UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   (MARK ONE)

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

                  For the quarterly period ended March 31, 2006

                                       OR

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

          For the transition period from _____________ to ____________


                         Commission file number 0-32013


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


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


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


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


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

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


Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

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

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

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

Registrant had 5,735,561 shares of Common Stock, $.001 par value per share,
outstanding as of May 15, 2006.

<PAGE>

                              Spear & Jackson, Inc.


                                      INDEX

                                                                     Page Number
PART I.  FINANCIAL INFORMATION

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

         Condensed Consolidated Statements of Operations -
         Three and Six Months ended March 31, 2006 and 2005..........      1

         Condensed Consolidated Balance Sheets - March 31, 2006
         and September 30, 2005 (audited) ...........................      2

         Condensed Consolidated Statements of Cash Flows -
         Six Months ended March 31, 2006 and 2005....................      3

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

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations ..................................     20

Item 3.  Quantitative and Qualitative Disclosures about Market Risk       52

Item 4.  Controls and Procedures ....................................     53

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings ..........................................     54

Item 6.  Exhibits ...................................................     56

SIGNATURES ..........................................................     57

Purchase Agreement effected April 8, 2005 between PNC Tool Holdings
LLC and Spear & Jackson, Inc. .......................................  EX 10.4

Certification of Acting Chief Executive Officer pursuant to Section
302 .................................................................  EX 31.1

Certification of Chief Financial Officer pursuant to Section 302 ....  EX 31.2

Certification of Acting Chief Executive Officer pursuant to Section
906 .................................................................  EX 32.1

Certification of Chief Financial Officer pursuant to Section 906 ....  EX 32.2


<PAGE>

ITEM 1.  Financial Statements (Unaudited)

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                                      FOR THE THREE MONTHS ENDED      FOR THE SIX MONTHS ENDED
                                                       MARCH 31,       MARCH 31,      MARCH 31,       MARCH 31,
                                                          2006           2005            2006           2005
                                                      -----------    ------------    -----------    ------------
<S>                                                   <C>             <C>            <C>             <C>
Net sales .........................................   $    27,572    $     27,773    $    50,498    $     52,458
Cost of goods sold ................................        19,078          18,357         34,975          35,091
                                                      -----------    ------------    -----------    ------------
Gross profit ......................................         8,494           9,416         15,523          17,367

Operating costs and expenses:
    Selling, general and administrative expenses ..         9,305           7,926         18,423          16,542
                                                      -----------    ------------    -----------    ------------
Operating (loss) income ...........................          (811)          1,490         (2,900)            825

Other income (expense)
    Rental income .................................            37              39             74              79
    Interest and bank charges (net) ...............            42             (12)            13             (41)

                                                      -----------    ------------    -----------    ------------
(Loss) income from continuing operations before
    unusual or infrequent items and income taxes ..          (732)          1,517         (2,813)            863

Unusual or infrequent items:
    Manufacturing reorganization costs ............        (1,228)              -         (1,228)              -
    Gain on sale of land and buildings net of
      reorganization costs ........................             -           2,503              -           2,503

                                                      -----------    ------------    -----------    ------------
(Loss) income from continuing operations before
    income taxes ..................................        (1,960)          4,020         (4,041)          3,366

Income tax (provision) benefit ....................          (103)           (491)           313            (448)
                                                      -----------    ------------    -----------    ------------

Net (loss) income from continuing operations ......        (2,063)          3,529         (3,728)          2,918
                                                      -----------    ------------    -----------    ------------

Discontinued operations:

    Loss from discontinued operations (net of
      income taxes of $nil in 2006 and 2005) ......           (66)           (335)           (87)           (372)
    Adjustment to previously recorded  loss on
      disposal of discontinued operations .........             2               -              9               -
                                                      -----------    ------------    -----------    ------------
Net loss from discontinued operations .............           (64)           (335)           (78)           (372)
                                                      -----------    ------------    -----------    ------------

Net (loss) income .................................   $    (2,127)   $      3,194    $    (3,806)   $      2,546
                                                      ===========    ============    ===========    ============

Basic and diluted (loss) income per share:

From continuing operations ........................   $     (0.36)   $       0.30    $     (0.65)   $       0.25
From discontinued operations ......................         (0.01)          (0.03)         (0.01)          (0.03)
                                                      -----------    ------------    -----------    ------------
Total (loss)income per share ......................   $     (0.37)   $       0.27    $     (0.66)   $       0.22
                                                      ===========    ============    ===========    ============

Weighted average shares outstanding ...............     5,735,561      11,741,122      5,735,561      11,741,122
                                                      ===========    ============    ===========    ============
</TABLE>

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

                                       1
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                          (IN THOUSANDS EXCEPT SHARES)
<TABLE>
<CAPTION>
                                                                                AT MARCH 31,    AT SEPTEMBER 30,
                                                                                    2006              2005
                                                                                ------------    ----------------
                                                                                (UNAUDITED)
<S>                                                                             <C>             <C>
                                     ASSETS
Current assets:
   Cash and cash equivalents ................................................   $      5,980    $          7,289
   Trade receivables, net of allowance for doubtful accounts of $1,458 and
     $1,525 .................................................................         19,982              16,448
   Inventories ..............................................................         22,694              24,999
   Foreign taxes recoverable ................................................            185                   -
   Deferred income tax asset, current portion ...............................          2,663               2,623
   Other current assets .....................................................          1,355               1,316
                                                                                ------------    ----------------
       Total current assets .................................................         52,859              52,675

Property, plant and equipment, net ..........................................         17,182              17,568
Deferred income tax asset ...................................................         12,884              12,690
Investments .................................................................            380                 157
                                                                                ------------    ----------------
       Total assets .........................................................   $     83,305    $         83,090
                                                                                ============    ================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Notes payable ............................................................   $      1,408    $            752
   Trade accounts payable ...................................................          9,606               8,103
   Accrued expenses and other liabilities ...................................         12,150              11,241
   Foreign taxes payable ....................................................            145                  88
                                                                                ------------    ----------------
       Total current liabilities ............................................         23,309              20,184
Other liabilities ...........................................................            789                 749
Pension liability ...........................................................         37,469              35,954

                                                                                ------------    ----------------
       Total liabilities ....................................................         61,567              56,887
                                                                                ------------    ----------------
Stockholders' equity:
Common stock, 25,000,000 shares authorized $0.001 par value; 12,011,122
   issued and 5,735,561 shares outstanding ..................................             12                  12
Additional paid in capital ..................................................         51,590              51,590
Accumulated other comprehensive income (loss):
   Minimum pension liability adjustment, net of tax .........................        (42,902)            (43,751)
   Foreign currency translation adjustment, net of tax ......................         10,219              11,765
   Unrealized  gain (loss) on derivative instruments ........................             31                  (7)
Retained earnings ...........................................................          3,328               7,134
Less: 6,275,561 common stock held in treasury, at cost ......................           (540)               (540)
                                                                                ------------    ----------------
       Total stockholders' equity ...........................................         21,738              26,203
                                                                                ------------    ----------------
                                                                                ------------    ----------------
       Total liabilities and stockholders' equity ...........................   $     83,305    $         83,090
                                                                                ============    ================
</TABLE>

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

                                       2
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                      FOR THE SIX MONTHS ENDED
                                                                                     MARCH 31,        MARCH 31,
                                                                                       2006             2005
                                                                                    ----------       ----------
<S>                                                                                 <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income attributable to continuing and discontinued operations ...      $   (3,806)      $    2,546
  Adjustments to reconcile net (loss) income to net cash used in operating
   activities:
     Depreciation ............................................................           1,084            1,523
     Amortization of asset held for sale .....................................               -               22
     Gain on sale of land and buildings ......................................               -           (2,503)
     Loss on sale of plant, property and equipment ...........................               2               11
     Deferred income taxes ...................................................            (566)             349
  Changes in operating assets and liabilities:
     Increase in trade receivables ...........................................          (3,979)          (2,186)
     Decrease (increase) in inventories ......................................           1,725           (3,665)
     Increase in other current assets ........................................             (64)            (472)
     Contributions paid to pension plan ......................................          (1,829)          (1,456)
     Increase in other non-current liabilities ...............................           4,060            2,027
     Increase in trade accounts payable ......................................           1,641              782
     Increase (decrease) in accrued expenses and other liabilities ...........           1,186             (183)
     (Decrease) increase in foreign taxes payable ............................            (116)              46
     Increase (decrease) in other liabilities ................................              55             (182)
                                                                                    ----------       ----------
NET CASH USED IN OPERATING ACTIVITIES ........................................            (607)          (3,341)
                                                                                    ----------       ----------

INVESTING ACTIVITIES:
  Purchases of property, plant and equipment .................................          (1,082)            (642)
  Proceeds from sale of property, plant and equipment ........................              44            8,631
  Purchase of equity Investment ..............................................            (229)               -
                                                                                    ----------       ----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES ..........................          (1,267)           7,989
                                                                                    ----------       ----------

FINANCING ACTIVITIES:
  Increase in overdraft ......................................................             678               10
                                                                                    ----------       ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ....................................             678               10
                                                                                    ----------       ----------
Effect of exchange rate changes on cash and cash equivalents .................            (113)             176
                                                                                    ----------       ----------

CHANGE IN CASH AND CASH EQUIVALENTS ..........................................          (1,309)           4,834

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................................      $    5,980       $    9,924
                                                                                    ==========       ==========
SUPPLEMENTAL CASH FLOW INFORMATION
  Cash paid for interest .....................................................      $       92       $       61
                                                                                    ==========       ==========
  Cash paid for taxes ........................................................      $      369       $       53
                                                                                    ==========       ==========
</TABLE>

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

                                       3
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION

      These condensed consolidated financial statements are expressed in U.S.
dollars and have been prepared in accordance with accounting principles
generally accepted in the United States. The condensed consolidated financial
statements include the accounts of Spear & Jackson Inc. (the Company) and its
wholly owned subsidiaries, Mega Tools Ltd., Mega Tools USA, Inc., Megapro Tools,
Inc., S and J Acquisition Corp., Spear & Jackson plc and Bowers Group plc. Both
Spear & Jackson plc and Bowers Group plc are sub-holding companies and their
business is carried out by the following directly and indirectly owned
subsidiaries: Bowers Metrology Limited, Bowers Metrology UK Limited, Coventry
Gauge Limited (until February 28, 2006), CV Instruments Limited, Eclipse
Magnetics Limited, Spear & Jackson (New Zealand) Limited, James Neill Canada
Inc., James Neill Holdings Limited, James Neill U.S.A. Inc., Spear & Jackson
(Australia) Pty Ltd., Magnacut Limited, Neill Tools Limited, Spear & Jackson
Garden Products Limited, Spear & Jackson Holdings Limited, Spear & Jackson
France S.A., Societe Neill France S.A., CV Instruments Europe BV and Bowers
Eclipse Equipment Shanghai Co. Limited.

      As further explained in note 4, below, the purchase of Spear & Jackson plc
and Bowers Group plc by Megapro Tools, Inc. (now Spear & Jackson, Inc.), which
was completed on September 6, 2002, was treated as a reverse acquisition. The
results and assets of discontinued operations are presented in accordance with
Statement of Financial Accounting Standards ("SFAS") 144.

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

      The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial statements pursuant to both the rules and regulations of the
Securities and Exchange Commission and with instructions to Form 10-Q.
Accordingly, certain information and footnote disclosures required for annual
financial statements have been condensed or omitted. The Company's management
believes that all adjustments necessary to present fairly the Company's
financial position as of March 31, 2006 and September 30, 2005, and the results
of operations for the three and six month periods ended March 31, 2006 and March
31, 2005 and cash flows for the three and six month periods ended March 31, 2006
and March 31, 2005 have been included and that the disclosures are adequate to
make the information presented not misleading. The balance sheet at September
30, 2005 has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's and Subsidiaries' annual report on Form 10-K
for the year ended September 30, 2005.

      It is suggested that these financial statements be read in conjunction
with the audited consolidated financial statements and related footnotes of the
Company for the year ended September 30, 2005 included in the Company's annual
report filed on Form 10-K for the period then ended.

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

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

                                       4
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION - CONTINUED

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

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

NOTE 2 - RECENTLY ISSUED ACCOUNTING STANDARDS

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

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

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

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

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

                                       5
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 2 - RECENTLY ISSUED ACCOUNTING STANDARDS - CONTINUED

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

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

NOTE 3 - CRITICAL ACCOUNTING POLICIES

      A summary of our critical accounting policies is included in Note 2 to the
audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended September 30, 2005. Management believes
that the application of these policies on a consistent basis enables the Company
to provide useful and reliable financial information about the Company's
operating results and financial condition.

