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

                                    FORM 10-K
(Mark One)
[X] Annual Report Pursuant To Section 13 or 15(d) of The Securities Exchange
    Act of 1934

                  For the fiscal year ended September 30, 2005

                                       or

[ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange
    Act of 1934

                    For the transition period from N/A to N/A

                         COMMISSION FILE NUMBER: 0-32013

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

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

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

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

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

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

                    COMMON STOCK, PAR VALUE $0.001 PER SHARE.
                                (TITLE OF CLASS)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the 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 [_]

Indicate by check mark whether the registrant is a well-known seasoned user,
(as defined in Rule 405 of the Securities Act), Yes [_] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [_]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act), Yes [_] No [X]

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

The aggregate market value of the registrant's common stock (which is the only
common equity of the registrant, voting or non-voting) held by non-affiliates
computed by reference to the closing price of a share of the common stock on the
Over The Counter Bulletin Board on March 31, 2005 was $2,294,851.

The number of shares of registrant's common stock outstanding as of December 23,
2005 was 5,735,561.

<PAGE>
                                TABLE OF CONTENTS

                                                                            Page
PART I

   ITEM 1   BUSINESS                                                           1

   ITEM 1A  RISK ANALYSIS                                                     12

   ITEM 2   PROPERTIES                                                        17

   ITEM 3   LEGAL PROCEEDINGS                                                 18

   ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               19

PART II

   ITEM 5   MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
            MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES                 20

   ITEM 6   SELECTED FINANCIAL DATA                                           21

   ITEM 7   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS                               23

   ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK        56

   ITEM 8   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                       57

   ITEM 9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE                                          58

   ITEM 9A  CONTROLS AND PROCEDURES                                           59

   ITEM 9B  OTHER INFORMATION                                                 59

PART III

   ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                60

   ITEM 11  EXECUTIVE COMPENSATION                                            62

   ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT AND RELATED STOCKHOLDER MATTERS                        63

   ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                    66

   ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES                            67

PART IV

   ITEM 15  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                        68

SIGNATURES                                                                    69

<PAGE>
                                     PART I

ITEM 1.  BUSINESS

CORPORATE ORGANISATION

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

Incorporation of Megapro Tools, Inc.

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

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

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

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

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

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

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

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

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

                                       1
<PAGE>

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

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

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

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

Change of Name to Spear & Jackson, Inc.

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

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

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

Further Changes to Corporate Organization

During the year ended September 30, 2005 the Company set up a new sales and
distribution facility, CV Instruments BV, in Maastricht, Holland. This new
facility specializes in the distribution of portable hardness testing equipment
manufactured in China and the sale of general engineers hand tools.
Additionally, an allied manufacturing, quality control and distribution centre,
Bowers Eclipse Equipment Shanghai Co. Limited, has been established in Shanghai,
China and is expected to be fully operational during the second quarter of
fiscal 2006.

Exit from Screwdriver and Thread Gauge Measuring Operations

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

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

                                       2
<PAGE>

During the fourth quarter of fiscal 2005, the Company began marketing for sale
certain assets associated with its UK thread gauge measuring business. The
carrying values of the assets relating to this entity have been written down to
estimated fair value and the net operations, cash flows and assets have been
presented as "Discontinued Operations" in accordance with Statement of Financial
Accounting Standards ("SFAS") 144.

Recent Developments

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

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

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

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

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

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

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

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

                                       3
<PAGE>

Such percentage stock increases are not necessarily permanent as the Company may
subsequently reissue these shares, wholly or in part, for legitimate business
purposes.

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

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

On April 25, 2005 Jacuzzi stated in a report filed with the SEC that at this
time, no decision has been made by Jacuzzi to either change the composition of
the Company's Board of directors or assert an expanded role in the management of
the Company. Jacuzzi intends to monitor and evaluate its investment in the
Company on a continuing basis or formulate other purposes, plans or proposals
regarding the Company or the Common Stock held by Jacuzzi in addition to those
discussed above. Jacuzzi retains its right to change its investment intent.

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

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

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

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

                                       4
<PAGE>

SUMMARY OF PRINCIPAL OPERATIONS

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

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

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

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

   1) NEILL TOOLS, which consists of Spear & Jackson Garden Tools and Neill
      Tools, manufactures, among other products, hand hacksaws, hacksaw blades,
      hacksaw frames, 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 and
      bought in components from Far Eastern and Indian suppliers. Neill Tools
      product offering now includes a full range of hand power tools and, from
      January 1, 2005, Spear & Jackson Garden Tools' range has been supplemented
      by a portfolio of electric powered garden tools.

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

      MOORE & WRIGHT and COVENTRY GAUGE which manufacture a wide variety of
      products. The core product ranges principally 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 that 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.

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

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

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

                                       5
<PAGE>

BUSINESS SEGMENTS

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

The following table sets forth external sales by segment as a percentage of
total sales:

Business segment                              % of Total Sales
----------------                        ----------------------------
                                        2005        2004        2003
                                        ----        ----        ----

Hand and garden tools                   72.65       75.57       76.17

Magnetic products                       16.87       15.19       14.78

Metrology tools                         10.48        9.24        9.05

For further detailed financial information by reportable segment including
sales, profit and loss, and total asset information see Note 18 in the "Notes to
the Consolidated Financial Statements" included within this Annual Report on
Form 10-K. Also included within Note 18 is a detailed geographical analysis
including sales, profit and loss, and total asset information.

RESEARCH AND DEVELOPMENT

The Company invests in the development of new products and manufacturing
processes. Direct costs associated with new tooling for products are
capitalized, where material. All other costs, including salaries and wages of
employees involved in research and development projects, are expensed as
incurred.

SEASONALITY

Garden tool sales are seasonal by nature. Sales of such products typically peak
in the second and early part of the third quarter of the Company's financial
year when northern hemisphere customers increase order levels in anticipation of
the start of the spring gardening season. Garden product sales are lowest in the
first quarter of the financial year and the Company attempts to mitigate the
adverse impact of this by introducing various incentives to encourage customers
to place orders early.

STRATEGY

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

These markets chiefly comprise:

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

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

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

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

                                       6
<PAGE>

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

   *  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.

   *  Continuous product improvement and innovation.

   *  Increasing market share by offering highly competitive product offerings.

   *  The launch of new and innovative product and product ranges.

   *  Improving manufacturing efficiencies and continually reviewing other cost
      saving measures.

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.

With regard to the products supplied by the company, those classes of similar
products, which accounted for 10% of more of total consolidated revenue in the
last 4 years were as follows:

Product Type                                        % of Total Revenue
------------                              --------------------------------------
                                          2005       2004       2003       2002
                                          ----       ----       ----       ----

Industrial Cutting Tools                  18.63      19.87      15.84      17.59
(hacksaws, hacksaw blades, small saws,
saw frames, woodsaws and holesaws)

Garden, Digging and Cutting Tools         28.44      31.48      26.68      28.40
(manual and powered)

Electrical tools including power tools
and compressors                           N/A        N/A        11.97      N/A

Magnetic products                         10.69      N/A        N/A        N/A

Metrology products including gauges,
micrometers and precision tools           17.26      15.28      14.46      15.33

The company's product offerings comprise both own-manufactured items and
products sourced from third party suppliers. Products manufactured by the
company broadly comprise:

(a)   Hand & Garden Tools Division
      ----------------------------
      (i)   Industrial tools comprising:

            - Hacksaw Blades
            - Small Saws and Woodsaws
            - Saw Frames
            - Holesaws
            - Nutspinners and Riveters
            - Builders' Tools

      (ii)  Garden tools comprising:
            - Spades, Forks and Shovels
            - Cultivators
            - Other Agricultural and Contractors' Tools

(b)   Metrology Division
      ------------------
            - Gauges
            - Squares and Rules
            - Calipers and Dividers
            - Micrometers
            - Hardness Testing Equipment

(c)   Magnetics Division
      ------------------
            - Popular and Industrial Magnets
            - Chucks
            - Magnetic Tools
            - Lifters and Separators
            - Workholding and Handling Systems

                                       7
<PAGE>

Of the total sales revenues arising in the year ended September 30, 2005, 40.6%
of the revenues were attributable to the sale of non-manufactured, factored
products sourced from external suppliers. The percentage of total revenues
generated in the year ended September 30, 2004 and September 30, 2003 which
related to such factored items were 37% and 36% respectively.

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

                                                                      Number of
      Name/Location                      Products Manufactured        Employees
      -------------                      ---------------------        ---------

A. UK:

   Neill Tools                           Hand tools                      275
   Atlas Site, Sheffield

   Spear & Jackson Garden Products       Garden tools                     80
   Wednesbury, West Midlands

   Robert Sorby                          Woodturning tools                36
   Sheffield

   Eclipse Magnetics                     Magnetic products                62
   Vulcan Road, Sheffield

   Bowers Metrology                      Precision measuring tools        68
   Bradford

   Coventry Gauge                        Precision measuring tools        20
   Poole

B. France:

   Spear & Jackson                       Assembly of garden tools         47
   France

We maintain strict internal quality controls to monitor the standard of
production at the various facilities. In addition, the quality of externally
sourced finished products is checked by frequent tests and certification.

The raw materials utilized in our manufacturing processes typically comprise
steel (hot rolled, cold rolled, bright drawn, high speed, stainless) and other
alloys and castings, wood and plastics, paint and other coating materials,
packaging, bought in component parts and various abrasives, lubricants, tooling
and adhesives that are used in the manufacturing processes.

The Company regards these raw materials to be generally available and not
subject to restricted provision. Accordingly, the Company believes that there
are alternate sources for each category of raw materials that could be secured
without significant delay, if necessary.

WORKING CAPITAL

The Company principally builds inventory to known or anticipated customer
demand. In addition to normal safety stock levels, certain additional inventory
levels may be maintained for products with long purchase and manufacturing lead
times. The Company believes that it is important to carry adequate inventory
levels of raw materials and component parts to avoid production and delivery
delays that detract from its sales effort.

Sales of the Company's garden product ranges are lowest in the first quarter of
the financial year. The Company attempts to mitigate the adverse impact of this
by introducing various incentives, including extended payment terms, to
encourage customers to place orders early.

TOTAL BACKLOG ORDERS

As at November 25, 2005 there were $5.8 million backlog orders (November 26,
2004, $8.6 million).The $5.8 million comprises $3.7 million relating to the Hand
& Garden division (2004 $5.5 million), $1.2 million relating to the Metrology
division (2004 $1.8 million), and $0.9 million (2004 $1.3 million) relating to
the Magnetics division. Given the nature of the business, the portion of these
orders that will not be fulfilled within the current year will be immaterial.

NEW PRODUCTS

The Company's policy is to support its core product offering with a pipeline of
new products and range extensions. In the 12 month period ending on September
30, 2005 new product range launches and other significant product related
business developments have included:

                                       8
<PAGE>

NEILL TOOLS

   *  The 'Predator' woodsaw launched in the last fiscal year continued to show
      impressive growth with five new listings in a major retail outlet.
      Commissioning of new plant and equipment is reaching completion so that
      anticipated demand levels can be met.

   *  Listings were secured in a major UK big box retailer for the division's
      new garden power range that was launched in September 2004.

   *  Additional listings for builders' tools were secured in a major multiple
      retail chain which are expected to result in incremental sales revenues of
      approximately $0.5 million per annum.

   *  A machete range was launched specifically designed for the export market,
      the objective being to open up new sales markets with the introduction of
      this and other new products.

ECLIPSE

   *  Introduction of extensions to its magnetics assemblies, speciality
      magnetic tools principally for use in the automotive and industrial
      business sectors.

   *  Launch of a new range of magnetic filtration equipment designed to remove
      ferrous and carbide contaminations from cutting and processing fluids in
      the automotive and precision grinding industries.

   *  Design, development and launch of new products specifically for the food
      and automation industries, covering liquid processing, conveying and
      materials handling.

BOWERS

   *  The metrology division has established a European distribution outlet for
      hardness testers in Holland. The operation is now fully functional and
      trading throughout Europe. An allied manufacturing, quality control and
      distribution centre was established during the year that is expected to be
      fully operational by Q2 of fiscal 2006.

   *  Additional distributors appointed in Turkey, Australia, Mexico, Hong Kong
      and Russia.

SPEAR & JACKSON FRANCE

   *  Spear & Jackson France further enhanced its range of garden products and
      actively promoted new products including plastic snow shovels, bird
      feeders, weather stations and brass garden ornaments.

ROBERT SORBY

   *  Robert Sorby has introduced two new products, the midi versions of the
      popular Hollowmaster and Multi-tip Hollowing Tool.

AUSTRALASIA

   *  In both Australia and New Zealand range reviews have been completed to
      identify and to delete unprofitable lines and to introduce new products
      capable of delivering incremental sales and improved margins. These new
      and extended product ranges cover digging, cutting, handsaw, masonry and
      air tool ranges, all under the S&J brand. A new range of electrical
      generators, battery chargers and drainage products has also been launched.

CUSTOMERS

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

MARKETING AND DISTRIBUTION

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

                                       9
<PAGE>

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 AND COMPETITIVE CONDITIONS

Each of the Company's divisions operates in mature sectors and under extremely
competitive market conditions. This situation has been increasingly exacerbated
by the influx of low-cost Far Eastern and third world imports ensuring that
outstanding brand recognition and superior quality and performance are of
paramount importance.

The major competition for our hand and garden tools comes not only from the
low-cost Far Eastern imitations but also many established companies such as
Stanley in hand tools and Fiskars in garden cutting tools, while Ames/True
Temper possesses a significant share of the North American lawn and garden tools
market. The trend towards cheap Far Eastern products, the shift in customer
profile in the United Kingdom from specialized tool distributors to large DIY,
or `one-stop shops' and, in the past, brand equity dilution due to lower levels
of marketing and advertising, has placed significant pressures upon the
maintenance of market share. Likewise, in our French distribution outlet, the
ability to compete effectively with suppliers from the Far East is problematic
and there have also been significant inroads made by cheaper, lower quality
Eastern European products.

Although certain of our competitors are substantially larger than us and have
greater financial resources, we believe that we compete favorably with other
hand and garden tools companies because of the quality of our products, their
pricing and imaginative design, our ability to introduce niche products which
are clearly differentiated from competitor offerings and the level of our
customer support. Our reputation, customer service and unique brand offerings
enable us to build and maintain customer loyalty.

In our New Zealand and Australian distribution units, while price pressure has
been exerted through the increasing availability of tools manufactured from
within the Pacific Rim, the divisions are well placed to develop their position
as recognized and respected tool distributors marketing lines from manufacturers
all over the world who do not have, or do not wish to have their own presence in
either New Zealand or Australia.

With regard to our metrology operation, Bowers is a relatively small player
compared to its major competitors such as Mitutoyo, and, as such, is less able
to offer a complete product range. In addition, its traditionally heavy reliance
on the North American economy, the threat offered by low price Chinese imports
and the decline in availability of high-skilled engineers in the United Kingdom,
has directed the company's product ranges towards the "high technology" market
segment. Patented digital technology has staved off domination from Chinese
manufacturers while in certain areas, such as bore gauging, the complexity and
quality of the design has meant that Chinese competition has been insignificant.
Indeed Bowers is recognized as a global leader in the precision bore gauge
market.

                                       10
<PAGE>

Eclipse Magnetics mirrors a similar picture with a great deal of competition
coming from Europe and the Far East. The launch of quality, high-standard
products at competitive prices is anticipated to maintain and increase the
Eclipse Magnetics market share.

Although one of the smaller divisions within the group, Robert Sorby is a world
leader in turning tools, competing with the likes of Henry Taylor and Pfeil. It
is a premier manufacturer of high specification tools within the niche
wood-working tools market and seeks to differentiate itself from the large
number of manufacturers producing DIY type woodworking tools through quality,
design and brand.

EMPLOYEES

The number of persons employed by the Company and its wholly owned subsidiaries
at September 30, 2005, 2004 and 2003 were 710, 755 and 764 respectively. 277 of
the 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 June 2006 and January 2006 respectively and the
agreements with the Bowers workforce at Bradford in the UK become due in July
2006. The Company believes its relationship with employees is good.

CAPITAL EXPENDITURE

Capital expenditure in the years ended September 30, 2005, 2004 and 2003 was
$1.4 million, $7.2 million and $2.9 million respectively. Capital expenditure in
the year ended September 30, 2005 related to $1.0 million regarding the updating
of manufacturing plant and equipment and the further automation of the Company's
manufacturing facilities. The remaining $0.4 million was incurred in the
replacement of the Australian motor vehicle fleet. Capital expenditure in the
forthcoming financial year is expected to be approximately $1.0 million and will
be used to improve the Company's existing facilities, expand its manufacturing
capabilities and increase productivity.

INTELLECTUAL PROPERTY

Our ability to compete effectively depends in part on the protection of our
license patents, designs 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 has approval for eight patents. The filing dates for these patents
range between June 1999 and January 2004, and the expiration dates will,
therefore, occur 20 years after these original dates of application. These
patents are registered in Great Britain, Canada, Hong Kong and Taiwan and relate
to tools produced by the Company and to specific mechanisms utilized in certain
products manufactured by the Company.

In addition, the Company has 385 trademarks and 59 designs registered throughout
the world. The renewal dates for the trademarks range from December 2005 to
January 2020. The registered designs fall due for renewal in the period from
January 2005 and September 2010.

The designs to which the Company currently maintains rights comprise 8
registered designs issued by the United States, 1 registered design issued by
Canada, 31 registered designs issued by Great Britain, 10 registered designs
issued by Taiwan, 3 registered designs issued by China, 3 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 manufactured by the Company.

INFORMATION AVAILABLE ON SPEAR & JACKSON WEBSITE

We make available on our website our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to these
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
and Exchange Act of 1934, as amended, as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the SEC. The Company's
internet address is http://www.spear-and-jackson.com.

These documents are also available in print to any shareholder who requests by
sending a letter addressed to the Secretary of the Company.

                                       11
<PAGE>

ITEM 1A. RISK ANALYSIS

RISK FACTORS

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

Although we believe that our expectations are based on reasonable assumptions
within the bounds of our knowledge of our business and operations, actual
results may differ materially from our expectations. Uncertainties and factors
that could cause actual results or events to differ materially from those set
forth or implied include, without limitation:

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

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

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

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

   o  the timing of orders and shipments;

   o  emergence of new competitors or consolidation of existing competitors;

   o  continued absence of consolidation among key customers;

   o  Industry demand fluctuations.

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

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

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

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

                                       12
<PAGE>

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

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

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

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

RISKS CONCERNING THE MAINTAINING AND IMPROVEMENT OF CURRENT PRODUCT MIX:

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

RISKS RELATING TO INCREASING PRICE, PRODUCTS AND SERVICES COMPETITION:

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

RISKS IN CONNECTION WITH CHANGES IN COMPANY INVENTORY LEVELS:

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

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

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

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

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

                                       13
<PAGE>

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

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

   o  fluctuating exchange rates;

   o  tariffs and other barriers;

   o  difficulties in staffing and managing foreign sales operations;

   o  import and export restrictions;

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

   o  potentially adverse tax consequences;

   o  potential hostilities and changes in diplomatic and trade relationships.

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

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

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

RISKS IN CONNECTION WITH ATTRACTING AND RETAINING QUALIFIED KEY EMPLOYEES:

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

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

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

                                       14
<PAGE>

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

The Company has a defined benefit pension plan ("The Pension Plan", "The Plan")
covering certain of its UK employees, former employees and retirees. Our Pension
Plan assets are invested primarily in equity securities and fixed-income
government and corporate securities. At present, the Pension Plan has pension
liabilities that exceed its assets. Under applicable law, we are required to
make cash contributions to an underfunded pension plan to the extent necessary
to comply with minimum funding requirements imposed by regulatory demands. The
amount of such cash contributions is based on an actuarial valuation of the
Plan. The funding status of the Plan can change as a result of changes in the
investment returns on Plan assets, discount rates, mortality rates of Plan
participants and a number of other factors. We cannot provide assurance that the
value of the Pension Plan assets, or the investment returns on those Plan
assets, will continue to be sufficient in the future. It is therefore possible
that we may be required to make significant additional cash contributions to the
Plan which would reduce the cash available for other business requirements, or
that we will have to recognize a significant pension liability adjustment which
would decrease the net assets of the Company.

RISKS RELATED TO RAW MATERIAL AND ENERGY COSTS:

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

We purchase the majority of our raw materials for our products on the open
market and we also rely on third parties for the sourcing of certain finished
goods and component parts and assemblies. Accordingly, our cost of products may
be affected by changes in the market price of raw materials, sourced components
or finished goods. Gas, electricity and other utility prices have become
increasingly volatile in the UK, where we have a significant manufacturing
presence. This situation has been exacerbated by price increases for certain of
our raw materials, particularly steel, cobalt and plastics. We do not generally
engage in commodity hedging transactions for raw materials. Significant
increases in the prices of raw materials, sourced components, finished goods or
other commodities could require us to increase the prices of our products, which
may reduce consumer demand for our products or make us more susceptible to
competition. The Company's ability to pass these increases on to its customers
varies depending on the product line, rate and magnitude of any increase. There
may be periods of time during which increases in these costs cannot be recovered
and our profitability will be adversely affected.

RISKS ASSOCIATED WITH FOREIGN SUPPLIERS:

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

   o  increases in transportation costs;

   o  new or increased import duties;

   o  transportation delays;

   o  foreign work stoppages;

   o  potential war, terrorism and political unrest;

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

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

We believe that our existing balances of cash, cash equivalents, our cash flow
from operations, and the existing credit facilities negotiated for the Company's
UK and other operations will be sufficient to meet our cash needs for working
capital and capital expenditures for at least the next 12 months.

We may, however, require additional financing to fund our operations in the
future. Although we expect existing debt financing arrangements and cash flows
generated from operating activities to be sufficient to fund operations at the
current and projected levels in the future, there is no assurance that our
operating plan will be achieved. We may need to take actions to reduce costs and
to seek alternative financing arrangements.

                                       15
<PAGE>

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

As discussed in ITEM 3 of this annual report and also in the footnotes to the
consolidated financial statements, we are involved in various pending litigation
matters arising out of main and derivative Class Action claims and also from the
ordinary routine conduct of our business, including, from time to time,
litigation relating to such items as commercial transactions, contracts, and
environmental matters. The final outcome of these matters, particularly those
relating to the Class Action litigation, cannot be determined with certainty and
such actions may therefore have a material adverse effect on the Company's
financial position and its results of operations or cash flows.

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

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

THE POTENTIAL ACQUISITION OF THE COMPANY OR ITS PRINCIPAL ASSETS:

As detailed in the footnotes to the consolidated financial statements and in
ITEM 1, above, of this annual report, the Company's majority shareholder,
Jacuzzi Brands, Inc., has formally announced a plan of disposition with regard
to the shares it holds in the Company. Any resulting change in ownership of the
Company may have a significant impact on its future strategy, the way that it
conducts its operations and the size and composition of its earnings and net
assets.

RISK FACTORS THAT MAY NEGATIVELY IMPACT OUR STOCK PRICE:

Our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors particular to the Company, its industry and
the markets in which it operates. Not all of these factors are in our control.

These factors may include: sales falling below anticipated levels because of the
timing of orders or weakening demand; adverse sales mixes; regional economic and
governmental conditions; raw material price volatility; and benefits from
restructuring initiatives falling below forecast. Such factors may therefore
cause our operating results for future periods to be below the expectations of
management and the Company's advisers and this may cause a decline in the price
of our common stock.

                                       16
<PAGE>

ITEM 2.  PROPERTIES

Our principal executive office is located at 401 South Lasalle Street, Suite
201, Chicago, Illinois 60605. Previously the principal executive office was
located in Boca Raton, Florida, but this property was sold on February 15, 2005.

We operate from eight sites in the United Kingdom, one site in France, the
Netherlands, New Zealand and China, and three sites in Australia. Six of such
locations are plant facilities and the remainder are office distribution
facilities. Five of the locations are owned and the remaining ten are occupied
under leases of varying lengths.

The UK owned locations comprise:

   *  Neill Tools, Atlas site, Sheffield, England
   *  Spear & Jackson Garden Products site, Wednesbury, West Midlands, England
   *  Robert Sorby site, Sheffield, England
   *  Bowers Metrology site, Bradford, England

The French manufacturing and distribution facility is located in St Chamond.

The leasehold sites and their respective lease periods, date of expiry of lease
and annual lease rentals are as follows:

                                                                       Annual
                                   Lease                            Lease Rental
Occupier/Location                  Period       Expiry of Lease        $'000
-----------------                  ------       ---------------     ------------

UK
Eclipse Magnetics, Sheffield
England                            25 years     June 2011                320

Coventry Gauge, Poole Dorset
England                            20 years     June 2009                114

Robert Sorby, Doncaster
England                            10 years     May 2009                  21

Bowers Metrology, Hampshire
England                            10 years     August 2012              133

AUSTRALIA
Victoria Building
Dandenong South
Australia                          12 years     December 2014            194

Welshpool, Australia               2 years      April 2007                30

West Terrace, Adelaide
Australia                          3 years      February 2007             15

NEW ZEALAND
Avondale
Auckland, New Zealand              3 years      April 2008                57

THE NETHERLANDS
Maastricht                         6 years      March 2011                40
The Netherlands

CHINA
Min Hang District                  5 years      May 2010                  62
Shanghai, China

The square footage of the above properties ranges from 3,000 to 240,000 square
feet.

