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, 2005

                                       OR

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

                  For the transition period from _____ to _____


                         Commission file number 0-32013


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


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


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


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


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

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

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

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

Registrant had 5,735,561 shares of Common Stock, $.001 par value per share,
outstanding as of August 15, 2005.

<PAGE>
                              Spear & Jackson, Inc.


                                      INDEX

                                                                           Page
                                                                          Number
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

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

         Condensed Consolidated Statements of Operations -
         Three and Nine Months ended June 30, 2005 and 2004 ..............   2

         Condensed Consolidated Statements of Cash Flows -
         Nine Months ended June 30, 2005 and 2004 ........................   3

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

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

Item 3.  Quantitative and Qualitative Disclosures about Market Risk ......  45

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

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings ...............................................  49

Item 6.  Exhibits ........................................................  50

SIGNATURES ...............................................................  51

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

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

<PAGE>

ITEM 1.  Financial Statements (Unaudited)

<TABLE>
                                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

                                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   (UNAUDITED)

                                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>

                                                       FOR THE THREE MONTHS ENDED    FOR THE NINE MONTHS ENDED
                                                        JUNE 30,       JUNE 30,       JUNE 30,       JUNE 30,
                                                          2005           2004           2005           2004
                                                      ------------   ------------   ------------   ------------
<S>                                                   <C>            <C>            <C>            <C>
Net sales ..........................................  $     26,330   $     26,407   $     79,638   $     76,816
Cost of goods sold .................................        17,744         18,359         53,644         52,887
                                                      ------------   ------------   ------------   ------------
Gross profit .......................................         8,586          8,048         25,994         23,929

Operating costs and expenses:
  Selling, general and administrative expenses .....         8,094          8,067         25,049         23,144

                                                      ------------   ------------   ------------   ------------
Operating  income (loss) ...........................           492            (19)           945            785

Other income (expense)
  Rental income ....................................            39             58            118            140
  Interest and bank charges (net) ..................             9            (92)           (32)          (233)

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

Income (loss) before unusual or infrequent items ...           540            (53)         1,031            692

Profit on sale of land and buildings, net of related
  reorganization costs .............................             -              -          2,503              -
Manufacturing reorganization costs .................          (269)             -           (269)             -

                                                      ------------   ------------   ------------   ------------
Income (loss) before income taxes ..................           271            (53)         3,265            692

Provision for income taxes .........................          (206)          (234)          (654)          (766)
                                                      ------------   ------------   ------------   ------------

Net income (loss) ..................................  $         65   $       (287)  $      2,611   $        (74)
                                                      ============   ============   ============   ============

Basic and diluted earnings (loss) per share: .......  $       0.01   ($      0.02)  $       0.26   ($      0.01)
                                                      ============   ============   ============   ============


Weighted average shares outstanding ................     6,197,527     11,741,122      9,893,257     11,741,122
                                                      ============   ============   ============   ============

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

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

                                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                          (IN THOUSANDS EXCEPT SHARES)
<CAPTION>
                                                                              AT JUNE 30,       AT SEPTEMBER 30,
                                                                                 2005                 2004
                                                                              -----------       ----------------
                                                                              (UNAUDITED)
<S>                                                                            <C>                  <C>
                              ASSETS
Current assets:
  Cash and cash equivalents ..............................................     $  8,544             $  5,090
  Trade receivables, net .................................................       18,273               18,843
  Inventories ............................................................       25,735               21,988
  Assets held for sale ...................................................            -                3,190
  Deferred income tax asset, current portion .............................        2,009                2,128
  Other current assets ...................................................        1,685                1,310
                                                                               --------             --------
    Total current assets .................................................       56,246               52,549

Property, plant and equipment, net .......................................       18,472               22,114
Deferred income tax asset ................................................       10,374               10,933
Investments ..............................................................          158                  160
                                                                               --------             --------
    Total assets .........................................................     $ 85,250             $ 85,756
                                                                               ========             ========


               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable ..........................................................     $      -             $     68
  Trade accounts payable .................................................        8,419                8,562
  Accrued expenses and other liabilities .................................       13,865               12,948
  Foreign taxes payable ..................................................          101                   22
                                                                               --------             --------
    Total current liabilities ............................................       22,385               21,600
Other liabilities ........................................................          871                1,172
Pension liability ........................................................       30,242               33,545

                                                                               --------             --------
    Total liabilities ....................................................       53,498               56,317
                                                                               --------             --------
Stockholders' equity:
Common stock .............................................................            6                   12
Additional paid in capital ...............................................       51,596               51,590
Accumulated other comprehensive income (loss):
  Minimum pension liability adjsutment, net of tax .......................      (37,482)             (38,030)
  Foreign currency translation adjustment, net of tax ....................       11,538               12,429
  Unrealized loss on derivative instruments ..............................          (16)                 (61)
Retained earnings ........................................................        6,650                4,039
Less: 6,275,561 common stock held in treasury, at cost ...................         (540)                (540)
                                                                               --------             --------
    Total stockholders' equity ...........................................       31,752               29,439
                                                                               --------             --------

                                                                               --------             --------
    Total liabilities and stockholders' equity ...........................     $ 85,250             $ 85,756
                                                                               ========             ========

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

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

                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                   (UNAUDITED)

                                                 (IN THOUSANDS)
<CAPTION>
                                                                                    FOR THE NINE MONTHS ENDED
                                                                                   JUNE 30,             JUNE 30,
                                                                                     2005                2004
                                                                                   -------              -------
<S>                                                                                <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss) .........................................................      $ 2,611              $   (74)
  Adjustments to reconcile net income to net cash used in
   operating activities:
    Depreciation ............................................................        2,225                2,207
    Amortization of asset held for sale .....................................           16                    -
    Profit on sale of land and buildings ....................................       (2,503)                   -
    Loss on sale of plant and equipment .....................................           11                   14
    Deferred income taxes ...................................................          515                  673
  Changes in operating assets and liabilities, excluding the effects
   of acquisitions and dispositions:
    Decrease/ (increase) in trade receivables ...............................          256               (2,940)
    (Increase) decrease in inventories ......................................       (4,374)               2,329
    Increase in other current assets ........................................         (394)                 (51)
    Contributions paid to pension plan ......................................       (5,892)              (2,096)
    Increase in other non-current liabilities ...............................        3,028                  973
    Increase in trade accounts payable ......................................          160                  126
    Increase in accrued expenses and other liabilities ......................          721                1,222
    Increase (decrease) in foreign taxes payable ............................           54                  (25)
    Decrease in other liabilities ...........................................         (284)                (531)
                                                                                   -------              -------
NET CASH (USED IN) PROVIDED BY  OPERATING ACTIVITIES ........................       (3,850)               1,827
                                                                                   -------              -------

INVESTING ACTIVITIES:
  Purchases of property, plant and equipment ................................         (942)              (7,071)
  Proceeds from sale of property, plant and equipment net
   of costs of disposal .....................................................        8,616                   81
                                                                                   -------              -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES .........................        7,674               (6,990)
                                                                                   -------              -------

FINANCING ACTIVITIES:
  Repayment of ovedraft .....................................................          (67)                (302)
                                                                                   -------              -------
NET CASH  USED IN FINANCING ACTIVITIES ......................................          (67)                (302)
                                                                                   -------              -------

Effect of exchange rate changes on cash and cash equivalents ................         (303)                 (41)
                                                                                   -------              -------

CHANGE IN CASH AND CASH EQUIVALENTS .........................................        3,454               (5,506)

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................................      $ 8,544              $ 3,685
                                                                                   =======              =======

SUPPLEMENTAL CASH FLOW INFORMATION
  Cash paid for interest ....................................................      $    32              $   219
                                                                                   =======              =======
  Cash paid for taxes .......................................................      $    85              $   118
                                                                                   =======              =======

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

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

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 (IN THOUSANDS)

NOTE 1 - BASIS OF PRESENTATION

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

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

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

The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
statements pursuant to both the rules and regulations of the Securities and
Exchange Commission and with instructions to Form 10-Q. Accordingly, certain
information and footnote disclosures required for annual financial statements
have been condensed or omitted. The Company's management believes that all
adjustments necessary to present fairly the Company's financial position as of
June 30, 2005 and September 30, 2004, and the results of operations for the
three and nine month periods ended June 30, 2005 and June 30, 2004 and cash
flows for the nine month periods ended June 30, 2005 and June 30, 2004 have been
included and that the disclosures are adequate to make the information presented
not misleading. The balance sheet at September 30, 2004 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's and Subsidiaries' annual report on Form 10-K for the year ended
September 30, 2004.

It is suggested that these financial statements be read in conjunction with the
audited consolidated financial statements and related footnotes of the Company
for the year ended September 30, 2004 included in the Company's annual report
filed on Form 10-K for the year 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 has decided not to hedge against the
impact of exposures giving rise to these translation adjustments as such hedges
may impact upon the Company's cash flow compared to the translation adjustments
which do not affect cash flow in the medium term.

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

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

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 1 - BASIS OF PRESENTATION - CONTINUED

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

NOTE 2 - RECENTLY ISSUED ACCOUNTING STANDARDS

SFAS No. 123 (Revised 2004), "Share-Based Payment," issued in December 2004, is
a revision of FASB Statement 123, "Accounting for Stock-Based Compensation" and
supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees," and
its related implementation guidance. The Statement focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123 (Revised 2004) requires a public
entity to measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award
(with limited exceptions). That cost will be recognized over the period during
which an employee is required to provide service in exchange for the award. This
statement is effective as of the beginning of the first interim or annual
reporting period of the Company's first fiscal year beginning on or after June
15, 2005. The Company will accordingly adopt the standard in the first quarter
of fiscal 2006. The Company has not determined the impact, if any, that this
statement will have on its consolidated financial position or results of
operations.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
of ARB No. 43, Chapter 4," which clarifies the types of costs that should be
expensed rather than capitalized as inventory. This statement also clarifies the
circumstances under which fixed overhead costs associated with operating
facilities involved in inventory processing should be capitalized. The
provisions of SFAS No. 151 are effective for fiscal years beginning after June
15, 2005 and the Company will adopt this standard in fiscal 2006. The Company
has not determined the impact, if any, that this statement will have on its
consolidated financial position or results of operations.

