U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
[X]   Annual Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange
      Act Of 1934

[ ] Transition Report Under Section 13 Or 15(D) Of The Securities Exchange Act
    Of 1934


                        COMMISSION FILE NUMBER: 333-40738

                              SPEAR & JACKSON, INC.
                  --------------------------------------------
                 (Name of small business issuer in its charter)

         Nevada                                         91-2037081
----------------------------                          --------------
(State or other jurisdiction                         (I.R.S. Employer
of incorporation or organization)                     Identification No.)

           2200 Corporate Boulevard, Suite 314, Boca Raton, FL 33431
           ---------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (561) 999-9011
                            -------------------------
                            Issuer's telephone number

Securities registered under Section 12(b) of the Exchange Act:     NONE.

Securities registered under Section 12(g) of the Exchange Act:

                    COMMON STOCK, PAR VALUE $0.001 PER SHARE.

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not contained in this form,  and no disclosure will be
contained,  to the best of registrant's  knowledge,  in definitive proxy or
information  statements  incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]

<PAGE>

State issuer's revenues for its most recent period ended September 30, 2003,
$91,845,000.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days $20,825,078 as of January 13, 2004.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 11,741,122 Shares of Common Stock as
of January 13, 2004.

Transitional Small Business Disclosure Format (check one): Yes [X] No [ ]

This Annual Report on Form 10-K, including items discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 6, contains statements that relate to future plans, events, financial
results or performance and which are defined as forward-looking statements as
defined under the Private Securities Litigation Reform Act of 1995.

These statements are based on the beliefs of the Company's management, as well
as assumptions made by management and currently available information, that if
they never materialize or prove incorrect, could cause our results to differ
materially from those expressed or implied by such forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "should," "expects," intends," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential" or "continue," or the negative
of these terms or other comparable terminology. All statements other than a
recitation of historical fact are statements that could be deemed
forward-looking statements, including any projections of earnings, revenue,
synergies, accretion, margins, costs or other financial items; any statements of
the plans, strategies and objectives of management for future operations,
including the execution of integration and restructuring plans; any statement
concerning proposed new products, services, developments or industry rankings;
any statements regarding future economic conditions or performance; any
statements of belief; and any statements of assumptions underlying any of the
foregoing.

These forward-looking statements are only predictions, and may be inaccurate.
Actual events or results may differ materially. Although management believes
that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements, and actual results, events or performance may differ
materially. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this report. Spear & Jackson,
Inc. undertakes no obligation to publicly release the results of any revisions
to these forward-looking statements that may arise from changing circumstances
or unanticipated events.


                                       2
<PAGE>

         PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

General

         We are in the business of manufacturing and distributing a wide range
         of tools and magnetic and metrology equipment under various brand names
         including:

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

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

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

1)       Neill Tools, which consists of S&J Garden Tools and Neill Tools,
         manufactures, among other products, hand hacksaws, hacksaw blades,
         hacksaw frames, builder's tools, riveter guns, wood saws and lawn,
         garden and agricultural tools, all non-powered. In addition, Neill
         Tools has supplemented its UK manufactured products with factored
         products from Far Eastern suppliers.

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 sources from the Far
         East both to end-customers as well as 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

<PAGE>

3)       The Company's metrology division comprises:

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

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

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

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

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 and New Zealand.

These chiefly comprise:

The non-powered hand tool industry in which the Company has hand tool,
engineer's 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, watches, electrical windows and
magnetic filters.

The metrology industry which can be split into two main market segments: (i) low
tolerance tools such as tape measures, rulers and carpenters protractors and
(ii) surface roughness measuring equipment and laser measuring instruments, etc.
used in the 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.

                                       4

<PAGE>

Corporate Organization

We were incorporated in December, 1998 under the laws of the state of Nevada. We
conduct our business operations through our wholly owned subsidiaries, Spear &
Jackson plc and Bowers Group plc, Mega Tools Ltd. and Mega Tools USA, Inc.

We acquired each of Mega Tools Ltd. and Mega Tools USA, Inc. on September 30,
1999.  Prior to September 30, 1999,  Mega Tools USA, Inc. was operated as a
subsidiary of Mega Tools Ltd. We acquired Mega Tools Ltd. from Ms. Maria Morgan,
Envision  Worldwide  Products Ltd., Mr. Robert Jeffery,  Mr. Lex Hoos and Mr.
Eric Paakspuu in exchange for the issue of 6,200,000  restricted  shares of our
common stock. We acquired Mega Tools USA, Inc. from Mega Tools Ltd. in exchange
for the payment of $340,000,  which was  satisfied by the issue of a demand
promissory  note by us to Mega Tools Ltd. Our  acquisition  of Mega Tools USA,
Inc. was completed  immediately  prior to our  acquisition of Mega Tools Ltd. We
had no business  assets  prior to the  acquisition  of Mega Tools  Ltd. and Mega
Tools USA.  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.

In September 2002, we acquired all the issued and outstanding shares of Spear &
Jackson plc and Bowers Group, plc (together S&J") owned by USI Mayfair Limited,
a wholly owned subsidiary of U.S. Industries, Inc. (now Jacuzzi Brands, Inc.),
for a purchase price comprising 3,543,281 shares of common stock and 6%
promissory notes in the principal amount of (pound)150,000. As further explained
in note 3 of the financial statements, this transaction was treated as a reverse
acquisition.

Reflecting the relative size of S&J within the continued business, Megapro
Tools, Inc. changed its name to Spear & Jackson, Inc. in November 2002.

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

Strategy

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

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

(b)      Continuous product improvement and innovation.

                                       5

<PAGE>

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

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

(e)      Significantly increasing our North American market penetration via
         large "Big Box" outlets. This is recognized by the Company as a major
         growth area and we have accordingly appointed a new vice president of
         sales to actively pursue all major sales opportunities for existing and
         planned new products in both the United Staes and Canada.

Products and Services

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 red
magnet to a computer controlled materials handling system. The Company's product
offering is supported by a pipeline of new products and extensions.

In the period from October 1, 2002 to date, announcements concerning new product
ranges and other significant business issues have included:

The launch of the "world's strongest" shovel range, a new range of shovels for
use in construction, civil engineering and on landscape sites. This product line
was launched in December 2002 and is the Company's most recent collaboration
with JCB branded products.

In November 2002, the Company's Eclipse Magnetics operations announced that it
would be supplying the Jaguar car company with magnetic oil filters. The low and
high pressure oil filters are rated to operate at 20 and 200 bar, respectively,
making a significant impact in both power train plant and pressing industries.

In November 2002, the Company announced a new magnetic pickup tool, "Needle
Stick". The hand-held magnetic pickup tool allows handlers of needles to safely
extract and dispose of needles in a safe manner without the need for cumbersome
forceps. In addition, multiple needles can be extracted in one operation.

In January 2003 the Company's Neill Tools operations launched "The Demolition
Saw", a multipurpose hard wearing saw with the ability to cut through metal,
plastic, wood and concrete blocks thanks to the application of a new edge
treatment to the saw's high tensile toughened blade.

Also in January the Company launched a new Eclipse high access saw and a new
design of a junior hacksaw which allows access into restricted spaces.

A range of power tools and air power tools was launched in February 2003 in the
UK and Europe. The range of 71 products included such items as compressors, air
drills, impact wrenches, spray guns, angle grinders, impact drills, jig saws,
sanders, circular saws, engravers to Mitre saws and many more. The significance
of these power tools is that they are all finished with a new "soft touch" and
are sold as kits in blow mold cases.

                                       6

<PAGE>

All of the new products were presented at the Cologne Show in March 2003, the
premier hardware and tool show in the world.

The Tyzack brand, synonymous with plastering, and the initiator of the first
steel plasterers' trowel launched a comprehensive range of drywall lining tools.
The range comprises jointing, taping knives and saws with numerous accessories
including support props, corners and lifters.

Eclipse Magnetics signed an exclusive supply agreement with a leading
manufacturer of metal detection equipment. This will complement the division's
existing expertise in the separation field land will provide total foreign body
detection of all metals to the food and pharmaceutical industries.

In March 2003, Eclipse also launched a European multi-lingual merchandiser range
of 52 different magnets at the Cologne International Hardware Fair. The
innovative packaging and display units enable the magnets to be positioned at
key point of sale locations, enabling our magnets to take a significant
promotional prominence when displayed with other engineering consumables.

In addition, in April 2003 Eclipse Magnetics began a worldwide launch of a new
safety shim (TM). This solution for creating a safety pre-test system to
guarantee a safe lift for lifting loads has been granted full patent status.

Also in April 2003, Bowers launched two new products in the USA, the Checkmatic
universal bench gauge and the Smart Plug 2-point measuring system. These tools
are capable of performing a multitude of internal and external measuring tasks.

In July 2003 we formally ceased trading with Toolbank, a major UK hand tool
wholesaler, because of a conflict in product distribution policy and
dissatisfaction with the level of support being given to the delivery of new
Spear & Jackson product to the market. Agreements were secured to supply various
UK builders' merchants direct. This has enabled us to have a more direct route
to market and has allowed us to give greater support to our branded product.

Examples of new business gained following the cessation of trade with Toolbank
include:

*        An agreement for the supply of hand and contractors tools was secured
         with Buildbase, a major UK builders' merchant.

*        An agreement for the supply of hand and contractors tools was secured
         with N.M.B.S, a buying group of large independent builders' merchants
         and hardware stores.

*        A contract for the supply of garden products was agreed with Tesco, a
         major supermarket retailer in the UK. The value of orders is expected
         to exceed $650k.

                                       7

<PAGE>

New listings for Eclipse branded hand tools, including sockets, spanners,
screwdrivers and hacksaws were gained with Bauhaus, a major retailer in Turkey.

We were awarded a contract to supply Neverbend forks, spades and agricultural
contractors' tools by the Government of Fiji. The tender was won on the basis of
both price and quality as we were able to demonstrate that our products are able
to withstand the rigors of sustained use in arduous conditions.

Gamma, a major retailer in the Netherlands, increased its range of Spear &
Jackson garden products by including Razorsharp secateurs in its 144 stores.

Eclipse Magnetics separator business continued to flourish and a contract into
Parmargon Products, a supplier of rubber sealing rings to the automotive
industry, was gained during the year. The component parts have metal inserts
which require sorting and the separator equipment is ideal for their ongoing
control procedures. Eclipse Magnetics will continue to develop its separation
business to devise further products for use in food processing environments
where the removal of metal contamination is vital.

S&J France saw the launch of its new `Cottage' range of garden tools exceed
expectations this year. The product range has been sold through over 300 stores
across France and has achieved sales of $475,000 since the introduction of these
products. In addition, S&J France increased its garden tools listings with OBI,
a French DIY store chain, by supplying them with a new range of bypass loppers.

In September 2003 Eclipse Magnetics launched what claims to be the first
`secondary' design type of high intensity magnetic separator for use in
pneumatic conveying lines. The "Pneumag" can be utilized in both blown and
vacuum lines and is capable of removing ferrous and stainless steel
contamination introduced by incoming ingredients and line wear.

On 9 September 2003 it was announced that Neill Tools had signed a trading
agreement with the THS Group for the supply of a comprehensive range of hand
tools, engineering tools and electric power tools. THS is Europe's leading
engineers' supply chain specialist and for almost 30 years has been the most
innovative tool and engineering products distributor of its kind. THS provides
its 110 member companies with competitive access to thousands of related
consumables by a unique network of leading brand suppliers.

Customers

The Company has a broad customer base with no single customer accounting for
greater than 10% of total sales.

                                       8

<PAGE>

Marketing and Distribution

Our products are distributed in the United Kingdom, European Union, Australasia
and North America.

They are sold through various distribution channels supported by in-house sales
professionals. Products are handled by mass merchants, independent sales agents,
engineering distributors, as well as sales direct to retailer and end users.
Specific marketing policies and distribution routes are adopted by the
divisions, reflecting either the value of the product being marketed or its
complexity. For the high volume, low unit value products such as garden tools,
hand tools and certain magnetic and metrology tools, the normal course of
distribution is via the merchandiser or industrial tool distributors. For low
volume, high unit value products, such as magnetic systems and precision
laboratory based measuring machines, the normal route would be direct to the end
user.

The garden and hand tools are primarily sold through three main channels,
retail, wholesale and industrial. The metrology and magnetics divisions sell
through industrial product distributors and directly to end users. The hobby
products are sold by hobby retailers and in their speciality catalogs.

Brands

A significant part of the Company's operation is branding and brands strategy.

Spear & Jackson has held leading brand names in its core business since 1760.
Neill Tools is one of the largest British based manufacturers of hand tools with
leading brand names such as Neill Tools, Eclipse, Elliott Lucas and Spear &
Jackson. In the metrology division, the Moore & Wright brand has been recognized
for over 100 years for its traditional craftsmanship while the Bowers name has
been at the forefront of international precision measuring equipment for over 50
years. Eclipse Magnetics is a recognized brand name in the UK manufacturing
industry because of its long history of supplying quality magnetic tools. Robert
Sorby is a recognized specialist in marketing its wood turning tools.

Competition

We compete for sales of our products with many established companies including
Henry Taylor and Pfeil in carving and turning tools, Fiskars and Wilkinson Sword
in cutting tools and T&T in air tools. In addition, AMES/True Temper possesses a
significant share of the North American lawn and garden tools market.

Employees

At December 31, 2003, the Company employed 757 full-time and 4 part-time
employees. 465 were in manufacturing, 71 in engineering, 129 in sales and
marketing, 29 in distribution and 64 in general administration. 333 of the

                                       9

<PAGE>

Company's employees are subject to union agreements. Our Company's union
contracts with Neill Tools at the Company's Atlas and Wednesbury UK sites fall
due for negotiation in January 2004 and the agreements with the Bowers workforce
at Bradford in the UK become due in July 2004. The Company believes its
relationships with employees are good.

 Intellectual Property

Our ability to compete effectively depends in part on the protection of our
license patents and trademarks, which are used in the design, marketing and
sales of our many products. We can provide no assurance to investors that the
patents and trademark licensed by us will not be challenged, invalidated, or
circumvented by other manufacturers.

The Company currently maintains the rights to 2 patents issued by the United
States Patent and Trademark Office, 3 patents issued by Canada, 4 patents issued
by Great Britain, 2 patents issued by Taiwan, 4 patents issued by China, 2
patents issued by Hong Kong, and 1 patent issued by APDC. The patents relate to
certain tools manufactured by the Company and certain mechanisms utilized in the
tools manufactured by the Company.

The Company currently maintains the rights to 8 registered designs issued by the
United States, 1 registered design issued by Canada, 34 registered designs
issued by Great Britain, 13 registered designs issued by Taiwan, 4 registered
designs issued by China, 2 registered designs issued by France, 1 registered
design issued by New Zealand, 1 registered design issued by Australia, and 1
registered design issued by India. The registered designs relate to certain
tools manufacture d by the Company.

ITEM 2.           DESCRIPTION OF PROPERTY.

Our principal executive office is located at 2200 Corporate Boulevard, Suite
314, Boca Raton, Florida 33431. The premises consist of approximately 3,000
square feet. We lease the space at a monthly rate of $3,728. The lease expires
in September 2004.

We operate from eight sites in the United Kingdom. Six of such locations are
plant facilities and two are office distribution facilities. Four of the
locations are owned and the remaining four are leased under long-term leases. We
own one distribution and manufacturing facility in France. The square footage
ranges from 3,000 to 240,000 square feet. In addition, we have two leased sales
units located in Australia and New Zealand.

We do not lease or own any other real property.

ITEM 3.           LEGAL PROCEEDINGS.

The Company is currently involved in a legal action with the former managing
director of Spear & Jackson plc concerning the amount of severance compensation

                                       10

<PAGE>

payable following his dismissal as part of a management reorganization program
in September 2002. The outcome of this action will not be known until later in
2004 but the company is confident that the amounts provided in respect of the
dispute will be adequate to cover any amounts payable should the Company's
defense be unsuccessful.

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 operation of the Company.

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to our security holders for a vote during the final
quarter of our fiscal year ending September 30, 2003.

                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

Our shares are currently trading on the OTC Bulletin Board under the stock
symbol SJCK. Our shares began trading on the OTC Bulletin Board on November 17,
2001. The high and the low trades for our shares for each quarter of actual
trading from September 30, 2002 to December 31, 2003 were:

Quarter                                          High              Low

Quarter ended September 30, 2002                 $2.40            $ .91

Quarter ended December 31, 2002                  $4.15            $2.60

Quarter ended March 31, 2003                     $5.89            $3.37

Quarter ended June 30, 2003                      $15.99           $5.40

4th Quarter ended September 30, 2003             $15.80           $4.70

Quarter ended December 31, 2003                  $6.40            $3.25

The trades reflect inter-dealer prices, without retail mark-up, markdown or
commission and may not represent actual transactions.