We consider all of our properties as suitable and adequate to carry on our
business. We also believe that we maintain sufficient insurance coverage on all
of our real and personal property.

We do not lease or own any other real property.

                                       17
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

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

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

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

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

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

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

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

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

                                       18
<PAGE>

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

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

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

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

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

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 ended September 30, 2005.

                                       19
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         ISSUER PURCHASES OF EQUITY SECURITIES

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 following table sets forth for the periods indicated the range of the
high and low sales price.

                  Fiscal 2005 - Stock Price        Fiscal 2004 - Stock Price
                  -------------------------        -------------------------
                  High $              Low $        High $              Low $
                  ------              -----        ------              -----
First Quarter      1.35                0.68         6.40                3.25
Second Quarter     1.90                1.35         5.53                2.58
Third Quarter      1.83                1.15         3.15                1.10
Fourth Quarter     1.53                1.05         1.85                1.10
Year               1.90                0.68         6.40                1.10

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

HOLDERS OF COMMON STOCK

As of September 30, 2005, there were 21 record owners of our common stock.

DIVIDENDS

We have not paid or declared 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.

Future dividend policy will depend on:

   *  our earnings
   *  capital commitments
   *  expansion plans
   *  legal or contractual limitations
   *  financial conditions and
   *  other relevant factors

EQUITY PLAN COMPENSATION INFORMATION
<TABLE>
<CAPTION>

                                      Number of Securities to    Weighted average         Number of Securities
                                      be issued upon exercise    exercise price of        remaining available for
                                      of outstanding options,    outstanding options,     future issuance under
                                      warrants and rights.       warrants, and rights.    equity compensation plans.
                                      -----------------------    ---------------------    --------------------------
<S>                                             <C>                        <C>                       <C>
Equity compensation plans approved
by security holders                             0                           0                        0

Equity compensation plans not
approved by security holders                    0                           0                        0

</TABLE>

                                       20
<PAGE>

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below in respect of the
Consolidated Statements of Operations for the years ended September 30, 2005,
2004, and 2003 and the consolidated financial data relating to the Consolidated
Balance Sheets as at September 30, 2005 and 2004, have been derived from the
audited consolidated financial statements of Spear & Jackson, Inc. included
elsewhere herein. The selected consolidated data in respect of the Consolidated
Statement of Operations for the years ended September 30, 2002 and September 30,
2001 and the consolidated financial data pertaining to the Consolidated Balance
Sheets at September 30, 2002 and September 30, 2001 have been derived from
audited consolidated financial statements of Spear & Jackson, Inc. that are not
included herein.
<TABLE>
<CAPTION>
                                                         AS OF AND  FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
                                                    2005          2004           2003          2002          2001
                                                -----------   ------------   ------------   -----------   -----------
<S>                                             <C>           <C>            <C>            <C>           <C>
CONSOLIDATED STATEMENTS OF OPERATIONS:

Net sales ....................................  $   100,698   $     99,485   $     90,124   $    87,886   $    95,462
Costs and Expenses:
Cost of goods sold ...........................       67,463         67,574         61,838        61,954        68,049
Operating costs and expenses .................       31,405         29,753         21,909        27,250        27,375
Other (income) loss ..........................         (204)           116            101            96           254
                                                -----------   ------------   ------------   -----------   -----------
Income (loss) from continuing operations
    before unusual or infrequent items .......        2,034          2,042          6,276        (1,414)         (216)

Unusual or infrequent items credited (charged)        2,168              -              -             -       (13,534)
                                                -----------   ------------   ------------   -----------   -----------
Income (loss) from continuing operations
    before income taxes ......................        4,202          2,042          6,276        (1,414)      (13,750)
                                                -----------   ------------   ------------   -----------   -----------

Provision for income taxes ...................         (468)        (1,205)        (1,497)         (948)          226
                                                -----------   ------------   ------------   -----------   -----------

Net income (loss) from continuing operations .        3,734            837          4,779        (2,362)      (13,524)
                                                -----------   ------------   ------------   -----------   -----------

Loss from discontinued operations ............         (163)          (214)           (66)       (1,150)            -

Provision for losses on disposal of
    discontinued operations ..................         (476)          (187)           (97)            -             -
                                                -----------   ------------   ------------   -----------   -----------
Net loss from discontinued operations ........         (639)          (401)          (163)       (1,150)            -
                                                -----------   ------------   ------------   -----------   -----------

Net income (loss) ............................  $     3,095   $        436   $      4,616   $    (3,512)  $   (13,524)
                                                ===========   ============   ============   ===========   ===========

Basic and diluted net income (loss) per share:

From continuing operations ...................  $      0.42   $       0.07   $       0.40   $     (0.58)  $     (3.82)

From discontinued operations .................  $     (0.07)  $      (0.03)  $      (0.01)  $     (0.28)  $      0.00
                                                -----------   ------------   ------------   -----------   -----------
                                                $      0.34   $       0.04   $       0.39   $     (0.86)  $     (3.82)
                                                ===========   ============   ============   ===========   ===========

Weighted average shares outstanding ..........    8,845,290     11,741,122     11,988,930     4,100,071     3,543,281
                                                ===========   ============   ============   ===========   ===========


CONSOLIDATED BALANCE SHEETS:

Working capital (note 4) .....................  $    29,868   $     28,821   $     28,273   $    21,789   $    24,637
Other assets (note 4) ........................  $    33,038   $     35,335   $     30,628   $    28,934   $    27,388
Other liabilities ............................  $    36,703   $     34,717   $     27,049   $    21,419   $    11,573
Stockholders' equity .........................  $    26,203   $     29,439   $     31,852   $    29,304   $    40,452
</TABLE>

                                       21
<PAGE>

   1. The Consolidated Statements of Operations for the years ended September
      30, 2000 and 2001 contain the results of the Company's Industrial Saws
      Division that was sold in March 2001.

   2. On September 6, 2002 Spear & Jackson, Inc. acquired Megapro Tools, Inc.
      and its subsidiaries ("Megapro") via a reverse takeover. The results and
      net assets of Megapro are included in the Consolidated Statements of
      Operations and the Consolidated Balance Sheet from that date until the
      date of Megapro's disposition on September 30, 2003. The results of
      Megapro are presented in the Consolidated Statements of Operations as
      discontinued operations.


   3. The Statements of Operations for the years ended September 30, 2005,
      September 30, 2004 and September 30, 2003 include within discontinued
      operations the results of the Company's thread gauge measuring business
      which the Company began marketing for sale in the fourth quarter of fiscal
      2005. To preserve conformity with previously issued and audited
      consolidated financial statements the Statements of Operations for the
      years ended September 30, 2003 and September 30, 2002 include the results
      of this business segment in continuing operations. Net sales of the thread
      gauge measuring business for these two years were $1.6 million and $1.8
      million, respectively, and the net losses were $0.1 million and $0.2
      million respectively.

   4. Working capital comprises current assets, excluding any deferred income
      tax assets, less current liabilities. Other assets comprise property,
      plant and machinery, deferred income tax assets, and investments. For
      consistency of presentation, the current portion of deferred income tax
      assets is shown within "Other assets".

                                       22
<PAGE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

FORWARD LOOKING STATEMENTS

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

In evaluating any forward-looking statements, you should consider various risk
factors, including those summarized above under ITEM 1A and those described in
other sections of this report, in the other reports the Company files with the
SEC and in the Company's press releases. Such factors may cause the Company's
actual results to differ materially from any forward-looking statement. The
Company disclaims any obligation to publicly update the statements, or disclose
any difference between its actual results and those reflected in the statements.
With respect to all such forward-looking statements, the Company seeks the
protection afforded by the Private Securities Litigation Reform Act of 1995.

SUMMARY OVERVIEW

Although sales of $100.7 million for the year ended 30 September, 2005 show an
increase of $1.2 million when compared to those for the equivalent period last
year, operating profit has fallen from $2.2 million in 2004 to $1.8 million in
2005. In the year to September 30, 2005 income before taxes has benefited
significantly from a reduction in net interest payable of $0.3 million and from
net income of $2.1 million relating to unusual or infrequent items. The
infrequent items comprise a $3.3 million gain arising on the sale of the surplus
element of the Company's Wednesbury facility and the disposal of its warehouse
and office facility in Boca Raton less charges of $1.1 million in respect of a
UK manufacturing reorganization program that was initiated in the year. No
similar income arose in the comparable period in 2004.

DISCUSSION OF OPERATING RESULTS

While sales for the year increased by $1.2 million (1.2%) this was primarily due
to favorable currency exchange fluctuations in the year of $4.0 million offset
by sales volume decreases of $2.3 million and increased sales rebates of $0.5
million. Improvements in volumes were recorded in our Metrology and Magnetics
divisions, but these were offset by volume decreases in our other businesses
attributable to soft domestic demand in the UK, challenging business conditions
in many of our end markets, increasing pressure from cheap, Far Eastern imports
and the weak US dollar.

Gross profit was 33.0% for the year ended September 30, 2005 compared to 32.08%
in the previous year. Direct costs are still being adversely affected in the
cost prices of our principal raw materials of steel, plastic, cobalt and nickel,
and increases in basic utility costs. Nevertheless, margins have shown signs of
improvement as various divisions witnessed favorable sales mixes and benefited
from favorable exchange gains on imported factored products, increased gross
margins on items sourced from the Far East and India that were formerly
manufactured in the UK and the sale of obsolete inventories at prices higher
than their written down value.

Selling, general and administrative expenses have increased by $1.7 million
(5.6%) in the year. Reasons for the increase include: unfavorable US$ sterling
cross rates in the year; increased FAS 87 pension costs; continuing high level
of UK distribution costs following the move to a "direct to market" sales
approach; and general inflationary increases. These adverse effects have,
however, been mitigated by the $0.8 million release of the excess element of a
provision relating to severance compensation payable to the former Managing
Director of Spear & Jackson plc. In addition the Company has benefited from the
local reorganization and cost cutting measures (particularly in the Company's
Australian subsidiary) which have further reduced expenses.

                                       23
<PAGE>

While improvements have been made in the overall levels of general and
administration overheads incurred this year, the company is pursuing various
initiatives to reduce the levels of sales and distribution costs in future
periods. Additionally, settlement of the Company's SEC litigation suit should
result in decreases in administration costs in future periods following the
reduction in legal and professional costs. However, other head office legal
costs associated with the ongoing class action and the role of the corporate
monitor are likely to be incurred until the resolution of this matter. Despite
these cost-reduction efforts, administration costs will increase significantly
in the year ended September 30, 2006 as a result of the non-cash FAS 87 pension
charge increasing from $4.0 million to $8.2 million.

As a result of the decrease in sales volume and higher overhead costs being only
partially offset by gross margin improvements, the Company's operating income
has decreased by $0.4 million (18.2%) from $2.2 million in 2004 to $1.8 million
in 2005.

The Company has benefited in the year from the $3.3 million gain arising on the
sale of the surplus element of its UK manufacturing facility at Wednesbury and
the disposal of its US warehouse facility in Boca Raton. The impact on pre-tax
profits has been negatively impacted by the provision of $1.1 million
manufacturing reorganization costs. As a result of the sale of the surplus
element of the Wednesbury property referred to above, the Company was
contractually obliged to vacate office and warehouse facilities located on those
parts of the site that have been sold and provision has been made for the costs
in connection with the required on site reorganization. Additionally, in the
final quarter of the year, the Company performed a review of its UK
manufacturing operations. A number of strategies are to be implemented to reduce
its ongoing cost basis and accrual has been made for severance costs,
restructuring charges and fixed asset impairment charges relating to those
initiatives.

The Company intends to continue to launch new products and to explore
initiatives to reduce its operational base costs, both in respect of raw
materials and processes, in order to minimize margin erosion and to retain its
competitive edge over cheap foreign imports. The Company's management has
already implemented a number of initiatives to improve profitability and to
restructure its UK manufacturing base. These strategies will continue and
further opportunities will be explored. Such restructuring costs and other
initiatives, together with planned investment in new capital equipment in the
UK, are anticipated to achieve improved efficiencies and reduce labor costs with
corresponding improvements in the ongoing profitability of the Company in the
forthcoming year.

OTHER MATTERS

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

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

                                       24
<PAGE>

Although the SEC litigation has now been satisfactorily resolved, the class
action lawsuits that have been initiated in the US District Court for the
Southern District of Florida by Company shareholders against the Company, Sherb
& Co LLP, the Company's former independent auditor, and certain of the Company's
directors and officers, still remain. The defendants filed certain Motions to
Dismiss with regard to the Complaint and on October 19, 2005, the U.S. District
Court for the Southern District of Florida entered its Order regarding these
motions. The Order denied the Company's motion as well as that of Dennis
Crowley. The Company is in the process of preparing its answer and defenses to
the Complaint. The Court granted the Motion to Dismiss on behalf of William
Fletcher, The Company's interim Chief Executive Officer and also granted the
Motion to Dismiss of the Company's former auditor, Sherb & Co. LLP. The class
plaintiff has since filed an appeal regarding the trial court's decision to
dismiss the case against Sherb & Co. LLP, which appeal is presently pending. No
appeal was filed with respect to the decision to dismiss the case against
William Fletcher. It is impossible at this time to ascertain the ultimate legal
and financial liability or whether this action will have a material adverse
effect on the Company's financial condition and results of operations.

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

RESULTS OF OPERATIONS

GENERAL

The results discussed below compare the years and quarters ended September 30,
2005, 2004 and 2003. 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 financial statements from September
6, 2002, the date of its deemed acquisition, until September 30, 2003, the
effective date of the disposition of the Megapro screwdriver division.

The operating results of Megapro Tools, Inc. and its subsidiary companies, and
those of the thread gauge measuring division of Spear & Jackson, Inc., which is
currently being actively marketed for resale, are disclosed under discontinued
operations.

SUMMARY

A summary of the results of operations is as follows:

                                  Years Ended                Quarters Ended
                                  September 30                September 30
                            -----------------------      ----------------------
                            2005      2004     2003      2005     2004     2003
                             $m        $m       $m        $m       $m       $m
                            ----      ----     ----      ----     ----     ----

Sales                       100.7     99.5     90.1      22.3     24.0     19.4

Gross profit                 33.2     31.9     28.3       7.5      8.4      5.6
Operating costs              31.4     29.7     21.9       7.0      7.2      5.6
Operating income              1.8      2.2      6.4       0.5      1.2        -
Other income/(expenses)       0.2     (0.2)    (0.1)      0.1        -     (0.1)
Provision for taxes          (0.5)    (1.2)    (1.5)      0.2     (0.5)     0.3
Unusual or infrequent
    events                    2.2        -        -      (0.1)       -        -
Discontinued operations      (0.6)    (0.4)    (0.2)     (0.2)    (0.2)    (0.2)
                            -----     ----     ----      ----     ----     ----
                              3.1      0.4      4.6       0.5      0.5      0.0
                            =====     ====     ====      ====     ====     ====


                                       25
<PAGE>

SALES

2005 COMPARED TO 2004

Sales from continued activities increased by $1.2 million (1.2%) from $99.5
million in the year ended September 30, 2004 to $100.7 million for the year
ended September 30, 2005. Sales of $22.3 million for the quarter ended September
30, 2005 were $1.7 million (6.9%) lower than sales of $24.0 million recorded for
the comparable period last year.

The net increase in sales for the year and the decrease in the quarter ended
September 30, 2005 over the comparable periods in the prior year are analyzed as
follows:

                                                 Year              Quarter
                                                 ended             ended
                                                 September 30,     September 30,
                                                 2005              2005
                                        Note     $m                $m
                                        ----     -------------     -------------

Effect of exchange rate movements       (a)       4.0               0.3
Sales volumes decreases                 (b)      (2.3)             (1.6)
Increased rebates                       (c)      (0.5)             (0.4)
                                                 ----              ----
                                                  1.2              (1.7)
                                                 ====              ====

Analyzed by principal business segment, the net revenue increases and decreases
over prior periods can be summarized as follows:

                                                 Year ended        Quarter ended
                                                 September 30,     September 30,
                                                 2005              2005
                                        Note     $m                $m
                                        ----     -------------     -------------
a) Hand and garden tools

   Effect of exchange rate movements    (a)       3.1               0.3
   Sales volume decreases               (b)      (4.7)             (2.0)
   Rebates                              (c)      (0.5)             (0.4)
                                                 ----              ----
                                                 (2.1)             (2.1)
                                                 ----              ----
b) Metrology tools

   Effect of exchange rate movements    (a)       0.5                -
   Sales volume increases               (b)       1.4               0.4
                                                 ----              ----
                                                  1.9               0.4
                                                 ----              ----
c) Magnetic products

   Effect of exchange rate movements    (a)       0.4                -
   Sales volume increases               (b)       1.0                -
                                                 ----              ----
                                                  1.4               0.0
                                                 ----              ----

   Total                                          1.2              (1.7)
                                                 ====              ====

Notes:

(a)   The functional currencies of the group's revenues are sterling, the Euro
      and the Australian and New Zealand dollar. The principal functional
      currency is sterling and the variation in the US$/(pound) cross rate in
      the year, and to a lesser extent, the quarter ended September 30, 2005
      compared to the comparable periods last year has had a significant
      favorable impact on the US dollar value of the group's sales. The average
      US$/(pound) cross rates in the periods under review can be summarized as:

                                                  Average Cross Rates
                                        ----------------------------------------
                                        2005            2004          % Movement
                                        ----            ----          ----------

      Year ended September 30           1.851           1.787         +3.6%
      Quarter ended September 30        1.785           1.788         (0.2%)

                                       26
<PAGE>

      Although in the quarter ended 30 September, 2005 the US$/(pound) cross
      rate decreased when compared to the previous year, the Company still
      benefited from favorable exchange gains. This is due to the fact that
      there was a significant movement in the $/Aus $ cross rate in the last
      quarter when compared to last year which has had a significant effect on
      the translation of the Australian division's sales from Australian dollars
      to $. The $0.4 million favorable variance on the $/Aus $ cross rate more
      than compensated for the adverse US$/(pound) exchange variances in the UK
      based operating divisions.

(b)   Business conditions in many of our end markets remained challenging as a
      result of continued competition from rival suppliers in a number of our
      product ranges, increasing pressure from cheap Far Eastern imports, the
      weak US dollar and poor retailing conditions in the UK and Australasia.

      Within the UK, Neill Tools witnessed increasingly difficult trading
      conditions in the fourth quarter of the fiscal year where sales were 11.1%
      lower than the comparable period last year. Buoyant hand tools demand from
      the Middle East in previous quarters has eased and UK sales of garden
      tools have been adversely affected by depressed order intake from major
      retail outlets. Likewise, Australia and New Zealand continue to show
      volume decreases ($3.0 million for the year and $0.8 million in the last
      quarter) which are primarily attributable to increased levels of
      competition from foreign imports and a slow down in consumer spending.

      While similar market pressures have been experienced over the year in the
      Metrology and Magnetics products divisions, volume increases over the
      prior period of $2.4 million for the year and $0.4 for the quarter were
      still achieved. This was attributable to growth in the Metrology
      distribution facility in Maastricht and increases in export sales in
      Eclipse Magnetics following the establishment of new distribution
      channels.

(c)   Sales rebates charged in the year ended September 30, 2005 amounted to
      $4.4 million and $0.9 million of rebates were expensed in the quarter
      ending on that date. The level of rebates in the year ended September 30,
      2005 has increased by 13.6% over the comparable period last year. This is
      due to: increased trading volumes in France; the offering of increased
      rebates in the UK in the Company's Neill Tools division as an additional
      customer incentive in a highly competitive sales market; and adverse
      movement in the (pound)/US$ cross rate.

2004 COMPARED TO 2003

Sales from continuing activities increased by $9.4 million (10.2%) from $90.1
million in the year ended September 30, 2003 to $99.5 million for the year ended
September 30, 2004. Sales of $24.0 million for the quarter ended September 30,
2004 were $4.6 million (23.2%) higher than sales of $19.4 million recorded for
the comparable prior year period.

The net increase in sales for both the year and quarter ended September 30, 2004
over the comparable periods in the year ended September 30, 2003 is analyzed as
follows:

                                                 Year              Quarter
                                                 ended             ended
                                                 September 30,     September 30,
                                                 2004              2004
                                        Note     $m                $m
                                        ----     -------------     -------------

Effect of exchange rate movements       (a)      12.8              2.0
Sales volumes (decreases)/increases     (b)      (3.2)             2.4
(Increased)/decreased rebates           (c)      (0.2)             0.2
                                                 ----              ---
                                                  9.4              4.6
                                                 ====              ===

                                       27
<PAGE>

The net revenue increases over prior periods can be summarized by principal
business segment as follows:

                                                 Year ended        Quarter ended
                                                 September 30,     September 30,
                                                 2004              2004
                                        Note     $m                $m
                                        ----     -------------     -------------
a) Hand and garden tools

   Effect of exchange rate movements    (a)      10.2              1.4
   Sales volume (decreases)/increases   (b)      (3.4)             2.0
   Rebates                              (c)      (0.2)             0.2
                                                 ----              ---
                                                  6.6              3.6
                                                 ----              ---
b) Metrology tools

   Effect of exchange rate movements    (a)       1.6              0.4
   Sales volume increases                         0.2              0.2
                                                 ----              ---
                                                  1.8              0.6
                                                 ----              ---
c) Magnetic products

   Effect of exchange rate movements    (a)       1.0              0.2
   Sales volume increases               (b)        -               0.2
                                                 ----              ---
                                                  1.0              0.4
                                                 ----              ---

   Total                                          9.4              4.6
                                                 ====              ===

Notes:

(a)   The functional currency of the majority of the group's revenues is
      sterling and the variation in the US$/(pound) cross rate in both the year
      and the quarter ended September 30, 2004 compared to the comparable
      periods last year has had a significant favorable impact on the US dollar
      value of the group's sales. The average cross rates in the periods under
      review were as follows:

                                                  Average Cross Rates
                                        ----------------------------------------
                                        2004            2003           %Movement
                                        ----            ----           ---------
      Year ended September 30           1.787           1.597          +11.9%
      Quarter ended September 30        1.788           1.614          +10.8%

(b)   Business conditions in most of our end markets remained difficult as a
      result of depressed demand, the intense competition from competing
      suppliers in a number of our product ranges and the adverse effect of a
      weak US dollar in certain of our export markets. Additionally, although
      the Company strategy to aggressively promote our product continued,
      increased expenditure in 2004 on expanding and strengthening the sales and
      marketing infrastructure was not sufficient to fully absorb the increase
      in overhead on the previous year.

      Within the hand and garden products segment, despite difficult trading
      conditions both the Neill Tools and Robert Sorby divisions showed
      aggregate sales volume increases for both the quarter ($2.3 million
      (26.4%)) and the year ($4.1 million (9.9%) ended September 30, 2004
      compared t the comparable period last year. Furthermore, the Neill Tools
      2004 sales volume increase was achieved despite the cessation of trade
      with a major UK wholesaler, to whom Neill Tools sold $2.8 million of
      product in the year ended September 30,2003.

      However, the sales volume increases achieved in Neill Tools and Robert
      Sorby were exceeded by sales volume decreases in the Australia and New
      Zealand divisions (a $0.4 million (13.6%) shortfall in quarter 4, 2004 and
      a $7.4 million (37.4%) fall for the year). The Australian sales shortfall
      in 2004 compared to the level of sales achieved in 2003 is primarily due
      to the loss of a major customer to whom significant sales were made in the
      first three-quarters of fiscal 2003.

      Similar market pressures were prevalent in the metrology, magnetic
      products segments and in the Company's French subsidiary but volumes were
      largely maintained with both divisions generating a marginal sales volume
      increase by the end of the year.

                                       28
<PAGE>

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

      Sales rebates charged in the year ended September 30, 2004 amounted to
      $3.6 million and $1.0 million of rebates were charged in the quarter
      ending on that date.

SEGMENTAL REVIEW OF SALES

We aim to maintain and develop the sales 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.

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

NEILL TOOLS

2005 COMPARED TO 2004

Sales for the year to September 30, 2005 of $43.9 million showed a reduction of
$0.5 million (1%) over last year's sales of $44.4 million. The decrease was
attributable to adverse volumes of $1.7 million and increased rebates of $0.3
million offset by favorable exchange movements of $1.5 million.

Despite a promising start in the first half of the year Neill Tools witnessed
particularly difficult trading conditions in the third and fourth quarters of
the year. The UK retail market continued a downward trend, especially in the
multiple retail sector, and market indicators recorded UK retail sales at their
lowest for over 20 years. Additionally, export sales, which in the first half of
the year had exceeded expectations, have seen an easing in demand. Our strong
export sales performance at the beginning of the year was bolstered by the
demand generated by the huge construction programs that were put in place
following the conflicts in the Middle East, but this demand has now begun to
slow. In addition Neill Tools experienced a weakening of its order book with
Middle Eastern countries during quarters three and four. The continued worldwide
terrorist activity has affected the appetite for business travel and as a
consequence sales orders have declined.

UK trading conditions, especially in the garden tools market, have deteriorated
due to increasingly soft demand in the multiple retail sector. Despite the
resultant sales shortfalls in our gardening business, the "Predator" woodsaw
range, which was so successful last year, has continued to sell strongly. As
previously reported, capital investment of approximately $0.9 million in new
woodsaw and hacksaw blade plant has been approved and is now almost fully
operational. This will ensure that the record levels of productivity experienced
in the year can be sustained.