      As disclosed in the annual report on Form 10-K for the fiscal year ended
September 30, 2005, the discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements.
These have been prepared in conformity with accounting principles generally
accepted in the United States. The preparation of the financial statements
requires us to make estimates and assumptions and adopt accounting policies that
affect the reported amounts of assets, liabilities, revenues and expenses as
disclosed in those financial statements. These judgements can be subjective and
complex, and consequently actual results could differ from those estimates. Our
most critical accounting policies relate to revenue recognition; foreign
exchange risk; inventory, the computation of deferred income taxes, the
recognition of deferred income tax assets and pension and other post retirement
benefit costs. Since September 30, 2005, there have been no changes in our
critical accounting policies and no significant changes to the assumptions and
estimates related to them.

NOTE 4 - NATURE OF BUSINESS

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

      On September 6, 2002 the Company acquired the entire issued share capital
of Spear & Jackson plc and Bowers Group plc. These companies, through their
principal operating entities, as disclosed in note 1,

                                       6
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 4 - NATURE OF BUSINESS - CONTINUED

manufacture and distribute a broad line of hand tools, lawn and garden tools,
industrial magnets and metrology tools primarily in the United Kingdom, Europe,
Australia, North and South America, Asia and the Far East.

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

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

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

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

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

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

      On April 21, 2005, Jacuzzi adopted a plan of disposition of the Company's
common stock. On March 23, 2006, Jacuzzi ("the Seller") entered into a Stock
Purchase Agreement with United Pacific Industries Limited, a Bermuda
Corporation, ("UPI"), to sell its holding of 3,543,281 shares of the Common
Stock of Spear & Jackson, Inc. ("the Shares") to UPI for $1.40 per share for an
aggregate purchase price of $4,960,593.

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

      The purchase of the Shares by UPI contemplated by the Stock Purchase
Agreement is subject to the satisfaction of a number of closing conditions,
including approval by UPI's shareholders and the United

                                       7
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 4 - NATURE OF BUSINESS - CONTINUED

Kingdom Pensions Regulator, and the receipt of certain other regulatory
approvals as well as other customary closing conditions.

      Closing is reported to occur no later than July 31, 2006.

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

NOTE 5 - DISCONTINUED OPERATIONS

      The following table presents the results of the Company's operations that
have been reclassified as discontinued and the (loss) income that has been
recorded in connection with the disposal of these businesses:
<TABLE>
<CAPTION>
                                                                        FOR THE THREE MONTHS              FOR THE SIX MONTHS
                                                                                ENDED                            ENDED
                                                                      MARCH 31,        MARCH 31,       MARCH 31,        MARCH 31,
                                                                        2006             2005            2006             2005
                                                                   --------------   --------------  --------------   --------------
                                                            Note   (IN THOUSANDS)   (IN THOUSANDS)  (IN THOUSANDS)   (IN THOUSANDS)
<S>                                                         <C>    <C>              <C>             <C>              <C>
Revenues reclassified to discontinued operations:
 Thread gauge measuring division ........................   (a)    $          235   $          428  $          590   $          850
                                                                   --------------   --------------  --------------   --------------
                                                                   $          235   $          428  $          590   $          850
                                                                   ==============   ==============  ==============   ==============

Loss from discontinued operations:
Loss from operations of thread gauge measuring
      division ..........................................   (a)               (66)  $         (335)            (87)  $         (372)
                                                                   --------------   --------------  --------------   --------------
                                                                   $          (66)  $         (335) $          (87)  $         (372)
                                                                   ==============   ==============  ==============   ==============

Adjustment to previously recorded loss on disposal of
 discontinued operations:
  Megapro screwdrivers division .........................   (b)                 2   $            -               9   $            -
                                                                   --------------   --------------  --------------   --------------
                                                                   $            2   $            -  $            9   $            -
                                                                   ==============   ==============  ==============   ==============

Total loss from discontinued operations net of taxes ....          $          (64)  $         (335) $          (78)  $         (372)
                                                                   ==============   ==============  ==============   ==============
</TABLE>

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

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

                                       8
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 5 - DISCONTINUED OPERATIONS - CONTINUED

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

      Having considered the future financial position of Megapro, the directors
of Spear & Jackson, Inc. provided $97 against the recoverability of the balance
of the sales proceeds which was outstanding at September 30, 2003. A further
$187 was provided against this debt in the year ended September 30, 2004. It has
now been agreed with Megapro that it will pay Canadian $54 (approximately $41)
in settlement of those debts and this is being repaid in monthly installments of
Canadian $5 (approximately $4) of which $27 was received in the year ended
September 30, 2005. A further $9 has been received in the six months ended March
31, 2005.

NOTE 6 - RETIREMENT BENEFIT PLAN

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

      Pension costs amounted to $2,033 for the quarter ending March 31, 2006 and
$1,019 for the same quarter last year. Pension costs for the six months ending
March 31, 2006 were $4,060 compared with $2,027 for the equivalent period last
year. The net periodic costs include the following components:
<TABLE>
<CAPTION>
                                                           FOR THE THREE MONTHS                FOR THE SIX MONTHS
                                                                   ENDED                              ENDED
                                                        MARCH 31,         MARCH 31,         MARCH 31,         MARCH 31,
                                                          2006              2005              2006              2005
                                                     --------------    --------------    --------------    --------------
                                                     (IN THOUSANDS)    (IN THOUSANDS)    (IN THOUSANDS)    (IN THOUSANDS)
<S>                                                  <C>               <C>               <C>               <C>
Sevice cost ......................................   $          524    $          460    $        1,049    $          916
Interest cost ....................................            2,609             2,570             5,209             5,114
Expected return on plan assets ...................           (2,466)           (2,704)           (4,925)           (5,378)
Recognition of actuarial loss ....................            1,366               693             2,727             1,375

                                                     --------------    --------------    --------------    --------------
Total Benefit cost ...............................   $        2,033    $        1,019    $        4,060    $        2,027
                                                     ==============    ==============    ==============    ==============
</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 Company has contributed $945 to the Plan in the quarter to March
31, 2006 (2005 $727) and $1,829 in the six month period ended on that date (2005
$1,456). The Company anticipates that contributions of $3.3 million will be made
in the year ending September 30, 2006 (2005 $10.2 million of which $3.0 million
was in respect of annual ongoing employer contributions and $7.2 million related
to a one-off special contribution into the Plan).

      Accounting standards require a minimum pension liability be recorded when
the value of pension assets is less than the accumulated benefit obligation
("ABO") at the annual measurement date. As of September 30, 2005, our most
recent measurement date for pension accounting, the value of the ABO exceeded
the market value of investments held by the pension plan by approximately $35.95
million. In accordance with accounting standards, the charge against
stockholders' equity will be adjusted in the fourth quarter to reflect the value

                                       9
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 6 - RETIREMENT BENEFIT PLAN - CONTINUED

of pension assets compared to the ABO as of the end of September 2006. If the
level of pension assets exceeds the ABO as of a future measurement date, the
full charge against stockholders' equity would be reversed.

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
                                                                             AT MARCH 31,     AT SEPTEMBER 30,
                                                                                 2006               2005
                                                                            --------------    ----------------
                                                                            (IN THOUSANDS)     (IN THOUSANDS)
<S>                                                                 <C>     <C>               <C>
Assets held and used:
  Land and buildings, at cost .............................                 $       15,612    $        15,799
  Machinery, equipment and vehicles, at cost ..............                         30,479             35,331
  Furniture and fixtures, at cost .........................                          1,149              1,256
  Computer hardware, at cost ..............................                          1,358              1,244
  Computer software, at cost ..............................                            295                342
  Assets held under finance leases, at cost ...............         (a)              2,227              2,883
                                                                            --------------    ---------------
                                                                                    51,120             56,855
  Accumulated Depreciation ................................                        (33,938)           (39,287)
                                                                            --------------    ---------------
   Net ....................................................                 $       17,182    $        17,568
                                                                            ==============    ===============
</TABLE>

(a) Included in property, plant and equipment at March 31, 2006 are capital
leases with a net book value of $0.9 million (September 30, 2005 $0.9 million).
The cost of these assets held under capital leases was $2.2 million (September
30, 2005 $2.9 million) and the accumulated depreciation relating to these assets
was $1.3 million (September 30, 2005 $2.0 million).

NOTE 8 - INVENTORIES
<TABLE>
<CAPTION>
                                                                     AT MARCH 31,     AT SEPTEMBER 30,
                                                                         2006               2005
                                                                    --------------    ----------------
                                                                    (IN THOUSANDS)     (IN THOUSANDS)
<S>                                                                 <C>               <C>
Finished products ...............................................   $       17,599    $         19,740
In-process products .............................................            5,032               6,481
Raw materials ...................................................            4,912               5,320
 Less: allowance for slow moving and obsolete inventories .......           (4,849)             (6,542)
                                                                    --------------    ----------------
                                                                    $       22,694    $         24,999
                                                                    ==============    ================
</TABLE>

NOTE 9 - UNUSUAL OR INFREQUENT ITEMS

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

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

                                       10
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9 - UNUSUAL OR INFREQUENT ITEMS - CONTINUED

      (a)   GAIN ON SALE OF LAND AND BUILDINGS NET OF REORGANIZATION COSTS -
            CONTINUED
<TABLE>
<CAPTION>
                                                             WEDNESBURY       BOCA RATON
                                                              ENGLAND           FLORIDA           TOTAL
                                                           --------------   --------------   --------------
                                                           (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                                                        <C>              <C>              <C>
Sale proceeds net of selling, professional and
   other costs .........................................   $        5,174   $        3,427   $        8,601
Less: net book value ...................................            2,223            3,168            5,391
                                                           --------------   --------------   --------------
Gross profit on disposal ...............................            2,951              259            3,210

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

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

      (b)   MANUFACTURING REORGANIZATION COSTS

      On January 25, 2006, the Company announced the closure of the remaining
element of its manufacturing site at Wednesbury, England. All manufacturing,
assembly, warehouse and distribution operations currently performed at this
location will be transferred to the Company's principal UK manufacturing site in
Sheffield.

      The closure and relocation of the Wednesbury facility are expected to take
approximately six months and the costs of this exercise are anticipated to be
circa. (pound)1.2 million ($2.1 million). These costs include employee severance
payments, site closure expenses, factory reorganization expenses, plant transfer
costs and associated capital expenditure. Negotiations are currently in progress
regarding the sale of the Wednesbury site to a non-related third party. It is
expected that the sales price of the site will be in excess of its net book
amount and the Company has not therefore made any provision against the balance
sheet carrying value of this property at March 31, 2006. Funds realized from any
disposal will be used to finance the closure costs with any excess sale proceeds
being reinvested in the business.

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

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

      Costs provided in respect of the site closure as at March 31, 2006 and
amounts credited in respect of the release of excess provisions from prior
periods are as follows:

                                       11
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9 - UNUSUAL OR INFREQUENT ITEMS - CONTINUED

      (b)   MANUFACTURING REORGANIZATION COSTS - CONTINUED

                                                             (IN THOUSANDS)

Severance costs .........................................       $  1,185
Site closure costs ......................................            367
                                                                --------
                                                                   1,552

Release of excess provisions accrued in prior periods ...           (324)
                                                                --------
Net reorganization costs ................................          1,228
                                                                ========

      In addition to the costs of $1.6 million provided at March 31, 2006 it is
anticipated that a further $0.5 million will be incurred in respect of the
Wednesbury site closure on or before November 30, 2006 for which provision will
be made in accordance with applicable financial reporting standards as and when
liabilities for such charges crystallize.

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

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

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

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

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

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

      (iv) As discussed in (b), above, $1.6 million has been provided in respect
      of the Wednesbury site closure at March 31, 2006.

      (v) The Company also has further provisions of $1.7 million in respect of
      other UK manufacturing reorganization and relocation costs that were set
      up in prior periods.

      In the quarter ended March 31, 2006, $0.2 million has been spent in
respect of employee severance costs and other reorganization expenses for which
provision was made at September 30, 2005 and, as noted above, additional
provisions of $1.6 have been made in the period. The following is a summary of
the liability balance as at October 1,2005, January 1, 2006 and March 31, 2006
together with movements in the three and six month periods ended March 31, 2006.