                                       11

<PAGE>

Holders of Common Stock

As of October 1, 2003, there were 28 record owners of our common stock.

Dividends

We have not paid any dividends on our common stock and do not intend to do so
for the foreseeable future. Any earnings will be retained by the Company and
used to expand the Company's existing operations.

Equity Plan Compensation Information
<TABLE>
<CAPTION>

                                                                                                 Number of Securities
                                          Number  of  Securities  to     Weighted average        remaining available for
                                          be  issued  upon  exercise     exercise price of       future issuance  under
                                          of  outstanding   options,     outstanding options,    equity compensation
                                          warrants and rights.           warrants, and rights.   plans.

<S>                                       <C>                            <C>                     <C>
Equity  compensation  plans  approved     0                              0                       0
by security holders

Equity    compensation    plans   not     0                              0                       0
approved by security holders


</TABLE>

                                       12

<PAGE>

Item 6.      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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, judgements 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. We believe that
the following discussion addresses our most critical accounting policies, which
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
judgements, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain. Note 2 to the accompanying consolidated
financial statements includes a summary of the significant accounting policies
used in the preparation of the consolidated financial statements.

INVENTORY VALUATION

Inventories are stated at the lower of cost and net realizable value. Cost
includes all costs incurred in bringing each product to its present location and
condition, as follows:-

Raw materials, consumables and goods for resale - principally valued at cost
determined on a first in, first out basis although, in certain subsidiaries,
inventories are valued using a cost determined on a weighted average basis.

Work in progress and finished goods - cost of direct materials and labour plus
attributable overheads based on a normal level of activity. As above, in certain
subsidiaries, inventories of factored products are valued at average cost.

Provisions in respect of net realizable value and obsolescence are applied to
the gross value of the inventory. Net realizable value is based on estimated
selling price less any further costs expected to be incurred to completion and
disposal. Provision is made for slow moving or defective items by comparing
inventories on hand to future projected demand. Provision is made where
inventories held are in excess of 1 year's budgeted future sales as follows:

     Inventory in excess of 1 to 2 years' sales:      provision of 25% of cost
     Inventory in excess of 2 to 3 years' sales:      provision of 50% of cost
     Inventory in excess of 3 to 5 years' sales:      provision of 75% of cost
     Inventory in excess of 5 years' sales:           provision of 95% of cost

                                       13
<PAGE>

Obsolete inventories are subject to a 100% provision. This provisioning
methodology has been consistently applied by management over a number of years.
Management believes that this approach is both prudent and provides an accurate
and efficient manner for making suitable provision against slow moving and
obsolete inventory lines.

       Comparable stock values are as follows:-
                                                     09.30.03         09.30.02
                                                      $'000            $'000
       Gross Stock
       -     raw materials and consumables            5,464             4,978
       -     work in progress                         4,894             4,140
       -     finished goods                          18,747            16,380

       Less
       -     slow moving, obsolete and net
             realizable value provisions             (5,755)           (5,839)
                                                     ------            ------
       Net Stock Valuation                           23,350            19,659
                                                     ======            ======

The overall increase in the net value of inventory of $3.6 is attributable to:

(i)    The impact of a weakening sterling/US dollar cross rate. The period end
       cross rate at September 30, 2003 was 1.66 and the comparable rate at
       September 30, 2002 was 1.55. Restating the 2002 inventory at 2003
       exchange rates increases the net value of 2002 inventories by $1.36
       million.

(ii)   Inventory builds in the Company's Australian subsidiary and its UK garden
       products division in anticipation of Q1 2004 sales, together with the
       effect of inventories of power tool and other factored goods which were
       new product launches in 2003 and which were not, therefore, in stock at
       September 30, 2002.

Activity on the inventory reserve in the above years can be summarized as:

                                             2003          2002          Notes
                                            $'000         $'000

Balance brought forward                     5,839          5,980
Provisions released following
  disposal of inventory                      (639)          (982)      (a)
Additional provisions made                    125            451       (b)
Inventory reserves relating to group
  companies purchased/(sold) in the year       -              37
Exchange movements                            430            353
                                            ------         ------
Balance carried forward                     5,755          5,839
                                            ======         ======

                                       14
<PAGE>

(a)    A UK stock reduction program was initiated in the final quarter of 2001
       and completed during 2002. As part of this exercise, a significant amount
       of old inventory was sold at discounted prices to release warehouse space
       and to liquidate heavily provisioned slow moving inventory lines. The
       2003 provision release includes a $101 utilisation relating to the
       disposal of excess inventories in the company's Australian subsidiary but
       is otherwise in line with management's expectation of annual provision
       usage.

(b)    The 2002 total for additional annual provisions was impacted by a one-off
       provisioning exercise required in the Company's French subsidiary which
       resulted in that company's inventory reserve increasing by circa. $150.
       No similar provision was needed at September 30, 2003.

REVENUE RECOGNITION

Revenue is recognised upon shipment of products or delivery of products to the
customer depending on the terms of the sale. Provisions are made for warranty
and return costs at the time of sale. Such provisions have not been material.

Most of the Company's major customers have provision for sales rebates in their
trading terms. The levels of rebates are individually negotiated with each
customer and are unique to that customer. Typically, a series of escalating
targets are set for purchases from Spear & Jackson, Inc. and, on reaching each
target, a rebate, usually paid in the form of credit note but occasionally in
cash, is triggered e.g.

                         Sales            Rebate           Rebate
                         Revenues
                         $'000            %                $'000

Target        1           500              5.0              25
              2           750              7.5              56
              3          1000             10.0             100
              4          1250             12.0             150

The revenue targets are set on a twelve-month basis, however the period ends
used for these sales targets are not necessarily coterminous with the accounting
period end of Spear & Jackson, Inc. At any point in time, the rebate liability
is calculated by estimating the annual sales value for each customer (in order
to ascertain the rebate % the customer is likely to achieve), applying the
relevant % to the actual sales achieved to date, and then deducting any interim
rebates already paid.

The rebates charge is netted against gross sales in the profit and loss account.
Rebates are paid to customers per their individual agreements. Typically
payments are made semi-annually or annually, however there are agreements in
place in which rebates are paid monthly and quarterly.

                                       15
<PAGE>

Generally there is no provision for customers to return products they cannot
sell. However, a small number of customers have negotiated a return clause in
their trading agreements. There is a time limit for these returns, which vary
from customer to customer, none of which exceed 12 months from the original
invoice date. The amount of mutual returns made in the year ended September 30,
2003 was $66,000.

FOREIGN CURRENCY TRANSLATION

The functional currency of each of the Company's foreign operations is the local
currency. The consolidated financial statements of Spear & Jackson, Inc. are
denominated in US dollars.

Changes in exchange rates between UK sterling, the Euro, the New Zealand dollar,
the Australian dollar and the US dollar will affect the translation of the UK,
French, 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.

The US$ Balance sheet and income statement financial data could therefore be
subject to material fluctuation year on year as a result of significant
movements in the cross rate between the US$ and the various source functional
rates used in the consolidation.

Translation adjustments arising from the use of differing exchange rates from
period to period are included in the Accumulated Other Comprehensive Income
(Loss) account in Stockholders' Equity. Management has decided not to hedge
against the impact of exposures giving rise to these translation adjustments as
such hedges may impact upon the Company's cash flow compared to the translation
adjustments which do not affect cash flow in the medium term.

PENSION AND POST-RETIREMENT BENEFIT OBLIGATIONS

The Company operates a contributory defined benefit plan covering certain of its
employees in the United Kingdom based subsidiaries of Spear & Jackson plc.
Several statistical and other factors which attempt to anticipate future events
are used in calculating the expense and liability related to the plans. These
factors include assumptions about the discount rate, expected return on plan
assets and rate of future compensation increases as determined by us, within
certain guidelines and in conjunction with our actuarial consultants and
auditors. In addition, 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.

This discussion addresses the sensitivities in assumptions that could impact the
plan disclosures in the company's consolidated balance sheet and income
statement and also their effect on ongoing employer contribution payments and
the company's liquidity.

                                       16
<PAGE>

The principal assumptions used to determine Spear & Jackson plc's pension
benefit costs are the discount rate, the rate of compensation increase and the
expected return on plan assets.

The discount rate used to determine the present value of future pension payments
is based on the yields on high-quality, fixed-income investments (typically
A-rated corporate bonds and government gilts). The present values of the
Company's future pension and other post-retirement obligations were determined
using discount rates of 5.5% at September 30, 2003, and 5.75% at September 30,
2002.

The expected rate of return on assets is set in the light of long term
expectations for returns on the assets held by the plan. The start point for the
derivation of the rate is the return on gilts of appropriate term compared to
the plan liabilities. To reflect the fact that a significant part of the plan's
assets are invested in asset classes, such as equities and corporate bonds, that
are expected to produce higher returns than gilts, the overall rate of return on
assets has then been adjusted to take account of these higher yields.

The rate of compensation increase and the expected return on plan assets were
assumed to be 2.5% and 7.5% in the year ended September 30, 2003 and 2.25% and
7.5%, respectively, in the year ended September 30, 2002.

The following table illustrates the sensitivity to a change in certain of the
key assumptions used in calculating the assets and liabilities of the pension
plan:
<TABLE>
<CAPTION>

                                   Impact on 2004          Impact on            Impact on
                                   Pre-Tax Pension         September 30,        September 30,
Change in Assumption               Expense                 2003                 2003 Equity
                                                           PBO                  (Net of tax)
--------------------------------------------------------------------------------------------
25 basis point
<S>                                 <C>                     <C>                   <C>
decrease in discount rate          +$0.501 million         +$6.284 million       -$4.232 million

25 basis point
increase in discount rate          -$0.446 million         -$5.616 million       +$3.773 million

25 basis point
decrease in expected
return on assets                   +$0.335 million             -                    -

25 basis point
increase in expected
return on assets                   -$0.335 million             -                    -
</TABLE>

                                       17
<PAGE>

Using the assumptions referred to above, the funded status of the plan under FAS
87 at September 30, 2003 and September 30, 2002 was as follows:

                                                           9/30/03      9/30/02
                                                           $'000        $'000

       Projected benefit obligation                        (154,105)   (132,953)
       Fair value of plan assets                            124,355     109,141
                                                            -------     --------
       Projected benefit obligation in
         excess of plan assets                              (29,750)    (23,812)
       Unrecognised actuarial loss                           47,637      38,146
                                                             ------     --------
       Net amount recognized                                 17,887      14,334
                                                            ========    ========

In both years the projected benefit obligation is in excess of plan assets. The
impact of this underfunding has not been recognised in its entirety but has,
instead, been deferred or spread over the assumed future working lifetime of 13
years for active plan members based on actuarial expectation of a substantial
future increase in the value of plan assets.

The majority of the unrecognised actuarial loss has arisen as a result of
substantial asset losses, and significant liability increases due to a
continuing reduction in the discount rate. The impact of the reduction in the
discount rate has been particularly severe for the Plan given that the
membership profile of the scheme is relatively mature (with over 50% of the Plan
members being pensioners) and that a significant proportion of pensions increase
at a fixed 5% when in payment.

Due to the lower discount rate and a decline in the fair market value of plan
assets during 2001 and 2002, the accumulated benefit obligation at September 30,
2001 and 2002 exceeded the fair value of plan assets by $4.7 million and $20.4
million, respectively. At September 30, 2003, the ABO again exceeded the market
value of plan assets. The excess at the 2003 period end was $25.2 million and a
net of tax comprehensive loss of $4.2 million has been charged against
shareholders' equity in 2003. Cumulative amounts recognised in the consolidated
balance sheet at September 30, 2003, together with comparative disclosures for
2001 and 2002 are therefore as follows:

<TABLE>
<CAPTION>

                                                           2003          2002          2001
                                                           $'000         $'000         $'000
<S>                                                    <C>               <C>          <C>
       Accrued pension (liability)/asset
         (disclosed in other liabilities)                  (25,262)      (20,442)      (4,668)
       Other comprehensive income
         (disclosed in shareholders' equity)                43,149        34,776       15,103
                                                            ------       -------       ------
       Net amount recognised                                17,887        14,334       10,435
                                                            ------       -------       ------
</TABLE>

Assuming only modest recoveries in the fair market value of plan assets in 2004
and the application of a reduced discount rate it is anticipated that the
accumulated benefit obligation at September 30, 2004 will again exceed the fair
value of plan assets.

                                       18
<PAGE>

The overall funding objective of the scheme is to hold assets which are
sufficient to cover the plan's past service ongoing liabilities. These
liabilities form the "funding target" and include an allowance for expected
future increases to the pensionable earnings of active members so that the cost
of the plan's benefits is considered over the longer term.

The last full actuarial valuation of the scheme was carried out at April 5,
2002. This showed the following:

                                                                         $M
       Value of past service ongoing liabilities                      (128.4)
       Market value of assets                                          120.3
                                                                      ------
       Past service deficit                                             (8.1)
                                                                      ========

       Funding ratio                                                     94%


Under the United Kingdom Pensions Act 1995, schemes must satisfy a minimum
funding test known as the Minimum Funding Requirement (MFR). This is based on
the benefits which would be paid if the active members had left the plan on the
valuation date. The ratio of the market value of the plan's assets to its MFR
liabilities is known as the MFR funding ratio. At the valuation date the MFR
funding ratio was also 94%.

As at September 30, 2002 because of falls in stock markets in the period from
April 5, 2002 to that date and adverse movements in gilt yields, the
base-funding ratio had fallen to approximately 78% and the MFR funding ratio to
circa. 91%. At November 30, 2003 (the latest date at which information is
available), following modest equity rallies, the base funding ratio has improved
to 89% and the MFR funding rate to 96%.

Company pension contributions are determined by the Trustees of the plan with
the agreement of the principal employer and after consultation with the actuary
with the intention of eliminating the past service deficit in the long term and
ensuring that the MFR funding ratio is restored to 100% within 10 years.

With effect from November 1, 2003 the actuary recommended that the company
should change its rate of contributions to 21.2%. This rate of contributions is
unchanged from that recommended and implemented for the year ended October 31,
2003.

                                       19
<PAGE>

Based on the funding position of the plan at the valuation date and applying his
long-term assumptions, the actuary confirmed that contributing at such a rate
would be sufficient to bring the plan's assets into line with its funding
target. Further, in current investment market conditions, contributions at the
rate of 21.2% rising to 24.2% with effect from November 1, 2007 would be
sufficient to meet the MFR requirements.

Contributions at a rate of 21.2% equate to a cash cost to the Company of
approximately $2.7m. The Company believes that these payments will be adequately
funded from operating cash generated in the year.

In the period from August 1, 2001 to October 30, 2002 the company contribution
rate was 24.8%, from June 1, 2000 to July 31, 2001 the rate was 28.5% and prior
to that the level of employer contributions was set at 5%.

Employer contributions paid in the year to September 30, 2003 totalled $2.8
million, contributions in the year to September 30, 2002 amounted to $3.2 and
$11.2 million in the year ended September 30, 2001. The latter figure included a
one-off special contribution payment of $7.4 million which was made to reduce
the funding deficit.

The presentation of the Company's UK defined benefit pension plan was restated
for fiscal years 2002 and 2001. The adjustments required arose from errors and
omissions in the calculations that were prepared by the Company's actuaries when
producing the pension plan disclosures that were originally included in Form
10-KSB.

RESULTS OF OPERATIONS

2003 compared with 2002

The results discussed below compare the year ended September 30, 2003 with the
year ended September 30, 2002. As explained in note 3 to the financial
statements, the acquisition of Spear & Jackson plc and Bowers Group plc
(together "S&J") by Megapro Tools, Inc. (now Spear & Jackson, Inc.) on September
6, 2002 has been accounted for as a reverse acquisition. In these financial
statements, S&J is the operating entity for financial reporting purposes and the
financial statements for all periods represent S&J's financial position and
results of operations.

The operating results and net assets of Megapro Tools, Inc. and its subsidiary
companies are included in the consolidated statements from September 6, 2002,
the date of its deemed acquisition until September 30, 2003, the effective date
of the disposal of the Megapro screwdriver division.

The disposal of the Megapro companies followed a strategic review of the
screwdriver division by the directors of Spear & Jackson, Inc. from which it was
determined that the screwdriver division was not a core activity. As a result of
the sale the Megapro business has been presented in the 2003 and 2002 financial
statements as a discontinued operation.

All figures are expressed in $'000 unless otherwise stated.

OVERVIEW

Net revenues from continuing activities increased by $3,959 (4.5%) from $87,886
in the year ended September 30, 2002 to $91,845 in the twelve months to
September 30, 2003.