The threat to the business from low-cost, Far Eastern economies continues
unchanged. These competitive pressures have been exacerbated by the weakness of
the US dollar, price increases imposed by our steel, plastics and utility
suppliers, and the difficulty within a competitive market place of passing on
these increases to customers. Despite this, margins have been maintained when
compared to last year, as divisional profitability has benefited from favorable
sales mixes, the sale of obsolete inventories at amounts above NRV and the
successful implementation of a number of strategic initiatives to reduce the
cost of manufacturing and distribution.

During the year the division announced a reorganization in connection with the
closure of part of one of its manufacturing facilities, and carried out a review
of its UK manufacturing operations, for which costs of $1.5 million have been
provided. These initiatives will reduce the division's reliance on
own-manufactured items and will enable the division to progress the sourcing of
componentry for UK assembly to further reduce costs and improve profitability.

Given the depressed trading conditions, focus has been directed towards tight
overhead cost control and reorganizations of certain sales and administrative
functions have been undertaken to reduce these costs.

                                       29
<PAGE>

2004 COMPARED TO 2003

Revenues for the year to September 30, 2004 of $44.4 million showed an
improvement of $6.9 million (18.3%) over the 2003 revenues of $37.5 million.
This increase was attributable to favorable exchange movements of $4.6 million,
and increased volumes of $3.4 million offset by an increase in sales rebates of
$1.1 million.

While the division experienced a demanding year, the decision implemented in
July 2003 to cease trading with its major UK wholesale customer and to deal with
its customers on a direct basis, reaped benefits and enabled the division to
re-establish links with its customer base. The increased UK sales were partially
offset, however, by the weakening dollar that continued to have a detrimental
effect on sales into certain export markets that were linked to that currency.
To counteract this decline in price competitiveness, margins were reduced in
some regions in order to achieve substantial fixed volume orders. In other
areas, such as the Middle East, the division received increased orders for metal
cutting blades due to a major competitor experiencing financial difficulties,
and hand tool sales and orders strengthened as a result of the proliferation of
rebuilding projects following the conflicts in Iraq.

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

The 'Predator' woodsaw range was revitalized in the year and sales order intake
exceeded all expectations with the woodsaw department operating on a three shift
basis to meet demand. Likewise, the division successfully secured business with
two major UK builders merchants for woodsaws and contractors' tools. The
introduction of hand power tools into the UK market under the S&J brand
generated approximately $1.8 million of sales in the year.

Although sales improved, divisional management remained fully appreciative of
the shrinking UK manufacturing base and the threat from low-cost, Far Eastern
economies. Manufacturing costs remained high and, in order to compete
effectively in a global market, alternative sources of supply were sought.

The control of costs, especially increased distribution costs associated with
the change in customer delivery requirements, became a major priority.

ECLIPSE MAGNETICS

2005 COMPARED TO 2004

Revenues for the year increased by $1.4 million (14.8%) from $9.3 million in
2004 to $10.7 million in 2005. This increase was due, in the main, to improved
trading volumes of $1.0 million and favorable exchange differences of $0.4
million.

Sales of both the distribution range of products and the engineered products
line have shown a marked improvement when compared to last year helped by new
distribution channels in Europe and new initiatives in South America.

The higher technology area of the division, "Applied Magnetic Systems", has
continued to design and develop new products, mainly driven by the material
handling and separation business. New products have been designed, developed and
installed within the food and automation industries, covering liquid processing,
conveying and materials handling industry. In particular, the division has been
successful in developing a new range of patented filtration products,
'Micromag', which is designed to protect expensive pumps and valves.

In the industrial sector, reduced demand was experienced from key sales accounts
as certain customers migrated to Far Eastern manufacturers.

As previously reported, the standard low technology area of the business has
continued to be eroded by good quality imports at low price points from our
competitors in China and the Far East. This is directly impacting on our
distribution and industrial markets where customers are switching supply sources
to the Far East or redesigning systems and applications to accommodate newer
magnetic materials.

Despite sales price erosion, increases in steel prices and the cost of
utilities, 2005 gross margins have not been eroded thanks to the stabilization
of raw material prices for nickel and cobalt (two major alloys used in magnet
manufacturing), an improved mix of products sold within the engineering products
division and improvements in manufacturing costs.

The main challenges to the business continue to be the delivery of a lower
manufacturing cost base, delivering added value to customers, the continued
development of new products through the Applied Magnetics Systems division and
increasing market share within key product segments.

                                       30
<PAGE>

2004 COMPARED TO 2003

Sales for the year increased by $1.0 million (12.3%) from $8.3 million in 2003
to $9.3 million in 2004. The increase was due primarily to favorable exchange
differences with sales volumes remaining static.

During this challenging year the division suffered from the generally depressed
industrial economic conditions. Most markets were stagnant and the depressed
nature of the sector was exacerbated by the continuing weakness of the US dollar
which challenged margins and reduced competitiveness in comparison to locally
based manufacturers.

The standard low technology area of the business continued to be affected
adversely by the increased presence of good quality imports from our competitors
in China and the Far East, which directly impacted upon our distribution and
industrial markets. On top of this, Eclipse witnessed a 60% increase in the raw
material prices of nickel and cobalt, two major alloys used in magnet
manufacturing, which inevitably resulted in margin erosion.

The division's higher added value Applied Magnetics operation continued to
flourish, however, showing an 18% sales growth in the year. During the year the
Company refocused its sales activities towards these higher technology products,
particularly materials handling and product separation, to mitigate volume
reductions and product discontinuations in its traditional permanent magnets
business.

The division continued to offer a high level of quality product and after sales
service with emphasis on new products and ranges. The new Optimag standard range
launched during the year offered the automotive, automation, and materials
handling markets a high performance clamping module for all materials handling
applications. Likewise, the Automag oil filtration device, designed to remove
all ferrous contamination from oils within manufacturing process lines, was
launched and was well received by UK automotive manufacturers. The patented
"Ultralift" permanent lifting magnet increased its market share and continues to
grow at over 10% per year. During the year new industrial catalog listings were
obtained with major distributors in Germany and the USA, building solid
foundations for the future.

ROBERT SORBY

2005 COMPARED TO 2004

Robert Sorby sales for the year showed no overall movement from last year ($5.0
million in both years), although favorable exchange movements of $0.2 million
were offset by a volume decrease of $0.2 million.

Robert Sorby has suffered from a very challenging market place, especially in
the second half of the year. UK home retail market sales fell by 7% compared to
last year, reflecting the competitive trading conditions and reduced consumer
demand. To resist sales dilution the division's UK marketing effort has centered
on the attendance at national, regional and dealer shows, supported by
specialist magazine advertising. Additionally, Robert Sorby's mail order
operation has now become firmly established and continuing focus is to be placed
here in the future. As a result of strong demand in this sector an e-commerce
web site is currently under construction.

Overseas sales have also been disappointing, especially in the US. We have
continued to maintain a strong overseas promotional activity, which is essential
in retaining market share and resisting the efforts of competitors to
consolidate their own market positions.

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

2004 COMPARED TO 2003

Sales for the year increased by $1.2 million (29.8%), rising from $3.9 million
in 2003 to $5.1 million in 2004. The increase was due to increased volume growth
of $0.7 million and favorable exchange rates of $0.5 million.

The division had a successful year with substantial sales volume growth. Despite
the weak US dollar, sales into North America remained buoyant in the year. This
strong overseas sales performance was able to compensate for a flat UK market
where demand was depressed.

                                       31
<PAGE>

In the soft UK market, the main thrust continued to be the promotion of lathes,
lathe chisels and lathe chucks where the division occupied an increasingly
strong position. The introduction of the new DVR lathe in the first quarter
impacted very strongly on subsequent periods' results. This introduction was
supported by heavy promotional activity including consumer advertising, consumer
literature and in-store demonstrations. Other product sales have flowed through
as a result of this activity.

As with other divisions, Robert Sorby has suffered through the weakness of the
US dollar as a high percentage of business is generated in North America. This
position was exacerbated by the closure of a major customer in November 2003.
However the loss of the customer and the negative impact of a weak dollar was
compensated by an increase in business with other dealers.

BOWERS

2005 COMPARED TO 2004

Sales for the year showed an increase of $1.9 million (14.3%) from $13.7 million
in 2004 to $15.6 million in 2005. $1.4 million of this increase is attributable
to increased sales volume with the remaining $0.5 million due to favorable
exchange rate variances.

Quarter 4 results were in line with forecast but a larger than normal slowdown
in sales to the USA over the summer months and manufacturing capacity issues in
the UK resulted in the division being unable to recover trading profit
shortfalls in quarters 1 and 2.

The new sales and distribution facility set up in Maastricht, Holland, is now
fully operational and has continued to have a favorable impact on trading
volumes. This new facility, specializing in the distribution of portable
hardness testing equipment manufactured in China and the sale of general
engineers' hand tools, has excellent connections in mainland Europe. The
division's earnings have been depressed by considerable set-up costs but it is
anticipated that its profitability will be increased once these one-time charges
are eliminated. An allied manufacturing, quality control and distribution centre
is being established in Shanghai, China and this is expected to improve
divisional margins further once the business is fully functional during Q2 of
fiscal 2006. Currently the quality control operation for these hand tools is
being carried out in Maastricht but this will be transferred to Shanghai where
the division will benefit from lower labor costs.

Other successes in the year include solid performances in the USA, although the
growth experienced during the first three quarters of the year slowed down in
the last quarter. High sales levels of the new Smart Plug 2-point product have
also been encouraging. Good progress has been made in new markets throughout the
year and new or additional distributors have been appointed in Turkey,
Australia, Mexico, Hong Kong and Russia.

Overheads were strictly controlled throughout the year, which helped to
compensate for lower than expected revenues. A restructuring of the UK sales
operation in Q4 will also reduce overheads for the new financial year.

Margins showed marginal deteriorations due to efficiency problems at one of the
UK manufacturing sites but this will be addressed through a new capital
expenditure initiative that is to be implemented in Q1 of fiscal 2006.
Mitigating these adverse margin impacts was the slight strengthening of the $
which lowered the cost of factored items purchased from the Far East.

Looking forward, demand for own manufactured hand tools will continue to face
further pressure from cheap Far East imports and increased emphasis will be
placed on the new systems division which offers bespoke gauging solutions. The
Company therefore recognizes that it needs to continue to focus the UK
manufacturing sites on producing more high technology products and measuring
solutions. In order to make the Company more competitive in the low technology
sectors various initiatives are being explored including the establishment of
the manufacturing and distribution centre in Shanghai.

2004 COMPARED TO 2003

Sales for the year increased by $1.8 million (13.3%), rising from $11.9 million
in 2003 to $13.7 million in 2004. The increase was due primarily to favorable
exchange fluctuations with only modest sales volume growth.

The trend for the year continued into quarter 4 where a steadily improving US
market was offset by difficult trading conditions in Europe. In particular sales
to France and Italy witnessed significant reductions from the previous year
while sales into Germany saw improvements, although part of this increase was
attributable to goods being re-exported to expanding Eastern European markets.

                                       32
<PAGE>

Far Eastern markets were targeted throughout the year with additional
distribution channels opened up in China, Thailand and Malaysia. The weakness of
the US dollar has made Bowers products less competitive in these regions and
margins have therefore been affected. As many Western manufacturers relocate to
China there is an ever-increasing demand for gauges to improve product quality
and the division sees this as a major advantage over local Chinese competition.

With regard to UK sales, the final quarter of 2004 saw some improvements
although the year finished well behind expectations. The main successes were in
the Aerospace sector, with several projects signed with blue-chip manufacturers.
Likewise the systems side of the business continued to expand and the new Moore
& Wright brand of digital products achieved important listings in several of the
large UK catalog distribution companies.

The capital products within the range continued to disappoint, due to the
hesitancy of key customers to invest, but some signs of recovery were
experienced, led mainly by demand from UK based aerospace manufacturers.

The successful launch of the new Smart Plug 2-point range far exceeded
expectations.

S&J FRANCE

2005 COMPARED TO 2004

Sales in the year increased by $0.8 million (7.8%) from $9.6 million in 2004 to
$10.4 million in 2005, the increase being attributable to favorable exchange
rate variances of 0.5 million and volume increases of $0.3 million.

On a macro level the French economy has remained depressed with increased
unemployment rates, lower consumer confidence and reduced spending levels.
Business conditions in the company's markets have reflected the sluggish retail
environment with price competition and consolidation of competitors putting
pressure on margins. Additionally, the company suffers from a large amount of
French garden product turnover being concentrated in a small number of retail
outlets, which makes price negotiations very difficult. As a result of this, the
company has been forced to offer higher rebate levels to stimulate sales.

Significant marketing activity has been undertaken during the year to promote
the Company's principal brands and new listings have continued to make an
important impact especially brass ornaments, thermometer and weather station
ranges, culture products, extensions to the garden product and hand tool range
and plastic shovels. Given the seasonal nature of garden product sales, the
marketing and promotional activity undertaken in the year (new design and
packaging for the company's principal brands; creation of new web site) together
with the impact of new ranges have played an important role in the French
division.

Gross margins in the year to September 30, 2005 have improved by two percentage
points over the comparable period last year as a result of production
efficiencies and the negotiation of more favorable supplier terms. An overhead
reduction program has also been successfully implemented.

Further range expansions and the set up of a mail order service for garden
products and accessories are planned to enhance the Company's market position.

2004 COMPARED TO 2003

Sales increased by $0.9 million (10.7%) from $8.7 million in 2003 to $9.6
million in 2004, the increase being attributable to favorable exchange rate
variances of $1.1 million offset by increased sales rebates ($0.1 million) and
volume decreases ($0.1 million).

The French economy remained depressed during the year and the poor weather in
March and April resulted in reduced garden tool sales activity in the key
selling months for the garden season from which full year sales never fully
recovered.

Despite the flat trading conditions several new listings were achieved for new
products including brass ornaments and the stainless steel range extensions.

In addition the division was successful in gaining the business of two new
private labels and the increased sales orders arising from these new outlets
crystallized as additional sales revenues.

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

                                       33
<PAGE>

AUSTRALASIA

2005 COMPARED TO 2004

Sales decreased from $17.4 million in 2004 to $15.0 million in 2005, the $2.4
million (13.8%) decrease being attributable to sales volume decreases of $3.0
million and increased sales rebate levels of $0.3 million offset by favorable
exchange variances of $0.9 million.

The sales revenues of the Australian division have continued to suffer in
comparison to the prior year due to the loss of business with a major Australian
retailer, increased levels of competition and a softening in retail demand
spurred by increases in domestic interest rates which have negatively impacted
on consumer spending.

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

Margins in both Australia and New Zealand have remained under pressure given the
sluggish retail demand, the increased promotional and marketing costs necessary
to maintain sales levels, unfavorable sales mixes and reduced exchange gains
from a weakening Australian dollar. These adverse effects have been mitigated,
where possible, by improved product sourcing.

Mitigating the margin dilution have been overhead reductions over the prior year
in excess of 20% across all cost centers in the two Australasian units.

Competition from imported Asian products and the increasing trend of the large
Australian retailers to import and develop their own home brands continues to
place pressure on the sales and margins of the business. To counter this trend,
the division has instigated aggressive pricing policies to ensure it can
maintain and improve existing sales volumes and market share in all categories
in which it competes. The division also remains focused on re-establishing and
consolidating its trading relationships with retail customers and suppliers and
on maximizing the selling opportunities of the Spear & Jackson branded products.
In this regard, management has now introduced a number of new and extended
ranges and promotional programs across the digging, garden cutting, handsaw and
air tool ranges. In addition, the division has concentrated on improved product
sourcing to ensure that all S&J branded product meets customers' expectations
and is positioned within the appropriate price points. To date, not all of these
initiatives have reached their full potential but we do anticipate that
incremental sales and margin growth will be forthcoming. In addition, management
has initiated a series of cost cutting measure, including the restructuring of
the workforce, in order to meet the slow down in sales demand.

2004 COMPARED TO 2003

Sales decreased from $19.8 million in 2003 to $17.4 million in 2004, the $2.4
million (12.5%) decrease being attributable to sales volume decreases of $7.4
million compensated by favorable exchange variances of $4.1 million and reduced
sales rebates of $0.8 million.

Despite the Australian and New Zealand economies performing strongly, retail
trading slowed down in the second half of the year with the increase in domestic
interest rates driving a slow down in consumer spending.

The considerable fall in sales from 2003 is principally due to the poor
performance of hand tools, masonry products and garden tools arising from:-

(a) The interruptions to the operations of the business, particularly the
enforced reduction of promotional sales programs, resulting from the resignation
of the division's Managing Director and the restructuring of the sales and
marketing functions.

(b) The prolonged Australian drought severely affected rural trade and farm
income resulting in sales of digging and garden products failing to reach
expectations. A decline in power tool sales due to falling price points and
competition from cheap foreign imports further compounded the situation. The
adverse impact of these shortfalls was partially offset, however, by strong air
tool sales.

(c) The loss of significant power tool business with a major retailer and
changes to legislation regarding the specification of electrical goods, which
saw a substantial reduction of power tools inventories at lower than budgeted
margins to avoid significant stock obsolescence provisions.

                                       34
<PAGE>

COSTS OF GOODS SOLD AND GROSS PROFIT

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

                        Years ended September 30,     Qtrs. ended September 30,
                        -------------------------     --------------------------
                        2005     2004      2003       2005       2004      2003
                          %        %         %          %          %         %
                        ----     ----      ----       ----       ----      ----
Cost of goods sold
as a % of sales         66.99    67.92     68.61      66.59      64.83     71.32

Gross profit margin     33.01    32.08     31.39      33.41      35.17     28.68

Costs of goods sold decreased marginally to $67.5 million in the year to
September 30, 2005 from $67.6 million in 2004. In the quarter to September 30,
2005 the cost of goods sold was $14.8 million compared to $15.6 million in 2004,
an increase of 12.1%.

COMPARISON OF 2005 TO 2004

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

   -  exchange gains realized on the purchase of factored products denominated
      in US dollars from suppliers in the Far East;

   -  a more favorable and advantageous sales mix;

   -  further increase in selling directly to customers rather than via
      intermediaries;

   -  improved product sourcing and increased factoring and production
      efficiencies;

   -  negotiated price increases; and

   -  sale of slow moving inventories at amounts in excess of their net
      realizable value.

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

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

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

COMPARISON OF 2004 TO 2003

Margins were negatively impacted in the year by a number of raw material price
increases (principally rises in cost of nickel and cobalt, major raw materials
of our magnetic products, and steel), together with increases in the costs of
fuel used to operate our manufacturing processes and higher utility charges.
These adverse variances were mitigated, however, by the following factors which
has meant that overall gross profit margins improved over the year, and
especially in the last quarter of the year:

   -  exchange gains realized on the purchase of factored products denominated
      in US dollars from suppliers located in the Far East

   -  more favorable and advantageous sales mix, especially in the last quarter
      of the year

   -  the full year effect of selling directly to customers as a result of the
      decision of Neill Tools to cease trading with its major UK wholesaler,
      Toolbank

                                       35
<PAGE>

   -  Sales, at amounts greater than net written down value, of inventories of
      certain obsolete and slow-moving products

   -  the release, in September 2004, of the excess element of UK stock loss
      provisions. As in previous years these provisions had been accrued in the
      first three quarters of the year based on management's estimates of the
      expected ongoing level of stock losses. The excess portion was identified
      following the completion of the year-end inventory counts.

EXPENSES

2005 COMPARED TO 2004

Selling, general and administrative (SG&A) expenses increased by $1.7 million
(5.6%) from $29.7 million in the year ended September 30, 2004 to $31.4 million
in the year ended September 30, 2005. SG&A expenses for the quarter ended
September 30, 2005 were $7.0 million, a decrease of $0.2 million (3.3%) over the
expenses charged in the equivalent period last year.

The principal reasons for the movements are as follows:

                                            Increase/(Decrease) over Prior Years
                                            ------------------------------------
                                                Year ended      Quarter ended
                                               September 30,    September 30,
                                                   2005             2004
                                                    $m               $m
                                               -------------    -------------

a) Impact of movements in average                   1.10           (0.1)
   US$/sterling cross rates in the period

b) Increased FAS87 pension costs                    2.69            0.63

c) Inflationary increases net of foreign            0.50            0.10
   exchange gains and losses on trading
   transactions

d) Decreased head office costs relating to         (0.7)           (0.3)
   reduced legal and professional fees,
   monitor fees and associated costs

e) Increased UK warehouse and distribution          0.40            0.10
   costs following the change to direct sales

f) Release of excess provision associated with     (0.75)          (0.25)
   settlement of severance compensation
   payable to former Managing Director

g) Cost savings in Australia                       (1.1)           (0.3)

h) Other net decreases in SG&A expenses            (0.44)          (0.08)
                                                   -----           -----

Total increase (decrease) in SG&A expenses          1.70           (0.2)
                                                   =====           =====

2004 COMPARED TO 2003

SG&A expenses increased by $7.8 million (35.8%) from $21.9 million in the year
ended September 30, 2003 to $29.7 million in the year ended September 30, 2004.
SG&A expenses for the quarter ended September 30, 2004 were $7.2 million, an
increase of $1.6 million (29.6%) over the expenses charged in the equivalent
period last year.

                                       36
<PAGE>

Major reconciling items were as follows:

                                                     Increase over Prior Years
                                                   Year ended      Quarter ended
                                                  September 30,    September 30,
                                                      2004             2004
                                                       $m              $m
                                                  -------------    -------------

a) Impact of movements in average                      2.5              0.6
   US$/sterling cross rates in the period

b) Increased FAS87 pension costs                       1.0              0.2

c) Inflationary increases and set up costs of          0.6              0.2
   Florida US sales infrastructure

d) Increased head office costs relating to legal       1.1              0.3
   and professional fees, monitor fees and
   associated costs

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

f) Settlements of senior and other employees'          0.6                -
   severance liabilities in 2002/3 for amounts
   less than anticipated.  There are no
   comparable items in 2003/4

g) Exceptional bad debt recoveries in Q1               0.1                -
   2002/3 that were not repeated in 2003/4

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

i) Exchange losses suffered                            0.2                -

j) Settlement of sales tax liabilities at
   amounts less than anticipated                       0.2                -

k) Current year expansion of UK and                    0.5              0.2
   Australasian selling and administration
   functions, increased property depreciation
   and other costs

l) Increased audit and other compliance costs          0.2              0.1
                                                       ---              ---

Total increase in expenses                             7.8              1.6
                                                       ===              ===

OTHER INCOME AND EXPENSES

Other income and expenses has moved from a charge in both 2003 and 2004 ($0.1
million and $0.2 million respectively) to a credit of $0.2 million in 2005.

This improvement is attributable to higher 2005 bank interest receivable in the
Company's UK businesses. During 2004 cash balances in the UK were negatively
impacted by the cash outflows relating to the purchase of land and buildings at
Wednesbury, England for $3.2 million. This resulted in increased interest
charges during 2004. The sale of the excess element of the Wednesbury site for
$5.2 million in January 2005 and the $3.4 million derived from the disposition
of the Company's warehouse in Boca Raton have increased cash balances and
generated higher interest income.

INCOME FROM CONTINUING OPERATIONS BEFORE UNUSUAL ITEMS AND INCOME TAXES

Our profit from continuing activities before income taxes in the year ended
September 30, 2005 amounted to $2.0 million (2004 : $2.0 million, 2003 $6.3
million). In the quarter ended September 30, 2005 the profit from continuing
operations before tax was $0.6 million (2004 : $1.2 million, 2003 : $0.1 million
(loss)).

                                       37
<PAGE>

UNUSUAL OR INFREQUENT ITEMS

GAIN ON SALE OF LAND AND BUILDINGS

In the year to September 30, 2005 the Company has recorded net gains of $3.3
million on the sale of land and buildings. On January 28, 2005 the Company
completed the sale of part of its industrial site at St. Paul's Road,
Wednesbury, England and on February 15, 2005 the Company also concluded the
disposal of its warehouse and office facility in Boca Raton, Florida. Details of
these sales are as follows:

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

Sale proceeds                   5.2                    3.5                8.7
Less net book value            (2.2)                  (3.2)              (5.4)
                               -----                  -----              -----
                                3.0                    0.3                3.3
                               =====                  =====              =====

In the results for the nine months ended June 30, 2005 the Company deducted $0.7
million of reorganization costs from the gain on sale relating to the Wednesbury
property. These costs are now presented within Manufacturing Reorganization
costs below.

MANUFACTURING REORGANIZATION COSTS

Manufacturing reorganization costs comprise:
                                                      Note             $m

Manufacturing reorganization and relocation           (i)              0.4
Severance costs                                       (ii)             0.5
Fixed asset impairment write-downs                    (iii)            0.8
Release of provisions                                 (iv)            (0.6)
                                                                      -----
                                                                       1.1
                                                                      -----

(i)   As a result of the sale of the surplus element of the Wednesbury
      property, the Company is contractually obliged to vacate office and
      warehouse facilities located on these parts of the site that have been
      sold. A provision of $0.4 million has been made for costs in connection
      with this obligation. The provision principally relates to office and
      factory refurbishment and reorganization expenses together with
      expenditure in respect of departmental relocations within the remainder of
      the site. Following the sale, elements of the Wednesbury manufacturing
      operation have been closed or transferred and costs in connection with
      these initiatives are dealt with in (ii) and (iii) below.

