year as the benefits of these initiatives follow
through.


                                       35
<PAGE>

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

Robert Sorby

Revenues for the third quarter were $0.4 million higher than last year (2004
$1.3 million, 2003 $0.9 million), attributable to volume growth of $0.3 million
and favorable exchange movements of $0.1 million. For the nine months ended June
30, 2004 revenues increased by $0.8 million from $3.1 million to $3.9 million
with the division benefiting from favorable exchange movements of $0.4 million
and volume growth of $0.4 million.

The third quarter proved another very strong period for Robert Sorby with sales
orders and margins running ahead of budget. Despite the weak dollar, sales into
North America were particularly strong with one of our major customers placing a
large promotional order. This strong overseas sales performance has been able to
compensate for a flat UK market where demand has been depressed.

In the soft UK market, the main thrust has continued to be the promotion of
lathes, lathe chisels and lathe chucks where we have an increasingly strong
position. The introduction of the new DVR lathe in the first quarter impacted
very strongly on subsequent periods' results and we anticipate that this trend
will continue despite a generally weak market.

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

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

The loss of the customer and the negative impact of a weak dollar have, however,
been compensated by an increase in business with other dealers to the extent
that the loss had no overall adverse effect. The Company anticipates that, in
the long term, this broadening of the customer base will prove to be a major
benefit to Robert Sorby.

The third quarter has also realised the benefits of the launch of the new range
of `Stebcentres', a unique drive for woodworkers' lathes. Reaction from
customers has been positive and sales of this line continue to grow.

Bowers Metrology

Revenues for the third quarter show an increase of $0.4 million over last year
($3.5 million 2003, $3.9 million 2004) due to favorable exchange movements. The
revenues for the 9 months ended June 30, 2004 show a similar position with an
increase of $1.2 million ($10.4 million 2003, $11.6 million 2004) attributable
to favorable exchange movements.


                                       36
<PAGE>

Quarter 3 showed a strong recovery of sales in North America despite the adverse
currency fluctuations affecting our competitiveness in the overseas markets,
particularly Korea and China, that are linked to the US dollar. The general
economic upturn being experienced in the North American and UK markets however,
has been slow in filtering through to the rest of the European Union,
particularly France, Italy, Scandinavia and the Benelux region, and demand has
been depressed in these areas. Germany remains a strong market despite weak
domestic demand due to goods being re-exported to the active European companies.

The main successes of the quarter were again the increased activity in the UK
Aerospace sector, with several projects signed with blue-chip manufacturers. The
Systems side of the business continues to expand and the new Moore & Wright
brand of digital products has achieved important listings in several of the
large UK catalog distribution companies.

The capital products within the range continue to disappoint, due to the
hesitancy of key customers to invest but signs of recovery are now being
experienced, led mainly by demand from UK based aerospace manufacturers.
Financing options for customers are being considered to alleviate the up front
cost of such products.

The fixed limit products sold under the Coventry Gauge brand continue to face
fierce price competition and steps were taken to further reduce cost in this
part of the business.

The strengthening of the export sales team has led to many new distributors
being appointed in the Middle and Far Eastern markets.

The SmartPlug 2-point gauges launched earlier in the year have thus far exceeded
expectations in the UK, particularly with General Automotive and F1 racing
teams.


                                       37
<PAGE>

S&J France

Revenues for the quarter were flat compared to last year (2003 $2.3 million,
2004 $2.2 million), with favorable exchange movement of $0.2 million
compensating for volume decreases of $0.2 million. For the nine months,
favorable exchange movements of $1.0 million again compensated for volume
reductions of $0.3 million, giving a total increase of $0.7 million over last
year (2003, $7.1 million, 2004 $7.8 million).

The French economy remains depressed with low consumer spending and increases in
unemployment. The weather did not improve as significantly as it did in the UK,
at least partially accounting for garden tool sales not being as favorable as
expected.