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

In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections". SFAS 154 replaces APB Opinion No. 20, "Accounting Changes", and
SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements". SFAS
154 requires that a voluntary change in accounting principle be applied
retrospectively with all prior period financial statements presented on the new
accounting principle. SFAS 154 also requires that a change in method of
depreciating or amortizing a long-lived non-financial asset be accounted for
prospectively as a change in estimate, and correction of errors in previously
issued financial statements should be termed a restatement. SFAS 154 is
effective for accounting changes and correction of errors made in fiscal years
beginning after December 15, 2005. We are currently evaluating what impact, if
any, this statement will have on our financial statements.

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 3 - CRITICAL ACCOUNTING POLICIES

A summary of significant accounting policies is included in Note 2 to the
audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended September 30, 2004. Management believes
that the application of these policies on a consistent basis enables the Company
to provide useful and reliable financial information about the Company's
operating results and financial condition.

As disclosed in the annual report on Form 10-K for the fiscal year ended
September 30, 2004, the discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements.
These have been prepared in conformity with accounting principles generally
accepted in the United States. The preparation of the financial statements
requires us to make estimates and assumptions and adopt accounting policies that
affect the reported amounts of assets, liabilities, revenues and expenses as
disclosed in those financial statements. These judgments can be subjective and
complex, and consequently actual results could differ from those estimates. Our
most critical accounting policies relate to revenue recognition; foreign
exchange risk; inventory valuation and pension and other postretirement benefit
costs. Since September 30, 2004, there have been no changes in our critical
accounting policies and no significant changes to the assumptions and estimates
related to them.

NOTE 4 - NATURE OF BUSINESS

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

On September 6, 2002 the Company acquired the entire issued share capital of
Spear & Jackson plc and Bowers Group plc. These companies through their
principal operating entities, as disclosed in note 1, manufacture and distribute
a broad line of hand tools, lawn and garden tools, industrial magnets and
metrology tools primarily in the United Kingdom, Europe, Australasia, 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 November 7, 2002 the Company changed its name from Megapro Tools, Inc. to
Spear & Jackson, Inc.

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 5 - RETIREMENT BENEFIT PLAN

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

Pension costs amounted to $1,001 for the quarter ending June 30, 2005 and $323
for the same quarter last year. Pension costs for the nine months ending June
30, 2005 were $3,028 compared with $973 for the equivalent period last year. 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,
                                                2005              2004              2005              2004
                                           --------------    --------------    --------------    --------------
                                           (in thousands)    (in thousands)    (in thousands)    (in thousands)
<S>                                           <C>               <C>               <C>               <C>
Sevice cost ........................          $   453           $   380           $ 1,369           $ 1,142
Interest cost ......................            2,526             2,252             7,640             6,759
Expected return on plan assets .....           (2,656)           (2,735)           (8,034)           (8,208)
Recognition of actuarial loss ......              678               426             2,053             1,280

                                              -------           -------           -------           -------
Total Benefit cost .................          $ 1,001           $   323           $ 3,028           $   973
                                              =======           =======           =======           =======
</TABLE>

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

The pension plan actuarial advisors carried out an actuarial valuation of the
Plan as at December 31, 2004. This valuation showed an increase in the Plan's
deficit compared to that calculated at April 5, 2002, the date of the last full
actuarial valuation. Following discussions between the Company and the Trustees
of the Plan, it was been agreed that the Company would make a special
contribution to the Plan of (pound)4 million (approximately $7.2 million).
(pound)2 million (approximately $3.6 million) was paid in June 2005 with the
remainder to be paid by the end of September 2005. Also, from May 2005, the
Company's annual pension contributions have increased from (pound)1.5 million
(approximately $2.7 million) to (pound)1.9 million (approximately $3.4 million).

TThe Company has contributed $4,436 to the Plan in the quarter to June 30, 2005
(2004 $672) and $5,892 in the nine month period ending on that date (2004
$2,096). The figures for the three and nine month period to June 30, 2005
include $3,632 relating to the special contribution that was made in June 2005.
Taking into account the increase in annual contributions referred to above, the
Company anticipates that ongoing employer contributions of $3.2 million will be
made in the year ending September 30, 2005 (2004 $2.7 million) in addition to
the special contribution of $7.2 million (2004 $nil).

Accounting standards require a minimum pension liability be recorded when the
value of pension assets is less than the accumulated benefit obligation ("ABO")
at the annual measurement date. As of September 30, 2004, our most recent
measurement date for pension accounting, the value of the ABO exceeded the
market value of investments held by the pension plan by approximately $33.5
million. In accordance with accounting standards, the charge against
stockholders' equity will be adjusted in the fourth quarter to reflect the value
of pension assets compared to the ABO as of the end of September 2005. If the
level of pension assets exceeds the ABO as of a future measurement date, the
full charge against stockholders' equity would be reversed.

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET

                                                  At June 30,   At September 30,
                                                     2005            2004
                                                --------------  ----------------
                                                (in thousands)   (in thousands)
Assets held and used:
  Land and buildings, at cost ..............       $ 15,851         $ 18,177
  Machinery, equipment and vehicles, at cost         35,041           35,101
  Furniture and fixtures, at cost ..........          1,258            1,241
  Computer hardware, at cost ...............          1,246            1,264
  Computer software, at cost ...............            343              348
  Assets held under finance leases, at cost  (a)      2,848            2,828
                                                   --------         --------
                                                     56,587           58,959
  Accumulated Depreciation .................        (38,115)         (36,845)
                                                   --------         --------
  Net ......................................       $ 18,472         $ 22,114
                                                   ========         ========

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

(a) Included in property, plant and equipment at June 30, 2005 are capital
leases with a net book value of $1.0 million (June 30, 2004 $1.5 million). The
cost of these assets held under capital leases was $2.8 million (June 30, 2004
$2.8 million) and the accumulated depreciation relating to these assets was $1.8
million (June 30, 2004 $1.3 million).

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

NOTE 7 - UNUSUAL OR INFREQUENT EVENTS

A) PROFIT ON SALE OF LAND AND BUILDINGS, NET OF RELATED REORGANIZATION COSTS
On January 28, 2005 the Company completed the sale of part of its industrial
site at St. Paul's Road, Wednesbury, England, and on February 15, 2005 the
Company also concluded the disposal of its warehouse and office facility in Boca
Raton, Florida. Details of these sales are as follows:
<TABLE>
<CAPTION>
                                                            Wednesbury          Boca Raton           Total
                                                              England            Florida
                                                          --------------      --------------     --------------
                                                          (in thousands)      (in thousands)     (in thousands)
<S>                                                           <C>                 <C>                 <C>
Sale of land  and buildings:

Sale proceeds net of selling, professional
 and other costs  ..............................              $5,174              $3,427              $8,601
Less: net book value ...........................               2,223               3,168               5,391
                                                              ------              ------              ------
Gross profit on disposal .......................               2,951                 259               3,210

Less: related reorganisation costs (see below) .                 707                   -                 707
                                                              ------              ------              ------
                                                               2,244                 259               2,503
                                                              ======              ======              ======
</TABLE>
                                        8
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 7 - UNUSUAL OR INFREQUENT EVENTS - CONTINUED

As a result of the sale of the surplus element of the Wednesbury property, the
Company is contractually obliged to vacate office and warehouse facilities
located on those parts of the site that have been sold. A provision of $707,000
has been made for costs in connection with this obligation.

The current manufacturing and administration operation will be consolidated on
the retained element of the premises and the costs of $707,000 provided for this
exercise principally relate to office and factory refurbishment and
reorganization expenses and expenditure in respect of departmental relocations
within the remainder of the site.

B) MANUFACTURING REORGANIZATION COSTS

In the quarter ended June 30, 2005 the Company has incurred $269,000 of
reorganization costs in connection with the part closure of one of its UK
manufacturing facilities.

NOTE 8 - INVENTORIES

                                                  At June 30,   At September 30,
                                                     2005             2004
                                                --------------  ----------------
                                                (in thousands)   (in thousands)

Finished products ..........................       $ 20,397         $ 16,779
In-process products ........................          5,949            5,211
Raw materials ..............................          5,517            5,944
Less: allowance for slow moving and obsolete
  inventories ..............................         (6,128)          (5,946)
                                                   --------         --------
                                                   $ 25,735         $ 21,988
                                                   ========         ========

NOTE 9 - INCOME TAXES

Spear & Jackson is subject to income taxes in the US and in the other overseas
tax jurisdictions where its principal trading subsidiaries operate. The
provision for US and foreign income taxes consists of:
<TABLE>
<CAPTION>
                                            For the Three    For the Three     For the Nine      For the Nine
                                            Months Ended     Months Ended      Months Ended      Months Ended
                                              June 30,          June 30,          June 30,          June 30,
                                                2005              2004              2005              2004
                                           --------------   --------------    --------------    --------------
                                           (in thousands)   (in thousands)    (in thousands)    (in thousands)
<S>                                            <C>               <C>               <C>               <C>
Current tax (charge)/credit .......            $ (40)            $ (31)            $(139)            $ (93)
Deferred tax charge ...............             (166)             (203)             (515)             (673)

                                               -----             -----             -----             -----
                                               $(206)            $(234)            $(654)            $(766)
                                               =====             =====             =====             =====
</TABLE>
                                        9
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 9 - INCOME TAXES - CONTINUED

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,
                                                 2005             2004             2005              2004
                                            --------------   --------------   --------------    --------------
                                            (in thousands)   (in thousands)   (in thousands)    (in thousands)
<S>                                            <C>              <C>              <C>              <C>
Tax at US federal statutory income tax rate    $   (95)         $    19          $(1,143)         $  (242)
Overseas tax at rates different to
 effective rate ...........................        (13)             (33)             109              (58)
Permanent differences .....................        (39)             (38)            (118)            (113)
Gain on sale of UK property covered by
 capital losses brought forward ...........          -                -              885                -
Valuation allowance .......................        (59)            (182)            (387)            (353)

                                               -------          -------          -------          -------
                                               $  (206)         $  (234)         $  (654)         $  (766)
                                               =======          =======          =======          =======
</TABLE>