In the final quarter of the year the Company performed a review of its UK
manufacturing operations and has now begun implementation of a number of
strategies to reduce its ongoing cost base. Costs incurred in the implementation
of these initiatives comprise:

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

(iii) The ongoing usage and remaining asset lives of the plant and machinery
      involved in the restructured operations have been reviewed and impairment
      write-downs made where necessary.

(iv)  Certain provisions made in prior periods relating to manufacturing
      initiatives that will not now be implemented following the finalization
      of the Company's UK manufacturing reorganization strategy have been
      released in the year.

INCOME TAX

Income taxes of $0.5 million were provided in the year ended September 30, 2005
(2004: 1.2 million, 2003: $1.5 million). In the quarter ended September 30, 2005
there was a tax credit of $0.2 million (2004: $0.5 million charge, 2003: $0.3
million credit).

Income taxes represented 11.1% of profit before tax in 2005 (2004: 59%, 2003:
23.8%).

                                       38
<PAGE>

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

The principal reasons for the significant fluctuations between the effective
rates of tax and the US Federal statutory rate in the periods under review are
summarized below:

a) 2005

   The effective rate in the year ended September 30, 2005 was less than the
   expected statutory rate for the following reasons:

   i)    The $3.0 million profit on the sale of the Company's excess land at
         Wednesbury, England, is not subject to taxation due to the availability
         of capital tax losses brought forward not recognized in the deferred
         tax computation. This has reduced the theoretical tax charge by $0.9
         million.

   ii)   Income within certain overseas subsidiaries within the Spear & Jackson
         Group is taxed at different rates from the effective rate. The typical
         non-US taxation rate suffered by the Company's US overseas subsidiaries
         is approximately 30% compared to a US Federal Statutory rate of 35%.
         The effect of applying a rate of 30% as opposed to 35% to the Company's
         results is a tax credit of approximately $0.1 million.

   iii)  Certain adjustments were made to prior year estimates resulting in a
         $0.2 million credit to the taxation charge.

   iv)   The utilization of certain tax losses that are not recognized within
         the deferred tax computation has further reduced the tax charge by
         $0.1m.

The above were only partially offset by items which contributed to a higher than
expected statutory rate such as:

   i)    Permanent differences between accounting and taxable income as a result
         of non-deductible expenses. (tax effect $0.1 million)

   ii)   In addition the effective rate of tax has been increased as a result
         of losses that have been incurred in the United States for which no
         utilization against future projects is envisaged in the short term and
         to which a valuation allowance has therefore been applied. (tax impact
         $0.2 million)

Because of the availability of tax net operating losses, other tax credits and
the benefit of a tax deduction (spread over four years) in respect of the
special contribution of $7.2 million that was made to the Company Pension Plan
in the year, it is not anticipated that any significant element of the taxation
provision for the year will result in the payment of income tax.

b) 2004

   The effective rate in the year ended September 30, 2004 was greater than the
   expected statutory rate for the following principal reasons:

   i)    Losses arose in the US parent company and our Australian subsidiary in
         the year which could not be offset against other taxable income and
         which were not treated as a deferred tax asset as no short-term
         utilization of these losses could be anticipated. The tax value of
         these losses was $0.6 million and the tax charge for the year has been
         increased by this amount.

   ii)   The majority of the Company's operations are located outside the
         United States. The typical non-US taxation rate suffered by the
         Company's overseas subsidiaries is approximately 30%, compared to a US
         Federal statutory rate of 35%. The effect of applying a rate of 30% as
         opposed to 35% to the Company's pre-tax earnings results in a tax
         credit of approximately $0.1 million.

                                       39
<PAGE>

c) 2003

   The effective rate in the year ended September 30, 2003 was less than the
   expected statutory rate for the following reasons:

   i)    Significant profits arose in the Company's Australian and UK
         subsidiaries, which were sheltered from taxation by the availability of
         Net Operating Losses ("NOLs"), brought forward. These NOLs had not
         previously been capitalized as a deferred tax asset due to doubts
         concerning their utilization, in the short-term, against future trading
         profits of the entity. This therefore resulted in a taxation credit of
         $0.7 million in the year.

   ii)   The Company was informed by its former parent undertaking of
         reductions required to the carrying value of UK NOLs brought forward
         from prior accounting periods. This adjustment resulted in an increase
         to the tax charged of $0.2 million.

   iii)  The typical non-US taxation rate suffered by the Company's overseas
         subsidiaries is approximately 30%, compared to a US federal statutory
         rate of 35%. The effect of applying a rate of 30% as opposed to 35% to
         the Company's pre-tax earnings results in a tax credit of $0.3 million.

   iv)   Losses arose in certain subsidiaries during the year that could not
         be offset against other taxable income and which were not treated as a
         deferred tax asset as no short-term utilization of these losses could
         be anticipated. The tax value of these losses was $0.2 million and the
         Company's tax charge for the year was correspondingly increased by this
         amount.

NET INCOME FROM CONTINUING OPERATIONS AFTER INCOME TAXES

Our net profit after income taxes from continuing operations was $3.7 million
for the year to September 30, 2005. This compares to a profit after income taxes
of $0.8 million for the year ended September 30, 2004, and $4.8 million in 2003.

DISCONTINUED OPERATIONS

Discontinued operations relate to the thread gauge measuring division of the
Metrology Division, based in the UK, and the Megapro screwdriver division of
Spear & Jackson, Inc.

During the fourth quarter of fiscal 2005, the company began marketing for sale
the thread gauge measuring business that is located in the United Kingdom. The
carrying values of the assets relating to this entity have been written down to
estimated fair value.

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

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

Total losses attributable to discontinued operations were $0.6 million in the
year ended September 30, 2005 and $0.4 million and $0.2 million in the years
ended September 30, 2004 and September 30, 2003 respectively.

                                       40
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity, cash flows and capital resources were as follows:

                                           September     September     September
                                           30, 2005      30, 2004      30, 2003
                                           $ m           $ m           $ m
                                           ---------     ---------     ---------

Cash and cash equivalents                   7.3           5.1           9.2
Overdrafts                                 (0.8)         (0.1)         (0.3)
Working capital (excluding deferred tax)   29.9          28.8          28.3
Stockholders' equity                       26.2          29.4          31.9
                                           ====          ====          ====

Net cash (used in) provided by
 operating activities                      (5.8)          3.4           6.6
Cash provided by (used in) investing
 activities                                 7.3          (7.1)         (1.7)
Cash provided by (used in) financing
 activities                                 0.7          (0.3)         (2.1)
Effect of exchange rate changes               -          (0.1)         (0.1)
                                           ----          ----          ----
Changes in cash and cash equivalents        2.2          (4.1)          2.7
                                           ====          ====          ====

DISCUSSION OF CASH FLOWS

2005 COMPARED TO 2004

Net cash used by operating activities in the year ended September 30, 2005 was
$5.8 million (2004: $3.4 million cash generation). This represents a year on
year adverse movement of $9.2 million (271%) which arose primarily from the
following:

   -  increase in net outflows from other assets and liabilities of $5.6m (194%)

   -  decrease in trade working capital inflows of $3.3 million (196%)

   -  Reduction in net income (adjusted for depreciation, gain on sale of land
      and buildings and deferred income taxes, etc) of $0.3 million (8.4%) as
      dealt with in the commentary of results above.

The reasons for these variances in the cash flow movements associated with other
assets and liabilities and trading working capital are summarized below:

(a)   Variances in cash flows attributable to other assets and liabilities

      i)    The major contributory factor is the payment of the special
            contribution of $7.2 million to the UK Pension Plan that was made in
            two equal installments in June and September 2005. Additionally,
            annual employer pension contributions increased by $0.3 million,
            from May 2005, following agreement between the company and the
            Trustees of the UK Pension Plan.

      ii)   The $0.8 million of additional legal and professional fees, monitor
            costs and related expenses accrued in the US Holding Company at
            September 30, 2004 have been partially defrayed in the year under
            review thereby giving rise to a cash outflow. Further costs will
            continue to be incurred until the monitor's duties are curtailed and
            the various litigation issues are resolved.

      iii)  Release of a $0.6 million restructuring provision (as discussed in
            manufacturing reorganization costs, above) that was made in prior
            periods.

      The adverse effect of the above has been mitigated by:

      i)    Reduced lease payments in the year payable on the UK car fleet of
            $0.2 million.

      ii)   The inclusion of UK reorganization and severance provisions at
            September 30, 2005 which will not be paid until fiscal 2006.

      iii)  An increase in the non-cash FAS 87 pension charge of $2.7 million.

                                       41
<PAGE>

(b)   Trade working capital variances.

      The net decrease in cash inflows derived from increases in trade working
      capital is as follows:

                                               Note          $ million
                                               ----          ---------

      Increased inventory outflows             (i)           (6.7)
      Increased trade receivable inflows       (ii)           4.0
      Increased trade payable outflows         (iii)         (0.6)
                                                             -----
                                                             (3.3)
                                                             -----

      i)    In the year ended September 30, 2005 inventories increased by $3.6
            million compared to a decrease of $3.1 million in the year ended
            September 30, 2005. During 2004 a rigorous inventory reduction
            program had been initiated. In addition, stock levels at September
            30, 2003 were particularly high with one-off stock builds in the
            Company's Australian subsidiary and the bulk purchase of new ranges
            of factored products in the UK. These stock-builds reversed in 2004
            thereby contributing to the cash inflows in 2004. Not only were they
            not repeated during 2005 but inventory levels have been adversely
            impacted by poor UK final quarter sales. Additionally, purchases of
            stock in the new Metrology Division in Holland have also had an
            adverse effect on inventory flows, as have strategic stock builds in
            those sectors of the UK business that are undergoing reorganization.

      ii)   UK sales in August and September 2004 benefited from increased
            turnover of approximately $1.8 million when compared to the
            equivalent period in 2003. The inflow from trade receivables in the
            year ended September 30, 2005 therefore benefits from cash received
            from these sales. Sales levels in the last quarter of 2005 across
            the majority of divisions have been lower than those witnessed in
            the last quarter of 2004. This has therefore reduced trade
            receivables and further contributed to the favorable movement in
            trade receivables when compared to last year.

      iii)  Decreased trade payable inflows of $0.6 million have arisen in the
            year due to increasing levels of purchases from overseas on reduced
            payment terms.

Cash inflow from investing activities in the year ended September 30, 2005 was
$7.3 million compared to an outflow of $7.1 million in 2004. The year ended
September 30, 2005 includes $5.2 million relating to the sale of land at
Wednesbury, England and $3.5 million relating to the warehouse and office
facility at Boca Raton, Florida. Purchases of plant and equipment were $1.4
million including $0.4 million on leased motor vehicles. The net outflow in 2004
relates primarily to $3.2 million that was paid to purchase the land and
buildings at Wednesbury, England and $3.3 million paid in respect of the
acquisition of the warehouse and office facilities at Boca Raton, Florida.

Net cash provided by financing activities was $0.7 million compared to an
outflow of $0.3 million in 2004. The 2004 outflow principally represents the
repayment of the overdrafts in the company's French subsidiary. The 2005 inflow
relates to the utilization of the United Kingdom bank overdraft facility.
Despite the receipt, in January 2005, of $5.2 million in relation to the sale of
the land and buildings at Wednesbury, the special pension contribution of $7.2
million paid in June and September 2005 and the payment, in quarter 4, of
various UK reorganization costs, has led to a utilization of part of the UK bank
overdraft facility.

2004 COMPARED TO 2003

Net cash generated from operating activities in the year ended September 30,
2004 was $3.4 million (2003: $6.6 million). This represents a decrease of $3.2
million (48.9%) that arose primarily from the factors discussed below:-

   -  reduction in net income (adjusted for depreciation and deferred taxes) of
      $4.0 million (47.5%) as dealt with in the commentary of the 2004 results,
      above.

   -  increase in trade working capital inflows of $0.7 million (81.1%).

   -  increase in net inflows from other assets and liabilities of $0.1 million
      (5.5%).

                                       42
<PAGE>

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

(a)   Trade Working Capital Variances

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

                                               Note          $ million
                                               ----          ---------

      Increased inventory inflows              (i)            4.2
      Reduced trade receivable inflows         (ii)          (5.8)
      Increased trade payable inflows          (iii)          2.3
                                                              ---
                                                              0.7
                                                              ---

      (i)   UK inventories show year on year reductions which are attributable,
            in part, to the ongoing implementation of the group inventory
            reduction program. In addition, stock levels at September 30, 2003
            were particularly high, with one-off stock builds in the Company's
            Australian subsidiary and the purchase of new factored products in
            the UK. These stock-builds have reversed in the year resulting in a
            favorable inventory inflow.

      (ii)  UK sales in August and September 2002 benefited from increased
            turnover of approximately $1.1 million with the Company's principal
            UK distributor, as that company placed additional sales orders pre
            year end in order to secure higher sales rebate levels. This
            increased sales activity increased trade receivables at September
            30, 2002 to higher than normal levels. As a result of this, the cash
            flow in the year ended September 30, 2003 benefited from the receipt
            of the cash receivable from these extra sales. Following the
            cessation of trade with the UK distributor in April 2003, there were
            no similar sales in August and September of 2003, and so the cash
            flows in the year ended September 2004 have been correspondingly
            reduced.

            In addition, trade receivable balances in the Neill Tools division
            at September 30, 2004 have increased, reflecting both the higher
            level of sales in the month of September 2004 and the change in the
            customer base resulting from the division's decision to deal with
            customers directly rather than via intermediary wholesalers.

      (iii) Favorable trade payable variances compared to 2002 arise as a
            result of the 2003 movement on trade payables being negatively
            impacted by the payment in that year for significant stocks
            purchased at the 2002 period end by the Company's Australian
            subsidiary that were sold immediately after the year end.

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

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

      (i)   $0.8 million of additional legal and professional fees, monitor
            costs and related expenses accrued in the US holding company at
            September 30, 2004.

      (ii)  That element of the Pension Plan liability recognized on the
            balance sheet that relates to the FAS87 charge has increased from
            $0.3 million in 2003 to $1.3 million in 2004.

      The benefits of the above inflows have been reduced by:

      (i)   An interim payment in March 2004 of $0.4 million relating to the
            settlement payable in respect of the termination of the former
            managing director of Spear & Jackson, plc.

      (ii)  Full annual effect of $0.7 million in respect of the increased
            lease payments in the year payable on the UK car fleet that was
            replaced between January and April of 2003.

                                       43
<PAGE>

Cash outflow from investing activities was $7.1 million in the year ended
September 30, 2004, compared to $1.7 million in 2003. Fiscal 2004 includes $7.2
million of capital expenditure, $3.2 million of which relates to the purchase of
land and buildings at Wednesbury, England which is the base for our UK garden
tools manufacturing operation. Prior to its purchase this property was being
leased from the former owners of Spear & Jackson, plc. A further $3.3 million
relates to the purchase of a distribution outlet at Boca Raton, Florida. The
2003 comparatives include $2.9 million of capital expenditure which principally
relates to the replacement of the UK car fleet under capitalized operating
leases. In addition the 2003 cash flow also includes $1.0 million relating to
the sales proceeds derived from the replacement of the UK car fleet. This was
not repeated in 2004.

Net cash absorbed by financing activities was $0.3 million in 2004 compared to
$2.1 million in 2003. The 2004 outflow principally represents the repayment of
overdrafts in the Company's French subsidiary. The 2003 financing activity
outflow reflects, inter alia, the $1.0 million repayment of the Company's
Australian subsidiary's overdraft, the repayment of $0.2 million promissory
notes issued in connection with the purchase of Spear & Jackson plc and Bowers
Group plc and the $0.5 million repurchase of common stock.

BANK FACILITIES

The UK subsidiaries of Spear & Jackson plc and Bowers Group plc maintain a line
of credit of $8.0 million. This is secured by fixed and floating charges on the
assets and undertakings of these businesses. Of the total facility, $5.3 million
relates to bank overdrafts and $2.7 million is available for letters of credit.
These facilities are denominated in British pounds. The overdraft carries
interest at UK base rate plus 1%. At September 30, 2005 the company had $0.8
million (2004: $nil) outstanding under the overdraft line and $0.6 million in
outstanding letters of credit (2004: $1.5 million).

As a consequence of the special pension contributions of $7.2 million that was
paid in two installments in June and September 2005, and the additional funding
which will be required to finance the forthcoming restructuring initiatives, an
open-ended, on demand bridging loan of $5.3 million has been secured with the
company's UK bankers. The facility is denominated in British pounds and is
secured by a first legal charge over the remaining Wednesbury land and property.
It carries interest at UK base rates plus 1%. This facility had not been
utilized at September 30, 2005 and has not yet been used in Q1 of Fiscal 2006.

The French and Australian subsidiaries of Spear & Jackson plc maintain
short-term credit facilities of $2.8 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 nothing outstanding under the
overdraft lines at September 30, 2005 (2004: $0.07 million) and $0.1 million of
letters of credit and bills were outstanding under these facilities at September
30, 2005 (September 30, 2004 : $0.9 million).

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

The Company's bank accounts held with the HSBC Bank plc by UK subsidiaries of
Spear & Jackson plc and Bowers Group plc form a pooled fund. As part of this
arrangement the companies involved have entered into a cross guarantee with HSBC
Bank plc to guarantee any bank overdraft of the entities in the pool. At
September 30, 2005 the extent of this guarantee relating to gross bank
overdrafts was $20.4 million (September 30, 2004 $20.5 million). The overall
pooled balance of the bank accounts within the pool at September 30, 2005 was a
net overdrawn balance of $0.8 million (September 30, 2004 $1.6 million cash in
hand).

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

Our business operations have been funded from net operating income supplemented,
where necessary, by utilization of the UK, French and Australian banking
facilities described above. We believe what we have sufficient capital
resources, liquidity and available credit under our current principal banking
facilities supplemented, where necessary, by temporary increases, to sustain our
current business operations and normal operating requirements for the
foreseeable future.

                                       44
<PAGE>

As the Company continues to focus its efforts on improving the competitiveness
of its worldwide operations, additional funding may be required to finance
restructuring of the non-profitable areas of the Company's divisions and to meet
items of significant one-off expenditure. Such expenditure may include: site
reorganization costs at the Company's manufacturing facility in Wednesbury,
England; investment in new capital equipment; further special contribution
payments to reduce the pension plan deficit; and any expansion of the Spear &
Jackson or Bowers operations.

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

OUTLOOK

The first two months of Quarter 1 2006 are in line with expectations and show a
break even position before consideration of FAS 87 charges. We anticipate that
because of the seasonal nature of our garden products businesses in the UK and
France and the low sales level in December, a trading loss will be recorded in
that month and for the first quarter as a whole. This trading pattern is
consistent with the prior year. The base trading loss will be exacerbated by a
significant increase in the non-cash FAS 87 pension charge. The Company's
actuaries anticipate that the charge will rise by $4.2 million from $4.0 million
in 2005 to $8.2 million in the year ended September 30, 2006. After deduction of
the revised pensions charge a loss for the first quarter of $1.6 million is
forecast. The increase of $4.2 million in the SFAS 87 pension charge will
clearly have a significant adverse effect on the Company's earnings in fiscal
2006. Management will consider all available operational strategies to mitigate
the negative impact of this increased expense so that any trading losses in the
year ended September 30, 2006 which arise as a result of the increase in pension
costs are reduced as far as possible.

Within the hand and garden business, competition remains fierce from cheap
foreign imports and the softening of demand in the UK retail sector is having an
adverse effect on sales as our major UK retailers instigate aggressive inventory
reduction programs to counter falling consumer interest. Demand from our export
markets, particularly the Far and Middle East has also begun to slacken as the
intensive purchasing activity resulting from building projects in the aftermath
of the Iraqi conflict has now started to decline.

Other elements of the UK hand and garden business have performed encouragingly.
In the woodsaw and hacksaw blades sectors, significant capital investment has
been carried out to ensure that production can keep pace with demand and future
growth prospects. It is unlikely, however, that the high level of demand for
these products will be sufficient to fully offset the adverse effects of the
general downturn in demand in the UK retail sector.

In response to the poor sales performance and increased competition at ever
lower price points from Far Eastern markets, the Company performed a detailed
review of its UK manufacturing operations in Q4 of 2005 and has now begun
implementation of a number of strategies to reduce its ongoing cost base.

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

To counteract this trend, management of the Australian and New Zealand
operations has developed and introduced a number of new and extended ranges and
promotional programs under the S&J brand across the digging, garden cutting,
hand saw, masonry and air tool ranges and these have been supplemented with new
ranges of electrical generator battery charges and drainage products. Going
forward these ranges should deliver incremental sales and margin growth.

Additionally, an overhead reduction program, including the restructuring of the
sales and distribution workforce, initiated in Australia and New Zealand during
fiscal 2005, was successfully implemented and management will continue to focus
on the removal of all excess costs from the business.

Within the Metrology division the new selling and distribution outlet in
Maastricht is now fully operational. The entity's trading results in 2005 were
depressed because of the incidence of pre-time start up costs. No similar items
are anticipated in 2006 and profitability should increase through the
elimination of these one-time costs and through incremental sales growth. This
earnings growth will be enhanced by the division's quality control and
distribution centre which has been established in Shanghai, China and which is
expected to become fully functional in Q2 of fiscal 2006.

                                       45
<PAGE>

Looking forward, demand for low cost, own manufactured hand tools will continue
to face further pressure from the Far East and increased emphasis will be placed
on the new systems division that offers bespoke gauging solutions. The Company
therefore recognizes that it needs to continue to focus the UK manufacturing
sites on producing more high technology products and measuring solutions. In
order to make the Company more competitive in the low technology sectors various
initiatives are being explored including the establishment of a full
manufacturing and distribution centre in the Far East.

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

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

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

Outside the UK, the level of overhead expenses, particularly legal and
professional costs, incurred by our US corporate head office has reduced
following the settlement of the SEC suit during 2005. However, any future
savings will be offset by the professional costs that are anticipated to be
incurred in relation to the Class Action law suit and the $4.4 million increase
in the FAS 87 pension charge referred to above.

In the forthcoming year we will continue to focus on improving cash generation.
2005 has benefited significantly from the sale, in January 2005, of the excess
element of the Company's Wednesbury manufacturing site for approximately $5.2
million and further funds were generated via the disposal of the Company's
warehouse and office premises at Boca Raton, Florida in February 2005 for
approximately $3.4 million.

The proceeds of these sales have enabled us to fund operational restructuring
initiatives and other capital projects, finance both the $7.2 million special
contribution into the UK defined benefit pension plan (paid in two equal
installments in June and September 2005), and the increase of approximately $0.7
million in annual pension contributions. Such payments will enable the current
deficit in the plan to be reduced, and will, subject to certain conditions fix
our pension payment commitments until April 2007. As a consequence of the
special pension contribution referred to above and the additional funding which
will be required to finance the forthcoming restructuring initiatives, an
open-ended, on demand bridging loan of $5.3 million has been secured with the
Company's UK bankers.

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

As noted previously, the SEC announced on February 10, 2005 that it had settled
its securities fraud charges against Mr. Dennis Crowley, the Company's former
CEO and Chairman, the Company and others. The Company has been able to deal with
the significant business disruptions and distractions which the SEC legal action
has caused and the formal resolution of this litigation has enabled the Company
move forward in a more focused and structured manner so that both its short ad
long term strategies can be formulated and delivered. Inevitably, however,
uncertainties will still impact upon the Company's operations until the
financial effects of the Class Action and Derivative Complaint, explained in
detail in ITEM 3, "Legal Proceedings", are quantified and resolved.

                                       46
<PAGE>

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

The Company makes a range of contractual obligations in the ordinary course of
business. The following table summarizes the Company's principal obligations at
September 30, 2005:

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

Capital lease obligations      1.0          0.6        0.4      -         -
Operating leases
(note a)                       6.9          1.0        2.0      1.7       2.2
                               ---          ---        ---      ---       ---
                               7.9          1.6        2.4      1.7       2.2
                               ---          ---        ---      ---       ---

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

(b)   Excluded from the above tables are the amounts payable by the Company to
      the UK defined benefit pension plan as future funding obligations over the
      five year term shown above cannot be accurately forecast. The annual
      contribution rate is set annually by the actuary in accordance with the
      applicable UK regulatory legislation. In the year ended September 30, 2005
      the Company paid $10.2 million into the plan including a special
      contribution of $7.2 million. In the years ended September 30, 2006 and
      September 30, 2007, providing certain criteria are met, the annual
      contributions will be fixed at (pound)1.9 million (approximately $3.3
      million).

(c)   As at September 30, 2005, the Company had letters of credit of $0.7
      million outstanding that are secured by the UK and Australian credit
      facilities.

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

DISCUSSION OF CRITICAL ACCOUNTING POLICIES

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

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

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 labor plus
attributable overheads based on a normal level of activity. As above, in certain
subsidiaries, inventories of factored products are valued at average cost.

                                       47
<PAGE>

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

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:
                                                  2005             2004
                                                  ----             ----
                                                   $m               $m
   Gross Stock
      -  raw materials and consumables             5.3              5.9
      -  work in progress                          6.4              5.2
      -  finished goods                           19.8             16.8

   Less
      -  slow moving, obsolete and net
         realizable value provisions              (6.5)            (5.9)
                                                  ----             ----
   Net Stock Valuation                            25.0             22.0
                                                  ====             ====

The overall increase in the net value of inventory is $3 million which is stated
using year end US$ cross rates. The year end cross rate at September 30, 2005
was 1.7688 compared to 1.7976 at September 30, 2004. Restating the 2004
inventory at the 2005 closing cross rate would have the effect of reducing the
2004 inventories by $0.4 million. The total stock movement, excluding currency
fluctuations, is therefore an increase of $3.4 million. This increase is
attributable to:

(i)   Rigorous stock reduction programs initiated during the year to September
      30, 2004 were not repeated in the year to September 30, 2005.