Several new listings were achieved for new products including brass ornaments
and the stainless steel range extensions which have off-set the slow garden tool
sales in the quarter.

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

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

Australasia

Revenues for the third quarter for Spear & Jackson Australia and Spear & Jackson
New Zealand were $2.8 million lower than last year (2003 $5.4 million, 2004 $3.6
million). Volume reductions of $2.8 million were only partly compensated by
favorable exchange movements of $0.8 million and decreased sales rebates of $0.2
million. Similarly, results for the nine month period show overall revenue
reductions of $2.9 million (2003 $15.2 million, 2004 $12.3 million) being
attributable to volume decreases of $7.0 million being partly compensated by
favorable exchange movements of $3.8 million and reduced rebates of $0.3
million.

The sales revenues of the Australian subsidiary in the nine month period ended
June 30, 2004 showed a considerable fall when compared to the company's sales
performance in the equivalent period last year. This is principally due to the
loss of a major customer in quarter 4 of last year together with the
interruptions to the operations of the business resulting from the resignation
of the Company's Managing Director and the restructuring of the sales and
marketing functions.

Despite the Australian and New Zealand economies performing strongly, retail
trading has slowed down in the quarter with the increase in domestic interest
rates.


                                       38
<PAGE>

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

Our Australian division remains focussed on rebuilding its sales and marketing
infrastructure and to maximize the selling opportunities of the Spear & Jackson
branded products. The Company believes that customer confidence is returning,
and the outlook going forward should improve with significant progress being
made in expanding our core ranges within major National Retail Groups. We will
continue to focus on expanding our market share of the air tool market and,
following the disposal of all excess power tool inventories, we aim to reduce
our other slow moving inventory.

COSTS OF GOODS SOLD AND GROSS PROFIT

Costs of goods sold increased to $18.4 million in the three month period ended
June 30, 2004 from $16.7 million in the three months ended June 30, 2004 and
increased to $52.9 million in the nine months ended June 30, 2004 from $48.8
million in the equivalent period last year.

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

<TABLE>
<CAPTION>
                                            Three Months Ended             Nine Months Ended
                                           June 30       June 30          June 30       June 30
                                             2004          2003             2004          2003
                                               %             %                %             %
<S>                                         <C>           <C>               <C>           <C>
Cost of goods sold as a
% of sales                                  69.52         67.51             68.85         67.81

Gross Profit Margin                         30.48         32.49             31.15         32.19
</TABLE>

Margins have been negatively impacted in both the quarter ending and the nine
months ending June 30, 2004 by a number of raw material price increases
(principally rises in the cost of nickel and cobalt, major raw materials of our
magnetic products, and steel), together with increases in the cost of fuel used
to operate our manufacturing processes and higher utility charges. These adverse
variances have, however, been mitigated by exchange gains realized on factored
products bought in US dollars from suppliers located in the Far East.

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

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


                                       39
<PAGE>

EXPENSES

Selling, general and administrative (SG&A) expenses increased by $2.8 million
from $5.3 million in the three months ended June 30, 2003 to $8.1 million in the
quarter ending June 30, 2004. SGA expenses for the nine months ended June 30,
2004 were $23.1 million, an increase of $6.3 million over the expenses charged
in the equivalent nine month period last year.

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

<TABLE>
<CAPTION>
                                                              Increases Over Prior Years

                                                    Three Months ended        Nine Months ended
                                                     June 30, 2004             June 30, 2004
                                                             $m                        $m
<S>                                                          <C>                       <C>
a)    Impact of movements in average                         0.6                       1.9
      US$/sterling cross rates in the period

b)    Increased FAS87 pension costs                          0.3                       0.8

c)    Inflationary increases and set up                      0.2                       0.5
      costs of Florida US sales infrastructure

d)    Increased head office costs relating                   0.5                       0.8
      to legal and professional fees, monitor fees
      and associated costs

e)    Increased UK warehouse and                             0.4                       0.6
      distribution costs following the change
      to direct sales

f)    Settlements of senior and other employees'             0.3                       0.6
      severance liabilities in 2002/3 for
      amounts less than anticipated.  There
      are no comparable items in the
      current year
g)    Exceptional bad debt recoveries in                     -                         0.1
      Q1 2002/3 not repeated in 2003/4