                                       12
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9 - UNUSUAL OR INFREQUENT ITEMS - CONTINUED
<TABLE>
<CAPTION>
                                    AT JANUARY 1,      EXCHANGE        AMOUNTS         AMOUNTS       AT MARCH 31,
                                        2006          MOVEMENTS        PROVIDED/         PAID            2006
                                                                      (RELEASED)
                                   --------------   --------------  --------------  --------------  --------------
                                   (IN THOUSANDS)   (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)
<S>                                <C>              <C>             <C>             <C>             <C>
(a) Included in Accrued Expenses and Other Liabilities:

Wednesbury move costs ...........     $    400         $      9        $   (324)       $    (85)       $      -
Employee severance costs ........          118                3               0            (121)              -
Other UK reorganization costs ...        1,638               17               -               -           1,655
Wednesbury closure costs ........            -              (59)           1552             (39)          1,454
                                      --------         --------        --------        --------        --------
                                      $  2,156         $    (30)       $  1,228        $   (245)       $  3,109
                                      ========         ========        ========        ========        ========

(b) Included in Property, Plant and Equipment:

Asset impairments ...............     $    779         $      8        $      -        $      -        $    787
                                      ========         ========        ========        ========        ========

Total ...........................     $  2,935         $    (22)       $  1,228        $   (245)       $  3,896
                                      ========         ========        ========        ========        ========
</TABLE>

The movement in the liability balance between October 1, 2005 and March 31, 2006
is as follows:
<TABLE>
<CAPTION>
                                    AT OCTOBER 1,      EXCHANGE         AMOUNTS         AMOUNTS      AT MARCH 31,
                                        2005          MOVEMENTS        PROVIDED/          PAID           2006
                                                                      (RELEASED)
                                   --------------   --------------  --------------  --------------  -------------
                                   (IN THOUSANDS)   (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)
<S>                                <C>              <C>             <C>             <C>             <C>
(a) Included in Accrued Expenses and Other Liabilities:

Wednesbury move costs ...........     $    444         $     (4)      $   (324)        $   (116)       $      -
Employee severance costs ........          402               (8)             0             (394)              -
Other UK reorganization costs ...        1,687              (32)             -                -           1,655
Wednesbury closure costs ........            -              (59)         1,552              (39)          1,454
                                      --------         --------       --------         --------        --------
                                      $  2,533         $   (103)      $  1,228         $   (549)       $  3,109
                                      ========         ========       ========         ========        ========

(b) Included in Property, Plant and Equipment:

Asset impairments ...............     $    803         $    (16)      $      -         $      -        $    787
                                      ========         ========       ========         ========        ========

Total ...........................     $  3,336         $   (119)      $  1,228         $   (549)       $  3,896
                                      ========         ========       ========         ========        ========
</TABLE>

NOTE 10 - INCOME TAXES

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

                                       13
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 10 - INCOME TAXES - CONTINUED

                          FOR THE THREE MONTHS ENDED   FOR THE SIX MONTHS ENDED
                            MARCH 31,     MARCH 31,     MARCH 31,     MARCH 31,
                              2006          2005          2006          2005
                          ------------  ------------  ------------  ------------
                          IN THOUSANDS  IN THOUSANDS  IN THOUSANDS  IN THOUSANDS

Current tax provision ...    $ (103)       $  (51)       $ (253)       $  (99)
Deferred tax (provision)
 benefit ................         -          (440)          566          (349)
                             ------        ------        ------        ------
                             $ (103)       $ (491)       $  313        $ (448)
                             ======        ======        ======        ======

      A reconciliation of the net (provision)benefit for income taxes compared
with the amounts arising at the US federal rate is as follows:
<TABLE>
<CAPTION>
                                                       FOR THE THREE MONTHS            FOR THE SIX MONTHS
                                                              ENDED                           ENDED
                                                     MARCH 31,       MARCH 31,       MARCH 31,       MARCH 31,
                                                       2006            2005            2006            2005
                                                  --------------  --------------  --------------  --------------
                                                  (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)
<S>                                               <C>             <C>             <C>             <C>
Tax at US federal statutory income tax rate .....    $    708        $ (1,290)       $  1,441        $ (1,048)
Overseas tax at rates different to effective rate        (189)            165            (336)            122
Adjustment to prior year overseas tax provisions            -               -             (89)              -
Gain on sale of UK property covered by losses
  brought forward ...............................           -             885               -             885
Permanent differences ...........................          36)            (40)            (72)            (79)
Valuation allowance .............................        (586)           (211)           (631)           (328)
                                                     --------        --------        --------        --------
                                                     $   (103)       $   (491)       $    313        $   (448)
                                                     ========        ========        ========        ========
</TABLE>

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

      Deferred income tax expense or benefit is based on the changes in the
asset or liability from period to period.

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

      In the quarter ended March 31, 2006, the income tax benefit relating to
the Company's U.S. and non-U.S. subsidiary losses has been offset by a valuation
allowance based upon an assessment by management of the Company's ability to
realize such benefits. In assessing the Company's ability to realize its
deferred tax assets, management considered the scheduled reversal of deferred
tax liabilities, projected future taxable income and taxation thereon and other
strategic planning initiatives. Future reversal of the valuation allowance will
be achieved either when the tax benefit is realized or when it has been
determined that it is more likely than not that the benefit will be realized
through offset against future taxable income.

                                       14
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 11 - COMPREHENSIVE INCOME

      Comprehensive income represents net income and other revenues, expenses,
gains and losses that are excluded from net income and recognized directly as a
component of stockholder's equity. Comprehensive income and its components
comprise the following:
<TABLE>
<CAPTION>
                                                   FOR THE THREE MONTHS ENDED        FOR THE SIX MONTHS ENDED
                                                    MARCH 31,       MARCH 31,       MARCH 31,        MARCH 31,
                                                      2006            2005            2006             2005
                                                 --------------  --------------  --------------   --------------
                                                 (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)   (IN THOUSANDS)
<S>                                              <C>             <C>             <C>              <C>
Total net (loss) income .......................     $ (2,127)      $  3,194         $ (3,806)        $  2,546
Other comprehensive income (loss)
   Additional minimum pension liability .......         (445)           658              849           (1,929)
   Foreign currency translation adjustments ...          434         (1,389)          (1,546)           3,277
   Unrealized gains on derivative instruments .           24             16               38               57
                                                    --------       --------         --------         --------
Total comprehensive (loss) income .............     $ (2,114)      $  2,479         $ (4,465)        $  3,951
                                                    ========       ========         ========         ========
</TABLE>

NOTE 12 - SEGMENT DATA

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

      Given below are summaries of the significant accounts and balances by
business segment and by geographical location, reconciled to the consolidated
totals. In both periods, transactions and balances applicable to the Company's
distribution companies in France, Australia and New Zealand have been aggregated
with the hand and garden product businesses since these products represent the
most significant proportion of the distribution companies' trades. Those
transactions relating to the Company's distribution entities in the Netherlands
and China have been included in the Metrology division disclosures. The
summaries also provide an analysis of the accounts and balances between
continuing and discontinued operations.

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

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

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

                                       15
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 12 - SEGMENT DATA - CONTINUED
<TABLE>
<CAPTION>
                                         SALES           LONG-LIVED ASSETS (a)           SALES           LONG-LIVED ASSETS (a)
                                 ---------------------   ---------------------   ---------------------   ---------------------
                                  THREE MONTHS ENDED      THREE MONTHS ENDED       SIX MONTHS ENDED        SIX MONTHS ENDED
                                 MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,
                                   2006         2005       2006        2005        2006        2005        2006        2005
                                 ---------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
<S>                              <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Hand & garden tools ..........    $20,795     $20,891     $ 5,003     $ 6,633     $37,053     $39,315     $ 5,003     $ 6,633
Metrology tools ..............      4,203       4,383       2,825       2,601       8,624       8,400       2,825       2,601
Magnetic products ............      2,809       2,927         244         737       5,411       5,593         244         737
Corporate ....................          -           -       9,110      10,123           -           -       9,110      10,123
                                  -------     -------     -------     -------     -------     -------     -------     -------
   Total .....................    $27,807     $28,201     $17,182     $20,094     $51,088     $53,308     $17,182     $20,094
                                  =======     =======     =======     =======     =======     =======     =======     =======
Attributable to:
   Continuing operations .....    $27,572     $27,773     $17,182     $20,094     $50,498     $52,458     $17,182     $20,094
   Discontinued operations ...    $   235     $   428     $     -     $     -     $   590     $   850     $     -     $     -
                                  -------     -------     -------     -------     -------     -------     -------     -------
                                  $27,807     $28,201     $17,182     $20,094     $51,088     $53,308     $17,182     $20,094
                                  =======     =======     =======     =======     =======     =======     =======     =======

<CAPTION>
                                      DEPRECIATION        CAPITAL EXPENDITURE        DEPRECIATION         CAPITAL EXPENDITURE
                                 ---------------------   ---------------------   ---------------------   ---------------------
                                  THREE MONTHS ENDED      THREE MONTHS ENDED       SIX MONTHS ENDED       SIX MONTHS ENDED
                                 MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,
                                   2006        2005        2006        2005        2006        2005        2006        2005
                                 ---------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
<S>                              <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Hand & garden tools ..........    $   356     $   483     $   175     $   294     $   734     $   945     $   538     $   572
Metrology tools ..............         14         172         327          10          99         285         537          66
Magnetic products ............         69          88           -           -         150         172           7           4
Corporate ....................         51          63           -           -         101         121           -           -
                                  -------     -------     -------     -------     -------     -------     -------     -------
   Total .....................    $   490     $   806     $   502     $   304     $ 1,084     $ 1,523     $ 1,082     $   642
                                  =======     =======     =======     =======     =======     =======     =======     =======
Attributable to:
   Continuing operations .....    $   490     $   806     $   502     $   304     $ 1,084     $ 1,523     $ 1,082     $   642
                                  =======     =======     =======     =======     =======     =======     =======     =======

<CAPTION>
                                 OPERATING (LOSS) INCOME       NET INTEREST      OPERATING (LOSS) INCOME      NET INTEREST
                                 -----------------------  ---------------------  ----------------------- ---------------------
                                   THREE MONTHS ENDED      THREE MONTHS ENDED       SIX MONTHS ENDED       SIX MONTHS ENDED
                                  MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,  MARCH 31,   MARCH 31,
                                    2006        2005        2006        2005        2006        2005       2006        2005
                                 ----------   ----------  ---------   ---------   ---------   ---------  ---------   ---------
<S>                              <C>          <C>         <C>         <C>         <C>         <C>        <C>         <C>
Hand & garden tools ..........    $  (306)    $    850    $     2     $   (58)    $(2,534)    $   153     $   (36)    $  (103)
Metrology tools ..............        217          311         (3)         (4)        612         603         (13)         (7)
Magnetic products ............        119          318         (1)         (2)        195         541          (3)         (5)
Corporate ....................       (905)        (324)        44          52      (1,251)       (844)         65          74
                                  -------     --------    -------     -------     -------     -------     -------     -------
   Total .....................    $  (875)    $  1,155    $    42     $   (12)    $(2,978)    $   453     $    13     $   (41)
                                  =======     ========    =======     =======     =======     =======     =======     =======
Attributable to:
   Continuing operations .....    $  (811)    $  1,490    $    42     $   (12)    $(2,900)    $   825     $    13     $   (41)
   Discontinued operations ...    $   (64)    $   (335)   $     -     $     -     $   (78)    $  (372)    $     -     $     -
                                  -------     --------    -------     -------     -------     -------     -------     -------
                                  $  (875)    $  1,155    $    42     $   (12)    $(2,978)    $   453     $    13     $   (41)
                                  =======     ========    =======     =======     =======     =======     =======     =======
</TABLE>