(ii)  Poor retail sales in the UK in the last quarter of the year lead to
      higher than usual stock-builds.

(iii) Strategic stock builds in those sectors of the UK business that are
      undergoing reorganization.

(iv)  Stock held at the Company's operation in Maastricht which was established
      during the year.

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

                                           2005          2004
                                           ----          ----
                                            $m            $m

Balance brought forward                     5.9           5.8
Provisions released following
  disposal of inventory                    (0.5)         (0.7)
Additional provisions made                  0.9           0.4
Exchange movements                          0.2           0.4
                                           ----          ----
Balance carried forward                     6.5           5.9
                                           ====          ====

While the Company has benefited in income terms from selling considerable
volumes of stock previously written down, the inventory reserve has increased
during the year. This is primarily due to inventory write-downs that were
required in discontinued operations in order to restate inventories at their
estimated net realizable value.

                                       48
<PAGE>

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 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 the Company 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
                    $m               %                $m
                    --------         ------           ------

Target   1          0.5               5.0             0.025
         2          0.75              7.5             0.056
         3          1.0              10.0             0.100
         4          1.25             12.0             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.

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,
2005 was $0.4 million (September 30, 2004 $0.03 million).

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, Dutch, 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 that do not affect cash flow in the medium term.

                                       49
<PAGE>

PENSION AND POST-RETIREMENT BENEFIT OBLIGATIONS

A. ACTUARIAL BACKGROUND

The Company operates a contributory defined benefit pension plan ("The Plan")
covering certain of its employees in the United Kingdom based subsidiaries of
Spear & Jackson plc.

The overall funding objective of the Plan is to hold assets that are sufficient
to cover the Plan's past service and 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 Plan was carried out at December 31,
2004. This showed the following:

                                                           $M
                                                           --

         Value of past service ongoing liabilities       (190.0)
         Market value of assets                           150.0
                                                          -----
         Past service deficit                             (40.0)
                                                          =====

         Funding ratio                                     79%

Under the United Kingdom Pensions Act 1995, plans 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 89%.

The previous full actuarial valuation was performed at April 5, 2002. The Plan
funding and MFR funding ratios at that date and at September 30 financial year
ends thereafter have been:

                                                 Funding Ratios
                                              Plan %         MFR %
                                              ------         -----

         April 5, 2002                        94             94
         September 30, 2002                   78             91
         September 30, 2003                   89             96
         September 30, 2004                   81             92

At September 30, 2005 (the latest date at which information is available for the
current year annual filing), the base funding ratio and MFR funding ratio had
strengthened to 85% and 96% respectively.

Company pension contributions are determined by the Trustees of the Plan with
the agreement of the principal employer and after consultation with the actuary.
Contribution levels are set with the intention of eliminating the past service
deficit in the long term.

Following the December 2004 actuarial valuation of the Plan, the rate of
employer contribution fell due for re-certification on or before May 31, 2005.
After discussion between the Plan trustees and the Company it was agreed that
the Company would make a special contribution to the Plan of (pound)4 million
(approximately $7.2 million) payable in two installments of (pound)2 million
(approximately $3.6 million) in June and September 2005. It was also agreed that
from June 2005 the Company's annual rate of pension contribution would increase
to (pound)1.9 million (approximately $3.3 million).

The actuary has confirmed that this contribution rate, which will remain fixed
until September 30, 2007 providing certain funding criteria are met, is adequate
for the purpose of securing that the MFR funding ratio will be returned to 100%
by the end of 10 years. The Company believes that payments at the current level
will be adequately funded from future annual operating cash generation.

Contributions depend on the future experience of the Plan subsequent to the
valuation date, particularly the investment returns. The next valuation of the
Plan will be carried out no later than December 31, 2007. It is intended that
the contribution rate will be reviewed in 2007 and any adjustments to the rate
agreed at that time. Should such agreement not, however, be reached by August
31, 2007, then the Company's contribution will increase to (pound)3 million
(approximately $5.3 million).

                                       50
<PAGE>

Contributions will therefore be subject to review, upwards or downwards, at
future actuarial valuations. Company contribution rates, which in previous years
have been expressed as a percentage of relevant pensionable earnings, have been
as follows:

                                                  Rate
                                                  %
                                                  ----

         Prior to June 1, 2000                     5.0
         June 1, 2000 to July 31, 2001            28.5
         August 1, 2001 to October 30, 2002       24.8
         October 31, 2002 to May 31, 2005         21.2

The amounts of employer contributions paid at these rates in recent accounting
periods are:

         Year Ended                               $ million
         ----------                               ---------

         September 30, 2003                        2.7
         September 30, 2004                        2.8
         September 30, 2005                       10.2

The contributions paid in the year ended September 30, 2005 include a special
contribution of $7.2 million.

B. PRESENTATION OF PENSION AND POST RETIREMENT BENEFITS UNDER SFAS 87

Several statistical and other factors which attempt to anticipate future events
are used in calculating the expense and liabilities relating to the Plan. These
factors include assumptions about the discount rate, expected return on Plan
assets and rate of future compensation increases as determined by us, within
certain guidelines, and in conjunction with our actuarial consultants and
auditors. In addition, our actuarial consultants also use subjective factors
such as withdrawal and mortality rates to estimate the expense and liability
related to the Plan. 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.

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
AA-rated corporate bonds). The present values of the Company's future pension
and other post-retirement obligations were determined using discount rates of
5.0% at September 30, 2005, and 5.5% at September 30, 2004 and September 30,
2003.

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 2.9% and 6.5% in the year ended September 30, 2005 (2004: 2.8% and
7.0% respectively, 2003 : 2.5% and 7.5% respectively).

As noted above, a number of statistical and other factors are utilized in
determining the assumptions about the discount rate, expected return on Plan
assets, rates of future compensation and inflationary increase and mortality
rates necessary for the preparation of the disclosures relating to the Company's
Pension Plan which are required in accordance with SFAS 87. The use of different
assumptions may have a significant impact on the measurement of the profit and
loss account pension expense and the balance sheet pension liability that are to
be recognized in the Company's financial statements.

                                       51
<PAGE>

Certain of these assumptions have judgmental aspects. There is, therefore, the
potential for a range of acceptable values to be available for several of the
assumptions at any time, all of which could be justified and considered
appropriate for the purposes of compiling the necessary disclosures under SFAS
87.

The range of possible acceptable assumptions reflects, inter alia, degrees of
optimism and caution that the actuaries can build into their assumption models
concerning certain macro and micro economic conditions and other demographic
factors. Further, because of the constantly evolving nature of such economic and
demographic factors, assumptions will not remain constant over time but will
move to reflect changes in the principal calculation drivers that underpin them.

The following sensitivity table illustrates the impact on the Company's balance
sheet and the amounts charged against the Company's earnings in respect of SFAS
87 pension expense as a result of making changes in certain of the key
assumptions used in calculating the assets and liabilities of the Pension Plan:

                                                  Impact on
                                                 September 30,
                                                     2005            Impact on
                              Impact on 2006      Projected        September 30,
                              Pre-Tax Pension       Benefit        2005 Equity
Change in Assumption              Expense         Obligation       (Net of tax)
--------------------          ---------------   --------------    --------------

25 basis point
decrease in discount rate     +$0.74 million    +$9.09 million    -$6.08 million

25 basis point
increase in discount rate     -$0.71 million    -$8.67 million    +$5.84 million

25 basis point
decrease in expected
return on assets              +$0.37 million    -                 -

25 basis point
increase in expected
return on assets              -$0.37 million    -                 -

25 basis point
increase in compensation
assumption                    +$0.16 million    +$0.78 million    -

25 basis point
decrease in compensation
assumption                    -$0.16 million    -$0.76 million    -

Use of PA80C2010
Mortality table               -$1.38million     -$10.44million    +$7.04million

Given below, in tabular format, is a summary of the assumptions used in the
preparation of the SFAS 87 pension calculations in the years ended September 30,
2005, 2004, 2003 and 2002.

ASSUMPTIONS SUMMARY
                                SEPTEMBER    SEPTEMBER    SEPTEMBER    SEPTEMBER
                                  2005         2004         2003          2002
                                ---------    ---------    ---------    ---------
WEIGHTED AVERAGE  ASSUMPTIONS

Discount rate                       5.00%        5.50%        5.50%        5.75%
Rate of compensation increase       2.90%        2.80%        2.50%        2.25%
Expected return on assets           6.50%        7.00%        7.50%        7.50%
Fixed pension increase              5.00%        5.00%        5.00%        5.00%
LPI pension increase                2.70%        2.70%        2.50%        2.25%
Post 1988 GMP increase              2.40%        2.40%        2.00%        1.85%
Inflation                           2.80%        2.80%        2.50%        2.25%
Mortality table                         -         PA80         PA90         PA90
Mortality table -
 current pensioners             PA92C2005            -            -            -
Mortality table -
 future pensioners              PA92C2015            -            -            -


                                       52
<PAGE>

Using the assumptions referred to above, the funded status of the Plan under FAS
87 at September 30, 2005, 2004, 2003 and 2002 was as follows:

                                 9/30/05      9/30/04      9/30/03      9/30/02
                                  $'000        $'000        $'000        $'000
                                ---------    ---------    ---------    ---------
Projected benefit obligation    (213,471)    (180,375)    (154,105)    (132,953)
Fair value of plan assets        170,110      141,257      124.355      109,141
Projected benefit obligation
  in excess of plan assets       (43,361)     (39,118)     (29,750)     (23,812)
Unrecognized actuarial loss       69,907       59,902       47,637       38,146
Net amount recognized             26,546       20,784       17,887       14,334

As at September 30, 2002, 2003, 2004 and 2005 the projected benefit obligation
is in excess of Plan assets. The impact of this underfunding has not been
recognized in its entirety in the above tabulations but has, instead, been
deferred or spread over the assumed future working lifetime of 13 years for
active Plan members in years 2002 to 2004 and 12 years in 2005.

The majority of the unrecognized actuarial loss has arisen as a result of
substantial asset losses, significant liability increases due to a continuing
reduction in the discount rate and the increased longevity of Plan participants.
The impact of the reduction in the discount rate has been particularly severe
for the Plan given that a significant proportion of pensions increase has a
fixed 5% element when in payment.

Due to the lower discount rate, a decline in the fair market value of plan
assets during 2002 and 2003 and the use of revised mortality tables, the
accumulated benefit obligation at September 2002, September 30, 2003 and 2004
exceeded the fair value of plan assets by $20.4 million, $25.3 million and $33.5
million respectively. At September 30, 2005, the ABO again exceeded the market
value of plan assets. The excess at the 2005 period end was $36.0 million and a
net of tax comprehensive loss of $6.3 million has been charged against
shareholders' equity in 2005. Cumulative amounts recognized in the consolidated
balance sheet at September 30, 2005, together with comparative disclosures for
2002, 2003 and 2004 are therefore as follows:

                                         2005       2004       2003      2002
                                         $'000      $'000      $'000     $'000
                                         -----      -----      -----     -----

Accrued pension liability               (35,954)   (33,545)   (25,262)  (20,442)
  (disclosed in other liabilities)
Other comprehensive income               62,500     54,329     43,149    34,776
  (disclosed in shareholders' equity)
Net amount recognized                    26,546     20,784     17,887    14,334

Unless Plan experience is significantly more favorable than expectations then it
is anticipated that the accumulated benefit obligation at September 30, 2006
will again exceed the fair value of plan assets.

Under SFAS 87, the following amounts have been charged against earnings in the
years ended September 30, 2005, 2004 and 2003.

                     $m
                     ---
            2005     4.0
            2004     1.3
            2003     0.3

The Company has been advised by its actuaries that the comparable SFAS87 pension
charge for the year ended September 30, 2006 will be approximately $8.2 million.

The increase of approximately $4.2 million is primarily due to an increase in
the projected benefit obligation relative to the increase in the market related
value of assets. The market related value of assets, which is used to calculate
the deferred losses in the Plan and the expected return on assets, smoothes the
movements in the fair value of assets over a five year period.

                                       53
<PAGE>

During the year ended September 30, 2005 the fair value of assets increased by
around 20%. This increase was broadly in line with the increase in the projected
benefit obligation over the same period. However, the impact of the increase in
the fair value of assets on the pension cost is to be spread over five years.
For illustrative purposes, if the full impact of the increase in the fair value
was to be taken into account in the SFAS 87 pension charge calculation, the
pension cost for the year ending September 30, 2006 would be approximately $3.0
million lower. Therefore, a significant part of the increase in the pension
charge is attributable to the market related value calculation. Recognition of
the deferred gain over the next four years would, if Plan experience is broadly
in line with expectations, lead to a corresponding decrease in the pension
charge over that time.

INCOME TAXES

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

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

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

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

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

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

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

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

                                       54
<PAGE>

The Company has recorded significant deferred tax assets in its current and
prior year consolidated balance sheets. SFAS 109, "Accounting for Income Taxes",
requires a valuation allowance to be established when it is "more likely than
not" that all or a portion of a deferred tax asset will not be realized. A
review of all available positive and negative evidence is undertaken by the
Company each year to determine the likelihood of realizing the deferred tax
benefits that potentially arise on its property, plant and equipment, the UK
pension benefit plan, accruals and allowances, inventories and tax loss carry
forwards.

Such reviews consider the available positive and negative evidence, and comprise
all those factors believed to be relevant, including the Company's recent
operating results and its expected future profitability, including the impact of
its manufacturing restructuring strategies. Based on these reviews, the Company
can then determine whether there is a reasonable expectation that it will
generate sufficient future taxable income such that its gross deferred tax
assets relating to property, plant and equipment, the UK pension benefit plan,
accruals and allowances and inventories are "more-likely-than-not" to be
realized under the SFAS 109 criteria.

The gross deferred tax assets in respect of tax loss carry forwards and other
tax credits currently relate to operating loss carry forwards ("NOLS") in the
Company's UK, US and Australian companies and to other UK tax credits. The
Company's NOLs arising in the UK, France and Australia can be carried forward
without time expiration while the US tax losses expire at various dates between
2017 and 2020. A recent history of operating losses in the entities concerned
and other factors has precluded the Company from demonstrating that it is more
likely than not that the benefits of these domestic and foreign operating loss
carry forwards and other tax credits will be realized. Accordingly, at September
30, 2005 and prior years, a full valuation allowance has been recorded against
these items.

Spear & Jackson will continue to review the recoverability of its deferred tax
assets and, based on such periodic reviews, the Company could recognize a change
in the valuation allowance relating to its deferred tax assets in the future
should, for example, estimates of forecast taxable income be reduced or other
favorable or adverse events occur.

RECENT ACCOUNTING PRONOUNCEMENTS

See note 2 in the "Notes to the Consolidated Financial Statements in Part II of
this Annual Report on Form 10-K.

                                       55
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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

INTEREST RATE RISK

The Company is exposed to interest rate changes primarily as a result of
interest payable on its bank borrowings and interest receivable on its cash
deposits. At September 30, 2005 the Company had borrowings in the form of
overdrafts amounting to $0.8 million that are repayable on demand and had cash
and cash equivalents of approximately $7.3 million. Given the current levels of
borrowings, the Company believes that a 1% change in interest rates would not
have a material impact on consolidated income or cash flows. Holding the same
variables constant, a 10% increase in interest rates would again have a
negligible effect on interest payable.

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

EXCHANGE RATE RISK

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

In the year ended September 30, 2005 compared to the equivalent period in 2004,
the change in exchange rates had the effect of increasing the Company's
consolidated sales by $4.0 million, or 3.9%. Since most of the Company's
international operating expenses are also denominated in local currencies, the
change in exchange rates had the effect of increasing operating expenses by $1.1
million for the twelve months ended September 30, 2005 compared to the
comparable prior year period. If the US dollar further weakens in the future, it
could result in the Company having to suffer reduced margins in order for its
products to remain competitive in the local market place.

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

We manage the risk and attempt to reduce such exposure by periodically entering
into short term forward exchange contracts. At September 30, 2005 the Company
held forward contracts to sell Australian and New Zealand dollars to buy
approximately $10 million US dollars.

The contract values were not materially different to the period end value of the
contracts. A 10% strengthening or weakening of the US$ against its Australian
and New Zealand counterparts could, however, result in the Company suffering
losses or benefiting from gains of approximately $0.1 million had no forward
contracts been taken out.

COMMODITY PRICE RISK

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

CREDIT RISK

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

At September 30, 2005 the Company had made an allowance of $1.5 million in
respect of doubtful accounts which management believes is sufficient to cover
all known or expected debt non-recoveries.

                                       56
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                      INDEX


                                                                     Page Number

Report of Independent Registered Public Accounting Firm                  F-1

Report of Former Independent Registered Public Accounting Firm           F-2

Consolidated Balance Sheets as of September 30, 2005 and 2004            F-3

Consolidated Statements of Operations for the years ended                F-4
September 30, 2005, 2004 and 2003

Consolidated Statements of Changes in Stockholders' Equity               F-5
for the years ended September 30, 2005, 2004 and 2003

Consolidated Statements of Cash Flows for the years ended                F-6
September 30, 2005, 2004 and 2003

Notes to Consolidated Financial Statements                               F-7


                                       57
<PAGE>

REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Spear & Jackson, Inc.
Chicago, Illinois

We have audited the accompanying consolidated balance sheets of Spear & Jackson,
Inc. and Subsidiaries (the "Company") as of September 30, 2005 and September 30,
2004 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the years in the two-year period ended September 30,
2005. 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 audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the 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 consolidated financial position of Spear &
Jackson, Inc. as of September 30, 2005, and September 30, 2004 and the results
of its operations and its cash flows for each of the years in the two-year
period ended September 30, 2005, in conformity accounting principles generally
accepted in the United States of America.

/s/ Chantrey Vellacott DFK LLP
Chartered Accountants,
London, England

December 23, 2005

                                       F-1
<PAGE>

REPORT OF FORMER INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors
Spear & Jackson, Inc.
Boca Raton, Florida

We have audited the consolidated balance sheet of Spear & Jackson, Inc. as of
September 30, 2003 and the related accompanying consolidated statements of
operations, stockholders' equity and cash flows for the year ended September 30,
2003. 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 the standards of the Public Accounting
Oversight Board ( United States) . 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 results of the operations of Spear &
Jackson, Inc. and its cash flows for the year ended September 30, 2003, 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-2
<PAGE>
<TABLE>
                                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

                                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
                                                                              FOR THE FISCAL YEARS ENDED
                                                                    SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                                                                        2005            2004            2003
                                                                    -------------   -------------   -------------
<S>                                                                  <C>            <C>             <C>
Net sales                                                            $   100,698    $     99,485    $     90,124
Cost of goods sold                                                        67,463          67,574          61,838
                                                                     -----------    ------------    ------------
Gross profit                                                              33,235          31,911          28,286

Operating costs and expenses:
  Selling, general and administrative expenses                            31,405          29,753          21,909

                                                                     -----------    ------------    ------------
Operating income                                                           1,830           2,158           6,377

Other income (expense)
  Rental income                                                              157             184             136
  Interest (net)                                                              47            (300)           (237)

                                                                     -----------    ------------    ------------
Income from continuing operations before unusual or
 infrequent items and income taxes                                         2,034           2,042           6,276
Unusual or infrequent items:
  Gain on sale of land and buildings                                       3,279               -               -
  Manufacturing reorganization costs                                      (1,111)              -               -

                                                                     -----------    ------------    ------------
Income from continuing operations before income taxes                      4,202           2,042           6,276

Provision for income taxes                                                  (468)         (1,205)         (1,497)
                                                                     -----------    ------------    ------------

Net income from continuing operations                                      3,734             837           4,779
                                                                     -----------    ------------    ------------
Discontinued operations:

  Loss from discontinued operations                                         (163)           (214)            (66)
  (net of income taxes of $nil in 2005 and 2004 and $44 in 2003)
  Provision for losses on disposal of discontinued operations               (476)           (187)            (97)
                                                                     -----------    ------------    ------------

Net loss from discontinued operations                                       (639)           (401)           (163)
                                                                     -----------    ------------    ------------

Net income                                                           $     3,095    $        436    $      4,616
                                                                     ===========    ============    ============
Basic and diluted net income (loss) per share:

  From continuing operations                                         $      0.42    $       0.07    $       0.40

  From discontinued operations                                             (0.07)          (0.03)          (0.01)
                                                                     -----------    ------------    ------------

                                                                     $      0.35    $       0.04    $       0.39
                                                                     ===========    ============    ============

Weighted average shares outstanding                                    8,845,290      11,741,122      11,988,930
                                                                    ============    ============    ============

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

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

                                 CONSOLIDATED BALANCE SHEETS

                                (IN THOUSANDS EXCEPT SHARES)
<CAPTION>
                                                         AT SEPTEMBER 30,   AT SEPTEMBER 30,
                                                               2005              2004
                                                         ----------------   ----------------
<S>                                                         <C>                <C>
                        ASSETS

Current assets:
  Cash and cash equivalents                                 $    7,289         $    5,090
  Trade receivables, net                                        16,448             18,843
  Inventories                                                   24,999             21,988
  Assets held for sale                                               -              3,190
  Deferred income tax asset, current portion                     2,623              2,128
  Other current assets                                           1,316              1,310
                                                            ----------         ----------
      Total current assets                                      52,675             52,549

Property, plant and equipment, net                              17,568             22,114
Deferred income tax asset                                       12,690             10,933
Investments                                                        157                160
                                                            ----------         ----------
      Total assets                                          $   83,090         $   85,756
                                                            ==========         ==========

          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable                                             $      752         $       68
  Trade accounts payable                                         8,103              8,562
  Accrued expenses and other liabilities                        11,241             12,948
  Taxes payable                                                     88                 22
                                                            ----------         ----------
      Total current liabilities                                 20,184             21,600
Other liabilities                                                  749              1,172
Pension liability                                               35,954             33,545
                                                            ----------         ----------
      Total liabilities                                         56,887             56,317
                                                            ----------         ----------
Stockholders' equity:
Common stock                                                        12                 12
Additional paid in capital                                      51,590             51,590
Accumulated other comprehensive income(loss):
  Minimum pension liability adjustment, net of tax of
   $16,974 in 2005 and $14,261 in 2004                         (43,751)           (38,030)
  Foreign currency translation adjustment, net of
   tax $nil                                                     11,765             12,429
  Unrealized loss on derivative instruments                         (7)               (61)
Retained earnings                                                7,134              4,039
Less: 6,275,561 common stock shares held in treasury,
 at cost                                                          (540)              (540)
                                                            ----------         ----------
         Total stockholders' equity                         $   26,203         $   29,439
                                                            ----------         ----------

         Total liabilities and stockholders' equity         $   83,090         $   85,756
                                                            ==========         ==========

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

                                           F-4
</TABLE>
<PAGE>
<TABLE>
                                              SPEAR & JACKSON, INC. AND SUBSIDIARIES

                                    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                              (IN THOUSANDS EXCEPT AMOUNT OF SHARES)
<CAPTION>
                                                                          ACCUMULATED
                                                               OTHER COMPREHENSIVE INCOME (LOSS)
                                                            --------------------------------------
                                                                                      UNREALIZED
                                                ADDITIONAL   PENSION     FOREIGN    GAINS/(LOSSES)            TREASURY
                               COMMON STOCK      PAID IN     MINIMUM     CURRENCY    ON DERIVATIVE  RETAINED    STOCK
                              NUMBER    AMOUNT   CAPITAL    LIABILITY  TRANSLATION    INSTRUMENTS   EARNINGS  (COMMON)    TOTAL
                            ----------  ------  ----------  ---------  -----------  --------------  --------  --------  --------
<S>                         <C>          <C>     <C>        <C>         <C>            <C>          <C>       <C>       <C>
Balance October 1, 2002     12,011,122     12      51,590     (24,343)       3,056          2         (1,013)       0     29,304
Comprehensive income
 Net income for the year                                                                               4,616               4,616
 Other comprehensive
  income:
  Foreign currency
   translation adjustment                                      (1,683)       4,350                                         2,667
  Reclassification
   adjustment for prior
   year unrealized holding
   gains included in net
   income                                                                                  (2)                                (2)
  Unrealized holding
   losses originating in
   the year                                                                               (15)                               (15)
  Additional minimum
   pension liability
   adjustment
   (net of tax of $1,790)                                      (4,178)                                                    (4,178)
                                                                                                                        --------
 Other comprehensive
  income                                                                                                                  (1,528)
                                                                                                                        --------
Comprehensive income                                                                                                       3,088
Shares repurchased                                                                                               (540)      (540)
                            ----------   ----    --------   ---------   ---------      ------       --------  -------   --------
Balance September 30, 2003  12,011,122     12      51,590     (30,204)      7,406         (15)         3,603     (540)    31,852
                            ----------   ----    --------   ---------   ---------      ------       --------  -------   --------
Comprehensive income
 Net income for the year                                                                                 436                 436
 Other comprehensive
  income:
  Foreign currency
   translation adjustment                                      (2,509)      5,023                                          2,514
  Reclassification
   adjustment for prior
   year unrealized holding
   gains included in net
   income                                                                                  15                                 15
  Unrealized holding
   losses originating in
   the year                                                                               (61)                               (61)
  Additional minimum
   pension liability
   adjustment
   (net of tax of $2,278)                                      (5,317)                                                    (5,317)
                                                                                                                        --------
 Other comprehensive
  income                                                                                                                  (2,849)
                                                                                                                        --------
Comprehensive income                                                                                                      (2,413)
                            ----------   ----    --------   ---------   ---------      ------       --------  -------   --------
Balance September 30, 2004  12,011,122     12    $ 51,590   $ (38,030)  $  12,429      $  (61)      $  4,039  $  (540)  $ 29,439
                            ==========   ====    ========   =========   =========      ======       ========  =======   ========
Comprehensive income
 Net income for the year                                                                               3,095               3,095
 Other comprehensive
  income:
  Foreign currency
   translation adjustment                                         608        (664)                                           (56)
  Reclassification
   adjustment for prior
   year unrealized holding
   gains included in net
   income                                                                                  61                                 61
  Unrealized holding
   losses originating in
   the year                                                                                (7)                                (7)
  Additional minimum
   pension liability
   adjustment
   (net of tax of $2,713)                                      (6,329)                                                    (6,329)
                                                                                                                        --------
 Other comprehensive
  income                                                                                                                  (6,331)
                                                                                                                        --------
Comprehensive income                                                                                                      (3,236)
                            ----------   ----    --------   ---------   ---------      ------       --------  -------   --------
Balance September 30, 2005  12,011,122   $ 12    $ 51,590   $ (43,751)  $  11,765      $   (7)      $  7,134  $  (540)  $ 26,203
                            ==========   ====    ========   =========   =========      ======       ========  =======   ========