                                       20
<PAGE>

The increase in revenues of $3.9 million in the year to September 30, 2003
compared to the comparable period in 2003 is attributable to net sales volume
increases and favorable exchange movements. The sales volume increases have
been diluted by reduced turnover in the UK following management's decision to
cease trading with a major hand tool wholesaler, Toolbank. This turnover
reduction has had no adverse effect on margin.

As part of a key marketing strategy, sales mix has shifted significantly towards
higher margin products. In addition, the margin benefit accruing from selling
direct to major customers rather than through an intermediary wholesaler
(Toolbank) has also favourably impacted on the trading results for the quarter
ending September 30, 2003. Such margin improvements, allied to continuing strict
cost control and manufacturing efficiencies have resulted in substantial
improvements in the gross profit percentage and operating income. These factors
are dealt with in more detail in the sections below.

DIVISIONAL REVIEW

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

Detailed comments on the principal business divisions are as follows:

Neill Tools

Revenues for the twelve months ended September 30, 2003 were $1.7 million less
than those in the year ended September 30, 2002, with volume decreases
(including sales reductions arising from a cessation of trade with a major
wholesaler - see below), offset by favorable exchange rate variances.

The division has experienced a very demanding year with considerable change and
restructuring at all levels. During July 2003 Neill Tools confronted a
long-standing issue regarding its relationship with its major wholesale
customer, Toolbank. Toolbank, as Neill Tools' largest single customer, had
progressively positioned itself to become not only a customer but also a
competitor. A strategic decision was therefore taken to cease trading with
Toolbank and deal with its customers on a direct basis.

Neill Tools' management recognized that the division's sales would initially
suffer while new relationships were being built but that it would be in a
stronger position moving forward since customer relationships and contacts would
be improved and gross margins would be increased by removing the wholesaler.

                                       21
<PAGE>

The company was restructured to cope with the demands of its new trading route
and during the 3rd and 4th quarters of 2003 the primary focus of the business
has been to establish direct trading links with its customers. Already
agreements to supply various UK builders' merchants have been obtained and
Buildbase, Travis Perkins and N.M.B.S. have been supplied with hand and
contractors tools. The company's decision to trade direct has been fully
supported by its customer base and new business continues to grow. Looking
forward, Neill Tools is now better structured than it has been for many years,
having removed the barriers that were effectively stopping the company from
engaging its customers.

The division continues to focus on new product development and this strategy has
seen the launch of new ranges of dry lining tools, hand power tools, air power
tools, leather workware, spanners, sockets, screwdrivers and pliers. To further
enhance end-user presence a team of dedicated merchandisers has been recruited
to go direct to stores to ensure that our product is both available and
prominently displayed. In addition Neill Tools is working actively in the US
market to secure business with national `Big-Box' retailers.

Despite difficult trading conditions, profitability has increased thanks to
preserved margins and the beneficial effects of the restructuring that took
place in the final quarter of September 2002. Significant cost savings and
earnings benefits have flowed from reorganization and efficiency initiatives in
administration and production.

The company has not neglected its core competencies and a capital investment
program of $450 was instigated in the year in new robotic technology to ensure
our world class status in our core processes is maintained. With several
significant new product launches planned for 2004 and continued investment in
core processes the future looks optimistic for Neill Tools.

Eclipse Magnetics

Eclipse Magnetics sales for the year to September 2003 were little changed from
those in the previous year with advantageous exchange rate variances
compensating any reduction in sales volumes.

The Eclipse Magnetics markets reflected the still some-what depressed global
industrial economic conditions. During this challenging year the division has
refocused its sales activities towards higher technology, value added products,
at the same time underpinning these new sales areas with its core product
offerings within its traditional low technology markets.

New product development has continued with the introduction of patented lifting
magnets, specialized separation equipment and specialized magnetic materials for
industrial applications.

Despite sluggish revenues, gross margins have improved due to greater emphasis
on higher-margin products, changes in manufacturing methods and efficiency
improvements.

                                       22
<PAGE>

The restructuring exercise carried out in 2002 has reaped significant benefits
with regard to margin improvement and a 20% decrease in fixed costs.

Increasing market share in key global economies, continued brand awareness, and
the provision of quality product with excellent after sales service continue to
be the main management strategies.

Robert Sorby

Robert Sorby revenues in the year ended September 30, 2003 showed a marginal
decrease compared to revenues in the twelve months to September 30, 2002.

The UK market performed strongly with growth in business through an improved
distribution network and through our own retail outlet where mail order business
improved markedly. By contrast, the US market was generally weak reflecting a
softness in the economic climate.

Considerable focus is being placed on building our overseas presence in key
markets such as the US, Canada and Australia, especially through consumer shows
and demonstration tours, and we hope to reap the benefits of this extensive
promotional activity in the forthcoming financial year.

One of the most encouraging developments during the year has been the
introduction of a new range of woodworking lathes and there has been
considerable success at marketing products through international consumer
exhibitions, in-store demonstrations and increased consumer advertising and
editorials.

The core woodturning tool business remains strong despite an increasing number
of competitors. This was backed by strong consumer advertising in which we
switched our strategy from brand advertising to more focused product
advertising. The `Sandmaster', which was introduced during 2002, is now listed
by almost every dealer net work worldwide.

Bowers

Turnover in the twelve months to September 2003 showed little movement from the
prior year with any adverse sales volume reductions mitigated by favourable
exchange rate variances.

Despite difficult trading conditions, especially in Europe and Asia, the upturn
in both the US and the UK continued to gain momentum. Initiatives in China have
grown at a rapid pace, in particular as western manufacturers are relocating in
large numbers and require high precision measuring equipment to maintain quality
standards.

A series of new product and marketing initiatives introduced in 2003 including
the Smart Plug 2-point gauging system and the new range of Moore & Wright
digital hand tools, have further extended our product range.

                                       23
<PAGE>

A focus on the large industrial catalogs has brought some excellent results
during the year, particularly with the Hoffmann Group, one of the largest
catalogs in Europe. Additional listings were obtained in the new issue of
their catalog which was launched in July 2003.

The positive effect of restructuring carried out in the last quarter of 2002
such as closing the loss making calibration business and consolidating two sites
in the south of England, has been reflected in the increased profitability of
the division.

The outlook for the forthcoming year is very positive with all major markets
showing signs of improved levels of investment. Bowers is a key supplier to many
of the large military and aerospace manufacturers and order books for these
customers extend well into 2007. Key events in 2004 are the UK MACH Machine Tool
exhibition in April and the USA IMTS Machine Tool exhibition in September. Both
of these shows will see the launch of several significant new product ranges.

S&J France

Sales in the year ended September 30, 2003 increased by $1.7 million in the
year, attributable to increased sales volume and advantageous exchange rate
movements.

S&J France launched, with success, new garden ranges including cottage garden
tools, aimed at the female market, or those working in restricted garden areas
like rockeries. These new ranges have enjoyed penetration into new markets
including a listing with Castorama, the largest `Big Box' retailer in France.

Spear & Jackson Australia and Spear & Jackson New Zealand

S&J Australia and S&J New Zealand 2003 revenues were over $3.8 million more than
those in the year ended September 30, 2002 comprising sales volume increases and
favorable exchange rate movements.

The increased sales and profitability of the division has been largely due to
the introduction of new ranges of products that are being sold to national
retail chains under specific branding arrangements. Continued efficiencies in
the areas of administration, warehousing and distribution have also contributed
to the improved profitability.

COST OF GOODS SOLD AND GROSS PROFIT

Costs of goods sold increased to $62,947 in the year ended September 30, 2003
from $61,954 in the twelve months to September 30, 2002. Cost of goods sold as a
percentage of sales decreased to 68.5% during the year ended September 30, 2003
compared to 70.5% in the twelve months ended September 30, 2002.

                                       24
<PAGE>

These movements reflect more favourable sales mixes; the profit advantages in
the UK attaching to the move to direct customer selling rather than using an
intermediary wholesaler; continuing focus on strict product cost control and the
benefits derived in 2003 from both the closure of the loss-making calibration
business division in September 2002 and certain manufacturing reorganisation
programmes initiated in Q4 2002.

Current year gross profit percentages and their 2002 prior year comparatives are
accordingly as follows:

Year ended September 30, 2003: 31.46%, year ended September 30, 2002: 29.51%.

We will continue to monitor and evaluate means of maintaining and improving
current sales mixes and of further reducing costs of goods sold across all our
principal trading operations to avoid any margin erosion.

EXPENSES

Selling, general and administration expenses were $22,534 for the year ended
September 30, 2003 and $27,250 for the year ended September 30,2002.

The net movements of $4,716 comprises:

(a)      Overhead increases in respect of:-

(i)      increased overhead costs relating to adverse exchange movements of $1.8
         million.

(ii)     increased FAS87 pension charge of $0.2 million.

(b)      Overhead cost reductions relating to:

(i)      The provision in Q4 2002 of restructuring costs in respect of the
         reorganisation of senior management across all businesses; the
         reorganisation of the UK purchasing and customer service departments;
         the relocation of manufacturing and office facilities in the UK and
         Australia; the implementation of severance programmes in the UK. In
         total, those restructuring provisions amounted to $4.4 million. There
         is no comparable item in 2003.

(ii)     Significant savings in the year accruing from the staff reduction
         programmes, reorganisation of senior management, departmental
         restructuring (as referred to above), together with the benefits of
         continued rigorous control of costs and non-essential expenditure.

Other income and expenses have marginally increased from a net expense of $96 in
the year ended September 30, 2002 to a net expense of $101 in the year ended
September 30, 2003.

                                       25
<PAGE>

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

Our profit before income taxes derived from continuing operations in the year to
September 30, 2003 amounted to $6,263. This compares to a loss before income tax
for the year ended September 30, 2002 of $1,414. As discussed above, this
increase in profitability is derived from improvements in gross margins, the
ongoing benefits arising from overhead cost savings and the presence, in 2002,
of significant one-off costs relating to reorganisation and other restructuring
programmes initiated in quarter 4 of that year.

INCOME TAX

The provision for income taxes was $1,497 in the year to September 30, 2003
compared to a $948 income tax charge in the year to September 30, 2002.

Income taxes were 23.9% of the profit before tax in 2003 as opposed to 67.04% of
the loss before income taxes in 2002. Differences between the effective rate and
the statutory rate result from tax charges in certain overseas subsidiaries
within the Spear & Jackson group being taxed at rates different from the
effective rate, the utilisation of tax losses which are not recognised within
the deferred tax computation and permanent differences between accounting and
taxable income as a result of non-deductible expenses and non-taxable income.
Because of the availability of tax net operating losses (particularly in the
United Kingdom and Australia) it is not anticipated that any of the 2003 tax
charge will result in the payment of any income taxes.

NET INCOME (LOSS) FROM CONTINUING OPERATIONS

Our net profit after income taxes from continuing operations was $4,766 for the
year to September 30, 2003. This compares to a loss after income taxes of $2,362
for the year ended September 30, 2002.

DISCONTINUED OPERATIONS

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

Total losses attributable to discontinued operations were $150 in the year ended
September 30, 2003 and $1,150 in the year to September 30, 2002.

                                       26
<PAGE>

The 2002 losses include a $1,138 goodwill impairment write-down following an
initial review of the future earnings and cashflows of the screwdriver business
together with a trading loss of $12 arising in the period from acquisition to
September 30, 2002.

The 2003 loss of $150 comprises a net tax loss of $53 for the screwdriver
division and a $97 provision for the potential loss on disposal of the business.
This loss reflects the potential irrecoverability of certain elements of the
sale consideration which are held in the form of loan notes.

FINANCIAL CONDITION

Liquidity and Capital Resources

Our cash position was $9,191 at September 30, 2003 and our total net assets were
$31,852 at that date.

Net cash provided by operating activities in the year to September 30, 2003 was
$6,654 compared to an operating cash utilisation of $983 in the year to
September 30, 2002.

The increase in cash generation in 2003 of $7.6 million arises from the increase
in profitability (adjusted for depreciation and deferred taxes) of $7.0 million
which is attributable to the one off charges in 2002 for goodwill impairment and
reorganisation programs, and the resultant cost savings accruing from these
initiatives in 2003. The increased cash flows derived from the base improvement
in net income in 2003 compared to 2002 have been further augmented in the
current year by a further decrease in trade working capital of $0.3 million
together with a pension fund contribution payment reduction of $0.3 million.

The decrease in trade working capital in the year to September 30, 2003 amounts
to $0.7 million compared to a decrease in the year to September 30, 2002 of $0.4
million. The principal components of this movement comprise: improved trade
receivables collection of $3.3 million, reduced outflows on current and
non-current liabilities of $2.2 million (largely attributable to the inception
of new finance leases following the replacement of the UK leased motor vehicle
fleet) with these favorable variances mitigated by increased inventory outflows
of $2.4 million (stock builds in the company's Australian subsidiary and the
purchase of new factored products in the UK) and adverse trade payable flows of
$3.0 million.

The cash outflow from investing activities was $1,681 in the year to September
30, 2003. This compares to an inflow from investing activities in the year to
September 30, 2002 of $2,436. 2002 benefited from both the receipt of $1 million
in respect of the sale proceeds of the Company's Irish subsidiary and proceeds
of $3.1 million received on the sale of a UK manufacturing plant. 2003 includes
$2.9 million regarding purchases of property, plant and equipment (2002 $1.4
million) which principally relates to the replacement of the UK car fleet under
capitalized operating leases and the purchase of computer equipment in
Australia.

                                       27
<PAGE>

Net cash used in financing activities was $2,179 in the year to September 30,
2003 compared to net cash provided by financing activities of $1,982 in the year
to September 30, 2002. Cash provided by financing activities in the year to
September 30, 2003 includes $2,009 received from shares issued in the year.
There was no comparable item in the twelve months ended September 30, 2003.

Cash utilized by financing activities in the year ended September 30, 2003
includes the repayment of overdrafts in Australia of approximately $1 million,
the repayment of a shareholder loan of $60 and the settlement of a director's
loan of $100 (see below), the repayment of the promissory notes of $235 and $285
issued to the vendors of Spear & Jackson plc and Bowers Group plc which formed
part of the purchase consideration of those companies and $540 expended on the
repurchase of common stock.

Our business operations have been funded primarily from net operating income. We
have also utilized loans from the Bank of Montreal, shareholder loans and other
bank facilities in the US, UK, France, Australia and New Zealand.

Mr. Neil Morgan, a shareholder, had advanced to us the amount of $100 as a
director's loan. The loan was unsecured, bore interest at 10.25% per annum and
had no specific terms of repayment. The loan was discharged as part of the sales
proceeds for the Megapro screwdriver division.

Mr. Robert Jeffrey, another of our shareholders, had previously advanced to us
an unsecured loan at an interest rate of 10.25% per annum. Until maturity, we
were required to make quarterly payments of interest to Mr. Jeffrey. This loan,
together with all accrued interest, was repaid in the quarter ended March 31,
2003.

The Spear & Jackson and Bowers companies have overdraft facilities with various
UK, French and Australian banks but none of the companies are currently funding
any of their financing requirements through bank or other loans.

Funding to finance new products launches in the Spear & Jackson and Bowers
companies will be funded from their existing banking facilities. We believe that
we have sufficient capital resources and liquidity over both the short term to
sustain our business operations.

ITEM 7.  FINANCIAL STATEMENTS.

 See financial statements beginning on page F-1

                                       28

<PAGE>

                          INDEX TO FINANCIAL STATEMENTS
                                                                    Page

Audited Financial Statements for the Years Ended
September 30, 2003 and  2002

Independent Auditors' Report                                         F 1

Consolidated Balance Sheet at September 30, 2003                     F 2

Consolidated Statements of Operations for the years
ended September 30, 2003 and  2002                                   F 3

Consolidated Statements of Stockholders Equity for the years
ended September 30, 2003 and 2002                                    F 4

Consolidated Statements of Cash Flows for the years
ended September 30, 2003 and  2002                                   F 5

Notes to Consolidated Financial Statements                           F 6-30




<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors
Spear & Jackson, Inc.
New York, New York

We have audited the accompanying consolidated balance sheet of Spear & Jackson,
Inc. as of September 30, 2003 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended September
30, 2003 and 2002. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Spear & Jackson ,
Inc. as of September 30, 2003 and the results of their operations and their cash
flows for the years ended September 30, 2003 and 2002, in conformity with
accounting principles generally accepted in the United States of America.

                                                /s/Sherb & Co., LLP
                                                -------------------
                                                Certified Public Accountants
New York, New York
December 5, 2003


                                      F-1

<PAGE>



                              SPEAR & JACKSON, INC.