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

                                       16
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

The following table presents certain data by geographic areas (in thousands):
<TABLE>
<CAPTION>
                                       SALES (a)         LONG-LIVED ASSETS (b)         SALES (a)         LONG-LIVED ASSETS (b)
                                 ---------------------   ---------------------   --------------------    ---------------------
                                  THREE MONTHS ENDED      THREE MONTHS ENDED       SIX MONTHS ENDED        SIX MONTHS ENDED
                                 MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31
                                   2006        2005        2006        2005        2006        2005        2006        2005
                                 ---------   ---------   ---------   ---------   ---------   --------    ---------   ---------
<S>                              <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
United Kingdom ...............    $12,901     $11,971     $15,341     $18,145     $22,509     $22,621     $15,341     $18,145
Europe .......................      6,580       7,035       1,130       1,272      11,255      11,760       1,130       1,272
Australasia ..................      3,334       3,404         411         677       7,067       7,402         411         677
North America ................      1,735       1,898           -           -       3,524       3,519           -           -
China and Rest of World ......      3,257       3,893         300           -       6,733       8,006         300           -
                                  -------     -------     -------     -------     -------     -------     -------     -------
   Total .....................    $27,807     $28,201     $17,182     $20,094     $51,088     $53,308     $17,182     $20,094
                                  =======     =======     =======     =======     =======     =======     =======     =======
Atributable to:
   Continuing operations .....    $27,572     $27,773     $17,182     $20,094     $50,498     $52,458     $17,182     $20,094
   Discontinued operations ...    $   235     $   428     $     -     $     -     $   590     $   850     $     -     $     -
                                  -------     -------     -------     -------     -------     -------     -------     -------
                                  $27,807     $28,201     $17,182     $20,094     $51,088     $53,308     $17,182     $20,094
                                  =======     =======     =======     =======     =======     =======     =======     =======

<CAPTION>
                                     DEPRECIATION         CAPITAL EXPENDITURE        DEPRECIATION         CAPITAL EXPENDITURE
                                 ---------------------   ---------------------   --------------------    ---------------------
                                  THREE MONTHS ENDED      THREE MONTHS ENDED       SIX MONTHS ENDED        SIX MONTHS ENDED
                                 MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31
                                   2006        2005        2006        2005        2006        2005        2006        2005
                                 ---------   ---------   ---------   ---------   ---------   --------    ---------   ---------
<S>                              <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
United Kingdom ...............    $   403     $   707     $   359     $   269     $   902     $ 1,335     $   849     $   368
Europe .......................         36          32           7          20          73          56          34          40
Australasia ..................         48          67          20          15         106         132          20         234
China and Rest of World ......          3           -         116           -           3           -         179           -
                                  -------     -------     -------     -------     -------     -------     -------     -------
   Total .....................    $   490     $   806     $   502     $   304     $ 1,084     $ 1,523     $ 1,082     $   642
                                  =======     =======     =======     =======     =======     =======     =======     =======
Atributable to:
   Continuing operations .....    $   490     $   806     $   502     $   304     $ 1,084     $ 1,523     $ 1,082     $   642
                                  =======     =======     =======     =======     =======     =======     =======     =======

<CAPTION>
                                OPERATING (LOSS) INCOME       NET INTEREST      OPERATING (LOSS) INCOME      NET INTEREST
                                -----------------------  ---------------------  -----------------------  ---------------------
                                  THREE MONTHS ENDED      THREE MONTHS ENDED       SIX MONTHS ENDED        SIX MONTHS ENDED
                                 MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31    MARCH 31
                                   2006        2005        2006        2005        2006        2005        2006        2005
                                ----------   ----------  ---------   ---------   ---------   ---------   ---------   ---------
<S>                             <C>          <C>         <C>         <C>         <C>         <C>         <C>         <C>
United Kingdom ...............    $(1,014)    $   830     $    (9)    $    26     $(2,949)    $   506     $   (32)    $    17
Europe .......................        399         478          (4)        (61)        360         355         (42)       (102)
Australasia ..................        (11)         47          13          11         (15)        117          25          29
North America ................       (137)       (200)         42          12        (250)       (525)         62          15
China and Rest of World ......       (112)          -           -           -        (124)
                                  -------     -------     -------     -------     -------     -------     -------     -------
   Total .....................    $  (875)    $ 1,155     $    42     $   (12)    $(2,978)    $   453     $    13     $   (41)
                                  =======     =======     =======     =======     =======     =======     =======     =======
Atributable to:
   Continuing operations .....    $  (811)    $ 1,490     $    42     $   (12)    $(2,900)    $   825     $    13     $   (41)
   Discontinued operations ...    $   (64)    $  (335)    $     -     $     -     $   (78)    $  (372)    $     -     $     -
                                  -------     -------     -------     -------     -------     -------     -------     -------
                                  $  (875)    $ 1,155     $    42     $   (12)    $(2,978)    $   453     $    13     $   (41)
                                  =======     =======     =======     =======     =======     =======     =======     =======
</TABLE>

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

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

                                       17
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 13 - LEGAL PROCEEDINGS

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

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

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

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

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

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

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

                                       18
<PAGE>

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 13 - LEGAL PROCEEDINGS - CONTINUED.

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

      These various class action suits were subsequently consolidated.
Thereafter, the defendants filed certain Motions to Dismiss with regard to the
Complaint and on October 19, 2005, the U.S. District Court for the Southern
District of Florida in Re Spear & Jackson Securities Litigation entered its
Order regarding these Motions. The Order denied the Company's motion as well as
that of Mr. Crowley, the former Chief Executive Officer of Spear & Jackson. The
Company responded to the Complaint having filed answer and defenses and is
proceeding with the discovery phase of the case. A trial date has been set for
October 2006.

      The Court granted the Motion to Dismiss on behalf of Mr. Fletcher, the
Company's acting Chief Executive Officer, and also granted the Motion to Dismiss
on behalf of the Company's former independent auditor, Sherb & Co., LLP. The
class plaintiff has since filed an appeal regarding the trial court's decision
to dismiss the case against Sherb & Co., LLP, which appeal is presently pending.
No appeal was filed with respect to the decision to dismiss the case against Mr.
Fletcher.

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

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

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

                                       19
<PAGE>

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

General
-------

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

Forward Looking Statements
--------------------------

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

Risk Factors
------------

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

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

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

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

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

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

      o  the timing of orders and shipments;

      o  emergence of new competitors or consolidation of existing competitors;

      o  continued absence of consolidation among key customers;

      o  Industry demand fluctuations.

                                       20
<PAGE>

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

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

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

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

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

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

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

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

                                       21
<PAGE>

RISKS CONCERNING THE MAINTAINING AND IMPROVEMENT OF CURRENT PRODUCT MIX:

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

RISKS RELATING TO INCREASING PRICE, PRODUCTS AND SERVICES COMPETITION:

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

RISKS IN CONNECTION WITH CHANGES IN COMPANY INVENTORY LEVELS:

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

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

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

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

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

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

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

      o  fluctuating exchange rates;

                                       22
<PAGE>

      o  tariffs and other barriers;

      o  difficulties in staffing and managing foreign sales operations;

      o  import and export restrictions;

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

      o  potentially adverse tax consequences;

      o  potential hostilities and changes in diplomatic and trade
         relationships.

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

In the course of its evaluation of internal control over financial reporting, as
required by Section 404 of the US Sarbanes-Oxley Act of 2002, the Company may
identify areas of internal control that need improvement or rectification or may
identify other conditions that could result in significant deficiencies or
material weaknesses in internal control. If the Company is unable to implement
the requirements of Section 404 in a timely manner or with adequate compliance,
its independent auditors may not be able to attest to the effectiveness of its
internal control over financial reporting and it may be subject to sanctions or
investigation by regulatory authorities. Any failure to strengthen internal
controls, as necessary, could result in accounting errors or misstatements that
could harm the reliability of the Company's financial statements and which
could, in turn, adversely affect investor confidence and the price of the
Company's common stock.

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

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

RISKS IN CONNECTION WITH ATTRACTING AND RETAINING QUALIFIED KEY EMPLOYEES:

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

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

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

                                       23
<PAGE>

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

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

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

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

RISKS RELATED TO RAW MATERIAL AND ENERGY COSTS:

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

We purchase the majority of our raw materials for our products on the open
market and we also rely on third parties for the sourcing of certain finished
goods and component parts and assemblies. Accordingly, our cost of products may
be affected by changes in the market price of raw materials, sourced components
or finished goods.

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

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

RISKS ASSOCIATED WITH FOREIGN SUPPLIERS:

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

      o  increases in transportation costs;

      o  new or increased import duties;

      o  transportation delays;

      o  foreign work stoppages;

                                       24
<PAGE>

      o  potential war, terrorism and political unrest;

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

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

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

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

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

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

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

THE POTENTIAL ACQUISITION OF THE COMPANY OR ITS PRINCIPAL ASSETS:

As detailed in the footnotes to the condensed consolidated financial statements,
in April 2005 the Company's majority shareholder, Jacuzzi Brands, Inc.,
("Jacuzzi") formally announced a plan of disposition with regard to the shares
it holds in the Company. In March 2006, Jacuzzi entered into a Stock Purchase
Agreement with United Pacific Industries Limited, a Bermuda Corporation, to sell
its holding of shares in the Company. Any resulting change in ownership or
control of the Company may have a significant impact on its future strategy, the
way that it conducts its operations and the size and composition of its earnings
and net assets.

                                       25
<PAGE>

RISK FACTORS THAT MAY NEGATIVELY IMPACT OUR STOCK PRICE:

Our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors particular to the Company, its industry and
the markets in which it operates. Not all of these factors are in our control.
These factors may include: sales falling below anticipated levels because of the
timing of orders or weakening demand; adverse sales mixes; regional economic and
governmental conditions; raw material price volatility; and benefits from
restructuring initiatives falling below forecast. Such factors may therefore
cause our operating results for future periods to be below the expectations of
management and the Company's advisers and this may cause a decline in the price
of our common stock.

There has been no material change in our risk factors from those described on
pages 12 to 16 in our Form 10-K for the fiscal year ended September 30, 2005. In
evaluating any forward-looking statements, you should consider various risk
factors, including those summarized above, and, those described in the other
sections of this report, in the other reports the Company files with the SEC and
in the Company's press releases. Such factors may cause the Company's actual
results to differ materially from any forward-looking statement. The Company
disclaims any obligation to publicly update the statements, or disclose any
difference between its actual results and those reflected in the statements.
With respect to all such forward-looking statements, the Company seeks the
protection afforded by the Private Securities Litigation Reform Act of 1995.

CORPORATE ORGANIZATION

OVERVIEW

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

Incorporation of Megapro Tools, Inc.

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

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

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

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

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

                                       26
<PAGE>

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

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

On August 23, 2002, USI Mayfair Limited, a corporation organized under the laws
of England and a wholly owned subsidiary of USI Global Corp., Megapro Tools,
Inc. ("Megapro") and S and J Acquisitions Corp. (a company incorporated on
August 22, 2002 under the laws of the State of Florida and a wholly owned
subsidiary of Megapro Tools, Inc.) executed a Stock Purchase Agreement to
acquire all of the issued and outstanding shares of Spear & Jackson plc and its
affiliate, Bowers Group plc, owned by USI Mayfair Limited. The purchase price
comprised 3,543,281 shares of common stock of Megapro and promissory notes in
the principal amount of (pound)150,000 pounds sterling ($232,860) ("the
Transaction"). The Transaction closed on September 6, 2002.

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

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

Change of Name to Spear & Jackson, Inc.

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

                                       27
<PAGE>

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.

FURTHER CHANGES TO CORPORATE ORGANIZATION

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

EXIT FROM SCREWDRIVER AND THREAD GAUGE MEASURING OPERATIONS

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

The disposition of the trade and assets of the screwdriver division was
undertaken by Neil Morgan who was then heading up the division. The Company
believed that no specific authorization was afforded to Mr. Morgan to undertake
that disposition. The disposition proceeds were in the form of $284,000 of loan
notes and other receivables and the discharge of a loan of $100,000 owed by the
Company to the managing director of the screwdriver division. Full provision was
made in the Company's financial statements against the recoverability of these
disposition proceeds. It has now been agreed with Megapro that it will pay
Canadian $ 53,900 (approximately $41,000) in settlement of those debts and this
is being paid in monthly installments of Canadian $5,000 (approximately
$3,800).$27,000 was received in the year ended September 30, 2005 and a further
$7,000 has been received in the three months to December 31, 2005.

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

RECENT DEVELOPMENTS

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

                                       28
<PAGE>

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

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

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

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

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

The Stock Purchase Agreement was effected on April 8, 2005, following formal
approval by the SEC on February 10, 2005 and, on February 15, 2005 by the U.S.
District Court for the Southern District of Florida of the settlement of the
litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc., International
Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No:
04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further conditioned
on, among other things, the disgorgement and civil penalty funds being paid by
Mr. Crowley. These monies have now been received and are being administered for
the benefit of the victims of the alleged fraud by a court appointed
administrator, pursuant to the Fair Funds provisions of the Sarbanes-Oxley Act
of 2002.