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

                                                               F-5
</TABLE>
<PAGE>
<TABLE>
                                         SPEAR & JACKSON, INC. AND SUBSIDIARIES

                                         CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                     (IN THOUSANDS)
<CAPTION>
                                                                                FOR THE FISCAL YEARS ENDED
                                                                      SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                                                                           2005            2004            2003
                                                                      -------------   -------------   -------------
<S>                                                                   <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income attributable to continuing and discontinued
   operations                                                         $       3,095   $         436   $       4,616
  Adjustments to reconcile net income to net cash (used in)
   provided by operating activities:
    Depreciation                                                              3,542           2,929           2,741
    Provision for loss on disposal of discontinued operations                   503             187              97
    Amortization of asset held for sale                                          16               -               -
    Gain on sale of land and buildings                                       (3,279)              -               -
    Loss (gain) on sale of plant, property and equipment                          6              14            (134)
      Deferred income taxes                                                     294           1,092           1,441
  Changes in operating assets and liabilities, excluding the effects
   of acquisitions and dispositions:
    Decrease (increase) in trade receivables                                  2,129          (1,930)          3,894
    (Increase) decrease in inventories                                       (3,553)          3,192          (1,040)
    (Increase) decrease in other current assets                                 (30)           (437)            557
    Contributions paid to pension plan                                      (10,207)         (2,706)         (2,836)
    Increase in other non-current liabilities                                 3,991           1,295             274
    (Decrease) increase in trade accounts payable                              (168)            392          (1,941)
    Decrease in accrued expenses and other liabilities                       (1,739)           (286)         (1,752)
    Increase (decrease) in taxes payable                                         37             (56)              4
    (Decrease) increase in other liabilities                                   (423)           (722)            733
                                                                      -------------   -------------   -------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                          (5,786)          3,400           6,654
                                                                      -------------   -------------   -------------

INVESTING ACTIVITIES:
  Proceeds from sale of business net of costs                                     -               -             287
  Purchases of property, plant and equipment                                 (1,379)         (7,191)         (2,933)
  Net cash relinquished on sale of businesses                                     -               -             (17)
  Proceeds from sale of property, plant and equipment                         8,676              81             982
                                                                      -------------   -------------   -------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                           7,297          (7,110)         (1,681)
                                                                      -------------   -------------   -------------

FINANCING ACTIVITIES:
  Repayment of long-term debt                                                     -               -             (23)
  Repayment of overdraft                                                        (77)           (261)         (1,012)
  Increase in overdraft                                                         762               -               -
  Promissory notes repaid                                                         -               -            (235)
  Director loan discharged                                                        -               -            (100)
  Shareholder loan repaid                                                         -               -             (60)
  Common stock re-purchased                                                       -               -            (540)
  Notes receivable (net of provisions) discharged                                 -               -            (209)
                                                                      -------------   -------------   -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                             685            (261)         (2,179)
                                                                      -------------   -------------   -------------

Effect of exchange rate changes on cash and cash equivalents                      3            (130)            (89)
                                                                      -------------   -------------   -------------

CHANGE IN CASH AND CASH EQUIVALENTS                                           2,199          (4,101)          2,705

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                5,090           9,191           6,486
                                                                      -------------   -------------   -------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                              $       7,289   $       5,090   $       9,191
                                                                      =============   =============   =============

SUPPLEMENTAL CASH FLOW INFORMATION
  Cash (received) paid for interest                                   $         (32)  $         297   $         145
                                                                      =============   =============   =============

  Cash paid for income taxes                                          $         137   $         169   $          96
                                                                      =============   =============   =============

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

                                                        F-6
</TABLE>
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

         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 Limited, Mega Tools USA, Inc., Megapro Tools, Inc., S
and J Acquisition Corp., Spear & Jackson plc and Bowers Group plc. Both Spear &
Jackson plc and Bowers Group plc are sub-holding companies and their business is
carried out by the following directly and indirectly owned subsidiaries: Bowers
Metrology Limited, Bowers Metrology (UK) Limited, Coventry Gauge Limited, CV
Instruments Limited, Eclipse Magnetics Limited, Spear & Jackson (New Zealand)
Limited, James Neill Canada Inc., James Neill Holdings Limited, James Neill
U.S.A. Inc., Spear & Jackson (Australia) Pty Ltd., Magnacut Limited, Neill Tools
Limited, Spear & Jackson Garden Products Limited, Spear & Jackson Holdings
Limited, Spear & Jackson France S.A., Societe Neill France S.A. , CV Instruments
Europe BV and Bowers Eclipse Equipment Shanghai Co. Limited.

         As further explained in note 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.
The results of operations of acquired companies have been included in the
consolidated statements of operations and cash flows of the Company from the
date of acquisition. The results of operations of companies sold during the
period are included in the consolidated statements of operations and cash flows
of the Company up to the date of disposal. The results and assets of
discontinued operations are presented in accordance with Statement of Financial
Accounting Standards ("SFAS") 144.

         All significant intercompany accounts and transactions have been
eliminated on consolidation. Certain prior year amounts have been reclassified
in the accompanying financial statements to conform with current year
presentation.

NOTE 2 - ACCOUNTING POLICIES

FISCAL YEAR: All fiscal year data contained herein reflect results of operations
for the years ended September 30, 2005, September 30, 2004 and September 30,
2003.

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 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 of the balance sheet in this manner affects the stockholders'
equity account, referred to as the accumulated other comprehensive income
account. Management has decided not to hedge against the impact of exposures
giving rise to these translation adjustments as such hedges may impact upon the
Company's cash flow compared to the translation adjustments that do not affect
cash flow in the medium term.

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 2 - ACCOUNTING POLICIES - CONTINUED

PROPERTY, PLANT AND EQUIPMENT: 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.

All of the Company's long lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected discounted future cash flows is less
than the carrying value of the asset, a loss is recognized based upon the fair
value of the asset and its carrying value.

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
value. 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.

                                       F-8
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 2 - ACCOUNTING POLICIES - CONTINUED

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

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

EARNINGS PER SHARE: Earnings (loss) per share is computed in accordance with
SFAS 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: SFAS 123, "Accounting for Stock-Based Compensation,"
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
$2,252 in the year ended September 30, 2005 and $2,444 and $1,847 in the years
ended September 30, 2004 and September 30, 2003, respectively.

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 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

                                       F-9
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 2 - ACCOUNTING POLICIES - CONTINUED

REVENUE RECOGNITION - CONTINUED

in the form of credit note but occasionally in cash, is triggered e.g.

                                Sales
                              Turnover          Rebate           Rebate
                                  $                %                $
         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 that 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,
2005 was $350 and $257 and $66 in the years ended September 30, 2004 and
September 30, 2003, respectively.

RESEARCH AND DEVELOPMENT COSTS: Research and development costs are expensed as
incurred. There was no material research and development expenditure in the
years ended September 30, 2005, September 30, 2004 and September 30, 2003.

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:

         On October 22, 2004, the President signed the "American Jobs Creation
Act of 2004" (the "Act"). On December 21, 2004, the FASB issued two FSP's
regarding the accounting implications of the Act related to (1) the deduction
for qualified domestic production activities ("FSP SFAS No. 109-1") and (2) the
one-time tax benefit for the repatriation of foreign earnings ("FSP SFAS No.
109-2"). The guidance in the FSP's applies to financial statements for periods
ending after the date the Act was enacted.

         FSP 109-1, "Application of FASB Statement No. 109, 'Accounting for
Income Taxes,' to the Tax Deduction on Qualified Production Activities Provided
by the American Jobs Creation Act of 2004", clarifies that the tax deduction for
domestic manufacturers under the Act should be accounted for as a special
deduction in accordance with SFAS 109, "Accounting for Income Taxes." We are
currently evaluating the impact, if any, of FSP-109-1 on our consolidated
financial statements.

         FSP SFAS 109-2, "Accounting and Disclosure Guidance for the Foreign
Earnings Repatriation Provision within the American Jobs Creation Act of 2004",
provides enterprises more time (beyond the financial-reporting period during
which the Act took effect) to evaluate the Act's impact on the enterprise's plan
for reinvestment or

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 2 - ACCOUNTING POLICIES - CONTINUED

NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED

repatriation of certain foreign earnings for purposes of applying FASB
Statement. The Act provides for a special one-time tax deduction of 85 percent
dividends received deduction on certain foreign earnings repatriated in fiscal
2005 or 2006. The deduction would result in an approximate 5.1 percent federal
tax on a portion of the foreign earnings repatriated. State, local and foreign
taxes could apply as well. To qualify for this federal tax deduction, the
earnings must be reinvested in the United States pursuant to a domestic
reinvestment plan. Certain other criteria in the Jobs Act must be satisfied as
well. We studied the provisions of the Act related to the repatriation of
earnings and do not intend to repatriate any earnings as of September 30, 2005.

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

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

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

         In March 2005, the FASB issued Interpretation ("FIN") No. 47,
"Accounting for Conditional Asset Retirement Obligations--an Interpretation of
FASB Statement No. 143." This Interpretation clarifies the timing of liability
recognition for legal obligations associated with an asset retirement when the
timing and (or) method of settling the obligation are conditional on a future
event that may or may not be within the control of the entity. FIN No. 47 is
effective no later than the end of fiscal years ending after December 15, 2005.
We are currently evaluating the impact, if any, of FIN 47 on our consolidated
financial statements.

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

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 2 - ACCOUNTING POLICIES - CONTINUED

NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED

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

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

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

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

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

         The relevant acquisition process utilizes the capital structure of
Megapro Tools, Inc. and the assets and liabilities of S&J are recorded at
historical cost. In these financial statements, S&J is the operating entity for
financial reporting purposes and the financial statements for all periods
presented represent S&J's financial position and results of operations. The
equity of Megapro Tools Inc. is the historical equity of S&J retroactively
restated to reflect the number of shares issued in the S&J acquisition. On
November 7, 2002 the Company changed its name from Megapro Tools, Inc. to Spear
& Jackson, Inc.

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 3 - NATURE OF BUSINESS - CONTINUED

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

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

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

         On April 21, 2005, Jacuzzi adopted a plan of disposition of the
Company's' Common Stock (the "Plan of Disposition"), under which Jacuzzi intends
to:

      o  investigate the strategic alternatives with respect to the sale of the
         Common Stock held by them;

      o  take such further actions as will result in Jacuzzi disposing of the
         Common Stock within a one-year period; and engage investment banking,
         legal, and other advisors as necessary to assist in the disposition of
         the Company's Common Stock.

         Jacuzzi may dispose of its Common Stock in one or more transactions of
all or a portion of their shares of Common Stock in the open market, in
privately negotiated transactions or otherwise.

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

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

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 4 - UNUSUAL OR INFREQUENT EVENTS

a) GAIN ON SALE OF LAND AND BUILDINGS

         On January 28, 2005 the Company completed the sale of part of its
industrial site at St. Paul's Road, Wednesbury, England, and on February 15,
2005 the Company also concluded the disposal of its warehouse and office
facility in Boca Raton, Florida. Details of these sales are as follows:
<TABLE>
<CAPTION>
                                                WEDNESBURY       BOCA RATON
                                                  ENGLAND         FLORIDA           TOTAL
                                              --------------   --------------   --------------
                                              (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                                              <C>              <C>              <C>
Sale of land and buildings:

Sale proceeds net of selling, professional
 and other costs                                 $ 5,243          $ 3,433          $ 8,676
Less: net book value                               2,223            3,174            5,397
                                                 -------          -------          -------
Gain on sale                                     $ 3,020          $   259          $ 3,279
                                                 =======          =======          =======
</TABLE>

b) MANUFACTURING REORGANIZATION COSTS

Manufacturing reorganization costs arising in the year ended September 30, 2005
comprise the following:

                                                      NOTE         TOTAL
                                                              --------------
                                                              (IN THOUSANDS)

    Manufacturing, reorganization and relocation       (i)      $   (437)
    Severance costs                                   (ii)          (487)
    Fixed asset impairment write-downs               (iii)          (819)
    Release of provisions                             (iv)           632
                                                                --------
                                                                $ (1,111)
                                                                ========

         (i) As a result of the sale of the surplus element of the Wednesbury
property, the Company is contractually obliged to vacate office and warehouse
facilities located on those parts of the site that have been sold. A provision
of $437 has been made for costs in connection with this obligation. The
provision principally relates to office and factory refurbishment and
reorganization expenses together with expenditure in respect of departmental
relocations within the remainder of the site. $45 of these costs were paid prior
to the year end. Following the sale, elements of the Wednesbury manufacturing
operation have been closed or transferred and costs in connection with these
initiatives are dealt with in (ii) and (iii) below.

         In the final quarter of the year the Company performed a review of its
UK manufacturing operations and has now begun implementation of a number of
strategies to reduce its ongoing cost base. Costs incurred in the implementation
of these initiatives comprise:

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

         (iii) The ongoing usage and remaining asset lives of the plant and
machinery involved in the restructured operations have been reviewed and
impairment write-downs made where necessary.

         (iv) Certain provisions made in prior periods relating to manufacturing
initiatives which will not now be implemented following the finalization of the
Company's UK manufacturing reorganization strategy, have been released in the
year.

                                      F-14
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 5 - DISCONTINUED OPERATIONS

         The following table presents the results of the Company's operations
that have been reclassified as discontinued and the loss that has been recorded
in connection with the disposal these businesses:
<TABLE>
<CAPTION>
                                                                       FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
                                                                   ------------------------------------------------
                                                                        2005             2004             2003
                                                                   --------------   --------------   --------------
                                                            Note   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)
<S>                                                          <C>      <C>              <C>              <C>
Revenues reclassified to discontinued operations:
 Megapro screwdrivers division                               (a)      $     -          $     -          $  1,093
 Thread gauge measuring division                             (b)        1,627          $ 1,694          $  1,721
                                                                      -------          -------          --------
                                                                      $ 1,627          $ 1,694          $  2,814
                                                                      =======          =======          ========

Loss from discontinued operations
Loss from operations of Megapro screwdrivers division        (a)      $     -          $     -          $    (53)
Loss from operations of thread gauge measuring division      (b)         (163)         $  (214)         $    (13)
                                                                      -------          -------          --------
                                                                      $  (163)         $  (214)         $    (66)
                                                                      =======          =======          ========

(Loss) profit on disposal of discontinued operations:
Provision for profit (loss )on disposal of Megapro
 screwdrivers division                                       (a)      $    27          $  (187)         $    (97)
Provision for loss on disposal of thread gauge
 measuring division                                          (b)         (503)               -                 -
                                                                      -------          -------          --------
                                                                      $  (476)         $  (187)         $    (97)
                                                                      =======          =======          ========

                                                                      -------          -------          --------
Total loss from discontinued operations, net of taxes                 $  (639)         $  (401)         $   (163)
                                                                      =======          =======          ========
</TABLE>

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

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

The net assets transferred comprised:

                                                     (IN THOUSANDS)
             Inventories                                 $ 141
             Trade receivables                             190
             Property, plant and equipment                 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.

                                      F-15
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 5 - DISCONTINUED OPERATIONS - CONTINUED

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

         (b) During the fourth quarter of fiscal 2005, the Company began
marketing for sale certain assets associated with its thread gauge measuring
business that is located in the United Kingdom. The carrying value of the assets
relating to this entity has been written down to the lower of depreciated cost
or estimated fair value after consideration of selling costs. These assets and
liabilities of discontinued operations held for sale have not been reported
separately in the consolidated balance sheets of the Company as the amounts
involved are not considered material.

NOTE 6 - TRADE RECEIVABLES, CONCENTRATIONS OF CREDIT RISK AND ALLOWANCE FOR
DOUBTFUL ACCOUNTS

                                            AT SEPTEMBER 30,   AT SEPTEMBER 30,
                                            -----------------------------------
                                                  2005               2004
                                            ----------------   ----------------
                                             (IN THOUSANDS)     (IN THOUSANDS)
  Trade receivables                         $         17,973   $         20,546
  Allowance for doubtful accounts                     (1,525)            (1,703)
                                            ----------------   ----------------
                                            $         16,448   $         18,843
                                            ================   ================

Concentration of Credit Risk:

         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.

Allowance for Doubtful Accounts:

         The Company establishes reserves for potential credit losses including
a specific reserve for any particular receivable when collectibility is not
probable. In addition, the Company provides a general reserve on all accounts
based on a specified range of percentages which are applied to outstanding
balances depending on their aging. Such losses have been within management's
expectations.

         The following table provides a roll forward of the changes in the
allowance for doubtful accounts:
<TABLE>
<CAPTION>
                                      BALANCE       CHARGED TO   CHARGED TO                 BALANCE
                                  AT BEGINNING OF    COSTS AND     OTHER                   AT END OF
DESCRIPTION                           PERIOD         EXPENSES     ACCOUNTS    DEDUCTIONS    PERIOD
-----------                       ---------------   ----------   ----------   ----------   ---------
<S>                                   <C>            <C>           <C>         <C>          <C>
Notes                                                               (1)          (2)

Year ended September 30, 2005         $  1,703        $   21       ($  27)     ($  172)     $  1,525
                                      ========       =======       ======      =======      ========

Year ended September 30, 2004         $  2,101       ($  147)       $ 165      ($  416)     $  1,703
                                      ========       =======       ======      =======      ========

Year ended September 30, 2003         $  1,975        $   81        $ 151      ($  106)     $  2,101
                                      ========       =======       ======      =======      ========
</TABLE>

                                      F-16
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 6 - TRADE RECEIVABLES, CONCENTRATIONS OF CREDIT RISK AND ALLOWANCE FOR
DOUBTFUL ACCOUNTS - CONTINUED

NOTES:

   (1) Items charged to other accounts comprise exchange rate fluctuations
       during the year.

   (2) Deductions comprise recoveries of items previously written off.

NOTE 7 - INVENTORIES

                                            AT SEPTEMBER 30,   AT SEPTEMBER 30,
                                            -----------------------------------
                                                  2005               2004
                                            ----------------   ----------------
                                             (IN THOUSANDS)     (IN THOUSANDS)

  Finished products                         $         19,740   $         16,779
  In-process products                                  6,481              5,211
  Raw materials                                        5,320              5,944
  Less: allowance for slow moving and
   obsolete inventories                               (6,542)            (5,946)
                                            ----------------   ----------------
                                            $         24,999   $         21,988
                                            ================   ================

The following table provides a summary of the adjustments to the allowance for
slow moving and obsolete inventories:
<TABLE>
<CAPTION>
                                      BALANCE       CHARGED TO   CHARGED TO                 BALANCE
                                  AT BEGINNING OF    COSTS AND     OTHER                   AT END OF
DESCRIPTION                            PERIOD        EXPENSES     ACCOUNTS    DEDUCTIONS     PERIOD
-----------                       ---------------   ----------   ----------   ----------   ---------
<S>                                   <C>              <C>          <C>         <C>         <C>
NOTE                                                                (1)          (2)

Year ended September 30, 2005         $ 5,946          $ 884        $ 189       ($ 477)     $ 6,542
                                      =======          =====        =====       ======      =======

Year ended September 30, 2004         $ 5,755          $ 391        $ 468       ($ 668)     $ 5,946
                                      =======          =====        =====       ======      =======

Year ended September 30, 2003         $ 5,839          $ 125        $ 431       ($ 640)     $ 5,755
                                      =======          =====        =====       ======      =======
</TABLE>

NOTES:

   (1) Items charged to other accounts comprise exchange rate fluctuations
       during the year, and sundry recategorizations.

   (2) Deductions comprise obsolete items sold or scrapped.

                                      F-17
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 8 - PROPERTY, PLANT AND EQUIPMENT, NET

                                             AT SEPTEMBER 30,   AT SEPTEMBER 30,
                                             ----------------   ----------------
                                                   2005              2004
                                             ----------------   ----------------
                                              (IN THOUSANDS)     (IN THOUSANDS)
Assets held and used:
  Land and buildings, at cost            (a)    $  15,799          $   18,177
  Machinery, equipment and vehicles,
   at cost                                         35,331              35,101
  Furniture and fixtures, at cost                   1,256               1,241
  Computer hardware, at cost                        1,244               1,264
  Computer software, at cost                          342                 348
  Assets held under finance leases,
   at cost                               (b)        2,883               2,828
                                                ---------          ----------
                                                   56,855              58,959
  Accumulated Depreciation:                       (39,287)            (36,845)
                                                ---------          ----------
  Net                                           $  17,568          $   22,114
                                                =========          ==========
Assets held for sale:
  Assets held for sale, at cost:         (a)    $       -          $    3,228
  Accumulated Depreciation:                             -                 (38)
                                                ---------          ----------
  Net                                           $       -          $    3,190
                                                =========          ==========

         (a) During the year ended September 30, 2004, the Company spent $3.3
million on the acquisition of its manufacturing site at St Paul's Road,
Wednesbury, England, and $3.2 million on a warehouse and office facility in Boca
Raton, Florida. Following the removal from office of the Company's former CEO,
the current board, in conjunction with the independent Corporate Monitor
retained by the U.S. Securities and Exchange Commission, performed a detailed
review of its U.S. sales and distribution strategy. As a result, the original
initiative of setting up a central distribution unit in Florida was deferred.
The Boca Raton warehouse was offered for sale and this property was accordingly
presented as an asset held for sale in the consolidated balance sheet of the
Company at September 30, 2004. The Boca Raton premises were sold on February 15,
2005. The Company completed the sale of part of its industrial site at
Wednesbury on January 28, 2005. Details of these dispositions are provided in
note 4, above.

         (b) Included in property, plant and equipment at September 30, 2005 are
capital leases with a net book value of $1.3 million (September 30, 2004 $1.3
million). The cost of these assets held under capital leases was $2.9 million
(September 30, 2004 $2.8 million), and the accumulated depreciation relating to
these assets was $1.6 million (September 30, 2004 $1.5 million).

NOTE 9 - INVESTMENTS

         Investments comprise the following:

                                             AT SEPTEMBER 30,   AT SEPTEMBER 30,
                                             ----------------   ----------------
                                      NOTE         2005               2004
                                             ----------------   ----------------
                                              (IN THOUSANDS)     (IN THOUSANDS)
30% investment in Bipico Industries
  Private limited                      (a)      $      67          $      69
30% investment in  Bowers
  Metrologie SA                        (a)             67                 68
Other investments in equity
  securities                           (b)             23                 23

                                                ---------          ---------
                                                $     157          $     160
                                                =========          =========

                                      F-18
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 9 - INVESTMENTS - CONTINUED

         (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:
<TABLE>
<CAPTION>
                                                                   FOR THE FISCAL YEARS ENDED
                                                      SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,
                                                    -------------------------------------------------------
                                                          2005               2004               2003
                                                    ----------------   ----------------   -----------------
                                                     (IN THOUSANDS)     (IN THOUSANDS)      (IN THOUSANDS)
<S>                                                 <C>                <C>                <C>
Continued operations:
  Current tax charge                                $           (174)  $           (113)  $            (100)
  Deferred tax charge                                           (294)            (1,092)             (1,397)
                                                    ----------------   ----------------   -----------------
                                                    $           (468)  $         (1,205)  $          (1,497)
                                                    ================   ================   =================

Discontinued operations:
  Deferred tax charge                               $              -   $              -   $             (44)
                                                    ================   ================   =================

Total                                               $           (468)  $         (1,205)  $          (1,541)
                                                    ================   ================   =================
</TABLE>

The current and deferred tax charges arise wholly in non US operations.