                           CONSOLIDATED BALANCE SHEET
                                 (in thousands)

                              September 30, 2003


                                ASSETS
Current assets:
 Cash and cash equivalents                                     $ 9,191
 Trade receivables, net                                         15,432
 Inventories                                                    23,350
 Other current assets                                              999
                                                                ------
Total current assets                                            48,972

Property, plant and equipment, net                              19,561
Deferred tax asset                                               10,919
Investments                                                        148
                                                                ------
Total assets                                                   $79,600
                                                                ======


                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Notes payable                                                 $   304
 Trade accounts payable                                          7,552
 Accrued expenses and other liabilities                         12,793
 Foreign taxes payable                                              50
                                                                ------
Total current liabilities                                       20,699

Other liabilities                                                1,787
Pension liability                                               25,262
                                                                ------
Total liabilities                                               47,748
                                                                ------
Stockholders' equity:
 Common stock                                                       12
 Additional paid in capital                                     51,590
 Accumulated other comprehensive income:
  Pension additional minimum liability                         (30,204)
  Foreign currency translation adjustment                        7,406
  Unrealized (losses) on derivative instruments                    (15)
 Retained earnings                                               3,603
 Less: 270,000 common stock held in treasury, at cost             (540)
                                                                -------
                                                                31,852
                                                                -------
Total stockholders' equity                                     $79,600
                                                                =======




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

                                      F-2
<PAGE>

                              SPEAR & JACKSON, INC.


                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                 (in thousands)


<TABLE>
<CAPTION>
                                                               For the Fiscal Years Ended
                                                             September 30,       September 30,
                                                                  2003               2002
                                                                                  (Restated)
                                                            -----------------   ----------------
<S>                                                          <C>                <C>
Net sales                                                    $        91,845    $        87,886
Cost of goods sold                                                    62,947             61,954
                                                            -----------------   ----------------
Gross profit                                                          28,898             25,932

Operating costs and expenses:
Selling, general and administrative expenses                          22,534             27,250
                                                            -----------------   ----------------
Operating income (loss)                                                6,364             (1,318)

Other income (expense)
Royalties (net)                                                         -                    13
Rental income                                                            136                125
Interest and bank charges (net)                                         (237)              (234)
                                                            -----------------   ----------------
Income (loss) from continuing operations
 before income taxes                                                   6,263             (1,414)
Provision for income taxes                                            (1,497)              (948)
                                                            -----------------   ----------------
Net income (loss) from continuing operations                           4,766             (2,362)
                                                            -----------------   ----------------
Discontinued operations:

Loss from opeartions of Megapro screwdriver division
 (including taxation charges of $44 in 2003)                             (53)               (12)
Goodwill impairment losses                                              -                (1,138)
Provision for loss on disposal of Megapro
 screwdriver division                                                    (97)              -
                                                            -----------------   ----------------
Net loss from discontinued operations                                   (150)            (1,150)
                                                            -----------------   ----------------
Net income (loss)                                            $         4,616    $        (3,512)
                                                            =================   ================
Basic and diluted net income (loss) per share:
 Continuing operations                                       $          0.40    $        (0.58)
 Discontinued operations                                               (0.01)            (0.28)
                                                            -----------------   ----------------
                                                             $          0.39    $        (0.86)
                                                            =================   ================
 Weighted average shares outstanding                              11,988,930         4,100,071
                                                            =================   ================

</TABLE>



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

                                      F-3
<PAGE>



                              SPEAR & JACKSON, INC.
<TABLE>
<CAPTION>

                            CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                                                                             Accumulated
                                                                  Other Comprehensive Income (Loss)
                                                                ---------------------------------------
                                                                                       Unrealized
                                             Additional Treasury Foreign     Pension  Gains/(Losses)
                             Common Stock     Paid in    Stock   Currency    Mimimum  On Derivative    Retained    Total
                            Number    Amount  Capital   (Common) Translation Liability Instruments     Earnings
                           ---------- ------ ---------- -------- ----------- --------- --------------- ----------  ------
<S>                                    <C>      <C>       <C>       <C>         <C>        <C>            <C>       <C>
                                       $000     $000      $000      $000        $000       $000           $000      $000

Balance October 1, 2001     3,543,281     3    48,428                 29     (10,572)        65          2,499     40,452
Shares issued less
 cancellations              8,467,841     9     3,162                                                               3,171
                           ---------- ------ --------- -------- ------------ --------- --------------- --------   -------
                           12,011,122    12    51,590                 29     (10,572)        65          2,499    43,623
                           ========== ====== ========= ======== ============ ========= =============== ========   =======

Foreign currency
 adjustment                                                        3,027        (560)                              2,467
Net loss for the year                                                                                   (3,512)   (3,512)
Reclassification of
 adjustment for gains
 included in net income                                                                     (65)                     (65)
Unrealized holding gains
 originating in the year                                                                      2                        2
Additional minimum
 pension liability
 (net of tax of $5,662)                                                      (13,211)                            (13,211)
                           ---------- ------ --------- -------- ------------ --------- --------------- --------   -------
Comprehensive loss for
 the year                                                          3,027     (13,771)       (63)        (3,512)  (14,319)
                           ---------- ------ --------- -------- ------------ --------- --------------- --------   -------
Balance September 30,
 2002                      12,011,122    12    51,590              3,056     (24,343)         2         (1,013)   29,304

Shares repurchased           (270,000)                     (540)                                                    (540)

Foreign currency
 adjustment                                                        4,350      (1,683)                              2,667
Net income for the year                                                                                  4,616     4,616
Reclassification of
 adjustment for gains
 included in net income                                                                      (2)                      (2)
Unrealized holding losses
 originating in the year                                                                    (15)                     (15)
Additional minimum pension
 liability (net of tax of
 (pound)1,790)                                                                (4,178)                             (4,178)
                           ---------- ------ --------- -------- ------------ --------- --------------- --------   -------
Comprehensive loss for
 the year                                                          4,350      (5,861)       (17)         4,616     3,088
                           ---------- ------ --------- -------- ------------ --------- --------------- --------   -------
Balance September 30,
 2003                      11,741,122    12    51,590  (540)       7,406     (30,204)       (15)         3,603    31,852
                           ========== ====== ========= ======== ============ ========= =============== ========   =======

</TABLE>



    The accompanying notes are an integral part of these financial statements


                                      F-4
<PAGE>




                              SPEAR & JACKSON, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                           For the Fiscal Years Ended
                                                                         ----------------------------
                                                                         September 30,   September 30,
                                                                             2003            2002
                                                                                          (Restated)
                                                                         --------------  --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) attributable to continuing
<S>                                                                         <C>            <C>
 and discontinued operations                                                $ 4,616        $ (3,512)
Adjustments to reconcile net income (loss) to net
 cash provided by (used in) operating activities:
Depreciation                                                                  2,741           3,211
Provision for loss on disposal of discontinued operations                        97            -
Goodwill impairment loss                                                       -              1,138
(Profit) loss on sale of plant, property and equipment                         (134)             95
Deferred income taxes                                                         1,441             835
Changes in operating assets and liabilities, excluding the effects
of acquisitions and dispositions:
Decrease in trade receivables                                                 3,894             605
(Increase) decrease in inventories                                           (1,040)          1,331
Decrease in other current assets                                                557             607
Contributions paid to pension plan                                           (2,825)         (3,175)
Decrease in other non-current assets                                            264              19
(Decrease)  increase in trade accounts payable                               (1,941)          1,110
Decrease in accrued expenses and other liabilities                           (1,753)         (3,112)
Increase in foreign taxes payable                                                 4              17
Decrease (increase) in other liabilities                                        733            (152)
                                                                         ----------      ----------
NET CASH  PROVIDED BY (USED IN) OPERATING ACTIVITIES                          6,654            (983)
                                                                         ----------      ----------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment                                   (2,933)         (1,434)
Costs incurred on purchase of businesses                                       -               (281)
Proceeds from sale of businesses net of costs                                   287           1,000
Net cash acquired (relinquished) on purchase/sale of businesses                 (17)             46
Proceeds from sale of property, plant and equipment                             982           3,105
                                                                         ----------      ----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                          (1,681)          2,436
                                                                         ----------      ----------
FINANCING ACTIVITIES:
Repayment of long-term debt                                                     (23)             (9)
Repayment of overdraft                                                       (1,012)            (18)
Promissory notes repaid                                                        (235)           -
Shareholder loan repaid                                                         (60)           -
Director's loan discharged                                                     (100)           -
Common stock re-purchased                                                      (540)           -
Notes receivable (net of provisions)                                           (209)           -
Share capital issued                                                           -              2,009
                                                                         ----------      ----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                          (2,179)          1,982
                                                                         ----------      ----------
Effect of exchange rate changes on cash and cash equivalents                    (89)            341
                                                                         ----------      ----------
CHANGE IN CASH AND CASH EQUIVALENTS                                           2,705           3,776

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                6,486           2,710
                                                                         ----------      ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                    $ 9,191         $ 6,486
                                                                         ==========      ==========

SUPPLEMENTAL CASH FLOW INFORMATION
    Cash paid for interest                                                  $   145         $   147
                                                                         ==========      ==========

    Cash paid for taxes                                                     $    96         $   96
                                                                         ==========      ==========

</TABLE>


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



                                      F-5
<PAGE>




                              SPEAR & JACKSON, INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                          (in thousands except shares)

Note 1--Basis of Presentation

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

As further  explained in note 3, below,  the purchase of Spear & Jackson plc and
Bowers Group plc by Megapro Tools, Inc. (now Spear & Jackson, Inc.) which was
completed on September 6, 2002 was treated as a reverse acquisition.

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

Note 2--Accounting Policies

Fiscal Year: All fiscal year data contained herein reflect results of operations
for the years ended September 30, 2003, and September 30, 2002.

Use of Estimates: 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.

Foreign Currency Translation: The functional currency of each of the Company's
foreign operations is the local currency. The consolidated financial statements
of Spear & Jackson, Inc. are denominated in US dollars.

Changes in exchange rates between UK sterling, the Euro, the New Zealand dollar,
the Australian dollar and the US dollar will affect the translation of the UK,
French, 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 adjustments arising from the use of differing exchange rates from
period to period are included in the Accumulated Other Comprehensive Income
(Loss) account in Stockholders' Equity. 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.



                                      F-6
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 2--Accounting Policies - continued

Fixed Assets: Property, plant and equipment are stated on the basis of cost less
accumulated depreciation provided under both the straight-line method and the
declining balance basis, depending on type and class of asset.

Depreciation is calculated using the following estimated useful lives:
Buildings - depreciation based on lives ranging from 25 to 70 years
Equipment - depreciation based on lives ranging from 2 to 10 years
Vehicles - depreciation based on lives ranging from 3 to 4 years
Computer hardware - depreciation based on lives ranging from 3 to 5 years
Computer software - depreciation based on lives ranging from 1to 3 years
Molds - depreciation based on a life of 10 years

Where assets are held under finance leases , the assets are depreciated over
their estimated useful lives or the period of the lease, if shorter.

Inventories: Inventories are principally valued at the lower of cost, determined
under the first-in, first-out method, or net realizable value. Certain finished
goods inventories are recorded at the lower of average cost and net realizable
In addition, certain raw materials and work-in-progress inventories are stated
at the lower of cost and replacement cost, where cost is determined on a
weighted average basis.

Comprehensive Income: The Company has adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is comprised of net income and all changes to stockholders' equity,
except those due to investment by stockholders, changes in paid in capital and
distributions to stockholders.

Financial Instruments: The fair value of all short-term financial instruments
approximate their carrying value due to their short maturity.

The Company's financial instruments consist of cash, accounts receivable, bank
indebtedness, accounts payable, accrued liabilities, director's loan payable and
loans and notes payable. Unless otherwise noted, it is management's opinion that
the Company is not exposed to significant interest, or credit risks arising from
these financial instruments. Unless otherwise noted the fair values of these
financial instruments approximate their carrying values since they are
receivable or payable on demand, or the interest rates on these instruments
fluctuate with market rates.

Derivative Financial Instruments: SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended, requires that all derivative
instruments be reported on the balance sheet at fair value and establishes
criteria for designation and effectiveness of hedging relationships. The Company
uses forward contracts to hedge its exposure to volatility of currency exchange
rates. These hedges are intended to offset the effect of transaction gains and
losses, which arise when payments of collections in a foreign currency are made
or received one to three months after the asset or liability is generated. The
fair value of these instruments is reflected in other current assets on the
Company's balance sheet. Where the Company's assessment of these hedges reveals
no ineffectiveness, gains and losses on these instruments are deferred in Other
comprehensive income (loss) until the underlying transaction gain or loss is
recognized in earnings.

Income Taxes: The Company follows the provisions of Statement of Financial
Accounting Standards ("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.

                                      F-7

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 2--Accounting Policies - continued

Earnings per Share: Earnings (loss) per share is computed in accordance with
SFAS No. 128, "Earnings Per Share". Basic earnings (loss) per share is
calculated by dividing the net income (loss) available to common stockholders by
the weighted average number of common shares outstanding for the period. Diluted
earnings (loss) per share reflects the potential dilution of securities that
could share in earnings of an entity. In loss periods, dilutive common
equivalent shares are excluded as the effect would be anti-dilutive. Basic and
diluted earnings per share are the same for the periods presented.

Stock Based Compensation: Stock-Based Compensation Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS
123"), encourages, but does not require, companies to record compensation cost
for stock-based employee compensation plans at fair value. The Company has
chosen to account for stock- based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", and related Interpretations. Accordingly, compensation
cost for the Company's stock at the date of the grant over the amount of an
employee must pay to acquire the stock. The Company has adopted the "disclosure
only" alternative described in SFAS 123 and SFAS 148, which require pro forma
disclosures of net income and earnings per share as if the fair value method of
accounting had been applied.

Advertising and Marketing Expenses: The Company follows the provisions of
Statement of Position 93-7 in respect of advertising expenses and costs are
expensed as incurred. Advertising and marketing costs charged to operations were
$1,847 in the year ended September 30, 2003 and $1,192 in the year ended
September 30, 2002.

Goodwill, Goodwill Impairment,Intangible and Other Assets: Goodwill represents
the excess of the cost over the fair value of net assets acquired in business
combinations. Goodwill and other "indefinite-lived" assets are not amortized and
are subject to the impairment rules of Statement of Financial Accounting
Standards No. 142 (SFAS 142) which the Company adopted effective as of October
1, 2001. Goodwill is tested for impairment on an annual basis or upon the
occurrence of certain circumstances or events. The Company determines the fair
market value of its reporting unit using quoted market rates and cash flow
techniques. The fair market value of the reporting unit is compared to the
carrying value of the reporting unit to determine if an impairment loss should
be calculated. If the book value of the reporting unit exceeds the fair value of
the reporting unit, an impairment loss is indicated. The loss is calculated by
comparing the fair value of the goodwill to the book value of the goodwill. If
the book value of the goodwill exceeds the fair value of goodwill, an impairment
loss is recorded. Fair value of goodwill is determined by subtracting the fair
value of the identifiable assets of a reporting unit from the fair value of the
reporting unit.

Cash Equivalents: Cash equivalents represent short-term, highly liquid
investments, which have maturities of ninety days or less when purchased.

Revenue Recognition: Revenue is recognized upon shipment of products or delivery
of products to the customer depending on the terms of the sale. Provisions are
made for warranty and return costs at the time of sale. Such provisions have not
been material.

Most of the company's major customers have provision for sales rebates in their
trading terms. The level of rebates is individually negotiated with each
customer and is unique to that customer. Typically, a series of escalating
targets is set for purchases from Spear & Jackson and, on reaching each target,
a rebate, usually paid in the form of credit note but occasionally in cash, is
triggered e.g.

                                      F-8
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 2--Accounting Policies - continued

Revenue Recognition - continued:

                             Sales               Rebate               Rebate
                             Revenues
                                $                 %                     $
 Target        1              500k                5.0                  25k
               2              750k                7.5                  56k
               3             1,000k              10.0                 100k
               4             1,250k              12.0                 150k

The revenue targets are set on a twelve month basis, however these sales
targets period ends are not necessarily coterminous with the accounting period
end of Spear & Jackson, Inc. At any point in time, the rebate liability is
calculated by estimating the annual sales value for each customer (in order to
ascertain the rebate % the customer is likely to achieve), applying the relevant
% to the actual sales achieved to date, and then deducting any interim rebates
already paid.

The  rebates  charge is taken as a  reduction  to sales in the  profit  and loss
account.  Rebates  are  paid  to  customers  per  their  individual  agreements.
Typically payments are made half yearly or yearly,  however there are agreements
in place in which rebates are paid monthly and quarterly.

