UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A (Rule 14a-101)
SCHEDULE 14A
INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant ý

Filed by a Party other than the Registrant ¨

Check the appropriate box:

ýPreliminary Proxy Statement

¨Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

¨Definitive Proxy Statement

¨Definitive Additional Materials

¨Soliciting Material Under Rule 14a-12

SPEAR & JACKSON, INC.

(Name of Registrant as Specified In Its Charter)

_____________________________________________________________________________________________

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

¨No fee required.

ýFee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)

Title of each class of securities to which transaction applies: Common Stock

(2)

Aggregate number of securities to which transaction applies: 2,192,280

(3)

Per unit price or other underlying value of transaction computed pursuant to exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

$1.96 per share of Common Stock

(4)

Proposed maximum aggregate value of transaction: $4,296,869

(5)

Total fee paid: $459.77

¨Fee paid previously with preliminary materials.

ýCheck box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)

Amount Previously Paid:

(2)

Form, Schedule or Registration Statement No.:

(3)

Filing Party:

(4)

Date Filed:

Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

PRELIMINARY COPY

SPEAR & JACKSON, INC.
12012 SOUTHSHORE BOULEVARD, SUITE 103

WELLINGTON, FLORIDA 33414
_______________, 2007

DEAR STOCKHOLDERS:

You are cordially invited to attend a special meeting of stockholders of Spear & Jackson, Inc. (“S&J’’ or the “Company”), to be held on __________, 2007, at _____ local time, at __________.

At the special meeting, you will be asked to approve the Agreement and Plan of Merger, dated June 22, 2007 (the ‘‘Merger Agreement’’), among S&J, United Pacific Industries Limited, a Bermuda corporation (“UPI”), Pantene Global Holdings Limited, a Hong Kong corporation and wholly owned subsidiary of UPI (“Pantene”, and collectively with UPI the ‘‘Parent’’), and Pantene Global Acquisition Corp., a Nevada corporation and wholly owned subsidiary of Pantene (‘‘Newco’’).

Patrick J. Dyson is our Chairman, Chief Financial Officer, Secretary, and a member of our Board of Directors, and is UPI’s Chief Financial Officer; Lewis Hon Ching Ho is our Chief Administrative Officer and a member of our Board of Directors, and is a director and the general manager of Pantene Electronics (Hangzhou) Co. Ltd., a subsidiary of UPI; Brian C. Beazer is our Assistant Treasurer and is the Chairman of UPI; Nila Ibrahim is our General Counsel and is the General Counsel of UPI.

Parent holds 3,543,281 shares of our common stock, representing approximately 61.78% of our outstanding common stock. Each share of our common stock is entitled to one vote.

Under the Merger Agreement, S&J will be merged with and into Newco, with Newco as the surviving corporation. Under the Merger Agreement, upon the consummation of the merger, each holder of outstanding shares of our common stock other than (i) Parent and (ii) stockholders who validly exercise and perfect dissenter’s rights under Nevada law, will be entitled to receive $1.96 per share in cash without interest. Shares held by stockholders who validly exercise and perfect their dissenter’s rights under Nevada law will be converted into the right to receive such consideration as may be determined to be due pursuant to the provisions of Sections 92A.300 through 92A.500 of the Nevada Revised Statutes.

After the merger, Newco will continue its operations as a privately held company. Current stockholders of S&J, other than Parent, will not participate in any future earnings and growth of Newco, as the surviving corporation. Parent will own all of the equity of the surviving corporation.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of this transaction, passed upon the fairness or merits of this transaction, or passed upon the accuracy or adequacy of the disclosure in this document. Any representation to the contrary is a criminal offense.

Details of the merger and the Merger Agreement are discussed in the enclosed proxy statement, the forepart of which includes a summary of the terms of the merger and certain questions and answers relating to the proposed transaction. A copy of the Merger Agreement is attached as Exhibit A to the proxy statement.

In order to reduce any conflict of interest in evaluating, negotiating and recommending the merger and the terms of the Merger Agreement, our Board of Directors delegated those duties to our Finance Committee. Dr. J. Preston Jones, is the chairperson and sole member of the Finance Committee. Dr. Jones is independent, is neither an officer nor an employee of S&J, and has no financial interest in the merger.

Our Board of Directors, upon the recommendation of the Finance Committee, has unanimously approved the merger and the Merger Agreement. Our Board of Directors and the Finance Committee believe that the terms of the merger and the Merger Agreement are fair to, and in the best interests of, S&J stockholders, other than Parent.

In reaching its decision, the Finance Committee considered, among other factors, the written opinion of Capitalink, L.C. (“Capitalink”), a division of Ladenburg Thalmann & Co. Inc. (“Ladenburg”), the Finance Committee’s financial advisor. Based upon and subject to the considerations and limitations set forth in its opinion, Capitalink concluded that the $1.96 per share cash consideration to be received in the merger by the holders of our common stock is fair, from a financial point of view, to the holders of our capital stock, other than Parent.

BASED UPON THE RECOMMENDATION OF THE FINANCE COMMITTEE, OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE ‘‘FOR’’ THE APPROVAL OF THE MERGER AGREEMENT AND ‘‘FOR’’ THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, TO SOLICIT ADDITIONAL VOTES IN FAVOR OF APPROVAL OF THE MERGER AGREEMENT.

The affirmative vote of a majority of the outstanding shares of our common stock is required to adopt and approve the Merger Agreement. Each outstanding share of common stock will be entitled to one vote. Parent currently holds in excess of a majority of the outstanding shares of our common stock and intends to vote its shares in favor of the merger.

Our stockholders will be entitled to dissenter’s rights under Nevada law in connection with the merger as described in the accompanying proxy statement.

It is very important to us that your shares be represented at the special meeting, whether or not you plan to attend personally. Therefore, you should complete and sign the enclosed proxy card and return it as soon as possible in the enclosed postage paid envelope. This will ensure that your shares are represented at the special meeting.

The accompanying notice of meeting and proxy statement explain the merger and the Merger Agreement and provide specific information concerning the special meeting of stockholders. Please read these materials carefully.

Sincerely,

Dr. J. Preston Jones,

Chairperson of the

Finance Committee

This proxy statement is dated __________, 2007 and is first being mailed to stockholders on or about __________, 2007.

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SPEAR & JACKSON, INC.
12012 SOUTHSHORE BOULEVARD, SUITE 103

WELLINGTON, FLORIDA 33414

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON __________, 2007

Notice is hereby given that a special meeting of the stockholders of Spear & Jackson, Inc. (‘‘S&J’’ or the “Company”) will be held on __________, 2007 at _____ local time at __________ for the following purposes:

1.

APPROVAL OF THE MERGER AGREEMENT. To consider and vote upon a proposal to adopt and approve the Agreement and Plan of Merger dated as of June 22, 2007, among United Pacific Industries Limited, a Bermuda corporation (“UPI”), Pantene Global Holdings Limited, a Hong Kong corporation and wholly owned subsidiary of UPI (“Pantene,” and collectively with UPI the ‘‘Parent’’), and Pantene Global Acquisition Corp., a Nevada corporation and wholly owned subsidiary of Pantene (‘‘Newco’’), and S&J (the ‘‘Merger Agreement’’), pursuant to which S&J will be merged with and into Newco with Newco being the surviving corporation, and each of our stockholders, other than (i) Parent, and (ii) stockholders who exercise and perfect dissenter’s rights under Nevada law, will be entitled to receive $1.96 per share in cash, without interest, in accordance with and subject to the terms and conditions contained in the Merger Agreement. Shares held by stockholders who validly exercise and perfect their dissenter’s rights under Nevada law will be converted into the right to receive such consideration as may be determined to be due pursuant to the provisions of Sections 92A.300 through 92A.500 of the Nevada Revised Statutes. The Merger Agreement is more fully described in the accompanying proxy statement and a copy of the Merger Agreement is attached as Exhibit A to the accompanying proxy statement.

2.

ADJOURNMENT. To approve adjournment of the Special Meeting, if necessary or appropriate, to provide time to solicit additional proxies if it does not appear that there will be enough shares voted in favor of the Merger Agreement to approve the Merger Agreement at the time of the special meeting.

3.

OTHER MATTERS. To consider, act upon and transact such other matters as may properly come before the special meeting or any adjournments or postponements thereof.

The affirmative vote of a majority of the outstanding shares of our common stock is required to adopt and approve the Merger Agreement and the transactions contemplated thereby, including the merger. Each outstanding share of common stock will be entitled to one vote. Parent currently holds in excess of a majority of the outstanding shares of our common stock and intends to vote its shares in favor of the Merger Agreement and the merger.

BASED UPON THE RECOMMENDATION OF THE FINANCE COMMITTEE, OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE ‘‘FOR’’ THE APPROVAL OF THE MERGER AGREEMENT AND ‘‘FOR’’ THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, TO SOLICIT ADDITIONAL VOTES IN FAVOR OF APPROVAL OF THE MERGER AGREEMENT.

Our Board of Directors has fixed the close of business on __________, 2007 as the record date for determining the stockholders entitled to notice of and to vote at the special meeting and any adjournments or postponements thereof. Only holders of record of shares of our common stock at the close of business on the record date are entitled to notice of and to vote at the Special Meeting.

If the Merger Agreement is adopted and approved by the stockholders at the Special Meeting and the merger is completed, any stockholder (a) who files with S&J before the taking of the vote on the adoption and approval of the Merger Agreement, a written demand stating that they intend to seek appraisal of their shares of capital stock if the merger is completed and (b) whose shares are not voted in favor of the Merger Agreement, will have the right to seek appraisal of their shares of capital stock. S&J and any stockholder seeking an appraisal shall have the rights and duties and shall follow the procedures set forth in Sections 92A.300 to 92A.500 of the Nevada Revised Statutes, a copy of which is attached as Exhibit C to the accompanying proxy statement. See the section entitled ‘‘DISSENTER’S RIGHTS’’ in the proxy statement for more information.

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Your vote is very important regardless of how many shares of our capital stock you own. Whether or not you plan to attend the special meeting, you are requested to sign, date and return the enclosed proxy without delay in the enclosed postage paid envelope. You may revoke your proxy at any time prior to its exercise. If you are present at the special meeting or any adjournments thereof, you may revoke the proxy and vote personally on the matters properly brought before the special meeting.

By Order of the Board of Directors

/s/ Patrick J. Dyson

Patrick J. Dyson

Chairman

Wellington, Florida

__________________, 2007

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TABLE OF CONTENTS

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EXHIBIT A – Agreement and Plan of Merger

EXHIBIT B – Opinion of Capitalink, L.C.

EXHIBIT C – Sections 92A.300 to 92A.500 of the Nevada Revised Statutes

EXHIBIT D – Annual Report on Form 10-K for the year ended September 30, 2006

EXHIBIT E – Quarterly Report on Form 10-Q for the quarter ended March 31, 2007

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PRELIMINARY COPY

SUMMARY TERM SHEET

This summary term sheet highlights selected information contained in this proxy statement and may not contain all of the information that is important to you. We urge you to read this entire proxy statement carefully, including the exhibits. The term ‘‘Newco’’ refers to Pantene Global Acquisition Corp., a Nevada corporation; the term ‘‘Parent’’ refers collectively to United Pacific Industries Limited, a Bermuda corporation (“UPI”) and Pantene Global Holdings Limited, a Hong Kong corporation and wholly owned subsidiary of UPI (“Pantene”).

The Merger. Spear & Jackson, Inc. (‘‘S&J’’ or the “Company”) has entered into an agreement and plan of merger (the ‘‘Merger Agreement’’) which provides for the merger of S&J with Newco, a newly formed Nevada corporation controlled by Parent. Following the merger, S&J will cease to be a publicly held company. See ‘‘The Merger Agreement’’ beginning on page 40.

S&J. S&J, through its principal operating entities, 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. In order to reduce any conflict of interest in evaluating, negotiating and recommending the merger and the terms of the Merger Agreement, our Board of Directors delegated those duties to the Finance Committee of the Board of Directors. The Finance Committee consists of Dr. J. Preston Jones, who is an independent director, is not an officer or employee of S&J, and who has no financial interest in the merger. Our Board of Directors, upon the recommendation of the Finance Committee, has unanimously approved the merger and the Merger Agreement. Our Board of Directors and the Finance Committee believe that the terms of the merger and the Merger Agreement are fair to, and in the best interests of, S&J stockholders, other than the Parent. Our common stock is traded on the Pink Sheets in the over the counter market under the symbol ‘‘SJCK.PK.’’ Our corporate headquarters are located at 12012 Southshore Boulevard, Suite 103, Wellington, Florida 33414, and our telephone number is (561) 793-7233. See ‘‘Parties to the Merger Agreement’’ beginning on page 39.

Newco. Newco is a newly organized Nevada corporation formed and currently wholly owned by Pantene, which is wholly owned by UPI (collectively referred to herein as “Parent”). Parent formed Newco for the purpose of engaging in the merger. Immediately following the merger, Newco, as the surviving corporation, will be wholly-owned by Parent. See ‘‘Parties to the Merger Agreement’’ beginning on page 39.

Parent. UPI is a Bermuda corporation. UPI is a holding company. Apart from its holdings in S&J, UPI is primarily engaged, through its Asia-based principal operating subsidiaries, in the manufacture and sale of power supply products and electronic components, and offers original equipment manufacturer (OEM) services and electronics/electrical manufacturing services (EMS). Pantene is a Hong Kong corporation and wholly owned subsidiary of UPI. Pantene is a special purpose investment vehicle and holds only 61.8% of S&J and 100% of Newco. UPI and Pantene are collectively referred to herein as “Parent”. See ‘‘Parties to the Merger Agreement’’ beginning on page 39.

Related Parties. Patrick J. Dyson is our Chairman, Chief Financial Officer, Secretary, and a member of our Board of Directors, and is UPI’s Chief Financial Officer; Lewis Hon Ching Ho is our Chief Administrative Officer and a member of our Board of Directors, and is a director and the general manager of Pantene Electronics (Hangzhou) Co. Ltd., a subsidiary of UPI; Brian C. Beazer is our Assistant Secretary and is the Chairman of UPI; Nila Ibrahim is our General Counsel and is the General Counsel of UPI.

Stockholder Vote. You are being asked to consider and vote upon a proposal to adopt and approve the Merger Agreement. The Merger Agreement must be adopted and approved by the affirmative vote of a majority of the outstanding shares of our common stock. Each outstanding share of common stock will be entitled to one vote. Parent currently holds in excess of a majority of the outstanding shares of our common stock and intends to vote its shares in favor of the Merger Agreement and the merger.

Payment. In the merger, all of the outstanding shares of our common stock (other than those shares held by the Parent and stockholders who exercise and perfect dissenter’s rights under Nevada law) will be converted into the

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right to receive the merger consideration of $1.96 in cash, without interest. Shares held by stockholders who validly exercise and perfect their dissenter’s rights under Nevada law will be converted into the right to receive such consideration as may be determined to be due pursuant to the provisions of Sections 92A.300 through 92A.500 of the Nevada Revised Statutes. See ‘‘The Merger Agreement’’ beginning on page 40.

Management. Our current management will continue as management of the surviving corporation on the same terms as they are presently employed. See ‘‘Special Factors -- Interests of the Parent in the Merger’’ beginning on page 27.

Interests of the Parent. The opportunity to retain an equity interest in S&J and to continue as management of the surviving corporation following the merger provides the Parent with interests in the merger that are different from, or in addition to, your interests as a S&J stockholder. See ‘‘Special Factors -- Interests of the Parent in the Merger’’ beginning on page 27.

Fairness of the Merger. Based upon the recommendation of the Finance Committee, our Board of Directors has unanimously determined that the terms of the Merger Agreement and the merger are fair to, and in the best interests of, the S&J stockholders other than Parent. Parent and Newco also believe that the terms of the Merger Agreement and the merger are fair to, and in the best interests of, the S&J stockholders other than Parent. See ‘‘Special Factors -- Recommendation of the Board of Directors; Fairness of the Merger’’ beginning on page 11; and ‘‘Determination of the Fairness of the Merger by Parent and Newco’’ beginning on page 15.

Reasons for the Merger. In reaching the conclusion that the terms of the merger and the Merger Agreement are fair to, and in the best interests of, the S&J stockholders other than the Parent, the Finance Committee and our Board of Directors considered the following factors, among others:

·

the fact that the $1.96 per share to be paid to stockholders in the merger represents (i) a premium of approximately 92% over the $1.02 closing sale price for the shares of our common stock on the Pink Sheets of the over the counter market on May 14, 2007, the trading day preceding our announcement of UPI’s initial offer of $1.483 per share, and (ii) a premium of approximately 32% over the $1.48 closing sale price for the shares of our common stock on each of the five trading days preceding June 14, 2007, the day the Finance Committee determined to recommend that our Board of Directors approve the Merger Agreement;

·

the opinion of Capitalink, dated June 14, 2007, that the cash consideration of $1.96 per share to be received by the holders of our common stock (other than the Parent) is fair to such holders from a financial point of view;

·

the fact that Parent’s significant equity interest in S&J would likely deter potential strategic and financial third party buyers in light of Parent’s stated intention not to sell its interest;

·

the Finance Committee’s conclusion that it was unlikely that any party other than Parent would propose and complete a transaction that was more favorable than the merger; and

·

the history of arms-length negotiations between the Finance Committee and Parent regarding the price per share offered to stockholders and the terms and conditions of the merger.

See ‘‘Special Factors -- Recommendation of the Board of Directors; Fairness of the Merger’’ beginning on page 11.

Opinion of Financial Advisor. In deciding to approve the terms of the Merger Agreement and the merger, one factor our Board of Directors and the Finance Committee considered was the opinion of the Finance Committee’s financial advisor, Capitalink. Capitalink concluded that the merger consideration to be received by the holders of our capital stock (other than the Parent) in the merger is fair, from a financial viewpoint, to such holders. The complete Capitalink’s opinion, including applicable limitations and assumptions, describes the basis for the

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opinion and is attached as Exhibit B to this proxy statement. See “Special Factors -- Opinion of Financial Advisor to the Finance Committee” beginning on page 18.

Merger Financing. Parent and Newco estimate that $5 million will be necessary to complete the merger and pay their related fees and expenses. Such amount is to be funded directly by Parent from acquisition financing and out of its working capital. S&J estimates it will incur $275,000 in fees and expenses to complete the merger, which amount will be funded out of working capital. See “Special Factors -- Merger Financing” beginning on page 28.

Conditions. The Merger Agreement and the merger are subject to approval by the holders of a majority of the outstanding shares of our common stock. The merger also is subject to other conditions, including:

·

the merger shall have been approved by the holders of a majority of the outstanding ordinary shares of UPI;

·

the absence of any law or regulation or any judgment, injunction, order or decree prohibiting the consummation of the merger;

·

S&J shall have performed in all material respects all of its obligations required by the Merger Agreement;

·

the absence of any action or proceeding (a) seeking to restrain or prohibit Parent’s ownership or operation of all or a material portion of S&J’s business or (b) that is reasonably likely to have a material adverse effect on S&J; and

·

obtaining required authorizations, consents, waivers, orders and approvals, except as would not, individually or in the aggregate have a materially adverse effect on S&J.

Covenants. We gave an undertaking in the Merger Agreement not to solicit, encourage or facilitate any Acquisition Proposal (as defined in the Merger Agreement), but we may furnish information, or enter into discussions and negotiations with, any person in response to an unsolicited, bona fide written proposal that constitutes or has a reasonable likelihood of resulting in a “Superior Offer.” This is defined to mean an unsolicited bona fide written Acquisition Proposal that our Board of Directors or Finance Committee determines, by resolution duly adopted, in its good faith reasonable judgment, and after consulting with its independent financial advisor, and after taking into account the likelihood and anticipated timing of consummation of such offer, which provides the following: (a) a tender for all, and not less than all, of the minority shares of common stock of the Company, (b) commencement of the tender to occur within fourteen (14) days of the date of the Superior Offer, (c) reasonable and customary closing conditions and no additional material conditions, (d) a financing commitment from a recognized national financing institution, and (e) the potential bidder has been informed and acknowledges that, in accordance with the UK Pensions Act of 2004 (as may be amended from time to time), in certain circumstances, an owner of shares in the Company that exceeds a threshold of 29.9% of the issued and outstanding shares, may be required to make contributions to reduce the underfunded pension liability of certain of the Company’s UK subsidiaries.

Termination of the Merger Agreement. The parties may agree to terminate the Merger Agreement at any time before the merger. In addition, the Merger Agreement may be terminated for a number of reasons, including

·

the merger is not completed on or before December 31, 2007;

·

our Board of Directors withdraws or modifies its recommendation in a manner adverse to Parent;

·

the parties breach any of their representations, warranties or covenants in the Merger Agreement and are unable to cure such breach by a specified date; or

·

a court of competent jurisdiction or other governmental body shall have issued a final and nonappealable order permanently restraining, enjoining or otherwise prohibiting the consummation

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of the merger. See “The Merger Agreement -- Termination of the Merger Agreement” beginning on page 45.

After the Merger. Upon completion of the merger, Newco as the surviving corporation will be a privately held corporation, wholly owned by the Parent. There will be no public market for shares of the common stock of Newco. The shares of common stock of S&J will cease to be traded on the Pink Sheets in the over the counter market and registration of the common stock of S&J under the Securities Exchange Act of 1934, as amended, will be terminated. The Parent will own 100% of the outstanding equity interest in Newco as the surviving corporation. See “Special Factors -- Effects of the Merger” beginning on page 26 and “-- Interests of the Parent in the Merger” beginning on page 27.

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Questions and Answers about the Merger

Q: What am I being asked to vote upon?

A: You are being asked to consider and vote upon a proposal to adopt and approve the agreement and plan of merger (the ‘‘Merger Agreement’’). Under the Merger Agreement, Spear & Jackson, Inc., a Nevada corporation (“S&J” or the “Company”), will be merged with and into Pantene Global Acquisition Corp., a Nevada corporation (“Newco”), with Newco as the surviving corporation. Newco is a wholly owned subsidiary of Pantene Global Holdings Limited, a Hong Kong corporation (“Pantene”). Pantene is a wholly owned subsidiary of United Pacific Industries Limited, a Bermuda corporation (“UPI” and together with Pantene the “Parent”).

Patrick J. Dyson is our Chairman, Chief Financial Officer, Secretary, and a member of our Board of Directors, and is UPI’s Chief Financial Officer; Lewis Hon Ching Ho is our Chief Administrative Officer and a member of our Board of Directors, and is a director and the general manager of Pantene Electronics (Hangzhou) Co. Ltd., a subsidiary of UPI; Brian C. Beazer is our Assistant Treasurer and is the Chairman of UPI; Nila Ibrahim is our General Counsel and is the General Counsel of UPI.

Parent holds approximately 61.78% of our common stock and intends to vote its shares in favor of the Merger Agreement and the merger. Each share of our common stock is entitled to one vote. If the Merger Agreement is adopted and approved and the merger is completed, S&J will no longer be a publicly held corporation. Parent will own all of the equity interest in Newco as the surviving corporation.

Q: What will I receive in the merger? (See “The Special Meeting” beginning on page 36.)

A: Upon completion of the merger each outstanding share of our common stock, other than those shares held by the Parent and stockholders who exercise and perfect dissenter’s rights under Nevada law, will be converted into the right to receive $1.96 in cash, without interest. Shares held by stockholders who validly exercise and perfect their dissenter’s rights under Nevada law will be converted into the right to receive such consideration as may be determined to be due pursuant to the provisions of Sections 92A.300 through 92A.500 of the Nevada Revised Statutes.

Q: What role did the Finance Committee play in the merger? (See “Special Factors -- Background of the Merger” beginning on page 8.)

A: Parent will own all of the continuing equity interests in Newco as the surviving corporation immediately following completion of the merger. Parent holds approximately 61.78% of our common stock and intends to vote its shares in favor of the Merger Agreement and the merger. Each share of our common stock is entitled to one vote. Certain of our officers and directors are also officers and directors of UPI. Accordingly, our Board of Directors believed that the Finance Committee would reduce any potential conflict of interest in evaluating, negotiating and recommending the merger and the terms of the Merger Agreement. The chairman and sole member of the Finance Committee is Dr. J. Preston Jones. Dr. Jones is independent, is neither an officer nor an employee of S&J, and has no financial interest in the merger.

Q: Why is the Board of Directors recommending that I vote in favor of the Merger Agreement? (See “Special Factors -- Reasons for the Board of Directors’ Determination” beginning on page 14.)

A: Based upon the recommendation of the Finance Committee, our Board of Directors has unanimously determined that the terms of the Merger Agreement and the merger are fair to, and in the best interests of, our stockholders other than the Parent. Our Board of Directors, based upon the recommendation of the Finance Committee, unanimously recommends that you vote for the adoption and approval of the Merger Agreement.

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Q: When do you expect the merger to be completed? (See “The Merger Agreement -- Effective Time of Merger” beginning on page 40.)

A: S&J, Parent and Newco are working toward completing the merger as quickly as possible. If the Merger Agreement is adopted and approved and the other conditions to the merger are satisfied or waived, the merger is expected to be completed promptly after it is approved by the shareholders of UPI.

Q: What are the U.S. federal income tax consequences of the merger? (See “Special Factors -- Federal Income Tax Considerations” beginning on page 29.)

A: Generally, the merger will be taxable for U.S. federal income tax purposes. You will recognize taxable gain or loss in the amount of the difference between $1.96 and your adjusted tax basis for each share of our common stock that you own. The Parent will have different tax consequences from the merger.

The tax consequences of the merger to you will depend on the facts of your own situation. You should consult your own tax advisor for a full understanding of the tax consequences of the merger to you.

Q: When and where is the special meeting?

A: The special meeting of our stockholders will be held at _____ local time on __________, 2007, at __________.

Q: Who can vote on the Merger Agreement?

A: Holders of our common stock at the close of business on __________, 2007, the record date for the special meeting, may vote in person or by proxy at the special meeting.

Q: What do I need to do now?

A: You should read this proxy statement carefully, including the exhibits accompanying this proxy statement and the documents incorporated by reference into this proxy statement, and consider how the merger affects you. Then, please mark your vote on your proxy card and date, sign and mail it in the enclosed, postage paid return envelope as soon as possible so that your shares can be voted at the special meeting.

Q: What happens if I do not return a proxy card?

A: The failure to return your proxy card will have the same effect as voting against the Merger Agreement.

Q: May I vote in person?

A: Yes. You may attend the special meeting and vote your shares in person whether or not you sign and return your proxy card. If your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy from the broker, bank or other nominee.

Q: May I change my vote after I have mailed my signed proxy card?

A: Yes. You may change your vote at any time before your proxy card is voted at the special meeting. You can do this in one of three ways. First, you can send a written notice to our Secretary at our executive offices located at 12012 Southshore Boulevard, Suite 103, Wellington, Florida 33414, stating that you would like to revoke your proxy. Second, you can complete and submit a new proxy card. Third, you can attend the meeting and vote in person. Your attendance alone will not revoke your proxy. If you have instructed a broker to vote your shares, you must follow directions received from your broker to change those instructions.

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Q: If my shares are held in ‘‘street name’’ by my broker, will my broker vote my shares for me?

A: No. Your broker will not be able to vote your shares without instructions from you. You should instruct your broker to vote your shares by following the procedures provided by your broker.

Q: Should I send in my stock certificates now?

A: No. After the merger is completed, you will receive written instructions for exchanging your shares of common stock for a cash payment of $1.96 per share, without interest.

Q: Do I have a right to seek an appraisal of my shares? (See “Special Factors -- Dissenter’s Rights” beginning on page 30.)

A: Yes. If you wish, you may seek an appraisal of the fair value of your shares, but only if you comply with all requirements of Nevada law. (See “Exhibit C” and “Special Factors -- Dissenter’s Rights” beginning on page 30. Based on the determination of the Nevada courts, the appraised fair value of your shares of our common stock, which will be paid to you if you seek an appraisal, may be more than, less than or equal to the amount to be paid in the merger.

Q: Is there any litigation challenging the merger?

A: No. However, a complaint could be filed at any time. There can be no guarantee that such a claim would not interfere with the merger.

Q: Who can help answer my questions?

A: The information provided above in question and answer format is for your convenience only and is merely a summary of the information contained in this proxy statement. You should carefully read this entire proxy statement, including the exhibits and the documents incorporated by reference. If you would like additional copies, without charge, of this proxy statement or if you have questions about the merger, including the procedures for voting your shares, you should contact:

Spear & Jackson, Inc.

12012 Southshore Boulevard, Suite 103

Wellington, Florida 33414

Telephone: (561) 793-7233

Fax: (561) 793-7966

Email: pdyson@spear-and-jackson.com

Attn: Investor Relations

Cautionary Statement Concerning Forward-Looking Information

This proxy statement includes and incorporates by reference statements that are not historical facts. These forward-looking statements are based on our current estimates and assumptions and, as such, involve uncertainty and risk. Forward-looking statements include the information concerning our possible or assumed future results of operations and also include those preceded or followed by the words ‘‘anticipates,’’ ‘‘believes,’’ ‘‘could,’’ ‘‘estimates,’’ ‘‘expects,’’ ‘‘intends,’’ ‘‘may,’’ ‘‘should,’’ ‘‘plans,’’ ‘‘targets’’ and/or similar expressions.

The forward-looking statements are not guarantees of future performance, and actual results may differ materially from those contemplated by these forward-looking statements. In evaluating any forward-looking statements, you should consider various risk factors, including those summarized in (i) Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2006, as filed with the SEC, (ii) other sections of this proxy statement, (iii) the other reports the Company files with the SEC, and (iv) the Company’s press releases. Such factors may cause the Company’s actual results to differ materially from any forward-looking statement. Except to the extent required under the federal securities laws, we do not intend to update or revise the forward-looking statements to reflect circumstances arising after the date of the preparation of the forward-looking statements.

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PROPOSAL ONE
APPROVAL OF THE MERGER AGREEMENT

SPECIAL FACTORS

Background of the Merger

In November 2004, S&J entered into a Stock Purchase Agreement with PNC Tool Holdings LLC (“PNC”) and Dennis Crowley, the sole member of PNC. Under the Stock Purchase Agreement S&J acquired, for $100 and other good and valuable consideration, 6,005,561 common shares of S&J held by PNC, which constituted approximately 51.1% of the outstanding common shares of S&J.

With the return of the S&J shares to S&J by PNC, the percentage of S&J stock held by S&J stockholders increased correspondingly. Jacuzzi Brands, Inc. (“Jacuzzi”), which at the time was the beneficial owner of 3,543,281 shares of S&J common stock, had its interest in S&J increase to approximately 61% of the then outstanding common stock.

On April 21, 2005, Jacuzzi adopted a plan of disposition of its interest in S&J’s common stock, and commenced an extensive process to sell its shares. Jacuzzi sought to identify potential purchasers, obtain indications of interest, coordinate with S&J to provide access to potential purchasers, conduct due diligence investigations and evaluate the various proposals submitted. Jacuzzi received and assessed offers from, and engaged in discussions with, numerous bidders, including UPI. Jacuzzi weighed the range of potential value under each offer as well as the different structures proposed, the proposed form and source of any financing, the conditions to each offer and the likelihood that such conditions would be satisfied, the proposed form of agreement submitted by the bidders and the other risks presented in respect of consummation of the various proposed transactions. At the end of an eleven month process, Jacuzzi determined that the offer from UPI was superior to the other offers, and decided to sell all its shares to UPI for $1.40 per share. The purchase price for the sale of the Shares was determined pursuant to arms-length negotiations. Jacuzzi engaged an independent financial advisor to render a fairness opinion to the effect that the sale of the shares to UPI was fair to Jacuzzi from a financial point of view.

In January 2006, S&J’s corporate monitor, Soneet Kapila, suggested that S&J consider third party approaches involving the purchase of all the company’s outstanding share capital. Several investor groups expressed interest in S&J, but none delivered a formal proposal. On March 15, 2006, S&J and Jacuzzi did, however, receive a non-binding merger proposal from Rosewood Partnership LLP, a U.K. private equity company, which, if consummated, would have resulted in the acquisition of all the outstanding shares of S&J for $2.25 per share, subject to certain conditions, including approval by Jacuzzi, other S&J shareholders, and the U.K. Pension Regulator. The Rosewood proposal was subject to financing which was to be leveraged against the assets of S&J, thereby potentially compromising S&J’s ability to clear the deficit on its UK defined benefit pension plan. S&J issued a press release on March 27, 2006 indicating that the Board of Directors had not had a full opportunity to evaluate the proposal due to its apparent rejection by Jacuzzi, whose consent was a prerequisite to the merger.

On July 28, 2006, Jacuzzi’s sale of its shares of S&J common stock to UPI closed, after UPI received shareholder approval and the other closing conditions were satisfied or waived. At the closing, UPI assigned the S&J shares to its wholly-owned subsidiary, Pantene.

In January 2007, Brian C. Beazer, the chairman of UPI, indicated that S&J should expect to receive a merger proposal from a UPI nominated subsidiary, indicating their desire to acquire the remaining equity interests which UPI did not own in S&J. In November 2006, Ms. Maria Lam had tendered her resignation as Chairman of the Board of Directors of S&J to take effect in January 2007, and effective as of the close of business on February 14, 2007, the Board of Directors of S&J elected Patrick J. Dyson as a director and Chairman of the Board.

In February 2007, the Board of Directors established a Finance Committee, which would be comprised of independent directors and would be charged with reviewing and advising S&J’s Board of Directors regarding any proposed bid by UPI or other third parties to acquire S&J. On February 8, 2007, S&J engaged Capitalink to issue a fairness opinion on any potential proposed transaction with UPI.

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In order to allow the Finance Committee to comply with its responsibilities, the Board of Directors sought and selected an independent director to chair the Finance Committee. The Board of Directors of S&J, effective April 17, 2007, appointed Dr. J. Preston Jones as director. Dr. Jones was provided an annual director’s fee of $30,000, payable in quarterly installments, and an additional $30,000 for services to the Finance Committee. S&J and Dr. Jones subsequently entered into an indemnification agreement.

On May 14, 2007, S&J reported that its Finance Committee received an offer from UPI to acquire, for $1.483 per share in cash, the remaining outstanding shares of common stock of S&J that UPI did not then own. The offer was subject to all regulatory approvals, including board approval, shareholder approvals, Securities and Exchange Commission approval and Hong Kong Stock Exchange approval.

On May 15, 2007, a telephonic meeting of the Board of Directors of S&J was held. All members of the Board of Directors of S&J participated. Also participating were representatives of Capitalink and representatives of Arnstein & Lehr LLP, the Company’s counsel. Representatives of Arnstein & Lehr reviewed with the Directors the structure and terms of the proposal, and their fiduciary obligations in connection therewith. After a discussion of the basic terms of the proposal, the Board of Directors unanimously agreed to have the Finance Committee, comprised solely of Dr. Preston Jones, an independent director, receive, review, evaluate and study the proposal and any alternative proposals or strategic alternatives, negotiate on behalf of S&J, if appropriate, the terms and conditions of the proposal from UPI or any alternative proposals with applicable parties and make a recommendation to the Board of Directors at the appropriate time as to the proposal from UPI or any alternative proposals or strategic alternatives. At such meeting, Capitalink reviewed with the Board of Directors the steps it would undertake to determine the fairness of the offer and highlighted certain issues, including issues associated with S&J’s pension liability.

On May 18, 2007, a telephonic meeting of S&J’s Board of Directors was held on which each of the members of the Board, excluding Mr. Ho, participated. Also in attendance were representatives of Capitalink and Arnstein & Lehr and representatives of Price Waterhouse Coopers (“PWC”). The PWC representative reviewed with the Board numerous issues concerning S&J’s pension liability, including its amount, mechanisms for determining such liability and the process for funding such liability.

During May 2007, representatives of Capitalink received due diligence materials and conducted telephonic due diligence meeting with representatives of S&J’s management.

On May 23, 2007, a telephonic meeting of the Finance Committee was held. Dr. Jones was present; also in attendance were representatives of Arnstein & Lehr and Capitalink. At the meeting, representatives of Capitalink discussed with the Finance Committee its preliminary view of the valuation of S&J.

The Finance Committee also discussed the absence of any unsolicited expressions of interest by other potential bidders, and determined that since S&J and Jacuzzi had actively sought bidders over a lengthy 18-month period, an additional market check was not required. After extensive discussion, the Finance Committee agreed to defer reaching any conclusion regarding a response to the UPI proposal until after reviewing Capitalink’s completed financial analysis.

On May 24, 2007, a telephonic meeting of the S&J Board of Directors was held. Each of the members of the Board of Directors participated. Also in attendance were representatives of Capitalink and Arnstein & Lehr. Dr. Jones reviewed with the Board the status of the Finance Committee’s review of the UPI proposal. The Board of Directors also discussed various issues associated with the pension plan and various regulatory issues inherent in the UPI proposal and the overall merger transaction as proposed.

On May 31, 2007, the Finance Committee and representatives of Capitalink and Arnstein & Lehr held a telephonic meeting with representatives of UPI to discuss the proposed offer and the Finance Committee’s concerns relating to S&J’s pension plan liability obligations.

On May 31, 2007, the Finance Committee had a telephonic meeting with representatives of Capitalink and Arnstein & Lehr to further discuss the offer from UPI. The Finance Committee concluded that the offer from UPI was not sufficient. Dr. Jones, on behalf of the Finance Committee, indicated that he would have discussions with

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Mr. Brian C. Beazer of UPI to determine if their proposed price could be increased to adequately represent the full value of S&J.

On June 6, 2007, Dr. Jones had a conversation with Mr. Beazer of UPI concerning the UPI offer. Dr. Jones advised Mr. Beazer that a range of $2.00 per share would most likely be appropriate. Mr. Beazer suggested that Dr. Jones speak with Mr. David H. Clarke.

On June 7, 2007, Dr. Jones spoke with Mr. Clarke and indicated the Finance Committee’s concern about the level of the proposed bid by UPI. Mr. Clarke indicated that the UPI offer could be increased to $1.80 per share. On June 7, 2007, a telephonic meeting of the Finance Committee was held. Dr. Jones participated, as did representatives of Capitalink and Arnstein & Lehr. The Finance Committee concluded that the offer was still not sufficient and Dr. Jones indicated that he would continue discussions with Mr. Clarke.

On June 8, 2007, Dr. Jones again spoke with Mr. Clarke to discuss the proposed transaction and concerns with the earlier revised offer price. As a result of these discussions, Mr. Clarke verbally indicated that UPI was willing to raise its offer to $1.90 per share.

On June 11, 2007, a telephonic meeting of the Finance Committee was held. Dr. Jones participated, as did representatives of Capitalink and Arnstein & Lehr. Based upon the discussions at the meeting, the Finance Committee concluded that an offer of $1.96 would be sufficient to recommend the proposal to S&J’s stockholders. Dr. Jones indicated that he would continue discussions with Mr. Clarke to achieve such result.

On June 12, 2007, Dr. Jones had a further conversation with Mr. Clarke and discussed how the current verbal offer of $1.90 was not sufficient. Dr. Jones and Mr. Clarke agreed that they would have a telephonic conference with Capitalink and their respective attorneys to pursue price negotiations.

From May 15, 2007 to June 13, 2007, UPI, its counsel Schneider Weinberger & Beilly, the Finance Committee and Arnstein & Lehr had conducted lengthy negotiations concerning the definitive Merger Agreement and related documents and exchanged numerous drafts of the Merger Agreement reflecting their negotiations. During this period, the Finance Committee met with its advisors to discuss the various drafts and to formulate responses.

On June 13, 2007, the Finance Committee, representatives of Capitalink and Arnstein & Lehr had a telephonic meeting with UPI, represented by Mr. Clarke, and its legal counsel Schneider, Weinberger and Beilly, to discuss the valuation of S&J. After lengthy discussions, Mr. Clarke indicated that UPI was willing to raise its offer to $1.96 per share, provided that this would enable S&J’s Board of Directors to receive a fairness opinion from Capitalink.

On June 14, 2007, the Finance Committee held a meeting at which representatives of Capitalink and Arnstein & Lehr were present. During the meeting representatives of Arnstein & Lehr presented a summary of the terms of the Merger Agreement and related agreements. Capitalink made a financial presentation regarding the proposed transaction. During that session, representatives of Capitalink provided the Finance Committee with its oral opinion (subsequently confirmed in writing), that based upon and subject to various qualifications and limitations as of the date of such opinion, the merger consideration was fair, from a financial point of view, to the holders of Company common stock other than UPI and its affiliated entities. With the benefit of that presentation and advice the Finance Committee, having deliberated regarding the terms of the proposed acquisition, determined that the merger and the Merger Agreement are substantively and procedurally fair to, and in the best interests of, S&J and the unaffiliated stockholders and recommended that the Board of Directors approve the Merger Agreement and the transactions contemplated thereby and that our Board of Directors recommend that the S&J’s stockholders vote to adopt the Merger Agreement.

On June 15, 2007, following that resolution, a telephonic meeting of the Board of Directors was held with representatives of Capitalink and Arnstein & Lehr. Following the Finance Committee’s recommendation to the Board of Directors, the Board of Directors, by unanimous vote, determined that the merger and the Merger Agreement are substantially and procedurally fair to, and in the best interests of S&J and its unaffiliated

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stockholders, declared the Merger Agreement and the merger to be advisable, and recommended that S&J’s stockholders vote to adopt the Merger Agreement. The recommendation was subject to the execution of the Merger Agreement for which there remained several open points.

On June 19, 2007, a revised draft of the Merger Agreement was presented by counsel for UPI to the Finance Committee and counsel. The parties negotiated the terms of the Merger Agreement and reached agreement in-principle on the definitive terms on June 20, 2007.

On June 22, 2007, the Merger Agreement was executed by the parties. On June 25, 2007, S&J filed a current report on 8-K announcing the signing of the Merger Agreement and issued a press release announcing the signing of the Merger Agreement.

Recommendation of the Board of Directors; Fairness of the Merger

The Finance Committee of our Board of Directors has determined that the terms of the Merger Agreement and the merger are fair to, and in the best interests of, S&J stockholders other than the Parent. The Finance Committee recommended to our Board of Directors that the Merger Agreement and the merger be adopted and approved. The Finance Committee considered a number of factors, as more fully described above under ‘‘Background of the Merger’’ and as described below under ‘‘Reasons for the Finance Committee’s Determination,’’ in making its recommendation. Our Board of Directors, acting upon the recommendation of the Finance Committee, unanimously determined that the terms of the Merger Agreement and the proposed merger are fair to, and in the best interests of, S&J stockholders other than the Parent.

BASED UPON THE RECOMMENDATION OF THE FINANCE COMMITTEE, OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE ‘‘FOR’’ THE APPROVAL OF THE MERGER AGREEMENT.

Reasons for the Finance Committee’s Determination of the Fairness of the Merger and Recommended Approval of the Merger

In determining the substantive fairness of the merger and recommending adoption and approval of the Merger Agreement and the merger to our Board of Directors, the Finance Committee considered a number of factors that they believe supported their recommendation and determination, including:

·

the merger will provide our stockholders a substantial premium for their shares compared to the market price of our common stock, as set forth in the analysis of Capitalink; the Finance Committee adopted the analysis of Capitalink with respect to current and historical prices of our common stock and considered the premium paid in relation to the current and historical prices; the Finance Committee concluded that the substantial premium supported its determination that the merger is fair and should be adopted now;

·

the Finance Committee’s knowledge of our business, financial results and prospects, as well as the Finance Committee’s knowledge of our industry generally; specifically, the views expressed by Capitalink and our management regarding our financial condition, results of operations, business and prospects, including the view that our status as a public company has not significantly helped us access capital and including our prospects if we were to remain publicly owned given the negative impact of the costs of being publicly owned on our results of operation and financial condition; the Finance Committee concluded that these collective insights about our business supported its determination that the merger is fair given the state of our business, financial condition, results of operations and prospects and should be adopted now;

·

the controlling equity interest of 61.78% of S&J’s capital stock held by Parent would likely deter potential strategic and financial third party buyers in light of the stated intention of Parent not to sell its interests; the Finance Committee concluded that this deterrent effect supported its determination to recommend the transaction;

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·

the Finance Committee’s conclusion it was unlikely that any party other than the Parent would propose and complete a transaction that was more favorable than the merger to S&J and its stockholders;

·

the limitations we suffered and could likely continue to suffer as a public company, including our limited trading volume of an average of 6,200 shares a day, that we have virtually no institutional sponsorship, and that no research analysts currently follow us, all of which adversely affect the trading market and the value of our common stock; the Finance Committee concluded that these limitations imposed on S&J as a public company supported its determination that the merger is fair and should be adopted now;

·

the accounting, legal and other expenses we are required to incur to remain a public company; if we were to remain a public company we would experience significant expenses that would include director and officer insurance, public registration expenses (registration fees, printing, mailing annual reports and proxy), audit fees for compliance with the internal controls provision of Sarbanes Oxley and legal fees associated with being public; the Finance Committee determined that the opportunity to save these expenses if S&J became a private company supported its determination that the merger is fair and should be adopted now;

·

the history of the negotiations with respect to the merger consideration that, among other things, led to an increase in the Parent’s offer to $1.96 per share of our common stock and the belief of the Finance Committee that $1.96 per share of our common stock was the highest price that the Parent would agree to pay; together with the opinion of Capitalink, as discussed below, that, as of the date of such opinion, the $1.96 per share consideration to be received by stockholders (other than the Parent) in the merger is fair to such stockholders from a financial point of view; the Finance Committee concluded that its ability to increase the value of the offer and Capitalink’s opinion both supported its determination that the merger is fair, that it should be structured in its current form and that it should be adopted now;

·

the $1.96 per share to be paid to stockholders in the merger represents a premium of approximately 92% over the $1.02 closing sale price for the shares of our common stock on the Pink Sheets of the over the counter market on May 14, 2007, the trading day preceding our announcement of UPI’s initial offer of $1.483 per share;

·

the $1.96 per share to be paid to stockholders other than the Parent in the merger represents (i) a premium of approximately 32% over the $1.48 closing sale price for the shares of our common stock on the Pink Sheets of the over the counter market on each of the five trading days preceding June 14, 2007, the day the Finance Committee determined to recommend that our Board of Directors approve the Merger Agreement. The Finance Committee concluded that the size of the premium supported its determination that the merger is fair and should be adopted now;

·

the presentations of Capitalink at various Finance Committee meetings, its final presentation at the June 14, 2007 meeting, its updates to that presentation including the opinion of Capitalink dated June 14, 2007, based on and subject to the limitations, assumptions and qualifications set forth in its opinion, as to the fairness, from a financial point of view, of the merger consideration to the holders of our common stock (other than Parent); see ‘‘Opinion of Financial Advisor to the Finance Committee’’, and a copy of the opinion of Capitalink attached as Exhibit B to the proxy statement; the Finance Committee concluded that the financial analysis of Capitalink, which the Finance Committee believes constituted an assessment of our going concern value, and is described further in ‘‘Opinion of Financial Adviser to the Finance Committee’’, supported its determination that the merger is fair and should be adopted now;

·

the financial resources of Parent, which the Finance Committee believes, as a result of the personal knowledge of its members, reasonably supports the Parent’s ability to meet their financial obligations to pay up to a total of $1.96 to our stockholders pursuant to the Merger Agreement;

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·

cash will be paid to our stockholders (other than the Parent) in the merger, eliminating any uncertainties in valuing the merger consideration to be received by our stockholders (other than the Parent); the Finance Committee concluded that the certainty of value provided by the use of cash consideration supported its determination that the merger is fair, that it should be structured in its current form and that it should be adopted now;

·

the Merger Agreement permits us to terminate the Merger Agreement in the event our Board of Directors withdraws their recommendation of the Merger Agreement and the merger; the Finance Committee concluded that the our ability to terminate supported its determination that the merger is fair, that it should be structured in its current form and that it should be adopted now;

·

Nevada law entitles our stockholders who do not vote in favor of the merger and who timely file a written intent to demand payment with S&J to seek appraisal rights for their shares by following the procedures prescribed by Nevada law, or as those rights are later determined by a Nevada court if the merger is consummated; See ‘‘Special Factors -- Dissenter’s Rights’’; the Finance Committee concluded that the availability of this statutory appraisal remedy for dissatisfied stockholders supported its determination that the merger would fairly protect all stockholders and should be structured in its current form and that it should be adopted now;

·

the Finance Committee’s judgments that it was unlikely for our stockholders to realize in excess of $1.96 per share due to the current and prospective environment in which we operate; the Finance Committee concluded that the unlikely prospects for a higher trading price of our shares if it remained a public company supported its determination that the merger is fair and should be adopted now;

·

The Finance Committee also determined that the merger is procedurally fair due to a number of factors. All of the material positive factors considered by the Finance Committee in this determination were as follows:

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our Board of Directors empowered its Finance Committee to consider and negotiate the Merger Agreement;

·

the Finance Committee was given exclusive authority to, among other things, evaluate, negotiate and recommend the terms of any proposed transactions;

·

the Finance Committee received advice from its own independent legal counsel and financial advisors in evaluating, negotiating and recommending the terms of the Merger Agreement;

·

Capitalink rendered an opinion concerning the fairness, from a financial point of view, of the consideration to be received by our stockholders (other than the Parent) in the merger;

·

the price of $1.96 per share and the other terms and conditions of the Merger Agreement resulted from active and lengthy arm’s length negotiations between the Finance Committee and its representatives, on the one hand, and the Parent and its representatives on the other hand;

·

under Nevada law, our stockholders have a right to timely demand appraisal of their shares; and

·

after public disclosure of the Parent’s initial proposal on May 15, 2007, through June 14, 2007, no other party expressed a serious interest in acquiring S&J at a price exceeding $1.96 a share.

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·

The Finance Committee also considered a variety of risks and other potentially negative factors concerning the merger. These included the following:

·

the cash consideration received by a stockholder generally will be taxable to the stockholder in an amount equal to the excess of the merger consideration received by such stockholder over such stockholder’s tax basis in the stockholder’s capital stock; and

·

following the merger, our stockholders, other than the Parent will cease to participate in any future earnings growth of the surviving corporation or benefit from any increase in the value of the surviving corporation.