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

i)    Exchange losses suffered                               0.1                       0.2

j)    Settlement of taxation disputes
      at amounts less than anticipated                       0.2                       0.2

k)    Current year expansion of                              0.2                       0.4
      UK and Australasian selling
      and administration functions,
      increased property depreciation
      and other costs                                        ___                       ___

      Total increase in expenses                             2.8                       6.3
                                                             ===                       ===
</TABLE>


                                       40
<PAGE>

Expressed as a percentage of sales, selling, general and administration expenses
were 30.6% of revenues for the three months ended June 30, 2004 (2003 : 21.3%)
and 30.1% of revenues for the nine months ended on that date (2003 : 23.4%).

Other income and expenses moved from a net expense of $29,000 in the three
months ended June 30, 2003 to a net expense of $34,000 in the quarter ended June
30, 2004. In the nine months ended June 30, 2004 other income and expenses
amounted to a net expense of $93,000 compared to a net expense of $36,000 in the
equivalent period last year.

This adverse movement is attributable to higher 2004 bank interest charges in
the Company's French and UK businesses (principally as a result of the level of
UK borrowings increasing following the purchase of the land and buildings in
Wednesbury) and the receipt of royalty income of $14,000 in the prior year for
which there is no similar item in the comparable period this year.

INCOME FROM CONTINUING ACTIVITIES BEFORE INCOME TAXES

Our loss from continuing activities before income taxes in the three months
ended June 31, 2004 amounted to $53,000. This compares to an income from
continuing activities before taxes for the three months ended June 30, 2003 of
$2.7 million. This net decrease in profitability of $2.8 million is attributable
to increased overhead costs of $2.8 million, as explained above.

Our income from continuing activities before income taxes in the nine months
ended June 30, 2004 amounted to $0.7 million compared to $6.3 million in the
nine months ended June 30, 2003. This net decrease in profitability of $5.6
million is due to increased overhead costs of $6.3 million offset by gross
profit increases of $0.7 million.

INCOME TAX

Income taxes of $234,000 were provided in the three months ended June 30, 2004
compared to a $832,000 income tax charge in the three months ended June 30,
2003.

Income taxes of $766,000 were charged in the nine months ended June 2004, and
$1.8 million in the nine months ended June 30, 2003.

Income taxes were 441.5% of losses before tax in the three months ended June 30,
2004 as opposed to 30.3% of profits before tax in the quarter ended June 30,
2003. Income taxes were 110.7% of profits before tax in the nine months ended
June 30, 2004 compared to 28.3% in the nine months ended June 30, 2003.


                                       41
<PAGE>

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

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

Furthermore, the difference between the effective rate of tax used in the
current year as opposed to that used in the quarter ended June 30, 2003 and the
nine months ended on that date is also increased as a result of the higher
proportion of profits in those periods which arose in companies having the
benefit of tax losses which had not been recognized as an asset within the group
deferred tax computation.

Because of the availability of tax net operating losses and other tax credits,
it is not anticipated that any significant element of the tax charge for the
nine months ended June 30, 2004 will result in the payment of income tax.

NET (LOSS)/PROFIT FROM CONTINUING ACTIVITIES

Our net loss from continuing activities after income taxes was $287,000 for the
three months ended June 30, 2004 (2003 : $1.9 million profit). For the nine
month period ended on that date our net loss from continuing activities was
$74,000 (2003 : $4.5 million profit).