Generally  there is no provision  for  customers to return  products they cannot
sell.  However,  a small number of customers have  negotiated a return clause in
their  trading  agreements.  There is a time limit for these  returns which vary
from  customer to  customer,  none of which  exceed 12 months from the  original
invoice date. The amount of mutual returns made in the year to 30 September 2003
was $66,000 (September, 30, 2002 $66,000).

Research and Development Costs: Research and development costs are expensed as
incurred. There was no material research and development expenditure in the year
to September 30, 2003 or the year to September 30, 2002.

Segment Reporting: Operating segments are defined as components of an enterprise
for which separate financial information is available that is evaluated
regularly by chief operating decision makers in deciding how to allocate
resources in assessing performance.

New Accounting Pronouncements:

In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for the fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives. SFAS 141 was
effective commencing July 1, 2001, and the Company has elected to adopt SFAS 142
as of October 1, 2001.

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
143, Accounting for Asset Retirement Obligations, which addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. The
standard applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or normal use of the asset. SFAS No. 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
fair value of the liability is added to the carrying amount of the associated
asset and this additional carrying amount is depreciated over the life of the
asset. The liability is accreted at the end of each period through charges to
operating expense. If the obligation is settled for the other than the carrying
amount of the liability, a gain or loss is recognized on settlement. The
provisions of this statement are effective for fiscal years

                                      F-9

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

New Accounting Pronouncements - continued

beginning  after June 15, 2002.  The adoption of SFAS No. 143 did not have an
impact on the results of operation or financial position

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. The FASB's new rules on asset impairment
supersede SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of, and provide a single accounting model
for long-lived assets to be disposed of. Although retaining many of the
fundamental recognition and measurement provisions of SFAS No. 121, the new
rules significantly change the criteria that would have to be met to classify an
asset as held-for-sale. The new rules also supersede the provisions of APB
Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, with regard to reporting the effects of a
disposal of a segment of business and require expected future operating losses
from discontinued operations to be displayed in discontinued operations in the
period(s) in which the losses are incurred (rather than as of the measurement
date as presently required by APB No. 30). The Statement is effective for the
Company in the beginning of fiscal year 2003. The Company does not believe this
statement will have a material effect on the earnings or financial position of
the Company.

SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections was issued April 2002. This
Statement rescinds FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This
Statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets
of Motor Carriers. This Statement amends FASB Statement No. 13, Accounting for
Leases, to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. This Statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The provisions of this
Statement related to the rescission of Statement 4 shall be applied in fiscal
years beginning after May 15, 2002. The provisions in paragraph 8 and 9(c) of
this Statement related to Statement 13 shall be effective for transactions
occurring after May 15, 2002. All other provisions of this Statement shall be
effective for financial statements issued on or after May 15, 2002. The effects
of implementation are not material.

SFAS No. 146 Accounting for Costs Associated with Exit or Disposal Activities
was issued June 2002. This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). The provisions of this
Statement are effective for exit and disposal activities that are initiated
after December 31, 2002.

In September 2002, the FASB issued SFAS No. 147, Acquisition of Certain
Financial Institutions. SFAS No. 147 changed the special accounting for
unidentifiable intangible assets recognised under SFAS No. 72. Transition
provisions for previously recognised unidentifiable intangible assets were
effective on October 1, 2002. The effects of implementation had no impact on the
Company's consolidated financial statements.

In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure," which provides alternative methods of
transition for a voluntary change to fair value based method of accounting for
stock-based employee compensation as prescribed in SFAS 123, "Accounting for
Stock-Based Compensation." Additionally, SFAS 148 required more prominent and
more frequent disclosures in financial statements about the effects of
stock-based compensation. The provisions of this Statement are effective for
fiscal years ending after December 15, 2002, with early application permitted in
certain circumstances. The Company has adopted the disclosure provisions in
these consolidated financial statements as disclosed under Stock Based
Compensation.

                                      F-10

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

New Accounting Pronouncements - continued

In January 2003, FASB issued FASB Interpretation No.46 (FIN No. 46),
Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin No. 51, Consolidated Financial Statements. FIN No. 46 explains
how to identify variable interest entities and how an enterprise assesses its
interest in a variable entity to decide whether to consolidate that entity. FIN
No. 46 requires existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries if the entities do not effectively
disperse risks among parties involved. FIN No. 46 is effective immediately for
variable interest entities after January 31, 2003, and to variable interest
entities in which an enterprise obtained an interest after that date. FIN No. 46
applies in the first fiscal year or interim period beginning after June 15,
2003, to variable interest entities in which an enterprise holds a variable
interest that is acquired before February 1, 2003. The adoption of FIN No. 46 is
not expected to have a material effect on the Company's financial position and
results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
changes in SFAS No. 149 improve financial reporting by requiring that contracts
with comparable characteristics be accounted for similarly. This statement is
effective for contracts entered into or modified after June 30, 2003 and all of
its provisions should be applied prospectively.

In May 2003, the FASB issued SFAS No. 150, "Accounting For Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
changes the accounting for certain financial instruments with characteristics of
both liabilities and equity that, under previous pronouncements, issuers could
account for as equity. The new accounting guidance contained in SFAS No. 150
requires that those instruments be classified as liabilities in the balance
sheet.


Note 3 - 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 is 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. (see note 4).

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

         Having considered the relative sizes of the businesses involved in the
combination and other factors, 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.

                                      F-11
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 3 - Nature of Business - continued

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

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


Note 4--Acquisitions and Dispositions of Businesses

         (a) Acquisitions - prior year

         On September 6, 2002, the Company purchased the entire issued share
capital of Spear & Jackson plc and Bowers Group plc via the issue of 3,543,281
of its common stock and the issue of (pound)150,000 of 6% promissory notes.
Spear & Jackson manufactures and distributes a wide range of hand tools, garden
tools and magnetic products. The Bowers Group manufactures and distributes
metrology instruments.

         As explained in note 3 to these financial statements, this transaction
was accounted for as a reverse acquisition. Accordingly, the net assets of Spear
& Jackson plc and Bowers Group plc were included in the consolidated financial
statements at their historic carrying value. The operating results, cash flows
and the fair value of Megapro Tools, Inc. and its subsidiary companies are
included in the financial statements from September 6, 2002, the deemed date of
acquisition, onwards.

         The purchase price for the Megapro Tools, Inc. and its subsidiary
companies was $1,443, which was allocated to the fair value of assets and
liabilities acquired as follows:



                                                              (in thousands)
Inventories                                                    $        271
Trade receivables                                                       101
Trade payables                                                          (38)
Other assets                                                             32
Other liabilities and provisions                                       (180)
Property, plant and equipment                                           202
Deferred and current income taxes                                        62
Director and shareholder loans                                         (160)
Cash and cash equivalents                                                46
Bank indebtedness                                                       (31)
Goodwill (note 5)                                                     1,138
                                                               --------------
                                                               $      1,443
                                                               ==============


         (b) Dispositions - current year


         During the year the directors of Spear & Jackson, Inc carried out a
strategic review of the company's loss making screwdriver division. 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 discontinued at their net book value
of $384.


                                      F-12
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 4--Acquisitions and Dispositions of Businesses - contd.

         (b) Dispositions - current year - contd.

         The net assets transferred comprise:
                                          $'000

       Trade receivables                  190
       Inventory                          141
       P.P & E                            100
       Cash                                17
       Other assets                         9
       Trade payables
       and other liabilities              (73)
                                          ----
                                          384
                                          ===

       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 the Megapro division,
the directors of Spear & Jackson, Inc. have made provision against the
recoverability of part of the balance of the sales proceeds which is still
outstanding. The company is closely monitoring the ability of the Megapro
management to settle the outstanding sale proceeds and is also in discussion
with them concerning alternative means of payment so as to minimize the amount
of disposal losses that may ultimately crystallize.

         (b) Dispositions - prior year

                On January 20, 2002 the Company sold its subsidiary, True Temper
Ireland Limited, for $1million. This subsidiary had been excluded from the
consolidated results of the Company in prior periods as it had been regarded as
an asset held for resale and control was therefore temporary. In addition,
effective control did not rest with the direct majority owner (Spear & Jackson
plc) but rather with the ultimate parent, US Industries, Inc. (now Jacuzzi
Brands, Inc.). All decisions concerning the company's strategic direction and
its ultimate sale were dealt with by officers of US Industries, Inc. The
original cost of investment in True Temper Ireland amounted to $7.54 million and
the difference of $6.54 million between the above cost and the ultimate sale
proceeds of $1million was provided in the Company's financial statements for the
year ended September 30, 2001.

Note 5 - Goodwill


As disclosed in note 4, above, goodwill of $1,138 was recognized on the deemed
acquisition of Megapro Tools, Inc. ("Megapro"). Due to deteriorating earnings
projections and cash flow forecasts of Megapro, the Company decided that
goodwill impairment existed at September 30, 2002. As a result, Spear & Jackson,
Inc. recorded a goodwill impairment charge of $1,138 at that date thereby
eliminating all recorded goodwill in respect of the Megapro acquisition.


                                      F-13
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 6 - Trade Receivables and Concentrations of Credit Risk

                                                    At September 30,
                                                   ------------------
                                                         2003
                                                    ----------------
                                                     (in thousands)
Trade receivables                                   $        17,533
Allowance for doubtful accounts                              (2,101)
                                                    ----------------
                                                           $ 15,432
                                                    ================
         The Company's sales are principally in the United Kingdom, Europe,
Australia, North and South America, Asia and the Far East. The Company performs
periodic credit evaluations of its customers' financial condition and generally
does not require collateral. Credit losses have been within management's
estimates.

Note 7 - Inventories

                                                             At September 30,
                                                           --------------------
                                                                    2003
                                                            ------------------
                                                              (in thousands)
Finished products                                           $          18,747
In-process products                                                     4,894
Raw materials                                                           5,464
  Less: allowance for slow moving and obsolete inventories             (5,755)
                                                            ------------------
                                                            $          23,350
                                                            ==================

 Note 8 - Property, Plant and Equipment, net

                                                        At September 30,
                                                      ---------------------
                                                             2003
                                                      ---------------------
                                                        (in thousands)
Land and buildings                                    $             11,839
Machinery, equipment and vehicles                                    5,603
Furniture and fixtures                                                 160
Computer hardware                                                       74
Computer software                                                       35
Assets held under finance leases                                     1,850
                                                      ---------------------
                                                      $             19,561
                                                      =====================

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


                                      F-14
<PAGE>


                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 9 - Investments

 Investments comprise the following:

                                                           At September 30,
                                                          ------------------
                                                     Note        2003
                                                             (in thousands)

30% investment in Bipico Industries Private limited   (a)  $             63
30% investment in  Bowers Metrologie SA               (a)                63
Other investments in equity securities                (b)                22
                                                           -----------------
                                                            $           148
                                                           =================

(a) With regard to the investments in Bipico Industries Private Limited and
Bowers Metrologie SA, the Company does not have the ability or right to appoint
any directors to the boards of either company. The majority ownership in the
companies is held by a small group of shareholders and Spear & Jackson, Inc. is
therefore unable to exercise significant influence over the operating and
financial decisions of these companies. Accordingly, Spear & Jackson, Inc.
accounts for these investments on the basis of historical cost less provision
for any permanent diminution in value.

(b) These investments represent equity investments classified as
available-for-sale. It is the Company's intention to hold these for longer than
one year. The investments are shown at cost which the Company's directors
estimate to be equivalent to their fair value.


Note 10--Income Taxes

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

                                                For the Fiscal Years Ended
                                            September 30,          September 30,
                                            ------------------------------------
                                               2003                     2002
                                            -----------------  -----------------
                                                         (in thousands)

Current tax charge                          $           (100)  $           (113)
Deferred tax charge credit                            (1,397)              (835)
                                            -----------------  -----------------
                                            $         (1,497)  $           (948)
                                            =================  =================

                                      F-15
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 10--Income Taxes - continued

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

                                               For the Fiscal Years Ended
                                            September 30,          September 30,
                                            ------------------------------------
                                                 2003                   2002
                                            -----------------  -----------------
                                                       (in thousands)

Tax at US federal statutory income tax rate $         (2,192)   $           897
Overseas tax at rates different to
 effective rate                                          313               (129)
Permanent timing differences                             (60)               (62)
Impairment loss not giving rise to tax
 credits                                                -                  (341)
Adjustment of prior year estimates                       (98)              -
Valuation allowance                                      533             (1,216)
Miscellaneous                                              7                (97)
                                             ----------------  -----------------
                                             $        (1,497)   $          (948)
                                             ================  =================

Deferred income tax assets and liabilities for 2003 reflect the impact of
temporary differences between the book values of assets, liabilities and equity
for financial reporting purposes and the bases of such assets, liabilities and
equity as measured by applicable tax regulations, as well as tax loss and tax
credit carry-forwards.

The temporary differences and carry forwards that give rise to deferred assets
and liabilities at September 30, 2003 comprise:

                                                         At September 30,
                                                       ---------------------
                                                               2003
                                                       ---------------------
                                                          (in thousands)
Deferred tax liabilities:
Property, plant and equipment                           $              (56)
                                                       ---------------------
Total deferred tax liabilities                                         (56)
                                                       ---------------------

Deferred tax assets:

Pension benefit plan                                                 8,238
Accruals and allowances                                              2,471
Inventory                                                              266
Tax loss carry forwards and other tax credits                       19,208
                                                        ---------------------
Total deferred tax assets                                           30,183
Valuation allowance                                                (19,208)
                                                        ---------------------
Net deferred tax assets                                             10,975
                                                        ---------------------

Deferred tax asset, net                                 $           10,919
                                                        =====================


                                      F-16
<PAGE>


                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)



Note 10--Income Taxes - continued

A valuation allowance of $19.2 million has been made against certain deferred
tax assets of Spear & Jackson, Inc. at September 30, 2003, due to the
uncertainty of their future realization. These assets relate to operating loss
carry forwards in the Company's UK, US and Australian companies totaling
approximately $5.5 million and to other UK tax credits of approximately $13.7
million.

Note 11--Notes Payable

The French and Australian subsidiaries of Spear & Jackson plc maintain
short-term credit facilities of $5.6 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 $0.3 million outstanding under the
overdraft lines at September 30, 2003 (September 30, 2002: $1.2 million) and
$0.8 million of letters of credit and bills outstanding under these facilities
(September 30, 2002: $1.0 million). In addition, the UK subsidiaries of Spear &
Jackson plc and Bowers Group plc maintain a line of credit of $7.4 million. This
is secured by fixed and floating charges on the assets and undertakings of these
businesses. Of the total facility, $5.0 million relates to bank overdrafts and
$2.4 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 September 30, 2003 and September 30, 2002 the Company had no
borrowings outstanding under the overdraft line but had $0.8 million in
outstanding letters of credit (September 30, 2002: $0.7 million).

Note 12 - Short Term Debt

Movements in short term debt in the year comprise:

                                                          At September 30,
                                                        --------------------
                                                               2003
                                                        --------------------
                                                           (in thousands)

Balance at October 1, 2002                                 $           60
Interest accrued                                                        5
Interest and capital repaid                                           (65)
                                                            -------------
Balance at September 30, 2003                                       -
                                                            =============

The above loan was provided by a former stockholder of the Company. The loan was
unsecured and carried interest at 10.25%. It was repaid in June 2003.


                                      F-17
<PAGE>


                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)



Note 13 - Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consist of the following:

                                                          At September 30,
                                                          -----------------
                                                                 2003
                                                           ---------------
                                                           (in thousands)
Compensation related                                       $        4,212
Rebates/dealer incentives                                           1,288
Sales taxes payable                                                   425
Finance lease - current portion                                       811
Audit and accountancy costs                                           286
Commissions                                                           483
Property rentals                                                      282
Provisions                                                          2,289
Other                                                               2,717
                                                           ---------------
                                                           $       12,793
                                                           ===============

Note 14 - Director's Loan Payable

The managing director of the Megapro screwdriver division had previously
provided a loan of $100 to the Company. The loan was unsecured, due on demand,
bore interest at 10.25% per annum and had no specific terms of repayment. The
loan was discharged as part of the sales consideration due from the director on
the sale of the screwdriver division (note 4).

Note 15 - Other Liabilities

Other liabilities comprise:

                                                            At September 30,
                                                           ------------------
                                                                   2003
                                                             ---------------
                                                             (in thousands)
Finance lease liabilities - non current portion              $        1,144
Property rentals                                                        523
Governments grants received                                             120
                                                             ---------------
                                                             $        1,787
                                                             ===============

Note 16--Pension Plan

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

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.
In the year ended September 30, 2003 contributions amounted to $2.8 million and
in the year to September 30, 2002 contributions totaled $3.4 million.