The Finance Committee did not ask Capitalink to attempt to determine the liquidation value of S&J and gave little consideration to the net book value of S&J’s assets because it believed that those measures of asset value were not relevant to the market value of our business and would be considerably less than the merger consideration of $1.96 per share of our common stock and our going concern value. The Finance Committee’s belief regarding liquidation value was based upon their understanding of our industry, their general business knowledge that liquidation sales generally result in proceeds substantially less than the sale of a going concern business such as in this transaction, and an understanding of the UK regulations regarding the requirements to fully fund an underfunded pension of a company in liquidation. Based upon the various analyses of value by Capitalink, the Finance Committee concluded that the liquidation value and book value were not materially relevant to the market value of our business. While the Finance Committee reviewed with Capitalink its various financial analyses and reviewed with our officers our historical results and budget, the Finance Committee did not independently generate its own separate financial analysis of the merger.

After considering these factors, the Finance Committee concluded that the positive factors relating to the merger outweighed the negative factors. Because of the variety of factors considered, the Finance Committee did not find it practicable to quantify or otherwise assign relative weights to, and did not make specific assessments of, the specific factors considered in reaching its determination. However, the Finance Committee may have assigned different weights to various factors. The determination of the Finance Committee was made after consideration of all of the factors together.

Reasons for the Board of Directors’ Determination

Our Board of Directors consists of three directors, one of whom serves on the Finance Committee. At the June 15, 2007 meeting of our Board of Directors, the Finance Committee, with its legal advisers participating, reported to the other members of our Board of Directors on the course of its negotiations with the Parent and its legal counsel, its review of the Merger Agreement and the factors it took into account in reaching its determination that the merger is fair to, and in the best interests of, our stockholders other than the Parent. In view of the wide variety of factors considered in its evaluation of the merger, our Board of Directors did not find it practicable to quantify or otherwise assign relative weights to, and did not make specific assessments of, the specific factors considered in reaching its determination. Rather, our Board of Directors based its position on the totality of the information presented and considered. In considering the determination of the Finance Committee, our Board of Directors believed that the analysis of the Finance Committee was reasonable and adopted the Finance Committee’s conclusion and the analysis underlying the conclusion. Except as described below, the Board of Directors did not consider any material reasons different from or in addition to those set forth in the Finance Committee’s discussions described above.

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Fairness of the Merger to Stockholders Other than Parent

Our Board of Directors believes that the Merger Agreement and the merger are substantively and procedurally fair to, and in the best interests of, all holders of our common stock other than Parent. In addition, our Board of Directors empowered its Finance Committee, consisting of one director, who is independent, to review and negotiate the terms of the merger. The merger consideration of $1.96 in cash per share was the highest price the Parent indicated it was willing to pay following arms’ length negotiations between the Finance Committee and the Parent and their representatives.

In reaching these conclusions, our Board of Directors considered it significant that:

·

the Finance Committee received advice from its own financial and legal advisors who have extensive experience with transactions similar to the merger and who assisted the Finance Committee in evaluating the merger and in negotiating with the Parent.

·

Capitalink was retained to advise the Finance Committee as to the fairness, from a financial point of view, of the proposal received from the Parent. Capitalink reached the conclusion expressed in its written opinion dated June 14, 2007 that, subject to the considerations and limitations set forth in the opinion, the merger is fair, from a financial point of view, to all our holders of common stock other than Parent.

BASED UPON THE RECOMMENDATION OF THE FINANCE COMMITTEE, OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE ‘‘FOR’’ THE APPROVAL OF THE MERGER AGREEMENT.

Determination of the Fairness of the Merger by the Parent and Newco

The rules of the Securities and Exchange Commission require Parent and Newco to express their belief as to the fairness of the merger to all our other holders of common stock. Parent and Newco are making the statements included in this section solely for the purposes of complying with such rules. The views of Parent and Newco as to the fairness of the merger should not be construed as a recommendation to any stockholder as to how that stockholder should vote on the proposal to approve the Merger Agreement. Neither Parent nor Newco participated in the deliberations of the Finance Committee regarding, and did not receive advice from Capitalink as to the fairness to the stockholders of the merger. Neither Parent nor Newco retained an unaffiliated representative to act on behalf of the other S&J stockholders for the purpose of negotiating the terms of the merger or for the purposes of preparing a report concerning the fairness of the transaction.

However, Parent and Newco, in order to judge the fairness of the merger, have separately considered certain of the factors noted above which were taken into account by our Board of Directors and the Finance Committee. Specifically, Parent and Newco believe that the merger is fair to, and in the best interests of, all our other holders of common stock based on their consideration of the following factors:

·

the $1.96 per share to be paid to stockholders other than the Parent in the merger is higher than any firm offer received by the Company as described in ‘‘Background of the Merger;’’

·

the fact that the $1.96 per share to be paid to stockholders other than the Parent in the merger represents (i) a premium of approximately 92% over the $1.02 closing sale price for the shares of our common stock on the Pink Sheets of the over the counter market on May 14, 2007, the trading day preceding our announcement of UPI’s initial offer of $1.483 per share, (ii) a premium of approximately 32% over the $1.48 closing sale price for the shares of our common stock on the Pink Sheets of the over the counter market on each of the five trading days preceding June 14, 2007, the day the Finance Committee determined to recommend that our Board of Directors approve the Merger Agreement, and (ii) a premium of approximately 82% over the $1.08 average closing sale price for the shares of common stock from July 28, 2006, when Parent first acquired

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the controlling block of 61.8% of our outstanding common stock, through May 14, 2007, the day immediately preceding the first announcement of Parent’s bid at $1.483;

·

the fact that the Finance Committee determined that the merger is fair to, and in the best interests of, S&J and the stockholders (other than the Parent) and the Finance Committee’s recommendation that the stockholders vote to adopt and approve the Merger Agreement;

·

the fact of the receipt by and acceptance of the Finance Committee of the Capitalink opinion;

·

the arm’s length nature of the extensive negotiations between the Finance Committee and the Parent;

·

the involvement of the Finance Committee and its representation by counsel and engagement of a financial advisor;

·

their general knowledge of the Company’s business, financial results and prospects, as well as their knowledge of our industry generally, and their views regarding the Company’s financial condition, results of operations, business and prospects, including our prospects if we were to remain publicly owned;

·

the limitations the Company suffered and could likely continue to suffer as a public company, including our limited trading volume of an average of 6,200 shares a day, that we have virtually no institutional sponsorship, and that no research analysts currently follow the Company, all of which adversely affect the trading market and the value of our common stock;

·

the accounting, legal and other expenses the Company is required to incur to remain a public company; if the Company was to remain a public company it would experience expenses that would include director and officer insurance, public registration expenses (registration fees, printing, mailing annual reports and proxy), audit fees for compliance with the internal controls provision of Sarbanes Oxley and legal fees associated with being public;

·

cash will be paid to the Company stockholders (other than the Parent) in the merger, eliminating any uncertainties in valuing the merger consideration to be received by the Company’s stockholders (other than the Parent);

·

the Merger Agreement permits us to terminate the Merger Agreement in the event our Board of Directors withdraws their recommendation of the Merger Agreement and the merger;

·

the availability of appraisal rights under Nevada law to holders of shares of the Company’s common stock who timely dissent from the merger, which provides stockholders who dispute the fairness of the merger consideration with an opportunity to follow a procedure and allow a Nevada court to determine the fair value of their shares. See ‘‘Special Factors - Dissenter’s Rights’’;

·

the fact that after the Parent announced its consideration of possibly taking the Company private, the Company’s common stock price generally stayed in the range of $1.42 to $1.48 per share, and no buyers for the Company or its assets emerged in response to such announcement;

·

the belief that the principal advantage of the Company continuing as a public company would be to allow public stockholders to continue to participate in any growth in the value of the Company’s equity, but that, under all of the relevant circumstances and in light of the proposed $1.96 per share price, the value to stockholders that would be achieved by continuing as a public company was not likely to be as great as the merger consideration of $1.96;

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·

the fact that the Parent and others are essentially acquiring the Company ‘‘as-is’’, the representations and warranties are limited and do not survive the closing, and there are no holdbacks or escrows that would affect the proceeds received by the stockholders;

·

the fact that the Merger Agreement is not conditioned upon the acquisition of any third party financing arrangements.

·

The Parent and Newco also believe that the merger is procedurally fair to unaffiliated stockholders due to the following factors, among other things:

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the Company’s Board of Directors empowered its Finance Committee to consider and negotiate the Merger Agreement;

·

the Finance Committee was given exclusive authority to, among other things, evaluate, negotiate and recommend the terms of any proposed transactions;

·

the Finance Committee received advice from its own independent legal counsel and financial advisors in evaluating, negotiating and recommending the terms of the Merger Agreement;

·

Capitalink rendered an opinion concerning the fairness, from a financial point of view, of the consideration to be received by the Company’s stockholders (other than the Parent) in the merger;

·

the price of $1.96 per share and the other terms and conditions of the Merger Agreement resulted from active and lengthy arm’s length negotiations between the Finance Committee and its representatives, on the one hand, and the Parent and its representations on the other hand;

·

under Nevada law, the Company’s stockholders have a right to timely demand appraisal of their shares;

·

after public disclosure of the Parent’s initial proposal on May 14, 2007 through June 14, 2007, no other party had expressed any serious interest in acquiring the Company; and

·

the fact that the Parent and others are essentially acquiring the Company ‘‘as-is’’, the representations and warranties are limited and do not survive the closing, and there are no holdbacks or escrows that would affect the proceeds received by the stockholders;

·

In addition, the Parent and Newco also considered a variety of risks and other potentially negative factors concerning the Merger Agreement and the transactions contemplated by it, including the merger. These negative factors included:

·

the fact that, following the merger, the Company’s stockholders, other than Parent, will cease to participate in any future earnings of the Company or benefit from any future increase in the Company’s value, if any;

·

the fact that, for U.S. federal income tax purposes, the merger consideration will be taxable to the Company’s stockholders receiving the merger consideration to the extent the merger consideration exceeds a stockholder’s basis in stock it holds;

·

the possible disruption to the Company’s business that may result from the announcement of the merger and the resulting distraction of the attention of the Company’s management; and

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·

the fact that the failure to consummate the merger could negatively impact the market price of the Company’s common stock.

Parent and Newco did not assign relative weights to these factors. Rather, they viewed their position as being based on the totality of the information presented to and considered by them, except that particular consideration was placed on (a) the measures taken by the Finance Committee and our Board of Directors to ensure the procedural fairness of the transaction, including the involvement of the Finance Committee, the retention of legal and financial advisors by the Finance Committee and the arms-length nature of the negotiations between Finance Committee and Parent, and (b) receipt and acceptance by the Finance Committee of the Capitalink opinion.

The foregoing constitutes all the material factors considered by Parent and Newco in making their respective fairness determination. Parent and Newco did not consider whether the merger consideration constitutes fair value in relation to liquidation value as relevant to their determination as to the fairness of the merger. S&J did not receive any firm offers more favorable than that of Parent to acquire S&J during the past 18 months. Consequently, the Finance Committee could not and Parent and Newco did not, consider any other firm offers.

Other than the recommendations of the Finance Committee and our Board of Directors that the stockholders vote in favor of the adoption and approval of the Merger Agreement, no other person filing the Schedule 13E-3 with the Securities and Exchange Commission has made any recommendation with respect to the merger.

S&J, Parent and Newco have not made any provision in connection with the merger to grant our unaffiliated stockholders access to our corporate records, or to obtain counsel or appraisal services at the expense of S&J, Parent or Newco.

Opinion of Financial Advisor to the Finance Committee

Capitalink made a presentation and delivered its written opinion to our Finance Committee of the Board of Directors on June 14, 2007, and based upon and subject to the assumptions made, matters considered, and limitations on its review as set forth in the opinion, the merger consideration per share is fair, from a financial point of view, to our stockholders other than Parent. The amount of the merger consideration was determined pursuant to negotiations between the Finance Committee and UPI and not pursuant to recommendations of Capitalink. The full text of the written opinion of Capitalink is attached as Exhibit B and is incorporated by reference into this proxy statement.

You are urged to read the Capitalink opinion carefully and in its entirety for a description of the assumptions made, matters considered, procedures followed and limitations on the review undertaken by Capitalink in rendering its opinion. The summary of the Capitalink opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion.

The Capitalink opinion is for the use and benefit of our Board of Directors in connection with its consideration of the merger and is not intended to be and does not constitute a recommendation to you as to how you should vote or proceed with respect to the merger. Capitalink was not requested to opine as to, and its opinion does not in any manner address, the relative merits of the merger as compared to any alternative business strategy that might exist for us, our underlying business decision to proceed with or effect the merger, and other alternatives to the merger that might exist for us. Capitalink does not express any opinion as to the underlying valuation or future performance of S&J or the price at which our securities might trade at any time in the future.

In arriving at its opinion, Capitalink took into account an assessment of general economic, market and financial conditions, as well as its experience in connection with similar transactions and securities valuations generally. In so doing, among other things, Capitalink:

·

Reviewed the Merger Agreement.

·

Reviewed our publicly available financial information and other data that Capitalink deemed relevant, including our Annual Report on Form 10-K for the year ended September 30, 2006, our

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Quarterly Report on Form 10-Q for the six months ended March 31, 2007, and our Current Reports on Form 8-K filed January 26, 2007, February 9, 2007, February 21, 2007, April 25, 2007, May 15, 2007 and June 12, 2007.

·

Reviewed non-public information and other data with respect to us, including, financial projections for the five years ending September 30, 2011 (the “Projections”), management estimates of the current projected benefit obligations in excess of plan assets (the “PBO Estimate”) and other internal financial information and management reports.

·

Considered our historical financial results and present financial condition.

·

Reviewed and compared the trading of, and the trading market for our common stock, the Comparable Companies (as hereinafter defined), and two general market indices

·

Reviewed and analyzed our projected unlevered free cash flows and prepared a discounted cash flow analysis.

·

Reviewed and analyzed certain financial characteristics of publicly-traded companies that were deemed by Capitalink to have characteristics comparable to us (the “Comparable Companies”).

·

Reviewed and analyzed certain financial characteristics of target companies in transactions where such target company was deemed by Capitalink to have characteristics comparable to us.

·

Reviewed and analyzed the premiums paid in certain other transactions.

·

Reviewed and discussed with representatives of our management and their advisors certain financial and operating information furnished by them, including the Projections, the PBO Estimate and other analyses with respect to the our business, operations and obligations.

·

Performed such other analyses and examinations as were deemed appropriate.

In arriving at its opinion, Capitalink relied upon and assumed the accuracy and completeness of all of the financial and other information that was supplied or otherwise made available to Capitalink without assuming any responsibility for any independent verification of any such information. Further, Capitalink relied upon the assurances of our management that they were not aware of any facts or circumstances that would make any such information inaccurate or misleading. With respect to the financial information and projections utilized, Capitalink assumed that such information has been reasonably prepared on a basis reflecting the best currently available estimates and judgments, and that such information provides a reasonable basis upon which it could make an analysis and form an opinion. The projections were solely used in connection with the rendering of Capitalink’s fairness opinion. Our stockholders should not place reliance upon such projections, as they are not necessarily an indication of what our revenues and profit margins will be in the future. The projections were prepared by our management and are not to be interpreted as projections of future performance (or “guidance”) by us. Capitalink did not evaluate the solvency or fair value of us under any foreign, state or federal laws relating to bankruptcy, insolvency or similar matters. Capitalink did not make a physical inspection of our properties and facilities and did not make or obtain any evaluations or appraisals of our assets and liabilities (contingent or otherwise). In addition, Capitalink did not attempt to confirm whether we have good title to our assets.

Capitalink assumed that the merger will be consummated in a manner that complies in all respects with the applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and all other applicable foreign, federal and state statutes, rules and regulations. Capitalink assumes that the merger will be consummated substantially in accordance with the terms set forth in the Merger Agreement, without any further amendments thereto, and that any amendments, revisions or waivers thereto will not be detrimental to our stockholders.

Capitalink’s analysis and opinion are necessarily based upon market, economic and other conditions, as they existed on, and could be evaluated as of, June 14, 2007. Accordingly, although subsequent developments may affect its opinion, Capitalink has not assumed any obligation to update, review or reaffirm its opinion.

In connection with rendering its opinion, Capitalink performed certain financial, comparative and other analyses as summarized below. Each of the analyses conducted by Capitalink was carried out to provide a different perspective on the merger, and to enhance the total mix of information available. Capitalink did not form a conclusion as to whether any individual analysis, considered in isolation, supported or failed to support an opinion as to the fairness, from a financial point of view, of the merger consideration to our stockholders other than Parent. Further, the summary of Capitalink’s analyses described below is not a complete description of the analyses

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underlying Capitalink’s opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Capitalink made qualitative judgments as to the relevance of each analysis and factors that it considered. In addition, Capitalink may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described above should not be taken to be Capitalink’s view of the value of our assets. The estimates contained in Capitalink’s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the value of businesses or assets neither purports to be appraisals nor do they necessarily reflect the prices at which businesses or assets may actually be sold. Accordingly, Capitalink’s analyses and estimates are inherently subject to substantial uncertainty. Capitalink believes that its analyses must be considered as a whole and that selecting portions of its analyses or the factors it considered, without considering all analyses and factors collectively, could create an incomplete and misleading view of the process underlying the analyses performed by Capitalink in connection with the preparation of its opinion.

The summaries of the financial reviews and analyses include information presented in tabular format. In order to fully understand Capitalink’s financial reviews and analyses, the tables must be read together with the accompanying text of each summary. The tables alone do not constitute a complete description of the financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses performed by Capitalink.

The analyses performed were prepared solely as part of Capitalink’s analysis of the fairness, from a financial point of view, of the merger consideration to our stockholders other than Parent, and were provided to our Finance Committee of the Board of Directors in connection with the delivery of Capitalink’s opinion. The opinion of Capitalink was just one of the many factors taken into account by our Finance Committee in making its determination to approve the merger, including those described elsewhere in this proxy statement.

Stock Performance Review

Capitalink reviewed the daily closing market price and trading volume of our common stock for the twelve month period ended May 14, 2007 (the date prior to the announcement of the transaction). Capitalink noted the following that over the last twelve months, our closing stock price ranged from $0.95 and $1.40, and has experienced limited liquidity with a mean and median trading volume of 2,567 and 500 shares traded each day, respectively.

Valuation Overview

Capitalink generated an indicated valuation range for our company based on a discounted cash flow analysis, a comparable company analysis and a comparable transaction analysis each as more fully discussed below. Capitalink weighted the three approaches equally and arrived at an indicated equity value per share range of approximately $1.60 and approximately $2.37. Capitalink noted that the merger consideration per share of $1.96 is around the mid-point of the indicated equity value range.

Discounted Cash Flow Analysis

A discounted cash flow analysis estimates value based upon a company’s projected future free cash flow discounted at a rate reflecting risks inherent in its business and capital structure. Unlevered free cash flow represents the amount of cash generated and available for principal, interest and dividend payments after providing for ongoing business operations.

While the discounted cash flow analysis is the most scientific of the methodologies used, it is dependent on projections and is further dependent on numerous industry-specific and macroeconomic factors.

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In calculating our projected free cash flows, Capitalink also removed the estimated portion of the periodic pension expense that specifically relates to the “Catching Up” of our PBO estimate or unfunded pension liability. This adjustment ensures the analysis correctly accounts for the unfunded pension liability only once (i.e., Capitalink included this liability as part of net debt).

Capitalink utilized the forecasts provided by our management, which project gradual future growth in revenues from FY2006 to FY2011 from approximately $96.9 million to $127.9 million, respectively. This represents a compound average growth rate (or “CAGR”) of approximately 5.7% over the period. The projections provided by our management assume the Company continues operating under its current structure and does not include any benefits or costs related to any closure of any existing UK manufacturing facilities and the further outsourcing of such production to Asia or other low-cost manufacturing countries.

In order to arrive at a present value, Capitalink utilized discount rates ranging from 20.0% to 21.0%. This was based on an estimated weighted average cost of capital of 20.7% (based on our estimated weighted average cost of debt of 6.5% and a 24.7% estimated cost of equity). The cost of equity calculation was derived utilizing the Ibbotson build up method utilizing appropriate equity risk, industry risk and size premiums and a company specific risk factor, reflecting the risk associated with achieving the projected sales growth and profit margins given our poor performance in FY2006.

Capitalink presented a range of terminal values at the end of the forecast period by applying a range of long term perpetual growth rates between 2.0% and 4.0%.

Capitalink calculated a range of indicated enterprise values and then deducted net debt of approximately $22.1 million (which includes the estimated PBO of approximately $41.9 (₤21.3) million, or approximately $29.4 million after tax, less approximately $7.2 million in available cash). Capitalink utilized the estimated PBO after tax given that the pension obligation is tax deductible. Capitalink then derived a per share range of equity values of between $1.80 and $2.60 (by dividing by approximately 5.74 million shares outstanding). For purposes of Capitalink’s analyses, “enterprise value” means equity value plus all interest-bearing debt (including unfunded pension liabilities, after tax) less cash.

Comparable Company Analysis

A selected comparable company analysis reviews the trading multiples of publicly traded companies that are similar to us with respect to our business and revenue model, operating sector, size and target customer base.

Capitalink identified the following seven companies:

·

Danaher Corp.

·

Black & Decker Corp.

·

Stanley Works

·

Snap-On, Inc.

·

Fiskars Oyj

·

LS Starrett Co.

·

Leeport Holdings Ltd.

Most of the comparable companies are substantially larger than us both in terms of revenue and enterprise value, with latest twelve months, or LTM revenue ranging from approximately $112.7 million to approximately $10.0 billion, compared with our LTM revenue of approximately $100.5 million. Based on publicly available information as of June 11, 2007, the enterprise value for the comparable companies ranged from approximately $46.8 million to approximately $26.1 billion, compared with our enterprise value of approximately $35.2 million.

Capitalink noted that all of the comparable companies are more profitable than us, with EBITDA margins ranging from approximately 6.4% to approximately 22.9%, compared with our negative EBITDA margin of approximately -1.9%. For purposes of Capitalink’s analyses, “EBITDA” means earnings before interest, taxes, depreciation and amortization, as adjusted for add-backs for non-cash stock compensation expenses and one-time charges.

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Capitalink also noted that based on the total debt outstanding (including estimated PBO), we are significantly more leveraged than all of the comparable companies with approximately 80.0% debt to total invested capital ratio (compared with a mean of 19.5% for the comparable companies).

Multiples utilizing enterprise value were used in the analyses. For comparison purposes, all operating profits including EBITDA were normalized to exclude unusual and extraordinary expenses and income. Capitalink also calculated and utilized EBITDAP in their analysis which is equal to EBITDA plus periodic pension expenses.

Capitalink generated a number of multiples worth noting with respect to the comparable companies:

Enterprise Value Multiple of	Mean	Median	High	Low
LTM revenue	1.39x	1.42x	2.61x	0.41x
LTM EBITDA	9.2x	9.3x	13.8x	6.0x
LTM EBITDAP	9.0x	9.1x	13.5x	6.1x
2007 EBITDA	9.7x	9.8x	13.2x	4.3x

Capitalink also reviewed the historical multiples generated for the comparable companies, and noted that the mean enterprise value to LTM EBITDA multiple over the last ten years was 9.3x.

Capitalink selected an appropriate multiple range for us by examining the range indicated by the comparable companies and taking into account certain company-specific factors. Capitalink expects our valuation multiples to be significantly below the mean of the comparable companies due to our lower EBITDA margins, lower historical revenue growth, significant risks related to the pension liabilities and smaller size.

Based on the above factors, Capitalink applied the following multiples to the respective statistics:

·

Multiples of 0.30x to 0.35x LTM revenue

·

Multiples of 5.0x to 6.0x LTM EBITDAP

·

Multiples of 8.0x to 9.0x Average EBITDA (2002 – 2006)

and calculated a range of enterprise values for us by weighting the above indications equally and then deducted net debt of approximately $22.1 million to derive a per share range of equity values of between $1.40 and $2.30 (based on approximately 5.74 million shares outstanding).

None of the comparable companies have characteristics identical to us. An analysis of publicly traded comparable companies is not mathematical; rather it involves complex consideration and judgments concerning differences in financial and operating characteristics of the comparable companies and other factors that could affect the public trading of the comparable companies.

Comparable Transaction Analysis

A comparable transaction analysis involves a review of merger, acquisition and asset purchase transactions involving target companies that are in related industries to us. The comparable transaction analysis generally provides the widest range of value due to the varying importance of an acquisition to a buyer (i.e., a strategic buyer willing to pay more than a financial buyer) in addition to the potential differences in the transaction process (i.e., competitiveness among potential buyers).

Information is typically not disclosed for transactions involving a private seller, even when the buyer is a public company, unless the acquisition is deemed to be “material” for the acquirer. As a result, the selected comparable transaction analysis is limited to transactions involving the acquisition of a public company, or substantially all of its assets, or the acquisition of a large private company, or substantially all of its assets, by a public company.

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Capitalink located fifteen transactions announced since January 2003 involving target companies involved in the development, manufacture and marketing of various hand tools and are classified under the SIC code 3423 (Hand and Edge Tools, NEC), and for which detailed financial information was available.

Target	Acquiror
Lamitec Tools AB	Swedish Saw Blades Holding AB
Techtronic Industries Co. Ltd.	Platinum Securities Company Ltd
Gardena Holding AG	Husqvarna AB
Southern Saw Holdings, Inc.	Kasco Corp.
Easy Gardener Products Ltd.	Bayside Capital, Inc.
Acorn Products, Inc.	Ames True Temper Inc.
Spear & Jackson, Inc.	United Pacific Industries Ltd.
Horizon Distributors, Inc.	SCP Pool Corp.
Hayter, Ltd	Toro Co.
Pentair Tools Group	Black & Decker Corp.
Simplicty Manufacturing, Inc.	Briggs & Stratton Corp.
Ames True Temper, Inc.	Castle Harlan Partners
Global Garden Products Sweden	ABN AMRO Capital Benelux
SPS Technologies, LLC	Precision Castparts Corp.
Neelco Industries	Undisclosed Acquirer

Based on the information disclosed with respect to the targets in the each of the comparable transactions, Capitalink calculated and compared the enterprise values as a multiple of LTM revenue and LTM EBITDA.

Capitalink noted the following with respect to the multiples generated:

Multiple of enterprise value to	Mean	Median	High	Low
LTM revenue	0.84x	0.72x	1.73x	0.32x
LTM EBITDA	8.7x	9.5x	12.1x	4.8x

Capitalink expects S&J to be valued below the mean of the comparable transactions multiples due to our negative EBITDA margin, significant risks related to the pension liabilities, and smaller size.

Based on the above factors, Capitalink applied the following multiples to the respective statistics:

·

Multiples of 0.32x to 0.35x LTM revenue, and

·

Multiples of 8.5x to 9.5x Average EBITDA (2002-2006),

calculated a range of enterprise values for us by weighting the above indications equally and then deducted net debt of approximately $22.1 million to derive a per share range of equity values of between $1.60 and $2.20 (based on approximately 5.74 million shares outstanding).

None of the target companies in the comparable transactions have characteristics identical to us. Accordingly, an analysis of comparable business combinations is not mathematical; rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of the target companies in the comparable transactions and other factors that could affect the respective acquisition values.

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Premiums Paid Analysis

The premiums paid analysis involves the examination of the acquisition premiums derived in transactions where a minority interest of a public company was acquired by a controlling stockholder and the comparison of the observed premiums to the premium implied by the merger consideration per share. Capitalink reviewed the one-day, five-day and 30-day premiums for all minority interest transactions where:

·

The transaction was announced on or after January 2003;

·

The transaction value is between $10.0 million and $100.0 million;

·

The acquiring party previously had more than 50% shareholding in the target company; and

·

The target company is based in the United States or the United Kingdom.

Capitalink reviewed 27 transactions that met these criteria and calculated the mean and median of the acquisition premiums. They were 21.0% and 18.6%, for the one-day premium, 21.3% and 17.5%, for the five-day premium, and 33.0% and 21.2% for the 30-day premium.

Capitalink used the analysis to determine a range of implied indicated values for our common stock based on the range of minority interest acquisition premiums. Capitalink selected the total mean and median for all of the periods, and applied them to our one day, five day and thirty day stock price, prior to the announcement of the merger on May 14, 2007. Based on these premiums, Capitalink determined a range of indicated value for our common stock of between $1.28 and $1.34.

None of the target companies in the acquisition premiums analysis have characteristics identical to us. Accordingly, an analysis of comparable business combinations is not mathematical; rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of the target companies in the acquisition premiums analysis and other factors that could affect the respective acquisition values.

Based on the information and analyses set forth above, Capitalink delivered its written opinion to our Finance Committee of the Board of Directors, which stated that, as of June 14, 2007, based upon and subject to the assumptions made, matters considered, and limitations on its review as set forth in the opinion, the merger consideration is fair, from a financial point of view, to our stockholders other than Parent. Capitalink is an investment banking firm that, as part of its investment banking business, regularly is engaged in the evaluation of businesses and their securities in connection with mergers, acquisitions, corporate restructurings, private placements, and for other purposes. We determined to use the services of Capitalink because it is a recognized investment banking firm that has substantial experience in similar matters. Capitalink has received a fee in connection with the preparation and issuance of its opinion and will be reimbursed for its reasonable out-of-pocket expenses, including attorneys’ fees. In addition, we have agreed to indemnify Capitalink for certain liabilities that may arise out of the rendering of its opinion. Further, Capitalink has not previously provided, nor are there any pending agreements to provide, any other services to S&J or UPI. In addition, we has agreed to indemnify Capitalink for certain liabilities that may arise out of the rendering this opinion.

In the ordinary course of business, Capitalink’s affiliate Ladenburg, certain of Ladenburg’s affiliates, as well as investment funds in which they may have financial interests, may acquire, hold or sell, long or short positions, or trade or otherwise effect transactions, in debt, equity, and other securities and financial instruments (including bank loans and other obligations) of, or investments in, us, any other party that may be involved in the transaction and their respective affiliates.

General. While the foregoing summary describes the analyses and examinations that Capitalink deemed material in arriving at its opinion, the summary does not purport to be a comprehensive description of all analyses and examinations actually conducted by Capitalink in connection with its review of the merger and the preparation of its opinion. The preparation of a fairness opinion is a complex process and necessarily is not susceptible to partial analysis or summary description. Selecting portions of the analyses and of the factors considered by Capitalink, without considering all analyses and factors, would create an incomplete view of the process underlying the analyses set forth in the opinion of Capitalink delivered to the Finance Committee on June 14, 2007. In addition, the preparation of a fairness opinion does not involve a mathematical evaluation or weighing of the results of the individual analyses performed, but requires Capitalink to exercise its professional judgment, based on its experience

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and expertise in considering a wide variety of analyses taken as a whole. Each of the analyses conducted by Capitalink with its review of the merger and the preparation of its opinion was carried out in order to provide a different perspective on the transaction and to add to the total mix of information available. In preparing its opinion, Capitalink may have given some analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions. Accordingly, the ranges of valuations resulting from any particular analysis described above should not be taken to be Capitalink’s view of the actual value of S&J. To the contrary, Capitalink has expressed no opinion on the actual value of S&J, and its opinion extends only to its belief that the cash consideration is fair, from a financial point of view, to the stockholders other than Parent.

In performing its analyses, Capitalink made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of S&J and Capitalink. The analyses performed by Capitalink are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those suggested by such analyses. The analyses do not purport to be an appraisal or to reflect the prices at which S&J might actually be sold or the prices at which any of its securities may trade at any time in the future. Accordingly, actual results of these analyses are subject to substantial uncertainty and could vary significantly from those set forth in such projections.

As described above, the opinion of Capitalink delivered to the Finance Committee on June 14, 2007 and the accompanying presentation to the Finance Committee summarized above were among the many factors taken into consideration by the Finance Committee in making its determination to adopt the Merger Agreement and the merger, and to recommend the merger to the stockholders for their adoption. Capitalink does not, however, make any recommendation to the stockholders (or to any other person or entity) as to whether such stockholders should vote for or against the merger.

Capitalink was selected by the Finance Committee to render a fairness opinion in connection with the transaction because of Capitalink’s reputation and expertise as an investment banking firm. Capitalink, as part of its investment banking business, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, underwritings of equities, private placements and valuations for estate, corporate and other purposes. In the ordinary course of its business, Capitalink may actively trade our securities for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short term position in such securities.

Pursuant to the engagement letter with Capitalink, we agreed to pay Capitalink: $62,500.

In addition to any fees for professional services, we have agreed to reimburse Capitalink, upon request, for certain reasonable out-of-pocket expenses incurred in connection with Capitalink’s carrying out the terms of the engagement letter. We also agreed to indemnify Capitalink, to the fullest extent permitted by law or equity, against claims related to (i) the use of information provided to Capitalink by S&J, its agents, representatives and advisors, (ii) any of the services rendered pursuant to the engagement letter or (iii) matters which are the subject of, or arise out of, the engagement of Capitalink contemplated by the engagement letter, including liabilities under the federal securities laws. Except for the fees set forth above, neither S&J nor any of its affiliates has paid any fee to Capitalink nor engaged Capitalink in any material relationship.

The Finance Committee determined the cash consideration to be received by the stockholders pursuant to the Merger Agreement in arm’s length negotiations. The Finance Committee did not impose any restrictions or limitations upon Capitalink with respect to the investigations made or the procedures that Capitalink followed in rendering its opinion.

The foregoing summary does not purport to be a complete description of the analyses performed by Capitalink or the terms of its engagement by the Finance Committee. The foregoing summary of the analyses performed by Capitalink is qualified in its entirety by reference to the opinion of Capitalink attached as Exhibit B to this proxy statement.

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Purpose and Structure of the Merger

For S&J, the purpose of the merger is to allow our stockholders to realize the value of their investment in S&J in cash at a price that represents a premium over the market price of our common stock before the public announcement of the Merger Agreement and to take S&J private by purchasing all of the outstanding shares of capital stock. For the Parent, the purpose of the merger is also to allow it to acquire complete ownership of S&J and to increase the amount of S&J it currently owns. Moreover, our Board of Directors believes that, because of the limited liquidity of the shares of our common stock and the undervaluation of the common stock in the public market, S&J has not been able to fully realize the benefits of public company status. At the same time, the public company status has imposed substantial costs and a number of limitations on S&J and our management in conducting our operations. Accordingly, one of the purposes of the merger is to afford greater operating flexibility, allowing management to concentrate on long-term growth and to reduce its attention to the quarter-to-quarter performance often emphasized by the public markets. Further, the merger is intended to enable us to use in our operations those funds that would otherwise be expended in complying with requirements applicable to public companies.

The transaction has been structured as a cash merger. Parent acknowledges that the structure of the merger was mutually determined and was designed to, among other things, allow for a direct and negotiated agreement with S&J by way of the Finance Committee, rather than by way of a tender offer or other direct-to-stockholders structure.

S&J’s purpose in submitting the merger to the vote of its stockholders with a favorable recommendation at this time is to allow the stockholders other than the Parent an opportunity to receive a cash payment at a fair price and provide a prompt and orderly transfer of ownership of S&J to the Parent and provide the stockholders (other than the Parent) with cash for all of their shares of our common stock. As noted above, S&J for a significant period of time unsuccessfully had been exploring strategic alternatives with its investment advisors engaged specifically for that purpose. Parent did not select the timing of the merger based on any material non-public information.

Effects of the Merger

Upon completion of the merger, S&J, as the surviving corporation, will be a privately held corporation, owned by the Parent. After the merger, Parent may offer equity interests in the surviving corporation to senior officers of the surviving corporation although the amount and nature of such interest has not yet been determined.

As a result of the merger, Newco, as the surviving corporation, will be a privately held corporation, and there will be no public market for our common stock. After the merger, the shares of our common stock will cease to be traded on the Pink Sheets in the over the counter market, and price quotations of sales of shares of our common stock in the public market will no longer be available. In addition, registration of our common stock under the Exchange Act will be terminated. This termination will make most provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirement of furnishing a proxy or information statement in connection with stockholders’ meetings, no longer applicable. After the effective time of the merger, Newco will no longer be required to file periodic reports with the Securities and Exchange Commission.

At the effective time of the merger, the directors of Newco will become the directors of the surviving corporation and the current management of S&J is expected, in general, to remain the management of the surviving corporation. At the effective time of the merger, Newco’s articles of incorporation and bylaws will become surviving corporations articles of incorporation and the bylaws.

It is expected that, following completion of the merger, the operations of S&J will be conducted substantially as they are currently being conducted. S&J and the Parent do not have any present plans or proposals that relate to or would result in an extraordinary corporate transaction following completion of the merger involving S&J’s corporate structure, business or management, such as a merger, reorganization, liquidation, relocation of any operations or sale or transfer of a material amount of assets. However, S&J and the Parent will continue to evaluate S&J’s business and operations after the merger and may develop new plans and proposals that S&J and the Parent consider to be in the best interests of S&J and its then current stockholders. Because S&J has experienced net losses in recent years, the surviving corporation may in the future benefit from the use of certain operating loss carryforwards. To the extent the surviving corporation uses these operating loss carryforwards, the Parent will benefit from such use by the surviving corporation.

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The following table sets forth for Parent and each Management Stockholder their interest in our net book value and net income based upon the percentage of their beneficial ownership of our capital stock as of March 31, 2007.

	Ownership Percent	Net Book Value(1)	Net Income(2)
United Pacific Industries Limited	61.78%	$13,825,746	($4,002,726)
William Fletcher, CEO of Spear & Jackson UK	0	N.A.	N.A.
Patrick J. Dyson, Chairman, CFO, Secretary, and Director	0	N.A.	N.A.
Lewis Hon Ching Ho, Director and Chief Administrative Officer	0	N.A.	N.A.
Dr. Preston Jones, Director of S&J	0	N.A.	N.A.

———————

(1) Based on S&J’s stockholders’ equity as of March 31, 2007 (unaudited).

(2) Based on S&J’s net income for the fiscal year ended September 30, 2006.

Risks that the Merger Will Not Be Completed

Completion of the merger is subject to various risks, including, but not limited to, the following:

·

that S&J, Parent or Newco will not have performed in all material respects their obligations contained in the Merger Agreement before the effective time of the merger;

·

that the representations and warranties made by S&J, Parent or Newco in the Merger Agreement will not be true and correct at the closing date of the merger;

·

that there may be new litigation that could prevent the merger, cause the merger to be rescinded following completion of the merger or that could have a material adverse effect on S&J.

As a result of various risks to the completion of the merger, there can be no assurance that the merger will be completed even if the requisite stockholder approval is obtained. It is expected that, if our stockholders do not adopt and approve the Merger Agreement or if the merger is not completed for any other reason, the current management of S&J, under the direction of our Board of Directors, will continue to manage S&J as an ongoing business.

Interests of the Parent in the Merger

In considering the recommendations of our Board of Directors, our stockholders should be aware that Parent has interests different from our stockholders generally. As a result of the potential conflict of interest, our Board of Directors appointed the Finance Committee, consisting of one independent director who is not an officer or employee of S&J and who has no financial interest in the merger. The Finance Committee was empowered to evaluate, negotiate and recommend the Merger Agreement and to evaluate whether the merger is in the best interests of our stockholders other than Parent. The Finance Committee was aware of these differing interests and considered

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them, among other matters, in evaluating and negotiating the Merger Agreement and the merger and in recommending to our Board of Directors that the Merger Agreement and the merger be adopted and approved.

Executive Officers of the Surviving Corporation

Although their can be no assurances, it is expected that, in general, our current management will remain management of the surviving corporation on the same terms as their current employment. Our current executive officers are expected to remain officers of the surviving corporation following completion of the merger.

Continuing Equity Interests of the Parent

The Parent will own 100% of the equity interests in the surviving corporation.

Change in Control Protection Agreements

Patrick J. Dyson has 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.

Indemnification

Article VIII of our amended and restated by-laws includes provisions for indemnification of our officers and directors to the extent permitted by the Nevada Revised Statutes.

S&J and Dr. J. Preston Jones entered into an Indemnification Agreement in June 2007, pursuant to which S&J agreed to indemnify Dr. Jones in his role as a director of S&J to the fullest extent permitted by Nevada law, including, but not limited to, indemnification in third party proceedings, indemnification in derivative actions, indemnification for expenses as a witness, contribution where indemnification is unavailable, and advancement of expenses.

Section 78.7502 of the Nevada Revised Statutes authorizes a corporation to indemnify its directors, officers, employees or agents in non-derivative suits if such party acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 78.7502 further provides that indemnification shall be provided if the party in question is successful on the merits or otherwise.

The Merger Agreement provides that the surviving corporation will continue to honor all indemnification obligations in force as of the date of the Merger Agreement and will not amend, repeal or otherwise modify those obligations in a way that would adversely affect the rights of the individuals who are covered by the indemnification obligations.

Merger Financing

It is estimated that approximately $5 million will be required by Parent to complete the merger and pay related fees and expenses. This sum will be paid directly from acquisition financing and existing capital of Parent. S&J estimates it will incur approximately $275,000 in fees and expenses to complete the merger which will be funded out of working capital. See ‘‘Estimated Fees and Expenses of the Merger.’’

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Estimated Fees and Expenses of the Merger

Whether or not the merger is completed, in general, all fees and expenses incurred in connection with the merger will be paid by the party incurring those fees and expenses.

S&J’s fees and expenses of the merger are estimated to be as follows:

Description	Amount
Filing Fees (SEC)	$459.77
Capitalink Fees	$62,500
Legal Fees and expenses	$150,000
Accounting fees and expenses	$35,000
Printing and mailing costs	$25,000
Miscellaneous	$2,040.23
Total	$275,000

These expenses will not reduce the merger consideration to be received by our stockholders.

Federal Income Tax Considerations

Upon completion of the merger, each of the outstanding shares of our common stock (other than those held by the Parent and other than shares as to which dissenter’s rights are properly exercised) will be converted into the right to receive merger consideration of $1.96 in cash, without interest.

The following discussion is a summary of the principal United States federal income tax consequences of the merger to stockholders whose shares are surrendered pursuant to the merger (including any cash amounts received by dissenting stockholders pursuant to the exercise of dissenter’s rights). The discussion applies only to stockholders in whose hands shares of our capital stock are capital assets, and may not apply to shares of our capital stock received pursuant to the exercise of employee stock options or otherwise as compensation, or to stockholders who are not citizens or residents of the United States.

The United States federal income tax consequences set forth below are based upon present law. Because individual circumstances may differ, each stockholder is urged to consult their own tax advisor to determine the applicability of the rules discussed below to them and the particular tax effects of the merger, including the application and effect of state, local and other tax laws.

The receipt of cash pursuant to the merger (including any cash amounts received by dissenting stockholders pursuant to the exercise of dissenter’s rights) will be a taxable transaction for federal income tax purposes under the Internal Revenue Code of 1986, as amended, and also may be a taxable transaction under applicable state, local and other income tax laws. In general, for federal income tax purposes, a stockholder will recognize gain or loss equal to the difference between the cash received by the stockholder pursuant to the merger and the stockholder’s adjusted tax basis in the shares of our capital stock surrendered in the merger. Such gain or loss will be capital gain or loss and will be long term gain or loss if, on the effective date of the merger, the shares of our capital stock were held for more than one year. There are limitations on the deductibility of capital losses.

Payments in connection with the merger may be subject to ‘‘backup withholding’’ at a 28% rate. Backup withholding generally applies if the stockholder fails to furnish such stockholder’s social security number or other taxpayer identification number, or furnishes an incorrect taxpayer identification number. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons generally are exempt from backup withholding, including corporations and financial institutions. Certain penalties apply for failure to furnish correct information and for failure to include the reportable payments in income. Stockholders should consult with their own tax advisors as to the qualifications for exemption from withholding and procedures for obtaining such exemption.

Neither Parent nor Newco will recognize gain or loss for United States federal tax purposes as a result of the merger.

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Anticipated Accounting Treatment of Merger

It is expected that the merger will be treated as a recapitalization for accounting purposes. A recapitalization would not effect any change in the accounting basis of the assets or liabilities presented in the stand-alone financial statements of the operating entity, and the consideration paid for the shares would be accounted for as a reduction in equity.

Certain Regulatory Matters

S&J, Newco and the Parent do not believe that any governmental filings are required with respect to the merger other than (a) the filing of the articles of merger with the Secretary of State of the State of Nevada, and (b) filings with the Securities and Exchange Commission. S&J, Parent, and Newco do not believe that they are required to make a filing with the Department of Justice and the Federal Trade Commission pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. UPI has certain disclosure obligations under the rules of the Hong Kong Stock Exchange and, in seeking the approval of its shareholders for the Merger, may require clearance of a circular to shareholders from the Hong Kong Stock Exchange.

Dissenter’s Rights

General. Under Sections 92A.300 to 92A.500 of the Nevada Revised Statutes, referred to as the ‘‘NRS,’’ any holder of common stock who does not wish to accept merger consideration of $1.96 per share in cash for the holder’s shares of common stock may exercise dissenter’s rights under the NRS and elect to have the fair value of the holder’s shares of common stock on the date of the merger (exclusive of any element of value arising from the accomplishment or expectation of the merger) judicially determined by a Nevada court and paid to the holder in cash, together with a fair rate of interest, if any is due, provided that the holder timely complies with the provisions of Sections 92A.300 to 92A.480 of the NRS.

The following discussion is not a complete statement of the law pertaining to dissenter’s rights under the NRS, and is qualified in its entirety by the full text of Sections 92A.300 to 92A.500 of the NRS, as it then exists, which provisions are provided in their entirety as Exhibit C to this proxy statement. All references in the NRS and in this summary to a ‘‘stockholder’’ are to the record holder of the shares of common stock as to which dissenter’s rights are asserted. A person having a beneficial interest in shares of capital stock held of record in the name of another person, such as a broker or nominee, who elects to seek appraisal rights, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect their dissenter’s rights.

Under Section 92A.410(1), where a proposed merger is to be submitted for adoption and approval at a meeting of stockholders, as in the case of the special meeting contemplated in this situation, the subject corporation, must notify each of its stockholders entitled to dissenter’s rights that dissenter’s rights are applicable and include in that notice a copy of Sections 92A.300 to 92A.500 of the NRS as it then exists. This proxy statement constitutes that notice to the holders of common stock, and the applicable statutory provisions of the NRS are attached to this proxy statement as Exhibit C. Any stockholder who wishes to exercise dissenter’s rights or who wishes to preserve that right should review carefully the following discussion and Exhibit C to this proxy statement. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of the common stock, we believe that stockholders who consider exercising such dissenter’s rights should seek the advice of counsel, which counsel or other appraisal services will not be compensated for those services by S&J. Failure to comply with the procedures specified in Sections 92A.300 to 92A.500 in a timely and proper manner may result in the loss of dissenter’s rights and payment of the merger consideration of $1.96 per share in cash.

Filing Written Objection. Any stockholder who wishes to assert dissenter’s rights under Sections 92A.300 to 92A.500 of the NRS must satisfy each of the following conditions:

·

as more fully described below, before the vote on the Merger Agreement and the merger at the special meeting, the holder must deliver to Spear & Jackson, Inc., 12012 Southshore Boulevard, Suite 103, Wellington, Florida 33414, Attn: Patrick J. Dyson, Chairman and Chief Financial

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Officer, written notice of the holder’s intent to demand payment for the holder’s shares if the merger is completed; and

·

the holder must not vote the holder’s shares in favor of the Merger Agreement or the merger either by proxy or in person pursuant to Section 92A.420 of the NRS.

The written notice of the holder’s intent to demand payment for the holder’s shares must be in addition to and separate from any proxy or vote. Neither voting (in person or by proxy) against, abstaining from voting, or failing to vote on the Merger Agreement or the merger will constitute a written notice of intent to demand payment within the meaning of Section 92A.420.

Notice by Newco. Within 10 days after the effective time of the completion of the merger, Newco, as the entity surviving the merger of S&J into Newco, must send a written dissenter’s notice to all stockholders who (1) sent written notice of the holder’s intent to demand payment for the holder’s shares if the merger is completed in accordance with Section 92A.420 and (2) have not voted to approve and adopt, nor consented to, the Merger Agreement or the merger and are otherwise eligible for appraisal rights.

The dissenter’s notice will specify where holders should send their demand for payment, and where and when holders must deposit their stock certificates, if any. The dissenter’s notice will also inform holders of shares not represented by certificates of the extent to which the transfer of their shares will be restricted after their demand for payment is received. The dissenter’s notice will also include a form for demanding payment that references the date the merger was first publicly announced. The holder asserting dissenter’s rights must certify on this form whether or not the holder acquired beneficial ownership of the shares before the date the merger was first publicly announced. The dissenter’s notice will also set a date by when Newco must receive the demand for payment, which may not be less than 30 days or more than 60 days after the date the dissenter’s notice is delivered. Along with the dissenter’s notice, Newco will provide holders the current version of Sections 92A.300 through 92A.500 of the NRS.

If, after receiving a dissenter’s notice, the holder still wishes to proceed to exercise dissenter’s rights, the holder must timely demand payment, certify whether the holder acquired beneficial ownership of the shares before the date set forth in the dissenter’s notice, and deposit the holder’s certificates, if any, in accordance with the terms of the dissenter’s notice. Failure to demand payment timely and property or failure to deposit certificates as described in the dissenter’s notice may, at the discretion of Newco, terminate the holder’s right to receive payment pursuant to the Nevada dissenter’s rights statute. The holder’s rights as a stockholder, except as otherwise stated by the NRS, will continue until those rights are cancelled or modified by the completion of the merger.

Payment for shares. Within 30 days after the holder’s properly executed demand for payment, the holder will receive what Newco has determined to be the fair value of the holder’s S&J shares, plus accrued interest (computed from the effective date of the merger until the date of payment). The payment will be accompanied by S&J’s balance sheet as of the end of a fiscal year not more than 16 months before the date of payment, an income statement for that year, a statement of changes in the stockholders’ equity for that year, and the latest available interim financial statement(s), if any. Newco will also include an explanation of how it estimated the fair value of the shares and how the accrued interest was calculated, along with information regarding the holder’s right to challenge the fair value determined by Newco. A copy of the current version of Sections 92A.300 to 92A.500 of the NRS will also be included.