NOTE 10 - COMPREHENSIVE INCOME

Comprehensive income represents net income and other revenues, expenses, gains
and losses that are excluded from net income and recognized directly as a
component of stockholder's equity. Comprehensive income and its components
comprise the following:
<TABLE>
<CAPTION>
                                           For the Three     For the Three       For the Nine     For the Nine
                                            Months Ended      Months Ended       Months Ended     Months Ended
                                              June 30,          June 30,          June 30,          June 30,
                                                2005              2004              2005              2004
                                           --------------    --------------    --------------    --------------
                                           (in thousands)    (in thousands)    (in thousands)    (in thousands)
<S>                                           <C>               <C>               <C>               <C>
Total net  income (loss) .................    $    65           $  (287)          $ 2,611           $   (74)

Other comprehensive income (loss)

  Additional minimum pension liability ...      2,477                94               548            (3,039)
  Foreign currency translation adjustments     (4,168)             (529)             (891)            5,467
  Unrealized gains  on derivative
  instruments ............................        (12)              (11)               45                 -

                                              -------           -------           -------           -------
Total comprehensive income (loss) ........    $(1,638)          $  (733)          $ 2,313           $ 2,354
                                              =======           =======           =======           =======
</TABLE>

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 11 - COMMON STOCK
                                               At June 30,      At September 30,
                                                   2005                2004
                                               -----------      ----------------
                                                 (Number)            (Number)
                                               -----------      ----------------
Par value $.001 per share

Authorized : ...........................        25,000,000         25,000,000
                                               ===========        ===========

Issued : ...............................        12,011,122         12,011,122
                                               ===========        ===========

Outstanding:
    At  beginning of period ............        11,741,122         11,741,122
    Purchase of shares  (see below) ....        (6,005,561)                 -
                                               -----------        -----------
    At  end of period ..................         5,735,561         11,741,122
                                               ===========        ===========

On April 8, 2005 the Company acquired, for $100, 6,005,561 common shares of the
Company held by PNC Tool Holdings LLC. The Stock Purchase Agreement had been
approved by the SEC on February 10, 2005, and by the US District Court for the
Southern District of Florida on February 15, 2005 in part settlement of the
litigation captioned SEC v Dennis Crowley, Spear & Jackson, Inc., International
Media solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No.
04-80354-civ-Middlebrooks).

NOTE 12 - SEGMENT DATA

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

Given below are summaries of the significant accounts and balances by business
segment and by geographical location, reconciled to the consolidated totals. In
both periods, transactions and balances applicable to the Company's distribution
companies in France, Australia and New Zealand have been aggregated with the
hand and garden product businesses since these products represent the most
significant proportion of the distribution companies' trades.

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

The following is a summary of the significant accounts and balances (in
thousands) by business segment.

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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 12 - SEGMENT DATA - CONTINUED
<TABLE>
<CAPTION>
                              Sales           Long-lived Assets (a)           Sales           Long-lived Assets (a)
                     -----------------------  ---------------------  -----------------------  ---------------------
                       Three Months Ended                               Nine Months Ended
                      June 30,      June 30,   June 30,    June 30,   June 30,      June 30,   June 30,    June 30,
                        2005          2004       2005       2004       2005           2004       2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                   <C>           <C>        <C>         <C>        <C>          <C>         <C>         <C>
Hand & garden tools   $18,989       $20,146    $ 6,022     $ 9,622    $58,304      $ 58,297    $ 6,022     $ 9,622
Metrology tools         4,585         3,912      2,383       2,812     12,985        11,599      2,383       2,812
Magnetic products       2,756         2,349        625         901      8,349         6,920        625         901
Corporate                   -                    9,442      10,001          -                    9,442      10,001
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total              $26,330       $26,407    $18,472     $23,336    $79,638      $ 76,816    $18,472     $23,336
                     =========     =========  =========   =========  =========     =========  =========   =========

<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,
                        2005          2004       2005        2004       2005           2004      2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                    <C>           <C>        <C>         <C>       <C>           <C>         <C>        <C>
Hand & garden tools    $ 467         $ 465      $ 247       $ 218     $1,412        $ 1,464     $ 819      $ 3,636
Metrology tools          110            90         53           7        395            310       119          168
Magnetic products         69            78          -           3        241            249         4           28
Corporate                 56            66          -           5        177            184         -        3,239
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total               $ 702         $ 699      $ 300       $ 233     $2,225        $ 2,207     $ 942      $ 7,071
                     =========     =========  =========   =========  =========     =========  =========   =========

<CAPTION>
                     Operating Income (Loss)       Net Interest      Operating Income (Loss)      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,
                        2005          2004       2005        2004       2005          2004       2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                    <C>           <C>        <C>         <C>        <C>          <C>        <C>         <C>
Hand & garden tools    $   5         $ (70)     $ (59)      $ (56)     $ 158        $   641    $ (162)     $ (179)
Metrology tools          187           406         (2)         (5)       790          1,046        (9)        (14)
Magnetic products        346           296         (3)         (4)       887            839        (8)        (10)
Corporate                (46)         (651)        73         (27)      (890)        (1,741)      147         (30)
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total               $ 492         $ (19)     $   9       $ (92)     $ 945        $   785    $  (32)     $ (233)
                     =========     =========  =========   =========  =========     =========  =========   =========
</TABLE>

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


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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 12 - 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                                Nine Months Ended
                      June 30,      June 30,   June 30,    June 30,   June 30,      June 30,   June 30,    June 30,
                        2005          2004       2005       2004       2005           2004       2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                   <C>           <C>        <C>         <C>        <C>           <C>        <C>         <C>
United Kingdom        $11,851       $12,477    $16,684     $21,556    $34,472       $35,009    $16,684     $21,556
Europe                  5,355         4,659      1,169       1,224     17,115        14,951      1,169       1,224
Australasia             3,591         3,717        619         556     10,993        12,463        619         556
North America           2,097         2,035          -           -      5,616         5,212          -           -
Other                   3,436         3,519          -           -     11,442         9,181          -           -
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total              $26,330       $26,407    $18,472     $23,336    $79,638       $76,816    $18,472     $23,336
                     =========     =========  =========   =========  =========     =========  =========   =========

<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,
                        2005          2004       2005        2004       2005           2004      2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                    <C>           <C>        <C>         <C>        <C>          <C>         <C>        <C>
United Kingdom         $ 602         $ 575      $ 239       $  10      $1,937       $ 1,872     $ 607      $3,580
Europe                    33            27         35           -          89            73        75           3
Australasia               67            80         26         218         199           227       260         249
North America              -            17          -           5           -            35         -       3,239
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total               $ 702         $ 699      $ 300       $ 233      $2,225       $ 2,207     $ 942      $7,071
                     =========     =========  =========   =========  =========     =========  =========   =========

<CAPTION>
                     Operating Income (Loss)       Net Interest      Operating Income (Loss)      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,
                        2005          2004       2005        2004       2005          2004       2005        2004
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
<S>                    <C>           <C>        <C>         <C>       <C>           <C>         <C>         <C>
United Kingdom         $ 565         $ 737      $ 23        $ (55)    $ 1,071       $ 1,909     $  40      $ (130)
Europe                    95            22       (42)         (44)        450           219      (144)       (143)
Australasia              (25)         (207)        7            3          92          (277)       36          18
North America           (143)         (571)       21            4        (668)       (1,066)       36          22
                     ---------     ---------  ---------   ---------  ---------     ---------  ---------   ---------
   Total               $ 492         $ (19)     $  9        $ (92)    $   945       $   785     $ (32)     $ (233)
                     =========     =========  =========   =========  =========     =========  =========   =========
</TABLE>

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

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


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

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                                 (IN THOUSANDS)

NOTE 13 - LEGAL PROCEEDINGS

A number of class action lawsuits have been initiated in the U.S. District Court
for the Southern District of Florida by Company stockholders against the
Company, Sherb & Co. LLP, the Company's former independent auditor, and certain
of the Company's directors and officers, including Mr. Dennis Crowley, the
Company's then Chief Executive Officer/Chairman, and Mr. William Fletcher, the
Company's then CFO and now acting Chief Executive Officer.

These suits allege essentially the same claims as an SEC suit which was filed on
April 15, 2004, in the U.S. District Court for the Southern District of Florida.
This suit, filed against the Company and Mr. Crowley, among others, alleged
violations of the federal securities laws. These allegations arose from the
alleged failure of Mr. Crowley to accurately report his ownership of the
Company's stock, and his alleged manipulation of the price of the Company's
stock through the dissemination of false information, allowing him to profit
from sales of stock through nominee accounts. The suit was settled on February
15, 2005 following approval by the US District Court.

Lead counsel has now been appointed for the class action suits and a
consolidated complaint has been filed. The Company is in the process of
formulating its response. It is impossible at this time to ascertain the
ultimate legal and financial liability or whether this action will have a
material adverse effect on the Company's financial condition and results of
operations.

With effect from September 30, 2003 the Company exited its screwdriver
operations following the disposition of the trade and assets of Mega Tools Ltd
and Mega Tools USA, Inc. The disposition of the screwdriver division was
undertaken by Neil Morgan who was then heading up the division. The Company
believed that no specific authorization was afforded to Mr. Morgan to undertake
that disposition. The disposition proceeds were in the form of $284,000 of loan
notes and other receivables and the discharge of a loan of $100,000 owed by the
Company to Mr Morgan. Full provision was made in the Company's Financial
Statements against the recoverability of these disposition proceeds. It has now
been agreed with Megapro that it will pay Canadian $53,900 (approximately
$41,000) in settlement of those debts and this is being repaid in monthly
installments of Canadian $ 5,000 (approximately $3,800).

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

                                       14
<PAGE>

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

General

The following information should be read in conjunction with the consolidated
financial statements and notes thereto and other information set forth in this
report.

Forward Looking Statements

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

Risk Factors

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

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

-  achieving planned revenue and profit growth in each of the Company's business
   units;
-  renewal of material contracts in the Company's business units consistent with
   past experience;
-  successful and timely integration of any significant businesses acquired by
   the Company and realization of anticipated synergies;
-  increasing price, products and services competition;
-  emergence of new competitors or consolidation of existing competitors;
-  the timing of orders and shipments;
-  continuing availability of appropriate raw materials and factored products;
-  maintaining and improving current product mix;
-  changes in customer requirements and in the volume of sales to principal
   customers;

                                       15
<PAGE>

-  changes in governmental regulations in the various geographical regions where
   the Company operates;
-  the timely implementation of the Company's restructuring programs and
   financial plans;
-  general economic and political conditions, including the global economic
   slowdown and interest rate and currency exchange rate fluctuation;
-  continuing development and maintenance of appropriate business continuity
   plans for the Company's processing systems;
-  absence of consolidation among key customers;
-  attracting and retaining qualified key employees;
-  no material breach of security of any of the Company's systems;
-  the ability of the Company to control manufacturing and operating costs;
-  continued availability of financing, and financial resources on the terms
   required to support the Company's future business strategies;
-  costs incurred in respect of compliance with Section 404 of the
   Sarbanes-Oxley Act of 2002;
-  the outcome of pending and future litigation; and
-  the potential acquisition of the Company or its principal assets.