                                      F-18
<PAGE>


                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 16--Pension Plan - continued

        The Company's actuarial advisers carried out a valuation of the plan
under SFAS 87 at both September 30, 2003 and September 30, 2002. The following
table, as provided by the actuary, analyzes the movement in the pension plan
liability between September 30, 2002 and September 30, 2003 and provides a
reconciliation of changes in the projected benefit obligation, fair value of
plan assets and the funded status of the Company's defined benefit pension plan
with the amounts recognized in the Company's balance sheet at September 30 2003:

                                                                ---------------
                                                                 (in thousands)
Change in projected benefit obligation:
Benefit obligation at September 30, 2002                         $      132,953
Service cost                                                              1,439
Interest cost                                                             7,996
Employee contributions                                                      934
Foreign currency exchange rate changes                                    9,190
Actuarial loss                                                            8,977
Benefits paid                                                            (7,384)
                                                                 ---------------
   Projected benefit obligation at September 30, 2003            $      154,105
                                                                 ===============

Change in fair value of plan assets:
Fair value of plan assets at September 30, 2002                  $      109,141
Actual return on plan assets                                             11,284
Foreign currency exchange rate changes                                    7,544
Employer contributions                                                    2,836
Employee contributions                                                      934
Benefits paid                                                            (7,384)
                                                                 ---------------
Fair value of plan assets at September 30, 2003                  $      124,355
                                                                 ===============

Funded status of plan:
Projected benefit obligation in excess of plan assets            $      (29,750)
Unrecognized net actuarial loss                                          47,637
                                                                 ---------------
Net amount recognized                                            $       17,887
                                                                 ===============

Amounts recognized in the balance sheet consist of:
Accrued pension liability                                        $      (25,262)
Other comprehensive income                                               43,149
                                                                 ---------------
    Net amount recognized                                        $       17,887
                                                                 ===============

         The accumulated benefit obligations of the pension plan are in excess
of its assets. The projected benefit obligation, accumulated benefit obligation,
and fair value of assets for the pension plan were $154.1 million, $149.6
million, and $124.4 million, respectively, as of September 30, 2003.


                                      F-19
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 16--Pension Plan - continued


         The assumptions used and the net periodic pension cost for the
Company's defined benefit plans are presented below:

                                                            2003         2002
                                                        ------------ -----------
Weighted average assumptions as of September 30, 2003
Discount rate                                                 5.50%       5.75%
Rate of compensation increase                                 2.50%       2.25%
Expected return on assets                                     7.50%       7.50%
Fixed pension increase                                        5.00%       5.00%
LPI pension increase                                          2.50%       2.25%
Post 1988 GMP increase                                        2.00%       1.85%

                                                            2003          2002
                                                        ------------ -----------
Components of net periodic benefit cost Defined benefit
plans:
Service cost                                            $     1,439   $   1,647
Interest cost                                                 7,996       7,442
Expected return on plan assets                               (9,915)     (9,064)
Recognition of actuarial loss                                   754        -
                                                        ------------ -----------
Net periodic cost                                       $       274   $      25
                                                        ============ ===========

         The tables above set forth the historical components of net periodic
pension cost for the employees associated with the Company and is not
necessarily indicative of the amounts to be recognized by the Company on a
prospective basis.

          The valuation results are sensitive to the choice of key financial
assumptions. These assumptions are determined by the Company in consultation
with its actuarial advisers and auditors. The major financial assumptions have
been derived as follows:

         The Company sets the discount rate assumption annually for the
retirement benefit plan at its respective measurement date to reflect the yield
of high quality fixed-income corporate bonds.

         The Company's expected return on assets assumption is set in the light
of an actuarial analysis of the long term return expectations for the assets
held by the plan. The start point for the derivation of the rate is the return
on UK government stocks with maturity dates matching the crystallization of the
plan's liabilities. To reflect the fact that a significant part of the plan's
assets are invested in asset classes such as equities and corporate bonds that
are expected to produce higher returns than the government bonds, the overall
rate of return on assets has been adjusted to take account of these higher
yields.

         Price inflation is determined with reference to the difference in yield
between fixed interest and index-linked government bonds as adjusted to take
account of a higher perceived demand for index-linked bonds.


                                      F-20
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)



Note 16--Pension Plan - continued

         The following table illustrates the sensitivity to a change in certain
of the key assumptions used in calculating the assets and liabilities of the
pension plan:


                                Impact on 2004     Impact on      Impact on
                               Pre-Tax Pension   September 30,  September 30,
Change in Assumption             Expense             2003        2003 Equity
                                                      PBO       (Net of tax)
--------------------------------------------------------------------------------
25 basis point
decrease in discount          +$0.501 million  +$6.284 million  -$4.232 million
rate

25 basis point
increase in discount          -$0.446 million  -$5.616 million  +$3.773 million
rate

25 basis point
decrease in expected          +$0.335 million      -               -
return on assets

25 basis point
increase in expected          -$0.335 million      -               -
return on assets


Note 17--Leases

         Rental expense for operating leases in the year to September 30, 2003
was $0.8 million. Operating lease costs in the year to September 30, 2002
amounted to $0.9 million. Future minimum rental commitments under non-cancelable
operating leases as of September 30, 2003 are:

                                                    (in thousands)
                                                   ----------------

2004                                               $          798
2005                                                          775
2006                                                          780
2007                                                          785
Thereafter                                                    789
                                                         ---------
Total minimum lease payments                        $       3,927
                                                         =========



                                      F-21
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 17--Leases -continued

         Under capital lease agreements, the Company is required to make certain
monthly, quarterly or annual lease payments through 2007. The aggregate minimum
capital lease payments for the next four years, with their present value as of
September 30, 2003, are as follows:

                                                   (in thousands)
                                                   ----------------

2004                                               $          856
2005                                                          691
2006                                                          414
2007                                                          102
                                                       ------------
Total minimum lease payments                                2,063
Less amount representing interest at 5.25%                   (108)
                                                       ------------
Present value of net minimum lease payments                 1,955
Less current portion                                         (811)
                                                       ------------
Long-term portion                                  $        1,144
                                                       ============


Note 18 - Common Stock

         Authorized: 25,000,000 Common shares with a par value of $.001 per
share

Note 19 - Stock Option Plan

          On January 20, 2000, the Company's board of directors approved a Stock
Option Plan which provided for incentive stock options and non-qualified stock
options to be granted to officers, employees, directors and consultants to the
Company. Subject to restrictions outlined in the Stock Option Plan, options
granted, terms of exercise and expiration of options were determined by the
Board of Directors or by a compensation committee selected by the Board of
Directors. The maximum number of shares of the Company's common stock that could
be granted under the plan was 950,000 shares increased quarterly commencing
April 1, 2000 by the lessor of (i) 15% of the outstanding shares of the common
stock on the first day of the fiscal quarter less the number of shares of common
stock which could be granted under the plan prior to the first day of the
applicable fiscal quarter or (ii) a lessor amount determined by the Board of
Directors. No option was exercisable after the expiration of the earliest of (i)
ten years after the option was granted and (ii) three months after the date of
termination of the optionor's employment. Under the terms of the plan no options
could be granted to any employee of the Company who owned more than 10% of the
voting stock of the Company or its subsidiaries unless the option price was at
least 110% of the fair market value of the shares subject to the option and the
option was not exercisable after the expiration of five years from the date such
option was granted.

         The stock option plan was cancelled on September 6, 2002 following the
acquisition of Megapro Tools, Inc., via a reverse takeover, on that date.

Note 20 - Stock Options

         Pro-forma information regarding Net Loss and Loss per Share is required
under SFAS No. 123 and has been determined as if the Company had accounted for
its stock options under the fair value method of SFAS No. 123. As explained in
note 18, above, the stock option plan was cancelled on September 6, 2002. No
options were granted in the year to September 30, 2002 and 50,000 options were
granted in the year ended September 30, 2003.. The fair value of options granted
in this period was $0.65. The fair value was estimated at the date of the grant
using a Black-Scholes option pricing model with the following assumptions: no
dividends, an average risk-free interest rate of 3.01% (2001 - 5.59%),
volatility factor of the expected market price of the Company's common stock of
100% (2001 - 0.00%) and a weighted average expected life of the options of two
years.

                                      F-22

<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 20 - Stock Options  - continued:


                                                   Number       Weighted Average
                                                                  Exercise price
Outstanding, September 30 2000                       260,000            $0.85
  Expired March 14, 2001                            (130,000)           $0.85
                                                -------------   --------------
Outstanding, September 30 2001                       130,000            $0.85
                                                =============   ==============

Outstanding, September 30 2001                       130,000            $0.85
  Issued October 16, 2001                             50,000            $1.50
  Exercised, May 2002                                (27,000)           $1.50
  Cancelled, September, 2002                        (153,000)           $0.95
                                                -------------   --------------
Outstanding, September 30 2002                             0            $0.00
                                                =============   ==============

     For the year  ended  September  30,  2000  the  Company  recorded  deferred
compensation of $39,000 based upon the difference between the exercise price and
market price for the options  granted.  The deferred  compensation was amortized
over the  vesting  period of the stock  options  with  compensation  expense  of
$35,583  recognized for the year ended September 30, 2000. The remaining  $3,417
of deferred compensation was reversed upon expiration of the unvested portion of
the stock  options on March 14, 2001.  Compensation  expense was not recorded in
respect to the stock options  granted in 2001 to employees  because the exercise
price exceeded the market price of the shares at the time of the grant.


Note 21 - Stock Compensation

         There were no stock compensation transactions in the year ended
September 30, 2003. Items of stock compensation in the year ended September 30,
2002 were as follows:

         On January 15, 2002 the company issued 321,000 shares of its common
stock to a business combination consultant in consideration for the provision of
services with the objective of increasing the company's revenues and earnings
and expanding its business. The company recorded compensation expense of
$449,400 for this contract in the year ended September 30, 2002 based upon the
fair market value of the common stock on the date of issue.

         On February 27, 2002 10,000 shares of common stock were issued as
consideration for director's services. The company recorded compensation expense
of $28,000 in the year to September 30, 2002 based upon the fair market value of
the stock at the date of issue.

         Both the above items of stock compensation expense were charged to
income in the accounts of Megapro Tools, Inc. prior to its deemed purchase via a
reverse acquisition on September 6, 2002. They do not therefore impact the
consolidated statement of operations of Spear & Jackson, Inc. for the year ended
September 30, 2002.


                                      F-23
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)


Note 22 - Related Party Transactions and Balances

Transactions for the year ended September 30, 2003 and the year ended September
30, 2002 were as follows:

                                                  For the Fiscal Year Ended
                                                         September 30,
                                                        2003           2002

Interest on the promissory note
payable to a
significant stockholder of the company
and interest on director's loan                        $12             $7
                                                   ========         ==========

Note 23--Segment Data

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

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

         The financial information of the segments is regularly evaluated by the
corporate operating executives in determining resource allocation and assessing
performance and is periodically reviewed by the Company's Board of Directors.
The Company's senior management evaluates the performance of each business
segment based on its operating results and, other than general corporate
expenses, allocates specific corporate overhead to each segment. Accounting
policies for the segments are the same as those for the Company.


                                      F-24
<PAGE>


                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 23--Segment Data - continued

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

<TABLE>
<CAPTION>

                                           Sales                          Long-lived Assets (a)
                               --------------------------------       -----------------------------
                                 Year Ended      Year Ended             Year Ended    Year Ended
                               September 30,    September 30,         September 30,   September 30,
                                   2003            2002                  2003            2002
                               -------------  ---------------         ------------   --------------
<S>                                <C>              <C>                   <C>              <C>
  Hand & garden tools              $ 69,959         $ 65,940              $ 6,640          $ 6,638
  Metrology tools                    13,571           13,684                2,699            2,318
  Magnetic products                   8,315            8,262                1,023              915
  Screwdrivers                        1,093               84                 -                 200
  Corporate                            -                -                   9,199            8,781
                               -------------  ---------------         ------------   --------------
     Total                         $ 92,938         $ 87,970             $ 19,561         $ 18,852
                               =============  ===============         ============   ==============

Attributable to:
Continuing operations               $91,845          $87,886               $19,561          $18,652
Discontinued operations               1,093               84                  -                 200
                               -------------  ---------------         ------------   --------------
                                    $92,938          $87,970               $19,561          $18,852
                               =============  ===============         ============   ==============

                                       Depreciation                          Capital expenditure
                               --------------------------------       -----------------------------
                                 Year Ended      Year Ended             Year Ended    Year Ended
                               September 30,   September 30,          September 30,     September 30,
                                   2003            2002                  2003            2002
                               -------------  ---------------         ------------   --------------
  Hand & garden tools               $ 1,901          $ 2,183              $ 1,863          $ 1,181
  Metrology tools                       400              473                  638              139
  Magnetic products                     234              362                  337               75
  Screwdrivers                           14                2                    2                5
  Corporate                             192              191                   93               34
                               -------------  ---------------         ------------   --------------
     Total                          $ 2,741          $ 3,211              $ 2,933          $ 1,434
                               =============  ===============         ============   ==============

Attributable to:
Continuing operations               $ 2,727          $ 3,209               $ 2,931          $ 1,429
Discontinued operations                  14                2                     2                5
                               -------------  ---------------         ------------   --------------
                                    $ 2,741          $ 3,211               $ 2,933          $ 1,434
                               =============  ===============         ============   ==============

                                     Operating Income                        Net Interest
                               --------------------------------       -----------------------------
                                 Year Ended      Year Ended             Year Ended    Year Ended
                               September 30,   September 30,          September 30,     September 30,
                                   2003            2002                  2003            2002
                               -------------  ---------------         ------------   --------------
  Hand & garden tools               $ 3,404          $ 2,952               $ (255)          $ (358)
  Metrology tools                     1,380               91                  (18)             (17)
  Magnetic products                   1,715           (1,214)                 (14)              (8)
  Screwdrivers                          (17)             (10)                 (21)              (2)
  Corporate                            (135)          (3,147)                  61              149
                               -------------  ---------------         ------------   --------------
     Total                         $  6,347          $(1,328)              $ (247)          $ (236)
                               =============  ===============         ============   ==============

Attributable to:
Continuing operations               $ 6,364          $(1,318)              $  (237)         $  (234)
Discontinued operations                 (17)             (10)                  (10)              (2)
                               -------------  ---------------         ------------   --------------
                                    $ 6,347          $(1,328)              $  (247)         $  (236)
                               =============  ===============         ============   ==============
</TABLE>


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

                                      F-25
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 23--Segment Data - continued

The following table presents certain data by geographic areas (in thousands):
<TABLE>
<CAPTION>

                                       Sales (a)                      Long-lived Assets (b)
                             --------------------------------      ----------------------------
                              Year Ended      Year Ended             Year Ended    Year Ended
                              September 30,  September 30,         September 30,  September 30,
                                 2003            2002                 2003            2002
                             -------------   -------------         ------------   -------------
<S>                              <C>             <C>                  <C>             <C>
  United Kingdom                 $ 38,625        $ 40,814             $ 17,706        $ 17,047
  Europe                           17,159          15,439                1,243           1,135
  Australasia                      20,215          16,136                  605             463
  North America                     6,802           7,390                    7             207
  Other                            10,137           8,191                    -               -
                             ------------- ---------------         ------------   -------------
     Total                       $ 92,938        $ 87,970             $ 19,561        $ 18,852
                             ============= ===============         ============   =============

Attributable to:
Continuing operations             $91,364        $  7,886             $ 19,561        $ 18,652
Discontinued operations             1,093              84                 -                200
                               -------------  ---------------         ------------   --------------
                                  $92,938        $  7,970             $ 19,561        $ 18,852
                               =============  ===============         ============   ==============

                                      Depreciation                      Capital expenditure
                             --------------------------------      ----------------------------
                              Year Ended      Year Ended             Year Ended    Year Ended
                             September 30,   September 30,         September 30,  September 30,
                                 2003            2002                 2003            2002
                             -------------   -------------         ------------   -------------

  United Kingdom                  $ 2,303         $ 2,913              $ 2,585         $ 1,241
  Europe                              117              73                   11              20
  Australasia                         301             223                  330             161
  North America                        20               2                    7              12
                             ------------- ---------------         ------------   -------------
     Total                        $ 2,741         $ 3,211              $ 2,933         $ 1,434
                             ============= ===============         ============   =============

Attributable to:
Continuing operations             $ 2,727        $  3,209             $  2,931        $  1,429
Discontinued operations                14               2                    2               5
                               -------------  ---------------         ------------   -----------
                                  $ 2,741        $  3,211             $  2,933        $  1,434
                               =============  ===============         ============   ===========

                                   Operating income                Net Interest
                             --------------------------------      ----------------------------
                              Year Ended      Year Ended             Year Ended     Year Ended
                             September 30,   September 30,          September 30,  September 30,
                                 2003            2002                 2003            2002
                             -------------   -------------         ------------   -------------
  United Kingdom                 $  6,333         $ (1,415)             $  (77)         $   58
  Europe                              (85)            (251)               (186)           (166)
  Australasia                         595              376                 (10)           (126)
  North America                      (496)             (38)                 26              (2)
                             ------------- ---------------         ------------   -------------
     Total                       $  6,347         $ (1,328)             $ (247)         $ (236)
                             ============= ===============         ============   =============

Attributable to:
Continuing operations             $ 6,364        $ (1,318)            $   (237)       $   (234)
Discontinued operations               (17)            (10)                 (10)             (2)
                               -------------  ---------------         ------------   -----------
                                  $ 6,347        $ (1,328)            $   (247)       $   (236)
                               =============  ===============         ============   ===========

</TABLE>


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


                                      F-26
<PAGE>



                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 24--Financial instruments

         In the normal course of its business, the company invests in various
  financial assets and incurs various financial liabilities. The company also
  enters into agreements for derivative financial instruments to manage its
  exposure to fluctuations in foreign currency exchange rates. The fair value
  estimates of financial instruments presented below are not necessarily
  indicative of the amounts the company might pay or receive from actual market
  transactions. The company had the following financial assets and liabilities
  at September 30, 2003 and 2002.