DISCONTINUED OPERATIONS

The discontinued operations refer to the Megapro screwdriver division of Spear &
Jackson, Inc. which was acquired on September 6, 2002 and which was disposed
with effect from September 30, 2003. The directors of the Company had previously
carried out a goodwill impairment appraisal and a strategic review of the
division and had determined that this division did not represent a continuing
core activity. Various divestment strategies were considered and at September
30, 2003 the trade and assets of the principal Megapro companies were
transferred at their net book value to a management buy-in team headed by the
managing director of the Megapro business.

Total income attributable to discontinued operations was $12,000 in the quarter
ended June 30, 2003 and $45,000 for the nine months ended June 30, 2003.
Following the disposal of the business on September 30, 2003, there is no
comparable item in the quarter ended June 30, 2004 or the nine months ended on
that date.

FINANCIAL CONDITION

Liquidity and Capital Resources

Our cash and cash equivalents amounted to $3.7 million at June 30, 2004
((pound)9.2 million at September 30, 2003), working capital totalled $24.2
million at June 30, 2004 ($28.3 million at September 30, 2003) and our
shareholders' equity was $34.2 million at June 30, 2004 ($31.9 million at
September 30, 2003).


                                       42
<PAGE>

Net cash generated in operating activities in the nine month period ended June
30, 2004 was $1.8 million compared to $5.6 million in the nine months ended June
30, 2003. This represents a decrease of $3.8 million arising primarily from the
factors discussed below:

*   the reduction in net income (adjusted for depreciation, pension charges and
    deferred taxes) of $4.2 million as dealt with in the commentary on results,
    above,
*   decrease in net inflows from other assets and liabilities of $0.1 million.
    offset by:
*   increased trade working capital inflows of $0.5 million

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 trade working capital is attributable to:

                                                     Note          $million

       Increased inventory inflows                   (i)           5.9
       Reduced trade receivable inflows              (ii)          (4.0)
       Reduced trade payable inflows                 (iii)         (1.4)
                                                                   ----
       Net increase in trade
       working capital inflows                                       0.5
                                                                   =======

i)     In the period ended June 30, 2003 inventories increased by $3.6 million
       while there was an inventory decrease of $2.3 million in 2004. Given the
       cyclical nature of the UK hand and garden tool business, stock levels are
       expected to fall in Quarter 3 as inventory builds made in anticipation of
       the start of the Spring gardening season are sold through. The 2003
       reduction was, however, offset by the inclusion of significant inventory
       purchases, prior to the June 30, 2003 quarter-end, by our hand tools
       division in connection with new power tool product launches. This pattern
       of purchasing activity was not repeated in 2004, thereby reducing the
       inventory levels at June 30, 2004 compared to those at June 30, 2003.

       Additionally, UK inventories show year on year reductions which are
       attributable, in part, to the ongoing implementation of the group
       inventory reduction program.

ii)    UK sales revenues in August and September 2002 benefited from increased
       turnover of approximately $1.1 million with the UK distributor, Toolbank,
       as that company placed additional sales orders pre year end in order to
       secure higher rebate levels. This increased sales activity increased the
       total of trade receivables at September 30, 2002 to higher than normal
       levels. Operating cash in the period ended June 30, 2003 therefore
       incorporates the cash received from these sales. Following the cessation
       of trade with Toolbank in April 2003, there were no similar sales in
       August and September of 2003 and the cash flows associated with trade
       receivables in the period ended June 30, 2004 are correspondingly
       reduced.


                                       43
<PAGE>

       In addition to this, trade receivable balances at June 30, 2004 in the UK
       Hand and Garden and Robert Sorby divisions were approximately $2 million
       higher than their prior year comparatives reflecting higher sales in
       April to June 2004 compared to the same months last year.

iii)   The movement in inventories referred to in (i) above, is also reflected
       in the trade payables cash flows. Trade payables increased by $1.5
       million at June 30, 2003 when compared to September 30, 2002 thanks to
       the purchase of significant inventories of power tool products by our UK
       hand tool division. This purchasing activity was not repeated in 2004 and
       is not anticipated to reoccur in the short term and the increase in
       payables between September 30, 2003 and June 30, 2004 has accordingly
       reduced to $0.1 million.