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

CORPORATE ORGANIZATION

OVERVIEW

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

INCORPORATION OF MEGAPRO TOOLS, INC.

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

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

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

                                       16
<PAGE>

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

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

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

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

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

THE ACQUISITION OF SPEAR & JACKSON PLC AND BOWERS GROUP PLC BY MEGAPRO TOOLS,
INC.

On August 23, 2002, USI Mayfair Limited, a corporation organized under the laws
of England and a wholly-owned subsidiary of USI Global Corp., Megapro Tools,
Inc. ("Megapro") and S and J Acquisitions Corp. (a company incorporated on
August 22, 2002 under the laws of the State of Florida and a wholly owned
subsidiary of Megapro.) executed a Stock Purchase Agreement to acquire all of
the issued and outstanding shares of Spear & Jackson plc and its affiliate,
Bowers Group plc, owned by USI Mayfair Limited. The purchase price comprised
3,543,281 shares of common stock of Megapro and promissory notes in the
principal amount of (pound)150,000 pounds sterling (approximately $235,000)
("the Transaction"). The Transaction closed on September 6, 2002.

                                       17
<PAGE>

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

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

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

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

CHANGE OF NAME TO SPEAR & JACKSON, INC.

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

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

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

                                       18
<PAGE>

EXIT FROM SCREWDRIVER OPERATIONS

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

The disposition 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 disposition of the trade
and assets of the screwdriver division was undertaken by Neil Morgan who was
then heading up the division. The Company believed that no specific
authorization was afforded to Mr. Morgan to undertake that disposition and,
following review of the terms and circumstances of the purported sale, the
Company pursued claims against Mr. Morgan.

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 Mr.
Morgan. Full provision against the recoverability of these disposition proceeds
was made in the Company's Financial Statements. It has now been agreed with
Megapro that it will pay Can$53,900 (approximately $41,000) in settlement of
those debts and this is being repaid in monthly installments of Can$ 5,000
(approximately US$3,800).

RECENT DEVELOPMENTS

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

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

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

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

                                       19
<PAGE>

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

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

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

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

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

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

                                       20
<PAGE>

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

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

Jacuzzi retains the right to change their investment intent.

SUMMARY OF PRINCIPAL OPERATIONS

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

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

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

1)       NEILL TOOLS, which consists of Spear & Jackson Garden Tools and Neill
         Tools, manufactures, among other products, hand hacksaws, hacksaw
         blades, hacksaw frames, builders' tools, riveter guns, wood saws and
         lawn, garden and agricultural tools, all non-powered. In addition,
         Neill Tools has supplemented its UK manufactured products with factored
         products from Far Eastern suppliers. Neill Tools product offering has
         been expanded to include a full range of hand power tools and
         similarly, from January 1, 2005, Spear & Jackson Garden Tools' range
         has been supplemented by a portfolio of electric powered garden tools.

                                       21
<PAGE>

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

3)       The Company's metrology division comprises:

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

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

         In December 2004, the division also secured the European
         distributorship rights for a range of premier portable hardness testers
         sourced from China. This distribution operation is operated through a
         specifically formed Dutch subsidiary company, CV Instruments Europe BV,
         based in Maastricht, Holland.

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

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

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

For further detailed financial information by reportable segment, including
sales, profit and loss, and total asset information, see Note 12 in the "Notes
to the Condensed Consolidated Financial Statements" included within this
Quarterly Report on Form 10-Q. Also included within Note 12 is a detailed
geographical analysis including sales, profit and loss and total asset
information.

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

                                       22
<PAGE>

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

         Name/Location                       Products Manufactured
         -------------                       ---------------------

A        UK

a)       Neill Tools                         Hand tools
         Atlas Site, Sheffield

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

c)       Robert Sorby                        Wood turning tools
         Sheffield

d)       Eclipse Magnetics                   Magnetic products
         Vulcan Road, Sheffield

e)       Bowers Metrology                    Precision measuring tools
         Bradford

f)       Coventry Gauge                      Precision measuring tools
         Poole

B        France

         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.

                                       23
<PAGE>

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

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

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

(b)      Continuous product improvement and innovation.

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

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

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

The Company offers a comprehensive range of tools and these ranges are supported
by a pipeline of new products and range extensions. In the period from April 1,
2005 to June 30, 2005 new product range launches and other significant product
related business developments have included:

Neill Tools launched a machete range specifically for the export market, the
objective being to open up new markets with the introduction of new products.

Eclipse Magnetics has continued to design, develop and launch new products,
specifically for the food and automation industries, covering liquid processing,
conveying and materials handling.

Two new products introduced by Robert Sorby, the midi versions of the popular
Hollowmaster and Multi-tip Hollowing Tool were quickly listed by two major
customers.

DISCUSSION OF CRITICAL ACCOUNTING POLICIES

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

Management's Discussion and Analysis or Plan of Operation in the Company's 10-K
filing for the year ended September 30, 2004 included a detailed discussion
which addressed our most critical accounting policies. The quarterly financial
statements for the period ended June 30, 2005, attached hereto, should therefore
be read in conjunction with that discussion.

                                       24
<PAGE>

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

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

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

Since September 30, 2004 there have been no changes in our critical accounting
policies and no significant change to the assumptions and estimates related to
them.

OVERVIEW

When compared to the equivalent period last year, the results for the quarter
ended June 30, 2005 show an increase of $0.51 million in operating income from
an operating loss of $0.02 million in 2004 to an operating income of $0.49
million in 2005. For the nine month period ended June 30, 2005 operating income
improved by $0.16 million from $0.79 million in 2004 to $0.95 million in 2005.
In the nine month period ended June 30 2005, income before taxes has benefited
significantly from the $2.50 million profit arising on the sale of the surplus
element of the Company's Wednesbury facility and the disposal of its warehouse
and office facility in Boca Raton. No similar income arose in the comparable
period in 2004.

Despite the increases in trading profitability in 2005 compared to 2004, we
continue to experience various adverse macro economic factors, e.g. the
continuing weakness of the US $, further raw material and utility cost increases
and, especially in the last quarter, poor demand in the UK retail sector. These
have impacted negatively on the current quarter's performance and are also
expected to adversely affect earnings in future periods.

Sales revenues for the quarter ended June 30, 2005 decreased by approximately
$0.08 million (0.29%) over the comparable period in the previous year. This
reduction is primarily due to decreased sales volumes compensated by favorable
currency exchange fluctuations. For the nine months ended June 30, 2005 sales
revenues increased by $2.81 million (3.67%), with the principal element relating
to favorable exchange differences.

                                       25
<PAGE>

Gross profit was $8.59 million for the quarter ended June 30, 2005 compared to
$8.05 million for the prior year, an increase of $0.54 million (6.68%). For the
nine months ended June 30, 2005 gross profit increased by $2.06 million (8.63%),
from $23.93 million in 2004 to $25.99 million in 2005. Direct costs are still
being adversely affected by increases in prices for our principal raw materials
of steel, plastic, cobalt and nickel and increases in basic utility costs.
Nevertheless, margins saw signs of improvement as the various divisions
witnessed favorable sales mixes and benefited from both favorable exchange gains
on imported factored products and the sale of obsolete inventories at prices
higher than their written down value.

In comparison, margins in the three and nine month periods ending June 30, 2004
were depressed by a shift in sales mix from own-manufactured items towards lower
contribution factored product.

Selling, general and administrative expenses increased by $0.03 million (0.33%)
in the quarter to June 30, 2005 when compared to last year and have increased by
$1.9 million (8.23%) in the nine month period ended on that date from $23.14
million to $25.04 million. Both the three and nine month periods have been
negatively impacted by: continuing high levels of UK distribution costs
following the move to a "direct to market" sales approach; US $/sterling cross
rates in the period; general inflationary increases and increased FAS 87 pension
costs. These adverse effects have, however, been mitigated by the release of the
excess element of a provision relating to severance compensation payable to the
former managing Director of Spear & Jackson plc. In addition, the last two
quarters have seen the rewards of local reorganization programs and cost cutting
measures (particularly in the Company's Australian subsidiary) which have
further reduced expenses.

The Company believes that the level of overheads incurred in the three months
ended June 30, 2005, will be maintained in the short term. Various initiatives
are still, however, being implemented to reduce the levels of sales and
distribution costs in future periods. Additionally, settlement of the Company's
SEC litigation suit should result in decreases in administration costs in future
periods following the reduction in legal and professional costs. However, other
head office legal costs associated with the ongoing class action and the role of
the corporate monitor are likely to be incurred until the resolution this
matter.

Overall, the margin improvements have been sufficient to absorb the increased
SG&A expenses, and this has resulted in an operating profit of $0.49 million for
the three month period ended June 30, 2005 compared to an operating loss of
$0.02 million for the same period last year. Similarly, in the nine month period
ended June 30, 2005 operating profits have increased from $0.79 million in 2004
to $0.95 million in 2005.

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

                                       26
<PAGE>

In this regard, the Company has made provision in the quarter ending June 30,
2005 for $0.27 million of reorganization costs, announced in June 20005,
relating to the restructuring of one of its UK manufacturing facilities. Such
restructuring costs and other initiatives, together with planned investment in
new capital equipment in the UK, are anticipated to achieve improved
efficiencies and reduce labor costs with corresponding improvements in the
ongoing profitability of the Company in the forthcoming year.