A reconciliation of the provision for income taxes from continuing operations
compared with the amounts provided at the US federal rate is as follows:
<TABLE>
<CAPTION>
                                                                  FOR THE FISCAL YEARS ENDED
                                                      SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,
                                                    -------------------------------------------------------
                                                          2005               2004               2003
                                                    ----------------   ----------------   -----------------
                                                     (IN THOUSANDS)     (IN THOUSANDS)      (IN THOUSANDS)
<S>                                                 <C>                <C>                <C>
Tax at US federal statutory income tax rate         $         (1,247)  $           (574)  $          (2,192)
Overseas tax at rates different to effective rate                (89)               (81)                313
Gain on sale of UK property covered by capital
 losses brought forward                                          906                  -                   -
Permanent timing differences                                    (161)              (162)                (60)
Adjustment of prior year estimates                               219                118                 (98)
Valuation allowance                                             (143)              (536)                533
Miscellaneous                                                     47                 30                   7
                                                    ----------------   ----------------   -----------------
                                                    $           (468)  $         (1,205)  $          (1,497)
                                                    ================   ================   =================
</TABLE>

                                      F-19
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 10 - INCOME TAXES - CONTINUED

         Deferred income tax assets and liabilities for 2005 and 2004 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, 2005 and September 30, 2004 comprise:
<TABLE>
<CAPTION>
                                                     AT SEPTEMBER 30,      AT SEPTEMBER 30,
                                                     ----------------      ----------------
                                                           2005                  2004
                                                     ----------------      ----------------
                                                      (IN THOUSANDS)        (IN THOUSANDS)
<S>                                                    <C>                    <C>
Deferred tax assets:
  Property, plant and equipment                        $       412            $        59
  Pension benefit plan                                      10,812                 10,064
  Accruals and allowances                                    3,666                  2,752
  Inventory                                                    423                    186
  Tax loss carry forwards and other tax credits             21,082                 21,152

                                                       -----------            -----------
  Total deferred tax assets                                 36,395                 34,213
  Valuation allowance                                      (21,082)               (21,152)
                                                       -----------            -----------
  Net deferred tax assets                                   15,313                 13,061
                                                       -----------            -----------

Deferred tax asset, net                                $    15,313            $    13,061
                                                       ===========            ===========

Deferred tax asset, current portion                          2,623                  2,128
Deferred tax asset, non-current portion                     12,690                 10,933
                                                       ===========            ===========
                                                       $    15,313            $    13,061
                                                       ===========            ===========
</TABLE>

         SFAS No. 109, "Accounting for Income Taxes," requires a valuation
allowance to be established when it is "more likely than not" that all or a
portion of a deferred tax asset will not be realized. A review of all available
positive and negative evidence was undertaken by the Company at September 30,
2005 to determine the likelihood of realizing the deferred tax benefits relating
to property, plant and equipment, pension benefit plan, accruals and allowances,
inventories and tax loss carryforwards shown above.

         The review considered the available positive and negative evidence, and
included those factors believed to be relevant, including the Company's recent
operating results and its expected future profitability, including the impact of
its manufacturing restructuring strategies. Based on this review, the Company
expects to generate sufficient future taxable income such that its gross
deferred tax assets relating to property, plant and equipment, the UK pension
benefit plan, accruals and allowances and inventories will meet the
"more-likely-than-not" realizability test.

         The gross deferred tax assets in respect of tax loss carry forwards and
other tax credits relate to operating loss carry forwards in the Company's UK,
US and Australian companies totaling approximately $6.5 million (September 30,
2004 $6.3 million) and to other UK tax credits of approximately $14.6 million
(September 30, 2004 $14.9 million). The Company's NOLs arising in the UK, France
and Australia can be carried forward without time expiration while the US tax
losses expire at various dates between 2017 and 2020. A recent history of
operating losses and other factors has precluded the Company from demonstrating
that it is more likely than not that the benefits of these domestic and foreign
operating loss carryforwards and other tax credits will be realized.
Accordingly, at September 30, 2005 a valuation allowance of $21.1 million
(September 30, 2004 $21.2 million) has been recorded against these items.

                                      F-20
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 10 - INCOME TAXES - CONTINUED

         Spear & Jackson will continue to review the recoverability of its
deferred tax assets and, based on such periodic reviews, the Company could
recognize a change in the valuation allowance relating to its deferred tax
assets in the future should, for example, estimates of forecast taxable income
be reduced or other favorable or adverse events occur.

NOTE 11 - BANK FACILITIES

         The French and Australian subsidiaries of Spear & Jackson, Inc.
maintain short-term credit facilities of $2.8 million (2004: $3.2 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
nothing outstanding under the overdraft lines at September 30, 2005 (2004: $0.07
million) and $0.1 million of letters of credit and bills were outstanding under
these facilities (2004: $0.9 million).

         In addition, the UK subsidiaries of Spear & Jackson, Inc. maintain a
line of credit of $8.0 million (2004: $8.1million). This is secured by fixed and
floating charges on the assets and undertakings of these businesses. Of the
total facility, $5.3 million (2004: $5.4 million) relates to bank overdrafts and
$2.7 million (2004: $2.7 million) is available for letters of credit. These
facilities are denominated in British pounds. The overdraft carries interest at
UK base rate plus 1%. At September 30, 2005 the Company had $0.8 million (2004:
$nil) borrowings outstanding under the overdraft line and $0.6 million in
outstanding letters of credit (2004: $1.5 million). Additionally, as a
consequence of the special pension contributions made in June and September
2005, and the additional funding which will be required to finance the
forthcoming restructuring initiatives, an open-ended on demand bridging loan of
$5.3 million has been secured with Company's UK bankers. The facility is
denominated in British pounds and is secured by a first legal charge over the
Wednesbury land and property. It carries interest at UK base rates plus 1%. This
facility had not been utilized at September 30, 2005.

NOTE 12 - ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:
<TABLE>
<CAPTION>
                                                   AT SEPTEMBER 30,    AT SEPTEMBER 30,
                                                  --------------------------------------
                                                         2005                2004
                                                  -----------------   ------------------
                                                   (IN THOUSANDS)       (IN THOUSANDS)
<S>                                               <C>                 <C>
Compensation related                              $           2,746   $            4,124
Rebates/dealer incentives                                     1,297                1,315
Sales taxes payable                                             462                  480
Finance lease liabilities - current portion                     613                  803
Audit and accountancy fees                                      503                  308
Commissions                                                     735                  698
Property rentals                                                224                  309
Provisions                                                    2,533                2,411
Other                                                         2,128                2,500
                                                  -----------------   ------------------
                                                  $          11,241   $           12,948
                                                  =================   ==================
</TABLE>

NOTE 13 - OTHER LIABILITIES

Other liabilities comprise:

<TABLE>
<CAPTION>
                                                   AT SEPTEMBER 30,    AT SEPTEMBER 30,
                                                  --------------------------------------
                                                         2005                2004
                                                  -----------------   ------------------
                                                    (IN THOUSANDS)      (IN THOUSANDS)
<S>                                               <C>                 <C>
Finance lease liabilities - non current portion   $             337   $              625
Property rentals                                                412                  495
Government grant received                                         -                   52

                                                  -----------------   ------------------
                                                  $             749   $            1,172
                                                  =================   ==================
</TABLE>
                                      F-21
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 14 - 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. Admittance to the Plan is now closed. Pension Plan assets
are primarily invested in equities, fixed income securities and Government
stocks.

         Amounts payable by the Company to the Plan are determined on the advice
of the Plan's actuaries and after discussion with, and agreement by, the Plan's
trustees. The Company's funding policy with respect to the Plan is to make
contributions in respect of ongoing benefit accruals and the clearance of
underfunding deficits which are at least the minimum amounts required in
accordance with applicable UK law and pension regulations. In the years ended
September 30, 2005, September 30, 2004, and September 30, 2003, contributions
amounted to $10.3 million, $2.7million and $2.8 million, respectively.
Contributions in the year ending September 30, 2005 included special
contributions of (pound)4 million (approximately $7.2 million). The reasons for
the special contribution are explained below. Employer contributions in the year
ending September 30, 2006 are expected to be approximately $3.4 million.

         The pension Plan actuarial advisors carried out an actuarial valuation
of the Plan as at December 31, 2004. This valuation showed an increase in the
Plan's deficit compared to that calculated at April 5, 2002, the date of the
last full actuarial valuation. Following discussions between the Company and the
trustees of the Plan, it was agreed that the Company would make a special
contribution to the Plan of (pound)4 million (approximately $7.2 million).
(pound)2 million (approximately $3.6 million) was paid in June 2005 and the
remainder was paid in September 2005. Also, from May 2005, the Company's annual
pension contributions have increased from 21.2% of pensionable salaries
(approximately (pound)1.5million or $2.7 million) to a fixed amount of
(pound)1.9 million (approximately $3.4 million). This rate of annual
contribution will remain in place, subject to certain conditions, until April
207 when it will be reviewed by the Plan actuary.

Expected future benefit payments, excluding future new members, are as follows:

                                           EXPECTED BENEFIT
                          YEAR                 PAYMENTS
                          ----             ----------------
                                            (IN THOUSANDS)
                          2006               $      7,960
                          2007               $      8,319
                          2008               $      8,692
                          2009               $      9,083
                          2010               $      9,491
                       2011-2015             $     54,260

         The Company's actuary carried out valuations of the Plan under SFAS 87,
"Employers Accounting for Pensions", at September 30, 2005 and at September 30,
2004. The following table, as provided by the actuary, analyzes the movement in
the pension Plan liability between September 30, 2003, September 30, 2004 and
September 30, 2005 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 sheets at September 30, 2005 and September 30, 2004:

                                      F-22
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 14 - PENSION PLAN - CONTINUED
<TABLE>
<CAPTION>
                                                                            2005                2004
                                                                       --------------      --------------
                                                                       (IN THOUSANDS)      (IN THOUSANDS)
<S>                                                                    <C>                 <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION:
Projected benefit obligation at the beginning of the year              $     180,375       $     154,105
Foreign currency exchange rate changes                                        (4,530)             12,795
Service cost                                                                   1,805               1,518
Interest cost                                                                 10,072               8,977
Employee contributions                                                           947                 933
Actuarial loss                                                                32,229               9,459
Benefits paid                                                                 (7,427)             (7,412)
                                                                       -------------       -------------
  Projected benefit obligation at the end of the year                  $     213,471       $     180,375
                                                                       =============       =============
CHANGE IN FAIR VALUE OF PLAN ASSETS:
Fair value of plan assets at the beginning of the year                 $     141,257       $     124,355
Foreign currency exchange rate changes                                        (3,525)             10,329
Actual return on plan assets                                                  28,651              10,346
Employer contributions                                                        10,207               2,706
Employee contributions                                                           947                 933
Benefits paid                                                                 (7,427)             (7,412)
                                                                       -------------       -------------
  Fair value of plan assets at the end of the year                     $     170,110       $     141,257
                                                                       =============       =============
FUNDED STATUS OF PLAN:
Projected benefit obligation in excess of plan assets                  $     (43,361)      $     (39,118)
Unrecognized net actuarial loss                                               69,907              59,902
                                                                       -------------       -------------
  Net amount recognized                                                $      26,546       $      20,784
                                                                       =============       =============

AMOUNTS RECOGNIZED IN THE BALANCE SHEET CONSIST OF:
Accrued benefit cost                                                   $     (35,954)      $     (33,545)
Accumulated other comprehensive income                                        62,501              54,329
                                                                       -------------       -------------
  Net amount recognized                                                $      26,546       $      20,784
                                                                       =============       =============
INCREASE OVER THE YEAR IN THE MINIMUM LIABILITY INCLUDED IN
 OTHER COMPREHENSIVE INCOME                                            $       8,172       $       7,595
                                                                       =============       =============
</TABLE>

         At September 30, 2005 the projected benefit obligation, accumulated
benefit obligation, and fair value of assets for the pension Plan were $213.5
million (2004: $180.4 million), $206.2 million (2004: $174.8 million), and
$170.1 million (2004: $141.3 million).

         At September 30, 2005 and 2004 the Company had minimum pension plan
liabilities of $62.5 million and $54.3 million, respectively, in respect of the
Plan. In accordance with the requirements of SFAS 87 the Company has recognized
this liability on its balance sheet since the accumulated benefit obligations of
the Plan exceed the fair value of the Plan's assets. Any increase or decrease in
the minimum liability is recorded through a direct charge or credit to
stockholders' equity and is reflected, net of tax, as a component of
comprehensive income in the consolidated statements of shareholders' equity. The
Company's minimum pension liabilities increased by $8.4 million from fiscal 2004
to fiscal 2005. This increase is principally due to the adoption of a different
mortality table in the calculation of the Plan's benefit obligations together
with a decrease in the discount rate assumption used at September 30, 2005
compared to that employed at the previous fiscal year end.

                                      F-23
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 14 - PENSION PLAN - CONTINUED

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

                                             2005          2004          2003
                                          ---------     ---------      --------
WEIGHTED AVERAGE ASSUMPTIONS
  Discount rate                              5.00%         5.50%         5.50%
  Rate of compensation increase              2.90%         2.80%         2.50%
  Expected return on assets                  6.50%         7.00%         7.50%
  Fixed pension increase                     5.00%         5.00%         5.00%
  LPI pension increase                       2.70%         2.70%         2.50%
  Post 1988 GMP increase                     2.40%         2.40%         2.00%
  Inflation                                  2.80%         2.80%         2.50%


                                             2005          2004          2003
                                          ---------     ---------      --------
COMPONENTS OF NET PERIODIC BENEFIT COST
  Defined benefit plans:
    Service cost                          $   1,805     $   1,518      $  1,439
    Interest cost                            10,072         8,977         7,996
    Expected return on plan assets          (10,588)      (10,901)       (9,915)
    Recognition of actuarial loss             2,702         1,701           754
                                          ---------     ---------      --------

Net periodic cost                         $   3,991     $   1,295      $    274
                                          =========     =========      ========

         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 net periodic pension cost for the year ended September
30, 2006 is estimated to be $8.2 million.

         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 are reviewed by its 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 of suitable duration

         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. The expected return on assets assumed to determine the 2006 expense is
6.5% a year (2005: 7.0%), which is based on an equity risk premium of 3.75% a
year over the yields available on long-term government bonds at September 30,
2005 of 4.35% a year for 51% of the assets.

         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-24
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 14 - 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          Impact on
                            Impact on 2006      September 30,      September 30,
                            Pre-Tax Pension         2005           2005 Equity
Change in Assumption           Expense              PBO            (Net of tax)
-------------------------   ---------------    --------------     --------------

25 basis point
decrease in discount         +$0.74 million    +$9.09 million     -$6.08 million
rate

25 basis point
increase in discount         -$0.71 million    -$8.67 million     +$5.84 million
rate

25 basis point
decrease in expected         +$0.37 million          -                  -
return on assets

25 basis point
increase in expected         -$0.37 million          -                  -
return on assets

25 basis point
increase in compensation     +$0.16 million    +$0.78 million           -
assumption

25 basis point
decrease in compensation     -$0.16 million    -$0.76 million           -
assumption

Use of PA80C2010
Mortality table              -$1.38 million   -$10.44 million     +$7.04 million

         The trustees aim to invest the assets of the Plan prudently to ensure
that the benefits promised to members are provided. In setting the investment
strategy, the trustees first considered the lowest risk asset allocation that
they could adopt in relation to the Plan's liabilities (100% UK Government
Bonds). The asset allocation strategy they have selected is designed to achieve
a higher return than the lowest risk strategy while maintaining a prudent
approach to meeting the Plan's liabilities.

                                      F-25
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 14 - PENSION PLAN - CONTINUED

The allocation of Plan investments to the various asset categories at September
30, 2005 and September 30, 2004 was as follows:

                              Target       % of Assets at       % of Assets at
                            Allocation   September 30, 2005   September 30, 2004
                            ----------   ------------------   ------------------
ASSET CATEGORY:

   Equities                     50%               51%                 48%
   Bonds                        50%               43%                 49%
   Cash                          0%                6%                  3%
                               ---               ---                 ---
Total                          100%              100%                100%
                               ===               ===                 ===

The target shown above is a short-term allocation.

NOTE 15 - LEASES

         Rental expense for operating leases in the year ended September 30,
2005 was $1.1 million. Operating lease costs in both the years ended September
30, 2004 and September 30, 2003 amounted to $0.9 million. Future minimum rental
commitments under non-cancelable operating leases as of September 30, 2005 and
September 30, 2004 are as follows:

                                                             2005
                                                        (IN THOUSANDS)
                                                        --------------

         2006                                             $   1,032
         2007                                                 1,016
         2008                                                   982
         2009                                                   923
         2010                                                   809
         Thereafter                                           2,163
                                                          ---------
         Total minimum lease payments                     $   6,925
                                                          =========

         Under capital lease agreements, the Company is required to make certain
monthly, quarterly or annual lease payments through 2009. The aggregate minimum
capital lease payments for the next four years, with their present value as of
September 30, 2005, and September 30, 2004 are as follows:

                                                       2005           2004
                                                  (IN THOUSANDS)  (IN THOUSANDS)
                                                  --------------  --------------

         2006                                         $   651       $     846
         2007                                             350             510
         2008                                               5             148
         2009                                               -               5
                                                      -------       ---------
         Total minimum lease payments                   1,006           1,509
         Less amount representing
          interest at 5.5%                                (56)            (81)
                                                      -------       ---------
         Present value of net minimum
          lease payments                                  950           1,428
         Less current portion                            (613)           (803)
                                                      -------       ---------
         Long-term portion                            $   337       $     625
                                                      =======       =========

                                      F-26
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 16 - COMMON STOCK
                                                          2005         2004
                                                        (NUMBER)     (NUMBER)
                                                       ----------   ----------
         Par value $.001 per share

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

         Issued :                                      12,011,122   12,011,122
                                                       ==========   ==========
         Outstanding:
         At beginning of period                        11,741,122   11,741,122
         Purchase of shares (see below)                (6,005,561)           -
                                                       ----------   ----------
         At end of period                               5,735,561   11,741,122
                                                       ==========   ==========

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

NOTE 17 - RELATED PARTY TRANSACTIONS AND BALANCES

         Transactions for the years ended September 30, 2005, September 30,
2004, and September 30, 2003 were as follows:

                                            FOR THE FISCAL YEARS ENDED
                                  SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                                  -------------   -------------   -------------
                                      2005            2004            2003
                                  -------------   -------------   -------------

Interest on the promissory note
 payable to a significant
 stockholder of the company
 and interest on director's loan      $  0             $  0            $  12
                                      ====             ====            =====

         These transactions are recorded at the exchange amount, being the
amount of consideration established and agreed to by the related parties.

         At the year end, there were no amounts due from and to related parties
which are not disclosed elsewhere in these consolidated financial statements.

                                      F-27
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 18 - SEGMENT DATA

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

         Given below are summaries of the significant accounts and balances by
business segment and by geographical location, reconciled to the consolidated
totals. In all 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. Those
transactions relating to the Company's distribution entity in the Netherlands
have been included in the Metrology division. The summaries also provide an
analysis of the accounts and balances between continuing and discontinued
operations.

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

                                      F-28
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 18 - 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      YEAR ENDED        YEAR ENDED
                             SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,
                                  2005             2004             2003             2005             2004              2003
                             -------------    -------------    -------------     -------------    -------------     -------------
<S>                            <C>              <C>              <C>               <C>              <C>                <C>
  Hand & garden tools          $  74,339        $  76,468        $  69,959         $   5,488        $   8,814          $  6,640
  Metrology tools                 17,262           15,370           13,571             2,293            2,689             2,699
  Magnetic products               10,724            9,341            8,315               395              862             1,023
  Screwdrivers                         -                -            1,093                 -                -                 -
  Corporate                            -                -                -             9,392            9,749             9,199
                               ---------        ---------        ---------         ---------        ---------          --------
     Total                     $ 102,325        $ 101,179        $  92,938         $  17,568        $  22,114          $ 19,561
                               =========        =========        =========         =========        =========          ========

Attributable to:
Continuing operations          $ 100,698        $  99,485        $  90,124         $  17,568        $  22,060          $ 19,561
Discontinued operations        $   1,627        $   1,694        $   2,814         $       -        $      54          $      -
                               ---------        ---------        ---------         ---------        ---------          --------
                               $ 102,325        $ 101,179        $  92,938         $  17,568        $  22,114          $ 19,561
                               =========        =========        =========         =========        =========          ========

<CAPTION>
                                             DEPRECIATION                                      CAPITAL EXPENDITURE
                             -----------------------------------------------     ------------------------------------------------
                               YEAR ENDED       YEAR ENDED       YEAR ENDED        YEAR ENDED      YEAR ENDED        YEAR ENDED
                             SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,
                                  2005             2004             2003             2005             2004              2003
                             -------------    -------------    -------------     -------------    -------------     -------------
<S>                            <C>              <C>              <C>               <C>              <C>                <C>
  Hand & garden tools          $   2,291        $   1,975        $   1,901         $   1,256        $   3,726          $  1,863
  Metrology tools                    530              421              400               119              202               638
  Magnetic products                  474              281              234                 4               35               337
  Screwdrivers                         -                -               14                 -                -                 2
  Corporate                          247              252              192                 -            3,228                93
                               ---------        ---------        ---------         ---------        ---------          --------
     Total                     $   3,542        $   2,929        $   2,741         $   1,379        $   7,191          $  2,933
                               =========        =========        =========         =========        =========          ========

Attributable to:
Continuing operations          $   3,488        $   2,922        $   2,708         $   1,379        $   7,137          $  2,931
Discontinued operations        $      54        $       7        $      33         $       -        $      54          $      2
                               ---------        ---------        ---------         ---------        ---------          --------
                               $   3,542        $   2,929        $   2,741         $   1,379        $   7,191          $  2,933
                               =========        =========        =========         =========        =========          ========

<CAPTION>
                                             OPERATING INCOME                                     NET INTEREST
                             -----------------------------------------------     ------------------------------------------------
                               YEAR ENDED       YEAR ENDED       YEAR ENDED        YEAR ENDED      YEAR ENDED        YEAR ENDED
                             SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,
                                  2005             2004             2003             2005             2004              2003
                             -------------    -------------    -------------     -------------    -------------     -------------
<S>                            <C>              <C>              <C>               <C>              <C>                <C>
  Hand & garden tools          $     (19)       $   1,124        $   3,404         $    (178)       $    (203)         $   (255)
  Metrology tools                  1,610            1,533            1,380               (14)             (17)              (18)
  Magnetic products                1,058            1,136            1,715               (10)             (14)              (14)
  Screwdrivers                         -                -              (17)                -                -               (10)
  Corporate                         (982)          (1,849)            (135)              249              (66)               50
                               ---------        ---------        ---------         ---------        ---------          --------
     Total                     $   1,667        $   1,944        $   6,347         $      47        $    (300)         $   (247)
                               =========        =========        =========         =========        =========          ========
Attributable to:
Continuing operations          $   1,830        $   2,158        $   6,377         $      47        $    (300)         $   (237)
Discontinued operations        $    (163)       $    (214)       $     (30)        $       -        $       -          $    (10)
                               ---------        ---------        ---------         ---------        ---------          --------
                               $   1,667        $   1,944        $   6,347         $      47        $    (300)         $   (247)
                               =========        =========        =========         =========        =========          ========
</TABLE>

(a) Represents property, plant and equipment, net

                                      F-29
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 18 - 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      YEAR ENDED        YEAR ENDED
                             SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,
                                  2005             2004             2003             2005             2004              2003
                             -------------    -------------    -------------     -------------    -------------     -------------
<S>                            <C>              <C>              <C>               <C>              <C>                <C>
  United Kingdom               $  44,555        $  45,417        $  38,625         $  15,875        $  20,337          $ 17,706
  Europe                          21,778           18,817           17,159             1,163            1,231             1,243
  Australasia                     15,160           17,505           20,215               530              546               605
  North America                    6,982            6,954            6,802                 -                -                 7
  Other                           13,850           12,486           10,137                 -                -                 -
                               ---------        ---------        ---------         ---------        ---------          --------
     Total                     $ 102,325        $ 101,179        $  92,938         $  17,568        $  22,114          $ 19,561
                               =========        =========        =========         =========        =========          ========
Attributable to:
Continuing operations          $ 100,698        $  99,485        $  90,124         $  17,568        $  22,060          $ 19,561
Discontinued operations        $   1,627        $   1,694        $   2,814         $       -        $      54          $      -
                               ---------        ---------        ---------         ---------        ---------          --------
                               $ 102,325        $ 101,179        $  92,938         $  17,568        $  22,114          $ 19,561
                               =========        =========        =========         =========        =========          ========

<CAPTION>
                                             DEPRECIATION                                      CAPITAL EXPENDITURE
                             -----------------------------------------------     ------------------------------------------------
                               YEAR ENDED       YEAR ENDED       YEAR ENDED        YEAR ENDED      YEAR ENDED        YEAR ENDED
                             SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,
                                  2005             2004             2003             2005             2004              2003
                             -------------    -------------    -------------     -------------    -------------     -------------
<S>                            <C>              <C>              <C>               <C>              <C>                <C>
  United Kingdom               $   3,172        $   2,472        $   2,303         $     995        $   3,694          $  2,585
  Europe                             109               93              117                79                3                11
  Australasia                        261              313              301               305              266               330
  North America                        -               51               20                 -            3,228                 7
                               ---------        ---------        ---------         ---------        ---------          --------
     Total                     $   3,542        $   2,929        $   2,741         $   1,379        $   7,191          $  2,933
                               =========        =========        =========         =========        =========          ========
Attributable to:
Continuing operations          $   3,488        $   2,922        $   2,708         $   1,379        $   7,137          $  2,931
Discontinued operations        $      54        $       7        $      33         $       -        $      54          $      2
                               ---------        ---------        ---------         ---------        ---------          --------
                               $   3,542        $   2,929        $   2,741         $   1,379        $   7,191          $  2,933
                               =========        =========        =========         =========        =========          ========

<CAPTION>
                                             OPERATING INCOME                                     NET INTEREST
                             -----------------------------------------------     ------------------------------------------------
                               YEAR ENDED       YEAR ENDED       YEAR ENDED        YEAR ENDED      YEAR ENDED        YEAR ENDED
                             SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,
                                  2005             2004             2003             2005             2004              2003
                             -------------    -------------    -------------     -------------    -------------     -------------
<S>                            <C>              <C>              <C>               <C>              <C>                <C>
  United Kingdom               $   1,938        $   3,441        $   6,333         $     109        $    (186)         $    (77)
  Europe                             355              243              (85)             (185)            (163)             (186)
  Australasia                        183             (171)             595                60               24               (10)
  North America                     (809)          (1,569)            (496)               63               25                26
                               ---------        ---------        ---------         ---------        ---------          --------
     Total                     $   1,667        $   1,944        $   6,347         $      47        $    (300)         $   (247)
                               =========        =========        =========         =========        =========          ========
Attributable to:
Continuing operations          $   1,830        $   2,158        $   6,377         $      47        $    (300)         $   (237)
Discontinued operations        $    (163)       $    (214)       $     (30)        $       -        $       -          $    (10)
                               ---------        ---------        ---------         ---------        ---------          --------
                               $   1,667        $   1,944        $   6,347         $      47        $    (300)         $   (247)
                               =========        =========        =========         =========        =========          ========
</TABLE>

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

                                      F-30
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 19 - 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 and
derivative financial instruments at September 30, 2005 and 2004:

         FINANCIAL ASSETS AND LIABILITIES

         The Company's financial assets and liabilities comprise 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, 2005 and
2004.