Newco may elect to withhold payment from the holder of any dissenting shares if the holder became the beneficial owner of the shares on or after the date set forth in the dissenter’s notice as the date of the first public announcement of the merger. If Newco withholds payment, after the merger, Newco will estimate the fair value of the shares, plus accrued interest, and offer to pay this amount to the holder as full satisfaction of the holder’s demand of payment. The offer will contain a statement of Newco’s determination of the fair value for S&J shares, an explanation of how the accrued interest was calculated, and a statement of dissenter’s right to demand payment under Section 92A.480 of the NRS.

Determination of fair value. If the holder believes that the amount Newco paid in exchange for the holder’s dissenting shares is less than the fair value of the holder’s shares, or that the interest is not correctly determined, the

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holder may demand payment of the difference between the holder’s estimate and Newco’s estimate of S&J’s fair value per share. The holder must make such demand in writing and within 30 days after Newco has made or offered payment for the holder’s shares.

If there is still disagreement about the fair market value, Newco, within 60 days after the Company receives the holder’s demand, will petition the District Court of the appropriate county within Nevada to determine the fair value of the S&J shares and the accrued interest offered and paid. If Newco does not commence such legal action within the 60-day period, Newco will be required to pay each dissenting holder whose demand remains unsettled the amount demanded.

All dissenters whose demands remain unsettled will be made parties to the proceeding, and are entitled to seek a judgment for either (a) the amount, if any, of the fair value of the holder’s shares, plus interest, in excess of the amount Newco paid; or (b) the fair value, plus accrued interest, of the holder’s after-acquired shares for which Newco withheld payment, plus accrued interest, pursuant to Section 92A.470 of the NRS.

Newco will pay the costs and expenses of the court proceeding unless the court finds the dissenters acted arbitrarily, vexatiously, or in bad faith, in which case the costs will be equitably distributed as and against Newco and the disstenters and not necessarily in equal manner. Attorney’s fees will be divided as the court considers equitable.

Stockholders should be aware that the fair value of their shares as determined in a legal proceeding in accordance with Section 92A.490 of the NRS could be more than, the same as or less than the cash consideration of $1.96 per share of common stock the holder would receive under the Merger Agreement.

Any stockholder wishing to exercise dissenter’s rights is urged to consult legal counsel before attempting to exercise dissenter’s rights. Failure to comply strictly with all of the procedures set forth in Sections 92A.300 to 92A.480 of the Nevada Revised Statutes may result in the loss of a stockholder’s statutory dissenter’s rights.

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SPEAR & JACKSON, INC.
HISTORICAL FINANCIAL DATA

Our selected historical financial data presented below as of and for the years ended September 30, 2006, 2005, 2004, 2003, and 2002 are derived from our audited consolidated financial statements. The following selected historical financial data should be read in conjunction with our most recent Annual Report on Form 10-K which is incorporated by reference in this proxy statement. Such report is attached as Exhibit D.

For the Fiscal Years Ended September 30
	2006	2005	2004	2003	2002
	US$’000 (Except earnings (loss) per share)	US$’000 (Except earnings (loss) per share)	US$’000 (Except earnings (loss) per share)	US$’000 (Except earnings (loss) per share)	US$’000 (Except earnings (loss) per share)
Income Statement Data
Total revenues	96,993	100,698	99,485	90,124	87,886
Costs and expenses	(67,896)	(67,463)	(67,574)	(61,838)	(61,954)
Other operating expenses
Including Selling, General and administrative expenses and
Depreciation	(36,078)	(31,405)	(29,753)	(21,909)	(27,250)
Exceptional items	(692)	2,168	-	-	-
Total costs and expenses	(104,666)	(96,700)	(97,327)	(83,747)	(89,204)
Operating income	(7,673)	3,998	2,158	6,377	(1,318)
Interest expense, net	27	47	(300)	(237)	(234)
Other income, net	247	157	184	136	138
Taxation:	973	(468)	(1,205)	(1,497)	(948)
Income (loss) from continuing operations	(6,426)	3,734	837	4,779	(2,362)
Income (loss) from discontinued operations	(53)	(639)	(401)	(163)	(1,150)
Net income (loss)	(6,479)	3,095	436	4,616	(3,512)
Income (loss) available to common shareholders	(6,479)	3,095	436	4,616	(3,512)
Basic and diluted earnings (loss) per share:
Continuing Operations	(1.12)	0.42	0.07	0.40	(0.58)
Discontinued Operations	(0.01)	(0.02)	(0.03)	(0.01)	(0.28)
Total basic and diluted earnings (loss) per share	(1.13)	0.35	0.04	0.39	(0.86)

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For the Fiscal Years Ended September 30
	2006	2005	2004	2003	2002
	US$’000 (Except earnings (loss) per share)	US$’000 (Except earnings (loss) per share)	US$’000 (Except earnings (loss) per share)	US$’000 (Except earnings (loss) per share)	US$’000 (Except earnings (loss) per share)
Balance Sheet Items
Total Assets	83,260	83,090	85,756	79,600	73,920
Long Term Obligations	(41,264)	(36,703)	(34,717)	(27,049)	(21,419)
Total Liabilities	(61,419)	(56,887)	56,317	(47,748)	(44,616)

MARKET AND MARKET PRICE

Market Information

Our common stock is traded publicly on the Pink Sheets in the over the counter market. The table below represents the quarterly high and low bid and asked prices for our common stock for our last three fiscal years and the first quarter of our current fiscal year. The prices listed in this table reflect quotations without adjustment for retail mark-up, mark-down or commission, and may not represent actual transactions.

	High Closing Price	Low Closing Price
Fiscal Year Ending 9/30/2007
Third Quarter up to June 22, 2007	$1.50	$1.02
Second Quarter First Quarter	$1.25 $1.17	$1.05 $.095
Fiscal Year Ended 9/30/2006
Fourth Quarter	$1.35	$1.02
Third Quarter	$1.62	$1.10
Second Quarter	$1.75	$1.00
First Quarter	$1.20	$0.95
Fiscal Year Ended 9/30/2005
Fourth Quarter	$1.53	$1.05
Third Quarter	$1.85	$1.15
Second Quarter	$1.90	$1.15
First Quarter	$1.40	$0.68
Fiscal Year Ended 9/30/2004
Fourth Quarter	$1.64	$1.05
Third Quarter	$3.10	$1.15
Second Quarter	$5.45	$2.62
First Quarter	$5.45	$3.50

On May 14, 2007, the last full trading day before the public announcement of UPI’s initial offer of $1.483 per share, the closing sale price of our common stock as reported on the Pink Sheets of the over the counter market was $1.02 per share. On June 22, 2007, the last full trading day before the public announcement of the signing of the Merger Agreement, the closing sale price of our common stock was $1.47 per share. On __________, 2007, the last practicable trading day for which information was available prior to the date of the first mailing of this proxy

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statement, the closing price per share of our common stock as reported on the Pink Sheets of the over the counter market was $__________. Stockholders should obtain a current market quotation for our common stock before making any decision with respect to the merger.

Number of Stockholders

As of __________, 2007, there were _____ outstanding shares of our common stock, _____ record holders of our common stock, and approximately _____ beneficial owners of our common stock.

Dividends

We have never paid cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. If the merger is not completed, we intend to retain most of our future earnings to finance future growth.

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THE SPECIAL MEETING

General

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by our Board of Directors for use at the special meeting of stockholders to be held at the offices of __________ located at __________ on __________, 2007, beginning at __________ local time, and at any adjournments or postponements thereof. This proxy statement is accompanied by a form of proxy for use at the special meeting.

This proxy statement and the accompanying form of proxy are being mailed to stockholders on or about __________, 2007.

Matters to be Considered at the Special Meeting

At the special meeting, the stockholders will be asked to consider and vote upon the following proposals:

·

to adopt and approve the Agreement and Plan of Merger, dated as of June 22, 2007 (the ‘‘Merger Agreement’’), among Spear & Jackson, Inc. (‘‘S&J’’), United Pacific Industries Limited, a Bermuda corporation (“UPI”), Pantene Global Holdings Limited, a Hong Kong corporation and wholly owned subsidiary of UPI (“Pantene, and collectively with UPI the ‘‘Parent’’), and Pantene Global Acquisition Corp., a Nevada corporation and wholly owned subsidiary of Pantene (‘‘Newco’’), pursuant to which S&J will be merged with and into Newco with Newco being the surviving corporation,.

·

if there are not sufficient votes at the time of the special meeting to approve the Merger Agreement, the stockholders will be asked to consider and vote upon a proposal to adjourn the special meeting to permit further solicitation of proxies.

If the requisite votes in favor of the proposal to adopt and approve the Merger Agreement are obtained and certain other conditions are satisfied or, where permissible, waived, S&J will be merged with and into Newco with Newco being the surviving corporation. At the effective time of the merger, each share of our common stock outstanding immediately prior to the filing of a articles of merger with the Secretary of State of the State of Nevada will be converted into the right to receive merger consideration of $1.96 in cash, without interest, except for:

·

shares of our common stock held by Parent;

·

shares for which dissenter’s rights have been properly perfected under Sections 92A.300 through 92A.500 of the Nevada Revised Statutes, which will be entitled to receive the consideration provided for by the Nevada Revised Statutes; and

·

shares held by S&J in treasury at the effective time of the merger, which will be canceled without payment.

Like all other S&J stockholders, members of management and our Board of Directors will be entitled to receive the merger consideration for each of his or her shares of our common stock at the time of the merger.

S&J does not expect a vote to be taken at the special meeting on any matter other than the proposal to adopt and approve the Merger Agreement and if necessary, the adjournment. However, if any other matters are properly presented at the special meeting for consideration, the holders of the proxies will have discretion to vote on these matters in accordance with their best judgment.

BASED UPON THE RECOMMENDATION OF THE FINANCE COMMITTEE, OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE ‘‘FOR’’ THE APPROVAL OF THE MERGER AGREEMENT AND ‘‘FOR’’ THE ADJOURNMENT OF THE SPECIAL MEETING, IF

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NECESSARY, TO SOLICIT ADDITIONAL VOTES IN FAVOR OF APPROVAL OF THE MERGER AGREEMENT.

Record Date and Voting Information

Only holders of record of our common stock at the close of business on __________, 2007 will be entitled to notice of and to vote at the special meeting. At the close of business on July 5, 2007, there were outstanding and entitled to vote an aggregate of 5,735,561 shares of our common stock. Each share of our common stock is entitled to one vote. A list of our stockholders will be available for review at our executive offices during regular business hours for a period of 10 days before the special meeting. Each holder of record of our common stock on the record date will be entitled to one vote for each share held.

All votes will be tabulated by the inspector of elections appointed for the special meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. Brokers who hold shares in street name for clients typically have the authority to vote on ‘‘routine’’ proposals when they have not received instructions from beneficial owners. However, absent specific instructions from the beneficial owner of the shares, brokers are not allowed to exercise their voting discretion with respect to the adoption and approval of non-routine matters, such as the Merger Agreement. Proxies submitted without a vote by the brokers on these matters are referred to as ‘‘broker non-votes.’’ Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists at the special meeting.

The affirmative vote of a majority of our outstanding shares of common stock entitled to vote at the special meeting is required to adopt and approve the Merger Agreement. Each outstanding share of our common stock will be entitled to one vote. The shares of our common stock held by the Parent constituted 61.78% of the aggregate number of outstanding shares of our common stock on the record date. While we anticipate that Parent will vote in favor of the Merger Agreement, Parent does not have a contractual obligation and is not otherwise required to vote in favor of the Merger Agreement.

Abstentions and broker non-vote will have the same effect as a vote AGAINST adoption and approval of the Merger Agreement in the determination of whether a majority of our stockholder approve the Merger Agreement and will have no effect on a motion to adjourn or postpone the special meeting.

With the exception of broker non-votes, the treatment of which is discussed above, each share of our common stock represented by a proxy properly executed and received by S&J in time to be voted at the special meeting and not revoked will be voted in accordance with the instructions indicated on such proxy and, if no instructions are indicated, will be voted ‘‘FOR’’ the proposal to adopt and approve the Merger Agreement and, to the extent necessary be voted ‘‘FOR’’ a motion to adjourn or postpone the special meeting to another time and/or place for the purpose of soliciting additional proxies or otherwise. Any proxy which specifically abstains from voting, will not be voted in favor of the Merger Agreement or any such adjournment or postponement.

Quorum

The presence, in person or by proxy, of the holders of a majority of the aggregate outstanding shares of our common stock entitled to vote at the special meeting is necessary to constitute a quorum for the transaction of business at the special meeting. Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists at the special meeting.

Proxies; Revocation

Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. It may be revoked by filing with our Secretary at our executive offices located at 12012 Southshore Boulevard, Suite 103, Wellington, Florida 33414, a written notice of revocation or a duly executed proxy bearing a later date, or it may be revoked by attending the special meeting and voting in person. Attendance at the special meeting will not, by itself, revoke a proxy. Furthermore, if a stockholder’s shares are held of record by a broker,

37

bank or other nominee and the stockholder wishes to vote at the meeting, the stockholder must obtain a proxy from the record holder.

Expenses of Proxy Solicitation

We will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of this proxy statement, the proxy and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others for forwarding to these beneficial owners. We may reimburse persons representing beneficial owners of common stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by directors, officers or other regular employees of S&J. No additional compensation will be paid to directors, officers or other regular employees for their services.

Dissenter’s Rights

Stockholders who do not vote in favor of adoption and approval of the Merger Agreement, and who otherwise comply with the applicable statutory procedures of the Nevada Revised Statutes summarized above in this proxy statement, will be entitled to seek appraisal of the value of their capital stock as set forth in Sections 92A.300 through 92A.500 of the Nevada Revised Statutes. See ‘‘Special Factors - Dissenter’s Rights.’’

Please do not send in stock certificates at this time. In the event the merger is completed, the surviving corporation will distribute instructions regarding the procedures for exchanging our stock certificates for the cash payment.

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PARTIES TO THE MERGER AGREEMENT

Spear & Jackson, Inc.

12012 Southshore Boulevard, Suite 103,

Wellington, Florida 33414

(561) 793-7233

Spear & Jackson, Inc. (‘‘S&J’’), through its principal operating entities, 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. A more detailed description of our business is contained in our most recent Annual Report on Form 10-K, which is incorporated by reference into and accompanies this proxy statement. See also ‘‘Where Stockholders Can Find More Information.’’ Information about certain of our directors and executive officers is set forth in Exhibit D to this proxy statement.

United Pacific Industries Limited

Suite 27-05/06, 27/F.,

Vicwood Plaza

199 Des Voeux Road Central

Hong Kong

Tel: (852) 2802-9988

United Pacific Industries Limited (“UPI” and together with Pantene the “Parent”) is a Bermuda corporation. The principal business of UPI, through its operating subsidiaries other than S&J, is the manufacture and sale of power supply products and electronic components.

Pantene Global Holdings Limited

Suite 27-05/06, 27/F.,

Vicwood Plaza

199 Des Voeux Road Central

Hong Kong

Tel: (852) 2802-9988

Pantene Global Holdings Limited (‘‘Pantene” and together with UPI the “Parent’’) is a Hong Kong corporation and wholly owned subsidiary of UPI. The principal business of Pantene is investment holding. Pantene is the registered owner of approximately 61.78% of the outstanding common stock of S&J and 100% of the outstanding common stock of Newco.

Pantene Global Acquisition Corp.

Suite 27-05/06, 27/F.,

Vicwood Plaza

199 Des Voeux Road Central

Hong Kong

Tel: (852) 2802-9988

Pantene Global Acquisition Corp. (‘‘Newco’’) is a newly organized Nevada corporation formed and currently wholly owned by Pantene. Immediately following the merger, Newco, as the surviving corporation, will be owned by Pantene. Newco was formed solely for the purpose of engaging in the transactions contemplated by the Merger Agreement.

Related Parties

Patrick J. Dyson is our Chairman, Chief Financial Officer, Secretary, and a member of our Board of Directors, and is UPI’s Chief Financial Officer; Lewis Hon Ching Ho is our Chief Administrative Officer and a member of our Board of Directors, and is a director and the general manager of Pantene Electronics (Hangzhou) Co. Ltd., a subsidiary of UPI; Brian C. Beazer is our Assistant Treasurer and is the Chairman of UPI; Nila Ibrahim is our General Counsel and is the General Counsel of UPI.

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THE MERGER AGREEMENT

The description of the Merger Agreement contained in this proxy statement describes the material terms of the Merger Agreement. A complete copy of the Merger Agreement, without exhibits, appears in Exhibit A to this proxy statement and is incorporated by reference. You are urged to read the entire Merger Agreement as it is the legal document that governs the merger.

The Merger

The Merger Agreement provides that, subject to the conditions summarized below, Newco will merge with and into S&J. Upon completion of the merger, S&J will cease to exist and Newco will continue as the surviving corporation.

Newco is a Nevada corporation that was created solely for the purposes of the merger.

Effective Time of Merger

The merger will become effective upon the filing of articles of merger with the Secretary of State of the State of Nevada in accordance with the Nevada Revised Statutes or at such later time as is specified in the articles of merger. This time is referred to as the ‘‘effective time.’’ The filing is expected to occur as soon as practicable after adoption and approval of the Merger Agreement by our stockholders at the special meeting and satisfaction or waiver of the other conditions to the merger set forth in the Merger Agreement.

Articles of Incorporation, Bylaws and Directors and Officers the Surviving Corporation

When the merger is completed:

·

the articles of incorporation of Newco as in effect immediately prior to the effective time will be the articles of incorporation of the surviving corporation;

·

the bylaws of Newco in effect immediately prior to the effective time will be the bylaws of the surviving corporation;

·

the directors of Newco immediately prior to the effective time will become the directors of the surviving corporation; and

·

the officers of Newco immediately prior to the effective time will become officers of the surviving corporation.

Conversion of Capital Stock

At the effective time of the merger, each share of our common stock that is outstanding immediately prior to the filing of articles of merger with the Secretary of State of the State of Nevada will be converted into the right to receive merger consideration of $1.96 in cash, without interest, except for:

·

shares of our common stock held by Parent;

·

shares for which Dissenter’s rights have been perfected properly under Sections 92A.300 to 92A.500 of the Nevada Revised Statutes will be entitled to receive the consideration provided for by the Nevada Revised Statutes; and

·

shares held by S&J in treasury at the effective time of the merger will be canceled without payment.

At the effective time, each outstanding share of capital stock of Newco will remain unchanged.

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Payment For Shares

Prior to or simultaneous with the effective time, Parent or Newco will deposit with the paying agent appointed by Parent sufficient funds to pay the merger consideration. Promptly after the effective time, the surviving corporation, will cause to be mailed to each record holder of shares of our common stock immediately prior to the effective time a letter of transmittal and instructions to effect the surrender of their certificate(s) in exchange for payment of the merger consideration. Stockholders should not forward stock certificates to the paying agent until they have received the letter of transmittal.

Each stockholder will be entitled to receive the merger consideration only upon surrender to the paying agent of a share certificate, together with such letter of transmittal, duly completed in accordance with the instructions thereto. If payment of the merger consideration is to be made to a person whose name is other than that of the person in whose name the share certificate is registered, it will be a condition of payment that (a) the share certificate so surrendered be properly endorsed or otherwise in proper form for transfer and (b) the person requesting such exchange pay any transfer or other taxes that may be required to the satisfaction of the paying agent. No interest will be paid or accrued upon the surrender of the share certificates for the benefit of holders of the share certificates on any merger consideration.

Twelve months following the effective time, Parent will cause the paying agent to deliver to Parent or Newco, as the surviving corporation, all cash and documents in its possession, which have been deposited with the paying agent and which have not been disbursed to holders of share certificates. Thereafter, holders of certificates representing shares of our capital stock outstanding before the effective time will surrender their certificates to the surviving corporation, and will be entitled to look only to Parent and the surviving corporation, for payment of any claims for merger consideration to which they may be entitled. S&J, Parent, Newco and the paying agent will not be liable to any person in respect of any merger consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

Transfer of Shares

At the effective time, our stock transfer books will be closed and there will be no further transfers on our records or our transfer agent’s records of certificates representing shares of our capital stock outstanding before the effective time and any such certificates presented to the surviving corporation for transfer will be canceled. From and after the effective time, the holders of share certificates representing shares of our capital stock before the effective time will cease to have any rights with respect to these shares except as otherwise provided for in the Merger Agreement or by applicable law. All merger consideration paid upon the surrender for exchange of those share certificates in accordance with the terms of the Merger Agreement will be deemed to have been issued and paid in full satisfaction of all rights pertaining to the share certificates.

S&J Stockholder Approval

We have agreed to use our reasonable efforts to solicit proxies in favor of the adoption and approval of the Merger Agreement, provided that the Finance Committee and our Board of Directors may each withdraw or modify its respective recommendation relating to the Merger Agreement and the merger if the Finance Committee or our Board of Directors determines in good faith after consultation with its legal advisor that the merger is no longer in the best interests of our stockholders and that such withdrawal or modification is, therefore, advisable in order to satisfy its fiduciary duties to our stockholders.

Indemnification

The Merger Agreement provides that Parent and Newco will, for a period of two years after the effective time of the merger, to the fullest extent permissible under applicable law, continue to honor all our indemnification obligations to our present and former directors, officers, employees and agents against losses in connection with certain claims arising out of, relating to or in connection with any action or omission occurring or alleged to occur on or prior to the effective time of the merger.

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Representations and Warranties

The Merger Agreement contains various customary representations and warranties of S&J (which will not survive completion of the merger) relating to, among other things:

·

our due incorporation, valid existence and good standing;

·

our corporate power and authority to carry on our business;

·

our articles of incorporation and bylaws;

·

authorization, execution, delivery and enforceability of the Merger Agreement and approval of the Merger Agreement by the holders of a majority of the outstanding shares of our capital stock;

·

the absence of consents, approvals, authorizations or permits of governmental authorities, except those specified in the Merger Agreement, required for S&J to complete the merger;

·

the absence of any conflicts between the Merger Agreement and our articles of incorporation, as amended, and amended and restated bylaws, and charter or bylaws of any of our subsidiaries, and any applicable laws;

·

our capitalization;

·

due incorporation, valid existence and good standing of each of our subsidiaries;

·

the accuracy of our filings with the Securities and Exchange Commission;

·

the adequacy and accuracy of our financial statements;

·

the absence of material liabilities or obligations, except as disclosed in our reports filed with the Securities and Exchange Commission and certain liabilities or obligations specified in the Merger Agreement;

·

our material compliance with applicable laws and court orders;

·

the absence of any action, claim, suit, investigation or proceeding actually pending or threatened against us or our subsidiaries that if adversely determined, would, individually or in the aggregate, be reasonably expected to have a material adverse effect on our business or operations, except for those disclosed in our reports filed with the Securities and Exchange Commission;

·

brokers’, finders’ and investment bankers’ fees;

·

receipt of Capitalink fairness opinion;

·

the adequacy and accuracy of tax filings and timeliness of tax payments;

·

certain matters relating to employees and employee benefit plans;

·

certain matters relating to leases and real property;

·

certain matters related to material contracts;

·

the inapplicability of Nevada anti-takeover laws; and

42

·

the adequacy of S&J’s permits.

The Merger Agreement contains various customary representations and warranties of Parent and Newco (which will not survive completion of the merger) relating to, among other things:

·

the due formation, valid existence and good standing of Parent and due incorporation, valid existence and good standing of Newco;

·

the authorization, execution, delivery and enforceability of the Merger Agreement;

·

the absence of consents, approvals, authorization or permits of governmental authorities, except those specified in the Merger Agreement, required for Parent or Newco to complete the merger;

·

the absence of any conflicts between the Merger Agreement and Parent’s or Newco’s articles of incorporation or bylaws, any applicable law or other contracts or documents;

·

the accuracy of information concerning information provided by Parent or Newco in connection with this proxy statement;

·

the accuracy of the information concerning Parent and Newco in this proxy statement; and

·

brokers’, finders’ and investment bankers’ fees.

All representations and warranties are subject to various qualifications and limitations.

Covenants

We gave an undertaking in the Merger Agreement not to solicit, encourage or facilitate any Acquisition Proposal (as defined in the Merger Agreement), but we may furnish information, or enter into discussions and negotiations with, any person in response to an unsolicited, bona fide written proposal that constitutes or has a reasonable likelihood of resulting in a “Superior Offer.” This is defined to mean an unsolicited bona fide written Acquisition Proposal that our Board of Directors or Finance Committee determines, by resolution duly adopted, in its good faith reasonable judgment, and after consulting with its independent financial advisor, and after taking into account the likelihood and anticipated timing of consummation of such offer, which provides the following: (a) a tender for all, and not less than all, of the minority shares of common stock of the Company, (b) commencement of the tender to occur within fourteen (14) days of the date of the Superior Offer, (c) reasonable and customary closing conditions and no additional material conditions, (d) a financing commitment from a recognized national financing institution, and (e) the potential bidder has been informed and acknowledges that, in accordance with the UK Pensions Act of 2004 (as may be amended from time to time), in certain circumstances, an owner of shares in the Company that exceeds a threshold of 29.9% of the issued and outstanding shares, may be required to make contributions to reduce the underfunded pension liability of certain of the Company’s UK subsidiaries.

Conduct of Business Pending the Merger

We are subject to restrictions on our conduct and operations until the merger is completed. In the Merger Agreement, we have agreed that, prior to the effective time, we will operate our business only in the ordinary course consistent with past practice and use our commercially reasonable efforts to preserve intact our business organizations and relationships with third parties and to keep available the services of our present officers and employees.

Access to Information

We have agreed to give to Parent, its counsel, financial advisors, auditors and other authorized representatives reasonable access upon prior notice to our offices, properties, books and records and those of our

43

subsidiaries, and to furnish to Parent, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information as such Persons may reasonably request.

Conditions to the Merger

Conditions to Each Party’s Obligation. The obligations of S&J, Parent and Newco to complete the merger are subject to the satisfaction or waiver on or prior to the effective time of the following conditions:

·

the merger shall have been adopted and approved by the holders of a majority of our outstanding shares of common stock;

·

the merger shall have been approved by a majority vote of UPI’s shareholders;

·

obtaining any required consents; and

·

the absence of any law or regulation or any judgment, injunction, order or decree prohibiting the consummation of the merger.

Conditions to Parent and Newco’s Obligation. The obligations of each of Parent and Newco to complete the merger are subject to the satisfaction, or waiver by Parent and Newco, on or prior to the effective time, of the following conditions:

·

We shall have performed in all material respects all of our obligations required by the Merger Agreement and we must have delivered a certificate signed by an executive officer of S&J to such effect;

·

Our representations and warranties shall be true and correct, except where the failure, individually or in the aggregate, has not had, and would not reasonably be expected to have, material adverse effect; and

·

the absence of any action or proceeding (a) seeking to restrain or prohibit Parent’s ownership or operation of all of all or a material portion of our business or (b) that is reasonably likely to have a material adverse effect on S&J;

Conditions to Our Obligation. Our obligation to effect the merger is subject to the satisfaction, or waiver by us, on or prior to the effective time, of the following conditions:

·

Each of Parent and Newco must have performed in all material respects all obligations under the Merger Agreement required to be performed at or prior to the effective time and we must have received a certificate signed by an executive officer of Parent to such effect;

·

The representations and warranties of Parent and Newco shall be true and correct, except where the failure, individually or in the aggregate, has not had, and would not reasonably be expected to have, material adverse effect;

·

no claim, action, suit, proceeding or investigation shall have been instituted or threatened pursuant to which an unfavorable judgment, order, decree, stipulation or injunction sought would reasonably be expected to (1) prevent any of the material transactions contemplated by the Merger Agreement, or (2) cause any of the material transactions contemplated by the Merger Agreement to be rescinded following the consummation of the transactions;

·

the fairness opinion of Capitalink shall not have been withdrawn or modified in any material respect.

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Termination of the Merger Agreement

S&J, Parent and Newco may agree by mutual written consent to terminate the Merger Agreement at any time before the effective time. In addition, Parent or S&J may terminate the Merger Agreement if:

·

the merger is not completed on or before December 31, 2007;

·

a court of competent jurisdiction or other governmental body has issued a final and nonappealable order permanently restraining, enjoining or otherwise prohibiting the consummation of the merger;

·

any law or regulation, or a claim, action, suit or investigation is threatened or instituted which could reasonably be expected to prevent or rescind the merger;

·

if a condition to closing of the other party have been rendered impossible to satisfy in a timely manner and is not waived by the party entitled to the benefit thereof;

·

the merger shall not have been adopted and approved by the stockholders of S&J and UPI.

Parent may terminate the merge agreement if:

·

We breach any of our representations, warranties or covenants as set forth in the Merger Agreement, such that our representations, warranties and agreements are not met and such condition is incapable of being satisfied by the earlier of 30 written days of notice thereof or December 31, 2007; or

·

(a) At any time prior to our special meeting we withdraw or modify in a manner adverse to Parent the recommendation of our Board of Directors for the approval of the Merger Agreement and the merger; (b) we fail to include in this proxy statement the recommendation of our Board of Directors; (c) at any time prior to our special meeting our Board of Directors shall approve or publicly endorse or recommend any other acquisition proposal; (d) at any time prior to our special meeting we enter into any letter of intent, acquisition agreement or similar agreement accepting any other acquisition proposal; or (e) at any time prior to our special meeting certain tender or exchange offers relating to our securities shall have been commenced and we fail to timely communicate our recommendation to reject such tender or exchange offer.

We may terminate the Merger Agreement if:

·

Parent or Newco breaches any of its representations, warranties or covenants as set forth in the Merger Agreement, such that the representations, warranties and agreements of Parent and Newco are not met and such condition is incapable of being satisfied by the earlier of 30 written days of notice thereof or December 31, 2007; or

·

our Board of Directors has withdrawn its recommendation for the approval of the Merger Agreement and the merger.

However, in the Merger Agreement, we undertook that our Board of Directors will not withdraw or modify its recommendation for the approval of the Merger Agreement and the merger in a manner adverse to Parent, and no resolution will be adopted by our Board or the Finance Committee to withdraw or modify such Board recommendation, unless our Board of Directors or Finance Committee determines in good faith, after taking into account the advice of S&J’s outside legal counsel, that the failure to make such disclosure would be inconsistent with its fiduciary duties or is required by any legal requirement. We also qualified that nothing in the Merger Agreement shall preclude S&J, our Board of Directors or the Finance Committee from complying with Rules 14d-9 and 14e-2(a) or Item 1012(a) of Regulation M-A under the Exchange Act with regard to an Acquisition Proposal as defined in the Merger Agreement.

45

Generally, if the Merger Agreement is terminated, there will be no liability on the part of S&J, Parent or Newco or any of their affiliates, directors, officers, employers or stockholders, with the exception of the expense reimbursement/breakup fee provisions described below under “Expense Reimbursement.” However, no party will be relieved from liability for willful breaches of the Merger Agreement.

Expense Reimbursement

All fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement will be paid by the party incurring the expenses, whether or not the merger is completed, provided, however, in the event of a termination as a result of the withdrawal by our Board of Directors of its approval of the Merger as a result of the receipt of a superior offer, the person or group of persons making the superior offer will pay the Parent and Newco all reasonable costs and expenses incurred in connection with the Merger Agreement and the transactions set forth therein up to $850,000 plus a breakup fee of $125,000, and in all other cases where our Board withdraws its recommendation, the Company will reimburse the Parent and Newco all reasonable costs and expenses incurred in connection with the Merger Agreement and the transactions set forth therein up to $850,000 plus a breakup fee of $125,000.

Amendments; Extensions; Waivers

Any provision of the Merger Agreement may be amended or waived prior to the effective time if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to the Merger Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective, provided that, no amendment or waiver by us shall be effective unless first approved in writing by the Finance Committee and provided, further, that after the adoption of the Merger Agreement by our stockholders or the UPI stockholders, no amendment shall be made which pursuant to applicable law requires the further approval of our stockholders or the UPI stockholders.

BASED UPON THE RECOMMENDATION OF THE FINANCIAL COMMITTEE, OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE ‘‘FOR’’ THE APPROVAL OF THE MERGER AGREEMENT.

46

PROPOSAL TWO
ADJOURNMENT OF THE
SPECIAL MEETING

If at the special meeting the number of shares of capital stock voting in favor of the adoption of the Merger Agreement is insufficient to approve the merger under Nevada law, our management intends to move to adjourn the special meeting in order to enable our management to solicit additional proxies in favor of the proposal. In that event, we will ask our stockholders to vote upon the adjournment proposal, but not upon the merger proposal.

In the adjournment proposal, we are asking our stockholders to authorize the holder of any proxy solicited by our Board of Directors to vote in favor of granting management the discretionary authority to adjourn the special meeting, and any later adjournments of those meetings, to enable our management to solicit additional proxies in favor of the merger proposal.

If our stockholders approve the adjournment proposal, management could adjourn the meeting and any adjourned session of the meeting and use the additional time to solicit additional proxies in favor of the merger, including the solicitation of proxies from stockholders that have previously voted against the relevant proposal. Among other things, approval of the adjournment proposals could mean that, even though we have received proxies representing a sufficient number of votes against the merger proposal to defeat it, our management could adjourn the special meeting without a vote on the proposal and seek during that period to convince the holders of those shares to change their votes to votes in favor of the proposal.

Our Board of Directors believes that if the number of shares of our common stock voting in favor of the adoption of the merger proposal is insufficient to approve the proposal, it is in the best interests of the our stockholders to enable the our Board of Directors, for a limited period of time, to continue to seek to obtain a sufficient number of additional votes in favor of the proposal to approve it.

OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE FORTH PROPOSAL TO GRANT OUR MANAGEMENT THE DISCRETIONARY AUTHORITY TO ADJOURN THE SPECIAL MEETING.

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STOCK PURCHASE INFORMATION

Purchases by S&J

We have not engaged in any purchase transactions with respect to S&J capital stock.

Purchases by the Parent

On March 23, 2006, UPI entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Jacuzzi Brands, Inc., a Delaware corporation (“Jacuzzi”) and USI American Holdings, Inc., a Delaware corporation (“USI American” and, together with Jacuzzi, the “Seller”) to acquire the 3,543,281 shares of Common Stock of S&J (the “Shares”) owned by the Seller. The Stock Purchase Agreement was amended by Amendment No. 1 to the Stock Purchase Agreement, dated as of May 4, 2006, and was further amended by Amendment No. 2 to the Stock Purchase Agreement, dated as of July 10, 2006. Pursuant to an Assignment Agreement, dated as of July 28, 2006, UPI assigned its rights and obligations under the Purchase Agreement to its wholly-owned subsidiary Pantene. The transaction closed on July 28, 2006 and Pantene acquired the Shares on that date. The total cash consideration paid by the Parent was US $4,960,593.40 ($1.40 per share). Of the total cash consideration, approximately US $3,858,322 was obtained by UPI through bank borrowings from HSBC (Hong Kong) on normal commercial terms, with the balance coming from internal resources.

Purchases by Newco

Neither Newco nor any of its directors or executive officers, has engaged in any transaction with respect to our common stock.

Recent Transactions

Except for the transactions set forth above, there have been no transactions in our capital stock effected during the last 60 days by us, any of our directors or executive officers, Parent, or Newco.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our common stock as of July 5, 2007 by (i) each person who is known by us to own beneficially more than five percent of the outstanding shares of capital stock, and (ii) each of the named executive officers. Except where otherwise indicated, this information is based upon information provided to us by the named person.

Name and Address	Number of Shares Beneficially Owned (1)(2)	Percentage of Outstanding Shares
United Pacific Industries Limited	3,543,281	61.78%
Loeb Partners Corporation (through Loeb Arbitrage Fund and Loeb Offshore Limited)	328,149	5.7%

———————

(1)

Unless otherwise indicated in other footnotes, to the knowledge of S&J, all persons listed have sole voting and investment power with respect to shares of common stock, except to the extent shared with spouses under applicable law.

(2)

In computing the number of shares beneficially owned and the percentage of ownership of that person, shares of common stock subject to options or warrants exercisable within 60 days after the date of the information in the table are deemed outstanding. However, such shares are not deemed outstanding for the purpose of computing percentage ownership of any other person.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Our financial statements as of September 30, 2006 and for each of the years in the three-year period ended September, 2006, incorporated by reference in this proxy statement, have been audited by Chantrey Vellacott DFK LLP, our independent registered public accounting firm, as stated in their report incorporated herein by reference from our Annual Report on Form 10-K for the year ended September 30, 2006. Representatives of Chantrey Vellacott DFK LLP are expected to be available at the special meeting to respond to appropriate questions of stockholders and to make a statement if they desire to do so.

FUTURE STOCKHOLDER PROPOSALS

If the merger is completed, there will be no public participation in any future meetings of stockholders of S&J. However, if the merger is not completed, S&J stockholders will continue to be entitled to attend and participate in S&J stockholders’ meetings. If the merger is not completed, S&J will inform its stockholders, by press release or other means determined reasonable by S&J, of the date by which stockholder proposals must be received by S&J for inclusion in the proxy materials relating to the annual meeting, which proposals must comply with the rules and regulations of the Commission then in effect.

WHERE STOCKHOLDERS CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. In addition, because the merger is a ‘‘going private’’ transaction, we have filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 with respect to the merger. The Schedule 13E-3, the exhibits to the Schedule 13E-3 and such reports, proxy statements and other information contain additional information about S&J.

Our stockholders may read and copy the Schedule 13E-3 and any reports, statements or other information filed by S&J at the Commission’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Please call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our filings with the Commission are also available to the public from commercial document retrieval services and at the website maintained by the Commission located at: ‘‘http://www.sec.gov.’’

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The Commission allows us to ‘‘incorporate by reference’’ information into this proxy statement. This means that we can disclose important information by referring to another document filed separately with the Commission. The information incorporated by reference is considered to be part of this proxy statement. This proxy statement may update and supersede the information incorporated by reference. Similarly, the information that we later file with the Commission may update and supersede the information in this proxy statement. We incorporate by reference into this proxy statement the Annual Report on Form 10-K for the year ended September 30, 2006 filed by us with the Commission under the Exchange Act, which is attached as Exhibit D and the Quarterly Report on Form 10-Q for the period ended March 31, 2007 filed by us with the Commission under the Exchange Act, which is attached as Exhibit E.

However, any references in this document to the Private Securities Litigation Reform Act and ‘‘safe harbor’’ protection for forward-looking statements are specifically not incorporated by reference into this proxy statement.

We undertake to provide without charge to each person to whom a copy of this proxy statement has been delivered, upon request, by first class mail or other equally prompt means, within one business day of receipt of such request, a copy of any or all of the documents incorporated by reference herein, other than the exhibits to such documents, unless such exhibits are specifically incorporated by reference into the information that this proxy statement incorporates. Requests for copies should be directed to Spear & Jackson, Inc., 12012 Southshore Boulevard, Suite 103, Wellington, Florida 33414, Attention: Patrick J. Dyson, Chairman and Chief Financial Officer.

Document requests from S&J should be mailed by __________, 2007 in order to receive them before the special meeting.

The proxy statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is not lawful to make any offer or solicitation in such jurisdiction. The delivery of this proxy statement should not create an implication that there has been no change in our affairs since the date of this proxy statement or that the information herein is correct as of any later date.

Stockholders should not rely on information other than that contained or incorporated by reference in this proxy statement. We have not authorized anyone to provide information that is different from that contained in this proxy statement. This proxy statement is dated __________, 2007. No assumption should be made that the information contained in this proxy statement is accurate as of any date other than such date, and the mailing of this proxy statement will not create any implication to the contrary.

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EXHIBIT A

AGREEMENT AND PLAN OF MERGER

among:

UNITED PACIFIC INDUSTRIES LIMITED,

a Bermuda corporation;

PANTENE GLOBAL HOLDINGS LIMITED,

a Hong Kong corporation;

PANTENE GLOBAL ACQUISITION CORP.,

a Nevada corporation; and

SPEAR & JACKSON, INC.,

a Nevada corporation

Dated as of June 22, 2007

A-1

TABLE OF CONTENTS

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SECTION 1.	DESCRIPTION OF TRANSACTION	A-6
1.1	Merger of the Company into the Merger Sub	A-6
1.2	Effects of the Merger	A-6
1.3	Closing; Effective Time	A-6
1.4	Articles of Incorporation and Bylaws; Directors and Officers	A-7
1.5	Conversion of Shares	A-7
1.6	Payment Fund	A-8
1.7	Payment Procedures	A-8
1.8	Termination of Payment Fund	A-8
1.9	Closing of the Company’s Transfer Books	A-8
1.10	Lost Certificates	A-9
1.11	No Liability	A-9
1.12	Withholding Rights	A-9
1.13	Further Action	A-9
SECTION 2.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	A-9
2.1	Subsidiaries; Due Organization	A-9
2.2	Capitalization, Etc.	A-10
2.3	SEC Filings; Financial Statements	A-10
2.4	Absence of Changes	A-11
2.5	Title to Assets	A-12
2.6	Real Property; Leasehold	A-12
2.7	Contracts	A-12
2.8	Compliance with Legal Requirements	A-13
2.9	Governmental Authorizations	A-14
2.10	Tax Matters	A-14
2.11	Employee and Labor Matters; Benefit Plans	A-14

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2.12	Transactions with Affiliates		A-15
2.13	Legal Proceedings		A-15
2.14	Authority		A-15
2.15	Non-Contravention; Consents		A-15
2.16	Information Supplied		A-16
2.17	Fairness Opinion		A-16
2.18	Financial Advisor	A-16
2.19	State Takeover Statutes	A-16
SECTION 3.	REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB	A-16
3.1	Due Organization	A-17
3.2	Compliance with Legal Requirements	A-17
3.3	Legal Proceedings	A-17
3.4	Authority	A-17
3.5	Non-Contravention; Consents	A-17
3.6	Information Supplied	A-18
3.7	Broker Fees	A-18
3.8	No Prior Merger Sub Operations	A-18
SECTION 4.	CERTAIN COVENANTS OF THE PARTIES	A-19
4.1	Access and Investigation	A-19
4.2	Operations Prior to Closing	A-19
4.3	No Solicitation; Superior Offer	A-21
SECTION 5.	ADDITIONAL COVENANTS OF THE PARTIES	A-21
5.1	Company Proxy Statement	A-21
5.2	Company Stockholders’ Meeting	A-23
5.3	UPI Required Filings; Shareholder Approval	A-24
5.4	Employee Benefits	A-24
5.5	Indemnification of Officers and Directors	A-24
5.6	Regulatory Approvals and Related Matters	A-25

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5.7		Confidentiality; Disclosure		A-26
5.8		Performance of Obligations by Parent and Merger Sub		A-26
SECTION 6.		CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB		A-26
6.1		Accuracy of Company Representations		A-26
6.2		Performance of Covenants		A-26
	6.3		Company Stockholder Approval		A-26
	6.4		Company Officers’ Certificate		A-26
	6.5		UPI Stockholder Approval		A-26
	6.6		Other Governmental Approvals		A-26
	6.7		No Restraints		A-27
	6.8		No Company Material Adverse Effect		A-27
	SECTION 7.		CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY		A-27
	7.1		Accuracy of Parent and Merger Sub Representations		A-27
	7.2		Performance of Covenants		A-27
	7.3		Company Stockholder Approval		A-27
	7.4		Parent Officer’s Certificate		A-27
	7.5		UPI Stockholder Approval		A-27
	7.6		Other Governmental Approvals		A-27
	7.7		No Restraints		A-27
	SECTION 8.		TERMINATION		A-27
	8.1		Termination		A-27
	8.2		Effect of Termination		A-28
	8.3		Expenses		A-28
	SECTION 9.		MISCELLANEOUS PROVISIONS		A-28
	9.1		Amendment		A-28
	9.2		Extension; Waiver		A-29
	9.3		No Survival of Representations and Warranties		A-29
	9.4		Entire Agreement; Counterparts; Exchanges by Facsimile or Electronic Delivery		A-29

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9.5	Applicable Law; Jurisdiction; Waiver of Jury Trial	A-29
9.6	Attorneys’ Fees	A-29
9.7	Assignability; No Third Party Rights	A-30
9.8	Notices	A-30
9.9	Severability	A-31
9.10	Construction	A-31

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (“Agreement”) is made and entered into as of June 22, 2007, by and among: UNITED PACIFIC INDUSTRIES LIMITED, a Bermuda corporation (“UPI”); PANTENE GLOBAL HOLDINGS LIMITED, a Hong Kong corporation and wholly-owned subsidiary of UPI (“Pantene” and collectively with UPI, the “Parent”), PANTENE GLOBAL ACQUISITION CORP., a Nevada corporation and a wholly-owned subsidiary of Pantene (“Merger Sub”); and SPEAR & JACKSON, INC., a Nevada corporation and a 61.78% owned subsidiary of Pantene (the “Company”). Certain capitalized terms used in this Agreement are defined in Exhibit A.

RECITALS

A.

Parent, Merger Sub and the Company intend to effect a merger of the Company with and into the Merger Sub on the terms and subject to the conditions set forth in this Agreement (the “Merger”) with the Merger Sub continuing as the surviving entity and a wholly-owned subsidiary of Pantene, and the Company ceasing to exist.

B.

The board of directors of the Company has established a special committee of independent director (the “Independent Committee”) to, among other things, consider and evaluate the fairness to the Company and its stockholders (other than Parent and its respective Affiliates) of the Merger and to report its recommendation concerning the Merger to the full board of directors of the Company.

C.

The Independent Committee of the board of directors of the Company has recommended and the board of directors of the Company has unanimously approved this Agreement and the Merger and has deemed the Merger to be advisable and fair to, and in the best interests of the Company and its stockholders.

D.

The respective boards of directors of Parent and Merger Sub have approved this Agreement and the Merger and has deemed the Merger to be advisable and in the best interests of the corporations.

E.

The board of directors of the Company and the Independent Committee have received the written opinion of Capitalink, L.C. (“Capitalink”) that the Cash Consideration (as defined in Section 1.5(iii)) per share to be paid in the Merger in respect of each share held by the Company stockholders (other than shares held by Pantene) is fair, from a financial point of view, to such stockholders, and the Independent Committee has unanimously recommended that the board of directors of the Company approve and authorize this Agreement and the transactions contemplated hereby.

AGREEMENT

The parties to this Agreement, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, and intending to be legally bound, agree as follows:

Section 1.

DESCRIPTION OF TRANSACTION

1.1

Merger of the Company into Merger Sub. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3), the Company shall be merged with and into the Merger Sub. By virtue of the Merger, at the Effective Time, the separate existence of the Company shall cease and the Merger Sub shall continue as the surviving corporation in the Merger (the “Surviving Corporation”).

1.2

Effects of the Merger. The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the Nevada Revised Statutes (“NRS”).

1.3

Closing; Effective Time. The consummation of the Merger (the “Closing”) shall take place at the offices of Schneider Weinberger & Beilly LLC, on a date to be mutually agreed upon by Parent and the Company, which shall be no later than the second business day after the last of the conditions set forth in Sections 6 and 7 (other than conditions that by their terms are to be satisfied on the Closing Date) are satisfied or waived unless this Agreement is terminated as set forth in Section 8. The date on which the Closing actually takes place is referred to as the “Closing Date.” Subject to the provisions of this Agreement, articles of merger that satisfies the applicable

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requirements of the NRS shall be duly executed by the Company and concurrently with or as soon as practicable following the Closing shall be filed on the Closing Date with the Secretary of State of the State of Nevada. The Merger shall become effective at the time of the filing of such articles of merger with the Secretary of State of the State of Nevada (the time as of which the Merger becomes effective being referred to as the “Effective Time”).

1.4

Articles of Incorporation and Bylaws; Directors and Officers. At the Effective Time:

(a)

except as provided in Section 5.5(a), the articles of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the articles of incorporation of the Surviving Corporation until amended in accordance with applicable Legal Requirements (as hereinafter defined);

(b)

except as provided in Section 5.5(a), the bylaws of the Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation until amended in accordance with applicable Legal Requirements;

(c)

the directors and officers of the Surviving Corporation immediately after the Effective Time shall be the respective individuals who are directors and officers of Merger Sub immediately prior to the Effective Time.

1.5

Conversion of Shares.

(a)

At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company:

(i)

any shares of Company Common Stock held directly or indirectly by Parent, Merger Sub or any other wholly-owned Subsidiary of Parent immediately prior to the Effective Time, and any Company Common Stock held in treasury, shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor;

(ii)

except as provided in clause “(i)” above, each share of Company Common Stock outstanding immediately prior to the Effective Time (excluding any Dissenting Shares) shall be converted into the right to receive US$1.96 in cash, without interest (the “Cash Consideration”);

(iii)

each share of the common stock, $.001 par value per share, of Merger Sub outstanding immediately prior to the Effective Time shall remain as one issued and outstanding share of common stock of the Surviving Corporation.

(b)

Notwithstanding anything contained herein to the contrary, any Dissenting Shares shall not be converted into the right to receive the Cash Consideration, but shall instead be converted into the right to receive such consideration as may be determined to be due with respect to any such Dissenting Shares pursuant to the provisions of Sections 92A.300 to 92A.500 of the NRS. Each holder of Dissenting Shares who, pursuant to the provisions of Sections 92A.300 to 92A.500 of the NRS, becomes entitled to payment thereunder for such shares shall receive payment therefor or payment may be withheld in accordance with Sections 92A.300 to 92A.500 of the NRS. If, after the Effective Time, any Dissenting Shares shall waive, withdraw or lose their status as Dissenting Shares, then, subject to the provisions of Sections 92A.300 to 92A.500 of the NRS, any such shares shall immediately be converted into the right to receive the Cash Consideration in respect of such shares as if such shares had never been Dissenting Shares, and Parent shall deliver to the holder thereof, as promptly as reasonably practicable following the satisfaction of the applicable conditions set forth in Section 1.7, the Cash Consideration to which such holder would be entitled in respect thereof as if such shares had never been Dissenting Shares (and all such cash shall be deemed for all purposes of this Agreement to have become deliverable to such holder pursuant to Section 1.5(a)). The Company shall give Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to the applicable provisions of the NRS and received by the Company, and (ii) the right to participate in all negotiations and proceedings with respect to demands for appraisal under the applicable provisions of the NRS. The Company shall not, except with the prior written consent of Parent (which consent shall not be unreasonably withheld) or as otherwise required

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under the applicable provisions of the NRS, voluntarily make any payment or offer to make any payment with respect to, or settle or offer to settle, any claim or demand in respect of any Dissenting Shares.