         Financial Assets and Liabilities
         Cash and cash equivalents, accounts receivable, short-term borrowings,
  notes and accounts payable and long-term debt. In respect of these items fair
  value approximates to the carrying amounts indicated in the balance sheets at
  September 30, 2003 and 2002.

           Forward Exchange Contracts
         The Company had $309 and $875 in respect of forward exchange contracts
  outstanding as of September 30, 2003 and 2002, respectively, in order to hedge
  the foreign currency risk of certain accounts receivable and accounts payable
  transactions. These transactions are expected to crystallize within five
  months of the period end. The estimated fair values of the Company's forward
  exchange contracts at September 30, 2003 and 2002, which equal the carrying
  amounts of the related accounts receivable and accounts payable balances were
  $324 and $872. Changes in the fair value of forward exchange contracts
  designated and qualifying as cash flow hedges are reported in accumulated
  other comprehensive income (loss). These amounts are subsequently reclassified
  into earnings through other income (expenses) in the same period that the
  hedged items affect earnings. Most reclassifications occur when the products
  related to a hedged transaction are sold to customers or purchased from
  suppliers. Substantially all unrealized losses on derivatives included in
  accumulated other comprehensive income (loss) at the end of the year are
  expected to be recognized in earnings within the next five months.

Note 25--Commitments and Contingencies


         The Company had outstanding documentary letters of credit totaling $1.5
million at September 30, 2003 relating primarily to inventory purchases from
suppliers in the Far East.

         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 September 30, 2003 the extent of this guarantee relating to gross
bank overdrafts was $24.6 million (September 30, 2002 $22.0 million). The
overall pooled balance of the bank accounts within the pool at September 30,
2003 was a net cash in hand balance of $1.7 million (September 30, 2002 $2.0
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.

    Commitments under non-cancelable operating leases are disclosed in note 17.

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

                                      F-27
<PAGE>

                              SPEAR & JACKSON, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


                          (in thousands except shares)

Note 25--Commitments and Contingencies - contd.


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


Note 26--Subsequent Events

         In October 2003 the Company completed the purchase of freehold land and
buildings at Wednesbury in the United Kingdom for a total consideration of $3.2
million. The property, comprising a manufacturing plant, office premises and
warehouse, was acquired from Jacuzzi Brands Inc. which was the former owner of
Spear & Jackson plc and Bowers Group plc and which currently holds 30% of the
issued stock of Spear & Jackson, Inc.

         The property is occupied by Spear & Jackson Garden Products Limited,
one of the principal UK manufacturing subsidiaries of Spear & Jackson plc. Spear
& Jackson Garden Products Limited owned the site until the property was sold to
Jacuzzi prior to that company's divestment of its stock holdings in Spear &
Jackson plc and Bowers Group plc in September 2002. The sale price at that date
was agreed at (pound)2 million based on appraisals prepared by third party
property valuers.

Note 27 - Restatement of Previously Issued Financial Statements

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

Amendment No. 2 to the Annual Report on Form 10-KSB for the year to September
30, 2002 was filed on December 29, 2003 in order to amend and restate the
consolidated financial statements for both the year ended September 30, 2002 and
the year ended September 30, 2001. Adjustments that impacted on the Consolidated
Statement of Operations and the Consolidated Statement of Changes in
Shareholders' Equity for the year ended September 30, 2002, both of which
statements are presented as prior year comparatives in the current year
financial statements, are as follows:

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

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

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

                                      F-28

<PAGE>

         Item (a) impacted the previously reported figure for SGA expenses and
         also the tax charge for the year. Item (b) resulted in the previously
         disclosed pension asset of $14,962 being presented as a pension
         liability of $20,442 with corresponding debit entries being made to
         deferred taxation ($10,621) and to the "Other Comprehensive Income
         (Loss)" caption within shareholders' equity ($24,343).

2.       The fair value of the consideration for the deemed acquisition of
         Megapro Tools, Inc. was revised. This resulted in goodwill of $1,138
         being recognized which was then written off following a goodwill
         impairment review.

3.       Sales rebates totaling (pound)3,009 in 2002, which were previously
         presented as a component of SG and A expense, were reanalyzed and shown
         as a reduction to sales.

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

In addition to the above, following the disposal of the Company's Megapro
screwdriver division in September 2003, the results of that business have been
re-classified as discontinued operations in the Company's Consolidated Statement
of Operations for the year ended September 30, 2003 and the comparatives for the
year ended September 30, 2002 have been similarly presented.


The following tables present the consolidated statement of operations for the
year ended September 30, 2002 as previously reported and as restated. The
financial information is presented in thousands, except for per share data.

                                      F-29

<PAGE>

Spear & Jackson, Inc.
Consolidated Statement of Operations
                                                    For the Fiscal Year Ended
<TABLE>
<CAPTION>

                                                        September 30, 2002
                                  ---------------------------------------------------------
                                  As Previously    As Restated        Discontinued   As Restated
                                    Reported    Before Disclosure      Operations  After Disclosure
                                                 Of Discontinued                    Of Discontinued
                                                   Operations                        Operations
                                  ------------- -----------------     ------------ -----------------
<S>                                <C>              <C>                 <C>            <C>
Net sales                          $ 90,979         $ 87,970            $   (84)       $ 87,886
Cost of goods sold                   62,006           62,006                (52)         61,954
                                    --------         --------            -------        ---------
Gross profit                         28,973           25,964                (32)         25,932

Operating costs and expenses:
Selling, general and
 administrative expenses             30,355           27,292                (42)         27,250
                                    --------         --------            -------        ---------
Operating income (loss) from
 continuing operations               (1,382)          (1,328)                10          (1,318)

Other income (expense)
Royalties (net)                          13               13                  -              13
Rental income                           125              125                  -             125
Interest and bank charges (net)        (236)            (236)                 2            (234)
Goodwill impairment loss               -              (1,138)             1,138            -
                                    --------         --------            -------        ---------
Income (loss) from continuing
 operations before taxation          (1,480)          (2,564)             1,150          (1,414)
Provision for income taxes             (931)            (948)              -               (948)
                                    --------         --------            -------        ---------
Income (loss) from
 continuing operations               (2,411)          (3,512)             1,150          (2,362)
                                    ========         ========            =======        =========

Discontinued operations:
 Loss from operations of Megapro
 screwdriver division                                                       (12)            (12)
 Goodwill impairment loss                                                (1,138)         (1,138)
                                    --------         --------            -------        ---------
Loss from discontinued operations      -                -                (1,150)         (1,150)
                                    --------         --------            -------        ---------
Net loss                             (2,411)          (3,512)              -             (3,512)
                                    ========         ========            =======        =========

Basic and diluted loss per share

From continuing operations         $ (0.59)         $  (0.86)           $  0.28        $  (0.58)
From discontinued operations                                              (0.28)          (0.28)
                                    --------         --------            -------        ---------
                                   $ (0.59)         $  (0.86)           $     -        $  (0.86)
                                    ========         ========            =======        =========

Weighted average shares
 outstanding                      4,100,071         4,100,071           4,100,071       4,100,071
                                  =========         =========           =========       =========
</TABLE>



                                      F-30
<PAGE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

Effective December 16, 2002, the Company dismissed BDO Dunwoody LLP ("BDO") as
its principal accountants. The reports of BDO on the financial statements of
Megapro Tools, Inc. for the past two years contained no adverse opinion or
disclaimer of opinion and were unqualified or not modified as to uncertainty,
audit scope or accounting principle. The decision to dismiss BDO was recommended
by management and approved by the Company's Board of Directors. In connection
with its audits for the two most recent fiscal years and the subsequent interim
period preceding dismissal on December 16, 2002, there were no disagreements
with BDO on any matter of accounting principles or practices, financial
statement, disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of BDO would have caused them to make reference
thereto and report on the financial statements for such years. During the two
most recent fiscal years and prior to December 16, 2002, the Company had no
reportable events.

The Company requested BDO furnish a letter addressed to the Securities and
Exchange Commission stating whether or not BDO agrees with the statements above
and on December 22, 2002 BDO filed such letter with the Securities and Exchange
Commission.

Effective December 19, 2002, the Company engaged the accounting firm of Sherb &
Co LLP to audit the Company's financial statements for the fiscal year ended
September 30, 2002. The Company had not consulted with Sherb & Co, LLP during
the last two years or subsequent interim period on either the application of
accounting principles or type of opinion, Sherb & Co, LLP might issue on the
Company's financial statements.

ITEM 8A.          CONTROLS AND PROCEDURES.

Our management, which includes our Chief Executive Officer and Chief Financial
Officer, has conducted an evaluation of the effectiveness of our disclosure
controls and procedures (as defined in Rule 13(a)-14(c) promulgated under the
Securities Exchange Act of 1934) as of a date ("the Evaluation Date") within 90
days prior to the filing date of this report. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective for timely gathering, analyzing
and disclosing the information we are required to disclose in our reports filed
under the Securities Exchange Act of 1934, as amended. There have been no
significant changes made in our internal controls or in other factors that could
significantly affect our internal controls subsequent to the Evaluation Date.



                                       29
<PAGE>

                                    PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Our executive officers and directors and their respective ages as of September
30, 2003 are as follows:

Directors:

Name of Director      Age                  Title

Dennis Crowley        42        Chairman, Chief Executive Officer, and President

Joseph Piscitelli     64        Director

William Fletcher      57        Chief Financial Officer

Robert Dinerman       67        Director

John Harrington       62        Director

We have set forth below a brief description of the background and business
experience of our executive officers and directors for the past five years.

Mr. Dennis Crowley is our Chief Executive Officer, Secretary and Treasurer and
Chairman of the Board. Mr. Crowley was appointed in September 2002. Mr. Crowley
has served as the principal owner of PNC Investments Ltd, a private merchant
banking firm, since 1997.

Mr. Joseph Piscitelli was appointed as one of our directors on March 13, 2002.
Mr. Piscitelli was appointed Chief Operating Officer in September 2002. Mr.
Piscitelli is a retired businessman. Mr. Piscitelli founded a consumer goods
manufacturing company specializing in fire place products in 1978. He sold this
company in 1988 and retired from active business at that time. From 1964 to
1976, Mr. Piscitelli served as a chief financial officer and a chief executive
officer of a number of consumer goods manufacturing companies. Mr. Piscitelli
holds a degree in accounting.

Mr. William Fletcher was appointed Chief Financial Officer in September 2002.
Mr. Fletcher has served in various positions with Spear & Jackson plc since
1970, and was appointed Group Finance Director in May 2002.

Robert Dinerman was appointed a director in during fiscal 2003. Mr Dinerman was
Vice President - Administration of a frozen food corporation for many years and
more recently was chairman of Envision Industries. He is currently a board
member of Spring Valley Bank and is also chairman of the Cincinnati
Psychoanalytic Institute. Mr Dinerman received a BA in psychology from Lebanon
Valley College, Pennsylvania in 1958 and an MA in psychology from Xavier
University, Cincinnati in 1967. A licensed psychologist, Mr Dinerman taught for
over 25 years in the Graduate School of Business Administration at Xavier
University where he became Assistant Professor in the Department of Psychology.

John R Harrington, Jnr. was appointed a director in during fiscal 2003. Mr
Harrington has 30 years experience in the banking and trust fields and,
following his retirement from banking, he established an investment and
financial advisory service, Harrington Capital Management, of which he is
President. Mr Harrington holds a degree in economics

                                       30

<PAGE>

Term of Office

Our Directors are appointed for terms of one year to hold office until the next
annual general meeting of the holders of our common stock, as provided by the
Nevada Revised Statutes, or until removed from office in accordance with our
bylaws. Our officers are appointed by our board of directors and hold office
until removed by the board. For the fiscal period ended September 30, 2003, the
Board acted once by unanimous consent.

Committees

The Company  presently has no committees  of its Board of  Directors.  The
Company has not appointed an audit committee at the present time and the Board
in its entirety serves as the audit committee.  Messrs. Robert Dinerman and John
Harrington are independent directors.

Compliance with Section 16(a) of the Securities Exchange Act

Section 16(a) of the Exchange Act requires our executive officers and directors,
and persons who beneficially own more than ten percent of our equity securities,
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and greater than ten percent
shareholders are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file. Based on our review of the copies of such forms
received by it, we believe that during the fiscal period ended September 30,
2003, all such filing requirements applicable to our officers and directors were
complied with except that Dennis Crowley omitted to include in his initial
statement of beneficial ownership, the ownership of 74,500 shares by an
affilated entity.

ITEM 10.          EXECUTIVE COMPENSATION. COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth certain compensation information as to each
individual who served as the Company's chief executive officer during the year
ended September 30, 2003 and each executive officer who received in excess of
$100,000 for such fiscal period.

<TABLE>
<CAPTION>

                                             SUMMARY COMPENSATION TABLE
--------------------------- --------- -------------------------------- --------------------------------- ----------
                   Annual Compensation Long-Term Compensation
--------------------------- --------- -------------------------------- --------------------------------- ----------
                                                                               Awards           Payouts
--------------------------- --------- ----------- --------- ---------- ---------------------- ---------- ----------
                                                                                   Securities
                                                               Other                 Under-
                                                              Annual   Restricted     Lying               All Other
   Name and Principal                                         Compen-     Stock     Options/     LTIP      Compen-
        Position               Year     Salary      Bonus     sation    Award(s)      SARs      Payouts    sation
                                                                ($)        ($)         (#)        ($)        ($)
           (a)                  (b)       (c)        (d)        (e)        (f)         (g)        (h)        (i)
--------------------------- --------- ----------- --------- ---------- ----------- ---------- ---------- ----------
<S>                         <C>         <C>
Dennis Crowley              2003        365,907       -          -          -           -          -          -
Chief  Executive  Officer,  2002         30,000       -          -          -           -          -          -
President, and
Chairman***
--------------------------- --------- ----------- --------- ---------- ----------- ---------- ---------- ----------
W. Fletcher                 2003        141,000      5,000     15,160      -           -          -         44,371
Chief Financial Officer**
--------------------------- --------- ----------- --------- ---------- ----------- ---------- ---------- ----------
Neil Morgan*                2002        146,485       -          -          -           -          -          -
                            2001        142,405     51,714       -          -           -          -          -
--------------------------- --------- ----------- --------- ---------- ----------- ---------- ---------- ----------

         ***      Mr. Crowley was appointed Chief Executive Officer, President and Chairman of the Board in September 2002.
         **       Mr. Fletcher was appointed Chief Financial Officer in September 2002.
         *        Mr. Morgan resigned his officer and director positions in September 2002.
</TABLE>

                                       31

<PAGE>

Stock Option Grants

No stock options were granted to our directors and executive officers during our
most recent fiscal year ended September 30, 2003.

Exercises of Stock Options and Year-end Option Values

No stock options held by our directors and executive officers were exercised
during our most recent fiscal year ended September 30, 2003. At September 30,
2003, no director or executive officer held any stock options.

Compensation Arrangements

In September 2002, the Company entered into an employment agreement with Neil
Morgan which terminated in March 2003. Under the terms of such agreement, Mr.
Morgan received a salary at a monthly rate of $12,500 per month payable
semi-monthly solely out of available cash flow from the Company's Vancouver and
Seattle operations.