         DERIVATIVE FINANCIAL INSTRUMENTS

         The Company had $1 million and $1.5 million outstanding in respect of
forward exchange contracts outstanding as of September 30, 2005 and 2004,
respectively, in order to hedge the foreign currency risk of certain accounts
receivable and accounts payable transactions. These transactions are expected to
mature within four months of the period end. The estimated fair values of the
Company's forward exchange contracts at September 30, 2005 and 2004, which equal
the carrying amounts of the related accounts receivable and accounts payable
balances, were $1 million and $2.1 million. 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 2005 fiscal year
are expected to be recognized in earnings within the next three months.

NOTE 20 - COMMITMENTS AND CONTINGENCIES

         The Company had outstanding documentary letters of credit totaling $0.7
million at September 30, 2005 (2004: $2.4 million) 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, 2005 the extent of this guarantee relating to gross
bank overdrafts was $20.4 million (2004: $20.5 million). The overall pooled
balance of the bank accounts within the pool at September 30, 2005 was a net
overdrawn balance of $0.8 million (2004: $1.6 million cash in hand).

         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 15.

                                      F-31
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 20 - COMMITMENTS AND CONTINGENCIES - CONTD.

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

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

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

         The defendants filed certain Motions to Dismiss with regard to the
Complaint and on October 19, 2005, the U.S. District Court for the Southern
District of Florida in In Re Spear & Jackson Securities Litigation entered its
Order regarding these Motions. The Order denied the Company's motion as well as
that of Dennis Crowley, the former Chief Executive Officer of Spear & Jackson.
The Company is in the process of preparing its answer and defenses to the
Complaint. The Court granted the Motion to Dismiss on behalf of William
Fletcher, the Company's interim Chief Executive Officer and also granted the
Motion to Dismiss of the Company's former independent auditor, Sherb & Co., LLP,
although the dismissal regarding the latter is now on appeal.

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

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

         With effect from September 30, 2003 the Company exited its screwdriver
operations following the disposition of the trade and assets of Mega Tools Ltd
and Mega Tools USA, Inc. The disposition of the screwdriver division was
undertaken by Neil Morgan who was then heading up the division. The Company
believed that no specific authorization was afforded to Mr. Morgan to undertake
that disposition. An amount of $284 was provided against the recovery of any
disposition proceeds. It has now been agreed with Megapro that it will pay
Canadian $54 (approximately $41) in settlement of those debts and this is being
repaid in monthly installments of Canadian $ 5 (approximately $4) of which $27
has been received in the year ended September 30, 2005.

                                      F-32
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 20 - 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.

                                      F-33
<PAGE>
                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 21 - SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 2005:
                                                                QUARTERS ENDED
                                   DECEMBER         MARCH            JUNE          SEPTEMBER         TOTAL
                                   --------       ---------        ---------       ---------       ---------
<S>                                <C>            <C>              <C>             <C>             <C>
Net sales                          $ 24,685       $  27,773        $  25,954       $  22,286       $ 100,698
Gross profit                       $  7,951       $   9,416        $   8,423       $   7,445       $  33,235
Net income (loss)
  Continued operations             $   (611)      $   3,529        $     108       $     708       $   3,734
  Discontinued operations          $    (37)      $    (335)       $     (43)      $    (224)      $    (639)
  Total                            $   (648)      $   3,194        $      65       $     484       $   3,095
Net income (loss) per share
(Basic and diluted)
  Continued operations             $  (0.05)      $    0.30        $    0.02       $    0.15       $    0.42
  Discontinued operations          $  (0.01)      $   (0.03)       $   (0.01)      $   (0.02)      $   (0.07)
  Total                            $  (0.06)      $    0.27        $    0.01       $    0.13       $    0.35

<CAPTION>
FISCAL 2004:
                                                                QUARTERS ENDED
                                   DECEMBER         MARCH            JUNE          SEPTEMBER         TOTAL
                                   --------       ---------        ---------       ---------       ---------
<S>                                <C>            <C>              <C>             <C>             <C>
Net sales                          $ 22,569       $  26,985        $  25,978       $  23,953       $  99,485
Gross profit                       $  7,033       $   8,554        $   7,900       $   8,424       $  31,911
Net income
  Continued operations             $    333       $     (12)       $    (233)      $     749       $     837
  Discontinued operations          $    (52)      $     (56)       $     (54)      $    (239)      $    (401)
  Total                            $    281       $     (68)       $    (287)      $     510       $     436
Net income per share
(Basic and diluted)
  Continued operations             $   0.03       $       -        $   (0.02)      $    0.06       $    0.07
  Discontinued operations          $  (0.01)      $   (0.01)       $       -       $   (0.01)      $   (0.03)
  Total                            $   0.02       $   (0.01)       $   (0.02)      $    0.05       $    0.04
</TABLE>
                                      F-34
<PAGE>

ITEM 9.  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 two prior years contained no adverse opinion or
disclaimer of opinion and were not qualified or 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 agreed 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 ("Sherb") to audit the Company's financial statements for the fiscal year
ended September 30, 2002. The Company had not consulted with Sherb during the
last two years or subsequent interim period on either the application of
accounting principles or type of opinion that Sherb might issue on the Company's
financial statements.

On August 13, 2004 the Company announced the resignation of its independent
accountant, Sherb and on November 19, 2004 the Company engaged Chantrey
Vellacott DFK ("Chantrey Vellacott") as its independent auditor. The change in
accountants was ratified and approved by the Board of Directors on the same
date.

Prior to their appointment as the Company's primary auditor, Chantrey Vellacott
performed significant auditing procedures relating to the Company's non-United
States subsidiaries. In connection with these auditing procedures, the Company
discussed a variety of matters, including the application of accounting
principles and auditing standards. However, these discussions occurred in the
normal course of the Company's professional relationship with Chantrey Vellacott
and were not a condition of retaining them as Spear & Jackson's primary auditor.

There have been no disagreements between the Company and the former certifying
accountant, Sherb, on which Chantrey Vellacott has consulted.

During the Company's year ended September 30, 2003 and the subsequent interim
period up to August 13, 2004, there were no disagreements between the Company
and Sherb on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to Sherb's satisfaction, would have caused Sherb to make reference
to the subject matter of the disagreement in connection with its reports on the
Company's financial statements for such periods.

The audit report issued by Sherb on the consolidated financial statements of the
Company as of, and for the year ended September 30, 2003 did not contain any
adverse opinion or disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles.

                                       58
<PAGE>

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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

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

Definition of Disclosure Controls

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

Limitations on the Effectiveness of Controls

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

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

Conclusions

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

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as
defined in Rules 13a-15(f) of the Securities Exchange Act) that occurred during
the year ended September 30, 2005 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

Not applicable.

                                       59
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.

The executive officers of the Company, their ages, positions and past five
years' experience are set forth below. All executive officers of the company are
appointed by the Board of Directors annually. There are no family relationships
between any director, executive officer, or person nominated to become a
director or executive officer.

Directors and Executive Officers:

   NAME                      AGE     TITLE
   ----                      ---     -----

   John Harrington, Jr.      64      Interim Chairman
   William Fletcher          59      Acting Chief Executive Officer and Director
   Robert Dinerman           69      Director
   Patrick Dyson             49      Chief Financial Officer

Mr. John R. Harrington, Jr. was appointed Acting Chairman in April 2004
following the removal of Dennis Crowley from that position. He had previously
been a director of the Company since April 1, 2003. Mr. Harrington has 30 years
experience in the banking and trust fields and financial advisory services. Mr.
Harrington has served as President of Harrington Capital Management, a financial
advisory service firm since October 1996. Also in 1996, Mr. Harrington formed
the Harrington Foundation. The Foundation was formed for philanthropic purposes
with particular emphasis on the promotion of the cultural arts amongst children
and the development of awareness of the environment and the importance of its
protection. Mr. Harrington holds a degree in economics.

Mr. William Fletcher was appointed Acting Chief Executive Officer in April 2004
following the removal of Dennis Crowley from that position. He had previously
been Chief Financial Officer since September 2002. Mr. Fletcher has served in
various positions with Spear & Jackson plc since 1970. Mr. Fletcher was
appointed Finance Director of Neill Tools Limited, the Company's principal UK
subsidiary, in September 1987 and, in May 2002, he was appointed Group Finance
Director.

Mr. Robert Dinerman was appointed a director in August 2003. Mr. Dinerman was
Vice President of Pierre Frozen Foods in Cincinnati, Ohio from 1958-1995 and
from 1996 to 2001 was chairman of Envision Industries. He is currently a board
member of Spring Valley Bank and the Cincinnati Psychoanalytic Institute. In
1958, Mr. Dinerman received a BA in Psychology from Lebanon Valley College in
Annville, Pennsylvania and a Master's degree in psychology from Xavier
University in Cincinnati, Ohio in 1967. A licensed psychologist, Mr. Dinerman
taught for over 25 years in the Graduate School of Business at Xavier University
where he became Assistant Professor in the Department of Psychology.

Mr. Patrick Dyson was appointed Chief Financial Officer in October 2004. He
qualified as a member of the Institute of Chartered Accountants in England and
Wales in 1982 and worked in public practice with Barber Harrison & Platt in
Sheffield, England until joining Spear & Jackson plc in 1991, where he has
occupied a number of Corporate Financial roles within the Group. From April 1995
to July 2001 Mr. Dyson was Group Chief Accountant, and from August 2001 until
his appointment as Chief Financial Officer in October 2004 he was Group
Financial Controller. He holds a BA in English and an MA in Linguistics, both
from the University of Leeds, England.

In October 2004, the Company appointed Mr. S. Jack Campbell as advisor and
consultant to the Board of Directors. Mr. Campbell is Principal of MASI, Ltd., a
private investment banking firm in Chicago. His engagement involved advising the
Company on corporate governance matters, sourcing and identifying qualified
director candidates to augment the current Board, corporate strategic assistance
and coordination and liaison with the Corporate Monitor. On completion of the
various projects involved Mr. Campbell's advisory role was terminated.

Following the resolution of the SEC litigation and the securing of Directors and
Officers insurance in January 2005, the Company has continued to consider the
appointment of individuals as executive and non-executive directors to
strengthen the composition of the Company's Board of Directors.

                                       60
<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.

MEETINGS OF THE BOARD

During fiscal 2005, in addition to actions taken by unanimous written consent,
there were 8 meetings of the Company's Board of Directors.

COMMITTEES

The Company presently has an audit committee comprising Messrs. John Harrington
and Robert Dinerman, who comprise two of the three members of our Board of
Directors. There is currently no independent audit committee financial expert.
The audit committee met once during the year. A copy of the Audit Committee
Charter, which was formally adopted by the Board of Directors in January 2005,
was filed as an exhibit to the Annual Return on Form 10-K for the year ended
September 30, 2004.

The Board of Directors also adopted in January 2005 the charter for a
Compensation Committee and this, too, was filed as an exhibit to the Company's
Annual Return on Form 10-K for the year ended September 30, 2004. The Company
has not yet designated any of its directors to serve as members of the Company's
Compensation Committee.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT

Section 16(a) of the Exchange Act requires our directors and executive officers
and persons who own ten percent (10%) or more of a registered class of our
equity securities, to file with the Securities and Exchange Commission initial
reports of their ownership and reports of changes in their ownership of common
stock and other equity securities of Spear & Jackson, Inc. Officers, directors
and greater than ten percent (10%) stockholders are required by regulation to
furnish us with copies of all Section 16(a) forms they file.

The Company has requested various of its division and group executives to
register under Section 16(a) of the Securities Exchange Act of 1934,
notwithstanding that the Company does not consider such individuals to be
"officers" within the meaning of that statute. Accordingly, Messrs. Gilles
Champain, Stephen White and Paul Moore registered under Section 16 and Messrs.
Peter Gill and Lee Wells are expected to complete their registration in the near
future.

CODE OF ETHICS

The Company's management had previously developed a detailed employee policy
document covering business conduct practices and processes. Subsequent to this,
the Company has recently drafted and adopted a Code of Business Ethics and
Conduct. A copy of the code was filed as an exhibit to the Company's Annual
Return on Form 10-K for the year ended September 30, 2004.

                                       61
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain compensation information as to each
individual who served as the Company's chief executive officer during the years
ended September 30, 2005, 2004 and 2003 and each executive officer who received
in excess of $100,000 for such fiscal period.
<TABLE>
                                          SUMMARY COMPENSATION TABLE
<CAPTION>
                                   Annual Compensation                 Long-Term Compensation
                            --------------------------------   -------------------------------
                                                                      Awards             Payouts
                                                               -----------------------   -------
                                                      Other                 Securities
                                                     Annual                   Under-               All Other
                                                     Compen-   Restricted     Lying                 Compen-
                                                     sation      Stock       Options/     LTIP      sation
   Name and Principal       Year    Salary   Bonus     ($)      Award(s)       SARs      Payouts      ($)
       Position             ($)      ($)      ($)      (1)        ($)          (#)         ($)        (2)
 ------------------------   ----   -------   -----   -------   ----------   ----------   -------   ---------
<S>                         <C>    <C>       <C>     <C>           <C>          <C>         <C>      <C>
Dennis Crowley
Chief Executive Officer,
President, Secretary and    2005         -       -        -        -            -           -             -
Chairman of the Board       2004   194,545       -        -        -            -           -             -
until 15 April 2004***      2003   365,907       -        -        -            -           -             -


William Fletcher            2005   185,110       -   17,608        -            -           -        60,600
Acting Chief Executive      2004   175,265       -   15,231        -            -           -        54,683
Officer**                   2003   141,000   5,000   15,160        -            -           -        44,371


Patrick J. Dyson            2005   120,321       -   14,992        -            -           -        26,873
Chief Financial             2004   111,900   5,393   12,654        -            -           -        23,723
Officer*                    2003    95,988       -   11,475        -            -           -        20,638
</TABLE>

   ***   Mr. Crowley was appointed Chief Executive Officer, President and
         Chairman of the Board in September 2002. He was removed from office in
         April 2004.

   **    Mr. Fletcher was appointed Chief Financial Officer in September 2002.
         On Mr. Crowley's removal from office in April 2004 he was appointed
         acting Chief Executive Officer.

   *     Mr. Dyson was appointed Chief Financial Officer in October 2004.

   (1)   Other annual compensation includes payments made by the Company on
         behalf of the executive officers in respect of the provision of a fully
         expensed company automobile, private medical insurance and professional
         subscriptions.

   (2)   Comprises contributions to the Company's defined benefit pension plan.

STOCK OPTION GRANTS

No stock options were granted to our directors and executive officers during our
most recent fiscal year ended September 30, 2005.

EMPLOYMENT AGREEMENTS

William Fletcher has no formal employment agreement but in a letter issued
supplementary to Mr. Fletcher's original terms of employment, the Company has
agreed that in the event of termination of employment other than for cause, Mr.
Fletcher would be entitled to severance pay equal to twelve months of his
current base salary and other benefits.

On September 1, 2000 Patrick Dyson entered into an employment agreement which
provides that, in the event of termination of employment other than for cause,
Mr. Dyson would be entitled to severance pay equal to twelve months of his
current base salary and other benefits.

Mr. Fletcher's and Mr. Dyson's base salaries are determined by the Board and
both are entitled to participate in an annual bonus scheme under which bonuses
are payable based on the operating profit and cash performance of the Company
measured against pre-set targets.

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, 2005. At September 30,
2005, no director or executive officer held any stock options.

                                       62
<PAGE>

COMPENSATION ARRANGEMENTS OF OTHER DIRECTORS

Messrs. Harrington and Dinerman both received compensation of $12,500 in the
year ended September 30, 2005. In the year ended September 30, 2004 no
compensation was received and in the year ended September 30, 2003 each received
fees of $5,000. Additionally, Mr. Harrington and Mr. Dinerman are reimbursed for
travel and other expenses incurred in connection with meetings of the Board of
Directors and other Company matters.

At a meeting of the Board of Directors held in January 2005, the following
compensation arrangements were agreed for members of the Company's Board of
Directors, effective, prospectively, from January 1, 2005:

                                        Fee Per
                                        Meeting
Attendance at                              $
-------------                           -------
Formal Board Meeting                     3,000
Special Board Meeting                      500
Compensation Committee Meeting             500
Audit Committee Meeting                    750

Out of pocket costs incurred in connection with the above meetings and other
expenses incurred on other Company matters are reimbursed according to formal
policy guidelines.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

The following table sets forth our common stock ownership information as of
November 30, 2005, 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; (iii) each executive officer of the Company and (iv) 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:

         40 South Lasalle Street
         Suite 201
         Chicago
         Illinois
         60605

                                        SHARES                   PERCENT OF
NAME AND ADDRESS                  BENEFICIALLY OWNED         SHARES OUTSTANDING
----------------                  ------------------         ------------------

William Fletcher(1)                           -                         -

Patrick J Dyson (2)                           -                         -

John R. Harrington (3)                   67,981                     1.18%

Robert Dinerman (4)                      53,076                     0.93%

Jacuzzi Brands, Inc.                  3,543,281                    61.78%
777 S. Flagler Drive
Suite 1108
West Palm Beach, FL 33495

All Executive Officers and              121,057                     2.11%
Directors as a group
(4 persons)

   (1)   William Fletcher is the Acting Chief Executive Officer of the Company.

   (2)   Patrick Dyson is the Chief Financial Officer of the Company.

   (3)   John Harrington is Interim Chairman of the Company. Includes 15,000
         shares owned by Mr. Harrington's wife. The holding excludes 1,200
         shares owned by Mr. Harrington's daughter.

   (4)   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.

The Company has no securities authorized for issuance under equity compensation
plans.

                                       63
<PAGE>

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.

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
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.

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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.

As disclosed in ITEM 3 "LEGAL PROCEEDINGS", the Company entered into a Stock
Purchase Agreement with PNC Tool Holdings LLC ("PNC") and Dennis Crowley, the
sole member of PNC Tool Holdings. Under the Stock Purchase Agreement, the
Company acquired, for $100, and other good and valuable consideration, 6,005,561
common shares of the Company held by PNC Tool Holdings, which represented
approximately 51.1% of the outstanding common shares of the Company at December
31, 2004, and which constituted 100% of the common stock held by such entity.
The parties also executed general releases in favor of each other subject to the
fulfillment of the conditions of the Stock Purchase Agreement.

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

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

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ITEM 13. 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 the Company or in any presently proposed transaction
which has or will materially affect us:

   *  Any of the Company's 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.

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 at September 30, 2003 as part of the sales
consideration for the disposal of the Megapro screwdriver division.

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 has reviewed the terms of the transaction and has
evaluated the receivable and the assets purportedly conveyed to consider its
course of action in this matter and has accordingly provided $187,000 against
the recoverability of these receivables in the Company's financial statements
for the year ended September 30, 2004. This provision is in addition to the
$97,000 already provided as potentially irrecoverable in the Company's financial
statements for the year ended September 30, 2003. It has now been agreed with
Megapro that it will pay Canadian $ 53,900 (approximately $41,000) in settlement
of those debts and this is being paid in monthly installments of Canadian $5,000
(approximately $3,800) of which $27,000 has been received in the year ended
September 30, 2005.

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<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

ANNUAL AUDIT AND QUARTERLY REVIEW FEES

The aggregate fees for professional services rendered for the audit of the
Company's annual financial statements for the year ended September 30, 2005 and
for professional services rendered for the quarterly review of the financial
statements was $417,000 (2004: $345,000). The 2005 fee comprises $412,000 billed
by Chantrey Vellacott DFK LLP (2004:$332,000)and $5,000 billed by Sherb & Co LLP
(2004:$13,000).

TAX FEES

The aggregate fees billed by Chantrey Vellacott DFK for professional services
rendered for tax compliance, tax advice and tax planning were $178,000 for the
year ended September 30, 2005 (September 30, 2003: $73,000).

AUDIT RELATED FEES

There were no fees billed by the Company's accountants and former principal
accountants for financial information systems design and implementation in
either fiscal 2004 or 2005. There were no fees billed for professional services
related to Sarbanes-Oxley implementation, Section 404 in particular. It is
likely that significant fees will be incurred on this item in fiscal 2006.

PRE-APPROVAL POLICIES AND PROCEDURES

It is the policy of the Audit Committee to pre-approve all material, specific
expenditures relating to any off the matters set out above. In some cases,
projects with estimated budgets are pre-approved and monitored by the Audit
Committee, and final expenditures are ratified on completion. For fiscal 2005,
the Audit Committee approved and/or ratified all of the services detailed above.

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<PAGE>

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Financial Statements and Financial Statement Schedules:

The following documents are either filed herewith or incorporated herein by
reference:

Financial Statements.

The audited consolidated financial statements of Spear & Jackson, Inc. and
subsidiaries as of September 30, 2005 and 2004 and for each of the three years
in the period ended September 30, 2005 (including the notes thereto which
contain unaudited quarterly financial data for each of the two years ended
September 30, 2005), and the Reports of Independent Registered Public Accounting
Firms thereon, are included herein as shown in the "Index to the Consolidated
Financial Statements" set forth in ITEM 8.

(b) 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)
4.1      Stock Purchase Agreement dated September 2002 between us, USI Mayfair
         Limited, and PNC Tool Holdings, LLC(3)
4.2      Registration Rights Agreement dated September 2002, between us, USI
         Mayfair Limited, and PNC Tool Holdings, LLC(3)
4.3      Stockholders' Agreement dated September 2002, between us, USI Mayfair
         Limited, PNC Tool Holdings LLC, and Dennis Crowley(3)
4.4      Specimen Form of Common Stock Certificate.(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     Employment Agreement dated September 2002, between us and Neil
         Morgan(2)
10.3     Employment Agreement dated September 2002, between us and Joseph
         Piscitelli(2)
14       Code of Ethics (5)
16       Letters regarding concurrence of former independent public
         accountants.(4)
21       List of Subsidiaries *
31.1     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2     Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
         to Section 906 of the Sarbanes-Oxley Act of 2002. *
99.1     Audit Committee Charter (5)
99.2     Compensation Committee Charter (5)

     *   Filed herewith.

    (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 Annual Return on Form 10-KSB for
         the year ended September 30, 2002.

    (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.

    (4)  Filed as an Exhibit to the Company's Report on Form 8-K/A filed with
         the Securities and Exchange Commission on August 25, 2004.

    (5)  Filed as an Exhibit to the Company's Annual Return on Form 10-K for the
         year ended September 30, 2004.

(c) Financial Statement Schedules

No financial statement schedules are included herein because either the amounts
are not sufficient to require submission of the schedules or because the
information is included in the Financial Statements or notes thereto.

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                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated: December 23, 2005                SPEAR & JACKSON, INC.

                                        By: /s/ John Harrington Jr.
                                            -----------------------
                                            John Harrington Jr.
                                            Interim Chairman

Pursuant to the requirements of the Securities Act of 1934, 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:   December 23, 2005              By: /s/ John Harrington Jr.
                                            ------------------------
                                            John Harrington Jr.
                                            Interim Chairman

Dated:   December 23, 2005              By: /s/ William Fletcher
                                            --------------------
                                            William Fletcher
                                            Acting Chief Executive Officer
                                            (Principal Executive Officer)

Dated:   December 23, 2005              By: /s/ Robert Dinerman
                                            -------------------
                                            Robert Dinerman
                                            Director

Dated:   December 23, 2005              By: /s/ Patrick J. Dyson
                                            --------------------
                                            Patrick J. Dyson
                                            Chief Financial Officer
                                            (Principal Financial
                                            And Accounting Officer)


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