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

      With regard to the net decrease in inflows from other assets and
      liabilities contributing factors include:

i)     An interim payment in March 2004 of $0.4 million regarding the settlement
       payable re the termination of the former managing director of Spear &
       Jackson plc.

ii)   Increased lease payments in the nine months ended June 30, 2004 of $0.1
      million in respect of the UK car fleet which was replaced between January
      and April 2003.

iii)   The impact of items (i) and (ii) has been mitigated by (pound)0.4 million
       of additional legal and professional fees, monitor costs and related
       expenses accrued in the US holding company at June 30 2004. Payment of
       these accrued fees will crystallise in July and subsequent months and
       further costs will be incurred until the monitor's duties are curtailed
       and the various SEC and other litigation issues are resolved.

Cash outflow from investing activities was $7.0 million in the period ended June
30, 2004. This compares to an outflow from investing activities in the period
ended June 30, 2003 of $2.5 million. Net cash used in investing activities in
the nine months ended June 30, 2004 includes $7.0 million of capital
expenditures, $3.2 million of which relates to the purchase of the land and
buildings at Wednesbury, England which is the base for our UK garden tools
manufacturing operation. Prior to its purchase, this property was being leased
from the former owners of Spear & Jackson plc. A further $3.3 million relates to
the purchase of a distribution outlet at Boca Raton, Florida. Of the outflow in
the nine months ended June 30, 2003, $2.7 million related to capital
expenditures, primarily the replacement of the UK car fleet under capitalized
operating leases.

Net cash absorbed by financing activities was $0.3 million in the period ended
June 30, 2004 compared to of $1.5 million in the period ended June 30, 2003.


                                       44
<PAGE>

The 2004 outflow principally represents the partial utilization of the UK bank
overdraft facility in order to finance the $3.2 million purchase of the
Wednesbury property in the quarter ended December 31, 2003. The 2003 financing
activity outflow reflects the $1.2 million repayment of the Company's Australian
subsidiary's overdraft, the repayment of $0.2 million of promissory notes issued
in connection with the purchase of Spear & Jackson plc and Bowers Group plc and
the repayment of $0.1 million of shareholder loans.

BANK FACILITIES

The UK subsidiaries of Spear & Jackson plc and Bowers Group plc maintain a line
of credit of $8.2 million. This is secured by fixed and floating charges on the
assets and undertakings of these businesses. Of the total facility, $5.5 million
relates to bank overdrafts and $2.7 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, 2004 and September 30, 2003 the
Company had no borrowings outstanding under the overdraft line but had $1.6.
million in outstanding letters of credit (September 30, 2003: $0.8 million).

The French and Australian subsidiaries of Spear & Jackson plc maintain
short-term credit facilities of $3.0 million denominated in Euros and Australian
dollars. The facilities comprise bank overdraft lines, with interest rates
ranging from 6.8% to 12.6%, together with facilities for letters of credit and
the discount of bills receivable. There was $0.1 million outstanding under the
overdraft lines at June 30, 2004 (September 30, 2003: $0.3 million) and $0.9
million of letters of credit and bills outstanding under these facilities
(September 30, 2003: $0.8 million).

The UK facilities are due for renewal in April 2005 and the Australasian and
French facilities fall for renewal at various dates in 2004. 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, 2004 the extent of this guarantee relating to gross bank overdrafts was
$28.5 million (September 30, 2003 $24.6 million). The overall pooled balance of
the bank accounts within the pool at June 30, 2004 was a net cash in hand
balance of $1 million (September 30, 2003 $1.7 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.