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

On April 11, 2005 Jacuzzi agreed to the termination of a previous letter
agreement dated September 6, 2002, which supplemented the Stockholders'
Agreement of the same date. The letter agreement required Jacuzzi to vote a
substantial portion of its voting stock in the Company in proportion to the vote
of other shareholders of the Company. At the time the letter agreement was
executed, Jacuzzi was a principal, but a minority shareholder of the Company. As
explained above, with the recent return to the capital of the Company of the

                                       29
<PAGE>

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 Mr. Crowley and his spouse.

On April 21, 2005, Jacuzzi adopted a plan of disposition of the Company's common
stock. On March 23, 2006, Jacuzzi ("the Seller") entered into a Stock Purchase
Agreement with United Pacific Industries Limited, a Bermuda Corporation,
("UPI"), to sell its holding of 3,543,281 shares of the Common Stock of Spear &
Jackson, Inc. ("the Shares") to UPI for $1.40 per share for an aggregate
purchase price of $4,960,593. UPI reported the transaction on Form 13D Report
filed with the SEC, along with a copy of the Stock Purchase Agreement.

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

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

Closing is reported to occur no later than July 31, 2006.

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

SUMMARY OF PRINCIPAL OPERATIONS

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

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

                                       30
<PAGE>

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

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

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

2) ECLIPSE MAGNETICS' key products are permanent magnets (cast alloy), magnetic
   tools, machine tools, magnetic chucks and turnkey magnetic systems. Products
   range from very simple low-cost items to technically complex high value added
   systems. In addition, Eclipse Magnetics engages in the trading of other
   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, until February 28, 2006, 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 that measure the diameter of
   machined components. In addition to the core range of bore gauges, the
   Company also manufactures universal gauges and hardness testing equipment.

   In December 2004, the division secured the European distributorship rights
   for a range of premier portable hardness testers sourced from China. This
   distribution operation is operated through a specifically formed Dutch
   subsidiary company, CV Instruments Europe BV, based in Maastricht, Holland.
   An allied manufacturing, quality control and distribution centre, Bowers
   Eclipse Shanghai Equipment Limited, was established in Shanghai, China,
   during the year ended September 30, 2005.

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.

                                       31
<PAGE>

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

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

   Name/Location                             Products Manufactured

A  UK

a) Neill Tools                               Hand tools
   Atlas Site, Sheffield

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

c) Robert Sorby                              Wood turning tools
   Sheffield

d) Eclipse Magnetics                         Magnetic products
   Vulcan Road, Sheffield

e) Bowers Metrology                          Precision measuring tools
   Bradford

B  France

a) Spear & Jackson                           Assembly of garden tools
   France

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

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

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

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

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

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

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

                                       32
<PAGE>

(b) Continuous product improvement and innovation.

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

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

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

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

The Company's policy is to support its core product offering with a pipeline of
new products and range extensions. In the period from January 1, 2006 to March
31, 2006 new product range launches and other significant product related
business developments have included:

Neill Tools successfully tendered to supply S&J branded woodsaws to a large UK
builders' merchant, with deliveries commencing in February 2006. An exclusive
supply agreement with a large UK catalog house was also negotiated to supply a
range of garden power tools during February and March 2006.

Robert Sorby completed the development of the e-commerce site for its retail
store and this went live at the end of the quarter.

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, 2005 included a detailed discussion
which addressed our most critical accounting policies. The quarterly financial
statements for the period ended March 31, 2006, attached hereto, should
therefore be read in conjunction with that discussion.

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

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

Since September 30, 2005 there have been no changes in our critical accounting
policies and no significant change to the assumptions and estimates related to
them.

OVERVIEW

When compared to the equivalent periods last year, the results for the quarter
and six months ended March 31, 2006 show a decrease in both net sales and
operating profitability.

                                       33
<PAGE>

Sales revenues for the quarter ended March 31, 2006 decreased by approximately
$0.20 million (0.7%) from the comparable period last year. This decrease is
primarily due to adverse currency exchange fluctuations which have only
partially been offset by increased trading volumes. Amongst the principal
factors driving the increased volumes were the increased sales in our Neill
Tools division, which arose from an exclusive deal with a major UK retail chain
for the new range of Spear & Jackson garden power tools. For the six months
ended March 31, 2006 sales were approximately $1.96 million (3.74%) lower than
last year with the negative impact of adverse currency exchange fluctuations
being mitigated by sales volume increases.

Gross profit was $8.49 million for the quarter ended 31 March 2006 compared to
$9.42 million for the comparative period last year. For the six months ended 31
March 2006 gross profit was $15.52 million (2005: $17.37 million). Gross margins
were 30.81% in the three months ended March 31, 2006 (2005: 33.90%) and 30.74%
in the six months ended on that date (2005: 33.11%)

Gross profit continued to be adversely affected by increases in prices for our
principal raw materials of steel, plastic, cobalt and nickel and increases in
utility costs. Margins were further diluted by the mix switch in the hand and
garden division towards factored garden power tools at the expense of better
margins on industrial hand tool product lines.

Selling, general and administrative expenses have increased by $1.37 million
(17.40%) to $9.3 million in the three months ended March 31, 2006. In the six
month period under review, costs have increased by $1.88 million (11.37%)to
$18.42 million. This is primarily due to increases in the non-cash FAS 87
pension charge ($2.03 million and $1.01 million, respectively, for the six
months and three months ended March 31, 2006). Additionally, inflationary
increases, one-time costs in setting up our Shanghai facility, and higher
variable selling and distribution costs associated with increased trading
volumes in March 2006 have caused these costs to rise. Such increases have been
partially offset, however, by the beneficial movement in the US$/Sterling cross
rate, reduced head office legal costs and the effects of local reorganization
and cost-cutting measures.

While cost reduction programs will continue to be implemented to control the
level of overhead expenses, administrative costs for the full year will show a
significant increase over the prior year largely as a result of the $4.2 million
increase in the FAS 87 pension charge. Additionally, while settlement of the
Company's SEC litigation suit has resulted in decreases in administrative costs,
head office legal expenses associated with the Class and Derivative Action
litigation and the role of the Corporate Monitor will continue to be incurred
until a resolution of those legal issues.

On January 25, 2006 the Company announced the closure of the remaining element
of its manufacturing site at Wednesbury, England. The site closure forms part of
the Company's UK manufacturing reorganization program that has been initiated to
regenerate and modernize key areas of the hand and garden tools business. Costs
provided in respect of the site closure as at March 31, 2006 were $1.56 million
and it is anticipated that a further $0.5 million will be incurred in the period
to November 30, 2006. Net manufacturing reorganization costs of $1.23 million
recorded in the quarter comprise $1.56 million of Wednesbury closure expenses
less a credit of $0.33 million representing the release of provisions associated
with a reorganization of the Wednesbury site that was initiated in March 2005
and which are now no longer required.

While the Company has incurred net manufacturing reorganization costs of $1.23
million in the quarter to March 2006, in the quarter to March 2005 it benefited
from a $2.5 million gain relating to the sale of its warehouse and office
facility in Boca Raton, Florida, and the part-sale of its industrial site at
Wednesbury, England.

As a result of lower margins, higher overhead costs and manufacturing
reorganization provisions, the Company's operating result from continuing
activities has moved from a $3.53 million income in the quarter to March 31,
2005 to a $2.06 million loss in the quarter to March 31, 2006. Likewise, a $3.73
million loss incurred in the six months to March 31, 2006 compares to a $2.92
million profit in the same period last year.

                                       34
<PAGE>

RESULTS OF OPERATIONS

The following discussion provides a review of results for the three and six
months ended March 31, 2006 versus the three and six months ended March 31,
2005.

Summary Profit and Loss Account Data:

                                           Three Months          Six Months
                                          ended March 31        ended March 31
                                         2006       2005       2006       2005
                                          $m         $m         $m         $m

Net Sales ...........................    27.57      27.77      50.50      52.46
Cost of goods sold ..................   (19.08)    (18.35)    (34.98)    (35.09)
                                        ------     ------     ------     ------
Gross profit ........................     8.49       9.42      15.52      17.37
Selling, general and
  administrative expenses ...........    (9.30)     (7.93)    (18.42)    (16.54)
                                        ------     ------     ------     ------
Operating (loss)income ..............    (0.81)      1.49      (2.90)      0.83
Other income ........................     0.08       0.03       0.09       0.04
                                        ------     ------     ------     ------
(Loss)income from continuing
 operations before unusual and
 infrequent events ..................    (0.73)      1.52      (2.81)      0.87
Gain on sale of land and buildings ..        -       2.50          -       2.50
Manufacturing reorganization costs ..    (1.23)         -      (1.23)         -
                                        ------     ------     ------     ------
(Loss)income from continuing
operations before income taxes ......    (1.96)      4.02      (4.04)      3.37

Provision for income taxes ..........    (0.10)     (0.49)      0.31      (0.45)
                                        ------     ------     ------     ------

Net (loss)income from continuing
  operations ........................    (2.06)      3.53      (3.73)      2.92
                                        ------     ------     ------     ------

Net loss from discontinued Operations    (0.07)     (0.34)     (0.08)     (0.37)
                                        ------     ------     ------     ------

Net(loss)income .....................    (2.13)      3.19      (3.81)      2.55
                                        ======     ======     ======     ======

Effective tax rate ..................     5.09%     13.32%    (7.60%)     14.96%
                                        ======     ======     ======     ======

Comparisons as a % of net sales:

Gross profit ........................    30.81%     33.90%     30.74%     33.11%
Selling, general and
  Administration expenses ...........    33.75%     28.54%     36.48%     31.53%
Operating (loss) income .............    (2.94%)     5.36%     (5.74%)     1.57%
(Loss)income from continuing
  operations before income taxes ....    (7.11%)    14.47%     (8.00%)     6.42%
Net (loss)income ....................    (7.71%)    11.50%     (7.54%)     4.85%

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

NET SALES

Sales decreased by $1.96 million (3.74%) from $52.46 million in the six months
ended March 31, 2005 to $50.50 million for the six months ended March 31, 2005.
Sales of $27.57 million in the quarter ended March 31, 2006 were $0.20 million
(0.07%) lower than sales of $27.77 million recorded for the comparable period
last year.

                                       35
<PAGE>

The increase is analyzed as follows:

                                                     Six Months    Three Months
                                                       ended          ended
                                                      March 31,      March 31,
                                                        2006           2006
                                                         $m             $m
                                             Note

Effect of exchange rate movements            (a)       (3.44)          (2.01)

Sales volumes movements                      (b)        1.76            1.99

Increased rebates                            (c)       (0.28)          (0.18)
                                                       -----           -----
                                                       (1.96)          (0.20)
                                                       =====           =====

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

                                                     Six Months    Three Months
                                                       ended          ended
                                                      March 31,      March 31,
                                                        2006           2006
                                                         $m             $m
                                             Note

i)    Hand and garden tools

      Effect of exchange rate movements      (a)       (2.52)          (1.55)
      Sales volume increases                 (b)        0.54            1.64
      Rebates                                (c)       (0.28)          (0.18)
                                                       -----           -----
                                                       (2.26)          (0.09)
                                                       -----           -----

ii)   Metrology tools

      Effect of exchange rate Movements      (a)       (0.53)          (0.24)
      Sales volume increases                 (b)        1.01            0.25
                                                       -----           -----
                                                        0.48            0.01
                                                       -----           -----

iii)  Magnetic products

      Effect of exchange rate Movements      (a)       (0.39)          (0.22)
      Sales volume increases                 (b)        0.21            0.10
                                                       -----           -----
                                                       (0.18)          (0.12)
                                                       -----           -----

      Total net sales increase                         (1.96)          (0.20)
                                                       =====           =====

Notes:

(a) The functional currency of the majority of the group's revenues is sterling
and the variation in the US$/(pound) cross rate in the three and six month
periods ending March 31, 2006 compared to the comparable period last year has
had a significant impact on the US dollar value of the group's sales. The
average cross rates in the period under review can be summarized as:

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

                                         2006        2005      % Movement

      6 months ended March 31           1.750       1.878        -6.82%
      3 months ended March 31           1.752       1.889        -7.25%


                                       36
<PAGE>

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

Despite this however, there have been some significant sales volume increases.
Within the UK hand and garden division, performance for the quarter was better
than last year, mainly driven by an exclusive deal with a major retail chain for
Spear & Jackson powered garden tools. Likewise, both France and Australia showed
aggregate sales volume increases for the quarter. Within the Metrology division,
incremental sales growth continued via our selling and distribution facility in
Maastricht, together with a strong performance in the US.