1.6

Payment Fund. On or prior to the Closing Date, Parent shall select a reputable bank or trust company reasonably acceptable to the Company (the “Paying Agent”) to act as paying agent hereunder for the purpose of distributing the Cash Consideration. At or prior to the Effective Time, Parent shall deposit with the Paying Agent, in trust for the benefit of the holders of shares of Company Common Stock outstanding immediately prior to the Effective Time, cash in an aggregate amount equal to the product of the Cash Consideration and the number of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time but excluding shares held directly or indirectly by Parent (the “Payment Fund”). The Payment Fund will be invested by the Paying Agent in money market funds that invest solely in direct obligations of the United States government, the Paying Agent’s FDIC insured money market account or similar investments (it being understood that any and all interest or income earned on funds made available to the Paying Agent pursuant to this Agreement shall be remitted to Parent).

1.7

Payment Procedures.

(a)

As soon as practicable after the Effective Time (but in no event later than five (5) days following the Effective Time), Parent shall cause the Paying Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the “Certificates”): (i) a letter of transmittal as reasonably agreed by the parties prior to Closing which shall specify that delivery shall be effective, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent, and which letter shall be in customary form and have such other provisions as Parent and the Company shall reasonably agree prior to the Effective Time, and (ii) instructions for effecting the surrender of such Certificates in exchange for the Cash Consideration. Upon surrender of a Certificate to the Paying Agent (or receipt of an “agent’s message by the Paying Agent (or any other evidence of transfer that the Paying Agent may reasonably request) in the case of the transfer of Company Common Stock held in book-entry form) together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such Certificate shall be entitled to receive in exchange therefor the applicable Cash Consideration, without interest, and the Certificate so surrendered shall forthwith be cancelled. Until surrendered as contemplated by this Section 1.7, each Certificate (other than Certificates representing Dissenting Shares) shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, equal to the Cash Consideration.

(b)

No interest will be paid or will accrue on any Cash Consideration. In the event of a transfer of ownership of Company Common Stock which is not registered in the transfer records of the Company, the applicable Cash Consideration shall be payable to such transferee if the Certificate representing such Company Common Stock is presented to the Paying Agent, accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.

1.8

Termination of Payment Fund. Any portion of the Payment Fund that remains undistributed to the holders of shares of Company Common Stock on the first anniversary of the Effective Time shall be delivered to Parent, and any holders of shares of Company Common Stock who have not theretofore been paid the Cash Consideration payable to such holder under this Section 1 shall thereafter look only to Parent for the Cash Consideration with respect to the shares of Company Common Stock formerly represented thereby to which such holders are entitled pursuant to this Section 1 and Parent shall, upon the request of any such former stockholder promptly pay to such former stockholder of the Company the Cash Consideration to which he, she or it is entitled. Any such portion of the Payment Fund remaining unclaimed by holders of shares of Company Common Stock on the date that is three years after the Effective Time (or such earlier date immediately prior to such time as such amounts would otherwise escheat to or become property of any Governmental Body pursuant to applicable Legal Requirements) shall, to the extent permitted by applicable Legal Requirements, become the property of Parent free and clear of any claims or interest of any Person previously entitled thereto.

1.9

Closing of the Company’s Transfer Books. At the Effective Time: (a) all shares of Company Common Stock outstanding immediately prior to the Effective Time including Treasury stock shall automatically be canceled and retired and shall cease to exist (in exchange for the right to receive the Cash Consideration, without interest,

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except that shares held directly or indirectly by Parent shall not be entitled to such right), and all holders of certificates representing shares of Company Common Stock that were outstanding immediately prior to the Effective Time shall cease to have any rights as stockholders of the Company; and (b) the stock transfer books of the Company shall be closed with respect to all shares of Company Common Stock outstanding immediately prior to the Effective Time. No further transfer of any such shares of Company Common Stock shall be made on such stock transfer books after the Effective Time.

1.10

Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by Parent, the posting by such person of a bond in a reasonable amount and for a reasonable period of time as indemnity against any claim that may be made against Parent or the Surviving Corporation with respect to such Certificate, the Paying Agent will deliver in exchange for such lost, stolen or destroyed Certificate the applicable Cash Consideration, without interest, with respect to the shares of Company Common Stock formerly represented thereby.

1.11

No Liability. None of Parent, Merger Sub, the Company, the Surviving Corporation or the Paying Agent shall be liable to any Person in respect of any Cash Consideration from the Payment Fund delivered to a public official pursuant to and in full compliance with any applicable abandoned property, escheat or similar Legal Requirement.

1.12

Withholding Rights. Each of the Surviving Corporation, Parent and the Paying Agent shall be entitled to deduct and withhold from the Cash Consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as it is legally required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, as amended (the “Code”), the rules and regulations promulgated thereunder or any applicable Legal Requirement. To the extent that amounts are so withheld by the Surviving Corporation, Parent or the Paying Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect to which such deduction and withholding was made by the Surviving Corporation, Parent or the Paying Agent, as the case may be.

1.13

Further Action. If, at any time after the Effective Time, any further action is determined by Parent or the Surviving Corporation to be necessary to carry out the purposes of this Agreement or to vest the Surviving Corporation with full right, title and possession of and to all rights and property of Merger Sub and the Company, the officers and directors of the Surviving Corporation and Parent shall be fully authorized (in the name of Merger Sub, in the name of the Company and otherwise) to take such action.

Section 2.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and Merger Sub as follows, subject to any exception or disclosure set forth in any part or subpart of the Company Disclosure Schedule:

2.1

Subsidiaries; Due Organization.

(a)

Part 2.1(a) of the Company Disclosure Schedule identifies each Subsidiary of the Company and indicates its jurisdiction of organization. Neither the Company nor any of the Entities identified in Part 2.1(a) of the Company Disclosure Schedule owns any capital stock of, or any equity interest of any nature in, any other Entity, other than the Entities identified in Part 2.1(a) of the Company Disclosure Schedule. The Company has not agreed and is not obligated to make, nor or is it bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity. All of the outstanding shares of capital stock or other equity interests of each Subsidiary of the Company are owned by the Company, free and clear of all Encumbrances.

(b)

The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the jurisdictions set forth in Part 2.1(a) of the Company Disclosure Schedule and the Company and each Subsidiary has all necessary corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own or lease and use its assets in the manner in which its assets are

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currently owned or leased and used; and (iii) to perform its obligations under all Company Contracts by which it is bound that are material to the Company and its Subsidiaries taken as a whole. The Company has made available to Parent complete and correct copies of the articles of incorporation and bylaws of the Company and each of its Subsidiaries.

(c)

The Company (in jurisdictions that recognize the following concepts) is qualified to do business as a foreign corporation, and is in good standing, under the laws of such jurisdictions where the nature of its business requires such qualification, except as would not reasonably be expected to have a Company Material Adverse Effect.

2.2

Capitalization, Etc.

(a)

The authorized capital stock of the Company consists of 25,000,000 shares of Company Common Stock, of which 5,735,561 shares were issued and outstanding as of June22, 2007. The Company holds 6,275,561shares of its capital stock in its treasury. There are no outstanding stock appreciation rights, equity equivalents or phantom stock with respect to the capital stock of the Company.

(b)

All of the outstanding shares of Company Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable. None of the outstanding shares of Company Common Stock is entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right. None of the outstanding shares of Company Common Stock is subject to any right of first refusal in favor of the Company. Except as set forth in Part 2.2(b) of the Company Disclosure Schedule, there is no significant Company Contract currently in effect relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), any shares of Company Common Stock. Except as set forth in Part 2.2(b) of the Company Disclosure Schedule, the Company is not under any obligation, nor is it bound by any significant Company Contract to repurchase, redeem or otherwise acquire any outstanding shares of Company Common Stock or other securities. There are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company or any of its Subsidiaries is a party or by which any of them is bound obligating the Company or any of its Subsidiaries to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional shares of capital stock or other voting or equity securities or interests of the Company or of any Subsidiary or obligating the Company or any Subsidiary to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking or relating to the voting of capital stock or equity securities or interests of the Company or any Subsidiary.

2.3

SEC Filings; Financial Statements.

(a)

Except as disclosed in the Company SEC Documents (as defined herein) or on Schedule to Section 2.3(a) of the Company Disclosure Schedule, as of the time it was filed with or furnished to the SEC: (i) each registration statement, proxy statement, report, schedule, form, certification and other document filed by the Company with, or furnished by the Company with or to, the SEC since October 1, 2004, including all amendments thereto (collectively, the “Company SEC Documents”), complied as to form, and all documents filed by the Company with, or furnished by the Company with or to, the SEC between the date of this Agreement and the date of Closing (the “Interim SEC Documents”) will comply as to form, in all material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) none of the Company SEC Documents contained or, in the case of the Interim SEC Documents, will contain any untrue statement of a material fact or omitted or, in the case of the Interim SEC Documents, will omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, except to the extent corrected: (A) in the case of Company SEC Documents filed or furnished on or prior to the date of this Agreement that were amended or superseded on or prior to the date of this Agreement, by the filing or furnishing of the applicable amending or superseding Company SEC Document; and (B) in the case of Interim SEC Documents that are amended or superseded prior to the Closing Date, by the filing or furnishing of the applicable amending or superseding Interim SEC Document. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Parent or Merger Sub for inclusion in any Interim SEC Document. All statements, reports, schedules, forms, certifications and other documents required to have been filed by the Company with or to the SEC since October 1, 2004 have been so filed.

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(b)

The financial statements (including any related notes) contained or incorporated by reference in the Company SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited financial statements, as permitted by Form 10-Q, Form 8-K or any successor form under the Exchange Act, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments), and (iii) fairly presented in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of the Company and its Subsidiaries for the periods covered thereby.

(c)

Except for those liabilities that are reflected or reserved on the Company Unaudited Balance Sheet (as defined in Section 2.5 of this Agreement) (including any notes thereto) and for liabilities incurred in the ordinary course of business consistent with past practice since March 31, 2007, neither the Company nor any of its Subsidiaries has incurred any liability of any nature whatsoever (whether absolute, accrued or contingent and whether due or to become due) that has had or is reasonably likely to have, either individually or in the aggregate, a Company Material Adverse Effect.

2.4

Absence of Changes. Except as set forth on Part 2.4 of the Company Disclosure Schedule or the Company SEC Documents, since March 31, 2007, the Company and its Subsidiaries have conducted their respective businesses in all material respects in the ordinary course consistent with past practice, and, without limiting the generality of the foregoing:

(a)

there has not been any Company Material Adverse Effect;

(b)

neither the Company nor any of its Subsidiaries has: (i) declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of capital stock, other than dividends by a wholly-owned Subsidiary of the Company; or (ii) repurchased, redeemed or otherwise reacquired any shares of its capital stock or other securities;

(c)

there has been no amendment to the articles of incorporation or bylaws of the Company or any Subsidiary of the Company;

(d)

neither the Company nor any of its Subsidiaries has written off as uncollectible, or established any extraordinary reserve with respect to, any material account receivable or other material indebtedness;

(e)

neither the Company nor any of its Subsidiaries has made any pledge of any of its material assets or permitted any of its material assets to become subject to any Encumbrances

(f)

neither the Company nor any of its Subsidiaries has lent money to any Person in excess of $10,000 in the aggregate or incurred, guaranteed, assumed or otherwise became responsible for any indebtedness in excess of $100,000 in the aggregate;

(g)

neither the Company nor any of its Subsidiaries has changed any of its methods of accounting or accounting practices in any material respect, except as required by concurrent changes in GAAP or SEC rules and regulations;

(h)

neither the Company nor any of its Subsidiaries has (i) made or changed any material Tax election, (ii) entered into any settlement or compromise of any material Tax liability or (iii) surrendered any right to claim a material Tax refund;

(i)

neither the Company nor any of its Subsidiaries has prepared or filed any Tax Return inconsistent with past practice or, on any such Tax Return, taken any position, made any election, or adopted any method that is inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns in prior periods;

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(j)

neither the Company nor any of its Subsidiaries has settled or compromised any pending or threatened suit, action, claim, arbitration, mediation, inquiry, Legal Proceeding or investigation of or against the Company or any Subsidiary of the Company, unless in connection with such settlements or compromises (A) there was no finding or admission of any violation of any Legal Requirement or the rights of any Person and (B) the sole relief provided was monetary damages not in excess of $100,000 in the aggregate; and

(k)

neither the Company nor any of its Subsidiaries has agreed or committed to take any of the actions referred to in clauses “(b)” through “(j)” above.

2.5

Title to Assets. The Company owns, and has good and valid title to, all material assets purported to be owned by it, including all material assets reflected on the balance sheet of the Company as of March 31, 2007 contained in the Company SEC Documents (the “Company Unaudited Balance Sheet”) (except for assets sold or otherwise disposed of since the date of the Company Unaudited Balance Sheet). Except as would not be material to the Company and the Subsidiaries as a whole, all of said assets are owned by the Company free and clear of any Encumbrances, except for liens described in Part 2.5 of the Company Disclosure Schedule. The Company or its Subsidiaries are the lessees of, and hold valid leasehold interests in, all material assets purported to have been leased by them, including all material assets reflected as leased on the Company Unaudited Balance Sheet. Except as would not be material to the Company and the Subsidiaries as a whole, the assets owned or leased by the Company or its Subsidiaries constitute all the assets used in the business of the Company and its Subsidiaries (including all books, records, computers and computer programs and data processing systems) and are in good condition (subject to normal wear and tear and immaterial impairments of value and damage).

2.6

Real Property; Leasehold

Except as contained in the Company SEC Documents, neither the Company nor any of its Subsidiaries own any real property. Except as would not be material to the Company and the Subsidiaries as a whole, the Company SEC Documents sets forth an accurate and complete list of each lease pursuant to which any real property is being leased to the Company or any of its Subsidiaries. (All real property leased to the Company or any of its Subsidiaries is referred to as the “Leased Real Property”).

2.7

Contracts.

(a)

Subsections (i) through (v) of Part 2.7 of the Company Disclosure Schedule identify each Company Contract that constitutes a Company Significant Contract as of the date of this Agreement. For purposes of this Agreement, each of the following shall be deemed to constitute a “Company Significant Contract”:

(i)

any Contract constituting a Company Employment Agreement pursuant to which the Company or any of its Subsidiaries is or may become obligated to make any severance, termination, bonus or similar payment in excess of $50,000 to any Company Associate (except as may be required by applicable Legal Requirements and other than payments constituting base salary or commissions paid in the ordinary course of business);

(ii)

any Contract involving the payment of royalties or other amounts calculated based upon the revenues, income or similar measures of results of the Company or any of its Subsidiaries or based upon income, revenues, unit sales or similar measures of results related to any product or service of the Company or any of its Subsidiaries which, in any case, is reasonably likely to involve payments of more than $50,000 during the 12-month period commencing on the date of this Agreement;

(iii)

any Contract granting to any Person a right of first refusal or right of first offer on the sale of any part of the business of the Company or any of its Subsidiaries or imposing any restriction on the right or ability of the Company or any Affiliate to: (A) engage in any type or line of business or compete with any other Person; (B) acquire any product or other asset or any services from any other Person; (C) develop, sell, supply, distribute, offer, support or service any product or any technology or other asset to or for any other Person; or (D) transact business with any other Person;

(iv)

any Contract relating to any currency hedging;

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(v)

any Contract constituting or relating to a Government Contract or Government Bid that contemplates or involves the payment or delivery of cash or other consideration in an amount or having a value in excess of $50,000 in the aggregate, or contemplates or involves the performance of services having a value in excess of $50,000 in the aggregate; and

The Company has delivered or made available to Parent an accurate and complete copy of each Company Contract that constitutes a Company Significant Contract.

(b)

Each Company Significant Contract is (1) to the knowledge of the Company, a valid and binding obligation of the other parties thereto and (2) in full force and effect in all material respects.

(c)

Except as set forth in Part 2.7(c) of the Company Disclosure Schedule: (i) the Company has not materially violated or materially breached, or committed any default under, any Company Significant Contract; (ii) to the knowledge of the Company, no other Person has materially violated or materially breached, or committed any default under, any Company Significant Contract; (iii) to the knowledge of the Company, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) would reasonably be expected to: (A) result in a material violation or material breach of any Company Significant Contract; (B) give any Person the right to declare a default under any Company Significant Contract; (C) give any Person the right to receive or require a rebate, chargeback, penalty or any additional material rights under any Company Significant Contract; (D) give any Person the right to accelerate the maturity or performance of any Company Significant Contract; or (E) give any Person the right to cancel, terminate or modify in any material respect any Company Significant Contract; and (iv) since December 31, 2006, the Company has not received any written notice regarding any actual or possible material violation or material breach of, or default under, any Company Significant Contract.

2.8

Compliance with Legal Requirements.

(a)

Except as would not reasonably be expected to result in a Company Material Adverse Effect, the Company is in compliance in all material respects with all applicable Legal Requirements. Except as contained in the Company SEC Documents, since October 1, 2004, the Company has not received any written notice from any Governmental Body or other Person regarding any actual or possible violation in any material respect of, or failure to comply in any material respect with, any Legal Requirement.

(b)

The Company is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act.

(c)

The Company has designed and implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to provide reasonable assurance that material information relating to the Company, including its consolidated Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities.

(d)

The Company has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s auditors (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

(e)

To the knowledge of the Company, since the filing of its Annual Report on Form 10-K for the year ended September 30, 2006 through the date hereof, the Company has not identified any material weaknesses in the design or operation of internal control over financial reporting.

(f)

There are no outstanding loans made by the Company or any of its Subsidiaries to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company in material violation of the Sarbanes-Oxley Act.

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2.9

Governmental Authorizations. The Company holds all material Governmental Authorizations necessary to enable the Company to conduct its business substantially in the manner in which its business is currently being conducted. All such Governmental Authorizations are valid and in full force and effect, except as would not be materially adverse to the Company and its Subsidiaries taken as a whole. Since October 1, 2004, the Company has not received any written notice from any Governmental Body regarding: (i) any actual or possible violation of or failure to comply with any term or requirement of any material Governmental Authorization; or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any material Governmental Authorization. To the knowledge of the Company, no event has occurred or condition or state of facts exists which constitutes or, after notice or lapse of time or both, would constitute a breach or default under any such Governmental Authorization that would affect in any material respect the ability of the Company to conduct business as currently conducted.

2.10

Tax Matters.

(a)

Each of the material Tax Returns required to be filed by or on behalf of the Company or any Subsidiary of the Company with any Governmental Body prior to the date of this Agreement: (i) has been filed on or before the applicable due date (including any extensions of such due date); (ii) has been prepared in all material respects in compliance with all applicable Legal Requirements and (iii) when filed, was complete and accurate in all material respects and disclosed all Taxes required to be paid by the Company or any Subsidiary of the Company for the periods covered thereby. All material Taxes (whether or not shown on any Tax Return) owed by the Company or any Subsidiary of the Company have been timely paid or provided for.

(b)

The Company Unaudited Balance Sheet accrues all liabilities for all material Taxes of the Company or any Subsidiary of the Company with respect to all periods through the date thereof in accordance with GAAP, and no liabilities for material Taxes have been incurred since the date of the Company Unaudited Balance Sheet other than in the operation of the business of the Company or such Subsidiary in the ordinary course of business. The Company has established, in the ordinary course of business and consistent with its past practices, reserves adequate for the payment of all material Taxes of the Company or any Subsidiary of the Company since the date of the Company Unaudited Balance Sheet.

(c)

To the knowledge of the Company, no material Tax Return of the Company or any Subsidiary of the Company is currently subject to an audit by any Governmental Body. No extension or waiver of the limitation period applicable to any material Tax Return of the Company or any Subsidiary of the Company has been granted by the Company or any Subsidiary of the Company, and no such extension or waiver has been requested from the Company or any subsidiary of the Company.

2.11

Employee and Labor Matters; Benefit Plans

(a)

To the knowledge of the Company, no Company officer or director is a party to or is bound by any noncompetition agreement or other Contract (with any Person) that may have a material effect on the business or operations of the Company.

(b)

Except as provided in the Company SEC Documents, as of the date of this Agreement, the Company is not a party to, nor does it have a duty to bargain for, any collective bargaining agreement or other Contract with a labor organization representing any Company Employee, and there are no labor organizations representing, purporting to represent or, to the knowledge of the Company, seeking to represent any Company Employee. There is not now pending, and, to the knowledge of the Company, no Person has threatened in writing to commence, any strike, slowdown, work stoppage, lockout, job action, picketing, labor dispute, question regarding representation or union organizing activity or any similar activity. There is no material claim or grievance pending or, to the knowledge of the Company, threatened in writing relating to any employment Contract, wages and hours, plant closing notification, labor dispute, immigration or discrimination matters involving any Company Associate, including charges of unfair labor practices or harassment complaints.

(c)

The Company has delivered or made available to Parent accurate and complete copies of, as of the date of this Agreement: (i) documents setting forth the material terms of each Company Employee Plan, including all amendments thereto and all related trust documents; (ii) the most recent annual report, if any, required under

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applicable Legal Requirements in connection with each Company Employee Plan; (iii) all administrative service agreements and group insurance contracts; and (vi) all material correspondence since October 1, 2004 to or from any Governmental Body relating to any Company Employee Plan.

(d)

Except as contained in the Company SEC Documents, each of the Company and Company Affiliates has performed all obligations required to be performed by it under each Company Employee Plan, except as would not reasonably be expected to result in a Company Material Adverse Effect. Each Company Employee Plan can be amended, terminated or otherwise discontinued after the Closing in accordance with its terms, without material liability to Parent, the Company or any Company Affiliate (other than any liability for ordinary administration expenses).

2.12

Transactions with Affiliates. Except as set forth in the Company SEC Documents, as of the date of this Agreement, there are no transactions, agreements, arrangements or understandings between (i) the Company or any of its Subsidiaries, on the one hand, and (ii) any Affiliate of the Company or Company Associate (other than any of its Subsidiaries), on the other hand, of the type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act.

2.13

Legal Proceedings. Except as set forth in the Company SEC Documents filed prior to the date hereof, there is no pending Legal Proceeding to which the Company or its Subsidiaries is a party or, to the knowledge of the Company, to which any other Person is a party, and (ii) to the knowledge of the Company, no Governmental Body or other Person has threatened in writing to commence any Legal Proceeding to which the Company or its Subsidiaries is a party or was so threatened to become a party or, to the knowledge of the Company, to which any other Person is a party or was so threatened to become a party, in each case (1) that would reasonably be expected to have a Company Material Adverse Effect or (2) that challenges, or that seeks to prevent, delay, make illegal or otherwise materially interfere with, the Merger.

2.14

Authority. The Company has the corporate right, power and authority to enter into and to perform and, subject to obtaining the affirmative vote of the holders of a majority of the voting power of the shares of Company Common Stock outstanding on the record date for the Company Stockholders’ Meeting, consummate its obligations under this Agreement. The board of directors of the Company, based on the recommendation of the Independent Committee (at a meeting duly called and held or acting by unanimous written consent), as of the date of this Agreement has: (a) determined that the Merger is advisable and fair to, and in the best interests of, the Company and its stockholders other than Parent and its respective Affiliates and Associates; (b) authorized, approved and adopted the execution, delivery and performance of this Agreement by the Company and approved the Merger; and (c) recommended the approval of this Agreement by the holders of Company Common Stock and directed that this Agreement and the Merger be submitted for consideration by the Company’s stockholders at the Company Stockholders’ Meeting, which recommendation, as of the date hereof, has not been rescinded, modified or withdrawn in any way.

2.15

Non-Contravention; Consents. Assuming compliance with the applicable provisions of the Securities Act, the Exchange Act, the NRS, state securities or “blue sky” laws, except as set forth in Part 2.15 of the Company Disclosure Schedule, neither (1) the execution and delivery of this Agreement by the Company, nor (2) the consummation of the Merger or any of the other Contemplated Transactions, will or would reasonably be expected to, directly or indirectly (with or without notice or lapse of time):

(a)

contravene, conflict with or result in a violation of any of the provisions of the articles of incorporation or bylaws of the Company;

(b)

contravene, conflict with or result in a violation of, any Legal Requirement or any Order to which the Company or any of its material assets is subject;

(c)

contravene, conflict with or result in a material violation, a material breach or a default of, or forfeiture of any rights under, any of the terms or requirements of any Governmental Authorization that is held by the Company or that otherwise relates to the business of the Company as currently conducted;

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(d)

contravene, conflict with or result in a violation or breach of in any material respect, or result in a default under, any provision of any Company Significant Contract, or give any Person the right to: (i) declare a default or exercise any remedy under any such Company Significant Contract; (ii) a rebate, chargeback, penalty or change in delivery schedule under any such Company Significant Contract; (iii) accelerate the maturity or performance of any such Company Significant Contract; or (iv) cancel, terminate or modify any right, benefit, obligation or other term of such Company Significant Contract; or

(e)

result in the imposition or creation of any Encumbrance upon or with respect to any asset owned or used by the Company,

except, in the case of clauses “(b),” “(c)” and “(e)” of this sentence, as would not reasonably be expected to have a Company Material Adverse Effect. Except: (A) as may be required by the Securities Act, the Exchange Act, and the NRS and (B) as would not reasonably be expected to have a Company Material Adverse Effect, the Company was not, is not and will not be required to make any filing with or give any notice to, or to obtain any Consent from, any Person in connection with: (1) the execution, delivery or performance of this Agreement; or (2) the consummation of the Merger or any of the other Contemplated Transactions.

2.16

Information Supplied. The preliminary and definitive proxy statements to be filed by the Company with the SEC (including information incorporated by reference therein) (collectively, the “Proxy Statement”) shall not, on each relevant filing date, on the date of mailing to the Company’s stockholders and at the time of the Company Stockholders’ Meeting, and any other filings, schedules or materials required under the Exchange Act to be filed with the SEC in connection with obtaining the Required Company Stockholder Vote (as defined in Section 6.3) (each such filing, a “Required Filing”) shall not, as of the date thereof, the date of any amendment or supplement thereto and at the time of the Company Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not false or misleading; or, in the case of the Proxy Statement, omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Company Stockholders’ Meeting which has become false or misleading. The Proxy Statement and any Required Filings will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. If at any time prior to the Effective Time any event relating to the Company or any of its Affiliates should be discovered by the Company which is required to be set forth in a supplement to the Proxy Statement or an amendment or supplement to any Required Filing, the Company shall promptly inform Parent. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Parent or Merger Sub for inclusion in the Proxy Statement or any Required Filing.

2.17

Fairness Opinion. Prior to the execution of this Agreement, the Company received an opinion from Capitalink, L.C., financial advisor to the Company, to the effect that, as of June 14, 2007 and based upon and subject to the matters set forth therein, the Cash Consideration is fair, from a financial point of view, to the stockholders of the Company, other than the Parent. The Company shall deliver an executed copy of such opinion to Parent promptly following execution of this Agreement.

2.18

Financial Advisor. Except for Capitalink, the fees and expenses of which will be paid by the Company, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger or any of the other Contemplated Transactions based upon arrangements made by or on behalf of the Company.

2.19

State Takeover Statutes. No “fair price,” “moratorium,” “control share acquisition” or other similar antitakeover statute or regulation enacted under state or federal laws in the United States applicable to the Company is applicable to the transactions contemplated by this Agreement.

Section 3.

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub represent and warrant to the Company as follows, subject to: (a) the exceptions and disclosures set forth in the part or subpart of the Parent Disclosure Schedule corresponding to the particular Section or subsection in this Section 3 in which such representation and warranty appears; (b) any exceptions or

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disclosures cross-referenced to another part or subpart of the Parent Disclosure Schedule; and (c) any exception or disclosure set forth in any other part or subpart of the Parent Disclosure Schedule to the extent it is reasonably apparent that such exception or disclosure qualifies such other representation or warranty:

3.1

Due Organization.

(a)

UPI is a corporation duly organized, validly existing and in good standing under the laws of Bermuda, Pantene is a corporation duly organized, validly existing and in good standing under the laws of Hong Kong, and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of Nevada, and each of UPI, Pantene and Merger Sub have all necessary power and authority: (i) to conduct their businesses in the manner in which their businesses are currently being conducted; (ii) to own or lease and use their assets in the manner in which their assets are currently owned or leased and used; and (iii) to perform their obligations under all Contracts by which they are bound that are material to Parent and its Subsidiaries taken as a whole.

(b)

Each of UPI, Pantene and Merger Sub (in jurisdictions that recognize the following concepts) is qualified to do business as a foreign corporation, and is in good standing, under the laws of such jurisdictions where the nature of its business requires such qualification, except as would not reasonably be expected to have a Parent Material Adverse Effect.

3.2

Compliance with Legal Requirements. Each of Parent and Merger Sub are in compliance with all applicable Legal Requirements, except as would not reasonably be expected to affect its ability to consummate the Merger or any of the other transactions contemplated by this Agreement. Neither Parent nor Merger Sub has received any written notice from any Governmental Body or other Person regarding any actual or possible violation in any material respect of, or failure to comply in any material respect with, any Legal Requirement that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Merger.

3.3

Legal Proceedings. There is no pending Legal Proceeding against Parent or any of its Subsidiaries and, to the knowledge of Parent, no Governmental Body or other Person has threatened in writing to commence any Legal Proceeding against Parent or any of its Subsidiaries, that challenges, or that seeks to prevent, delay, make illegal or otherwise interfere with, the Merger.

3.4

Authority. Each of Parent and Merger Sub has the corporate right, power and authority to enter into and to perform and consummate its obligations under this Agreement. The board of directors of Parent (at a meeting duly called and held or by unanimous written consent) as of the date of this Agreement has: (a) determined that the Merger is advisable and in the best interests of Parent; and (b) subject to shareholders’ approval, authorized and approved the execution, delivery and performance of this Agreement by Parent and approved the Merger. The board of directors of Merger Sub (by unanimous written consent) has: (i) determined that the Merger is advisable and fair to, and in the best interests of, Merger Sub and its stockholder; (ii) authorized and approved the execution, delivery and performance of this Agreement by Merger Sub and approved the Merger. Pantene, as sole stockholder of Merger Sub, has approved this Agreement. UPI, as the sole stockholder of Pantene is required to obtain stockholder approval to approve this Agreement and the Merger and intends to recommend the adoption of this Agreement by the holders of its ordinary shares and will direct that this Agreement and the Merger be submitted for consideration by UPI’s stockholders at a UPI Stockholders’ Meeting. Except as otherwise disclosed, the execution, delivery and performance of this Agreement by each of Parent and Merger Sub and the consummation by each of Parent and Merger Sub of the Merger and the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of each of Parent and Merger Sub.

3.5

Non-Contravention; Consents. Assuming compliance with the applicable provisions of the Securities Act, the Exchange Act,, state securities or “blue sky” laws, and the Stock Exchange of Hong Kong Stock Limited (“SEHK”), neither (1) the execution and delivery of this Agreement by Parent and Merger Sub, nor (2) the consummation of the Merger or any of the Contemplated Transactions, will or would reasonably be expected to, directly or indirectly (with or without notice or lapse of time):

(a)

contravene, conflict with or result in a violation of any of the provisions of the articles of incorporation or bylaws of Parent or Merger Sub;

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(b)

contravene, conflict with or result in a violation of any Legal Requirement or any Order to which Parent or Merger Sub, or any of their material assets, is subject; or

(c)

contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any material Contract of Parent, or give any Person the right to: (i) declare a default or exercise any remedy under any such Contract; (ii) a rebate, chargeback, penalty or change in delivery schedule under any such Contract; (iii) accelerate the maturity or performance of any such Contract; or (iv) cancel, terminate or modify any right, benefit, obligation or other term of such Contract;

except, in the case of clauses “(b)” and “(c)” of this sentence, as would not reasonably be expected to have a Parent Material Adverse Effect. Except: (A) as may be required by the Securities Act, the Exchange Act, and the SEHK; and (B) as would not reasonably be expected to have a Parent Material Adverse Effect, neither Parent nor Merger Sub was, is or will be required to make any filing with or give any notice to, or to obtain any Consent from, any Person in connection with: (1) the execution, delivery or performance of this Agreement; or (2) the consummation of the Merger or any of the Contemplated Transactions.

3.6

Information Supplied.

(a)

The materials (as defined herein) to be filed by the Parent with the SEHK (including information incorporated by reference therein) (collectively, the “SEHK Materials”) shall not, on the filing date, on the date of mailing to the UPI stockholders and at the time of the UPI Stockholders’ Meeting, and any other filings, schedules or materials required under the SEHK rules to be filed with the SEHK in connection with obtaining the Required UPI Stockholder Vote shall not, as of the date thereof, the date of any amendment or supplement thereto and at the time of the UPI Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not false or misleading; or, omit to state any material fact necessary to correct any statement in any earlier communication for the UPI Stockholders’ Meeting which has become false or misleading. The SEHK Materials will comply as to form in all material respects with the provisions of the rules and regulations of the SEHK. If at any time prior to the Effective Time any event relating to the Parent or any of its Affiliates should be discovered by the Parent which is required to be set forth in a supplement to the SEHK Materials or an amendment or supplement thereto, the Parent shall promptly inform the Company. Notwithstanding the foregoing, the Parent makes no representation or warranty with respect to any information supplied by the Company for inclusion in the SEHK Materials.

(b)

The information supplied by Parent for inclusion in the Proxy Statement and any Required Filing shall not (i) in the case of the Proxy Statement, on each relevant filing date, on the date of mailing to the Company’s stockholders and at the time of the Company Stockholders’ Meeting, or (ii) in the case of any Required Filing, as of the date thereof, the date of any amendment or supplement thereto and at the time of the Company Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Company Stockholders’ Meeting which has become false or misleading. If at any time prior to the Effective Time, any event relating to Parent or any of its Affiliates should be discovered by Parent which is required to be set forth in a supplement to the Proxy Statement or an amendment or supplement to any Required Filing. Parent shall promptly inform the Company. Notwithstanding the foregoing, Parent makes no representation or warranty with respect to any information supplied by the Company that is contained in the Proxy Statement or any Required Filing.

3.7

Broker Fees. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger or any of the other Contemplated Transactions based upon arrangements made by or on behalf of Parent.

3. 8

No Prior Merger Sub Operations. Merger Sub was formed solely for the purpose of effecting the Merger and has not engaged in any business activities or conducted any operations other than in connection with the transactions contemplated hereby.

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Section 4.

CERTAIN COVENANTS OF THE PARTIES

4.1

Access and Investigation. During the period commencing on the date of this Agreement and ending as of the earlier of the Effective Time or the termination of this Agreement (the “Pre-Closing Period”), the Company shall (and shall cause its Subsidiaries to): (a) provide Parent and Parent’s Representatives with reasonable access during normal business hours, upon reasonable notice to the Company, to the Company’s and its Subsidiaries’ personnel and assets and to all existing books, records, Tax Returns, work papers and other documents and information relating to the Company or its Subsidiaries; and (b) provide or make available to Parent and Parent’s Representatives such copies of the existing books, records, Tax Returns, work papers and other documents and information relating to the Company or its Subsidiaries as Parent may reasonably request. Without limiting the generality of any of the foregoing, during the Pre-Closing Period, the Company and Parent shall promptly provide the other party with copies of any notice, report or other document filed with or sent to any Governmental Body on behalf of the Company, Parent or Merger Sub, as applicable, in connection with the Merger or any of the other Contemplated Transactions. The foregoing shall not require the Company to permit any inspection, or to disclose any information, that in the reasonable judgment of the Company could reasonably be expected to result in (i) the disclosure of any trade secrets of third parties or the violation of any obligations of the Company with respect to confidentiality if the Company shall have used reasonable efforts to obtain the consent of such third party to such inspection or disclosure, (ii) the waiver of any applicable attorney-client privilege so long as the Company has taken reasonable steps to permit inspection of or to disclose information described in this clause (ii) on a basis that does not compromise the Company’s privilege with respect thereto or (iii) the violation of any applicable Legal Requirement. The parties shall seek in good faith appropriate substitute disclosure arrangements under circumstances in which the immediately preceding sentence applies.

4.2

Operations Prior to Closing.

(a)

Except as set forth in Part 4.2(a) of the Company Disclosure Schedule or as expressly contemplated or permitted by this Agreement, during the Pre-Closing Period, the Company shall, in all material respects, conduct its business and operations in the ordinary course and in accordance with past practices and the Company shall use its commercially reasonable efforts to preserve substantially intact the business organization of the Company and its Subsidiaries and maintain its existing relationships and goodwill with material customers, suppliers, distributors, creditors, lessors, lessees, employees and business associates.

(b)

Without limiting the generality of the foregoing clause (a), except as set forth in Part 4.2(b) of the Company Disclosure Schedule or as expressly contemplated or permitted by this Agreement, during the Pre-Closing Period, the Company shall not, and shall not permit any Subsidiary to (without the prior written consent of Parent, which consent shall not be unreasonably withheld):

(i)

(A) declare, accrue, set aside or pay any dividend or make any other distribution in respect of any shares of capital stock, except for dividends by a wholly-owned Subsidiary of the Company, or (B) repurchase, redeem or otherwise reacquire any shares of capital stock or other securities;

(ii)

sell, issue, grant, pledge or otherwise encumber or authorize the sale, issuance, grant, pledge or encumbrance of: (A) any capital stock or other security; (B) any option, call, warrant or right to acquire any capital stock or other security; or (C) any instrument convertible into or exercisable or exchangeable for any capital stock or other security;

(iii)

amend or permit the adoption of any amendment to its articles of incorporation or bylaws of the Company or any Subsidiary of the Company;

(iv)

adjust, split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock;

(v)

authorize or make any commitment with respect to any capital expenditure (except that the Company may authorize or make a commitment with respect to any capital expenditures that, in the aggregate, do not exceed $100,000 between the date hereof and December 31, 2007;

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(vi)

other than in the ordinary course of business and consistent with past practices, amend, terminate (other than expiration in accordance with its terms) or waive any material right or remedy under, any Company Significant Contract;

(vii)

other than the renewal or extension of any such contract on substantially similar terms, enter into any contract that would have been a Company Significant Contract pursuant to Section 2.7(a);

(viii)

acquire, lease or license any right or other asset from any other Person (except as permitted under clause (v) above) or sell or otherwise dispose of, or lease or license, any right or other asset to any other Person (except in each case for any right or asset: (A) acquired, leased, licensed or disposed of by the Company in the ordinary course of business and consistent with past practices and not in an aggregate amount of more than $50,000; or (B) that is not material to the business of the Company);

(ix)

acquire (including by merger, consolidation, acquisition of stock or assets or any other business combination) any business or any corporation, partnership, association or other business organization or division thereof that is material to the Company;

(x)

make any pledge of any of its material assets or permit any of its material assets to become subject to any Encumbrances;

(xi)

lend money to any Person (other than (1) routine travel and business expense advances and sales commissions draws made to Company Employees in the ordinary course of business and (2) routine deferred collections of withholding taxes from employees who are not executive officers of the Company (as defined in Rule 3b-7 under the Exchange Act) in connection with the vesting of restricted shares issued under the Company Option Plans), or incur, guarantee assume or otherwise become responsible for any indebtedness in excess of $50,000 in the aggregate;

(xii)

except as expressly contemplated by Section 4.2(b)(xiii), establish, adopt, enter into or amend any Company Employee Plan or Company Employee Agreement, pay any bonus or make any profit-sharing or similar payment to, or increase the amount of the wages, salary, commissions, fringe benefits or other compensation (including equity-based compensation, whether payable in stock, cash or other property) or remuneration payable to, any Company Employees (except that the Company: (A) may provide routine, reasonable salary increases to Company Employees who are not executive officers of the Company (as defined in Rule 3b-7 under the Exchange Act) in the ordinary course of business and in accordance with past practices in connection with the Company’s customary employee review process; (B) may amend the Company Employee Plans to the extent required by applicable Legal Requirements; (C) may make customary bonus payments and profit sharing payments consistent with past practices in accordance with bonus and profit sharing plans existing on the date of this Agreement and (D) may make stay bonus payments to any employee not listed on Part 4.2(b)(xii) of the Company Disclosure Schedule so long as such payments are not in excess of $15,000 to any individual employee;

(xiii)

hire any employee (A) with an annual base salary in excess of $50,000 or (B) at the level of executive vice president or above or appoint any non-executive director with annual director’s fees in excess of $75,000;

(xiv)

other than in the ordinary course of business and consistent with past practices or as required by concurrent changes in GAAP or SEC rules and regulations, change any of its methods of accounting or accounting practices in any material respect;

(xv)

(A) make or change any material Tax election, (B) enter into any settlement or compromise of any material Tax liability or (C) surrender any right to claim a material Tax refund;

(xvi)

prepare or file any Tax Return inconsistent with past practice or, on any such Tax Return, take any position, make any election or adopt any method that is inconsistent with positions taken, elections made or methods used in preparing or filing similar Tax Returns in prior periods;

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(xvii)

except in connection with the derivative action Hapka v. Crowley, et al. Case No: CA005068, filed on June 1, 2004 in the Circuit Court for Palm Beach County, Florida, settle or compromise any pending or threatened suit, action, claim, arbitration, mediation, inquiry, Legal Proceeding or investigation of or against the Company or any Subsidiary of the Company, unless in connection with such settlements or compromises (A) there is no finding or admission of any violation of any Legal Requirement or the rights of any Person and (B) the sole relief provided is monetary damages not in excess of $50,000 in the aggregate;

(xviii)

enter into any material Contract that requires the consent or approval of any Person to consummate the Contemplated Transactions;

(xix)

enter into a new, or amend in any material respect any existing, transaction, agreement, arrangement or understanding between (A) the Company or any Subsidiary of the Company, on the one hand, and (B) any Affiliate or Associate of the Company (other than any Subsidiary of the Company), on the other hand; or

(xx)

agree or commit to take any of the actions described in clauses ”(i)” through “(xx)” of this Section 4.2(b). If the Company desires to take an action that requires the prior written consent of Parent pursuant to this Section 4.2(b), which consent shall not be unreasonably withheld, the Company shall deliver to Parent a written request for such written consent. Parent shall use commercially reasonable efforts to approve or deny the Company’s request as soon as reasonably practicable, and in any event within two business days after Parent has received the Company’s request. If the Company receives no such consent or denial within two business days after Parent has received the Company’s request, Parent shall be deemed to have granted its consent to the action set forth in such request.

During the Pre-Closing Period, the Company shall promptly notify Parent in writing after learning of any event, condition, fact or circumstance that would make the timely satisfaction of any of the conditions set forth in Section 6 impossible or unlikely or that would reasonably be expected to have a Company Material Adverse Effect. Without limiting the generality of the foregoing, the Company shall promptly advise Parent in writing of any material Legal Proceeding or material claim threatened in writing, commenced or asserted against or with respect to the Company. No notification given to Parent pursuant to this Section 4.2(c) shall limit or otherwise affect any of the representations, warranties, covenants or obligations of the Company contained in this Agreement.

(d)

During the Pre-Closing Period, Parent shall promptly notify the Company in writing of any event, condition, fact or circumstance that would make the timely satisfaction of any of the conditions set forth in Section 7 impossible or unlikely or that would reasonably be expected to have a Parent Material Adverse Effect. Without limiting the generality of the foregoing, Parent shall promptly advise the Company in writing of any material Legal Proceeding or material claim threatened in writing, commenced or asserted against or with respect to Parent relating to the Merger or the other Contemplated Transactions. No notification given to the Company pursuant to this Section 4.2(d) shall limit or otherwise affect any of the representations, warranties, covenants or obligations of Parent contained in this Agreement.

4.3

No Solicitation; Superior Offer.

(a)

During the Pre-Closing Period, the Company shall not, and the Company shall use its reasonable best efforts to cause its Representatives not to, directly or indirectly other than as set forth below:

(i)

solicit, initiate or knowingly encourage, induce or facilitate the making, submission or announcement of any Acquisition Proposal; or

(ii)

enter into any Contract contemplating or providing for any Acquisition Transaction unless it is anticipated that such Contract will provide a Superior Offer, as defined in Section 4(c) herein;

provided, however, that prior to the Company Stockholders’ Meeting, the Company may furnish information (including non-public information) regarding the Company to, or enter into discussions and negotiations with, any Person in response to an unsolicited, bona fide written proposal, and made after the date hereof that constitutes, or has a reasonable likelihood of resulting in, a Superior Offer, as defined in Section 4(c) herein, if: (A) neither the Company nor any Representative of the Company shall have breached any of the other provisions set forth in this

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Section 4.3; (B) the board of directors of the Company concludes in good faith, after having consulted with outside legal counsel, thatsuch action is necessary for the Board of Directors to comply with its fiduciary duty under applicable law; and (C) prior to furnishing any information regarding the Company to any such Person, such Person has entered into a confidentiality agreement with the Company. At least two business days prior to furnishing any such information to, or entering into discussions or negotiations with, such Person, the Company shall (A) give Parent written notice of the identity of such Person and of the Company’s intention to furnish information to, or enter into discussions or negotiations with, such Person and (B) furnish such information to Parent (to the extent such information has not been previously furnished by the Company to Parent). The Company agrees that neither it nor its Subsidiaries will enter into any confidentiality agreement with any Person subsequent to the date hereof that prohibits the Company from providing such information to Parent.

(b)

The Company shall promptly (and in no event later than 24 hours after receipt of any proposal) advise (orally and in writing) Parent of any proposal or inquiry that would reasonably be expected to lead to the making of a Superior Offer (including the identity of the Person making or submitting such proposal, and the material terms thereof) that is made or submitted by any Person during the Pre-Closing Period. The Company shall keep Parent reasonably informed on a prompt basis with respect to: (i) the status of any proposal; and (ii) the status and terms of any material modification thereto.

(c)

“Superior Offer” shall mean an unsolicited bona fide written Acquisition Proposal by any other Person(s) that the Company’s board of directors and/or the Independent Committee determines, by resolution duly adopted, in its good faith reasonable judgment, and after consulting with its independent financial advisor, and after taking into account the likelihood and anticipated timing of consummation of any Superior Offer, which provides the following: (a) a tender for all, and not less than all, of the minority shares of common stock of the Company, (b) commencement of the tender to occur within fourteen (14) days of the date of the Superior Offer, (c) reasonable and customary closing conditions and no additional material conditions, (d) a financing commitment from a recognized national financing institution, and (e) the potential bidder has been informed and acknowledges that, in accordance with the UK Pensions Act of 2004 (as may be amended from time to time), in certain circumstances, an owner of shares in the Company that exceeds a threshold of 29.9% of the issued and outstanding shares, may be required to make contributions to reduce the underfunded pension liability of certain of the Company’s UK subsidiaries.

.

Section 5.

ADDITIONAL COVENANTS OF THE PARTIES

5.1

Company Proxy Statement; Required Filing.

(a)

Promptly after the date of this Agreement, the Company shall prepare (with the assistance of Parent) and cause to be filed with the SEC (i) preliminary proxy materials to obtain the Required Company Stockholder Vote and (ii) any Required Filings. Promptly following the later of (i) receipt and resolution of SEC comments on the preliminary proxy materials and any Required Filing or (ii) the expiration of the 10-day waiting period provided in Rule 14a-6(a) promulgated under the Exchange Act, the Company shall file definitive proxy materials with the SEC and cause the Proxy Statement to be mailed to its stockholders. Parent and the Company will cooperate with each other in the preparation of the Proxy Statement and any Required Filing and, prior to filing the Proxy Statement or any Required Filing, the Company shall provide Parent with reasonable opportunity to review and comment on each such filing in advance.

(b)

The Company will notify Parent promptly of the receipt of any comments from the SEC or its staff (or of notice of the SEC’s intent to review the Proxy Statement or any Required Filing) and of any request by the SEC or its staff or any other government officials for amendments or supplements to the Proxy Statement or any Required Filing or any other filing or for additional/supplemental information, and will promptly supply Parent with copies of all correspondence between the Company or any of its Representatives, on the one hand, and the SEC, or its staff or any other government officials, on the other hand, with respect to the Proxy Statement, any Required Filing or other filing. Parent and the Company will cooperate with each other in the preparation of any written response and the Company shall provide Parent with reasonable opportunity to review and comment on any written response in advance. Whenever any event occurs that is required to be set forth in an amendment or supplement to the Proxy Statement, any Required Filing or any other filing, the Company shall promptly inform Parent of such occurrence, cooperate with Parent in the preparation of any such amendment or supplement, provide Parent with

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reasonable opportunity to review and comment on any such amendment or supplement in advance, and shall cooperate in filing with the SEC or its staff or any other government officials, and/or, to the extent required, mailing to the stockholders of the Company, such amendment or supplement.

5.2

Company Stockholders’ Meeting.

(a)

As promptly as practicable after the Proxy Statement is cleared by the SEC for mailing to the Company’s stockholders, the Company shall take all action necessary under all applicable Legal Requirements to duly call, give notice of and hold a meeting of the holders of Company Common Stock to vote on the adoption of this Agreement by the Required Company Stockholder Vote (the “Company Stockholders’ Meeting”). The Company shall ensure that all proxies solicited in connection with the Company Stockholders’ Meeting are solicited in compliance with all applicable Legal Requirements.