In the quarter ended March 31, 2005, the actuarial advisers to the Company's
defined benefit pension plan ("the Plan")completed an actuarial valuation of the
Plan, effective as at December 31, 2004. This valuation showed an increase in
the Plan's deficit compared to that calculated at April 5, 2002, the date of the
last full actuarial valuation. Following discussions between the Company and the
Trustees of the Plan regarding methods by which the asset shortfall could be
reduced, it was agreed, in early May, that the Company would make a special
contribution to the Plan of (pound)4 million (approximately $7.2 million).
(pound)2 million (approximately $3.6 million) was paid to the Plan in June 2005
and the balance will be paid in September. In addition, from May 2005, the
Company's annual pension contributions to the Plan increased from (pound)1.5
million (approximately $2.7 million) to (pound)1.9 million (approximately $3.4
million). This rate of annual contribution will remain in place, subject to
certain conditions, until April 2007 when it will be reviewed by the Plan
actuary. This agreement with regard to the future funding commitments of the
Plan will enable the Company to plan future cash flows with greater certainty
and will also avoid any re-negotiation of contribution rates in September 2005
when new pension legislation is enacted in the UK.

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

Although the SEC litigation has now been satisfactorily resolved, the class
action lawsuits that have been initiated in the US District Court for the
Southern District of Florida by Company shareholders against the Company, Sherb
& Co LLP, the Company's former independent auditor, and certain of the Company's
directors and officers, still remain.

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

RESULTS OF OPERATIONS

The following discussion provides a review of results for the three and nine
months ended June 30, 2005 versus the three and nine months ended June 30, 2004.

                                       27
<PAGE>

Summary Profit and Loss Account Data:

                                         Three Months           Nine Months
                                        ended June 30          ended June 30
                                       2005        2004       2005        2004
                                        $m          $m         $m          $m

Net Sales ........................     26.33       26.41      79.63       76.82
Cost of goods sold ...............    (17.74)     (18.36)    (53.64)     (52.89)

                                      ------      ------     ------      ------
Gross profit .....................      8.59        8.05      25.99       23.93
Selling, general and
  administrative expenses ........     (8.10)      (8.07)    (25.04)     (23.14)

                                      ------      ------     ------      ------
Operating income/(loss) ..........      0.49       (0.02)      0.95        0.79
Other income/(costs) .............      0.05       (0.04)      0.08       (0.10)

                                      ------      ------     ------      ------
Income/(loss) before unusual and
  infrequent events ..............      0.54       (0.06)      1.03        0.69
Unusual or infrequent items ......     (0.27)       -          2.23        -

                                      ------      ------     ------      ------
Income/(loss) before income taxes       0.27       (0.06)      3.26        0.69

Provision for income taxes .......     (0.21)      (0.23)     (0.65)      (0.76)
                                      ------      ------     ------      ------

Net income (loss) ................      0.06       (0.29)      2.61       (0.07)
                                      ======      ======     ======      ======

Effective tax rate ...............     76.01%     441.51%     20.03%     110.69%
                                      ======      ======     ======      ======

Comparisons as a % of net sales:

Gross profit .....................    32.61%      30.48%      32.64%     31.15%
Selling, general and
  Administration expenses ........    30.74%      30.55%      31.45%     30.13%
Operating income (loss) ..........     1.87%      (0.07%)      1.19%      1.02%
Income (loss) before income taxes      1.03%      (0.07%)      4.10%      0.90%
Net income (loss) ................     0.25%      (1.09%)      3.28%     (0.09%)

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

NET SALES

Sales increased by $2.81 million (3.67%) from $76.82 million in the nine months
ended June 30, 2004 to $79.63 million for the nine months ended June 30, 2005.
Sales of $26.33 million in the quarter ended June 30, 2005 were $0.08 million
(0.33%) lower than sales of $26.41 million recorded for the comparable period
last year.

                                       28
<PAGE>

The increase/(decrease) is analyzed as follows:

                                                     Nine Months    Three Months
                                                        ended           ended
                                                       June 30,        June 30,
                                                         2005            2005
                                                          $m              $m
                                           Note
Effect of exchange rate movements ........ (a)           3.72            0.94

Sales volumes movements .................. (b)          (0.73)          (1.02)

Increased rebates ........................ (c)          (0.18)              -
                                                        -----           -----
                                                         2.81           (0.08)
                                                        =====           =====

Presented by principal business segment, the net sales increase is analyzed as
follows:
                                                     Nine Months    Three Months
                                                        ended           ended
                                                       June 30,        June 30,
                                                         2005            2005
                                                          $m              $m
                                           Note
i)     Hand and garden tools

       Effect of exchange rate movements . (a)           2.81            0.72
       Sales volume decreases ............ (b)          (2.63)          (1.91)
       Rebates ........................... (c)          (0.18)              -
                                                        -----           -----
                                                            -           (1.19)
                                                        -----           -----

ii)    Metrology tools

       Effect of exchange rate movements . (a)           0.55            0.12
       Sales volume increases ............ (b)           0.84            0.56
                                                        -----           -----
                                                         1.39            0.68
                                                        -----           -----

iii)   Magnetic products

       Effect of exchange rate movements . (a)           0.36            0.10
       Sales volume increases ............ (b)           1.06            0.33
                                                        -----           -----
                                                         1.42            0.43
                                                        -----           -----

       Total net sales increase/(decrease)               2.81           (0.08)
                                                        =====           =====

                                       29
<PAGE>

Notes:

(a)    The functional currency of the majority of the group's revenues is
       sterling and the variation in the US$/(pound) cross rate in the three and
       nine month periods ending June 30, 2005 compared to the comparable
       periods last year has had a significant impact on the US dollar value of
       the group's sales. The average cross rates in the period under review can
       be summarized as:

                                                   Average Cross Rates
                                                   -------------------

                                           2005          2004         % Movement

       9 months ended June 30             1.8707        1.786           +4.74%
       3 months ended June 30             1.8571        1.8050          +2.89%

(b)    In general, business conditions in many of our end markets remained
       challenging as a result of continuing intense competition from rival
       suppliers in a number of our product ranges, increasing pressure from
       cheap Far Eastern imports, the weak US dollar, and poor retail trading
       conditions in the UK.

       Within the UK, Neill Tools, especially, has witnessed increasingly
       difficult trading conditions. Previously buoyant hand tools demand from
       the Middle East has slowed and UK sales of garden tools have been
       adversely affected by depressed order intake from the major retail
       outlets. Likewise, Australia and New Zealand continue to show volume
       decreases ($2.2 million cumulatively and $0.36 million in the quarter)
       primarily attributable to the increased levels of competition and a
       general slowing down of consumer spending.

       While similar market pressures were prevalent in the metrology and
       magnetic products segments, volume increases over the prior year of $0.9
       million for the quarter and $1.90 million cumulatively were still
       achieved. This was attributable to volume growth in the Metrology
       distribution facility in Maastricht, and increases in export sales in
       Eclipse Magnetics following the establishment of new distribution
       channels.

(c)    The level of rebates in the quarter ended June 30, 2005 is little changed
       from that in the same quarter last year and shows a $0.18 million
       increase in the nine month period when compared to 2004. The increases
       are attributable to increased trading volumes in France and in our Neill
       Tools division as a result of changes in customer profiles which have
       arisen following the set up of the direct to market sales route.

SEGMENT REVIEW OF SALES REVENUES

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

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

                                       30
<PAGE>

NEILL TOOLS

Sales for the quarter ended June 30, 2005 of $11.61 million showed a decrease of
$1.31 (10.15%) million over last year's sales of $12.92 million. This decrease
was attributable to decreased volumes of $1.51 million, and increased rebates of
$0.1 million, only partially compensated by favorable exchange variances of
$0.30 million. For the nine months ended June 30, 2005 sales of $34.93 million
showed an increase of $0.71 (2.09%) million from last year's sales of $34.22
million. This increase comprised favorable exchange movements of $1.58 million,
offset by decreased volumes of $0.60 million and increased sales rebates of
$0.27 million.

Despite sales volume improvements in previous quarters, Neill Tools has
experienced particularly difficult trading conditions in the third quarter. The
UK retail market has continued the downward trend witnessed at the end of the
last quarter, especially in the multiple retail sector. Additionally, export
sales, which in the first half of the year had exceeded expectations, have seen
a general downturn in the last quarter. This reduction is primarily attributable
to the huge construction programs put in place following the conflicts in the
Middle East, which have assisted our strong export sales performance in previous
quarters but which have now begun to slow down.

UK trading conditions in the garden tools market have deteriorated in the last
quarter, due to poor performance in the multiple retail sector. Despite these
shortfalls in the gardening business, the "Predator" woodsaw range, which was so
successful last year, has continued to sell strongly in the year. As previously
reported investment of approximately $0.9 million in new woodsaw and hacksaw
blade plant has been approved and this is expected to be fully operational in
Quarter 4. This will ensure that the record levels of productivity can be
sustained.

The threat to the business from low-cost, Far Eastern economies continues
unchanged. These competitive pressures have been exacerbated by the weakness of
the US dollar, price increases imposed by our steel, plastics and utility
suppliers, and the difficulty, within a competitive market place, of passing
these increases on to our customers. Despite this, margins have been maintained
when compared to the same period last year, as divisional profitability has
benefited from favorable sales mixes, the sale of obsolete inventories at
amounts above NRV and the implementation of a number of strategic initiatives to
reduce the cost of manufacturing and distribution which were introduced in the
last financial year. During the quarter the division announced a reorganization
in connection with the closure of part of one of its manufacturing facilities
and costs of $0.27 million have been provided in respect of this.

Given the depressed trading conditions, overhead cost control remains under
scrutiny and reorganizations of certain sales and administration functions have
been undertaken to reduce these costs.

ECLIPSE MAGNETICS

Sales for the quarter showed a $0.41 million (17.33%) increase over last year's
figures (2005 $2.76 million, 2004 $2.35 million) with favorable exchange
movements of $0.08 million and increased volumes of $0.33 million. Likewise for
the nine months ended June 30, 2005 sales showed a 20.65% increase of $1.43
million (2005, $8.35 million, 2004, $6.92 million) attributable to favorable
exchange movements of $0.38 million and increased volumes of $1.05 million.

                                       31
<PAGE>

Sales of both the distribution range of products and new lifting and clamping
products have shown a marked improvement when compared to last year helped by
new distribution channels in Europe. In the engineering sector, however, the
latter part of the quarter has experienced a slow down in activities reflecting
fragile manufacturing confidence and the uncertainties within the European
economy.

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
where customers are switching supply sources to the Far East or re-designing
systems and applications to accommodate newer magnetic materials.

The higher technology area of the division, "Applied Magnetic Systems",
continues to flourish, mainly driven by the material handling and separation
business. New products have been designed, developed and installed within the
food and automation industries, covering liquid processing, conveying and
materials handling industry.