(c) The level of rebates has increased overall in 2006 by $0.18 million in the
three month period and $0.28 million in the six month period when compared to
2005. The increases are attributable to increased trading volumes in France and
in our Neill Tools division as a result in 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:

NEILL TOOLS

Sales for the quarter ended March 31, 2006 of $12.73 million showed an
improvement of $0.31 (2.46%) million over last year's sales of $12.42 million.
This increase was attributable to increased volumes of $1.38 million offset by
adverse exchange movements of $0.98 million and increased sales rebates of $0.09
million. In the six months ended March 31, 2006 sales of $22.01 million were
$1.31 (5.62%) million less than last year's sales of $23.32 million. This
decrease comprised adverse exchange movements of $1.61 million and increased
sales rebates of $0.09 million offset by increased volumes of $0.39 million.

Overall, the division's sales for the second quarter were 2.46% better than last
year and in line with forecast. UK performance was better than last year, mainly
driven by an exclusive deal with a major retail chain for the new Spear &
Jackson lawn mowers. Export sales, however, were down on last year, mainly
attributable to the timing of a key account order being delayed into April.

Despite the improvement in sales performance over last year, the UK retail
sector once again reported a year on year downturn in consumer spending. This
increasingly soft retail demand has a direct impact on our Hand & Garden sales
in the UK and remains a cause for concern. Within the industrial tools business,
export markets continue to be driven by demand for our hacksaw blades. Sales of
these products now represent 60% of our industrial tools' revenues and
strategies are being prepared to spread this sales concentration risk through
the development of higher margin product ranges, brand presence and new product
development

Gross margins were again depressed. The main drivers behind this reduction were
a mix switch towards Garden Power products at the expense of the higher margins,
the consumption of key raw materials purchased at high prices in quarter 1, and
increases of more than 50% in gas & electricity supply costs. The price
surcharge relating to primary raw materials did, however, show a slight
reduction during the quarter and we have further mitigated the effect of the
price increases imposed by our steel, plastics and utility suppliers by passing
a proportion of these costs onto our customers from March.

Improvements in manufacturing costs continue to be the focus of the management
to improve competitiveness for new markets. On January 25, 2006 the company
announced the closure of the remaining element of its manufacturing site at

                                       37
<PAGE>

Wednesbury, England. The site closure forms another key part of the Company's UK
manufacturing strategy to regenerate and modernize key areas of the hand and
garden tools businesses. The transfer of operations from Wednesbury to Sheffield
is progressing on time and in budget, and when integrated will ensure that the
UK hand and garden business will deliver improved customer service and
satisfaction.

The main challenges for the business revolve around reducing the manufacturing
cost base and driving innovation and new product development in line with our
core brands and competences. In addition, the Company is recruiting key people
with the experience and skills to deliver new product development strategy and
focused product and brand management.

Quarter 3 performance is expected to deliver a profit compared to an operating
loss last year. The demand for the new Woodsaw range (Predator) continues to
drive manufacturing as we look to improve our output to satisfy the demand from
our markets. Much also depends on retail demand and favorable UK weather. The UK
climate is key in the level of garden sales for the next quarter as the April
and May budgets reflect increased consumer spending around the national holidays
that occur in the period.

ECLIPSE MAGNETICS

Sales for the quarter showed a $0.12 million (4.03%) decrease over last year's
figures (2006 $2.81 million, 2005 $2.93 million) with adverse exchange movements
of $0.22 million only partially offset by increased volumes of $0.10 million.
Likewise for the six months ended March 31, 2006 sales showed a 3.26% decrease
of $0.18 million (2006, $5.41 million, 2005, $5.59 million) attributable to
adverse exchange movements of $0.39 million mitigated by increased volumes of
$0.21 million.

Overall, sales volumes for the second quarter were higher than the comparable
period last year. Improved sales into the UK market were mainly attributable to
listings gained for our new filtration range and by sales generated from
separation equipment for use in the food processing industry. Gains in the UK
were, however, diluted by a decline in export sales, largely as a result of the
prior year benefiting from a one off order within the materials handling
division. Despite this reduction in total export sales, our US performance
continued to prosper as we continued to increase our US market share through the
introduction of new products and close key account management.

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

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

Gross margins were the same as in the equivalent period last year. The sales mix
improved towards the higher added value products, however, this was reduced by a
poor mix within the Industrial sector. Key primary materials, steel, nickel and
cobalt remained stable during the period but any beneficial impact has been
restricted by higher utility costs. Improvements in manufacturing costs
continue, therefore, to be the focus of the management to improve
competitiveness in new markets.

Looking forward, the main challenge continues to be the distancing of rival Far
East manufacturers from our key customer base. Our commodity-based business is
under continued threat. To counter this, we continue to promote the
attractiveness of our product by offering added value to our customers. At the
same time, however, we are taking positive steps to improve our manufacturing
process and product sourcing. As part of this strategy, the division enhanced
its presence in China in January 2006 when it paid $0.2 million for a 25% equity
participation in a recently formed Chinese Venture.

                                       38
<PAGE>

The management continues to follow a strategy of new product development,
increasing market share within key product segments and manufacturing
improvements.

ROBERT SORBY

Sales for the quarter decreased by $0.16 (11.41%) million when compared to last
year (2006 $1.21 million, 2005 $1.37 million) as a result of sales volume
decreases of $0.06 million and adverse exchange variances of $0.1 million. In
the six month period ending March 31, 2006, sales have decreased by $0.23
million (8.32%) from $2.75 million in 2005 to $2.52 million in 2006 primarily
due to adverse exchange variances of $0.18 million and reduced volumes of $0.05
million.

During the quarter Robert Sorby has faced a very challenging time with sales
declining amid softening demand in the UK trade and US markets.

The background in the UK is one of a very subdued market place. Almost without
exception our retail customers report very testing times and, indeed, we have
seen two of our dealers close down. It has been noticeable that there is an
increasing consumer resistance to the purchase of high price point items which,
in the recent past, have made a major contribution to the development of the
business.

To counteract this, last quarter we focused heavily on manufactured product and
in particular those product lines that were under competitive pressure. As a
result we have seen a significant improvement in sales of those products but at
a reduced individual gross margin. To mitigate the dilution in margins we have
reduced marketing costs, especially consumer advertising and dealer support. In
addition, a new product launch is planned for the UK in May that we anticipate
will generate incremental business.

In contrast to other dealers, our own retail store has bucked the trend showing
an 8% gain in sales with a reduced manning level. The growth has largely come
through increased mail order business.

During the quarter the store made a major effort to reduce inventory levels and
to complete, in-house, its e-commerce site. The site went live at the end of
March and, although it is too early to estimate the impact that the site will
have on the business, it is hoped that it will deliver further sales growth.

In overseas markets our main thrust continues to be in North America. After
gaining momentum during the first quarter we have seen sales slide back during
quarter two and we are running 15% below the same quarter in 2005. We see this
as a reflection of our market position rather than a loss of market share.

In the light of this shortfall, initiatives are in place with major customers.
One of these customers placed a $40k order in advance of a Father's Day
promotion. This is entirely incremental business. With another customer we are
planning a demonstration tour of their stores for the first time during the
summer months. New listings have been gained with other customers and an
additional sales initiative will be in place for the start of the new season in
the autumn.

Towards the end of 2005 we had suffered as a result of the dramatically
escalating price of steel, which is our prime raw material. Those prices have
now dropped significantly from their peak.

Looking forward the business climate remains uncertain. The UK retail sales in
general remain in the doldrums. The US gives a more positive picture but success
in this market will, in part, be dependent on our own initiatives.

                                       39
<PAGE>

BOWERS METROLOGY

Sales for the second quarter show a marginal increase of $0.01 million (0.3%)
over last year ($3.97 million 2006, $3.96 million 2005) due to increased sales
volumes of $0.25 million being offset by adverse exchange variances of $0.24
million. Cumulatively, sales have increased by $0.48 million (6.41%) from $7.55
million in 2005 to $8.03 million in 2006. This is attributable to increased
volumes of $1.01 million and adverse exchange movements of $0.53 million.

As anticipated in the report for Quarter 1 of Fiscal 2006, trading was more
difficult during Quarter 2, mainly because of a slowdown in the UK market.
Revenues were at a similar level to last year but EBIT was reduced because of
significant set-up costs being incurred with our new facility in Shanghai,
China.

The disposal of the loss making Coventry Gauge thread gauging division was
completed during the quarter. This disposal will now enable management to focus
on the developing businesses in the Netherlands and China, which both offer
significant opportunities for growth.

The Shanghai facility is currently operating as a quality control and
administration centre for products being shipped to Europe. During Quarter 3 it
is anticipated that sales to external customers in Asia will increase
significantly and in Quarter 4 the commencement of manufacturing is scheduled to
commence. The key products that are being developed are a range of bench
hardness testers and these will be sold worldwide under the company's CV
Instruments and Eseway brands.

The core Bowers export business has been positive with the USA and German
markets running in line with forecast. The French and Italian markets are,
however, still depressed but growth in Eastern Europe and Asia is compensating
for this. The recent weakening of Sterling has also improved our competitiveness
in Europe.

Margins are as budgeted, despite significant percentage increases in energy
costs. Cash is also in line with budget with the recent capital expenditure
projects for the Bowers Bradford facility now complete and running well. These
new machine tools have improved the accuracy of the products whilst also
reducing the unit costs.

Our main concern is the poor state of the UK industrial market. 2005 saw a slow
but steady recovery but 2006 has started disappointingly in virtually all
sectors. The announcement by BAE Systems to sell its 20% stake in Airbus is also
likely to result in reduced investment in the lucrative Aerospace sector. Good
growth is being experienced in the sales of products being sourced from China
but the UK Systems division is running behind budget because of a slowdown in
investment intentions.

Promotional activity is high and with May seeing our two key tradeshows of the
year, we anticipate that Quarter 3 should show a small improvement on Quarter 2.

SPEAR & JACKSON FRANCE

Overall, sales for the second quarter of $3.58 million have seen a $0.17 million
decrease (4.43%) with adverse exchange variances of $0.3 million only partially
offset by sales volume increases of $0.13 million. For the six month period
ended March 31, 2006 sales have decreased by $0.38 million (6.41%) from $5.89
million in 2005 to $5.51 million in 2006. Here, favorable volumes of $0.1 were
exceeded by adverse exchange movements of $0.48 million.

On a macro level, the French economy has remained depressed with increased
unemployment rates, lower consumer confidence and reduced spending levels.
Business conditions in the Company's markets have continued to reflect this
depressed retail environment.

                                       40
<PAGE>

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

We continue to feel the effects from the increasing flow of cheap Asian and Far
Eastern imports which puts pressure on turnover and margins. This margin
dilution could be further exacerbated by the opening of specialist cut-price
garden stores later in the year.

In order to combat increased competition from cheap imports and to combat the
negative effects of the seasonality of garden product sales, the Company
concentrates on marketing activity to promote its principal brands and to secure
new listings. In the last quarter the Company has created a private range of
cutting tools and revised other private range garden, wood and grass tools. The
launch of the bonsai tool range last quarter is proving to be successful with
listings secured in garden centers.

It is clear, however, that in order to increase the success of new product
ranges is essential that we are able to offer quality products at lower price
points.

AUSTRALASIA

Sales for the quarter for Spear & Jackson Australia and Spear & Jackson New
Zealand were $0.08 million (2.32%) lower than last year (2006 $3.28 million,
2005 $3.36 million), due to adverse exchange variances of $0.18 million,
increased sales rebates of $0.11 million compensated by increased sales volumes
of $0.21 million. Cumulatively for the six months to March 31, 2006 sales have
decreased by $0.34 million (4.67%) from $7.34 million in 2005 to $7.0 million in
2006. Adverse exchange movements of $0.26 million and increased rebates of $0.18
million were only partially compensated by increased volumes of $0.1 million.

The Australian market continued to experience a downturn in retail trading and
economic activity during the second quarter. Government intervention last year
to slow economic growth and inflation by an increase in domestic interest rates
has curtailed new housing starts, property investment and consumer spending.
These are now well down on the levels of the previous year. The weakening
Australian dollar and the significant increases in petrol costs (+30%) have also
impacted consumer confidence and discretionary spending. The recent employment
growth data in Australia also suggests that the Reserve Bank (RBA) may take a
more aggressive stance on interest rates in the second half of 2006, which will
further slow economic growth and inflation.

Likewise, the New Zealand economy contracted during the second quarter with GDP
falling for the first time in more than 5 years and sparking speculation that
the New Zealand economy may be heading into recession.