                                       45
<PAGE>

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

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

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, 2004:

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

<S>                             <C>                <C>          <C>          <C>           <C>
Capital lease obligations       1.6                0.8          0.8           -             -
Operating leases
(note a)                        7.2                0.9          1.8           1.8           2.7
                                ---                ---          ---           ---           ---
                                8.8                1.7          2.6           1.8           2.7
                                ---                ---          ---           ---           ---
</TABLE>

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


                                       46
<PAGE>

(b)    Excluded from the above tables are the amounts payable by the Company to
       the UK defined benefit pension plan as future funding obligations cannot
       be accurately forecast. The annual contribution rate is set annually by
       the actuary in accordance with the applicable UK regulatory legislation
       and will be next reviewed in November 2004. In the year to September 30,
       2004 the Company anticipates paying approximately $2.7 million into the
       plan.

(c)    As at June 30, 2004, the Company had letters of credit of $1.6 million
       outstanding which are secured by the UK and Australian credit facilities.
       In addition the Company's French subsidiary had discounted $0.9 million
       of bills of exchange with recourse.

OUTLOOK

The first weeks of quarter 4 have shown signs of improvement in certain sectors
of our markets and, in particular, export sales orders received by our UK
divisions have shown an encouraging increase. However, because of the seasonal
nature of sales of garden products in the UK, and the onset of July and August
manufacturing shut downs in both the UK and in France, we anticipate that, as
last year, Quarter 4 will see reduced sales in these countries compared to
Quarter 3.

Competition remains fierce from cheap foreign imports but our brand strength is
helping us to perform well in our export markets, particularly the Far and
Middle East, and certain macro economic factors in the UK are working to our
advantage. For example, the buoyant UK housing market is continuing to stimulate
demand for our builders' tools and related products. Some slackening of demand
in this sector may now start to crystallise following the Bank of England's
recent interest base rate hike and its effect on potential homebuyers' mortgage
repayments.

Our Australasian subsidiaries have experienced difficult trading conditions so
far this year following the loss, in 2003, of a major customer and upheavals
caused by changes to the management teams. Restructuring of the business is
nearing completion and, with the new managing director successfully exploring a
number of initiatives to regain lost market share, we anticipate increased sales
revenues from the operation in quarter 4 and a return to profitability.

In the fourth quarter we plan to continue to pursue a widening of our direct
sell UK customer base together with initiatives to increase our presence in
mainland Europe. Such customer gains are essential in helping to absorb the
additional overhead incurred in setting up the infrastructure for the "direct to
market" sale route.

The management of the Company anticipates that, in the remainder of the
financial year, our businesses will again face the issues of increased costs and
margin erosion as a result of raw material, fuel and other utility price
increases, interest rate increases and a weak dollar.

Increased emphasis will also be placed in promoting our own manufactured product
in an effort to reverse the dilution of margin caused by an increasing bias in
our recent sales mix towards factored items.


                                       47
<PAGE>

To mitigate the impact of these factors we plan to continue both to look at
initiatives to rationalize underperforming areas of the business and to monitor
the business infrastructures in the United Kingdom, particularly overhead costs,
to ensure that these are as cost efficient as possible and at a level
appropriate to the needs of the business. Despite this we anticipate that there
will continue to be increases in the level of certain administrative overhead
expenses as a result of legal and professional charges, monitoring fees and
related costs associated with the SEC suit referred to in Part II, Item 1,
below. The level of such costs is not always easy to accurately forecast but the
Company is committed to reducing overhead expenses wherever possible so that the
adverse impact of these legal costs is mitigated.

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

In the forthcoming quarter we will continue to focus on improving cash
generation. The group-wide inventory reduction program is ongoing as we look to
maximize our working capital. Further funds could be released via the sale of
significant surplus capital assets in both the UK and US and all such
opportunities will be considered in detail. We believe that the proceeds of any
such sales will enable us to fund future working capital requirements and other
projects, both domestically and abroad, which will contribute to the continued
growth of our business.