(b)

Subject to Section 5.2(c): (i) the Proxy Statement shall include a statement to the effect that the board of directors of the Company, based in part upon the recommendation of the Independent Committee, recommends that the Company’s stockholders vote to adopt this Agreement at the Company Stockholders’ Meeting (the recommendation of the Company’s board of directors, based in part upon the recommendation of the Independent Committee, that the Company’s stockholders vote to adopt this Agreement being referred to as the “Company Board Recommendation”); and (ii) except as provided below, the Company Board Recommendation shall not be withdrawn or modified in a manner adverse to Parent, and no resolution by the board of directors of the Company or the Independent Committee to withdraw the Company Board Recommendation or modify the Company Board Recommendation in a manner adverse to Parent shall be adopted. Notwithstanding anything to the contrary herein: (A) nothing in this Agreement shall preclude the Company from making any public disclosure of any material facts, if: the Company’s board of directors or Independent Committee determines in good faith, after taking into account the advice of the Company’s outside legal counsel, that the failure to make such disclosure would be inconsistent with its fiduciary duties or is required by any Legal Requirement; and (B) nothing in this Agreement shall preclude the Company, the Company’s board of directors or the Independent Committee from complying with Rules 14d-9 and 14e-2(a) or Item 1012(a) of Regulation M-A under the Exchange Act with regard to an Acquisition Proposal).

(c)

Notwithstanding anything to the contrary contained in this Agreement, at any time prior to the adoption of this Agreement by the Required Company Stockholder Vote, the Company Board Recommendation may be withdrawn, or modified in a manner adverse to Parent, pursuant to applicable provisions of the NRS, if the Company’s board of directors or the Independent Committee, after consulting with outside legal counsel representing the Company, determines in good faith that the failure to withdraw or modify the Company prior board Recommendation would be inconsistent with its fiduciary duties under applicable Legal Requirements. The Company shall notify Parent promptly (but in no event later than 24 hours after such withdrawal or modification) of any withdrawal of or modification to the Company Board Recommendation.

(d)

the Company’s obligation to duly call, give notice of and hold the Company Stockholders’ Meeting in accordance with Section 5.2(a) shall not remain in effect in the event of any withdrawal or modification of the Company Board Recommendation.

(e)

In the event that this Agreement is terminated by the Company pursuant to Section 8.1(i) and Section 5.2(c) by reason (A) of the Company after the date of this Agreement having received a Superior Offer, the Company will cause the Person or “group” of Persons making the Superior Offer to pay to the Parent, Pantene and Merger Sub within 30 days of termination of this Agreement, all documented, reasonable costs and expenses up to $850,000 in the aggregate incurred by the Company, Parent, Pantene and Merger Sub in connection with this Agreement and the transactions contemplated hereby, plus a breakup fee of $125,000 to Parent, or (B) for any other reason after the date of this Agreement, the Company will pay all documented, reasonable costs and expenses up to $850,000 in the aggregate incurred by Parent, Pantene and Merger Sub in connection with this Agreement and the transactions contemplated hereby, plus a breakup fee of $125,000 to Parent. 

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5.3

UPI Required Filing; Stockholder Meeting.

(a)

Promptly after the date of this Agreement, UPI and Pantene shall prepare (with the assistance of the Company) and, subject to and promptly after the date this Agreement has been duly adopted by the Required Company Stockholder’s Vote (as defined herein), cause to be filed the SEHK Materials to obtain the Required UPI Stockholder Vote (as defined herein) and cause such SEHK Materials to be mailed to the UPI stockholders. Parent and the Company will cooperate with each other in the preparation of the SEHK Materials and, prior to filing the SEHK Materials, the Parent and UPI shall provide Company with reasonable opportunity to review and comment on each such filing in advance.

(b)

As promptly as practicable after the SEHK Materials are cleared by the SEHK for mailing to the UPI stockholders, UPI shall take all action necessary under all applicable Legal Requirements to duly call, give notice of and hold a meeting of the holders of Common Stock of UPI to vote on the adoption of this Agreement by the Required UPI Stockholder Vote (the “UPI Stockholders’ Meeting”).

5.4

Employee Benefits.

(a)

 Parent agrees that all employees of the Company or its Subsidiaries who continue employment with the Surviving Corporation or any Subsidiary of the Surviving Corporation after the Effective Time (“Continuing Employees”) will continue to participate in, such Company Employee Plans, if any, as are continued by the Company or any of its Subsidiaries following the Closing Date (for the purposes of this Section 5.4 only, the “Specified Benefit Plans”).

(b)

Nothing in this Section 5.4 or elsewhere in this Agreement shall be construed to create a right in any Company Employee to employment with Parent, the Surviving Corporation, Subsidiary of the Surviving Corporation or any other Subsidiary of Parent. Except for Indemnified Persons (as defined in Section 5.5(a)) to the extent of their respective rights pursuant to Section 5.5, no Company Employee, and no Continuing Employee, shall be deemed to be a third party beneficiary of this Agreement.

5.5

Indemnification of Officers and Directors.

(a)

After the Effective Time for a period of two years from the Effective Time, each of Parent and the Surviving Corporation shall, to the fullest extent permitted under applicable law, indemnify and hold harmless, each present and former director, officer, employee and agent of the Company or any of its subsidiaries (each, together with such person’s heirs, executors or administrators, an “Indemnified Person”) against any costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any actual or threatened claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of, relating to or in connection with any action or omission occurring or alleged to occur on or prior to the Effective Time (including, without limitation, acts or omissions in connection with such persons serving as an officer, director or other fiduciary in any entity if such service was at the request or for the benefit of the Company) or the Merger, or the Contemplated Transaction, or the other transactions contemplated by this Agreement or arising out of or pertaining to the transactions contemplated by this Agreement to the extent that any such Indemnified Person is indemnified by the Company pursuant to the Company’s articles of incorporation and bylaws as in effect on the date hereof, any other indemnification arrangement as in effect on the date hereof or under the NRS. Parent shall assume, be jointly and severally liable for, and honor, guaranty and stand surety for, and shall cause the Surviving Corporation to honor, in accordance with their respective terms each of the covenants contained in this Section 5.5. Parent agrees not to amend the articles of incorporation or bylaws of Merger Sub to diminish the indemnity. Nothing herein limits the rights of any indemnified person or party pursuant to any applicable law, contract, articles of incorporation, bylaws, or otherwise including without limitation for any periods after two years from the Effective Date.

(b)

Parent shall pay, or upon the reasonable request of any indemnified person, advance all reasonable expenses, including reasonable attorneys’ fees, that may be incurred by any Indemnified Person in enforcing the indemnity and other obligations provided in this Section 5.5.

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(c)

This Section 5.5 is intended to be for the benefit of, and shall be enforceable by, the Indemnified Persons, their heirs and personal representatives and shall be binding on Parent, the Surviving Corporation and its respective successors and assigns, and may not be amended, altered or repealed in a manner that could reasonably be expected to be adverse to the Indemnified Persons after the Effective Time without the prior written consent of the affected Indemnified Person (provided that such amendment, alteration or repeal prior to the Effective Time shall be governed by Section 9.1). In the event that Parent, the Surviving Corporation or any of its respective successors or assigns: (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger; or (ii) transfers all or substantially all its properties and assets to any person, then, and in each case, proper provision shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, honor the indemnification obligations set forth in this Section 5.5.

5.6

Regulatory Approvals and Related Matters.

(a)

In addition to and without limitation on the other provisions of this Section 5.6, each party shall use reasonable best efforts to prepare and file, as promptly as practicable after the date of this Agreement, all necessary notices, reports and other documents required to be filed by such party with any Governmental Body with respect to the Merger and the Contemplated Transactions.

(b)

Parent, Merger Sub and the Company each shall promptly supply the other party with any information that may be required in order to effectuate any filings or applications pursuant to Section 5.6(a). Except where prohibited by applicable Legal Requirements, each of the Company and Parent shall consult with the other party prior to taking a position with respect to any such filing, shall permit the other to review and discuss in advance, and consider in good faith the views of the other in connection with, any analyses, appearances, presentations, memoranda, briefs, white papers, arguments, opinions and proposals before making or submitting any of the foregoing to any Governmental Body by or on behalf of any party hereto in connection with any investigations or proceedings in connection with this Agreement or the Contemplated Transactions, coordinate with the other in preparing and exchanging such information and promptly provide the other (and its counsel) with copies of all filings, presentations or submissions (and a summary of any oral presentations) made by such party with any Governmental Body in connection with this Agreement or the Contemplated Transactions; provided that with respect to any such filing, presentation or submission, each of Parent and the Company need not supply the other (or its counsel) with copies (or, in case of oral presentations, a summary) to the extent that any Legal Requirement applicable to such party requires such party or its Subsidiaries to restrict or prohibit access to any such properties or information or to the extent required by any existing confidentiality or non-disclosure agreement.

(c)

Each party will notify the other promptly upon the receipt of: (i) any comments from any officials of any Governmental Body in connection with any filings made pursuant hereto, and (ii) any request by any officials of any Governmental Body for amendments or supplements to any filings made pursuant to, or information provided to comply in all material respects with, any applicable Legal Requirements. Whenever any event occurs that is required to be set forth in an amendment or supplement to any filing made pursuant to Section 5.6(a), each party will promptly inform the other of such occurrence and cooperate in filing with the applicable Governmental Body such amendment or supplement.

(d)

Parent and the Company shall use reasonable best efforts to take, or cause to be taken, all actions necessary, proper or advisable to consummate the Merger and, without limiting the generality of the foregoing, each party to this Agreement: (i) shall prepare and make all filings (if any) and give all notices (if any) required to be made and given by such party in connection with the Merger and the Contemplated Transactions; and (ii) shall use reasonable best efforts to obtain each Consent (if any) required to be obtained (pursuant to any applicable Legal Requirement or Contract, or otherwise) by such party in connection with the Merger or any of the Contemplated Transactions, including, but not limited to, (A) entering into negotiations with any applicable Governmental Body; and (B) providing information required by law or governmental regulation; provided, however, that nothing in this Agreement shall require, or be construed to require, Parent to (1) proffer to, or agree to, sell or hold separate and agree to sell, before or after the Effective Time, any assets, businesses or interest in any assets or businesses of Parent, the Company or any of their respective Affiliates (or to consent to any sale, or agreement to sell, by the Company of any of its assets or businesses) or (2) agree to any changes or restriction in the operations of any such assets or businesses that, in the case of clause (2), would have a Parent Material Adverse Effect as defined in subsection (a) of the term “Parent Material Adverse Effect.”

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5.7

Confidentiality; Disclosure.

(a)

Parent and Merger Sub will hold and will cause their Representatives to hold in confidence, all documents and information furnished in connection with this Agreement. Other than documents or information (i) available to the public, (ii) which are or become known by Parent or Merger Sub from a source other than Parent or Merger Sub, as the case may be, other than by a breach of a confidentiality obligation owed to Parent or Merger Sub, respectively, or (iii) required by law to be disclosed.

(b)

The initial press release issued by Parent and the Company concerning this Agreement and the Contemplated Transactions shall be a joint press release and thereafter Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statement regarding the Merger or the Contemplated Transactions, except as may be required by applicable Legal Requirements. Notwithstanding anything to the contrary contained in this Section 5.7, the obligations of Parent and the Company set forth in this Section 5.7 shall not apply with respect to any public statement pursuant to Section 5.2(b) or relating to the withdrawal or modification of the Company Board Recommendation pursuant to Section 5.2(c).

5.8

Performance of Obligations by Parent and Merger Sub. Pantene, as the sole stockholder of Merger Sub, shall, subject to its shareholders’ approval, adopt this Agreement and approve the Merger and shall cause Merger Sub to perform each of its obligations under this Agreement.

Section 6.

CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB

The obligations of Parent and Merger Sub to cause the Merger to be effected and otherwise cause the transactions contemplated by this Agreement to be consummated are subject to the satisfaction, at or prior to the Closing, of each of the following conditions:

6.1

Accuracy of Company Representations. The representations and warranties of the Company set forth in Section 2 of this Agreement other than those listed in the immediately preceding sentence shall be true and correct, on the date hereof and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Company Material Adverse Effect.

6.2

Performance of Covenants. All of the covenants and obligations in this Agreement that the Company is required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all material respects.

6.3

Company Stockholder Approval. This Agreement shall have been duly adopted by the holders of a majority of the voting power of the shares of Company Common Stock outstanding on the record date for the Company Stockholders’ Meeting (the votes required being referred to herein as the “Required Company Stockholder Vote”).

6.4

Company Officers’ Certificate. Parent shall have received a certificate executed by the Principal Executive Officer and Chief Financial Officer of the Company, in their capacities as such, confirming that the conditions set forth in Sections 6.1 (Accuracy of Company Representations), 6.2 (Performance of Covenants) and 6.3 (Company Stockholder Approval) have been satisfied.

6.5

UPI Stockholder Approval. . This Agreement shall have been duly approved by the holders of a majority of the voting power of the ordinary shares of UPI outstanding on the record date for the Stockholders’ Meeting of (the “Required UPI Stockholder Vote”).

6.6

Other Governmental Approvals. Any Governmental Authorization or other Consent required to be obtained with respect to the Merger under any material Antitrust Law set forth on Part 6.6 of the Company Disclosure Schedule shall have been obtained and shall remain in full force and effect.

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6.7

No Restraints. No temporary restraining order, preliminary or permanent injunction or other Order preventing the consummation of the Merger shall have been issued by any court of competent jurisdiction or other Governmental Body and remain in effect, and there shall not be any Legal Requirement enacted or deemed applicable to the Merger that makes consummation of the Merger illegal.

6.8

No Company Material Adverse Effect. Since the date of this Agreement, no Effect shall have occurred that, individually or when together with all other Effects, has had or would reasonably be expected to have a Company Material Adverse Effect.

Section

7.

CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY

The obligation of the Company to effect the Merger and otherwise consummate the transactions contemplated by this Agreement is subject to the satisfaction, at or prior to the Closing, of the following conditions:

7.1

Accuracy of Parent and Merger Sub Representations. The representations and warranties of Parent and Merger Sub set forth in Section 3 of this Agreement shall be true and correct on the date hereof and as of the Closing Date as though made on and as of the Closing Date (except to the extent any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Parent Material Adverse Effect.

7.2

Performance of Covenants. All of the covenants and obligations in this Agreement that Parent and Merger Sub are required to comply with or to perform at or prior to the Closing shall have been complied with and performed in all material respects.

7.3

Company Stockholder Approval. This Agreement shall have been duly adopted by the Required Company Stockholder Vote.

7.4

Parent Officer’s Certificate. The Company shall have received a certificate executed by an executive officer of Parent, in his or her capacity as such, confirming that the conditions set forth in Sections 7.1 (Accuracy of Parent and Merger Sub Representations), 7.2 (Performance of Covenants), and 7.5 (UPI Stockholder Approval) have been satisfied.

7.5

UPI Stockholder Approval. This Agreement shall have been duly approved by the Required UPI Stockholder Vote.

7.6

Other Governmental Approvals. Any Governmental Authorization or other Consent required to be obtained with respect to the Merger under any material Antitrust Law set forth on Part 7.6 of the Company Disclosure Schedule shall have been obtained and shall remain in full force and effect.

7.7

No Restraints. No temporary restraining order, preliminary or permanent injunction or other Order against the Company preventing the consummation of the Merger by the Company shall have been issued by any court of competent jurisdiction or other Governmental Body and remain in effect, and there shall not be any Legal Requirement enacted or deemed applicable to the Merger that makes consummation of the Merger illegal.

7.8

Fairness Opinion. The Fairness Opinion of Capitalink has not been withdrawn or modified in any material respect.

Section

8.

TERMINATION

8.1

Termination. This Agreement may be terminated prior to the Effective Time:

(a)

by mutual written consent of Parent and the Company, duly authorized by the board of directors of Parent and the Company’s board of directors (with the approval of the Independent Committee);

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(b)

by either Parent or the Company (with the approval of the Independent Committee) if the Merger shall not have been consummated by December 31, 2007 or any other date that Parent and the Company may agree upon in writing (the “End Date”);

(c)

by either Parent or the Company (with the approval of the Independent Committee) if a court of competent jurisdiction or other Governmental Body shall have issued a final and nonappealable Order permanently restraining, enjoining or otherwise prohibiting the consummation of the Merger;

(d)

by either Parent or the Company (with the approval of the Independent Committee) if: (i) this Agreement shall not have been adopted at the Company Stockholders’ Meeting (and shall not have been adopted at any adjournment or postponement thereof) by the Required Company Stockholder Vote or (ii) this Agreement shall not have been adopted at the UPI Stockholders’ Meeting (and shall not have been adopted at any adjournment or postponement thereof);

(e)

by Parent if a Company Triggering Event shall have occurred;

(f)

by Parent upon a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in this Agreement such that, if such breach were occurring or continuing on the Closing Date, the conditions set forth in Section 6.1 or Section 6.2 would not be satisfied and which breach cannot be or has not been cured prior to the earlier to occur of (i) 30 days following written notice thereof to the breaching party or (ii) the End Date; or

(g)

by the Company upon a breach of any representation, warranty, covenant or agreement on the part of Parent or Merger Sub set forth in this Agreement such that, if such breach were occurring or continuing on the Closing Date, the conditions set forth in Section 7.1 or Section 7.2 would not be satisfied and which breach cannot be or has not been cured prior to the earlier to occur of (i) 30 days following written notice thereof to the breaching party or (ii) the End Date;

(h)

by either Parent or the Company (with the approval of the Independent Committee) if any of the conditions set forth in Sections 6 or 7 have been rendered impossible to satisfy in a timely manner and is not waived by the party entitled to the benefit thereof; or

(i)

by the Company if its board of directors has withdrawn its recommendation pursuant to Section 5.2(c).

8.2

Effect of Termination. In the event of the termination of this Agreement as provided in Section 8.1, this Agreement shall be of no further force or effect and there shall be no liability or obligation on the part of the Company, Parent or Merger Sub or their respective officers or directors; provided, however, that: (i) Section 5.7(a), this Section 8.2, Section 8.3, and Section 9 shall survive the termination of this Agreement and shall remain in full force and effect and (ii) the termination of this Agreement shall not relieve any party from any liability for any willful or intentional breach of any covenant, obligation, representation or warranty contained in this Agreement.

8.3

Expenses. Except as provided herein, all fees and expenses incurred in connection with this Agreement and the Contemplated Transactions shall be paid (or caused to be paid) by the party incurring such expenses, whether or not the Merger is consummated.

Section 9.

MISCELLANEOUS PROVISIONS

9.1

Amendment. This Agreement may be amended with the approval of the Company’s board of directors (with the approval of the Independent Committee) and the board of directors of Parent at any time (whether before or after the adoption of this Agreement by the Company’s stockholders or the UPI stockholders); provided, however, that after any such adoption of this Agreement by the Company’s stockholders or the UPI stockholders, no amendment shall be made which pursuant to applicable Legal Requirements requires further approval of the stockholders of the Company without the further approval of the Company Required Stockholder Vote, or requires further approval of the stockholders of UPI. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

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9.2

Extension; Waiver.

(a)

Subject to Sections 9.2(b) and 9.2(c), at any time prior to the Effective Time, Parent and Merger Sub on the one hand and the Company (with the approval of the Independent Committee) on the other hand may: (i) extend the time for the performance of any of the obligations or other acts of the other party; (ii) waive any inaccuracy in or breach of any representation, warranty, covenant or obligation of the other party in this Agreement or in any document delivered pursuant to this Agreement; and (iii) waive compliance with any covenant, obligation or condition for the benefit of such party contained in this Agreement. The agreement of Parent to any extension or waiver shall be deemed to be the agreement of Merger Sub to such extension or waiver.

(b)

No failure on the part of any party to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.

(c)

No party shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such party; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

9.3

No Survival of Representations and Warranties. None of the representations and warranties contained in this Agreement or in any certificate delivered pursuant to this Agreement shall survive the Merger.

9.4

Entire Agreement; Counterparts; Exchanges by Facsimile or Electronic Delivery. This Agreement and the other agreements, exhibits and disclosure schedules referred to herein constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among or between any of the parties with respect to the subject matter hereof and thereof. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. The exchange of a fully executed Agreement (in counterparts or otherwise) by facsimile or by electronic delivery in .pdf format shall be sufficient to bind the parties to the terms and conditions of this Agreement.

9.5

Applicable Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Nevada regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. In any action between any of the parties arising out of or relating to this Agreement or any of the Contemplated Transactions, each of the parties irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the State of Nevada, County of Clark. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO IT THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.

9.6

Attorneys’ Fees. In any action at law or suit in equity to enforce this Agreement or the rights of any of the parties hereunder, the prevailing party in such action or suit shall be entitled to receive its reasonable and documented attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.

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9.7

Assignability; No Third Party Rights. Neither this Agreement nor any party’s rights or obligations hereunder may be assigned or delegated by such party without the prior written consent of the other parties, and any attempted assignment or delegation of this Agreement or any of such rights or obligations by any party without the prior written consent of the other parties shall be void and of no effect, except that this Agreement and Parent’s and Merger Sub’s rights (but not its obligations) hereunder may be assigned by Parent or Merger Sub to an Affiliate, to a lender or financial institution as collateral for indebtedness or, after the Closing, Parent’s and Merger Sub’s rights and obligations hereunder may be assigned by Parent or Merger Sub in connection with a merger, consolidation or sale of all or substantially all of the assets of Parent or the Surviving Corporation and its Subsidiaries; provided, however, that no such assignment shall relieve the assigning party of its obligations hereunder. Subject to the immediately preceding sentence, this Agreement shall be binding upon, and shall be enforceable by and inure solely to the benefit of, the parties hereto and their respective successors and assigns. Except as specifically provided in Section 5.5, nothing in this Agreement, express or implied, is intended to or shall confer upon any Person (other than the parties hereto) any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

9.8

Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given or made as follows: (a) if sent by registered or certified mail in the United States return receipt requested, upon receipt; (b) if sent designated for overnight delivery by nationally recognized overnight air courier (such as DHL or Federal Express), two business days after mailing; (c) if sent by facsimile transmission before 5:00 p.m., when transmitted and receipt is confirmed; (d) if sent by facsimile transmission after 5:00 p.m. and receipt is confirmed, on the following business day; and (e) if otherwise actually personally delivered, when delivered, provided that such notices, requests, demands and other communications are delivered to the address set forth below, or to such other address as any party shall provide by like notice to the other parties to this Agreement:

if to Parent or Merger Sub:

United Pacific Industries Limited

Suite 27-05/06, 27/F.,

Vicwood Plaza

199 Des Voeux Road Central

Hong Kong

Attn: The Chairman

Fax: (852) 2802 9163

With a copy to:

Schneider Weinberger & Beilly LLP

2200 Corporate Blvd. N.W., Suite 210

Boca Raton, FL 33431

Attn: James Schneider

Fax: (561) 362-9612

if to the Company:

Spear & Jackson, Inc.

12012 Southshore Boulevard

Suite 103

Wellington, Florida 33414

Attn: The Chairman

Fax: (561) 793-7966

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with a copy to:

(i) The Chairman of the Board

Atlas Way, Atlas North

Sheffield S4 7QQ

United Kingdom

(ii) Arnstein & Lehr LLP

200 East Las Olas Blvd., Suite 1700

Ft. Lauderdale, Florida 33301

Attn: Joel Mayersohn

Fax: 954.713.7700

9.9

Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If a final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit such term or provision, to delete specific words or phrases or to replace such term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be valid and enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term or provision.

9.10

Construction.

(a)

For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include masculine and feminine genders.

(b)

The parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

(c)

As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

(d)

Except as otherwise indicated, all references in this Agreement to “Sections,” “Exhibits” and “Schedules” are intended to refer to Sections of this Agreement and Exhibits or Schedules to this Agreement.

(e)

The bold-faced headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

(f)

For purposes of Section 8, references to the failure of a party to perform its covenants or obligations in this Agreement shall, in the case of Parent, include the failure of Merger Sub to perform its covenants or obligations in this Agreement.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written.

UNITED PACIFIC INDUSTRIES LIMITED, a Bermuda corporation

By: __________________________________

PANTENE GLOBAL HOLDINGS LIMITED, a Hong Kong corporation

By: ___________________________________

PANTENE GLOBAL ACQUISITION CORP., a Nevada corporation

By: _________________________________

SPEAR & JACKSON, INC.,

a Nevada corporation

By: __________________________________

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EXHIBIT A

CERTAIN DEFINITIONS

For purposes of the Agreement (including this Exhibit A):

Acquisition Proposal. “Acquisition Proposal” shall mean any offer or proposal (other than an offer or proposal made or submitted by Parent) contemplating or otherwise relating to any Acquisition Transaction.

Acquisition Transaction. “Acquisition Transaction” shall mean any transaction or series of related transactions (other than: (1) the Contemplated Transactions and (2) any transaction in furtherance of the consummation of the Contemplated Transactions with the express consent of Parent) involving:

(a)

any merger, exchange, consolidation, business combination, issuance of securities, acquisition of securities, reorganization, recapitalization, takeover offer, tender offer, exchange offer or other similar transaction: (i) in which the Company is a constituent corporation; (ii) in which a Person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) of Persons directly or indirectly acquires or would acquire beneficial or record ownership of securities representing more than 20% of the outstanding voting securities of the Company or of any new series or new class of capital stock that would be entitled to a class or series vote with respect to the Merger; or (iii) in which the Company issues securities representing more than 20% of the outstanding voting securities of the Company or of any new series or new class of capital stock that would be entitled to a class or series vote with respect to the Merger;

(b)

any sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or assets that constitute or account for 20% or more of the consolidated net revenues, consolidated net income or consolidated assets of the Company and its Subsidiaries taken as a whole; or

(c)

any liquidation or dissolution of the Company.

Agreement. “Agreement” shall mean the Agreement and Plan of Merger to which this Exhibit A is attached, as it may be amended from time to time.

Affiliate. “Affiliate” shall have the meaning ascribed to such term under Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

Associate. “Associate” means, with respect to any specified Person, (1) any corporation or organization of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities, (2) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity, and (3) any relative or spouse of such Person, or any relative of such spouse.

Closing Date.

“Closing Date” has the meaning as defined in Section 1.3.

Code. “Code” shall mean the United States Internal Revenue Code of 1986, as amended.

Company Affiliate. “Company Affiliate” shall mean any Person under common control with the Company within the meaning of Section 414(b), Section 414(c), Section 414(m) or Section 414(o) of the Code, and the regulations issued thereunder.

Company Associate. “Company Associate” shall mean any current officer, director, or other employee, of the Company or any Company Affiliate.

Company Common Stock. “Company Common Stock” shall mean the Common Stock, $0.001 par value per share, of the Company.

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Company Contract. “Company Contract” shall mean any Contract to which any of the Company or any of its Subsidiaries is a party or otherwise bound.

Company Disclosure Schedule. “Company Disclosure Schedule” shall mean the Company Disclosure Schedule and exhibits thereto that has been delivered by the Company to Parent upon the execution of the Agreement.

Company Employee. “Company Employee” shall mean any current director, officer or employee of the Company or any of its Subsidiaries.

Company Employee Agreement. “Company Employee Agreement” shall mean any employment, severance, retention, transaction bonus, change in control, material consulting, or other similar Contract between: (a) the Company or any of its Subsidiaries or any Company Affiliate; and (b) any Company Associate, other than any such Contract that is terminable “at will” (or following a notice period imposed by applicable law) without any obligation on the part of the Company or any of its Subsidiaries or any Company Affiliate to make any severance, termination, change in control or similar payment or to provide any benefit, other than severance payments required to be made by the Company or any of its Subsidiaries pursuant to the Company’s standard severance policies or under applicable foreign law.

Company Employee Plan. “Company Employee Plan” shall mean any material plan, program, policy, practice or Contract providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits, retirement benefits or other benefits or remuneration of any kind, whether or not in writing that is maintained or contributed to, or required to be maintained or contributed to, by the Company or any Company Affiliate for the benefit of any Company Associate; provided, however, that a Company Employee Agreement shall not be considered a Company Employee Plan.

Company Group. “Company Group” shall mean any “affiliated group” (as defined in Section 1504(a) of the Code without regard to the limitations contained in Section 1504(b) of the Code) that, at any time on or before the Closing Date, includes or has included the Company or any Subsidiary or any predecessor of or successor to the Company or any Subsidiary (or another such predecessor or successor), or any other group of corporations that, at any time on or before the Closing Date, files or has filed Tax Returns on a combined, consolidated or unitary basis with the Company or any Subsidiary or any predecessor of or successor to the Company or any Subsidiary (or another such predecessor or successor).

Company Material Adverse Effect. “Company Material Adverse Effect” shall mean any adverse event, condition, effect, change, event, development or circumstance (each, an “Effect”) that, individually or when considered together with all other Effects, would reasonably be expected to have a material adverse effect on: (a) the business, condition (financial or otherwise) or results of operations of the Company and its Subsidiaries taken as a whole; provided, however, that, in no event shall any of the following, alone or in combination, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has occurred, a Company Material Adverse Effect: (i) effects resulting from conditions generally affecting the industries in which the Company or its customers participate or the U.S. or global economy or capital markets as a whole, to the extent that such conditions do not have a disproportionate impact on the Company and its Subsidiaries taken as a whole; (ii) changes in the trading price or trading volume of Company Common Stock; (iii) effects resulting from the announcement (or pre-announcement disclosure), or pendency of the Merger and the Contemplated Transactions (including any cancellation of or delays in customer orders, any reduction in sales, any disruption in distributor, reseller, supplier, partner or similar relationships or any loss of employees); (iv) any failure by the Company to meet internal projections or forecasts or third party revenue or earnings predictions for any period ending (or for which revenues or earnings are released) on or after the date of this Agreement, in and of themselves (it being understood that the Effects giving rise or contributing to the failure to meet such projections, forecasts or predictions may be taken into account in determining whether there has been, or would reasonably be expected to be, a Company Material Adverse Effect), (v) stockholder class action or derivative litigation, or similar claims or actions, arising from allegations of breach of fiduciary duty relating to the Company entering into this Agreement or disclosure violations in the securities filings made in connection with the Merger; (vi) effects resulting from compliance with the terms of, or the taking of any action required by, this Agreement, including actions taken pursuant to Section 5.6; (vii) changes in applicable Legal Requirements or GAAP; or (viii) effects resulting directly from the items set forth

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on Part A of the Company Disclosure Schedule or (b) the ability of the Company to consummate the Merger prior to the Initial End Date or, if applicable, the Extended End Date.

Company Product. “Company Product” shall mean any product or service developed, manufactured, marketed, distributed, provided, leased, licensed or sold, directly or indirectly, by or on behalf of the Company that is material to the business of the Company as currently conducted, and accounted for at least 5% of Company’s revenues for the fiscal year ending September 30, 2006.

Company SEC Documents. “Company SEC Documents” bears the meaning as defined in Section 2.3(a).

Company Triggering Event. A “Company Triggering Event” shall be deemed to have occurred if: (a) at any time prior to the Company Stockholder Vote, the Company’s board of directors shall have withdrawn or shall have modified in a manner adverse to Parent the Company Board Recommendation; (b) the Company shall have failed to include in the Proxy Statement the Company Board Recommendation; (c) at any time prior to the Company Stockholder Vote, the Company’s board of directors shall have approved or publicly endorsed or recommended any Acquisition Proposal; (d) at any time prior to the Company Stockholder Vote, the Company shall have entered into any letter of intent, acquisition agreement or similar agreement accepting an Acquisition Proposal; or (e) at any time prior to the Company Stockholder Vote, a tender or exchange offer relating to securities of the Company shall have been commenced by a Person unaffiliated with Parent and the Company shall not have sent to its stockholders, within 10 business days after the commencement of such tender or exchange offer, a statement disclosing that the Company recommends rejection of such tender or exchange offer.

Consent. “Consent” shall mean any approval, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).

Contemplated Transactions. “Contemplated Transactions” shall mean the Merger and the other transactions contemplated by the Agreement.

Contract. “Contract” shall mean any currently effective and legally binding written agreement, contract, subcontract, lease, instrument, note, option, warranty, purchase order, license, sublicense, commitment or undertaking.

Dissenting Shares. “Dissenting Shares” shall mean any shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and in respect of which appraisal rights shall have been properly perfected in accordance with the NRS in connection with the Merger and shall not have been effectively withdrawn or otherwise lost.

Effective Time.

“Effective Time” has the meaning as defined in Section 1.3.

Encumbrance. “Encumbrance” shall mean any lien, pledge, charge, mortgage, easement, encroachment, imperfection of title, title exception, title defect, right of possession, lease, security interest, encumbrance, adverse claim, interference or restriction on transfer (except for restrictions arising under applicable securities laws) except for: (i) liens or other imperfections of title that would not be reasonably likely to, individually or in the aggregate, materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Company; (ii) liens and encumbrances for Taxes, assessments or other government charges not yet due or which are being contested in good faith; (iii) zoning, building or other similar government restrictions; (iv) easements, covenants, rights of way or other similar restrictions with respect to real property; (v) vendor’s liens not exceeding the unpaid purchase price of the encumbered asset; (vi) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (vii) non-exclusive licenses entered into in the ordinary course of business and (viii) liens securing indebtedness that are reflected on the Company Unaudited Balance Sheet.

Entity. “Entity” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any company

A-35

limited by shares, limited liability company or joint stock company), firm, society or other enterprise, association, organization or entity.

Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

Expenses. “Expenses” shall mean documented and reasonable out-of-pocket fees and expenses incurred or paid by or on behalf of Parent in connection with the Merger or related to the authorization, preparation, negotiation, execution and performance of this Agreement and the Contemplated Transactions, including all documented and reasonable fees and expenses of law firms, commercial banks, investment banking firms, financing sources, accountants, experts and consultants to Parent.

GAAP. “GAAP” shall mean generally accepted accounting principles in the United States.

Government Bid. “Government Bid” shall mean any quotation, bid or proposal submitted to any Governmental Body or any proposed prime contractor or higher-tier subcontractor of any Governmental Body.

Government Contract. “Government Contract” shall mean any prime contract, subcontract, letter contract, purchase order or delivery order executed or submitted to or on behalf of any Governmental Body or any prime contractor or higher-tier subcontractor, or under which any Governmental Body or any such prime contractor or subcontractor otherwise has or may acquire any right or interest.

Governmental Authorization. “Governmental Authorization” shall mean any permit, license, certificate, franchise, permission, variance, clearance, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

Governmental Body. “Governmental Body” shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, ministry, fund, foundation, center, organization, unit, body or Entity and any court or other tribunal); or (d) self-regulatory organization.

Know-How. “Know-How” shall mean algorithms, apparatus, databases, data collections, diagrams, designs, formulae, inventions (whether or not patentable), know-how, methods, processes, proprietary information, protocols, schematics, specifications, software, software code (in any form, including source code and executable or object code), techniques, user interfaces, URLs, web sites and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing, such as instruction manuals, laboratory notebooks, prototypes, samples, studies and summaries).

Knowledge. “knowledge” shall mean, with respect to any party as to any particular matter, the actual knowledge, after reasonable investigation, of the executive officers of such party regarding such matter.

Legal Proceeding. “Legal Proceeding” shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

Legal Requirement. “Legal Requirement” shall mean any federal, state, local, municipal, foreign or other law, statute, constitution, ordinance, code, edict, decree, rule or regulation issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body (or under the authority of the NASD or The NASDAQ Stock Market).

Order. “Order” shall mean any order, writ, injunction, judgment or decree.

Parent Disclosure Schedule. “Parent Disclosure Schedule” shall mean the Parent Disclosure Schedule that has been delivered by Parent to the Company on the date of the Agreement.

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Parent Material Adverse Effect. “Parent Material Adverse Effect” shall mean any Effect that, individually or when considered together with all other Effects, is or would reasonably be expected to have a material adverse effect on: (a) the business, properties, condition (financial or otherwise) or results of operations of Parent and its Subsidiaries taken as a whole or (b) the ability of Parent to timely consummate the Merger.

Person. “Person” shall mean any individual, Entity or Governmental Body.

Representatives. “Representatives” shall mean directors, officers, agents, attorneys, accountants, advisors, financing sources and representatives.

Required Company Stockholder Vote. “Required Company Stockholder Vote” has the meaning as defined in Section 6.3.

Required UPI Stockholder Vote. “Required UPI Stockholder Vote” has the meaning as defined in Section 6.5.

 Sarbanes-Oxley Act. “Sarbanes-Oxley Act” shall mean the Sarbanes-Oxley Act of 2002, as it may be amended from time to time.

SEC. “SEC” shall mean the United States Securities and Exchange Commission.

Securities Act. “Securities Act” shall mean the Securities Act of 1933, as amended.

Subsidiary. An Entity shall be deemed to be a “Subsidiary” of another Person if such Person (a) directly or indirectly owns or purports to own, beneficially or of record: (i) an amount of voting securities of or other interests in such Entity that is sufficient to enable such Person to elect at least a majority of the members of such Entity’s board of directors or other governing body or (ii) at least 50% of the outstanding equity, voting or financial interests in such Entity; or (b) is a general partner of the Entity.

Tax. “Tax” shall mean any federal, state, local, or foreign tax (including any income, franchise, capital gains, gross receipts, value-added, surtax, estimated, unemployment, national health insurance, excise, ad valorem, transfer, stamp, sales, use, property, custom duty, withholding or payroll tax), including any penalty, interest or addition thereto), imposed by or under the authority of any Governmental Body.

Tax Return. “Tax Return” shall mean any return (including any information return), report, statement, declaration or other document (including any schedule or attachment thereto, and including any amendment thereof) required to be filed with any Governmental Body with respect to Taxes.

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EXHIBIT B

	Capitalink, L.C.
	4400 Biscayne Blvd.     14th Floor     Miami, Florida 33137     Phone 305-446-2026     Fax 305-446-2926     www.capitalinklc.com

June 14, 2007

The Finance Committee of

  the Board of Directors

Spear & Jackson, Inc.

12012 South Shore Blvd.

Suite 103

Wellington, FL 33414

Gentlemen:

We have been advised that, pursuant to the Agreement, draft dated May 9, 2007, and certain verbal agreements between Spear & Jackson, Inc. (the “Company”) and United Pacific Industries Limited, the Company’s majority shareholder (“UPI”) (the “Merger Agreement”), that UPI will acquire, for $1.96 per share in cash (the “Merger Consideration”), the remaining outstanding shares of common stock of the Company that UPI does not presently own from the holders of such shares (the “Non-UPI Shareholders”) (the “Merger”). The terms and conditions of the Merger are more specifically set forth in the Merger Agreement.

We have been retained to render an opinion as to whether, on the date of such opinion, the Merger Consideration is fair, from a financial point of view, to the Non-UPI Shareholders.

We have not been requested to opine as to, and our opinion does not in any manner address, the relative merits of the Merger as compared to any alternative business strategy that might exist for the Company, the decision of whether the Company should complete the Merger, and other alternatives to the Merger that might exist for the Company. The financial terms and other terms of the Merger were determined pursuant to negotiations between the Company, UPI and each of their respective advisors, and not pursuant to our recommendations.

In arriving at our opinion, we took into account an assessment of general economic, market and financial conditions as well as our experience in connection with similar transactions and securities valuations generally and, among other things:

·

Reviewed the Merger Agreement.

·

Reviewed publicly available financial information and other data with respect to the Company that we deemed relevant, including the Annual Report on Form 10-K for the year ended September 30, 2006, the Quarterly Report on Form 10-Q for the six months ended March 31, 2007, and the Current Reports on Form 8-K filed January 26, 2007, February 9, 2007, February 21, 2007, April 25, 2007, May 15, 2007 and June 12, 2007.

Member NASD|SIPC

Mergers & Acquisitions   |   Fairness Opinions & Valuations   |   Restructuring   |   Capital Raising   |   Financial Advisory

B-1

The Finance Committee of

  the Board of Directors

Spear & Jackson, Inc.

June 14, 2007

Page 2

·

Reviewed non-public information and other data with respect to Company, including, financial projections for the five years ending September 30, 2011 (the “Projections”), management estimates of the current projected benefit obligations in excess of plan assets (the “PBO Estimate”) and other internal financial information and management reports.

·

Considered the historical financial results and present financial condition of the Company.

·

Reviewed and compared the trading of, and the trading market for the Company’s common stock, the Comparable Companies (as hereinafter defined), and two general market indices

·

Reviewed and analyzed the Company’s projected unlevered free cash flows and prepared a discounted cash flow analysis.

·

Reviewed and analyzed certain financial characteristics of publicly-traded companies that were deemed by us to have characteristics comparable to the Company (the “Comparable Companies”).

·

Reviewed and analyzed certain financial characteristics of target companies in transactions where such target company was deemed by us to have characteristics comparable to that of the Company.

·

Reviewed and analyzed the premiums paid in certain other transactions.

·

Reviewed and discussed with representatives of the Company management and their advisors certain financial and operating information furnished by them, including the Projections, the PBO Estimate and other analyses with respect to the Company’s business, operations and obligations.

·

Performed such other analyses and examinations as were deemed appropriate.

In arriving at our opinion we have relied upon and assumed the accuracy and completeness of all of the financial and other information that was used by us without assuming any responsibility for any independent verification of any such information and we have further relied upon the assurances of the Company and UPI management that they were not aware of any facts or circumstances that would make any such information inaccurate or misleading. With respect to the financial information, Projections and the PBO Estimate utilized, we assumed that such information has been reasonably prepared on a basis reflecting the best currently available estimates and judgments, and that such information provides a reasonable basis upon which we could make our analysis and form an opinion. We have not evaluated the solvency or fair value of the Company under any foreign, state or federal laws relating to bankruptcy, insolvency or similar matters. We have not made a physical inspection of the properties and facilities of the Company and have not made or obtained any evaluations or appraisals of the Company’s assets and liabilities (contingent or otherwise). In addition, we have not attempted to confirm whether the Company has good title to its assets.

We assumed that the Merger will be consummated in a manner that complies in all respects with the applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and all other applicable foreign, federal and state statutes, rules and regulations. We assumed that the Merger will be consummated substantially in accordance with the terms set forth in the Merger Agreement, without any further amendments thereto, and without waiver by the Company of any of the conditions to any obligations or in the alternative that any such amendments, revisions or waivers thereto will not be detrimental to the Company or its shareholders in any material respect.

Our analysis and opinion are necessarily based upon market, economic and other conditions, as they exist on, and could be evaluated as of, June 14, 2007. Accordingly, although subsequent developments may affect our opinion, we do not assume any obligation to update, review or reaffirm our opinion.

Our opinion is for the use and benefit of the Finance Committee of the Board of Directors of the Company in connection with its consideration of the Merger and is not intended to be and does not constitute an opinion or recommendation to any shareholder of the Company as to how such shareholder should vote with respect to the Merger. We do not express any opinion as to the underlying valuation or future performance of the Company, or the price at which the Company’s securities might trade at any time in the future.

B-2

The Finance Committee of

  the Board of Directors

Spear & Jackson, Inc.

June 14, 2007

Page 3

Based upon and subject to the foregoing, it is our opinion that, as of the date of this letter, the Merger Consideration is fair, from a financial point of view, to the Non-UPI Shareholders.

In connection with our services, we have previously received a retainer and will receive the balance of our fee when we notify the Company that we are prepared to deliver the opinion. Our fee for providing the fairness opinion is not contingent on the completion of the Merger. Neither Capitalink nor its principals beneficially own any interest in the Company or UPI. Further, Capitalink has not provided any other services to the Company or UPI in the past. In addition, the Company has agreed to indemnify us for certain liabilities that may arise out of the rendering this opinion.

In the ordinary course of business, Capitalink’s affiliate Ladenburg Thalmann & Co. Inc. (“Ladenburg”), certain of Ladenburg’s affiliates, as well as investment funds in which they may have financial interests, may acquire, hold or sell, long or short positions, or trade or otherwise effect transactions, in debt, equity, and other securities and financial instruments (including bank loans and other obligations) of, or investments in, the Company, any other party that may be involved in the Merger and their respective affiliates.

Our opinion is for the use and benefit of the Finance Committee of the Board of Directors of the Company and is rendered in connection with its consideration of the Merger and may not be used by the Company for any other purpose or reproduced, disseminated, quoted or referred to by the Company at any time, in any manner or for any purpose, without our prior written consent, except that this opinion may be reproduced in full in, and references to the opinion and to us and our relationship with the Company may be included in filings made by the Company with the Securities and Exchange Commission, if required by Securities and Exchange Commission rules, and in any proxy statement or similar disclosure document disseminated to shareholders if required by the Securities and Exchange Commission rules.

Very truly yours,

/s/ Capitalink, L.C.

Capitalink, L.C.

B-3

EXHIBIT C

Sections 92A.300 through 92A.500 of the Nevada Revised Statutes

Nevada Revised Statutes § 92A.300 to § 92A.500

NRS 92A.300. Definitions. As used in NRS 92A.300 to 92A.500, inclusive, unless the context otherwise requires, the words and terms defined in NRS 92A.305 to 92A.335, inclusive, have the meanings ascribed to them in those sections.

NRS 92A.305. “Beneficial stockholder” defined. “Beneficial stockholder” means a person who is a beneficial owner of shares held in a voting trust or by a nominee as the stockholder of record.

NRS 92A.310. “Corporate action” defined. “Corporate action” means the action of a domestic corporation.

NRS 92A.315. “Dissenter” defined. “Dissenter” means a stockholder who is entitled to dissent from a domestic corporation’s action under NRS 92A.380 and who exercises that right when and in the manner required by NRS 92A.400 to 92A.480, inclusive.

NRS 92A.320. “Fair value” defined. “Fair value,” with respect to a dissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which he objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable.

NRS 92A.325. “Stockholder” defined. “Stockholder” means a stockholder of record or a beneficial stockholder of a domestic corporation.

NRS 92A.330. “Stockholder of record” defined. “Stockholder of record” means the person in whose name shares are registered in the records of a domestic corporation or the beneficial owner of shares to the extent of the rights granted by a nominee’s certificate on file with the domestic corporation.

NRS 92A.335. “Subject corporation” defined. “Subject corporation” means the domestic corporation which is the issuer of the shares held by a dissenter before the corporate action creating the dissenter’s rights becomes effective or the surviving or acquiring entity of that issuer after the corporate action becomes effective.

NRS 92A.340. Computation of interest. Interest payable pursuant to NRS 92A.300 to 92A.500, inclusive, must be computed from the effective date of the action until the date of payment, at the average rate currently paid by the entity on its principal bank loans or, if it has no bank loans, at a rate that is fair and equitable under all of the circumstances.

NRS 92A.350. Rights of dissenting partner of domestic limited partnership. A partnership agreement of a domestic limited partnership or, unless otherwise provided in the partnership agreement, an agreement of merger or exchange, may provide that contractual rights with respect to the partnership interest of a dissenting general or limited partner of a domestic limited partnership are available for any class or group of partnership interests in connection with any merger or exchange in which the domestic limited partnership is a constituent entity.

NRS 92A.360. Rights of dissenting member of domestic limited-liability company. The articles of organization or operating agreement of a domestic limited-liability company or, unless otherwise provided in the articles of organization or operating agreement, an agreement of merger or exchange, may provide that contractual rights with respect to the interest of a dissenting member are available in connection with any merger or exchange in which the domestic limited-liability company is a constituent entity.

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NRS 92A.370. Rights of dissenting member of domestic nonprofit corporation.

1. Except as otherwise provided in subsection 2 and unless otherwise provided in the articles or bylaws, any member of any constituent domestic nonprofit corporation who voted against the merger may, without prior notice, but within 30 days after the effective date of the merger, resign from membership and is thereby excused from all contractual obligations to the constituent or surviving corporations which did not occur before his resignation and is thereby entitled to those rights, if any, which would have existed if there had been no merger and the membership had been terminated or the member had been expelled.

2. Unless otherwise provided in its articles of incorporation or bylaws, no member of a domestic nonprofit corporation, including, but not limited to, a cooperative corporation, which supplies services described in chapter 704 of NRS to its members only, and no person who is a member of a domestic nonprofit corporation as a condition of or by reason of the ownership of an interest in real property, may resign and dissent pursuant to subsection 1.

NRS 92A.380. Right of stockholder to dissent from certain corporate actions and to obtain payment for shares.

1. Except as otherwise provided in NRS 92A.370; and 92A.390, any stockholder is entitled to dissent from, and obtain payment of the fair value of his shares in the event of any of the following corporate actions:

(a) Consummation of a conversion or plan of merger to which the domestic corporation is a constituent entity:

(1) If approval by the stockholders is required for the conversion or merger by NRS 92A.120 to 92A.160, inclusive, or the articles of incorporation, regardless of whether the stockholder is entitled to vote on the conversion or plan of merger; or

(2) If the domestic corporation is a subsidiary and is merged with its parent pursuant to NRS 92A.180.

(b) Consummation of a plan of exchange to which the domestic corporation is a constituent entity as the corporation whose subject owner’s interests will be acquired, if his shares are to be acquired in the plan of exchange.

(c) Any corporate action taken pursuant to a vote of the stockholders to the extent that the articles of incorporation, bylaws or a resolution of the board of directors provides that voting or nonvoting stockholders are entitled to dissent and obtain payment for their shares.

(d) Any corporate action not described in paragraph (a), (b) or (c) that will result in the stockholder receiving money or scrip instead of fractional shares.

2. A stockholder who is entitled to dissent and obtain payment pursuant to NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate action creating his entitlement unless the action is unlawful or fraudulent with respect to him or the domestic corporation.

NRS 92A.390. Limitations on right of dissent: Stockholders of certain classes or series; action of stockholders not required for plan of merger.

1. There is no right of dissent with respect to a plan of merger or exchange in favor of stockholders of any class or series which, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting at which the plan of merger or exchange is to be acted on, were either listed on a national securities exchange, included in the national market system by the National Association of Securities Dealers, Inc., or held by at least 2,000 stockholders of record, unless:

(a) The articles of incorporation of the corporation issuing the shares provide otherwise; or

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(b) The holders of the class or series are required under the plan of merger or exchange to accept for the shares anything except:

(1) Cash, owner’s interests or owner’s interests and cash in lieu of fractional owner’s interests of:

(I) The surviving or acquiring entity; or

(II) Any other entity which, at the effective date of the plan of merger or exchange, were either listed on a national securities exchange, included in the national market system by the National Association of Securities Dealers, Inc., or held of record by a least 2,000 holders of owner’s interests of record; or

(2) A combination of cash and owner’s interests of the kind described in sub-subparagraphs (I) and (II) of subparagraph (1) of paragraph (b).