2005 gross margins were 4% better than last year in both the quarter and for the
nine months ended June 30. The main driver in this improvement has been more
favorable raw material prices for nickel and cobalt (two major alloys used in
magnet manufacturing) and an improved mix of products sold within the
Engineering products division.

The main challenges to the business continue to be the delivery of a lower
manufacturing cost base, the development of new product through the Applied
Magnetics Systems division and increasing market awareness for such items.

ROBERT SORBY

Sales for the quarter showed a decrease of $0.06 million when compared to last
year (2005 $1.28 million, 2004 $1.34 million) with sales volume decreases of
$0.10 million being compensated by favorable exchange variances. For the nine
month period sales have increased by $0.12 million (3.04%) from $3.91 million in
2004 to $4.03 million in 2005 primarily due to favorable exchange variances of
$0.18 million and reduced volumes of $0.06 million.

The third quarter has continued the trends of the quarter ended March 31, 2005.
In the UK home market, low demand reflected a very challenging retail
environment and international sales, which had earlier in the year had shown
growth, witnessed a decline in the quarter. Against this background a number of
UK promotions were run to focus on key products and a major demonstration tour
of Australia and New Zealand was undertaken. Such continued promotional activity
will be essential in retaining market share and resisting the efforts of
competitors to consolidate their own market positions.

Continuing focus will be placed on our mail order business. Sales in the quarter
were up by 24% over the comparable period in 2004 and cumulative sales showed a
20% increase over the prior period. As a result of this strong demand an
e-commerce web site is currently under construction.

                                       32
<PAGE>

As well as flat UK markets, Robert Sorby, in common with other of the Company's
business units, faces the issue of escalating raw materials costs. Whilst
increases in steel prices have hitherto been resisted we are now being forced to
accept that cost revisions are inevitable and any such price increases may
adversely affect sales volume going forward.

BOWERS METROLOGY

Sales for the third quarter show an increase of $0.67 million (17.23%) over last
year ($4.58 million 2005, $3.91 million 2004) due to favorable exchange
movements of $0.12 million, and increased volumes of $0.55 million. Cumulatively
sales have increased by $1.39 million (11.97%) from $11.60 million in 2004 to
$12.99 million in 2005. This is attributable to increased volumes of $0.85
million and favorable exchange movements of $0.54 million.

The new sales and distribution facility set up in Maastricht, Holland has
continued to have a favorable impact on trading volumes. This new facility,
specializing in the distribution of portable hardness testing equipment
manufactured in China and the sale of general engineers hand tools, has
excellent connections in mainland Europe. While the division has incurred
considerable set-up costs, these are now complete and it has recorded a profit
in the last quarter.

Other successes in the quarter included continued solid performances by Bowers
in the USA, as well as high sales levels of the new SmartPlug 2 - point product.

Elsewhere, the Moore & Wright and Coventry Gauge divisions have continued to
struggle against the influx of low cost competition from China and the Far East
and the associated price cutting by competitors to combat the effect of these
cheap imports.

Margins have improved by a full percentage point over last year thanks to the
bias of sales towards higher margin products, particularly in the new systems
division, the sourcing of product direct from source rather than through
intermediary suppliers and the weakness of the US dollar.

Looking forward, demand for low cost, own manufactured hand tools will continue
to face further pressure from the Far East and increased emphasis will be placed
on the new systems division which offers bespoke gauging solutions. The Company
therefore recognizes that it needs to continue to focus the UK manufacturing
sites on producing more high technology products and measuring solutions and to
explore strategies to make the Company more competitive in the low technology
sectors.

S&J FRANCE

Overall, sales for the third quarter of $2.57 million have increased by $0.34
million over last year ($2.23 million) due to favorable exchange movements of
$0.13 million and volume increases of $0.06 million and decreased sales rebates
of 0.15 million. For the nine month period sales have increased by $0.67 million
(8.53%) from $7.80 million in 2004 to $8.47 million in 2005. Favorable volumes
of $0.26 million and exchange movements of $0.48 million have been offset by
increased rebates of $0.07 million.

                                       33
<PAGE>

On a macro level, French economy remained depressed, with increases in the rate
of unemployment, low consumer confidence and reduced spending levels.

Business conditions in the Company's markets reflect the sluggish retail
environment with price competition and consolidation of competitors putting
pressure on margins.

Significant marketing activity have been undertaken to promote the Company's
principal brands and new listings have continued to make an important impact
especially brass ornaments, thermometer and weather station ranges, cutting
products, extensions to the garden product and hand tool range and plastic snow
tools.

Production efficiencies introduced with the involvement of UK manufacturing
management have increased productivity rates and reduced costs and an overhead
reduction program has been successfully implemented.

It is anticipated that these production efficiencies will continue into
subsequent quarters. Further range expansions and the set up of a mail order
service for garden products and accessories are planned to enhance the Company's
market position.

AUSTRALASIA

Sales for the quarter for Spear & Jackson Australia and Spear & Jackson New
Zealand were $0.12 million (3.25%) lower than last year (2005 $3.54 million,
2004 $3.66 million), due primarily to reduced volumes of $0.37 million,
compensated by favorable exchange variances. Cumulatively for the nine months to
June 30, 2005 sales have decreased by $1.49 million (12.08%) from $12.36 million
in 2004 to $10.87 million in 2005. Volume reductions of $2.23 million were only
partly compensated by favorable exchange movements of $0.56 million and
decreased sales rebates of $0.18 million.

The sales revenues of the Australian subsidiary have continued to suffer in
comparison to the prior year due to the loss of business with a major Australian
retailer, increased levels of competition and a softening in retail demand. On a
macro-economic level, increases in domestic interest rates have negatively
impacted consumer spending and retail sales.

In New Zealand lower than expected levels of sales are attributable to increased
levels of competition from Asian imported power and air tool products and the
loss of business with a major retail group. As in Australia, increased domestic
interest rates and speculation concerning further rate hikes have dented
consumer confidence and slowed demand.

Margins remain under pressure given the sluggish retail demand and the increased
promotional and marketing costs necessary to maintain sales levels. These
effects have been mitigated, where possible, by improved product sourcing and by
favorable exchange gains resulting from a strong Australian dollar.

Our Australasian division remains focused on re-establishing and consolidating
its trading relationships with retail customers and suppliers and on maximizing
the selling opportunities of the Spear & Jackson branded products. In this
regard, management has now introduced a number of extended ranges and
promotional programs across the digging, garden, cutting, handsaw, and air tool

                                       34
<PAGE>

ranges that are anticipated to deliver incremental sales and margin growth in
the forthcoming quarters. A new range of electrical generators, battery chargers
and drainage products has also been launched. In addition, management has
initiated a series of cost cutting measures, including restructuring of the
workforce, in order to meet the slow down in sales demand.

COSTS OF GOODS SOLD AND GROSS PROFIT

Costs of goods sold decreased by 3.35% from $18.36 million in the three month
period ended June 30, 2004 to $17.74 million in the three months ended June 30,
2005. In the nine month period under review costs of goods sold increased by
1.43% from $52.89 million in the nine months ended June 30, 2004 to $53.64
million in the nine months ended June 30, 2005.

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

                                      Three Months Ended      Nine Months Ended
                                      June 30     June 30    June 30     June 30
                                       2005        2004       2005        2004

Cost of goods sold as a % of sales .   67.39       69.52      67.36       68.85

Gross Profit Margin ................   32.61       30.48      32.64       31.15

Despite continuing raw material (principally steel and plastic) and utility
price increases, together with increases in the cost of fuel used to operate our
manufacturing processes, gross margins have continued to show improvements over
last year as a result of:

o  exchange gains realized on the purchase of factored products denominated in
   US dollars from suppliers in the Far East
o  more favorable and advantageous sales mix
o  further increase in selling directly to customers rather than via
   intermediaries
o  improved product sourcing
o  realization of negotiated price increases
o  sale of slow moving inventories at amounts in excess of their net realizable
   value

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

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

                                       35
<PAGE>

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

OPERATING COSTS AND EXPENSES

Selling, general and administrative (SG&A) expenses increased slightly from
$8.07 million in the three months ended June 30, 2004 to $8.10 million in the
three months ended June 30, 2005. In the nine months ended June 30, 2005 costs
of $25.04 million have increased by $1.90 million (8.23%) from $23.14 million in
the nine months to June 30, 2004.

The principal reasons for the changes in the levels of SG&A expenses in the
three and nine month periods ended June 30, 2005 over their prior year
comparatives can be summarized as follows:

                                                 Increases Over Prior Year

                                            Nine Months            Three Months
                                               ended                  ended
                                           June 30, 2005          June 30, 2005
                                                 $m                     $m

a)     Impact of movements in                   1.20                   0.40
       average US$/sterling cross
       rates in the period

b)     Increased FAS 87 pension costs           2.06                   0.66

c)     Inflationary increases and               0.40                   0.10
       reduced foreign exchange
       gains on trading transactions

d)     Decreased head office costs             (0.40)                 (0.50)
       relating to legal and professional
       fees, monitor fees and associated
       costs

e)     Increased UK warehouse and               0.30                  (0.20)
       distribution costs following
       the change to direct sales

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

g)     Cost savings in Australia               (0.80)                 (0.20)

h)     Other net decreases in SG&A expenses    (0.36)                 (0.23)
                                               -----                  -----

       Total increase in SG&A expenses          1.90                   0.03
                                               =====                  =====

                                       36
<PAGE>

OTHER INCOME (EXPENSE)

Other income and expenses moved from a net expense of $0.04 million in the three
months ended June 30, 2004 to a net credit of $0.05 million in the three months
ended June 30, 2005. For the nine month period under review other income and
expenses has moved from a $0.10 million charge in the nine months to June 30,
2004 to a $0.08 million credit in the nine months to June 30, 2005.

This improvement is attributable to higher 2005 bank interest credits in the
Company's UK businesses. During the period to June 2004 the cash balances in the
UK were negatively impacted by the cash outflows relating to the purchase of
land and buildings at Wednesbury, England for $3.2 million. This resulted in
increased interest charges in the period to June 2004. Over the last year net
trading cash generation has improved cash balances thereby reducing interest
charges. In addition, the sale of the excess element of the Wednesbury site for
$5.2 million in January 2005 and the $3.4 million derived from the disposition
of the Company's warehouse in Boca Raton have increased cash balances and
generated higher interest income.