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

In quarter 4, therefore, we will continue to aggressively promote our products
to penetrate new markets and broaden our customer base. In the remainder of the
financial year and into 2004/5 emphasis will again be placed on the development
and launch of new, high quality products which are clearly differentiated from
the cheap foreign imports which are widely available in our markets. The recent
success of the "Predator" saw launches clearly illustrated the benefits of this
strategy and we intend to build on this in the following months with the
introduction of other new products.

Inevitably the removal of the Company CEO by the SEC, and the initiation of
legal proceedings against the Company and certain of its directors have resulted
in a temporary loss of focus on operating activities. The Company remains
confident, however, that it has the resources and expertise in place to deal
with these disruptions and, thanks to a dedicated senior management and work
force, will be able to move forward to achieve its business objectives in both
the short and long term.

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


                                       48
<PAGE>

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, 2004 the Company had borrowings in the form of overdrafts
amounting to $33,000 which are repayable on demand and had cash and cash
equivalents of approximately $3.7 million. Given the current levels of
borrowings, the Company believes that a 1% change in interest rates would not
have a material impact on consolidated income or cash flows. Holding the same
variables constant, a 10% increase in interest rates would again have a
negligible effect on interest payable.

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

EXCHANGE RATE RISK

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

In the nine months ended June 30, 2004 compared to the equivalent period in
2003, the change in exchange rates had the effect of increasing the Company's
consolidated sales by $10.8 million, or 14.1%. Since most of the Company's
international operating expenses are also included in local currencies, the
change in exchange rates had the effect of increasing operating expenses by $1.9
million for the nine months ended June 30, 2004 compared to the comparable prior
year period. If the US dollar further weakens in the future, it could result in
the Company having to suffer reduced margins in order for its products to remain
competitive in the local market place.

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, 2004 the Company held
forward contracts to sell Australian and New Zealand dollars to buy
approximately 2.1 million US dollars.

The contract values were not materially different to the period end value of the
contracts. A 10% strengthening or weakening of the US$ against its Australian
and New Zealand counterparts could, however, result in the Company suffering
losses or benefiting from gains of approximately $0.2 million had no forward
contracts been taken out.

COMMODITY PRICE RISK


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<PAGE>

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, 2004 the Company had made an allowance of $1.96 million in respect
of doubtful accounts which management believes is sufficient to cover all known
or expected debt non-recoveries.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

Attached as exhibits to this Quarterly Report are certifications of the acting
CEO and the CFO, which are required in accord with Rule 13a-14 of the Securities
Exchange Act of 1934. This Controls and Procedures section includes the
information concerning the controls evaluation referred to in the certifications
and it should be read in conjunction with the certifications for a more complete
understanding of the topics presented.


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<PAGE>

Definition of Disclosure Controls

Disclosure Controls are controls and other procedures of the Company designed
ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act of 1934, such as this Quarterly Report, is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms. Disclosure Controls are also designed to ensure that such
information is accumulated and communicated to our management, including the
Company's principal executive and principal financial officers, as appropriate,
to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Controls

Our management, including the acting CEO and the CFO, does not expect that our
Disclosure Controls or our internal control over financial reporting will
prevent all error and all fraud. A control system, no matter how well designed
and operated, can provide only reasonable, not absolute, assurance that the
control system's objectives will be met. Further, the design of a control system
must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, have
been detected.

These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. The design of any system of controls is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Over time, controls may become inadequate because
of changes in conditions or deterioration in the degree of compliance with
policies or procedures. Because of the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be
detected.

Conclusions

Based upon the Disclosure Controls evaluation referenced above, our acting CEO
and our CFO have concluded that, subject to the limitations noted above, as of
the end of the period covered by this Quarterly Report, our Disclosure Controls
were effective.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934)
that occurred during the quarter ended June 30, 2004 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.