2. There is no right of dissent for any holders of stock of the surviving domestic corporation if the plan of merger does not require action of the stockholders of the surviving domestic corporation under NRS 92A.130.

NRS 92A.400. Limitations on right of dissent: Assertion as to portions only to shares registered to stockholder; assertion by beneficial stockholder.

1. A stockholder of record may assert dissenter’s rights as to fewer than all of the shares registered in his name only if he dissents with respect to all shares beneficially owned by any one person and notifies the subject corporation in writing of the name and address of each person on whose behalf he asserts dissenter’s rights. The rights of a partial dissenter under this subsection are determined as if the shares as to which he dissents and his other shares were registered in the names of different stockholders.

2. A beneficial stockholder may assert dissenter’s rights as to shares held on his behalf only if:

(a) He submits to the subject corporation the written consent of the stockholder of record to the dissent not later than the time the beneficial stockholder asserts dissenter’s rights; and

(b) He does so with respect to all shares of which he is the beneficial stockholder or over which he has power to direct the vote.

NRS 92A.410. Notification of stockholders regarding right of dissent.

1. If a proposed corporate action creating dissenters’ rights is submitted to a vote at a stockholders’ meeting, the notice of the meeting must state that stockholders are or may be entitled to assert dissenters’ rights under NRS 92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections.

2. If the corporate action creating dissenters’ rights is taken by written consent of the stockholders or without a vote of the stockholders, the domestic corporation shall notify in writing all stockholders entitled to assert dissenters’ rights that the action was taken and send them the dissenter’s notice described in NRS 92A.430.

NRS 92A.420. Prerequisites to demand for payment for shares.

1. If a proposed corporate action creating dissenters’ rights is submitted to a vote at a stockholders’ meeting, a stockholder who wishes to assert dissenter’s rights:

(a) Must deliver to the subject corporation, before the vote is taken, written notice of his intent to demand payment for his shares if the proposed action is effectuated; and

(b) Must not vote his shares in favor of the proposed action.

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2. If a proposed corporate action creating dissenters’ rights is taken by written consent of the stockholders, a stockholder who wishes to assert dissenters’ rights must not consent to or approve the proposed corporate action.

3. A stockholder who does not satisfy the requirements of subsection 1 or 2 and NRS 92A.400 is not entitled to payment for his shares under this chapter.

NRS 92A.430. Dissenter’s notice: Delivery to stockholders entitled to assert rights; contents.

1. The subject corporation shall deliver a written dissenter’s notice to all stockholders entitled to assert dissenters’ rights.

2. The dissenter’s notice must be sent no later than 10 days after the effectuation of the corporate action, and must:

(a) State where the demand for payment must be sent and where and when certificates, if any, for shares must be deposited;

(b) Inform the holders of shares not represented by certificates to what extent the transfer of the shares will be restricted after the demand for payment is received;

(c) Supply a form for demanding payment that includes the date of the first announcement to the news media or to the stockholders of the terms of the proposed action and requires that the person asserting dissenter’s rights certify whether or not he acquired beneficial ownership of the shares before that date;

(d) Set a date by which the subject corporation must receive the demand for payment, which may not be less than 30 nor more than 60 days after the date the notice is delivered; and

(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.

NRS 92A.440. Demand for payment and deposit of certificates; retention of rights of stockholder.

1. A stockholder to whom a dissenter’s notice is sent must:

(a) Demand payment;

(b) Certify whether he or the beneficial owner on whose behalf he is dissenting, as the case may be, acquired beneficial ownership of the shares before the date required to be set forth in the dissenter’s notice for this certification; and

(c) Deposit his certificates, if any, in accordance with the terms of the notice.

2. The stockholder who demands payment and deposits his certificates, if any, before the proposed corporate action is taken retains all other rights of a stockholder until those rights are cancelled or modified by the taking of the proposed corporate action.

3. The stockholder who does not demand payment or deposit his certificates where required, each by the date set forth in the dissenter’s notice, is not entitled to payment for his shares under this chapter.

NRS 92A.450. Uncertificated shares: Authority to restrict transfer after demand for payment; retention of rights of stockholder.

1. The subject corporation may restrict the transfer of shares not represented by a certificate from the date the demand for their payment is received.

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2. The person for whom dissenter’s rights are asserted as to shares not represented by a certificate retains all other rights of a stockholder until those rights are canceled or modified by the taking of the proposed corporate action.

NRS 92A.460. Payment for shares: General requirements.

1. Except as otherwise provided in NRS 92A.470, within 30 days after receipt of a demand for payment, the subject corporation shall pay each dissenter who complied with NRS 92A.440 the amount the subject corporation estimates to be the fair value of his shares, plus accrued interest. The obligation of the subject corporation under this subsection may be enforced by the district court:

(a) Of the county where the corporation’s registered office is located; or

(b) At the election of any dissenter residing or having its registered office in this state, of the county where the dissenter resides or has its registered office. The court shall dispose of the complaint promptly.

2. The payment must be accompanied by:

(a) The subject corporation’s balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, a statement of income for that year, a statement of changes in the stockholders’ equity for that year and the latest available interim financial statements, if any;

(b) A statement of the subject corporation’s estimate of the fair value of the shares;

(c) An explanation of how the interest was calculated;

(d) A statement of the dissenter’s rights to demand payment under NRS 92A.480; and

(e) A copy of NRS 92A.300 to 92A.500, inclusive.

NRS 92A.470. Payment for shares: Shares acquired on or after date of dissenter’s notice.

1. A subject corporation may elect to withhold payment from a dissenter unless he was the beneficial owner of the shares before the date set forth in the dissenter’s notice as the date of the first announcement to the news media or to the stockholders of the terms of the proposed action.

2. To the extent the subject corporation elects to withhold payment, after taking the proposed action, it shall estimate the fair value of the shares, plus accrued interest, and shall offer to pay this amount to each dissenter who agrees to accept it in full satisfaction of his demand. The subject corporation shall send with its offer a statement of its estimate of the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenters’ right to demand payment pursuant to NRS 92A.480.

NRS 92A.480. Dissenter’s estimate of fair value: Notification of subject corporation; demand for payment of estimate.

1. A dissenter may notify the subject corporation in writing of his own estimate of the fair value of his shares and the amount of interest due, and demand payment of his estimate, less any payment pursuant to NRS 92A.460, or reject the offer pursuant to NRS 92A.470 and demand payment of the fair value of his shares and interest due, if he believes that the amount paid pursuant to NRS 92A.460 or offered pursuant to NRS 92A.470 is less than the fair value of his shares or that the interest due is incorrectly calculated.

2. A dissenter waives his right to demand payment pursuant to this section unless he notifies the subject corporation of his demand in writing within 30 days after the subject corporation made or offered payment for his shares.

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NRS 92A.490. Legal proceeding to determine fair value: Duties of subject corporation; powers of court; rights of dissenter.

1. If a demand for payment remains unsettled, the subject corporation shall commence a proceeding within 60 days after receiving the demand and petition the court to determine the fair value of the shares and accrued interest. If the subject corporation does not commence the proceeding within the 60-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.

2. A subject corporation shall commence the proceeding in the district court of the county where its registered office is located. If the subject corporation is a foreign entity without a resident agent in the state, it shall commence the proceeding in the county where the registered office of the domestic corporation merged with or whose shares were acquired by the foreign entity was located.

3. The subject corporation shall make all dissenters, whether or not residents of Nevada, whose demands remain unsettled, parties to the proceeding as in an action against their shares. All parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law.

4. The jurisdiction of the court in which the proceeding is commenced under subsection 2 is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers have the powers described in the order appointing them, or any amendment thereto. The dissenters are entitled to the same discovery rights as parties in other civil proceedings.

5. Each dissenter who is made a party to the proceeding is entitled to a judgment:

(a) For the amount, if any, by which the court finds the fair value of his shares, plus interest, exceeds the amount paid by the subject corporation; or

(b) For the fair value, plus accrued interest, of his after-acquired shares for which the subject corporation elected to withhold payment pursuant to NRS 92A.470.

NRS 92A.500. Legal proceeding to determine fair value: Assessment of costs and fees.

1. The court in a proceeding to determine fair value shall determine all of the costs of the proceeding, including the reasonable compensation and expenses of any appraisers appointed by the court. The court shall assess the costs against the subject corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment.

2. The court may also assess the fees and expenses of the counsel and experts for the respective parties, in amounts the court finds equitable:

(a) Against the subject corporation and in favor of all dissenters if the court finds the subject corporation did not substantially comply with the requirements of NRS 92A.300 to 92A.500, inclusive; or

(b) Against either the subject corporation or a dissenter in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to the rights provided by NRS 92A.300 to 92A.500, inclusive.

3. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the subject corporation, the court may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited.

4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess the costs against the subject corporation, except that the court may assess costs against all or some of the dissenters who are parties to the

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proceeding, in amounts the court finds equitable, to the extent the court finds that such parties did not act in good faith in instituting the proceeding.

5. This section does not preclude any party in a proceeding commenced pursuant to NRS 92A.460; or 92A.490 from applying the provisions of N.R.C.P. 68 or NRS 17.115.

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EXHIBIT D

                     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, 2006

                                       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 or organization                            Identification No.)

        12012 Southshore Boulevard, Suite 103, Wellington, Florida 33414

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

          (Address of principal executive offices, including Zip Code)

                                 (561) 793 7233

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

               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. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an

accelerated filer, or a non-accelerated filer. See definition of "accelerated

filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check

one):

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

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2 of the Exchange Act), Yes [ ] No [X]

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 as

reported in the "Pink Sheets" of the Over The Counter market on March 30, 2006

was $3,617,262.

The number of shares of registrant's common stock outstanding as of January 15,

2007 was 5,735,561.

D-1

                               TABLE OF CONTENTS

                                                                            PAGE

                                                                            ----

PART I

  ITEM 1   BUSINESS ........................................................   3

  ITEM 1A  RISK ANALYSIS ...................................................  17

  ITEM 2   PROPERTIES ......................................................  22

  ITEM 3   LEGAL PROCEEDINGS ...............................................  23

  ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .............  25

PART II

  ITEM 5   MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER

           MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ...............  26

  ITEM 6   SELECTED CONSOLIDATED FINANCIAL DATA ............................  27

  ITEM 7   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

           AND RESULTS OF OPERATIONS .......................................  28

  ITEM 7A  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ......  66

  ITEM 8   CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ........  68

  ITEM 9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

           AND FINANCIAL DISCLOSURE ........................................  69

  ITEM 9A  CONTROLS AND PROCEDURES .........................................  69

  ITEM 9B  OTHER INFORMATION ...............................................  70

PART III

  ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT ..................  70

  ITEM 11  EXECUTIVE COMPENSATION ..........................................  72

  ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

           AND RELATED STOCKHOLDER MATTERS .................................  73

  ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ..................  77

  ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES ..........................  78

PART IV

  ITEM 15  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K .  78

SIGNATURES .................................................................  80

                                        2

D-2

                                     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.

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 L150,000 pounds sterling ($232,860) ("the Transaction").

The Transaction closed on September 6, 2002.

                                       3

D-3

Concurrently with the closing of the Transaction, and as a condition precedent

thereto, Megapro closed a Private Placement pursuant to which it agreed to issue

6,005,561 shares of the common stock of Megapro to PNC Tool Holdings, LLC, a

Nevada limited liability company ("PNC"), in consideration for $2,000,000 (the

"Private Placement"). Mr. Dennis Crowley ("Crowley"), who became CEO of the

company, was the sole owner of PNC.

In connection with the closing of the Transaction, certain principal

shareholders of Megapro, including Envision Worldwide Products, Ltd, Neil Morgan

and Maria Morgan contributed an aggregate of 4,742,820 shares of their common

stock of Megapro to the capital of Megapro, and agreed to a two-year lock-up

with respect to their remaining 192,480 shares of common stock of Megapro. The

stockholders did not receive any consideration in connection with their

contribution of shares. As a result of the closing of the Transaction and the

Private Placement, and upon the effectuation of all post closing matters,

Megapro had 12,011,122 shares of common stock outstanding, 6,005,561 shares of

which were beneficially owned by PNC. The shares issued to PNC was subject to

the terms of a Stockholder's Agreement and a Registration Rights Agreement.

In the Stockholders' Agreement dated as of September 6, 2002 by and among

Megapro Tools, Inc., USI Mayfair Limited, PNC and Crowley (the "Stockholders")

it was agreed that, other than certain "unrestricted transfers", the parties

involved would not transfer any Company securities for the two years beginning

on September 6, 2002. On September 6, 2002, under an unrestricted transfer

relating to the transfer of stock from a permitted affiliate, USI Mayfair

Limited, transferred all of the Company securities owned by it, along with all

of its rights under the Stockholders' Agreement, to USI Global Corp.

Since the date of the Transaction, the Company has not issued any shares of its

stock except under a limited number of options and has not engaged in any

financing using its stock.

Change of Name to Spear & Jackson, Inc.

On October 1, 2002, the Board of Directors unanimously executed a written

consent authorizing and recommending that the stockholders approve a proposal to

effect the change of name to Spear & Jackson, Inc. On October 2, 2002, company

stockholders holding a majority of the voting power of the Company executed a

written consent authorizing and approving the proposal to effect the name

change.

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.

Recent Regulatory Matters and Acquisition of Minority Interest by United Pacific

Industries Limited from Jacuzzi Brands, Inc.

On April 15, 2004, the US Securities and Exchange Commission filed suit in the

U.S. District Court for the Southern District of Florida against the Company and

Mr. Dennis Crowley, its then current Chief Executive Officer/Chairman, among

others, alleging violations of the federal securities laws. Specifically with

regard to the Company, the SEC alleged that the Company violated the SEC's

registration, anti-fraud and reporting provisions. These allegations arise from

the alleged failure of Mr. Crowley to accurately report his ownership of the

Company's stock, and his alleged manipulation of the price of the Company's

stock through dissemination of false information, allowing him to profit from

sales of stock through nominee accounts. On May 10, 2004, the Company consented

to the entry of a preliminary injunction, without admitting or denying the

allegations of the SEC complaint. The SEC is continuing its investigation into

pension issues. The Company is offering its full cooperation.

As a further measure, the Court appointed a Corporate Monitor to oversee the

Company's operations. In addition to Mr. Crowley consenting to a preliminary

injunction the Court's order also temporarily barred Mr. Crowley from service as

an officer or director of a public company, and prohibited him from voting or

disposing of Company stock.

                                       4

D-4

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, was elected to serve as

acting Chief Executive Officer.

Following extensive settlement negotiations with 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 as well as funds collected

from co-defendants International Media Solutions, Inc., Yolanda Velazquez and

Kermit Silva who are not affiliated with the Company, to the victims of their

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. No disgorgement or civil penalties were sought from, or ordered to

be paid by, the Company.

Additionally, the Company entered into a Stock Purchase Agreement with PNC Tool

Holdings LLC ("PNC") and Mr. Crowley, the sole member of PNC. Under the Stock

Purchase Agreement, the Company acquired, for $100, and other good and valuable

consideration, 6,005,561 common shares of the Company held by PNC, which

represented approximately 51.1% of the outstanding common shares of the Company

at December 31, 2004, and which constituted 100% of the common stock held by

such entity. The parties also executed general releases in favor of each other

subject to the fulfillment of the conditions of the Stock Purchase Agreement.

The Stock Purchase Agreement was effected on April 8, 2005, following formal

approval by the SEC on February 10, 2005 and, on February 15, 2005 by the U.S.

District Court for the Southern District of Florida of the settlement of the

litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc., International

Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No:

04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further conditioned

on, among other things, the disgorgement and civil penalty funds being paid by

Mr. Crowley. These monies have now been received and are being administered for

the benefit of the victims of the alleged fraud by a court appointed

administrator pursuant to the Fair Funds provision of the Sarbanes-Oxley Act of

2002.

With the return of the Spear & Jackson shares to the Company by PNC, the

stockholders of the Company had their percentage stock interest increase

correspondingly. Jacuzzi Brands, Inc. ("Jacuzzi"), which at this time was a

beneficial owner of 3,543,281 shares of common stock, had its interest in the

Company increased to approximately 61.8% of the outstanding common stock.

On April 11, 2005, Jacuzzi agreed to the termination of a previous letter

agreement dated September 6, 2002, which supplemented the Stockholders'

Agreement of the same date. The letter agreement required Jacuzzi to vote a

substantial portion of its voting stock in the Company in proportion to the vote

of other stockholders of the Company. At the time the letter was executed,

Jacuzzi was a principal, but a minority shareholder of the Company. As explained

above, with the 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.

                                       5

D-5

Disposal of Majority Interest by Jacuzzi to United Pacific Industries Limited

On April 21, 2005, Jacuzzi adopted a plan of disposition of its interest in the

Company's common stock. On March 23, 2006, Jacuzzi and its subsidiary

undertaking, USI American Holdings, Inc. ("USI" and, together with Jacuzzi, "the

Seller") entered into a Stock Purchase Agreement (the "Stock Purchase Agreement"

with United Pacific Industries Limited ("UPI"), a Bermuda Corporation, whose

shares are traded on the Hong Kong Exchange, to sell its entire holding of

3,543,281 shares of the common stock ("the Shares") of Spear & Jackson, Inc. to

UPI for $1.40 per share for an aggregate purchase price of $4,960,593.

The representations, warranties and covenants made by Jacuzzi and UPI are

typical for this type of transaction, and include a covenant that restricts

Jacuzzi from soliciting or negotiating with a third party between the signing

date of the Stock Purchase Agreement and the closing date of the transaction.

Jacuzzi has also agreed that, in connection with the closing of the transaction,

it will, among other things, cause UPI's designees and one designee of Jacuzzi

to be elected to the Board of Directors of Spear & Jackson, Inc. and will use

commercially reasonable best efforts so that such UPI designees are in

sufficient numbers to give UPI a majority of the Board of Directors of the Spear

& Jackson, Inc. UPI has also agreed that neither it nor any of its affiliates

will purchase any additional Common Stock during the period from the signing

date of the Stock Purchase Agreement through one year following the closing at a

price less than $1.40 per share.

The purchase of the Shares by UPI contemplated by the Stock Purchase Agreement

was subject to the satisfaction of a number of closing conditions, including

approval by UPI's shareholders and the United Kingdom Pensions Regulator, and

receipt of certain other regulatory approvals as well as other customary closing

conditions. A copy of the Stock Purchase Agreement is on file with the SEC in

connection with the filing by Jacuzzi of a Schedule 13D/A on March 27, 2006.

The Seller and UPI entered into Amendment No. 1 dated as of May 4, 2006

("Amendment No. 1 to the Stock Purchase Agreement") to extend the date by which

the Seller and UPI were required to lodge the clearance application with the UK

Pensions Regulator. The Seller and UPI subsequently received a comfort letter

dated July 5, 2006 issued by the UK Pensions Regulator (the "Comfort Letter").

The Seller and UPI have agreed to waive the condition contained in the Stock

Purchase Agreement for a clearance from the UK Pensions Regulator and to accept

the Comfort Letter in satisfaction of that condition.

The trustees of Spear & Jackson, Inc.'s UK Pension Plan confirmed by a letter

dated July 6, 2006 their acceptance of the UK Pensions Regulator's

determination. The Seller and UPI then entered into Amendment No. 2 dated as of

July 10, 2006 ("Amendment No. 2 to the Stock Purchase Agreement") to waive their

respective requirements for a clearance from the UK Pensions Regulator and to

accept in its place the Comfort Letter which states the UK Pensions Regulator is

of the view, based on the information supplied to him in connection with the

clearance application, that the change of control as a result of the sale by the

Seller of all of its shares of Spear & Jackson, Inc. to UPI is not detrimental

to the UK pension plan and the UK Pensions Regulator believes that a clearance

is not necessary for the transaction.

In addition, pursuant to Amendment No. 2 to the Stock Purchase Agreement, UPI

agreed, subject to the Closing having occurred, to indemnify the Seller and JBI

Holdings Limited (the "Jacuzzi Indemnified Parties") should the UK Pensions

Regulator, regardless of the Comfort Letter, require any of the Jacuzzi

Indemnified Parties to make a contribution or provide financial support in

relation to the potential pension plan liabilities of SJI or its subsidiaries.

In addition, UPI has also agreed that for a period of 12-months from the Closing

Date, UPI will not, and will use its best efforts to ensure that neither Spear &

Jackson, Inc. nor any of its subsidiaries will, take any action or omit to take

any action that causes the UK Pensions Regulator, as a result of such action or

omission, to issue a contribution notice against the Jacuzzi Indemnified Parties

in relation to any UK pension plan in which Spear & Jackson, Inc. or any

subsidiary of Spear & Jackson, Inc. is an employer. Further, UPI agreed that for

a period of 12-months from the Closing Date, that it will not (and will use its

best efforts to ensure that neither Spear & Jackson, Inc. nor any subsidiary of

Spear & Jackson, Inc. will) engage in any action or inaction which in relation

to any such UK pension plan would fall within the UK Pension Regulation

clearance guidance note dated April 2005 as a 'Type A' event unless UPI procures

that clearance is issued by the UK Pensions Regulator in relation to such event

in terms which confirm that no Jacuzzi Indemnified Party shall be linked to a

financial support direction or contribution notice in respect of such event.

                                       6

D-6

Closing occurred on July 28, 2006.

On June 22, 2006, Jacuzzi and UPI filed a preliminary Form 14C with the SEC

announcing notice of change in control and of a majority of directors pursuant

to section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1

thereunder. The 14C indicated that three new directors would be designated by

and elected to the Board of directors by UPI, to serve until the Company's next

annual meeting. The 14C became effective on August 7, 2006, and the three new

directors replaced the incumbent directors on about August 27, 2006. In the

interim, the Board by resolution, appointed the three new directors--Lewis Hon

Ching Ho, Andy Yan Wai Poon and Maria Yuen Man Lam--to the Board effective on

August 9, 2006.

As previously reported by the Company, on July 28, 2006, Jacuzzi Brands, Inc.

together with USI American Holdings, Inc., completed the sale of their shares of

common stock of Spear & Jackson (representing a majority interest) to United

Pacific Industries Limited, which shares are held by United Pacific Industries

Limited's wholly-owned subsidiary Pantene Global Holdings Limited (collectively,

"UPI"). On August 7, 2006, the Company filed with the Securities and Exchange

Commission, and mailed to the Company's stockholders, an Information Statement

pursuant to Sections 14(c) and 14(f) of the Securities Exchange Act of 1934, as

amended, disclosing the intention of UPI to execute a written consent, as

majority stockholder, electing to the Board of Directors the following UPI

nominees: Lewis Hon Ching Ho; Andy Yan Wai Poon; and Maria Yuen Man Lam. On

August 9, 2006, the Board of Directors expanded the Board of Directors from

three members to six members and elected as additional directors Messrs. Ho and

Poon and Ms. Lam. Information concerning the backgrounds of the new Directors is

included in the Information Statement under the heading "Information Regarding

the Executive Officers and New Directors".

The Board of Directors elected the new Directors as a means to facilitate the

transition from the prior Board of Directors to the new Board of Directors.

Messrs. Harrington, Fletcher and Dinerman retired as Directors on or about

August 27, 2006. No new officers have been elected as yet by the Company.

Although Soneet Kapila has continued to serve as Corporate Monitor for the

Company, on January 10, 2007 he applied to the Court to terminate the role of

Corporate Monitor having determined that his function was no longer necessary.

The Court has not yet ruled on this application.

Brian C. Beazer, the Chairman of UPI, is a director of Jacuzzi and holds

approximately 24.56% of the shares of UPI. David H. Clarke, who, until his

retirement in September 2006, was the Chairman and Chief Executive Officer of

Jacuzzi, is a director of UPI and holds approximately 22.88% of the shares of

UPI. Mr. Clarke also holds approximately 28,350 shares of common stock of Spear

& Jackson, Inc., representing approximately 0.49% of the shares of Spear &

Jackson, Inc. but the shares of Spear & Jackson, Inc. owned by Mr. Clarke are

not being purchased at the time of the sale of the Shares by the Seller to UPI.

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, was established in Shanghai,

China and it is expected to become fully operational as a distribution and

manufacturing operation during the second quarter of fiscal 2007.

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 was subsequently agreed with Megapro that it would pay

Canadian $ 53,900 (approximately $41,000) in settlement of those debts and these

were paid in monthly installments of Canadian $5,000 (approximately $3,800).

                                       7

D-7

During the fourth quarter of fiscal 2005, the Company began marketing for sale

certain assets associated with its UK thread gauge measuring business. On

February 28, 2006, the Company concluded the sale of these assets for a nominal

consideration. The assets sold comprised plant and equipment, inventories and

goodwill. The acquirer paid L1 sterling and assumed certain liabilities in

respect of the leased premises from which the trade operates. The carrying

values of the assets relating to this operation have been written down to

estimated fair value and the net operations, cash flows and assets have been

presented as "Discontinued Operations" in accordance with Statement of Financial

Accounting Standards ("SFAS") 144.

Recent Litigation Developments

Subsequent to the SEC action a number of class action lawsuits were initiated in

the U.S. District Court for the Southern District of Florida by Company

stockholders against the Company, Sherb & Co. LLP, the Company's former

independent auditor, and certain of the Company's directors and officers,

including Mr. Crowley, the Company's former Chief Executive Officer/Chairman,

and Mr. Fletcher, the Company's former CFO and former acting Chief Executive

Officer. These suits alleged essentially the same claims as the SEC suit

discussed above.

These various class action suits were subsequently consolidated. Thereafter, the

defendants filed certain Motions to Dismiss with regard to the Complaint and on

October 19, 2005, the U.S. District Court for the Southern District of Florida

in Re Spear & Jackson Securities Litigation entered its Order regarding these

Motions. The Order denied the Company's motion as well as that of Mr. Crowley,

the former Chief Executive Officer of Spear & Jackson. The Court granted the

Motion to Dismiss on behalf of Mr. Fletcher, the Company's interim Chief

Executive Officer, and also granted the Motion to Dismiss on behalf of the

Company's former independent auditor, Sherb & Co., LLP. The class plaintiff

subsequently filed an appeal regarding the trial court's decision to dismiss the

case against Sherb & Co., LLP, which appeal is presently pending. No appeal was

filed with respect to the decision to dismiss the case against Mr. Fletcher.

On July 7, 2006 the Company, Dennis Crowley and the Class Plaintiff reached a

Memorandum of Understanding ("MOU"), which confirmed that the plaintiffs, the

Company and Crowley in the class action had reached an agreement in principle

for the settlement of this litigation, subject to Court approval. According to

the terms of the MOU, the Company deposited the sum of $650,000 into a Qualified

Settlement Fund, disbursement pending approval of the Court. Subsequent to this,

Sherb & Co. also agreed to the terms of the Settlement agreeing to contribute an

additional $125,000.

On November 9, 2006, the Stipulation of Settlement was filed with the Court for

preliminary approval. Assuming that the preliminary approval is granted, the

next step will be to notice the Class of the settlement and to set the approval

process for final hearing and final approval before the Court. The matter will

not be finally settled until the Court issues a final judgment approving the

settlement.

Following the execution of the MOU, the lead plaintiffs commenced discovery

procedures to confirm the fairness and reasonableness of the Settlement. The

plaintiffs retain the right to terminate the Settlement if such discovery

reveals that the Settlement is not fair, reasonable and adequate. Subject to

these discovery procedures confirming the adequacy of the Settlement, all

parties have agreed to use their best efforts to finalize an appropriate

Stipulation of Settlement and any other relevant documentation necessary to

obtain approval by the Court of the settlement of this action.

If the Settlement outlined in the MOU is not approved by the Court or, if

subsequently terminated, the terms of the above Settlement will be without

prejudice, any settlement amounts already paid will be returned and parties will

revert to their litigation positions immediately prior to the MOU.

                                       8

D-8

Should the class action settlement be approved, to facilitate the distribution

of the funds from the class suit to the class shareholders and keep

administrative costs to a minimum, the SEC Claim's Administrator applied to the

Court on January 9, 2007 for permission to combine the class action funds with

the funds derived in the SEC litigation, and allow for the SEC's Claim's

Administrator to disburse the collective funds.

On September 6, 2005, the Company was served with a Shareholder Derivative

Complaint filed on June 1, 2005 in the Circuit Court for Palm Beach County,

Florida (Case No. CA005068). The suit named the Company as nominal defendant.

Also named as defendants were, former directors Robert Dinerman, William

Fletcher and John Harrington, in addition to Dennis Crowley and the Company's

prior independent auditors, Sherb & Co. LLP.. 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 additionally

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.

Due to ongoing settlement discussions with the plaintiff's attorney, the Company

had not responded to the Complaint. In August 2006 the Company entered into a

settlement agreement with the plaintiff by agreeing to accept certain changes to

its corporate governance procedures and the payment of up to $75,000 in legal

fees. The settlement was filed with the Court in early November 2006, and if

approved by the Court, will result in a dismissal of the suit and release the

Company and the former director defendants, Messrs Robert Dinerman, William

Fletcher and John Harrington. A Preliminary Approval hearing is scheduled on

February 4,2007. Dennis Crowley and Sherb & Co.continue as defendants in this

suit.

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;

     *    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 also manufactured and sold a rage of thread

gauge measuring equipment under the "Coventry Gauge" logo until the sale of the

principal business assets of that operation in February 2006.

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

summarized as:

1)   NEILL TOOLS, consisting of Spear & Jackson Garden Tools and Neill Tools,

     manufactures, among other products, hand hacksaws, hacksaw blades, hacksaw

     frames, builder's tools and wood saws, 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.

                                       9

D-9

2)   ECLIPSE MAGNETICS' key products are permanent magnets (cast alloy),

     magnetic tools, machine tools, magnetic chucks and turnkey magnetic

     systems. Products range from very simple low-cost items to technically

     complex high value added systems. In addition, Eclipse Magnetics engages in

     the trading of other magnetic material, sourced from the Far East, both 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 which manufactures 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, which measure the diameter of

     machined components. In addition to the core range of bore gauges, the

     Company also manufactures universal gauges and hardness testing equipment.

     In December 2004, the division 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.

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

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

                            2006     2005    2004

Hand and garden tools ...  71.33    72.65   75.57

Magnetic products .......  11.20    10.48    9.24

Metrology tools .........  17.47    16.87   15.19

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.

                                       10

D-10

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.

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:

                                       11

D-11

Product Type                                          % of Total Revenue

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

                                              2006      2005      2004      2003

Industrial Cutting Tools

 (hacksaws, hacksaw blades, small saws,

 saw frames, woodsaws and holesaws) ....     19.23     18.63     19.87     15.84

Garden, Digging and Cutting Tools

 (manual and powered) ..................     26.59     28.44     31.48     26.68

Electrical tools including power tools

 and compressors........................       N/A       N/A       N/A     11.97

Magnetic products.......................     10.90     10.69       N/A       N/A

Metrology products including gauges,

 micrometers and precision tools........     17.50     17.26     15.28     14.46

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

     Industrial tools comprising:

          - Hacksaw Blades

          - Small Saws and Woodsaws

          - Saw Frames

          - Holesaws

          - Nutspinners and Riveters

          - Builders' Tools

An extensive range of garden tools comprising spades, forks, shovels,

cultivators and other agricultural and contractor's tools was manufactured at

the Company's UK plant in Wednesbury until the closure of that facility in

November 2006. After that date comparable products have been sourced from

overseas.

(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

Of the total sales revenues arising in the year ended September 30, 2006, 43.6%

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, 2005 and September 30, 2004 which

related to such factored items were 40.6% and 37% respectively.

                                       12

D-12

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

                                                             Number of

     Name/Location             Products Manufactured         Employees

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

A.   UK:

     Neill Tools               Hand tools                       164

     Atlas Site, Sheffield

     Robert Sorby              Woodturning tools                 31

     Sheffield

     Bowers Metrology          Precision measuring tools         66

     Bradford

Up to the date of their closure in November and December 2006, the Company also

manufactured a range of garden tools at its UK plant in Wednesbury and a range

of magnetic products at its premises in Vulcan Road, Sheffield, England.

B.   France:

     Spear & Jackson           Assembly of garden tools          28

     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 which 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 or prior to manufacturing suspensions or cessations. 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 24, 2006 there were $6.2 million backlog orders (November 25,

2005, $5.8 million). Given the nature of the business, the portion of these

orders which 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 months to September 2006 new

product range launches and other significant product related business

developments have included:

                                       13

D-13

NEILL TOOLS

*    Neill Tools successfully tendered to supply S&J branded woodsaws to a large

     UK builders' merchant, with deliveries commencing in February 2006.

*    An exclusive supply agreement with a large UK catalog house was also

     negotiated to supply a range of garden power tools during February and

     March 2006.

ECLIPSE

New products introduced during the year include:

*    "Micromag" filtration device

*    PLC controlled auto shuttle separator

*    Circular magnet sieve

*    Hydraulic oil filter and domestic boiler filter

*    Thin plate lifter and private label simple filter

BOWERS

*    The division successfully launched the Bowers Xtreme waterproof 3-point

     gauge in the US.

*    The new "Snapmatic" range of high precision snap gauges was launched at the

     biennial MACH tradeshow in May 2006. The first major shipments were

     fulfilled in quarter 4 of fiscal 2006.

SPEAR & JACKSON FRANCE

*    Spear & Jackson France has extended its product offerings to include a

     specialized bonsai range. Certain existing product lines, including

     thermometers, children's tools and S&J garden tools have also been revised.

ROBERT SORBY

*    Robert Sorby completed the development of the e-commerce site for its

     retail store in order to add sales revenues at no extra cost.

AUSTRALASIA

*    In Australia and New Zealand new and extended ranges under the S&J brand

     across garden digging, cutting, hand saw, masonry and air tool categories

     have been introduced.

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.

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.

                                       14

D-14

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.

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

woodworking tools market and seeks to differentiate itself from the large number

of manufacturers producing DIY type woodworking tools through quality, design

and brand.

                                       15

D-15

EMPLOYEES

The number of persons employed by the Company and its wholly owned subsidiaries

at September 30, 2006, 2005 and 2004 were 589, 710 and 755 respectively. 173 of

the Company's employees are subject to union agreements. Our Company's union

contracts with Neill Tools at the Company's Atlas site fall due for negotiation

in June 2007 and the agreements with the Bowers workforce at Bradford in the UK

fall due for renegotiation in July 2007. The Company believes its relationship

with employees is good.

CAPITAL EXPENDITURE

Capital expenditure in the years ended September 30, 2006, 2005 and 2004 was

$1.6 million, $1.4 million and $7.2 million respectively. Capital expenditure in

the year ended September 30, 2006 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 $0.6 million was incurred in the part

replacement of the UK and New Zealand motor vehicle fleet. Capital expenditure

in the forthcoming financial year is expected to be approximately $2.25 million

and will be used to replace key elements of the Company's computer hardware at

its Sheffield headquarters and 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 6 patents. The filing dates for these patents range

between June 1999 and January 2004 and the expiration dates will, therefore,

normally occur 20 years after these original dates of application. These patents

are registered in Great Britain, Canada, 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 373 trademarks and 42 designs registered throughout

the world. The renewal dates for the trademarks range from February 2007 to

August 2021. The registered designs fall due for renewal between June 2007 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, 21 registered designs issued by Great Britain, 6 registered designs

issued by Taiwan, 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.

                                       16

D-16

ITEM 1A. RISK ANALYSIS

Historically, Spear & Jackson, Inc. ("Spear & Jackson", "the Company", "we") has

achieved growth by the development of new products, strategic acquisitions and

expansion of the Company's sales organization. There can be no assurance that

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

which 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:

     - achieving planned revenue and profit growth in each of the Company's

business units;

     - changes in customer requirements and in the volume of sales to principal

customers; renewal of material contracts in the Company's business units

consistent with past experience;

     - the timing of orders and shipments;

     - emergence of new competitors or consolidation of existing competitors;

     - continued absence of consolidation among key customers;

     - 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 also be negatively affected by changes in the policies of our material

retail trade customers, particularly with regard to the reduction of trade

inventory levels, access to shelf space, and other conditions.

The market for certain of the Company's products is subject to economic

conditions affecting the industrial manufacturing sector, including the level of

capital spending by industrial companies and the general movement of

manufacturing to low cost foreign countries where the Company may not have a

competitive market presence. Accordingly, economic weakness in the industrial

manufacturing sector may result in decreased demand for certain of the Company's

products, which will impact negatively on the Company's trading performance.

Economic weakness in the consumer market will also have a detrimental effect on

the Company's profitability. In the event that demand for any of the Company's

products declines significantly, the Company could be required to recognize

certain costs as well as asset impairment charges on long-lived assets related

to those products.

                                       17

D-17

RISKS ASSOCIATED WITH THE SUCCESSFUL AND TIMELY INTEGRATION OF ANY SIGNIFICANT

BUSINESSES ACQUIRED BY THE COMPANY AND REALIZATION OF ANTICIPATED SYNERGIES:

The Company has made, and in the future may make, acquisitions of, or

significant investments in, businesses with complementary or aligned products

and services or in new start up businesses. Acquisitions involve numerous risks,

including but not limited to: (1) diversion of management's attention from other

operational matters; (2) inability to complete acquisitions along anticipated

timescales, or at all; (3) lack of success in realizing anticipated synergies

from acquisitions and investments (4) weaknesses in acquired company's internal

controls; (5) worse-than-expected performance of the acquired company or its

product offerings; (6) unknown, underestimated and/or undisclosed commitments or

liabilities; (7) failure to integrate and retain key employees; and (8)

unsuccessful integration of operations. The Company's inability to effectively

manage these risks could materially and adversely affect the Company's business,

financial condition and results of operations.

RISKS ASSOCIATED WITH MAJORITY STOCKHOLDER

As detailed in the footnotes to the consolidated financial statements, on July

28, 2006, the Company's majority stockholder, Jacuzzi Brands, Inc. ("Jacuzzi"),

completed the sale of its 61.8% stockholding in Spear & Jackson, Inc. to United

Pacific Industries Limited, a Bermuda corporation, and its wholly-owned

subsidiary Pantene Global Holdings Limited (collectively, "UPI"). This change in

ownership and control of the Company may have a significant impact on its future

strategy, the way that it conducts its operations and the size and composition

of its earnings and net assets, since UPI can influence substantially all

matters requiring stockholder approval by simple majority in excess of 50%,

including the election of directors, the approval of significant corporate

transactions, such as acquisitions, the ability to block an unsolicited tender

offer and any other matter requiring a vote of shareholders.

Additionally, based on its majority ownership, UPI is in position to complete a

merger or other transaction involving the Company, subject to compliance with

applicable regulatory requirements, which could result in the elimination of

minority stockholders. UPI paid Jacuzzi $1.40 per share for its shares of common

stock of the Company. UPI has agreed that for a one-year period following the

closing of its acquisition of the majority interest in the Company, should UPI

or any of its affiliates acquire any additional shares of the Company, the

purchase price per share will not be less than $1.40. However, UPI is under no

obligation to acquire any additional shares of the Company.

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 or products that could dilute margins or limit our ability to spread

manufacturing costs over normal levels of 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.

                                       18

D-18

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 as these reorganization or restructuring plans are implemented

or the related 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 and net assets.

Accordingly, we cannot be certain that currency exchange rate fluctuations will

not adversely affect our future results of operations and financial condition.

As explained above, a significant proportion of sales are made by our

businesses, particularly those in the UK, into foreign export markets. We

anticipate that the portion of our total revenue from international sales will

continue to increase as we further enhance our focus on developing new products,

establishing new business partners and strengthening our presence in key growth

areas. These overseas interests will therefore be subject to various financial

and operating risks that arise from conducting business internationally,

including:

     - unexpected changes in, or the imposition of, additional legislative or

regulatory requirements in the various geographical regions where the Company

operates ;

     - fluctuating exchange rates;

     - tariffs and other barriers;

     - difficulties in staffing and managing foreign sales operations;

     - import and export restrictions;

     - greater difficulties in accounts receivable collection and longer payment

cycles;

     - potentially adverse tax consequences;

     - 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

management's expectations, this may also have a negative impact on Company

earnings.

                                       19

D-19

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.

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. The 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 under funded pension plan to the extent necessary

to comply with minimum funding requirements imposed by regulatory demands. The

amount of such cash contributions is based on an actuarial valuation of the

Plan.

A number of statistical and other factors which attempt to anticipate future

events are used by the actuaries in calculating the expense and liability

related to the plan. These factors include assumptions about the discount rate,

expected return on plan assets and rate of future compensation increases as

determined by us, within certain guidelines, and in conjunction with our

actuarial consultants and auditors. Our actuarial consultants also use

subjective factors such as withdrawal and mortality rates to estimate the

expense and liability related to these plans. The actuarial assumptions used by

us may differ significantly, either favorably or unfavorably, from actual

results due to changing market and economic conditions, higher or lower

withdrawal rates or longer or shorter life spans of participants.

The funding status of the Plan can therefore alter as a result of changes in the

actuarial assumptions used, changes in market conditions and a number of other

factors. We cannot provide assurance that the value of the Pension Plan assets,

or the investment returns on those Plan assets, will continue to be sufficient

in the future. It is therefore possible that we may be required to make

significant additional cash contributions to the Plan which would reduce the

cash available for other business requirements, or that we will have to

recognize a significant pension liability adjustment which would decrease the

net assets of the Company.

RISKS RELATED TO RAW MATERIAL AND ENERGY COSTS:

The prices of many of the Company's raw materials vary with market conditions.

In addition, the price of many of the Company's finished goods that are sourced

from overseas' suppliers are impacted by changes in currency rates, freight

costs and raw materials at the point of production.

                                       20

D-20

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:

     - increases in transportation costs;

     - new or increased import duties;

     - transportation delays;

     - foreign work stoppages;

     - potential war, terrorism and political unrest;

     - exchange rate fluctuations that could increase the cost of foreign

manufactured goods.

RISKS CONCERNING THE CONTINUED AVAILABILITY OF FINANCING, AND FINANCIAL

RESOURCES ON THE TERMS REQUIRED TO SUPPORT THE COMPANY'S FUTURE BUSINESS

STRATEGIES:

We believe that our existing balances of cash, cash equivalents, our cash flow

from operations, and the existing credit facilities negotiated for the Company's

UK and other operations will be sufficient to meet our cash needs for working

capital and capital expenditures for at least the next 12 months. We may,

however, require additional financing to fund our operations in the future.

Although we expect existing debt financing arrangements and cash flows generated

from operating activities to be sufficient to fund operations at the current and

projected levels in the future, there is no assurance that our operating plan

will be achieved. We may need to take actions to reduce costs and to seek

alternative financing arrangements.

RISKS RELATING TO THE OUTCOME OF PENDING AND FUTURE LITIGATION AND GOVERNMENTAL

OR REGULATORY PROCEEDINGS:

As discussed in the footnotes to the consolidated financial statements, we are,

and have been, 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 such matters cannot always 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.

                                       21

D-21

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, and bad debts,

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.

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; profit volatility

arising from the seasonality of the garden product trade and benefits from

restructuring initiatives falling below forecast. Such factors may therefore

cause our operating results for future periods to be below the expectations of

management and the Company's advisers and this may cause a decline in the price

of our common stock.

There has been no material change in our risk factors from those described on

pages 12 to 16 in our Form 10-K for the fiscal year ended September 30, 2005.

ITEM 2.   PROPERTIES

Our principal executive office is located at 12012 Southshore Boulevard, Suite

103, Wellington, Florida 33414. Previously the principal executive office was

located at South Lasalle Street, Suite 201, Chicago, Illinois 60605.

We currently operate from five sites in the United Kingdom one site in France,

the Netherlands, New Zealand and China, and two sites in Australia. Four of such

locations are plant facilities and the remainder are office distribution

facilities. Four of the locations are owned and the remaining seven are occupied

under leases of varying lengths.

The UK owned locations comprise:

*    Neill Tools and Eclipse Magnetics, Atlas site, Sheffield, England

*    Robert Sorby site, Sheffield, England

*    Bowers Metrology site, Bradford, England

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

                                       22

D-22

The leasehold sites and their respective lease periods, date of expiry of lease

and annual lease rentals are as follows:

                                                                    Annual Lease

                                                                       Rental

Occupier/Location               Lease Period     Expiry of Lease       $'000

Robert Sorby, Doncaster

England                         10 years         May 2009                22

Bowers Metrology, Hampshire

England                         10 years         August 2012            140

AUSTRALIA

Victoria Building

Dandenong South

Australia                       12 years         December 2014          198

Welshpool, Australia            2 years          April 2007              30

NEW ZEALAND

Avondale

Auckland, New Zealand           3 years          April 2008              53

THE NETHERLANDS

Maastricht

The Netherlands                 6 years          March 2011              40

CHINA

Min Hang District

Shanghai, China                 5 years          May 2010                64

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.

In addition to the above, until December 2006, Eclipse Magnetics occupied leased

premises in Sheffield, England. These premises have now been vacated but Eclipse

Magnetics still remains responsible for the lease. The lease period is 25 years,

expires in June 2011 and the annual lease rental is $342,000.

We do not lease or own any other real property.

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. The SEC is continuing its investigation into

pension issues. The Company is offering its full cooperation.

As a further measure, the Court appointed a Corporate Monitor to oversee the

Company's operations. In addition to Mr. Crowley consenting to a preliminary

injunction the Court's order also temporarily barred Mr. Crowley from service as

an officer or director of a public company, and prohibited him from voting or

disposing of Company stock. Although Soneet Kapila has continued to serve as

Corporate Monitor for the Company, on January 10, 2007, he applied to the Court

to terminate the role of Corporate Monitor having determined that his function

was no longer necessary. The Court has not yet ruled on this application.

                                       23

D-23

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, was elected to serve as

acting Chief Executive Officer. Following extensive settlement negotiations with

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 as well as

funds collected from co-defendants International Media Solutions, Inc., Yolanda

Velazquez and Kermit Silva who were not affiliated with the Company, to the

victims of their 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. No disgorgement or civil penalties were sought from, or ordered to

be paid by, the Company.

Additionally, the Company entered into a Stock Purchase Agreement with PNC Tool

Holdings LLC ("PNC") and Mr. Crowley, the sole member of PNC. Under the Stock

Purchase Agreement, the Company acquired, for $100, and other good and valuable

consideration, 6,005,561 common shares of the Company held by PNC, which

represented approximately 51.1% of the outstanding common shares of the Company

at December 31, 2004, and which constituted 100% of the common stock held by

such entity. The parties also executed general releases in favor of each other

subject to the fulfillment of the conditions of the Stock Purchase Agreement.

The Stock Purchase Agreement was effected on April 8, 2005, following formal

approval by the SEC on February 10, 2005 and, on February 15, 2005 by the U.S.

District Court for the Southern District of Florida of the settlement of the

litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc., International

Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No:

04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further conditioned

on, among other things, the disgorgement and civil penalty funds being paid by

Mr. Crowley. These monies have now been received and are being administered for

the benefit of the victims of the alleged fraud by a court appointed

administrator pursuant to the Fair Funds provision of the Sarbanes-Oxley Act of

2002.

With the return of the Spear & Jackson shares to the Company by PNC, the

stockholders of the Company had their percentage stock interest increase

correspondingly. Jacuzzi Brands, Inc. ("Jacuzzi"), which a this time was a

beneficial owner of 3,543,281 shares of common stock had its interest in the

Company increase to approximately 61.8% of the outstanding common stock.

Subsequent to the SEC action a number of class action lawsuits were initiated in

the U.S. District Court for the Southern District of Florida by Company

stockholders against the Company, Sherb & Co. LLP, the Company's former

independent auditor, and certain of the Company's directors and officers,

including Mr. Crowley, the Company's former Chief Executive Officer/Chairman,

and Mr. Fletcher, the Company's former CFO and current acting Chief Executive

Officer. These suits allege essentially the same claims as the SEC suit

discussed above.

These various class action suits were subsequently consolidated. Thereafter, the

defendants filed certain Motions to Dismiss with regard to the Complaint and on

October 19, 2005, the U.S. District Court for the Southern District of Florida

in Re Spear & Jackson Securities Litigation entered its Order regarding these

Motions. The Order denied the Company's motion as well as that of Mr. Crowley,

the former Chief Executive Officer of Spear & Jackson. The Court granted the

Motion to Dismiss on behalf of Mr. Fletcher, the Company's interim Chief

Executive Officer, and also granted the Motion to Dismiss on behalf of the

Company's former independent auditor, Sherb & Co., LLP. The class plaintiff has

subsequently filed an appeal regarding the trial court's decision to dismiss the

case against Sherb & Co., LLP, which appeal is presently pending. No appeal was

filed with respect to the decision to dismiss the case against Mr. Fletcher.

                                       24

D-24

On July 7, 2006 the Company, Dennis Crowley and the Class Plaintiff reached a

Memorandum of Understanding ("MOU"), which confirmed that the plaintiffs, the

Company and Crowley in the class action had reached an agreement in principle

for the settlement of this litigation, subject to Court approval. According to

the terms of the MOU, the Company deposited the sum of $650,000 into a Qualified

Settlement Fund, disbursement pending approval of the Court. Subsequent to this,

Sherb & Co. also agreed to the terms of the Settlement agreeing to contribute an

additional $125,000.

On November 9, 2006, the Stipulation of Settlement was filed with the Court for

preliminary approval. Assuming that the preliminary approval is granted, the

next step will be to notice the Class of the settlement and to set the approval

process for final hearing and final approval before the Court. The matter will

not be finally settled until the Court issues a final judgment approving the

settlement.

Following the execution of the MOU, the lead plaintiffs commenced discovery

procedures to confirm the fairness and reasonableness of the Settlement. The

plaintiffs retain the right to terminate the Settlement if such discovery

reveals that the Settlement is not fair, reasonable and adequate. Subject to

these discovery procedures confirming the adequacy of the Settlement, all

parties have agreed to use their best efforts to finalize an appropriate

Stipulation of Settlement and any other relevant documentation necessary to

obtain approval by the Court of the settlement of this action.

If the Settlement outlined in the MOU is not approved by the Court or, if

subsequently terminated, the terms of the above Settlement will be without

prejudice, any settlement amounts already paid will be returned and parties will

revert to their litigation positions immediately prior to the MOU.