In addition, the Australian and New Zealand markets continue to be extremely
price competitive with many of our retail customers sourcing their "house
brands" directly from Asia in direct competition with S&J. This practice has
placed, and will continue to place, added pressure on our sales, margins and
market share.

Increased competition, declining price points, the losses of a garden range with
a major retail customer and a major agency line were offset by incremental sales
gains within our air, hand tool and metals categories.

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

                                       41
<PAGE>

COSTS OF GOODS SOLD AND GROSS PROFIT

Costs of goods sold increased by 3.93% from $18.35 million in the three month
period ended March 31, 2005 to $19.08 million in the three months ended March
31, 2006. In the six month period under review, costs of goods sold decreased by
0.31% from $35.09 million in the six months ended March 31, 2005 to $34.98
million in the six months ended March 31, 2006.

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

                              Three Months Ended          Six Months Ended
                              March 31  March 31          March 31 March 31
                              2006          2005          2006         2005

Cost of goods sold
as a % of sales               69.19        66.09          69.26       66.89

Gross Profit Margin           30.81        33.90          30.74       33.11

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

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

Improvements in manufacturing costs continue to be the focus of the management
to improve competitiveness for new markets. The manufacturing reorganization
program, initiated in the last quarter of 2005, and continued in the second
quarter with the announcement of the closure of our manufacturing site at
Wednesbury in the UK, will have a beneficial effect on margins. Own-manufactured
product will be progressively replaced with factored items sourced from overseas
thereby reducing costs and increasing profitability.

OPERATING COSTS AND EXPENSES

Selling, general and administrative (SG&A) expenses increased by $1.37 million
(17.27%) from $7.93 million in the three months ended March 31, 2005 to $9.3
million in the three months ended March 31, 2006. In the six months ended March
31, 2006 costs of $18.42 million have increased by $1.88 million (11.37%) from
$16.54 million in the six months to March 31, 2005.

The principal reasons for the changes in the levels of SG&A expenses in the
three and six month periods ended March 31, 2006 over their prior year
comparatives can be summarized as follows:

                                       42
<PAGE>

                                                  Increases Over Prior Year

                                               Six Months          Three Months
                                                 ended                ended
                                             March 31, 2006       March 31, 2006
                                                   $m                   $m

a)    Impact of movements in                     (0.90)               (0.40)
      average US$/sterling cross
      rates in the period

b)    Increased FAS 87 pension costs              2.03                 1.01

c)    Inflationary increases                      0.40                 0.20

d)    Decreased head office costs                (0.28)               (0.08)
      relating to legal and professional
      fees, monitor fees and associated
      costs

e)    One-time costs in setting up
      the China facility                          0.10                 0.10

f)    Other net increases including
      increases in variable selling and
      distribution costs associated with
      higher level of March 2006 sales            0.53                 0.54
                                                 -----                -----

      Total increase in SG&A expenses             1.88                 1.37
                                                 =====                =====

OTHER INCOME AND EXPENSES

Other income and expenses moved from a net credit of $0.03 million in the three
months ended March 31, 2005 to a net credit of $0.08 million in the three months
ended March 31, 2006. For the six month period under review other income and
expenses has moved from a $0.04 million credit in the six months to March 31,
2005 to a $0.09 million credit in the six months to March 31, 2006.

This improvement is attributable to higher 2005 bank interest credits in the
Company's American business and lower bank interest charges in the French
business.

INFREQUENT AND UNUSUAL ITEMS

(a) MANUFACTURING REORGANIZATION COSTS

On January 25, 2006, the Company announced the closure of the remaining element
of its manufacturing site at Wednesbury, England. All manufacturing, assembly,
warehouse and distribution operations currently performed at this location will
be transferred to other locations.

The closure and relocation of the Wednesbury facility are expected to take
approximately six months and the costs of this exercise are anticipated to be
circa. (pound)1.2 million ($2.1 million). These costs include employee severance
payments, site closure expenses, factory reorganization expenses, plant transfer
costs and associated capital expenditure. Negotiations are currently in progress
regarding the sale of the Wednesbury site to a non-related third party. It is
expected that the sales price of the site will be in excess of its net book
amount and the Company has not therefore made any provision against the balance
sheet carrying value of this property at March 31, 2006. Funds realized from any
disposal will be used to finance the closure costs with any excess sale proceeds
being reinvested in the business.

                                       43
<PAGE>

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

Costs provided in respect of the site closure as at March 31, 2006 were $1.56
million. In addition to these costs it is anticipated that a further $0.5
million will be incurred on or before November 30, 2006 for which provision will
be made in accordance with applicable financial reporting standards as and when
liabilities for such charges crystallize.

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

(b) PROFIT ON SALE OF LAND AND BUILDINGS

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

                                    Wednesbury       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)             0.0          (0.7)
                                       ----             ----          ----

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

Following the sale of the surplus element of the Wednesbury facility, provision
was made for costs to be incurred in connection with the consolidation of the
current manufacturing operation into the smaller site. These costs comprised
factory refurbishment, factory reorganization and departmental relocations
within the site. As noted in (a), above, certain of these provisions will no
longer be required following the decision to close the remainder of the site and
all excess provisions have accordingly been released in the quarter ended March
31, 2006.

(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

Our loss before income taxes in the three months ended March 31, 2006 amounted
to $1.96 million compared to an income before taxes for the three months ended
March 31, 2005 of $4.02 million. The loss before income taxes in the six month
period ended March 31, 2006 was $4.04 million compared to $3.37 million profit
in the comparable six month period last year.

                                       44
<PAGE>

The movements are attributable to:

                                        Six Months ended      Three Months ended
                                         March 31, 2006         March 31, 2006
                                               $m                     $m

Manufacturing reorganization costs           (1.23)                 (1.23)
Profit on sale of land and
buildings in 2005                            (2.50)                 (2.50)
Decreased gross margins                      (1.85)                 (0.93)
Increased SG&A costs                         (1.88)                 (1.37)
Increased other income                        0.05                   0.05
                                             -----                  -----

                                             (7.41)                 (5.98)
                                             -----                  -----

INCOME TAXES

An income tax charge of $0.1 million arose in the three months ended March 31,
2006 compared to a $0.49 million income tax charge in the three months ended
March 31, 2005. For the six month period to March 31, 2006 an income tax benefit
of $0.31 million arose compared to a $0.45 million charge in the comparative
period last year.

Income taxes were 5.09% of the loss before tax in the three months ended March
31, 2006 compared to 13.32% of the income before tax in the three months ended
March 31, 2005. Income taxes were 7.60% of losses in the six months ended March
31, 2006 compared to 14.96% of income in the comparable period last year.

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

i)    For the three months ended March 31, 2006 valuation allowances have been
      applied to the costs associated with the closure of the Wednesbury site.
      Additionally, valuation allowances have been applied to losses incurred
      certain UK divisions in the quarter. The effect of the above has resulted
      in a current tax charge for the three months ended March 31, 2006.

ii)   For the three months ended March 31, 2005 the $2.2 million profit on the
      sale of the Company's excess land at Wednesbury was not subject to
      taxation due to the availability of capital tax losses brought forward
      which were not recognized within the deferred tax computation.

NET (LOSS) INCOME FROM CONTINUING OPERATIONS AFTER TAXATION

Our net loss from continuing activities after income taxes was $2.06 million for
the three months ended March 31, 2006 (2005: $3.53 million profit) and for the
six months ended March 31, 2006 it was a $3.73 million loss compared to a $2.92
million profit in the previous year.

DISCONTINUED OEPRATIONS

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

                                       45
<PAGE>

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

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

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

Total losses attributable to discontinued operations were $0.07 million in the
three months ended March 31, 2006 (2005 : $0.34 million), and were $0.08 million
in the six months ended March 31, 2006 (2005 : $0.37 million).

FINANCIAL CONDITION

Liquidity and Capital Resources

Our cash and cash equivalents amounted to $5.98 million at March 31, 2006 ($7.29
million at September 30, 2005), working capital (excluding deferred taxes)
totaled $26.89 million at March 31, 2006 ($29.87 million at September 30, 2005)
and our stockholders' equity was $21.74 million at March 31, 2006 ($26.20
million at September 30, 2005).

Net cash used in operating activities in the six month period ended March 31,
2006 was $0.61 million compared to $3.34 million in the six months ended March
31, 2005. This decrease in net cash used of $2.73 million primarily arises from:

   o  increased trading working capital inflows of $4.46 million (note a)

   o  increase in net inflows from other assets and liabilities of $3.67 million
      (note b)

Offset by:

   o  the reduction in net income (adjusted for depreciation, and deferred
      taxes) of $5.4 million as explained in the commentary on trading results
      above.

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

a)    Trade Working Capital Variances

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

                                                             Note      $million

      Increased inventory inflows .....................      (i)          5.39
      Increased trade payable inflows .................      (ii)         0.86
      Reduced trade receivable inflows ................      (iii)       (1.79)
                                                                         -----
      Net increase in trade working capital inflows ...                   4.46
                                                                         =====

                                       46
<PAGE>

i)    In the six months ended March 31, 2005 inventories increased by $3.67
      million compared to a decrease of $1.72 million in the period ended March
      31, 2006. Within most of the UK divisions, and especially in the UK hand
      tool division, the period to March 31, 2006 witnessed a rigorous inventory
      reduction program, whereas in the comparable period last year stock levels
      increased. This trend was also mirrored in the Australia and New Zealand
      divisions. Such decreases were offset, however, by higher than usual
      seasonal inventory increases in our French business.

ii)   Increased trade payable inflows have arisen in the six months under review
      despite inventory reductions. With the increased dependence upon
      externally sourced factored goods rather than own-manufactured product,
      certain divisions such as Neill Tools, have witnessed a higher level of
      trade payables at the period end. This, in conjunction with extended
      settlement terms and payment timing issues, has resulted in increased
      trade payable inflows.

iii)  Trade receivable inflows for the six months to March 31, 2005 benefited by
      $0.7 million from customer receipts relating to increased sales levels in
      August and September 2004. As this trend was not repeated in August and
      September 2005, cash flows for the six months to March 31, 2005 did not
      benefit to the same extent from the collection of receivables from prior
      period sales. Additionally, trade receivable balances at March 31, 2006
      were inflated by higher than usual revenues in the month of March 2006.
      Collection of these debts will not be made until Quarter 3.

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

      With regard to the net inflows from other assets and liabilities, the main
      factors contributing to the $3.67 increased inflows are:

i)    An increase in the non-cash FAS 87 pension charge of $2.03 million;

ii)   The inclusion, at March 31, 2006 of a restructuring provision of $1.5
      million in relation to the closure of the Wednesbury site.


iii)  Increased accrual levels, especially in the month of March 2006,
      reflecting the increase in trading levels in certain of our operations.

      The beneficial effect of the above has been diluted by:

i)    Increased annual employer pension contributions of $0.37 million to the UK
      pension scheme;

ii)   Payments of $0.5 million in respect of the UK manufacturing reorganization
      program;

Cash outflow from investing activities was $1.27 million in the period ended
March 31, 2006 compared to an inflow of $7.99 million in the period ended March
31, 2005. The 2005 comparative period included receipts of $8.6 million relating
to the net sale proceeds of the property at Boca Raton, Florida and to the
partial sale of excess land at our Wednesbury manufacturing site. The 2006
figures include purchases of property, plant and equipment relating to the
partial renewal of our UK motor fleet and start up capital expenditure in our
newly formed Chinese operation. Additionally, the 2006 cash outflow also
includes the purchase of a 25% equity participation in a recently incorporated
Chinese magnetic products company.

Net cash provided by financing activities was $0.68 million in the period ended
March 31, 2006 (2005: $0.001 million). The March 2006 increase represents the
utilization of the UK bank overdraft facility to meet cyclical demands in the
UK, increased pension plan contributions and the payment of restructuring costs
associated with the manufacturing reorganization program.

                                       47
<PAGE>

BANK FACILITIES

The UK subsidiaries of Spear & Jackson plc and Bowers Group plc maintain a line
of credit of $7.81 million. This is secured by fixed and floating charges on the
assets and undertakings of these businesses. Of the total facility, $5.20
million relates to bank overdrafts and $2.61 million is available for letters of
credit. These facilities are denominated in British pounds. The overdraft
carries interest at UK base rate plus 0.75%. At March 31, 2006 the Company had
$1.14 million of borrowings outstanding under the overdraft line (September 30,
2005 $0.75 million) and had $0.12 million in outstanding letters of credit
(September 30, 2005: $0.6 million).