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<PAGE>

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

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

On April 15, 2004, the U.S. Securities and Exchange Commission, filed suit in
the U.S. District Court for the Southern District of Florida against the Company
and Mr. Dennis Crowley, its then 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, antifraud and reporting provisions. These allegations arise from
the alleged failure of Mr. Crowley to accurately report his ownership of the
Company's stock, and his alleged manipulation of the price of the Company's
stock through the dissemination of false information, allowing him to profit
from sales of the stock through nominee accounts. On May 10, 2004, the Company
consented to the entry of a preliminary injunction, without admitting or denying
the allegations of the SEC complaint.

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

On July 19, 2004, the Monitor filed a Motion to expand the scope of his role as
Monitor and included his Report on Findings and Recommendations dated July 16,
2004. The motion provides that the Monitor is seeking an expansion of his role
because of his criticisms of the capability and independence of the Company's
current Board and senior executive management to achieve corporate objectives
and pursue potential claims. The Company has filed a memorandum in opposition to
the request of the Monitor based on what the Company perceives to be
mischaracterization by the Monitor of developments to date, efforts and
substantial accomplishments by the Board and management, and potential harm to
the Company's shareholders based upon a more encompassing role for the Monitor.
The Company has also filed a Motion requesting the Court to reconsider that the
SEC's charges were not systemic throughout the Company's operations.

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


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<PAGE>

The Company is pursuing settlement negotiations with the SEC and Mr. Crowley to
reach a resolution with the SEC as well as Mr. Crowley.

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

Item 2.  Changes in Securities, Use of Proceeds and Issuer Purchases of
         Securities.

None

Item 3.  Defaults Upon Senior Securities

None

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

None

Item 5.  Other Information

See Part II Item 1, above.

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

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

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

32 Certification of Chief Executive Officer and 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 Surbanes-Oxley Act of 2002 (18 U.S.C. 350) .


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<PAGE>

(b) Reports on Form 8-K

i) Form 8-K was filed on August 4, 2004 in which the Company announced the
following:

         On July 22, 2004, the Company received a preliminary offer to purchase
         the Company's corporate subsidiaries, including Spear & Jackson plc and
         Bowers Group plc, from the Company's subsidiary management, including
         William Fletcher, the Company's Chief Financial Officer, a director and
         acting CEO and Chief Operating Officer. The proposed purchase (based on
         current exchange rates), which is for acquisition of the issued share
         capital of these subsidiaries, contemplates a cash purchase amount of
         approximately US$26,000,000, with the Company retaining existing cash
         and non-subsidiary real estate assets currently estimated to be
         approximately US$5,000,000. The proposal also contemplates forgiveness
         of existing inter-company receivables due from the parent. The offer is
         based on various assumptions including that the subsidiaries will be
         free of third party net debt and satisfactory resolution of certain
         pension issues as a result of changing pension legislation in the
         United Kingdom. The purchase price is based on minimum net assets of
         the subsidiaries of approximately $12,161,700 (based on current
         exchange rates) and subject to downward adjustment on the basis of the
         prospective purchaser's evaluation of the impact of such pension
         legislation.

         The Company will engage the services of an investment banking firm or
         similar organizations to assist in evaluating this proposal, as well as
         to consider any other proposals relevant to the Company and its
         subsidiaries. The Company will also require the evaluation and approval
         of its court-appointed Corporate Monitor as part of the approval
         process.

ii)      Form 8-K was filed on August 18, 2004 in which the Company announced
         the resignation of its independent accountant, Sherb & Co, LLP
         ("Sherb") on August 13, 2004.

iii)     Form 8-K/A was filed on August 25, 2004 in which a letter from Sherb to
         the Securities and Exchange Commission was appended in which Sherb
         stated their agreement to the statements made by the Company concerning
         Sherb in Form 8-K filed on August 18, 2004.


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<PAGE>

SIGNATURES

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

SPEAR & JACKSON, INC.

By:      /s/William Fletcher        Dated: September 24, 2004
         ----------------

         William Fletcher
         Acting Chief Executive Officer
         Chief Financial Officer


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