Should the class action settlement be approved, to facilitate the distribution

of the funds from the class suit to the class shareholders and keep

administrative costs to a minimum, the SEC Claim's Administrator applied to the

Court on January 9, 2007 for permission to combine the class action funds with

the funds derived in the SEC litigation, and allow for the SEC's Claim's

Administrator to disburse the collective funds.

On September 6, 2005, the Company was served with a Shareholder Derivative

Complaint filed on June 1, 2005 in the Circuit Court for Palm Beach County,

Florida (Case No. CA005068). The suit named, the Company as nominal defendant.

Also named as defendants were former directors Robert Dinerman, William Fletcher

and John Harrington, in addition to Dennis Crowley and the Company's prior

independent auditors, Sherb & Co. LLP.. 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 additionally 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.

Due to ongoing settlement discussions with the plaintiff's attorney, the Company

had not responded to the Complaint. In August 2006 the Company entered into a

settlement agreement with the plaintiff by agreeing to accept certain changes to

its corporate governance procedures and the payment of up to $75,000 in legal

fees. The settlement was filed with the Court in early November 2006, and if

approved by the Court, will result in a dismissal of the suit and release the

Company and the former director defendants Messrs Robert Dinerman, William

Fletcher and John Harrington. A preliminary Approval hearing is scheduled on

February 4, 2007.Dennis Crowley and Sherb & Co. continue as defendants in this

suit.

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, 2006.

                                       25

D-25

                                     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 "Pink Sheets" of the Over the Counter

market under the stock symbol SJCK.PK. 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 2006 - Stock Price     Fiscal 2005 - Stock Price

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

                         High $              Low $     High $              Low $

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

First Quarter ......      1.25                0.90      1.35                0.68

Second Quarter .....      1.80                0.95      1.90                1.35

Third Quarter  .....      1.62                1.10      1.83                1.15

Fourth Quarter .....      1.35                1.07      1.53                1.05

Year ...............      1.80                0.90      1.90                0.68

The highs and lows of our share price in the first quarter of fiscal 2007 were

as follows:

High $ 1.15

Low $ 0.95

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, 2006, there were 20 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 and reorganization 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>

                                       26

D-26

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, 2006,

2005, and 2004 and the consolidated financial data relating to the Consolidated

Balance Sheets as at September 30, 2006 and 2005, have been derived from the

audited consolidated financial statements of Spear & Jackson, Inc. included

herein. The selected consolidated data in respect of the Consolidated Statement

of Operations for the years ended September 30, 2003, and September 30, 2002 and

the consolidated financial data pertaining to the Consolidated Balance Sheets at

September 30, 2004, 2003 and September 30, 2002 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,

                                                          2006           2005            2004            2003            2002

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

<S>                                                  <C>              <C>             <C>             <C>              <C>

CONSOLIDATED STATEMENTS OF

OPERATIONS:

Net sales........................................     $   96,993       $ 100,698       $   99,485      $   90,124       $  87,886

Cost and Expenses:

    Cost of goods sold...........................         67,896          67,463           67,574          61,838          61,954

    Operating costs and expenses.................         36,078          31,405           29,753          21,909          27,250

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

    Operating (loss)income.......................         (6,981)          1,830            2,158           6,377          (1,318)

    Other income(expenses).......................            274             204             (116)           (101)            (96)

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

(Loss) income from continuing operations

    before unusual or infrequent items ..........         (6,707)          2,034            2,042           6,276          (1,414)

Unusual or infrequent items

    (charged) credited...........................           (692)          2,168                -               -               -

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

(Loss) income from continuing operations

    before income taxes..........................         (7,399)          4,202            2,042           6,276          (1,414)

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

Provision for income taxes.......................            973            (468)          (1,205)         (1,497)           (948)

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

Net (loss) income from continuing

   operations....................................         (6,426)          3,734              837           4,779          (2,362)

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

Loss from discontinued operations................           (101)           (163)            (214)            (66)         (1,150)

Provision for losses on disposal of

   discontinued operations.......................             48            (476)            (187)            (97)              -

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

Net loss from discontinued operations............            (53)           (639)            (401)           (163)         (1,150)

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

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

Net (loss) income................................    ($    6,479)      $   3,095       $      436      $    4,616      ($   3,512)

                                                     ===========      ==========      ===========     ===========      ==========

Basic and diluted net (loss) income  per share:

From continuing operations.......................    ($     1.12)      $    0.42       $     0.07      $     0.40      ($    0.58)

From discontinued operations.....................    ($     0.01)     ($    0.07)     ($     0.03)    ($     0.01)     ($    0.28)

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

                                                     ($     1.14)      $    0.35       $     0.04      $     0.39      ($    0.86)

                                                     ===========      ==========      ===========     ===========      ==========

Weighted average shares outstanding..............      5,735,561       8,845,290       11,741,122      11,988,930       4,100,071

                                                     ===========      ==========      ===========     ===========      ==========

CONSOLIDATED BALANCE SHEETS:

Working capital (note 3).........................     $   30,251       $  29,868       $   28,821      $   28,273       $  21,789

Other assets (note 3)............................     $   32,854       $  33,038       $   35,335      $   30,628       $  28,934

Other liabilities................................     $   41,264       $  36,703       $   34,717      $   27,049       $  21,419

</TABLE>

                                       27

D-27

          1. 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.

          2. The Statements of Operations for the years ended September 30,

     2006, 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.

          3. 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".

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

Sales of $97.0 million for the year ended September 30, 2006, show a decrease of

$3.7 million when compared to those for the equivalent period last year, while

the operating result has fallen from a profit of $1.8 million in 2005 to a loss

of $7.0 million in 2006. In the year ended September 30, 2006 the loss before

taxes has been further increased by $0.7 million of costs relating to unusual or

infrequent items (2005: net exceptional gains of $2.2 million). The infrequent

items comprise:

*    a $3.5 million gain arising on the sale of the residual element of the

     Company's Wednesbury facility;

*    charges of $3.5 million in respect of a UK manufacturing reorganization

     program which was initiated in the year;

*    $0.7 million of expenses in relation to the settlement of class and

     derivative litigation.

                                       28

D-28

The comparable 2005 figure of $2.2 million included a profit on disposal of land

and buildings of $3.3 million offset by manufacturing and other restructuring

costs of $1.1 million. After crediting taxation of $1.0 million (2005: charging

taxation of $0.5 million) and debiting losses from discontinued operations of

$0.1 million (2005: $0.6 million) the net loss for the year was $6.5 million

(2005: net income of $3.1 million)

These summary financials are presented in tabular form in the "Results of

Operations" section, below.

DISCUSSION OF OPERATING RESULTS

Sales for the year from continued activities have decreased by $3.7 million

(3.7%). This was primarily due to adverse currency exchange fluctuations in the

year of $3.1 million increased sales rebates of $0.5 million and marginal sales

volume decreases of $0.1 million. Sales volume improvements were recorded in our

Metrology, Magnetics and French divisions, but these were offset by volume

decreases in our other businesses attributable to soft domestic retail 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 30% for the year ended September 30, 2006 compared to 33% in

the previous year. Direct costs are still being adversely affected by cost price

increases in our principal raw materials of steel, plastic, cobalt and nickel,

and increases in basic utility costs. In our Neill Tools division margins have

been further diluted by a mix switch towards factored garden power tools at the

expense of better margins on industrial hand tool product lines. Additionally,

the Company's margins have been further eroded by one-time inventory provisions

of $1.1 million in our UK Garden Tools and Magnetics divisions following the

completion of reorganization programs in those operations.

Selling, general and administrative expenses have increased by $4.7 million

(14.9%) in the year. Reasons for the increase include: increased FAS 87 pension

costs of $4.37 million, general inflationary increases and one-time costs in

setting up our new Chinese facility. These adverse effects have, however, been

mitigated by the impact of movements in the US$/Sterling cross rates in the year

and decreased head office costs.

As a result of the decrease in sales volume, lower gross margins and higher

overhead costs, the Company's operating income has decreased by $8.8 million

(482%) from an income of $1.8 million in 2005 to a loss of $7.0 million in 2006.

The Company has benefited in the year from the $3.5 million gain arising on the

sale of the residual element of its UK manufacturing facility at Wednesbury. The

overall impact on pre-tax profits of this sale has been reduced by the provision

of $3.5 million manufacturing reorganization costs. On January 25 2006, the

Company announced the closure of the remaining element of its manufacturing site

at Wednesbury. All warehouse and distribution operations were transferred to the

Company's principal UK manufacturing site, Atlas, in Sheffield. Additionally, in

the final quarter of the year, the Company performed a review of its remaining

UK manufacturing operations. Further strategies are to be implemented at the

Atlas site and in the Eclipse Magnetics division to reduce the Company's ongoing

cost base 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, through improved raw materials

and product sourcing and by more efficient processes, in order to minimize

margin erosion and to retain its competitive edge over cheap foreign imports. As

noted above, 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

On March 23, 2006, Jacuzzi Brands, Inc. ("Jacuzzi") and its subsidiary

undertaking, USI American Holdings, Inc. ("USI" and together with Jacuzzi, the

"Seller") entered into a Stock Purchase Agreement (the "Stock Purchase

Agreement") with United Pacific Industries Limited ("UPI"), a Bermuda

Corporation, to sell its entire holding of 3,543,281 shares of the common stock

(the "Shares") of Spear & Jackson, Inc. ("SJI") to UPI for $1.40 per share for

an aggregate purchase price of $4,960,593. Such shares constitute all of the

shares of SJI owned by the Seller.

                                       29

D-29

The representations, warranties and covenants made by Jacuzzi and UPI were

typical for this type of transaction, and included a covenant that restricted

Jacuzzi from soliciting or negotiating with a third party between the signing

date of the Stock Purchase Agreement and the closing date of the transaction.

Jacuzzi also agreed that in connection with the closing of the transaction, it

would, among other things, cause UPI's designees and one designee of Jacuzzi to

be elected to the Board of Directors of Spear & Jackson, Inc. and would use

commercially reasonable best efforts so that such UPI designees are in

sufficient numbers to give UPI a majority of the Board of Directors of the Spear

& Jackson, Inc. UPI also agreed that neither it nor any of its affiliates would

purchase any additional Common Stock during the period from the signing date of

the Stock Purchase Agreement through one year following the closing at a price

less than $1.40 per share.

The purchase of the Shares by UPI contemplated by the Stock Purchase Agreement

was subject to the receipt of a number of closing conditions, including approval

by UPI's shareholders and the United Kingdom Pensions Regulator, and the receipt

of certain other regulatory approvals as well as other customary closing

conditions.

The Seller and UPI then announced that they had entered into Amendment No. 1

dated May 4, 2006, ("Amendment No. 1 to the Stock Purchase Agreement") to extend

the date by which the Seller and UPI were required to lodge the clearance

application with the UK Pensions Regulator. The Seller and UPI subsequently

received a comfort letter dated July 5, 2006, issued by the UK Pensions

Regulator (the "Comfort Letter"). The Seller and UPI agreed to waive the

condition contained in the Stock Purchase Agreement for a clearance from the UK

Pensions Regulator and to accept the Comfort Letter in satisfaction of that

condition.

The trustees of Spear & Jackson, Inc.'s UK Pension Plan confirmed by a letter

dated July 6, 2006 their acceptance of the UK Pensions Regulator's

determination. The Seller and UPI subsequently announced that they had entered

into Amendment No. 2 dated July 10, 2006, ("Amendment No. 2 to the Stock

Purchase Agreement") to waive their respective requirements for a clearance from

the UK Pensions Regulator and to accept in its place the Comfort Letter which

stated that the UK Pensions Regulator was of the view, based on the information

supplied to him in connection with the clearance application, that the change of

control as a result of the sale by the Seller of all of its shares of Spear &

Jackson, Inc. to UPI was not detrimental to the UK pension plan and that the UK

Pensions Regulator believed that a clearance was not necessary for the

transaction.

In addition, pursuant to the terms of Amendment No. 2 to the Stock Purchase

Agreement, UPI agreed, subject to the Closing having occurred, to indemnify the

Seller and JBI Holdings Limited (the "Jacuzzi Indemnified Parties") should the

UK Pensions Regulator, regardless of the Comfort Letter, require any of the

Jacuzzi Indemnified Parties to make a contribution or provide financial support

in relation to the potential pension plan liabilities of SJI or its

subsidiaries. In addition, UPI also agreed that for a period of twelve months

from the Closing Date, that it will not, (and will use its best efforts to

ensure that neither Spear & Jackson, Inc. nor any of its subsidiaries will) take

any action or omit to take any action that causes the UK Pensions Regulator, as

a result of such action or omission, to issue a contribution notice against the

Jacuzzi Indemnified Parties in relation to any UK pension plan in which Spear &

Jackson, Inc. or any subsidiary of Spear & Jackson, Inc. is an employer.

Further, UPI agreed that for a period of twelve months from the Closing Date,

that it will not (and will use its best efforts to ensure that neither Spear &

Jackson, Inc. nor any subsidiary of Spear & Jackson, Inc. will) engage in any

action or inaction which in relation to any such UK pension plan would fall

within the UK Pension Regulation clearance guidance note dated April 2005 as a

'Type A' event unless UPI procures that clearance is issued by the UK Pensions

Regulator in relation to such event in terms which confirm that no Jacuzzi

Indemnified Party shall be linked to a financial support direction or

contribution notice in respect of such event.

                                       30

D-30

On July 28, 2006 the purchase was formally completed.

On June 22, 2006, Jacuzzi and UPI filed a preliminary Form 14C with the SEC

announcing notice of change in control and of a majority of directors pursuant

to section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1

thereunder. The 14C indicated that three new directors would be designated by

and elected to the Board of directors by UPI, to serve until the Company's next

annual meeting. The 14C became effective on August 7, 2006, and the three new

directors would replace the incumbent directors on about August 27, 2006. In the

interim, the Board by resolution, appointed the three new directors Lewis Hon

Ching Ho, Andy Yan Wai Poon and Maria Yuen Man Lam to the Board effective August

9, 2006.

Brian C. Beazer, the Chairman of UPI, is a director of Jacuzzi and holds

approximately 24.56% of the shares of UPI. David H. Clarke is a director of UPI

and holds approximately 22.88% of the shares of UPI. Until his retirement from

all positions with Jacuzzi in September 2006, Mr. Clarke was the Chairman and

Chief Executive Officer of that company. Mr. Clarke also holds approximately

28,350 shares of common stock of Spear & Jackson, Inc., representing

approximately 0.49% of the shares of Spear & Jackson, Inc. but the shares of

Spear & Jackson, Inc. owned by Mr. Clarke are not being purchased at the time of

the sale of the Shares by the Seller to UPI.

As previously reported, a number of class action lawsuits were 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.

These various class action suits were subsequently consolidated. Thereafter, the

defendants filed certain Motions to Dismiss with regard to the Complaint and on

October 19, 2005, the U.S. District Court for the Southern District of Florida

in Re Spear & Jackson Securities Litigation entered its Order regarding these

Motions. The Order denied the Company's motion as well as that of Mr. Crowley,

the former Chief Executive Officer of Spear & Jackson. The Court granted the

Motion to Dismiss on behalf of Mr. Fletcher, the Company's interim Chief

Executive Officer, and also granted the Motion to Dismiss on behalf of the

Company's former independent auditor, Sherb & Co., LLP. The class plaintiff has

since filed an appeal regarding the trial court's decision to dismiss the case

against Sherb & Co., LLP, which appeal is presently pending. No appeal was filed

with respect to the decision to dismiss the case against Mr. Fletcher.

On July 7, 2006 the Company, Dennis Crowley and the Class Plaintiff reached a

Memorandum of Understanding ("MOU"), which confirmed that the plaintiffs, the

Company and Dennis Crowley had reached an agreement in principle for the

settlement of this litigation, subject to Court approval. According to the terms

of the MOU, the Company deposited $650,000 into a Qualified Settlement Fund,

disbursement pending approval of the Court. Subsequent to this Sherb & Co. also

agreed to the terms of the Settlement agreeing to contribute an additional

$125,000.

On November 9, 2006, the Stipulation of Settlement was filed with the Court for

preliminary approval. Assuming that the preliminary approval is granted, the

next step will be to notice the Class of the settlement and to set the approval

process for final hearing and final approval before the Court. The matter will

not be finally settled until the Court issues a final judgment approving the

settlement.

Following the execution of the MOU, the lead plaintiffs commenced discovery

procedures to confirm the fairness and reasonableness of the Settlement. The

plaintiffs retain the right to terminate the Settlement if such discovery

reveals that the Settlement is not fair, reasonable and adequate. Subject to

these discovery procedures confirming the adequacy of the Settlement, all

parties have agreed to use their best efforts to finalize an appropriate

Stipulation of Settlement and any other relevant documentation necessary to

obtain approval by the Court of the settlement of this action.

If the Settlement outlined in the MOU is not approved by the Court or, if

subsequently terminated, the terms of the above Settlement will be without

prejudice, any settlement amounts already paid will be returned and parties will

revert to their litigation positions immediately prior to the MOU.

                                       31

D-31

Should the class action settlement be approved, to facilitate the distribution

of the funds from the class suit to the class shareholders and keep

administrative costs to a minimum, the SEC Claim's Administrator applied to the

Court on January 9, 2007 for permission to combine the class action funds with

the funds derived in the SEC litigation, and allow for the SEC's Claim's

Administrator to disburse the collective funds.

On September 6, 2005, the Company was served with a Shareholder Derivative

Complaint filed on June 1, 2005 in the Circuit Court for Palm Beach County,

Florida (Case No. CA005068). The suit names the Company as nominal

defendant. Also named as defendants were former directors, Robert Dinerman,

William Fletcher and John Harrington, in addition to Dennis Crowley and the

Company's prior independent auditors, Sherb & Co. LLP. The suit contains

essentially the same factual allegations as an 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

additionally 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.

Due to ongoing settlement discussions with the plaintiff's attorney, the Company

had not responded to the Complaint. In August 2006 the Company entered into a

settlement agreement with the plaintiff by agreeing to accept certain changes to

its corporate governance procedures and the payment of up to $75,000 in legal

fees. The settlement was filed with the Court in early November 2006 and, if

approved by the Court, will result in a dismissal of the suit and release the

Company and the former director defendants Messrs Robert Dinerman, William

Fletcher and John Harrington. A Preliminary Approval hearing is scheduled on

February 4, 2007. Dennis Crowley and Sherb & Co. continue as defendants in this

suit.

RESULTS OF OPERATIONS

GENERAL

The results discussed below compare the years and quarters ended September 30,

2006, 2005 and 2004. 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.

Following their sales in September 2003 and February 2006, respectively, the

operating results of the Company's Megapro screwdriver division and those of its

Coventry Gauge thread gauge measuring division are disclosed under "Discontinued

Operations".

SUMMARY

A summary of the results of operations is as follows:

<TABLE>

<CAPTION>

                                                Years Ended                      Quarters Ended

                                                September 30                      September 30

                                        2006       2005        2004      2006        2005       2004

                                         $m         $m          $m        $m          $m         $m

<S>                                     <C>       <C>          <C>       <C>         <C>        <C>

Sales ...............................   97.0      100.7        99.5      21.8        22.3       24.0

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

Gross profit ........................   29.1       33.2        31.9       5.7         7.5        8.4

Operating costs .....................   36.1       31.4        29.7       8.3         7.0        7.2

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

Operating (loss) income .............   (7.0)       1.8         2.2      (2.6)        0.5        1.2

Other income/(expenses) .............    0.3        0.2        (0.2)      0.2         0.1          -

Unusual or infrequent events ........   (0.7)       2.2           -       1.8        (0.1)         -

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

(Loss) income from continuing

 operations before income taxes .....   (7.4)       4.2         2.0      (0.6)        0.5        1.2

Income tax benefit (provision) ......    1.0       (0.5)       (1.2)      0.7         0.2       (0.5)

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

(Loss)/income from continuing

 operations .........................   (6.4)       3.7         0.8       0.1         0.7        0.7

Discontinued operations .............   (0.1)      (0.6)       (0.4)        -        (0.2)      (0.2)

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

Net (loss) income ...................   (6.5)       3.1         0.4       0.1         0.5        0.5

                                        ====      =====        ====      ====        ====       ====

</TABLE>

                                       32

D-32

SALES

2006 COMPARED TO 2005

Sales from continuing activities decreased by $3.7 million (3.7%) from $100.7

million in the year ended September 30, 2005 to $97.0 million for the year ended

September 30, 2006. Sales of $21.8 million for the quarter ended September 30,

2006 were $0.5 million (1.97%) lower than sales of $22.3 million recorded for

the comparable period last year.

The net decreases in sales for the year and the quarter ended September 30, 2006

over the comparable periods in the prior year are analyzed as follows:

                                                      Year           Quarter

                                                     ended            ended

                                                  September 30,    September 30,

                                                      2006             2006

                                         Note          $m               $m

Effect of exchange rate movements...     (a)          (3.1)             0.7

Sales volumes decreases.............     (b)          (0.1)            (0.9)

Increased rebates...................     (c)          (0.5)            (0.3)

                                                      ----             ----

                                                      (3.7)            (0.5)

                                                      ====             ====

Analyzed by principal business segment, the net revenue increases and decreases

over prior periods can be summarized as follows:-

                                                      Year           Quarter

                                                     ended            ended

                                                  September 30,    September 30,

                                                      2006             2006

                                         Note          $m               $m

a)   Hand and garden tools

     Effect of exchange rate

      movements.....................     (a)          (2.3)             0.5

     Sales volume decreases.........     (b)          (2.0)            (1.4)

     Rebates........................     (c)          (0.4)            (0.2)

                                                      ----             ----

                                                      (4.7)            (1.1)

                                                      ----             ----

b)   Metrology tools

     Effect of exchange rate

      movements.....................     (a)          (0.5)             0.1

     Sales volume increases.........     (b)           1.4              0.4

     Rebates........................     (c)          (0.1)            (0.1)

                                                      ----             ----

                                                       0.8              0.4

                                                      ----             ----

c)   Magnetic products

     Effect of exchange rate

      movements.....................     (a)          (0.3)             0.1

     Sales volume increases.........     (b)           0.5              0.1

                                                      ----             ----

                                                       0.2              0.2

                                                      ----             ----

     Total                                            (3.7)            (0.5)

                                                      ====             ====

Notes:

(a)  The functional currencies of the group's revenues are UK sterling, the

     Euro, the Australian and New Zealand dollar and the Chinese Yuan. The

     principal functional currency is sterling and the variation in the average

     US$/L cross rate in the year to September 30, 2006 compared to the

     comparable period last year has had a significant adverse impact on the US

     dollar value of the group's sales. In contrast, the movement in the average

     cross rate for the quarter to September 30, 2006 has had a material

     favorable effect on the US dollar value of the group's sales when compared

     to last year. The average US$/L cross rates in the periods under review can

     be summarized as:

                                       33

D-33

                                             Average Cross Rates

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

                                   2006           2005            % Movement

Year ended September 30........   1.7956         1.8511             (2.99%)

Quarter ended September 30.....    1.874          1.785              4.99%

(b)  The trading environment in our principal markets was again challenging as a

     result of flat consumer demand, continuing competition from rival suppliers

     across a number of product ranges and the increasing practice of major

     retail customers promoting own label offerings sourced from the Far East at

     the expense of S & J Company product.

     Within the UK, Neill Tools and Robert Sorby have witnessed increasingly

     difficult trading conditions in the fourth quarter and for the year as a

     whole. Likewise, trading conditions have been equally competitive in our

     French and Australasian New Zealand divisions. The French market is

     becoming increasingly problematic because of the steady increase in Far

     Eastern imports. In New Zealand, sales have been negatively impacted by the

     loss of a major retail customer but such losses were mitigated by increased

     sales of air, masonry and hand tools in its sister Australian division.

     Despite the less than favorable market conditions in the Metrology and

     Magnetics products divisions, sales volumes increased over the prior year

     by $0.95 million. This increase arose from incremental sales growth in the

     Metrology division's facilities in Maastricht (first full year of trading)

     and Shanghai (business start up in the year) and increases in home and

     export sales in Eclipse Magnetics with both the filtration and separation

     ranges featuring prominently.

(c)  Sales rebates charged in the year ended September 30, 2006 amounted to $4.8

     million and $1.2 million of rebates were expensed in the quarter ending on

     that date. The level of rebates in the year ended September 30, 2006 has

     increased by 9.6% over the comparable period last year. This is due to

     increased trading volumes in Australia and the offering of increased

     rebates in the Neill Tools division and in France as an additional customer

     incentive in highly competitive sales markets.

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)

                                                      ====             ====

                                       34

D-34

Analyzed by principal business segment, the net revenue increases and decreases

over prior periods can be summarized as follows:-

                                                      Year           Quarter

                                                     ended            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)  In both 2004 and 2005, the functional currencies of the group's revenues

     were sterling, the Euro and the Australian and New Zealand dollar. The

     principal functional currency was sterling and the variation in the US$/L

     cross rate in the year, and to a lesser extent, the quarter ended September

     30, 2005 compared to the comparable periods last year had a significant

     favorable impact on the US dollar value of the group's sales. The average

     US$/L cross rates in the periods under review can be summarized as:

                                         Average Cross Rates

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

                                 2005            2004        % Movement

Year ended September 30......   1.8511          1.787           +3.6%

Quarter ended September 30...    1.785          1.788           (0.2%)

     Although in the quarter ended 30 September, 2005 the US$/L cross rate

     decreased when compared to the previous year, the Company still benefited

     from favorable exchange gains. This was due to the fact that there was a

     significant movement in the $/Aus $ cross rate in the last quarter of 2005

     when compared to the same quarter of the prior year which 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$/L 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 cheaper Far Eastern imports, the

     weak US dollar and poor retailing conditions in the UK and Australasia.

                                       35

D-35

     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 eased and UK sales of garden tools

     were adversely affected by depressed order intake from major retail

     outlets. Likewise, Australia and New Zealand continued to show volume

     decreases ($3.0 million for the year and $0.8 million in the last quarter)

     which were primarily attributable to increased levels of competition from

     foreign imports and a slow down in consumer spending.

     While similar market pressures were experienced over the year in the

     Metrology and Magnetics products divisions, volume increases over the prior

     year of $2.3 million cumulatively and $0.4 respectively 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

     increased by 13.6% over the comparable period last year. This was 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 movements in

     the L/US$ cross rate.

SEGMENTAL REVIEW OF SALES

We aim to maintain and develop the sales levels of our businesses through the

launch of new products, the improvement of existing ranges 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

2006 COMPARED TO 2005

Sales for the year to September 30, 2006 of $41.2 million showed a reduction of

$2.7 million (6.2%) over last year's total of $43.9 million. The decrease was

attributable to adverse volumes of $1.3 million, unfavorable exchange rates of

$1.3 million and increased rebates of $0.1 million.

Neill Tools continued to experience particularly tough trading conditions in the

year in both its export and home markets. Last year's export demand, bolstered

by the huge construction programs that were put in place following the conflicts

in the Middle East, has now declined. Additionally, our sales into the Middle

East have been affected by parallel imports into the UAE from Kuwait and

Indonesia. This issue further highlighted the fact that within the industrial

tools business, export markets continue to be driven by demand for our hacksaw

blades. Sales of these products now represent 60% of our industrial tools'

revenues and strategies are being prepared to spread this sales concentration

risk through the development of higher margin product ranges, brand presence and

new product development.

At home, the UK retail market continued a downward trend, especially in the

multiple retail sector, which, once again, is experiencing a downturn in

consumer spending. This increasingly soft retail demand together with industrial

and retail sales erosion through increased private label penetration had a

direct impact on our Hand & Garden sales in the UK and remains a cause for

concern. Overall, annual sales losses were mitigated, however, by the securing

of a $1.8 million agreement with a major retail chain for the Spear & Jackson

power garden tools during the first half of the year.

Gross margins continued to be depressed. The main drivers behind this reduction

were a mix switch toward Garden Power products at the expense of higher margin

product lines, increases of more than 50% in gas and electricity supply costs,

and, following the implementation of various manufacturing reorganization

initiatives, one-time stock provisions against obsolete, slow moving and

discontinued inventories.

                                       36

D-36

Improvements in manufacturing costs continue to be the focus of management to

improve competitiveness in new and existing markets. As previously reported, on

January 25, 2006, the company announced the closure of the remaining element of

its manufacturing site at Wednesbury, England. The site closure forms a key part

of the Company's UK manufacturing strategy to regenerate and modernize key areas

of the hand and garden tools businesses. All warehouse and distribution

operations previously performed at this location have now been transferred to

the Atlas site in Sheffield. The manufacturing and assembly functions formally

carried out at the Wednesbury site have been outsourced to suppliers based

outside the UK. The transfer of operations from Wednesbury to Sheffield was

completed by November 30, 2006 and, when fully integrated, will help to ensure

that the UK hand and garden business will deliver improved customer service and

satisfaction.

As a further element of its UK reorganization program, in the third quarter of

fiscal 2006 the company announced that certain manufacturing operations carried

out at its Atlas site would also cease.

Going forward, the main challenges for the business centre in the continuing

reduction of the manufacturing cost base and driving innovation and new product

development in line with our core brands and competences. In addition, the

Company is recruiting key people with the experience and skills to deliver new

product development strategy and focused product and brand management.

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 the 2004 figure 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, saw 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 slowed in the latter part of the

year. 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 affected the appetite for business travel and as a

consequence sales orders declined.

UK trading conditions, especially in the garden tools market, 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 in fiscal 2004, continued to sell strongly. Capital investment

of approximately $0.9 million in new woodsaw and hacksaw blade plant was

approved and implemented, ensuring that the record levels of productivity

experienced in the year could be sustained.

The threat to the business from low-cost, Far Eastern economies continued

unchanged. These competitive pressures were 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 were maintained when compared to

the previous year, as divisional profitability 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 were

provided. These initiatives were implemented to reduce the division's reliance

on own-manufactured items and to 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 was directed towards tight

overhead cost control and reorganizations of certain sales and administrative

functions were undertaken to reduce these costs.

                                       37

D-37

ECLIPSE MAGNETICS

2006 COMPARED TO 2005

Revenues for the year increased by $0.2 million (1.9%) from $10.7 million in

2005 to $10.9 million in 2006. This increase was explained by improved trading

volumes of $0.5 million offset by unfavorable exchange differences of $0.3

million.

Overall there has been sales volume growth in both our home and export markets.

The UK market reported a 5% improvement over last year, mainly attributable to

increased sales in the division's separation and core product ranges. Export

sales were also better than last year with lifting, separation and filtration

product ranges showing further improvements in performance. Sales into the US

continued to prosper as we continued to increase our US market share through the

introduction of new products and close key account management.

The Engineered Magnetic Solutions business saw further growth with new products

and technologies being offered for bespoke industry solutions.

Competition from the Far East remains the main threat, whether directly or

through agents, as we continue to see the emergence of more and more companies

in our trading markets offering high quality goods at low market price points.

Gross margins were lower than last year due to an adverse sales mix in the

Industrial sector, higher utility and key primary material costs and one-time

inventory provisions.

Reductions in direct costs and improvements in manufacturing efficiencies

continued therefore, to be the focus of management to improve competitiveness in

new and existing markets.

On August 11, 2006, the company announced both the cessation of certain

manufacturing activities at its site in Sheffield, England and the relocation of

its remaining business to the Atlas site, Sheffield. This site consolidation

forms another part of the Group's strategy to regenerate and modernize

operations and to reduce costs.

Looking forward, the main challenge continues to be the distancing of rival Far

East manufacturers from our key customer base. Our commodity-based business is

under continued threat. To counter this, we continue to promote the

attractiveness of our product by offering added value to our customers through,

for example, additional assembly work. At the same time, however, we are taking

positive steps to improve our manufacturing process and product sourcing. As

part of this strategy, the division enhanced its presence in China in January

2006 when it paid $0.2 million for a 25% equity participation in a recently

formed Chinese Joint Venture.

In addition to the cost control issues, management also continues to follow a

strategy of new product development as a key drive in increasing market share

within key product segments.

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 showed 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" continued

to design and develop new products, mainly driven by the material handling and

separation business. New products were designed, developed and installed within

the food and automation industries, covering liquid processing, conveying and

materials handling industry. In particular, the division was 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.

                                       38

D-38

The standard low technology area of the business continued to be eroded by good

quality imports at low price points from our competitors in China and the Far

East. This directly impacted on our distribution and industrial markets where

customers switched supply sources to the Far East or redesigned systems and

applications to accommodate newer magnetic materials.

Despite sales price erosion, increases in steel prices and the cost of

utilities, 2005 gross margins were not 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.

ROBERT SORBY

2006 COMPARED TO 2005

Robert Sorby sales for the year of $4.5 million showed a $0.5 million (9.6%)

decrease from last year's total of $5.0 million. This was attributable to

adverse sales volumes of $0.4 million and adverse exchange movements of $0.1

million.

The year to September 2006 has proved to be one of the most challenging faced by

Robert Sorby for many years. The UK home retail market sales fell by 9% compared

to last year, reflecting the challenging trading conditions and reduced consumer

demand. Two of the division's premier product groups, lathes and lathe chucks,

have felt the combined adverse effect of increased competition and a very

subdued market place.

Export markets, too, suffered softening demand, with a 10% decrease in sales to

North America, our principal export region. Here markets have been affected by

escalating living costs impacting adversely on our typical retiree customer who

lives on a fixed income. Additionally, excess stocks held by one major US

customer have had an adverse effect on the year's sales revenues.

We have continued to switch our focus from dealer selling to direct consumer

marketing, especially in-store demonstrations, woodworkers' club events and

regional exhibitions. One innovation has been the introduction of a series of

master classes in the UK and this concept is to be extended to the US in the

first quarter of the next financial year.

In the light of the sales shortfalls, emphasis has been placed on the control of

manufacturing costs, product development expenses and marketing expenditure.

Towards the end of 2005 we had suffered as a result of the dramatically

escalating price of steel, which is our prime raw material. Those prices have

now dropped significantly from their peak which has eased some of the pressure

on margins. In addition, the move from distribution through numerous UK trade

accounts to sales through our own retail arm, Turners Retreat, served to improve

gross margins as well as giving us more control of our product in the market

place.

Looking forward the business climate remains uncertain. In the UK uncertainty

over pension issues continues to have a negative impact on our typical customer.

In the USA, which, is our single biggest market, the outlook remains unclear

with pressure on personal expenditure. Against this unpromising background our

mail order business continues to flourish and the launch of a new sharpening

system in October has exceeded expectations.

2005 COMPARED TO 2004

Robert Sorby sales for the year showed no 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 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 the

prior year, reflecting the challenging 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.

                                       39

D-39

Overseas were also 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.

BOWERS

2006 COMPARED TO 2005

Sales for the year showed an increase of $0.8 million (5.3%) from $15.6 million

in 2005 to $16.4 million in 2006. $1.4 million of this increase is attributable

to increased sales volume offset by $0.5 million of adverse exchange rate

variances and $0.1 million of increased sales rebates.

The increase is mainly attributable to the continued expansion of the new sales

and distribution facility set up in Maastricht, Holland, that was established in

fiscal 2005 and, to a lesser extent, sales from our new Shanghai based facility

which commenced trading in the second quarter of the current year.

Growth in the UK based divisions has been rather more subdued. Here, the home UK

market remains the main concern, with the double threat of competition from low

cost imports and a shrinking industrial market place. Continuing factory

closures in the automotive market, including Rover and Peugeot, are,

unfortunately, not being offset by expansion in other UK factories such as

Honda, Nissan and Toyota. While the automotive sector has remained stagnant the

aerospace sector has performed well as has the offshore sector, where suppliers

have made significant investment in new equipment for this industry. In

particular, Bowers "Gagemaker" range of products has witnessed a 40% increase

during the year.

The core Bowers export business has been positive with the USA and German

markets performing strongly due to companies making significant investment in

machine tools, the key driver for stimulating purchase demand for metrology

equipment. We do anticipate a leveling off in expansion in these two markets in

fiscal 2007, although we expect this to be offset by expansion in Europe and

Asia.

The Shanghai facility is currently operating as a quality control and

administration centre for products being shipped to Europe. A complete range of

bench hardness testers has been introduced and a distributor network has been

established in Europe for these products with further distributors now appointed

in Asia for both the bench and portable hardness testers.

Bowers Shanghai has obtained a trading license to sell within the PRC and

preparations are now underway to commence direct selling activities in the

second quarter of Fiscal 2007. The activities in Shanghai will be further

enhanced when manufacturing operations commence in quarter 2 of Fiscal 2006/7.

Gross margins have been sustained during the year. Increased energy costs have

been offset by favorable exchange gains on imported products denominated in US

dollars and a price increase in July was successfully implemented.

Looking forward, demand for our own manufactured hand tools will continue to

face further pressure from cheap Far East imports. The company recognizes that

new products are the key drivers for growth in the business and several

significant new products are due to be launched during the 2006/7 fiscal year.

The main threats are a larger than expected slowdown in the US and any

significant adverse changes in exchange rates.

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 EBIT shortfalls in

quarters 1 and 2.

                                       40

D-40

The new sales and distribution facility set up in Maastricht, Holland, became

fully operational during the year and 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 were 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 included 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 were

also encouraging. Good progress was made in new markets throughout the year and

new or additional distributors were 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 was completed in quarter 4 as a means to further reduce overheads in

the 2006 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 which 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.

S&J FRANCE

2006 COMPARED TO 2005

Sales in the year decreased by $0.3 million (2.6%) from $10.4 million in 2005 to

$10.1 million in 2006, the decrease being attributable to adverse exchange rate

variances of 0.4 million offset by volume increases of $0.1 million.

The French economy remains subdued and business conditions in the Company's

principal markets have continued to mirror this depressed retail environment.

Competition remains intense in the French garden products market with a number

of suppliers trying to secure business with a shrinking base of retail outlets.

This competition inevitably leads to pressure on margins and the situation is

exacerbated by our sales profile where 40% of our turnover is concentrated on

two customers. This makes price negotiations difficult and can result in

additional incentives, e.g. rebates being offered, as a matter of course, in

order to gain orders. Sales rebate levels were particularly high in the period

under review.

We continue to feel the effects from the increasing flow of cheap Asian and Far

Eastern imports which puts pressure on turnover and margins. These pressures

were intensified by increases in direct costs, particularly raw materials and

payroll. This margin dilution could be further increased by the opening of

specialist cut-price garden stores in the course of the forthcoming year.

In order to relieve these margin pressures the Company continues to look for new

suppliers in China and India in order to drive down product cost. The Company

will continue to concentrate on marketing activity to promote its principal

brands and to secure new listings. Such activity will centre on the publication

of a new 2007 product catalogue, improvements to the Company web site,

advertising, newsletters, etc.

It is clear that in order to increase the success of new product ranges it is

essential that we are able to offer quality products at lower price points. We

will therefore focus on new product development as a way of both improving

margins and eliminating the seasonal peaks that are typical of the garden

products business. During 2006 the Company has extended its private ranges of

tools and introduced new snow, garden cutting and bonsai tools.

                                       41

D-41

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 remained depressed with increased

unemployment rates, lower consumer confidence and reduced spending levels.

Business conditions in the company's markets 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 forced to offer higher rebate levels to stimulate sales

Significant marketing activity was undertaken during the year to promote the

Company's principal brands and new listings 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 played an important role in the French division.

Gross margins in the year to September 30, 2005 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 was also successfully implemented.

AUSTRALASIA

2006 COMPARED TO 2005

Sales decreased from $15.0 million in 2005 to $13.8 million in 2006, the $1.2

million (7.8%) decrease being attributable to sales volume decreases of $0.35

million, increased sales rebate levels of $0.35 million and adverse exchange

variances of $0.5 million.

The sales volume decreases have all occurred within our New Zealand division

while Australia has witnessed some modest increases.

The Australian market recorded economic growth during the third and fourth

quarters despite an increase in domestic interest rates in May 2006 and

escalating fuel costs. The economy also recorded a 30-year low in its

unemployment rate giving early evidence that the increase in interest rates had

a less than anticipated impact on economic activity. Against this macro economic

backdrop, the division's sales were adversely affected by increased competition,

a rise in rival imported house brands, declining price points and the loss of

garden ranges with a major retail and agency line. Such losses were offset,

however, by increased sales in air, masonry, hand tools and metal products.

In New Zealand, sales levels were down on the previous year this being

attributable to increased levels of competition from Asian imported power and

air tool products, the loss of business with a major retail group in fiscal 2005

and a slowing of the New Zealand economy and declining consumer demand when

compared to the previous year.

In addition, the Australian and New Zealand markets continue to be extremely

price competitive with many of our retail customers sourcing their "house

brands" directly from Asia in direct competition with S&J. This practice has

placed, and will continue to place, added pressure on our sales, margins and

market share. Despite these pressures, margins in Australia were 3 points higher

than those achieved in the previous fiscal year as a result of improved product

sourcing and successful price increases. In contrast, margins in New Zealand

fell by two points as a result of adverse sales mixes and the clearance of slow

moving inventory at reduced prices.

Overall, sales to our major customers reflect the continued expansion and

domination of the market by the major corporate retailers who continue to expand

their market share at the expense of the traditional independent retail groups.

As such, our sales mix reflects this trend with sales growth continuing in the

corporate sector whilst sales within the independents continue to decline. Our

objective going forward is to spread our exposure to the corporate sector by

increasing our sales and market share in the independent and industrial markets.

                                       42

D-42

A major focus going forward will be the promotion and marketing of Spear &

Jackson brands to gain incremental sales and profit growth. The division will

also continue to develop and introduce new and extended ranges under the S&J

brand as a further lever to generate additional revenues.

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 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 negatively impacted on consumer

spending.

In New Zealand, lower than expected sales levels were 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 dented consumer

confidence and slowed demand.

Margins in both Australia and New Zealand 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 were mitigated, where

possible, by improved product sourcing.

Offsetting the margin dilution were overhead reductions in excess of 20%

compared to the prior year 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 continued to

place pressure on the sales and margins of the business. To counter this trend,

the division instigated aggressive pricing policies to help maintain and improve

existing sales volumes and market share in all categories in which it competes.

The division also remained focused on re-establishing and consolidating its

trading relationships with retail customers and suppliers and on maximizing the

selling opportunities of Spear & Jackson branded products. In this regard,

management 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 concentrated on improved product sourcing to ensure that

all S&J branded product meets customers' expectations and is positioned within

the appropriate price points. At the end of fiscal 2005, not all of these

initiatives had reached their full potential but efforts to generate incremental

sales and margin growth would continue into fiscal 2006. In addition, management

initiated a series of cost cutting measures, including the restructuring of the

workforce, in order to meet the slow down in sales demand.

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

                          2006      2005      2004     2006      2004      2003

                            %         %         %        %         %         %

Cost of goods sold.....   70.00     66.99     67.92    73.93     66.59     64.83

as a % of sales

Gross profit margin....   30.00     33.01     32.08    26.07     33.41     35.17

Costs of goods sold increased to $67.9 million in the year to September 30, 2006

from $67.5 million in 2005. In the quarter to September 30, 2006 the cost of

goods sold was $16.1 million compared to $14.8 million in 2005, an increase of

8.78%.

                                       43

D-43

COMPARISON OF 2006 TO 2005

Margins have continued to suffer from the adverse effects of raw material

(principally steel) and utility price hikes together with increases in the cost

of fuel used to operate our manufacturing processes. In the Neill Tools division

a main driver behind decreased margins has been the mix switch towards factored

garden power tools at the expense of better margins on industrial hand tool

product lines. Significantly, in the last quarter, margins have also been eroded

in both our Neill Tools and Eclipse divisions as a result of one-time inventory

provisioning against old and obsolete lines.

We will continue to 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. Improvements in manufacturing

efficiency and the reduction of direct costs continue to be the focus of

management as a means to improve competitiveness in new and existing markets.

The UK manufacturing reorganization program, initiated in the last quarter of

2005, and continued in the second and subsequent quarters of Fiscal 2006 with

the announcement of the closure of our manufacturing site at Wednesbury in the

UK, the relocation of the UK central warehouse to the Atlas site in Sheffield

and the cessation of certain manufacturing activities in the UK magnetics

division has had, and will have, a beneficial effect on margins.

Own-manufactured product will be progressively replaced with factored items

sourced from overseas thereby reducing costs and increasing profitability.

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 since 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 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 continued to show improvements over

Fiscal 2004, 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.

EXPENSES

2006 COMPARED TO 2005

Selling, general and administrative (SG&A) expenses increased by $4.7 million

(14.9%) from $31.4 million in the year ended September 30, 2005 to $36.1 million

in the year ended September 30, 2006. SG&A expenses for the quarter ended

September 30, 2006 were $8.3 million, an increase of $1.3 million (18.6%) over

the expenses charged in the equivalent period last year.

                                       44

D-44

The principal reasons for the movements are as follows:

                                            Increase/(Decrease) over Prior Years

                                               Year ended        Quarter ended

                                              September 30,       September 30

                                                  2006                2006

                                                   $m                  $m

a)   Impact of movements in average

     US$/sterling cross rates in the period.     (0.94)                0.2

b)   Increased FAS87 pension costs..........      4.37                1.22

c)   Inflationary increases net of foreign

     exchange gains and losses on trading

     transactions...........................      0.80                0.20

d)   Decreased head office costs relating to

     reduced legal and professional fees,

     monitor fees and associated costs......     (0.29)              (0.02)

e)   One-time costs in setting up the

     Metrology facility in Shanghai.........      0.10                0.00

f)   Other net increases(decreases).........      0.66                (0.3)

                                                  ----                ----

Total increase in SG&A expenses.............       4.7                 1.3

                                                  ====                ====

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                2005

                                                   $m                  $m

a)   Impact of movements in average

     US$/sterling cross rates in the period.      1.10                (0.1)

b)   Increased FAS87 pension costs..........      2.69                0.63

c)   Inflationary increases net of foreign

     exchange gains and losses on trading

     transactions...........................      0.50                0.10

d)   Decreased head office costs relating to

     reduced legal and professional fees,

     monitor fees and associated costs......      (0.7)               (0.3)

e)   Increased UK warehouse and distribution

     costs following the change to direct

     sales..................................      0.40                0.10

f)   Release of excess provision associated

     with settlement of severance

     compensation payable to former Managing

     Director...............................     (0.75)              (0.25)

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)

                                                 =====               =====

                                       45

D-45

OTHER INCOME AND EXPENSES

Other income and expenses has moved from a charge in 2004 of $0.2 million to

credits in 2005 and 2006 of $0.2 million and $0.3 million respectively.

The increase in 2006 over 2005 is due to the inclusion of income of $0.1 million

relating to the Group's share of earnings in Ningbo Hightec Magnetic Assemblies

Co. Ltd., a joint venture company in which the company holds a 25% stake.

Interest receivable levels in 2006 were slightly lower when compared to 2005.

Although the Group has benefited in the year from the sale proceeds ($4.8

million) attributable to the disposal of the remaining element of its

manufacturing facility in Wednesbury, England, this inflow has been offset not

only by restructuring and other costs associated with the closure of the site

but also by higher UK pension contributions. This has reduced interest

receivable on the UK net bank balances.

The $0.4 improvement in net income when comparing 2005 to 2004 is attributable

to bank interest receivable in the Company's UK businesses in Fiscal 2005.

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

sales of both 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 increased cash balances in fiscal 2005 and generated

higher interest income in that year.

UNUSUAL OR INFREQUENT EVENTS

Unusual or infrequent events comprise:

                                                Note   Years ended September 30,

                                                           2006         2005

                                                            Lm           Lm

Gain on sale of land and buildings...........   (a)         3.5          3.3

Manufacturing and other reorganization costs.   (b)        (3.5)        (1.1)

Settlement of class and derivative action

 litigation..................................              (0.7)

                                                           ----         ----

Total........................................              (0.7)         2.2

                                                           ====         ====

(a) Gain on sale of land and buildings

In the year to September 30, 2006 the Company recorded a net gain of $3.5

million on the sale of land and buildings. This was derived from the sale, on

July 27, 2006, of the remaining part of its industrial site at St. Paul's Road,

Wednesbury, England as follows:

                                                                      $m

Sale proceeds...................................................      4.8

Less net book value.............................................     (1.1)

Less deferred element of the gain relating to the future........     (0.2)

                                                                     ----

Market value of rentals.........................................      3.5

                                                                     ====

In the year to September 30, 2005 the Company 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 the Wednesbury site 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

                                ===           ===          ===

                                       46

D-46

(b) Manufacturing reorganization costs

2006

Manufacturing reorganization costs  comprise:

                                                     Note      $m

Manufacturing reorganization and relocation...        (i)      1.1

Severance costs...............................        (i)      1.7

Fixed asset impairment write-downs............       (ii)      1.2

Release of provisions.........................      (iii)     (0.5)

                                                               ---

                                                              (3.5)

                                                               ---

(i) On January 25, 2006 the Company announced the closure of the remaining

element of its manufacturing site at Wednesbury, England. With effect from

November 30, 2006 all warehouse and distribution operations previously performed

at this location were transferred to the Company's principal UK manufacturing

site in Sheffield ("Atlas"). The costs of closure of the Wednesbury site are

anticipated to be approximately $1.2 million. These costs include employee

severance payments, site closure costs, factory reorganization expenses, plant

transfer costs and associated capita expenditure.

In addition to the above, the Company announced that certain manufacturing

operations carried out at Atlas would also cease. Provisions for employee

severance costs in respect of the closure of these manufacturing operations were

made in the quarter ended June 30, 2006.

On August 11, 2006, the Company's UK subsidiary, Eclipse Magnetics Limited,

("Eclipse"), announced the cessation of certain manufacturing activities at its

UK site in Sheffield. Eclipse also announced that it would be relocating its

remaining business to the Atlas site. The cessation of manufacturing and site

relocation were completed by November 30, 2006 and provisions were made at

September 30, 2006 in respect of severance costs, relocation expenses and future

years rental costs relating to the vacated premises.

The Wednesbury site closure, the production rationalization at Atlas and the

restructuring at Eclipse form part of the Company's UK manufacturing

reorganization program which was initiated to regenerate and modernize key areas

of the hand and garden tools business. These closures will enable the Company to

consolidate its UK hand and garden tool and magnetic products manufacturing

sites and will allow the Company to develop a modern manufacturing, warehouse

and distribution facility which will be well placed to meet the current and

future needs of its customers.