As a consequence of the special pension contribution of $7.2 million that was
paid in two installments in June and September 2005, and the additional funding
which will be required to finance the ongoing restructuring initiatives, an
open-ended, on demand bridging loan of $5.20 million has also been negotiated
with the Company's UK bankers. The facility is denominated in British pounds and
is secured by a first legal charge over the Company's land and property at
Wednesbury, England. It carries interest at UK base rate plus 1%. This facility
has not yet been utilized.

The French and Australian subsidiaries of Spear & Jackson plc maintain
short-term credit facilities of $2.78 million denominated in Euros and
Australian dollars. The facilities comprise bank overdraft lines, with interest
rates ranging from 6.8% to 12.6%, together with facilities for letters of credit
and the discount of bills receivable. There was $0.27 million outstanding under
the overdraft lines at March 31, 2006 (September 30, 2005: nil). At that date
$1.78 million of letters of credit and bills were outstanding under these
facilities (September 30, 2005: $0.9 million).

The UK facilities were renewed in December 2005, the Australian facilities were
renewed in October 2005, and the French facilities fall due for renewal at
various dates in 2006. These lines of credit are subject to the Company's and
its subsidiaries' continued credit worthiness and compliance with the applicable
terms and conditions of the various facilities. Assuming that the Company
maintains compliance with these conditions it is anticipated that all the
facilities will be renewed on comparable terms and conditions.

The Company's bank accounts held with the HSBC Bank plc by UK subsidiaries of
Spear & Jackson plc and Bowers Group plc form a pooled fund. As part of this
arrangement the companies involved have entered into a cross guarantee with HSBC
Bank plc to guarantee any bank overdraft of the entities in the pool. At March
31, 2006 the extent of this guarantee relating to gross bank overdrafts was
$21.13 million (September 30, 2005 $20.4 million). The overall pooled balance of
the bank accounts within the pool at March 31, 2006 was an overdraft balance of
$1.14 million (September 30, 2005 in hand pooled balance of $1.6 million).

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

Our business operations have been funded from net operating income supplemented,
where necessary, by utilization of the UK, French and Australian banking
facilities described above. We believe that we have sufficient capital
resources, liquidity and available credit under our principal banking facilities
supplemented, where necessary, by temporary increases to sustain our current
business operations and normal operating requirements for the foreseeable
future. As the Company continues to focus its efforts on improving the
competitiveness of its worldwide operations, additional funding may be required
to finance the restructuring of the non-profitable areas of the Company's
divisions and to meet items of significant one-off expenditure. Such expenditure
may include: costs associated with the closure and relocation of the Company's
manufacturing facility in Wednesbury, England; investment in new capital
equipment; further special contribution payments to reduce the pension plan
deficit; further set up costs, and investment in our business ventures in China;
and any other expansion of the Spear & Jackson or Bowers operations.

                                       48
<PAGE>

Funding of these initiatives may be obtained through the negotiation of
increased bank lending facilities or the sale of surplus assets.

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

The Company makes a range of contractual obligations in the ordinary course of
business. The following table summarizes the Company's principal obligations at
March 31, 2006:

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

Capital lease obligations    0.97         0.54        0.27     0.16      -
Operating leases (note a)    6.15         0.98        1.89     1.58     1.70
                             ----         ----        ----     ----     ----
                             7.12         1.52        2.16     1.74     1.70
                             ----         ----        ----     ----     ----

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

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

(c)   As at March 31, 2006, the Company had letters of credit of $0.29 million
      outstanding which are secured under the UK and Australian credit
      facilities. In addition, the Company's French subsidiary had discounted
      $1.61 million of bills of exchange with recourse.

At March 31, 2006, the Company had no material off-balance sheet arrangements
other than the non-debt obligations described in contractual obligations, above.

OUTLOOK

Operating losses were incurred in both quarter 1 and quarter 2 and this trend is
anticipated to continue into quarter 3. As in previous quarters, the Company's
base trading profit will be eliminated by the non-cash FAS 87 expense which has
increased significantly over the comparable charge recognized in the period
ended March 31, 2005.

As previously explained, the Company's actuaries have calculated that the annual
pension charge will rise by $4.2 million from $4.0 million in 2005 to $8.2
million in the year ended September 30, 2006. Before consideration of pension
costs, base trading profit for the third quarter is currently anticipated to be
approximately $1.6 million and after deduction of the quarter's pension charge
of $2.1 million an operating loss (before unusual items and taxation) of $0.5
million is forecast.

Earnings in quarter three will also be negatively impacted by the provision of a
further $0.3 million of costs in connection with the closure of the Company's
manufacturing site in Wednesbury, England and other UK reorganization
initiatives. The adverse effect of these costs would, however, be offset by any
gain arising on the subsequent disposal of the Wednesbury site.

As a result of these increased pension charges and closure costs the Company
does not anticipate returning a profit before taxation in fiscal 2006.
Management will consider all available operational strategies to mitigate the
negative impact of these items so that any trading losses in the year ended
September 30, 2006 which arise as a result of the increase in pension costs and
one-time reorganization expenditure will be reduced as far as possible. In
addition, the level of losses incurred would be reduced if the sale of the
Wednesbury property is concluded during the year at an amount in excess of its
book value.

                                       49
<PAGE>

Although other elements of the UK hand and garden business have performed
encouragingly, it is unlikely that the level of demand for these products will
be sufficient to fully offset the adverse effects of the general downturn in
demand in the UK retail sector and the fierce competition from cheap foreign
imports. Demand from our export markets, particularly the Far and Middle East,
has also softened as the intensive purchasing activity resulting from building
projects in the aftermath of the Iraqi conflict has declined.

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

The closure and relocation of the Wednesbury facility are expected to take
approximately six months with completion expected in November 2006. The costs of
this exercise, which are anticipated to amount to approximately $2.1 million,
comprise employee severance payments, site closure expenses, factory
reorganization expenses, plant transfer costs and associated capital
expenditure. Negotiations continue regarding the sale of the Wednesbury site to
a non-related third party. It is expected that the sale price of the site will
be in excess of the property's net book amount and the Company has not therefore
made any provision against its balance sheet carrying value at March 31, 2006.
Funds realized from any disposal will be used to finance the closure costs with
any excess sale proceeds being reinvested in the business.

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

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

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

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

Within the Metrology division the new selling and distribution outlet in
Maastricht is now fully operational, and incremental revenue growth is forecast
for the rest of the fiscal year. In the future, this revenue and earnings growth
will be enhanced by the division's quality control and distribution centre which
has been established in Shanghai, China and which is expected to become fully
functional in quarter three of fiscal 2006. In the short term, however,
profitability will be negatively impacted by the one-time costs associated with
the start up of the business.

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<PAGE>

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

Our businesses will again face the issues of increased costs and margin erosion
as a result of raw material, fuel and other utility price increases, interest
rate increases, the $4.2 million increase in the FAS 87 pension charge and a
weak dollar. This will continue to put pressure on our margins and overhead
costs, and wherever possible, these increases will be passed on though sales
price increases.

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

The level of overhead expenses, particularly legal and professional costs,
incurred by our US corporate head office has reduced following the settlement of
the SEC suit during 2005. However, any future savings will be offset by the
professional costs that are anticipated to be incurred in relation to the Class
and Derivative Action lawsuits and legal expenses in connection with the
appraisal of offers from potential acquirers to purchase all, or part, of the
Company's common stock.

In future quarters we will continue to focus on improving cash generation. As
explained above, on January 25, 2006 the Company announced the closure of the
remaining element of its manufacturing site at Wednesbury, England. In addition,
therefore, to normal trading cash requirements, in the next six months costs of
approximately $2.1 million will be incurred in the relocation of the Wednesbury
manufacturing operation and its consolidation into the Company's principal UK
manufacturing site in Sheffield and elsewhere. These costs will be funded from
existing core and, where necessary, additional temporary UK bank facilities.

To restrict the pressure that this expenditure will have on the Company's bank
facilities, focus will be maintained on the working capital reduction program
that has already been initiated. The benefits of this initiative can be seen in
the favorable inventory movements in the quarter and emphasis will continue to
be placed on strict working capital control in the forthcoming months.
Additionally, the Company continues to be in negotiation with an external third
party in connection with the sale of the Wednesbury site. Utilization of the
Company's UK core and additional temporary additional banking facilities will
not be necessary if a sale is concluded in the short term as disposal proceeds
will be available to fund the reorganization costs. Any residual sale proceeds
will be reinvested in the business.

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

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

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<PAGE>

subsequent periods. A favorable climate in the UK will also be crucial to the
performance of garden product sales in the next quarter as the April and May
forecasts reflect increased consumer spending around national holidays that
occur in the period. Poor weather could significantly reduce anticipated demand.

As previously reported, the formal resolution of the SEC legal action in fiscal
2005 enabled the Company to move forward so that both short and long term
commercial strategies could be formulated and implemented. Uncertainties will
still remain, however, until the financial effects of the Class Action and
Derivative Complaint, explained in detail in PART II Item 1 ("Legal
proceedings"), below, are quantified and settled and until all issues regarding
the potential change in control of the Company are resolved.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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

INTEREST RATE RISK

The Company is exposed to interest rate changes primarily as a result of
interest payable on its bank borrowings and interest receivable on its cash
deposits. At March 31, 2006 the Company had cash and cash equivalents of
approximately $5.98 million. Given the current levels of borrowings, the Company
believes that a 1% change in interest rates would not have a material impact on
consolidated income or cash flows. Holding the same variables constant, a 10%
increase in interest rates would again have a negligible effect on interest
payable.

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

EXCHANGE RATE RISK

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

In the six months ended March 31, 2006 compared to the equivalent period in
2005, the change in exchange rates had the effect of decreasing the Company's
consolidated sales by $3.44 million, or 6.56%. Since most of the Company's
international operating expenses are also conducted in local currencies, the
change in exchange rates had the effect of decreasing operating expenses by $0.9
million for the six months ended March 31, 2006 compared to the comparable prior
year period.

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

We manage the risk and attempt to reduce such exposure by periodically entering
into short term forward exchange contracts. At March 31, 2006 the Company held
forward contracts in place to sell Australian and New Zealand dollars to buy
approximately 0.85 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 $0.09 million had no forward contracts been taken
out.

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<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 March 31, 2006, the Company made an allowance of $1.46 million in respect of
doubtful accounts which management believes is sufficient to cover all known or
expected debt non-recoveries.

ITEM 4.  CONTROLS AND PROCEDURES

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

Limitations on the Effectiveness of Controls

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

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<PAGE>

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

Conclusions

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

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934)
that occurred during the quarter ended March 31, 2006 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

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

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

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

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

                                       54
<PAGE>

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

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

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

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

These various class action suits were subsequently consolidated. Thereafter, the
defendants filed certain Motions to Dismiss with regard to the Complaint and on
October 19, 2005, the U.S. District Court for the Southern District of Florida
in Re Spear & Jackson Securities Litigation entered its Order regarding these
Motions. The Order denied the Company's motion as well as that of Mr. Crowley,
the former Chief Executive Officer of Spear & Jackson. The Company responded to
the Complaint having filed an answer and defenses and is proceeding with the
discovery phase of the case. A trial date has been set for October 2006. The
Court granted the Motion to Dismiss on behalf of Mr. Fletcher, the Company's
interim Chief Executive Officer, and also granted the Motion to Dismiss of the
Company's former independent auditor, Sherb & Co., LLP. The class plaintiff has
since filed an appeal regarding the trial court's decision to dismiss the case
against Sherb & Co., LLP, which appeal is presently pending. No appeal was filed
with respect to the decision to dismiss the case against Mr. Fletcher.

                                       55
<PAGE>

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

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

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

Item 6.  Exhibits

(a)   Exhibits

10.4  Stock Purchase Agreement effected April 8, 2005 between PNC Tool Holdings
      LLC and Spear & Jackson, Inc.

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

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

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

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


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<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.


May 15, 2006                            /s/ John Harrington, Jr.
                                        ------------------------
                                        John Harrington, Jr.
                                        Interim Chairman



May 15, 2006                            /s/ William Fletcher
                                        --------------------
                                        William Fletcher
                                        Acting Chief Executive Officer
                                        (Principal Executive Officer)



May 15, 2006                            /s/ Patrick J. Dyson
                                        ---------------------
                                        Patrick J. Dyson
                                        Chief Financial Officer
                                        (Principal Financial and
                                        Accounting Officer)


                                       57