In September 2002, the Company entered into an employment agreement with Joseph
Piscitelli which terminated in March 2003. Under the terms of that employment
agreement, Mr. Piscitelli served as the Company's Chief Operating Officer. Mr.
Piscitelli received a salary at a monthly rate of $10,000 per month paid
semi-monthly. Under the terms of the agreement Mr. Piscitelli agreed that he
would not, during the term of such agreement and for a period of six months from
the date of termination, engage in any competitive business activities with the
Company in the State of Florida, call upon any of the Company's customers or
clients for the purposes of engaging in any competitive activities or divert,
solicit or take away any of the Company's customers or clients for the purpose
of engaging in any competitive activities.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth our common stock ownership information as of
October 1, 2002, with respect to(i) each person known to us to own more than
five percent (5%) of our outstanding common stock, (ii) each director of the
Company; and(iii) all directors and executive officers as a group. The
information as to beneficial ownership was furnished to the Company by or on
behalf of the persons named. Unless otherwise indicated, the business address of
each person listed is 2200 Corporate Boulevard, Suite 314, Boca Raton, FL 33431.

                                       32
<PAGE>

                                                             Percent of Shares
Name and Address              Shares Beneficially Owned         Outstanding

PNC Tool Holdings LLC (1)            6,005,561                     51.15%

Dennis Crowley(1)                    6,085,061                     51.83%

Joseph Piscitelli(2)                     4,000                         *

William Fletcher(3)                       -                          -

John Harrington                         44,631                         *

Robert Dinerman                         53,076                         *

USI Global Corp.                     3,543,281                     30.18%
777 S. Flagler Drive
Suite 1108
West Palm Beach, FL 33495

All Executive Officers and           6,187,768                     52.70%
directors as a group
(3 persons)
-----------------
* Less than 1.0%

         (1) Dennis Crowley is the Company's Chief Executive Officer, President,
             Treasurer and a Director. He is the sole owner of PNC Tools
             Holdings LLC and majority shareholder of Arden Enterprises.
             Includes 6,005,561 shares beneficially held by PNC Tools Holdings,
             LLC and 74,500 shares beneficially held by Arden Enterprises.

         (2) Joseph Piscitelli is a Director of the Company.

         (3) William Fletcher is the Chief Financial Officer of the Company.

         (4) John Harrington is a Director of the Company. Includes 15,000
             shares owned by Mr. Harrington's wife.

         (5) Robert Dinerman is a Director of the Company. He is the owner along
             with his family of Envision Worldwide Products, Ltd. Includes
             53,076 shares beneficially held by Worldwide Products, Ltd.

Registration Agreement

The Company, USI Mayfair Limited and PNC Tool Holdings LLC have entered into a
Registration Rights Agreement. Under the terms of such agreement at any time
after 18 months from September 2002, or expiration or earlier termination of

                                       33

<PAGE>

that two-year lock-up period contained in the Stockholders` Agreement between
the Company, PNC Tool Holdings, LLC and USI Mayfair owners of 15% of the
securities held by (i) USI issued under the Acquisition Agreement between the
Company, USI Mayfair, Spear & Jackson Acquisition Corp and Spear & Jackson,
Inc., or (ii) PNC as of September 6, 2002 may demand that the Company register
all or part of such securities under the Securities Act of 1933. Each holder and
subsequent transferee shall have the right to exercise three demand registration
statements on Form S-1 or other similar form. Each holder of the security shall
have the right to an unlimited number of demand registrations on Form S-3
provided the Company shall not be obligated to effect more than two demand
registrations on Form S-3 in any 12-month period. In addition, after expiration
or early termination of the two-year lock-up period, the holders of the
registrable securities shall have a right, if the Company proposes to register
any of its securities (except for registration to the offer on Form S-8 or Form
S-4) to piggyback such registrable securities on such registration statement.

The Company has agreed not to make any public sale or distribution of its equity
securities or any other securities convertible into or exchangable or
exercisable for its equity securities during the 7 days prior to and 90 days
after the effective date of any underwritten demand registration or underwritten
piggyback registration. The Company also agrees that after filing a registration
statement with respect to the registrable securities, the Company will not
register any of its equity securities or the convertible securities issued on
its own behalf or at the request of any holder until at least 3 months have
lapsed from the effective date of the previous registration. This three-month
restriction does not apply to registrations of securities issued in connection
with employee benefits plans, to permit exercise or conversions of previously
issued options, warrants or other convertible securities or registrations on
Form S-4.

Change in Control

On September 6, 2002, we entered into a Stockholders' Agreement with USI Mayfair
Limited, PNC Tool Holdings LLC, and Dennis Crowley (collectively the
"Stockholders"). Pursuant to the terms of the Stockholders' Agreement the
Stockholders have agreed not to transfer any Company securities for a period of
two years following the date of the Agreement, other than certain unrestricted
transfers. An "Unrestricted Transfer" is any transfer (i) from any Stockholder
to any affiliate of such Stockholder, (ii) from any Stockholder to any other
Stockholder, (iii) from Dennis Crowley to any member of the immediate family of
Dennis Crowley or certain estate planning vehicles of Dennis Crowley, (iv) as
collateral security, by USI Mayfair Limited or its affiliates to one or more
third party banks or financial institutions, and (v) in the case of any
Stockholder that is not a natural person, transfers to non-affiliates of such
Stockholder resulting from a bona fide merger, stock sale, sale of all or
substantially all the assets of such Stockholder or other business combination
transaction involving such Stockholder, provided that clause (v) shall not apply
in the case of any such transaction effected with the intent of circumventing
the transfer restrictions of the Stockholders' Agreement.

                                       34

<PAGE>

Under the terms of the Stockholders' Agreement the Stockholders have agreed,
except in the case of an Unrestricted Transfer or a transfer of Company
securities registered under the Securities Act to a non-affiliated third person
effected through an ordinary course open market transaction, if at any time
after the two year anniversary of the date of the Stockholders' Agreement one or
more Stockholders propose to transfer any Company securities in a transaction or
series of transactions where the consideration for such Company securities is in
excess of $10,000, then the selling Stockholder shall provide written notice of
the proposed transaction to the other Stockholders and provide them with an
opportunity to participate in the proposed sale of Company securities on a pro
rata basis.

In addition, under the terms of the Stockholders' Agreement, subject to certain
exceptions set forth in the following paragraph, the Company has agreed not to
issue, sell or exchange, agree to issue, sell or exchange, or reserve or set
aside for issuance, sale or exchange, (i) any Company securities or (ii) any
option, warrant or other right to subscribe for, purchase or otherwise acquire
any Company securities, (collectively, the "Offered Securities"), unless in each
such case the Company shall have first delivered to the Stockholders a written
notice of any proposed or intended issuance, sale or exchange of Offered
Securities (the "Offer"), which Offer shall (A) identify and describe the
Offered Securities, (B) describe the price and other terms upon which the
Offered Securities are to be offered, issued, sold or exchanged, and (C) offer
to issue and sell to or exchange with the Stockholders up to their respective
pro rata portion of such Offered Securities. Each Stockholder's pro rata portion
of the Offered Securities shall be determined by multiplying seventy-five
percent (75%) of the aggregate amount of the Offered Securities by a fraction,
the numerator of which is the number of shares of voting securities then held by
such Stockholder and the denominator of which is the number of shares of voting
securities then outstanding. Each Stockholder shall have the right, for a period
of twenty (20) days following delivery of the Offer, to purchase or acquire such
Stockholder's pro rata portion of the Offered Securities at the price and upon
the other terms specified in the Offer. The Offer, by its terms, shall remain
open and irrevocable for such twenty (20) day period. To accept an Offer, in
whole or in part (provided, however, that the Stockholders may only elect to
purchase part of the Offered Securities if the Offer is not contingent on the
sale to the prospective purchaser of all of the Offered Securities), such
Stockholder must deliver a written notice ("Notice of Acceptance") to the
Company prior to the end of the twenty (20) day period of the Offer, setting
forth the portion (or all, if the Offer is contingent upon the sale to the
prospective purchaser of all of the Offered Securities) of such Stockholder's
pro rata portion of the Offered Securities that such Stockholder elects to
purchase. In addition, each Stockholder shall have the right to purchase (which
right shall be exercised by notice to such effect in the Notice Of Acceptance)
any Offered Securities not accepted by any other Stockholder, in which case the
Offered Securities not accepted by any such other Stockholders shall be deemed,
on the same terms and conditions, to be offered from time to time during such
twenty (20) day period to and accepted by such Stockholders who exercised their
options under this sentence ratably based on their interests in the Company or
as they may otherwise agree. Any Offered Securities that are not acquired by the

                                       35

<PAGE>

Stockholders or the offerees or purchasers described in the Offer in accordance
with this Section 6 may not be issued, sold or exchanged until they are again
offered to the Stockholders under the procedures specified in this Section 6.

Notwithstanding the foregoing, the pre-emptive rights of the Stockholders set
forth in the prior paragraph shall not apply to: (i) the issuance by the Company
of Offered Securities to employees, directors or consultants of the Company
pursuant to any Company stock option or other equity incentive plan, in
connection with an employment or consulting agreement or arrangement with the
Company, or in exchange for other securities of the Company (including, without
limitation, options granted under option plans) held by any such employees,
directors or consultants, (ii) Offered Securities issued in connection with the
acquisition of the business of another entity, whether by the purchase of equity
securities, assets or otherwise, (iii) Offered Securities issued as a stock
dividend to Stockholders or upon any subdivision or combination of Company
Securities, (iv) Offered Securities issued pursuant to or as contemplated by
that certain Stock Purchase Agreement, dated August 2001 by and between USI
Mayfair Limited and the Company, (v) Offered Securities sold by 18 the Company
in an underwritten public offering pursuant to an effective registration
statement under the Securities Act, (vi) capital stock or securities exercisable
for or convertible into such capital stock issued in connection with any
equipment leases or borrowings, direct or indirect, from third-party financial
or other institutions regularly engaged in such businesses, (vii) any warrants
issued without consideration or for nominal consideration in connection with any
third-party debt financings, or (viii) any performance-based equity issued to
third-parties in connection with strategic relationships.

The Stockholders' Agreement shall terminate upon the earliest of (i) our
dissolution, bankruptcy, or insolvency, or any assignment of all or
substantially all of our assets for the benefit of any creditor, (ii) an
agreement to terminate between us and certain of the Stockholders, and (iii) the
five year anniversary of the date of the Stockholders' Agreement.

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Except as disclosed in this section below, none of the following parties has,
since our date of incorporation, had any material interest, direct or indirect,
in any transaction with us or in any presently proposed transaction which has or
will materially affect us:

         *        Any of our directors or officers;
         *        Any person proposed as a nominee for election as a director;
         *        Any person who beneficially owns, directly or indirectly,
                  shares carrying more than 10% of the voting rights attached to
                  our outstanding shares of common stock;
         *        Any relative or spouse of any of the foregoing persons who has
                  the same house as such person.

                                       36

<PAGE>

Mr. Neil Morgan, our former president, had advanced to us a total of $100,019.
The loan was unsecured, bore interest at 10.25% per annum and had no specific
repayment terms. The loan was settled on September 30, 2003 as part of the sales
consideration for the disposal of the Megapro screwdriver division.

Mr. Robert Jeffery, a shareholder who owned in excess of 10% of our common
stock, had previously advanced unsecured shareholders loans in an amount of
$60,000 bearing interest at the rate of 10.25% per annum. The loans were repaid
in March 2003.

In connection with our acquisition of Spear & Jackson, PLC, Envision Worldwide
Products, Ltd., Neil Morgan and Maria Morgan contributed an aggregate of
4,742,820 shares of their common stock of the Company to its capital and have
agreed to a two-year transfer of restriction until September 2004 with respect
to their remaining 192,480 shares of common stock of the Company. The
shareholders did not receive any consideration in connection with their
contribution of shares.

In September 2002, the Company closed a private placement pursuant to which it
issued 6,005,561 shares of its common stock to PNC Tool Holdings, LLC in
consideration for $2,000,000. The sole shareholder of PNC Tool Holdings LLC is
Dennis Crowley, our Chief Executive Officer.

During the 2003 fiscal year, the Company carried out a strategic review of its
Megapro screwdriver division, which was operating at a loss. It was determined
that the division was no longer a core activity of the Company, and various
divestment strategies were considered. Disposition of the assets was undertaken
by Neil Morgan, who was heading up Megapro, to a separate group, which included
Mr. Morgan, and in exchange for which Spear & Jackson, Inc. received promissory
notes and other receivables from management of $284,000, as well as discharge of
a loan in the amount of approximately $100,000 owed by the Company to Neil
Morgan. The assets disposed of had a net book value of approximately $384,000.

         While the Company was evaluating the disposition of this non-core
activity, no specific authorization was afforded to prior management to formally
dispose of the operations of the Megapro assets pending approval by the Board of
Directors of the Company. Management is reviewing the terms of the transaction
as well as evaluating the receivable and the assets purportedly conveyed to
consider its course of action in this matter and whether it will require
adjustment of the consideration received in addition to the $97,000 already
provided as potentially irrecoverable in the Company's financial statements for
the year ended September 30, 2003.

ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K.

                  (a) EXHIBITS

EXHIBIT
NUMBER   DESCRIPTION

3-1      Articles of Incorporation(1)
3-2      Articles of Amendment changing our name to Megapro Tools Corporation(1)
3-3      Articles of Amendment changing our name to Megapro Tools Inc.(1)
3-4      Articles of Amendment amending Article 6 (1) 3.5 Amended By-Laws(1)
3-5      Articles of Amendment changing our name to Spear & Jackson, Inc.(2)
3-6      Amended and Restated Bylaws(2)
5.1      Opinion of Cane & Company, LLC, with consent to use(1)
10.1     Acquisition Agreement dated September 30, 1999 between us and Ms. Maria
         Morgan, Envision Worldwide Products Ltd., Mr. Robert Jeffery, Mr. Lex
         Hoos and Mr. Eric Paakspuu(1)
10.2     Stock Purchase Agreement dated September 2002 between us, USI Mayfair
         Limited, and PNC Tool Holdings, LLC(3)
10.3     Registration Rights Agreement dated September 2002, between us, USI
         Mayfair Limited, and PNC Tool Holdings, LLC(3)

                                       37

<PAGE>

10.4    Stockholders'  Agreement dated September 2002,  between us, USI Mayfair
        Limited, PNC Tool Holdings LLC, and Dennis Crowley(3)
10.5    Employment Agreement dated September 2002, between us and Neil Morgan(2)
10.6    Employment Agreement dated September 2002, between us and Joseph
        Piscitelli(2)
21      List of Subsidiaries
31.1    Certification of Principal Executive Officer
31.2    Certification of Principal Financial and Accounting Officer
32.1    Certification  of Principal  Executive  Officer  Pursuant to 18 U.S.C.
        Section 1350 as Adopted  Pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002
32.2    Certification  of Principal  Accounting  Officer  Pursuant to 18 U.S.C.
        Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002

         (1)      Filed as an exhibit to the Company's Form SB-2 registration
                  statement, as amended, filed with the Securities and Exchange
                  Commission originally on July 3, 2000 and as amended through
                  April 23, 2001.
         (2)      Filed as an exhibit to the Company's Form 10-KSB registration
                  statement filed with the Securities and Exchange Commission on
                  January 13, 2003.
         (3)      Filed as an Exhibit to the Company's  Report on Form 8-K filed
                  with the Securities and Exchange Commission on September 9,
                  2002.

                  (b) REPORTS ON FORM 8-K

On August 27, 2003 we filed a current report on Form 8-K disclosing the
repurchase of 270,000 shares of the Company's common stock.





                                       38
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Dated: January 13, 2004                      SPEAR & JACKSON, INC.

                                            By:/s/ Dennis Crowley
                                                ---------------------------
                                                   Dennis Crowley
                                                   Chief Executive Officer
                                                   (Principal Executive Officer)

In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.

Dated: January 13, 2004                     By: /s/Dennis Crowley
                                                -----------------------------
                                                   Dennis Crowley
                                                   Chief Executive Officer,
                                                   President, and a Director
                                                   (Principal Executive Officer)

Dated: January 13, 2004                     By: /s/William Fletcher
                                                -----------------------------
                                                   William Fletcher
                                                   Chief Financial Officer
                                                   (Principal Financial and
                                                   Accounting Officer)

Dated: January 13, 2004                     By: /s/Joseph Piscitelli
                                                -----------------------------
                                                   Joseph Piscitelli
                                                   Director

Dated: January 13, 2004                     By: /s/John Harrington Jr.
                                                -----------------------------
                                                   John Harrington Jr.
                                                   Director

Dated: January 13, 2004                     By: /s/Robert Dinerman
                                                -----------------------------
                                                   Robert Dinerman
                                                   Director