UNUSUAL OR INFREQUENT EVENTS

PROFIT ON SALE OF LAND AND BUILDINGS NET OF RELATED REORGANIZATION COSTS

In the nine months ended June 30, 2005 the Company has recorded net profits of
$2.5 million on the sale of land and buildings. On January 28, 2005 the Company
completed the sale of part of its industrial site at St. Paul's Road,
Wednesbury, England, and on February 15, 2005 the Company also concluded the
disposal of its warehouse and office facility in Boca Raton, Florida. Details of
these sales are as follows:

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

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

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

Less related reorganization costs ..   (0.7)               -             (0.7)
                                       ----             ----             ----

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

                                       37
<PAGE>

As a result of the sale of the surplus element of the Wednesbury property, the
Company is contractually obliged to vacate office and warehouse facilities
located on those parts of the site that have been sold. A provision of $707,000
has been made for costs in connection with this obligation.

The current manufacturing and administration operation will be consolidated on
the retained element of the premises and the costs of $707,000 provided for this
exercise principally relate to office and factory refurbishment and
reorganization expenses and expenditure in respect of departmental relocations
within the remainder of the site.

MANUFACTURING REORGANIZATION COSTS

During the quarter to June 30, 2005, provision has been made for employee
severance costs of $0.27 million following the announcement, in June 2005, of
the closure of part of one of the Company's UK manufacturing facilities.

INCOME (LOSS) BEFORE INCOME TAXES

Our income before income taxes in the three months ended June 30, 2005 amounted
to $0.27 million compared to a loss before taxes for the three months ended June
30, 2004 of $0.06 million. The income before income taxes in the nine month
period ended June 30, 2005 was $3.26 million compared to $0.69 million last
year.

The increase is attributable to:

                                  Nine Months ended           Three Months ended
                                   June 30, 2005                  June 30, 2005
                                        $m                             $m
Profit on sale of land and
 buildings, and other
 reorganization costs ............      2.23                         (0.27)
Increased gross margins ..........      2.06                          0.54
Increased SG&A costs .............     (1.90)                        (0.03)
Increased other income ...........      0.18                          0.09
                                       -----                          ----
                                        2.57                          0.33
                                       -----                          ----

PROVISION FOR INCOME TAXES

An income tax charge of $0.21 million arose in the three months ended June 30,
2005 compared to a $0.23 million income tax charge in the three months ended
June 30, 2004. For the nine month period to June 30, 2005 income taxes decreased
by $0.11 million from $0.76 million in 2004 to $0.65 million in 2005.

Income taxes were 76.01% of income before tax in the three months ended June 30,
2005 compared to 441.51% of losses in the three months ended June 30, 2004.
Income taxes were 20.03% of income in the nine months ended June 30, 2005
compared to 110.69% of income in the comparable period last year.

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

                                       38
<PAGE>

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

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

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

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

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

Because of the availability of tax net operating losses, the deductibility, for
tax purposes, of the special contribution to the Pension Plan and other tax
credits, it is not anticipated that any significant element of the taxation
provision for the three months and nine months ended June 30, 2005 will result
in the payment of income tax.

NET INCOME/(LOSS)

Our net profit from continuing activities after income taxes was $0.06 million
for the three months ended June 30, 2005 (2004: $0.29 million loss) and for the
nine months ended June 30, 2005 it was $2.61 million compared to $0.07 million
loss in the previous year.

FINANCIAL CONDITION

Liquidity and Capital Resources

Our cash and cash equivalents amounted to $8.5 million at June 30, 2005 ($5.1
million at September 30, 2004), working capital (excluding deferred taxes)
totaled $31.9 million at June 30, 2005 ($28.8 million at September 30, 2004) and
our stockholders' equity was $31.8 million at June 30, 2005 ($29.4 million at
September 30, 2004).

Net cash used in operating activities in the nine month period ended June 30,
2005 was $3.9 million compared to a $1.8 million inflow in the nine months ended
June 30, 2004. This increased outflow of $5.7 million inflow primarily arises
from:

o  decreased trading working capital inflows of $3.5 million (716.08%) (note a)

o  reduction of 584.05% in net inflows from other assets and liabilities of $2.3
   million (note b)

Offset by:

o  increase in net income (adjusted for depreciation, profit on loss on sale and
   deferred taxes) of $0.1 million (4.79%)

                                       39
<PAGE>

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

a)     Trade Working Capital Variances

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

                                                           Note      $million

       Increased trade receivables inflows ............    (i)          3.2
       Reduced inventory inflows ......................    (ii)        (6.7)
                                                                       ----
       Net decrease in trade working capital inflows ..                (3.5)
                                                                       ====

i)     UK sales in August and September 2004 benefited from increased turnover
       of approximately $1.8 million when compared to the equivalent period in
       2003. The inflow from trade receivables in the period to June 30, 2005
       therefore benefits from the cash received from these sales. In addition
       cash flows in the quarter to June 2005 have benefited from higher sales
       volumes in certain of the divisions in the second quarter of the year.

ii)    In the period ended June 30, 2005 inventories increased by $4.4 million
       compared to a decrease of $2.3 million in the period ended June 30, 2004.
       Within the UK hand tool division, the period to March 2004 witnessed a
       rigorous inventory reduction program. Similar reductions were not present
       at June 30, 2005. Inventory levels increased in anticipation of new
       product launches and levels were also negatively impacted by poor UK and
       Australian third quarter sales. Additionally, purchases of stock in the
       new Metrology division in Holland have also had an adverse effect on
       inventory flows.

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

With regard to the net outflows from other assets and liabilities, the major
contributory factor is the payment, in June 2005, of a $3.6 million special
contribution to the UK pension plan. At the same time the increased pension plan
charge of $2.1 million has diluted the effect of outflows in other assets and
liabilities. In addition, a provision of $ 0.7 million made in the last quarter
relating to costs to be incurred in connection with the consolidation of the
current garden tools UK manufacturing operation onto a smaller element of its
original site, has not yet been fully utilized. Payments in respect of this
exercise will continue to be made in subsequent months.

Cash inflow from investing activities was $7.7 million in the period ended June
30, 2005 compared to an outflow from investing activities in the period ended
June 30, 2004 of $7.0 million.

The net cash provided by investing activities in the nine months ended June 30,
2005 includes $5.2 million relating to the sale of land at Wednesbury, England
and $3.4 million relating to the warehouse and office facility at Boca Raton,
Florida. Purchases of plant and equipment were $0.9 million including $0.3
million on leased vehicles. The net outflow in 2004 relates primarily to $3.2
million in respect of the purchase of the land and buildings at Wednesbury,
England, and $3.3 million in respect of the warehouse and office facilities at
Boca Raton, Florida.

                                       40
<PAGE>

Net cash used in financing activities was $0.07 million in the period ended June
30, 2005 compared to $0.30 million in the period ended June 30, 2004.

BANK FACILITIES

The UK subsidiaries of Spear & Jackson plc and Bowers Group plc maintain a line
of credit of $7.9 million. This is secured by fixed and floating charges on the
assets and undertakings of these businesses. Of the total facility, $5.3 million
relates to bank overdrafts and $2.6 million is available for letters of credit.
These facilities are denominated in British pounds. The overdraft carries
interest at UK base rate plus 1.00%. At June 30, 2005 and September 30, 2004 the
Company had no borrowings outstanding under the overdraft line but had $1.9
million in outstanding letters of credit at June 30, 2005 (September 30, 2004:
$1.5 million).

The French and Australian subsidiaries of Spear & Jackson plc maintain
short-term credit facilities of $2.9 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 were no outstanding borrowings
outstanding under the overdraft lines at June 30, 2005 (September 30, 2004: $0.1
million) and $1.0 million of letters of credit and bills were outstanding under
these facilities at June 30, 2005 (September 30, 2004: $0.9 million).

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

The Company's bank accounts held with the HSBC Bank plc by UK subsidiaries of
Spear & Jackson plc and Bowers Group plc form a pooled fund. As part of this
arrangement the companies involved have entered into a cross guarantee with HSBC
Bank plc to guarantee any bank overdraft of the entities in the pool. At June
30, 2005 the extent of this guarantee relating to gross bank overdrafts was
$19.4 million (September 30, 2004 $20.5 million). The overall pooled balance of
the bank accounts within the pool at June 30, 2005 was a net cash in hand
balance of $2.0 million (September 30, 2004 $1.6 million).

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

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

                                       41
<PAGE>

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

As noted elsewhere, the Company will continue to focus its efforts on improving
the competitiveness of its worldwide operations. As a result, additional funding
may be required to finance further restructuring of the non-profitable areas of
the Company's divisions or to meet items of significant one-off expenditure.
Such expenditure includes: the site reorganization costs and closure of part of
the Company's manufacturing facility in Wednesbury, England for which provision
of $0.98 million has been made in the consolidated financial statements for the
nine months ending June 30, 2005; investment in new capital equipment; the
special contribution payment of $7.2 million to reduce the pension plan deficit;
and any expansion of the Spear & Jackson or Bowers operations.

Funding for these initiatives may be obtained through the negotiation of
increased bank lending facilities or the sale of surplus assets. In this regard,
a short term increase in the Company's UK overdraft facility of (pound)3 million
(approximately $5.4 million) has been agreed in principle with the Company's UK
bankers which will be available to provide the Company with temporary additional
facilities should these be required to fund any of the items referred to above.

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, 2005:
<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       1.1                0.7          0.4            -             -
Operating leases (note a)       6.6                0.9          1.7           1.6           2.4
                                ---                ---          ---           ---           ---
                                7.7                1.6          2.1           1.6           2.4
                                ---                ---          ---           ---           ---
</TABLE>

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

(b)    Excluded from the above tables are the amounts payable by the Company to
       the UK defined benefit pension plan as the profile of future funding
       obligations in the medium term cannot be accurately forecast. The pension
       plan actuarial advisors carried out an actuarial valuation of the Plan as
       at December 31, 2004. This valuation showed an increase in the Plan's
       deficit compared to that calculated at April 5, 2002, the date of the
       last full actuarial valuation. Following discussions between the Company
       and the Trustees of the Plan, it was agreed that the Company would make a
       special contribution to the Plan of approximately $7.2 million. (pound)2
       million (approximately $3.6 million) was paid to the Plan in June

                                       42
<PAGE>

       2005 and the balance will be paid over in September 2005. From May, the
       Company's annual pension contributions increased from $2.8 million to
       $3.6 million. Taking into account the increase in annual contributions,
       the Company anticipates that ongoing employer contributions of $3.2
       million will be made in the year ending September 30, 2005 in addition to
       the lump sum contribution of $7.3 million.

(c)    As at June 30, 2005, the Company had letters of credit of $2.3 million
       outstanding which are secured under the UK, Australian and French credit
       facilities. In addition, at the period end, the Company's French
       subsidiary had discounted $0.6 million of bills of exchange with
       recourse.

At June 30, 2005, the Company had no material off-balance sheet arrangements
other than the non-debt obligations described in contractual obligations, above.

OUTLOOK

The first month of quarter 4 has continued the sales and earnings trends
witnessed in the latter part of the quarter ended June 30, 2005. A loss before
taxation for the month of July of approximately $0.2 million is anticipated. A
similar result is expected in August before a return to profitability in
September. These forecasts assume no further deterioration in trading
conditions, especially in the UK retail sector.

Within the hand and garden business, competition remains fierce from cheap
foreign imports and the downturn in demand from the UK retail sector is having a
significant effect on profitability. Demand from our export markets,
particularly the Far and Middle East has begun to slacken. In previous quarters
order intake for hacksaw blades had been strong as a result of the building
projects associated with the aftermath of the Iraqi conflict but this activity
is now beginning to decline.

Elsewhere, within the UK hand and garden business the sale of garden power tools
has continued to be very successful. Likewise significant capital investment in
quarter four is on track to enable woodsaw and hacksaw blade production to keep
pace with demand and future growth prospects. It is unlikely, however, that
buoyant demand for these products will be sufficient to reverse the effects of
the general downturn in demand from the UK retail sector.

Due to poor sales performance a restructuring program, including the closure of
part of one of the UK's manufacturing sites and a reorganization of the sales
departments, has been initiated.

Our Australasian subsidiaries have continued to experience difficult trading
conditions because of flat demand in certain market sectors, increased levels of
competition within the power and air tool segments and reduced consumer
spending. Competition from imported Asian products and the increasing trend of
some retail groups to expand their own import programs have also placed sales
and margin pressures on the Australasian businesses.

To counteract this trend, management of the Australian and New Zealand
operations has developed and introduced a number of new and extended ranges and
promotional programs under the S&J brand across the digging, garden cutting,

                                       43
<PAGE>

hand saw, masonry and air tool ranges and these have been supplemented with new
ranges of electrical generator battery chargers and drainage products. Going
forward these ranges should deliver incremental sales and margin growth.

Additionally a series of cost-cutting measure, including the restructuring of
the sales and distribution workforce has been initiated in Australia and New
Zealand to meet the ongoing trading conditions and management will continue to
identify and remove excess costs from the business.

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

The management of the Company anticipates that, in the remainder of the
financial year and into fiscal 2006, our businesses will again face the issues
of increased costs and margin erosion as a result of raw material, fuel and
other utility price increases, interest rate increases and a weak dollar. This
will again put pressure on our margins and overhead costs and, wherever
possible, these increases will be passed on through sales price increases.

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. The short/medium term
effect of the terror threat in the UK is not yet known but no reaction has been
seen so far.

Continued emphasis will also be placed on promotional campaigns and
demonstration tours which focus on high margin product groups and on those high
added value areas of the Metrology and Magnetics businesses in an effort to
reverse the dilution of margin caused by an increasing bias in our recent sales
mix towards factored items or by those elements of additional cost which we have
not been able to pass on to end users.

In addition, we plan to continue both to look at initiatives to rationalize
underperforming areas of the business and to monitor operational infrastructures
in the United Kingdom, particularly overhead costs, to ensure that these are as
cost efficient as possible and at a level appropriate to the needs of the
business. In conjunction with this, an inventory reduction program is now taking
place to reduce stock levels, especially in those divisions witnessing a slow
down in trading levels.

Outside the UK we would anticipate that the level of legal and professional
charges incurred by our US corporate head office will reduce following the
settlement of the SEC suit on February 10, 2005. Any savings will be mitigated
by the professional costs that are anticipated to be incurred following the
appointment of investment bankers and other advisors to appraise any offers to
buy the Company or its principal assets, together with any costs incurred in
relation to the Class Action law suit.

In the forthcoming quarter we will continue to focus on maximizing cash
generation. The sale of the excess element of the Company's Wednesbury

                                       44
<PAGE>

manufacturing site in the UK was concluded on January 28, 2005 for approximately
$5.3 million (excluding transaction costs). Further funds were generated via the
disposal of the Company's warehouse and office premises at Boca Raton, Florida.
A sale of that property was concluded on February 15, 2005 for circa $3.4
million (net of sales commissions and other costs of disposal). The proceeds of
such sales will enable us to fund future working capital requirements,
operational restructuring initiatives and other capital projects, both
domestically and abroad, which will contribute to increased profitability and to
the continued growth of our business. Additionally, the sales proceeds from the
disposal of these two properties will help finance both the $7.2 million one
time payment into the UK defined benefit pension plan ($3.6 million of which was
paid out in June 2005) and the increase of approximately $0.7 million in annual
pension contributions. Such payments will enable the current deficit in the plan
to be reduced and will, subject to certain conditions, fix our pension payment
commitments until April 2007.

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

In the remainder of the financial year, and beyond, we will continue to promote
our products to penetrate new markets and seek to broaden our customer base
wherever possible. The emphasis will again be placed on the development and
launch of new, high quality products which are clearly differentiated from the
cheap foreign imports which are widely available in our markets. The recent
success of the "Predator" saw launches clearly illustrated the benefits of this
strategy and we intend to build on this in the following months with the
introduction of other new products across the Company's divisions.

As noted above, the SEC announced on February 10, 2005 that it has settled its
securities fraud charges against Mr. Dennis Crowley, the Company's former CEO
and Chairman, the Company and others. The Company has been able to deal with the
significant business disruptions and distractions which the SEC legal action has
caused and the formal resolution of this litigation will enable the Company to
move forward in a more focused and structured manner so that both its short and
long term strategies can be formulated and delivered. Inevitably, however,
uncertainties will still impact the Company's operations until the financial
effects of the class action litigation, explained in detail in PART II Item 1
("Legal proceedings"), below, are also quantified and resolved.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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

                                       45
<PAGE>

INTEREST RATE RISK

The Company is exposed to interest rate changes primarily as a result of
interest payable on its bank borrowings and interest receivable on its cash
deposits. At June 30, 2005 the Company had no borrowings and had cash and cash
equivalents of approximately $8.5 million. Given the current levels of
borrowings, the Company believes that a 1% change in interest rates would not
have a material impact on consolidated income or cash flows. Holding the same
variables constant, a 10% increase in interest rates would again have a
negligible effect on interest payable.

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

EXCHANGE RATE RISK

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

In the nine months ended June 30, 2005 compared to the equivalent period in
2004, the change in exchange rates had the effect of increasing the Company's
consolidated sales by $3.72 million, or 4.8%. 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 $1.2
million for the nine months ended June 30, 2005 compared to the comparable prior
year period. If the US dollar further weakens in the future, it could result in
the Company having to suffer reduced margins in order for its products to remain
competitive in the local market place.

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

We manage the risk and attempt to reduce such exposure by periodically entering
into short term forward exchange contracts. At June 30, 2005 the Company held
forward contracts to sell Australian and New Zealand dollars to buy
approximately 0.7 million US dollars.

The contract values were not materially different to the period end value of the
contracts. A 10% strengthening or weakening of the US$ against its Australian
counterpart could, however, result in the Company suffering losses or benefiting
from gains of approximately $0.06 million had no forward contracts been taken
out.

                                       46
<PAGE>

COMMODITY PRICE RISK

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

CREDIT RISK

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

At June 30, 2005 the Company had made an allowance of $1.80 million in respect
of doubtful accounts which management believes is sufficient to cover all known
or expected debt non-recoveries.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

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

Definition of Disclosure Controls

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

                                       47
<PAGE>

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

Sarbanes-Oxley Section 404 Compliance

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

                                       48
<PAGE>

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

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

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

A number of class action lawsuits have been initiated in the US District Court
for the Southern District of Florida by Company shareholders against the
Company, Sherb & Co. LLP, the Company's former independent auditor, and certain
of the Company's directors and officers, including Mr. Crowley, the Company's
former Chief Executive Officer/Chairman and Mr. William Fletcher, the Company's
then Chief Financial Officer.

These suits alleged essentially the same claims as the SEC suit which was filed
on April 15, 2004 in the U.S. District Court for the Southern District of
Florida. The SEC suit, filed against the Company and Mr. Crowley, among others,
alleged violations of the federal securities laws. These allegations arose from
the alleged failure of Mr. Crowley to accurately report his ownership of the
Company's stock, and his alleged manipulation of the price of the Company's
stock through the dissemination of false information, allowing him to profit
from sales of stock through nominee accounts. The suit was settled on February
15, 2005 following approval by the U.S. District Court.

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

                                       49
<PAGE>

With effect from September 30, 2003 the Company exited its screwdriver
operations following the disposition of the trade and assets of Mega Tools Ltd
and Mega Tools USA, Inc. The disposition of the screwdriver division was
undertaken by Neil Morgan who was then heading up the division. The Company
believed that no specific authorization was afforded to Mr. Morgan to undertake
that disposition and, following review of the terms and circumstances of the
reported sale, the Company pursued claims against Mr. Morgan. 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 Mr. Morgan. Full
provision was made in the Company's Financial Statements against the
recoverability of these disposition proceeds. It has now been agreed with
Megapro that it will pay Can$53,900 (approximately $41,000) in settlement of
these debts and this is being repaid in monthly installments of Can$5,000
(approximately US$3,800)

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

Item 6.  Exhibits

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

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

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

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

                                       50
<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 authorized.

SPEAR & JACKSON, INC.


August 15, 2005                         /s/ John Harrington, Jr.
                                            --------------------
                                            Interim Chairman



August 15, 2005                         /s/ William Fletcher
                                            ----------------
                                            Acting Chief Executive
                                            Officer



August 15, 2005                         /s/ Patrick J. Dyson
                                            ----------------
                                            Chief Financial Officer


                                       51