Costs provided in respect of the Wednesbury site closure and the Atlas

reorganization were $2.2 million. Costs provided in respect of the Eclipse move

were $0.6 million.

(ii) Following the announcement of the reorganizations detailed above, the

Company carried out a detailed review of the ongoing utilization and remaining

asset lives review of the plant and machinery involved in the restructured

operations. As a result of this review, impairment write-downs of $1.2 million

have been made in the year.

(iii) As explained below, a surplus element of the Wednesbury site was sold in

the first quarter of Fiscal 2005 and provision was made at March 31, 2005 for

various site reorganization costs that were to be incurred as a result of that

partial sale. Certain of those costs were not incurred following the sale and

closure of the remainder of the site. Excess provisions of $0.4 million were

therefore released in the current year in relation to those anticipated costs.

A further $0.1 million has been released in fiscal 2006 relating to sundry other

reorganization programs initiated in previous years which have now been

concluded at a cost that was less than originally anticipated or which have not

been implemented in full.

                                       47

D-47

2005

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 was contractually obliged to vacate office and warehouse

      facilities located on these parts of the site that were sold. A provision

      of $0.4 million was made for costs in connection with this obligation. The

      provision principally related to office and factory refurbishment and

      reorganization expenses together with expenditure in respect of

      departmental relocations within the remainder of the site. Following the

      sale, elements of the Wednesbury manufacturing operation were closed or

      transferred and costs in connection with these initiatives are dealt with

      in (ii) and (iii), below.

In the final quarter of the year the Company performed a review of its UK

manufacturing operations and began implementation of a number of strategies to

reduce its ongoing cost base. Costs incurred in the implementation of these

initiatives comprised:

(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 were reviewed and impairment

      write-downs made where necessary.

(iv)  Certain provisions made in prior periods relating to manufacturing

      initiatives which were no longer to be implemented following the

      finalization of the Company's UK manufacturing reorganization strategy,

      were released in the year.

SETTLEMENT OF CLASS AND DERIVATIVE ACTION LITIGATION

On July 7, 2006 the US District Court for the Southern District of Florida

issued a Memorandum of Understanding ("MOU"), which confirmed that the

plaintiffs and defendants in the class action had reached an agreement in

principle for the settlement of this litigation. In settlement of this action

the company paid $0.65 million into a Qualified Settlement Fund.

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. In August 2006 the Company entered into a settlement agreement with the

plaintiff by agreeing to accept certain changes to its corporate governance

procedures and the payment of $0.07 million in legal fees. This amount has now

been paid into a Court approved fund and, if the settlement is authorized by the

Court, the suit will be dismissed and the Company and its former directors will

be released.

INCOME TAX

An income tax benefit of $1.0 million was credited in the year ended September

30, 2006 (2005: $0.5 million charge, 2004: $1.2 million charge). In the quarter

ended September 30, 2006 there was a tax benefit of $0.7 million (2005: $0.2

million credit, 2004: $0.5 million charge).

Income taxes represented 13.15% of the loss before tax in 2006 (2005: 11.1%,

2004: 59% of the profit before tax).

                                       48

D-48

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)   2006

     The effective rate in the year ended September 30, 2006 was less than the

     expected statutory rate for the following reasons:

     i)   The $3.5 million profit on the sale of the remaining element of the

          Company's manufacturing site at Wednesbury, England, is not subject to

          taxation due to the availability of capital tax losses brought forward

          that have not been recognized in the deferred tax computation. This

          has reduced the theoretical tax charge by $1.0 million.

     ii)  Income within certain overseas subsidiaries within the Spear & Jackson

          Group is taxed at different rates from the effective rate. The typical

          local taxation rate suffered by the Company's non-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 $0.4

          million.

     iii) The utilization of certain tax losses which 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 its US operations 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

          $0.4 million)

     iii) As a result of the UK restructuring costs incurred in the year and the

          benefit of a tax deduction (spread over 4 years) in respect of the

          special contribution of $7.2 million that was made to the Company

          Pension Plan in fiscal 2005, tax losses have been generated in certain

          of the UK companies. Valuation allowances of approximately $1.3

          million have been applied to these losses as a recent history of

          losses and other factors has precluded the Company from demonstrating

          that it is more likely than not that the benefits of these operating

          loss carry forwards will be realized.

     iv)  During the year, previously recognized deferred tax assets relating to

          overseas, non-US operations have had a valuation allowance of $0.4

          million applied to them as they no longer meet the "more likely than

          not" reasonableness test.

b)    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 reduced the theoretical tax

            charge by $0.9 million.

                                       49

D-49

     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 which 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.

NET (LOSS)/INCOME FROM CONTINUING OPERATIONS AFTER INCOME TAXES

Our net loss after income taxes from continuing operations was $6.4 million for

the year to September 30, 2006. This compares to a profit after income taxes of

$3.7 million for the year ended September 30, 2005, and $0.8 million in 2004.

Our net income after income taxes from continuing operations was $0.1 million

for the quarter to September 30, 2006 (2005: $0.7 million, 2004: $0.7 million).

DISCONTINUED OPERATIONS

Discontinued operations relate to the Coventry Gauge 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

its thread gauge measuring business located in the United Kingdom. The carrying

values of the assets relating to this entity were initially written down to

estimated fair value in the quarter ended March 31, 2005 and further write-downs

were made in the final quarter of fiscal 2005. On February 28, 2006, the Company

concluded the sale of these assets for a nominal consideration.

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 $0.1 million in the

year ended September 30, 2006 and $0.6 million and $0.4 million in the years

ended September 30, 2005 and September 30, 2004 respectively.

                                       50

D-50

LIQUIDITY AND CAPITAL RESOURCES

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

                                                 September  September  September

                                                 30, 2006   30, 2005   30, 2004

                                          Notes     $ m        $ m        $ m

Liquidity and capital resources:

Cash and cash equivalents...............             9.9        7.3       5.1

Overdrafts..............................               -       (0.8)     (0.1)

Working capital (excluding deferred tax)            30.3       29.9      28.8

Stockholders' equity....................            21.8       26.2      29.4

                                                    ====       ====      ====

Cash Flows:

Net cash (used in) provided by

operating activities....................   (1)      (0.3)      (6.2)      3.2

Cash provided by (used in) investing

activities..............................   (2)       3.8        7.7      (6.9)

Cash (used in) provided by financing

activities..............................   (3)      (0.8)       0.7      (0.3)

Effect of exchange rate changes.........            (0.1)         -      (0.1)

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

Changes in cash and cash equivalents....             2.6        2.2      (4.1)

                                                    ====       ====      ====

DISCUSSION OF CASH FLOWS

2006 COMPARED TO 2005

(1)  Net cash used in operating activities in the year ended September 30, 2006

     was $0.3 million (2005: $6.2 million). This represents a year on year

     favorable movement of $5.9 million (95.16%), which arose primarily from the

     following:

-    increase in trade working capital inflows of $5.2 million (325%)

-    increase in net inflows from other assets and liabilities (including

     taxation) of $13.2m (150%)

-    Reduction in net income (adjusted for depreciation, gain on sale of land

     and buildings and deferred income taxes, etc) of $12.5 million (299%) as

     dealt with in the commentary of results above. This reduction reflects not

     only the overall decline in net operating income but also includes the

     one-time cash outflows associated with:-

     * The $0.7 million payment, during fiscal 2006, in relation to the

     manufacturing reorganization program at Wednesbury and Eclipse.

     * The $0.7 million payment in relation to the settlement of the class and

     derivative litigation actions in July 2006 and September 2006,

     respectively.

                                       51

D-51

The reasons for the variances in the cash flow movements associated with other

assets and liabilities are summarized below:

(a)  Trade working capital variances.

     The net increase in cash inflows derived from decreases in trade working

     capital is as follows:

                                                  Note     $ million

     Increased inventory inflows...............    (i)         6.5

     Increased trade receivable outflows.......   (ii)        (0.8)

     Increased trade payable outflows..........  (iii)        (0.5)

                                                               ---

                                                               5.2

                                                               ---

i)   In the year ended September 30, 2006 inventories decreased by $2.9 million

     compared to an increase of $3.6 million in the year ended September 30,

     2005. Poor UK final quarter sales in fiscal 2005 resulted in higher than

     normal inventory levels at the end of that year. Additionally, purchases of

     stock in the Metrology Division in Holland also had an adverse effect on

     inventory flows, as did strategic stock builds in those sectors of the UK

     businesses which were undergoing reorganization. September 2006 stock

     levels have benefited from a rigorous stock reduction program. The

     manufacturing reorganization program has also meant that, with the

     cessation of certain manufacturing operations and the sourcing of goods

     from outside suppliers, inventory values as well as stock levels have been

     reduced.

ii)  The inflow from trade receivables in the year ended September 30, 2005

     benefited from the receipt of cash relating to high sales levels in August

     and September 2004. This has was not repeated in 2006 as sales levels in

     the last quarter of 2005 were lower than those witnessed in the last

     quarter of 2004 and cash receipts in fiscal 2006 were thereby reduced.

iii) Decreased trade payable inflows of $0.5 million have arisen in the year due

     to increasing levels of purchases of factored goods from overseas suppliers

     on reduced settlement terms.

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

i)   The major contributory factor is an $11.1 million variance in the year on

     year movements in the UK Pension Plan and the pension charge debited to the

     profit and loss account in 2005 and 2006. During fiscal 2006 employer

     contributions of $3.4 million were paid into the plan whereas contributions

     of $10.2 million were paid in fiscal 2005. The 2005 payment included a

     special contribution of $7.2 million, which was made in two equal

     installments in June and September 2005. Additionally, there has been an

     increase in the non-cash FAS 87 charge of $4.3 million from $4.0 million in

     2005 to $8.3 million in 2006.

ii)  The inclusion, at 30 September 2006, of reorganization provisions of

     approximately $1.7 million relating to the UK manufacturing reorganization

     program at Wednesbury, Atlas and Eclipse which will not be paid until

     fiscal 2007.

The favorable effect of the above has been mitigated by:

i)   The reduction in the amounts to be provided in respect of legal and

     professional fees, monitor costs and related expenses payments in the US

     Holding Company. During fiscal 2005 approximately $0.5 million was defrayed

     but expenditure in 2006 and the level of creditors required at the year end

     show a decrease compared to those at September 2005.

ii)  The $0.5 million payment, during fiscal 2006, of employee severance and

     Wednesbury move costs for which provision had been made in the financial

     statements at September 30, 2005.

                                       52

D-52

Other cash flow movements:

(2)  Cash inflow from investing activities in the year ended September 30, 2006

     was $3.8 million compared to $7.7 million in 2005. The year ended September

     30, 2006 includes $4.8 million relating to the sale of the remaining

     element of its industrial site at St. Paul's Road, Wednesbury, England. The

     year ended September 30, 2005 includes $5.2 million relating to the sale of

     land at Wednesbury, England and also $3.5 million relating to the warehouse

     and office facility at Boca Raton, Florida. Purchases of plant and

     equipment were $0.9 million in 2006 compared to $1.0 million in 2005. Also

     included within the cash flow for the year to September 30 2006 is $0.2

     million relating to the acquisition of a 25% stake in a joint venture

     company, Ningbo Hitech Magnetic Assemblies Co. Ltd.

(3)  Net cash used in financing activities was $0.8 million compared to an

     inflow of $0.7 million in 2005. The 2006 outflow principally represents the

     repayment of UK overdrafts. The 2005 inflow relates to the utilization of

     the UK bank overdraft facility.

2005 COMPARED TO 2004

(1)  Net cash used by operating activities in the year ended September 30, 2005

     was $6.2 million (2004: $3.4 million cash generation). This represents a

     year on year adverse movement of $9.3 million (295%), which arose primarily

     from the following:

-    increase in net outflows from other assets and liabilities of $5.7m (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 a special contribution of

     $7.2 million to the UK Pension Plan, which was made in two equal

     installments in June and September 2005. Additionally, annual employer

     pension contributions increased by $0.3 million due to the increase, 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 were partially defrayed in the year under review thereby giving rise

     to a cash outflow.

iii) Release of $0.6 million of provisions 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 was not paid until fiscal 2006.

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

(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)

                                                            ----

                                       53

D-53

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

     also had an adverse effect on inventory flows, as did strategic stock

     builds in those sectors of the UK business which were 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 the 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 suppliers on reduced

     payment terms.

(2)  Cash inflow from investing activities in the year ended September 30, 2005

     was $7.7 million compared to an outflow of $6.9 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 $1.0 million. 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.

(3)  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, led to a

     utilization of part of the UK bank overdraft facility.

BANK FACILITIES

The UK subsidiaries of Spear & Jackson plc and Bowers Group plc maintain a line

of credit of $8.4 million. This is secured by fixed and floating charges on the

assets and undertakings of these businesses. Of the total facility, $5.6 million

relates to bank overdrafts and $2.8 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, 2006 the company had $nil

(2005: $0.8 million) outstanding under the overdraft line and $0.1 million in

outstanding letters of credit (2005: $0.6 million).

The French and Australian subsidiaries of Spear & Jackson plc maintain

short-term credit facilities of $2.7 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 both September 30, 2006 and September 30, 2005 $0.5 million

of letters of credit and bills were outstanding under these facilities at

September 30, 2006 (September 30, 2005: $0.1 million).

The UK facilities were renewed in December 2006, the Australian facilities were

renewed in October 2006 and the French facilities fall for renewal at various

dates in 2007. 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.

                                       54

D-54

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, 2006 the extent of this guarantee relating to gross bank

overdrafts was $21.6 million (September 30, 2005 $20.4 million). The overall

pooled balance of the bank accounts within the pool at September 30, 2006 was a

net cash in hand balance of $5.4 million (September 30, 2005 $0.8 million

overdrawn).

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.

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:

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 2007 were in line with expectations and show

an operating profit of $0.5 million before consideration of FAS 87 pension

charges, interest and taxation. We anticipate that because of the seasonal

nature of our garden products businesses in the UK and France and the

traditionally low sales level in December, a trading loss (before inclusion of

pension charges) will be recorded in that month of approximately $0.1 million.

This trading pattern is consistent with the prior year and with forecast. The

base trading profit will be eliminated by the significant non-cash pension

charge calculated in accordance with FAS 87. The Company's actuaries anticipate

that the charge will be $7.9 million for fiscal 2007 compared to $8.4 million

for fiscal 2006. Base trading profits for the first quarter are currently

anticipated to be $0.6 million and after the deduction of the quarter's pension

charge of $1.9 million an operating loss (before unusual items and taxation) of

$1.3 million is forecast. As a result of the level of pension charges the

Company does not anticipate returning a net profit after tax for fiscal 2007.

Management will consider all available operational strategies to mitigate the

negative impact of trading losses which arise as a result of the high pension

costs during the forthcoming year.

During the later part of fiscal 2005 and during 2006 the Company performed a

detailed review of its UK manufacturing operations to identify initiatives to

combat declining sales performance and the increase in low price point imports

from Far Eastern markets. The implementation of a number of strategies to reduce

its ongoing cost base was carried out during the year. In January 2006, the

Company announced the closure of its Wednesbury manufacturing and distribution

facility and the relocation of the central UK warehousing facility to the Atlas

site in Sheffield, England. This was completed by the end of November 2006. In

fiscal 2005 the Company had previously sold the excess element of its site and

on July 27, 2006 the Company completed the sale of the remaining element of the

Wednesbury property. Funds realized from the disposal have been used to finance

the closure costs associated with the Wednesbury site and any excess sale

proceeds be reinvested in the business.

In addition, in the third quarter of fiscal 2006 the Company announced the

cessation of certain manufacturing operations at its Atlas site. Likewise, on

August 11, 2006 the Company's UK subsidiary, Eclipse Magnetics, announced that

the Company would cease a number of its manufacturing activities at its site in

Sheffield and that the remaining elements of the business would be transferred

to the Atlas Site.

                                       55

D-55

The Wednesbury site closure, the Atlas reorganization and the Eclipse

restructuring and relocation form part of the Company's UK manufacturing

reorganization program which has been initiated to regenerate and modernize key

areas of the hand and garden tools and Eclipse businesses. The closures will

enable the Company to consolidate its sites and will allow the Company to

develop a modern manufacturing, warehouse and distribution facility which will

be well placed to meet the current and future needs of its customers. The

changes made to the shape and structure of the UK business are significant and

it is therefore probable that, in the short term, the cost savings that the

reorganizations will deliver will be diluted whilst new procedures and processes

are being established.

We will continue to look at further initiatives to rationalize underperforming

areas of the business and to monitor operational infrastructures in the United

Kingdom, particularly overhead costs, to ensure that these are as cost efficient

as possible and at a level appropriate to the needs of the business.

The Company's core UK hand and garden businesses continue to face challenging

trading conditions with the key considerations being soft demand in the UK

retail sector, fierce competition from cheap foreign imports and the increasing

trend for multiple retailers to buy and promote own label brands in preference

to Company products. The reorganization program referred to above was

implemented to address these issues and further strategies will be considered to

reduce the Company's cost base.

As with the Company's UK hand and garden tool businesses, our Australasian and

French subsidiaries continue to experience difficult trading conditions because

of flat retail demand, increased levels of competition from Far East imports,

reduced consumer spending and the increasing trend of some retail groups to

expand their own direct import programs.

To counteract such factors, the management of these operations has developed and

introduced a number of new and extended ranges and promotional programs. Going

forward these ranges should deliver incremental sales and margin growth.

Additionally, overhead reduction programs are ongoing as management continues to

focus on the removal of all excess costs from the businesses.

Within the Metrology division the new selling and distribution outlet in

Maastricht is now fully operational. In the future, this revenue and earnings

growth will be enhanced by the division's quality control and distribution

centre which has been established in Shanghai, China.

Looking forward, demand for our own manufactured metrology hand tools will

continue to face further pressure from low cost Far East imports. The Company

therefore recognizes the need to focus its UK manufacturing sites on producing

more high technology products and measuring solutions. New products are the key

drivers for growth and several new ranges are due to be released during fiscal

2007. In order to make the Company more competitive in the low technology

sectors, various initiatives are also being explored within our new Shanghai

facility including the set up of its own manufacturing operation.

Our businesses will again face the issues of increased costs and margin erosion

as a result of raw material, fuel and other utility price increases, interest

rate increases, the $7.9 million FAS 87 pension charge 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.

Current trends, however, suggest a continued weakening which will place

additional pressure on our sales into a number of export markets.

The level of overhead expenses, particularly legal and professional costs,

incurred by our US corporate head office has reduced following the settlement of

the SEC suit during 2005. Any future savings will be dependent upon the final

resolution of the Class and Derivative Action lawsuits and the continuing role

of the Corporate Monitor.

                                       56

D-56

In the forthcoming year we will continue to focus on improving cash generation.

As explained above, during fiscal 2006 the Company announced the closure of its

Wednesbury site and the relocation and reorganization of its Eclipse and Atlas

sites. In addition, therefore, to normal trading cash requirements, in the first

two quarters of fiscal 2007 costs will be defrayed in the relation to the

various restructuring initiatives. These costs will be funded from existing core

UK bank facilities. Further funds will also be required to finance the next

stage of the development of the Shanghai business through the set up of its own

manufacturing facility. During the course of the forthcoming year the Company

will commence negotiations with the trustees of the pension plan to determine

the level of future employer cash contributions. The contributions will be

calculated in accordance with new UK pension legislation and it is therefore

likely that pension payments will increase by at least $2 million per annum from

July 2007.

To restrict the pressure that this expenditure will have on the Company's bank

facilities, focus will be maintained on the working capital reduction program

that has already been initiated. Emphasis will therefore continue to be placed

on strict working capital control in the forthcoming months. In conjunction with

this, the inventory reduction program that was implemented in quarters one and

two will continue, although temporary increases in inventories will occur as a

result of inventory builds that will be necessary during the closure of the

Wednesbury manufacturing site and other reorganization initiatives.

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; successful sourcing of new and existing products at

favorable prices, 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; continued

reorganization of our manufacturing and overhead bases so that they are as cost

efficient as possible; the successful onward development of new operations in

China and elsewhere; and the maximization of cash resources and the negotiation

of additional bank facilities, where required, so that we are able to fund new

initiatives and take advantage of market opportunities.

Much, however, will continue to depend on the level of retail demand in our UK,

French and Australasian markets. The results for fiscal 2006 were adversely

affected by softening demand and a further deterioration in consumer confidence

could significantly impact on our earnings levels in subsequent periods.

As previously reported, the formal resolution of the SEC legal action in fiscal

2005 enabled the Company to move forward with more certainty so that both short

and long term commercial strategies could be formulated and implemented. The

stability of the Company will be further enhanced by the settlement of the Class

and derivative Action litigation and by the sale of Jacuzzi Brands, Inc.'s 61.8%

majority shareholding in Spear & Jackson, Inc. to United Pacific Industries

Limited ("UPI") on July 28, 2006.

The development of detailed business strategies under our new ownership

structure is in its formative stages but potential synergies and areas of

specific market and commercial expertise have been identified which, going

forward, are hoped to be of benefit to both Spear & Jackson, Inc. and UPI. Both

UPI and Spear & Jackson, Inc. welcome this business combination which should

lead to the formation of an enterprise of sufficient size and with a range of

products that will enable it to compete effectively in the modern global trading

environment.

                                       57

D-57

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, 2006:

                                     Total        Payments due by period ($m)

Contractual obligation               Amount    1 year   1-3      4-5     5 years

                                   Committed  or less  years    years    or more

                                     ($m)

Capital lease obligations........     0.9       0.5      0.4       -         -

Operating leases.................                                            -

(note a).........................     5.9       1.1      1.9     1.6       1.3

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

                                      6.8       1.6      2.3     1.6       1.3

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

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

     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, 2006

     the Company paid $3.4 million into the plan. In the year ended September

     30, 2007, in the ten month period to July 31, 2007 the level of

     contributions will be approximately $3.1 million. Contributions after that

     date will be determined after consultation between the Company, the actuary

     and the pension plan trustees. Following the introduction of new UK pension

     legislation it is anticipated that post July 31, 2007 Company contributions

     will increase to $5.9 per annum.

(c)  As at September 30, 2006, the Company had letters of credit of $0.6 million

     outstanding, which are secured by the UK and Australian credit facilities.

At September 30, 2006, 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 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 - valued at cost determined on a

first in, first out basis.

Work in progress and finished goods - cost of direct materials and labor plus

attributable overheads based on a normal level of activity.

                                       58

D-58

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:-

                                                                  2006     2005

                                                                   $m       $m

Gross Stock

-    raw materials and consumables............................     6.2      5.3

-    work in progress.........................................     4.5      6.4

-    finished goods...........................................    19.3     19.8

Less

-    slow moving, obsolete and net realizable value provisions    (7.1)    (6.5)

                                                                  ----     ----

Net Stock Valuation...........................................    22.9     25.0

                                                                  ====     ====

The overall decrease in the net value of inventory is $2.1 million which is

stated using year end US$ cross rates. The year end cross rate at September 30,

2006 was 1.8682 compared to 1.7688 at September 30, 2005. Restating the 2005

inventory at the 2006 closing cross rate would have the effect of increasing the

2005 inventories by $1.4 million. The total stock movement, excluding currency

fluctuations, is therefore a decrease of $3.5 million. This decrease is

attributable to:

(i)  Rigorous stock reduction programs initiated in the year to September 30,

     2006.

(ii) Higher than usual stock provisioning against old and obsolete lines.

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

                                                                  2006     2005

                                                                   $m       $m

Balance brought forward.......................................     6.5      5.9

Provisions released following disposal of inventory...........    (1.7)    (0.5)

Additional provisions made....................................     1.9      0.9

Exchange movements............................................     0.4      0.2

                                                                   ---      ---

Balance carried forward.......................................     7.1      6.5

                                                                   ===      ===

While the Company has benefited in income terms during the year from selling

inventories that had been previously written down, the inventory reserve has

increased during the year. This is primarily due to exchange rate fluctuations

and the insertion of one-time inventory provisions in the UK hand and garden and

Magnetics divisions as a result of the reorganizations carried out in those

operations.

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.

                                       59

D-59

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 is 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

                            Revenues        Rebate       Rebate

                               $m             %            $m

Target           1             0.5            5.0         0.025

                 2             0.75           7.5         0.056

                 3             1.0           10.0         0.1

                 4             1.25          12.0         0.15

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,

2006 was $0.9 million (September 30, 2005 $0.04 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 Chinese Yuan, the

New Zealand dollar, the Australian dollar and the US dollar will affect the

translation of the UK, French, Dutch, Chinese, New Zealand and Australian

subsidiaries' financial results into US dollars for the purposes of reporting

the consolidated financial results.

The process by which each foreign subsidiary's financial results are translated

into US dollars is as follows: income statement accounts are translated at

average exchange rates for the period; balance sheet asset and liability

accounts are translated at end of period exchange rates; and equity accounts are

translated at historical exchange rates.

The US$ Balance sheet and income statement financial data could therefore be

subject to material fluctuation year on year as a result of significant

movements in the cross rate between the US$ and the various source functional

rates used in the consolidation.

Translation adjustments arising from the use of differing exchange rates from

period to period are included in the Accumulated Other Comprehensive Income

(Loss) account in Stockholders' Equity. Management has decided not to hedge

against the impact of exposures giving rise to these translation adjustments as

such hedges may impact upon the Company's cash flow compared to the translation

adjustments which do not affect cash flow in the medium term.

PENSION AND POST-RETIREMENT BENEFIT OBLIGATIONS

A. ACTUARIAL BACKGROUND

The Company operates a contributory defined benefit plan covering certain of its

employees in the United Kingdom based subsidiaries of Spear & Jackson plc.

                                       60

D-60

The overall funding objective of the scheme 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 scheme 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, schemes were required to satisfy a

minimum funding test known as the Minimum Funding Requirement (MFR). This was

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 was known as the MFR funding ratio. At the 2004 valuation

date the MFR funding ratio was 89%.

The previous full actuarial valuation was performed at April 5, 2002. The base

funding and MFR funding ratios at that date and at September 30 financial year

ends thereafter have been:-

                                        Funding Ratios

                                    Base %           MFR %

     April 5, 2002...............     94               94

     September 30, 2002..........     78               91

     September 30, 2003..........     89               96

     September 30, 2004..........     81               92

     September 30, 2005..........     85               96

At September 30, 2006 (the latest date at which information is available for the

current year annual filing), the base funding ratio and MFR funding ratio shows

little movement at 84% and 98% 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 L4 million

(approximately $7.2 million) payable in two installments of L2 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 L1.9 million (approximately $3.7 million).

The actuary has confirmed that this contribution rate, which will remain fixed

until July 31, 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

2007, then the Company's contribution will increase to L3 million (approximately

$5.3 million). Following changes in UK pensions legislation the contribution

rate that will apply from August 2007 onwards will be determined in accordance

with the requirements of the Scheme Specific Funding regulations rather than

MFR. The Scheme Specific Funding regulations require , inter alia, that plan

deficits must be made good over an accelerated time frame and this requirement,

together with other conditions, will mean that the annual contribution level

will increase substantially from the rate of L1.9 million ($3.7 million) that is

currently being paid by the Company.

                                       61

D-61

Contributions will therefore be subject to review, upwards or downwards, at

future actuarial valuations. Contribution rates in previous years 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

     September 30, 2006.......      3.4

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 liability related to the plans. These

factors include assumptions about the discount rate, expected return on plan

assets and rate of future compensation increases as determined by us, within

certain guidelines, and in conjunction with our actuarial consultants and

auditors. In addition, our actuarial consultants also use subjective factors

such as withdrawal and mortality rates to estimate the expense and liability

related to these plans. The actuarial assumptions used by us may differ

significantly, either favorably or unfavorably, from actual results due to

changing market and economic conditions, higher or lower withdrawal rates or

longer or shorter life spans of participants.

This discussion addresses the sensitivities in assumptions that could impact the

plan disclosures in the company's consolidated balance sheet and income

statement and also their effect on ongoing employer contribution payments and

the company's liquidity.

The principal assumptions used to determine Spear & Jackson plc's pension

benefit costs are the discount rate, the expected return on plan assets and the

rate of compensation increase.

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

5.05% at September 30, 2006, 5.0% at September 30, 2005, and 5.5% at September

30, 2004.

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 3.1% and 6.6% in the year ended September 30, 2006 (2005: 2.9% and

6.5% respectively, 2004: 2.8% and 7.0% 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.

                                       62

D-62

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:

<TABLE>

<CAPTION>

                                                         Impact on

                                                       September 30,

                                                            2006               Impact on

                                   Impact on 2007        Projected            September 30,

                                   Pre-Tax Pension        Benefit             2006 Equity

Change in Assumption                   Expense           Obligation          (Net of tax)

<S>                                <C>                 <C>                   <C>

25 basis point

 decrease in discount rate.....    +$1.05 million      +$0.33 million        -$6.88 million

25 basis point

 increase in discount rate.....    -$1.01 million      -$9.85 million        +$6.56 million

25 basis point

 decrease in expected

 return on assets..............    +$0.41 million      -                     -

25 basis point

 increase in expected

 return on assets..............    -$0.41 million      -                     -

25 basis point

 increase in compensation

 assumption....................    +$0.15 million      +$0.77 million        -

25 basis point

 decrease in compensation

 assumption....................    -$0.15 million      -$0.75 million        -

Use of PA8002010

 Mortality table...............    -$1.56 million      -$11.47 million       +$7.75 million

</TABLE>

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,

2006, 2005, 2004 and 2003.

ASSUMPTIONS SUMMARY

                                   SEPTEMBER   SEPTEMBER   SEPTEMBER   SEPTEMBER

                                     2006        2005        2004        2003

WEIGHTED AVERAGE ASSUMPTIONS

Discount rate....................      5.05%       5.00%     5.50%       5.50%

Rate of compensation increase....      3.10%       2.90%     2.80%       2.50%

Expected return on assets........      6.60%       6.50%     7.00%       7.50%

Fixed pension increase...........      5.00%       5.00%     5.00%       5.00%

LPI pension increase.............      2.80%       2.70%     2.70%       2.50%

Post 1988 GMP increase...........      2.50%       2.40%     2.40%       2.00%

Inflation........................      3.00%       2.80%     2.80%       2.50%

Mortality table..................          -           -      PA80        PA90

Mortality table - current

  pensioners ....................  PA92C2005   PA92C2005         -           -

Mortality table - future

  pensioners.....................  PA92C2015   PA92C2015         -           -

                                       63

D-63

Using the assumptions referred to above, the funded status of the plan under FAS

87 at September 30, 2006, 2005, 2004 and 2003 was as follows:

                                 9/30/06      9/30/04      9/30/04      9/30/03

                                  $'000        $'000        $'000        $'000

Projected benefit obligation..  (234,598)    (213,471)    (180,375)    (154,105)

Fair value of plan assets.....   186,205      170,110      141,257      124,355

Projected benefit obligation

 in excess of plan assets.....   (48,393)     (43,361)     (39,118)     (29,750)

Unrecognized actuarial loss       71,322       69,907       59,902       47,637

Net amount recognized.........    22,929       26,546       20,784       17,887

As at September 30, 2003, 2004 and 2005, the 2006 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 2003 and 2004 and 12 years in 2005 and 2006 based

on actuarial expectation of a substantial future increase in the value of plan

assets.

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 the membership profile of the scheme is relatively

mature (with over 50% of the Plan members being pensioners) and that a

significant proportion of pensions increase at a fixed 5% when in payment.

Due to the lower discount rate, a decline in the fair market value of plan

assets during 2003 and the use of revised mortality tables, the accumulated

benefit obligation at September 2003, September 30, 2004 and 2005 exceeded the

fair value of plan assets by $25.3 million, $33.5 million and $36.0 million

respectively. At September 30, 2006, the ABO again exceeded the market value of

plan assets. The excess at the 2006 period end was $40.6 million and a net of

tax comprehensive loss of $6.3 million has been credited to shareholders' equity

in 2006. Cumulative amounts recognized in the consolidated balance sheet at

September 30, 2006, together with comparative disclosures for 2003, 2004 and

2005 are therefore as follows:

                                   2006         2005         2004         2003

                                  $'000        $'000        $'000        $'000

Accrued pension liability

 (disclosed in other

 liabilities).................   (40,565)     (35,954)     (33,545)     (25,262)

Other comprehensive income

 (disclosed in shareholders'

 equity)......................    63,494       62,500       54,329       43,149

Net amount recognized.........    22,929       26,546       20,784       17,887

Assuming only a modest increase in the fair market value of plan assets in 2006

and the application of a reduced discount rate it is anticipated that both the

accumulated benefit obligation and the potential benefit obligation at September

30, 2007 will exceed the fair value of plan assets. As a result of this, and

also the publication of a new US financial reporting standard relating to the

revised accounting treatment of defined benefit pension plans, it is likely that

the amount of the pension deficit recorded in the Company's balance sheet at

September 30, 2007 will increase substantially.

In September 2006, the FASB issued SFAS No. 158, Employers' Accounting for

Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB

Statements No. 87, 88, 106 and 132(R) (SFAS 158). This statement requires

recognition of the overfunded or underfunded status of defined benefit pension

and other postretirement plans as an asset or liability in the statement of

financial position and changes in that funded status to be recognized in

comprehensive income in the year in which the changes occur. SFAS 158 also

requires measurement of the funded status of a plan as of the date of the

statement of financial position. The recognition provisions of SFAS 158 are

effective for fiscal 2007, while the measurement date provisions are effective

for fiscal year 2009. If SFAS 158 were applied at the end of fiscal 2006, using

the Company's September 20, 2006 actuarial valuation, we would have recorded an

additional pre-tax charge to accumulated other comprehensive income totaling

$7.8 million ($5.5 million after tax) representing the difference between the

funded status of the plans based on the projected benefit obligation and the

amounts recorded on our balance sheet at September 30, 2006.

                                       64

D-64

Under SFAS 87, the following amounts have been charged against earnings in the

years ended September 30, 2006, 2005 and 2004.

               $m

     2006      8.4

     2005      4.0

     2004      1.3

The Company has been advised by its actuaries that the comparable SFAS87 pension

charge for the year ended September 30, 2007 will be approximately $7.9 million.

The increase in the charge over the last three years 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.

During the year ended September 30, 2006 the fair value of assets increased by

around 3.6%. 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, which cannot be offset

     against the French earnings. The French earnings thus remain unsheltered

     and attract taxation at the local statutory rate. The excess UK losses may

     not give rise to a taxation credit if a carry forward of the losses as a

     deferred tax asset cannot be justified through doubts concerning their

     ultimate utilization against future profits and a higher period two tax

     charge will follow.

                                       65

D-65

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.

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 which 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, French 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 2021. 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 wholly or

in parts. Accordingly, at September 30, 2006 a valuation allowance has been

applied against all NOLS in excess of those that are anticipated to be utilized

in the UK entities in 2007 and, in 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.

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.

                                       66

D-66

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, 2006 the Company had no borrowings in the form of

overdrafts and had cash and cash equivalents of approximately $9.9 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,

New Zealand and China. These operations transact business in the relevant local

currency and their financial statements are prepared in those currencies.

Translation of the balance sheets, income statements and cash flows of these

subsidiaries into US dollars is therefore impacted by changes in foreign

exchange rates.

In the year ended September 30, 2006 compared to the equivalent period in 2005,

the change in exchange rates had the effect of decreasing the Company's

consolidated sales by $3.1 million, or 3.1%. Since most of the Company's

international operating expenses are also denominated in local currencies, the

change in exchange rates had the effect decreasing operating expenses by $0.9

million for the twelve months ended September 30, 2006 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, 2006 the Company

held forward contracts to sell Australian and New Zealand dollars to buy

approximately $1.2 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 $0.05 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, 2006 the Company had made an allowance of $1.6 million in

respect of doubtful accounts which management believes is sufficient to cover

all known or expected debt non-recoveries.

                                       67

D-67

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                      INDEX

                                                                     Page Number

Report of Independent Registered Public Accounting Firm............      F-1

Consolidated Balance Sheets as of September 30, 2006 and 2005......      F-2

Consolidated Statements of Operations for the years ended

  September 30, 2006, 2005 and 2004................................      F-3

Consolidated Statements of Changes in Stockholders' Equity

  for the years ended September 30, 2006, 2005 and 2004............      F-4

Consolidated Statements of Cash Flows for the years ended

  September 30, 2006, 2005 and 2004................................      F-5

Notes to Consolidated Financial Statements.........................      F-6

                                       68

D-68

REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Spear & Jackson, Inc.

Wellington,

Florida

We have audited the accompanying consolidated balance sheets of Spear & Jackson,

Inc. and Subsidiaries (the "Company") as of September 30, 2006 and September

30, 2005 and the related consolidated statements of operations, stockholders'

equity and cash flows for each of the three years in the period ended September

30, 2006. These financial statements are the responsibility of the Company's

management. Our responsibility is to express an opinion on these financial

statements based on our audits.

We conducted our audit 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 audit provides a

reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in

all material respects, the consolidated financial position of Spear & Jackson,

Inc. and its subsidiaries as of September 30, 2006, and September 30, 2005 and

the consolidated results of their operations and its cash flows for each of the

three years in the period ended September 30, 2006, in conformity with US

generally accepted accounting principles.

/s/ Chantrey Vellacott DFK LLP

Chartered Accountants,

London, England

January 15, 2007

                                       F-1

D-69

<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,

                                                                    2006             2005             2004

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

<S>                                                             <C>              <C>              <C>

Net sales ..................................................    $     96,993     $    100,698     $     99,485

Cost of goods sold .........................................          67,896           67,463           67,574

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

Gross profit ...............................................          29,097           33,235           31,911

Operating costs and expenses:

    Selling, general and administrative expenses ...........          36,078           31,405           29,753

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

Operating (loss) income ....................................          (6,981)           1,830            2,158

Other income (expense):

    Rental and other income ................................             148              157              184

    Interest (net) .........................................              27               47             (300)

    Share of net earnings of investment in joint venture ...              99                -                -

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

(Loss) income from continuing operations before unusual or

  infrequent items .........................................          (6,707)           2,034            2,042

    Gain on sale of land and buildings .....................           3,497            3,279                -

    Settlement of class and derivative action litigation ...            (720)               -                -

    Manufacturing and other reorganization costs ...........          (3,469)          (1,111)               -

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

(Loss) income from continuing operations before income taxes          (7,399)           4,202            2,042

Income tax benefit (provision) .............................             973             (468)          (1,205)

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

Net (loss) income from continuing operations ...............          (6,426)           3,734              837

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

Discontinued operations:

    Loss from discontinued operations

     (net of income taxes of $nil in 2006 and 2005 and 2004)            (101)            (163)            (214)

    Losses and adjustments to previously recorded losses on

     disposal of discontinued operations ...................              48             (476)            (187)

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

Net loss from discontinued operations ......................             (53)            (639)            (401)

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

Net (loss) income ..........................................    $     (6,479)    $      3,095     $        436

                                                                ============     ============     ============

Basic and diluted net (loss) income per share:

    From continuing operations .............................    $      (1.12)    $       0.42     $       0.07

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

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

                                                                $      (1.13)    $       0.35     $       0.04

                                                                ============     ============     ============

Weighted average shares outstanding ........................       5,735,561        8,845,290       11,741,122

                                                                ============     ============     ============

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

                                                       F-2

</TABLE>

D-70

<TABLE>

                                  SPEAR & JACKSON, INC. AND SUBSIDIARIES

                                       CONSOLIDATED BALANCE SHEETS

                                  (IN THOUSANDS EXCEPT NUMBER OF SHARES)

<CAPTION>

                                                                      AT SEPTEMBER 30,   AT SEPTEMBER 30,

                                                                            2006               2005

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

<S>                                                                   <C>                <C>

                            ASSETS

Current assets:

   Cash and cash equivalents ...................................          $  9,930           $  7,289

   Trade receivables, net ......................................            15,983             16,448

   Inventories .................................................            22,853             24,999

   Assets held for sale ........................................                 -                  -

   Foreign taxes recoverable ...................................               215                  -

   Deferred income tax asset, current portion ..................             2,182              2,623

   Other current assets ........................................             1,425              1,316

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

        Total current assets ...................................            52,588             52,675

Property, plant and equipment, net .............................            15,594             17,568

Deferred income tax asset ......................................            14,570             12,690

Investments ....................................................               508                157

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

        Total assets ...........................................          $ 83,260           $ 83,090

                                                                          ========           ========

             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Notes payable ...............................................          $      -           $    752

   Trade accounts payable ......................................             7,766              8,103

   Accrued expenses and other liabilities ......................            12,234             11,241

   Taxes payable ...............................................               155                 88

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

        Total current liabilities ..............................            20,155             20,184

Other liabilities ..............................................               699                749

Pension liability ..............................................            40,565             35,954

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

        Total liabilities ......................................            61,419             56,887

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

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 expressed at

     year exchange rates of $19,048 in 2006 and $18,750 in 2005            (44,447)           (43,751)

   Foreign currency translation adjustment, net of tax $nil ....            14,581             11,765

   Unrealized loss on derivative instruments ...................               (10)                (7)

Retained earnings ..............................................               655              7,134

Less: 6,275,561 common stock shares held in treasury, at cost ..              (540)              (540)

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

        Total stockholders' equity .............................          $ 21,841           $ 26,203

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

        Total liabilities and stockholders' equity .............          $ 83,260           $ 83,090

                                                                          ========           ========

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

                                                   F-3

</TABLE>

D-71

<TABLE>

                                               SPEAR & JACKSON, INC. AND SUBSIDIARIES

                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                               (IN THOUSANDS EXCEPT NUMBER 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, 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 loss.....                                                                                               (2,849)

                                                                                                                           --------

Total comprehensive loss......                                                                                               (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 loss.....                                                                                               (6,331)

                                                                                                                           --------

Total comprehensive loss......                                                                                               (3,236)

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

Balance September 30, 2005....  12,011,122  $   12  $   51,590  $(43,751)  $   11,765   $         (7)  $ 7,134   $  (540)  $ 26,203

                                ==========  ======  ==========  ========   ==========   ============   =======   =======   =========

Comprehensive income

 Net loss for the year........                                                                          (6,479)              (6,479)

 Other comprehensive income:

  Foreign currency translation

   adjustment.................                                    (2,458)       2,816                                           358

  Reclassification adjustment

   for  prior year unrealized

   holding gains included in

   net income.................                                                                     7                              7

  Unrealized holding losses

   originating in the year....                                                                   (10)                           (10)

  Additional minimum pension

   liability adjustment

   (net of tax of $756).......                                     1,762                                                      1,762

                                                                                                                           --------

 Other comprehensive income...                                                                                                2,117

                                                                                                                           --------

Total comprehensive loss......                                                                                               (4,362)

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

Balance September 30, 2006....  12,011,122  $   12  $   51,590  $(44,447)  $   14,581   $        (10)  $   655   $  (540)  $ 21,841

                                ==========  ======  ==========  ========   ==========   ============   =======   =======   ========

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

                                                                 F-4

</TABLE>

D-72

<TABLE>

                                       SPEAR & JACKSON, INC. AND SUBSIDIARIES

                                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                   (IN THOUSANDS)

<CAPTION>

                                                                                FOR SHE FISCAL YEARS ENDED

                                                                       SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,

                                                                           2006            2005            2004

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

<S>                                                                    <C>             <C>             <C>

CASH FLOWS FROM OPERATING ACTIVITIES:

  Net (loss) income attributable to continuing and discontinued

    operations .....................................................     $ (6,479)       $  3,095        $    436

  Adjustments to reconcile net income to net cash (used in)

    provided by operating activities:

      Depreciation .................................................        3,223           3,542           2,929

      Provision for loss on disposal of discontinued operations ....          (36)            503             187

      Amortization of asset held for sale ..........................            -              16               -

      Gain on sale of land and buildings ...........................       (3,497)         (7,279)              -

      (Gain) on sale of plant, property and equipment ..............         (132)              6              14

      Deferred income taxes ........................................       (1,282)            294           1,092

      Equity earnings in joint venture .............................          (99)              -               -

  Changes in operating assets and liabilities, excluding the effects

    of acquisitions and dispositions:

      Decrease (increase) is trade receivables .....................        1,327           2,129          (1,930)

      Decrease (increase) in inventories ...........................        2,965          (3,553)          3,192

      Increase in other current assets .............................          (35)            (30)           (437)

      Contributions paid to pension plan ...........................       (3,428)        (10,207)         (2,706)

      Increase in other non-current liabilities ....................        8,357           3,991           1,295

      (Decrease) increase in trade accounts payable ................         (708)           (168)            392

      Increase (decrease) in accrued expenses and other liabilities          (278)         (2,132)           (521)

      (Decrease) increase in taxes payable .........................         (125)             37             (56)

      Decrease in other liabilities ................................          (88)           (423)           (722)

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

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES ................         (315)         (6,179)          3,165

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

INVESTING ACTIVITIES:

  Purchases of property, plant and equipment .......................         (946)           (986)         (6,956)

  Proceeds from sale of property, plant and equipment ..............        4,965           8,676              81

  Purchase of equity investment ....................................         (229)              -               -

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

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ................        3,790           7,690          (6,875)

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

FINANCING ACTIVITIES:

  Repayment of overdraft ...........................................         (794)            (77)           (261)

  Increase in overdraft ............................................            -             762               -

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

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES ................         (794)            685            (261)

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

Effect of exchange rate changes on cash and cash equivalents .......          (40)              3            (130)

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

CHANGE IN CASH AND CASH EQUIVALENTS ................................        2,641           2,199          (4,101)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .....................        7,289           5,090           9,191

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

CASH AND CASH EQUIVALENTS AT END OF YFAR ...........................     $  9,930        $  7,289        $  5,090

                                                                         ========        ========        ========

SUPPLEMENTAL CASH FLOW INFORMATION

   Cash (received) paid for interest ...............................     $    (27)       $    (32)       $    297

                                                                         ========        ========        ========

   Cash paid for income taxes ......................................     $    434        $    137        $    169

                                                                         ========        ========        ========

   Non-cash investing and financing activities .....................     $    649        $    393        $    235

                                                                         ========        ========        ========

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

                                                         F-5

</TABLE>

D-73

                     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, 2006, September 30, 2005 and September 30,

2004.

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, the

Chinese yuan and the US dollar will affect the translation of the UK, French,

New Zealand, Chinese 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

which do not affect cash flow in the medium term.

                                       F-6

D-74

                     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 1 to 3 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-7

D-75

                     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

$2,381 in the year ended September 30, 2006 and $2,252 and $2,444 in the years

ended September 30, 2005 and September 30, 2004, 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

                                       F-8

D-76

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 2 - ACCOUNTING POLICIES - CONTINUED

REVENUE RECOGNITION - CONTINUED

targets is set for purchases from Spear & Jackson and, on reaching each target,

a rebate, usually paid in the form of credit note but occasionally in cash, is

triggered e.g.

                     Sales

                    Turnover        Rebate         Rebate

                       $               %              $

Target    1            500k           5.0            25k

          2            350k           7.5            56k

          3          1,000k          10.0           100k

          4          1,250k          12.0           150k

The revenue targets are set on a twelve-month basis, however these sales targets

period ends are not necessarily coterminous with the accounting period end of

Spear & Jackson, Inc. At any point in time, the rebate liability is calculated

by estimating the annual sales value for each customer (in order to ascertain

the rebate % the customer is likely to achieve), applying the relevant % to the

actual sales achieved to date, and then deducting any interim rebates already

paid.

The rebates charge is taken as a reduction to sales in the profit and loss

account. Rebates are paid to customers per their individual agreements.

Typically payments are made half yearly or yearly, however there are agreements

in place in which rebates are paid monthly and quarterly.

Generally there is no provision for customers to return products they cannot

sell. However, a small number of customers have negotiated a return clause in

their trading agreements. There is a time limit for these returns which vary

from customer to customer, none of which exceed 12 months from the original

invoice date. The amount of mutual returns made in the year ended September 30,

2006 was $900 and $350 and $257 in the years ended September 30, 2005 and

September 30, 2004, 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, 2006, September 30, 2005 and September 30, 2004.

SEGMENT REPORTING: Operating segments are defined as components of an enterprise

for which separate financial information is available that is evaluated

regularly by chief operating decision makers in deciding how to allocate

resources in assessing performance.

NEW ACCOUNTING PRONOUNCEMENTS:

         In March 2005, the FASB issued Interpretation ("FIN") No. 47,

"Accounting for Conditional Asset Retirement Obligations--an Interpretation of

FASB Statement No. 143." This Interpretation clarifies the timing of liability

recognition for legal obligations associated with an asset retirement when the

timing and (or) method of settling the obligation are conditional on a future

event that may or may not be within the control of the entity. FIN No. 47 is

effective no later than the end of fiscal years ending after December 15, 2005.

We do not believe that the implementation of this statement will have a material

impact on the Company's consolidated results of operation and financial

condition.

         In March 2005, the SEC issued Staff Accounting Bulletin ("SAB") No. 107

regarding the Staff's interpretation of SFAS No. 123(R). This interpretation

provides the Staff's views regarding interactions between SFAS No. 123(R) and

certain SEC rules and regulations and provides interpretations of the valuation

of share-based payments for public companies. The interpretive guidance is

intended to assist companies in applying the provisions of SFAS No. 123(R) and

investors and users of the financial statements in analyzing the information

provided. We believe the adoption of this Statement will not have a material

impact on our financial position or results of operations.

                                       F-9

D-77

                     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.

         In October 2005, the FASB issued Staff Position No. 13-1, "Accounting

for Rental Costs Incurred During a Construction Period" ("FSP No. 13-1"). FSP

No. 13-1 is effective for the first reporting period beginning after December

15, 2005 and requires that rental costs associated with ground or building

operating leases that are incurred during a construction period be recognized as

rental expense. We do not believe that adoption of FSP No. 13-1 will have a

material impact on our financial statements.

         In March 2005, the FASB issued Interpretation ("FIN") No. 47,

"Accounting for Conditional Asset Retirement Obligations--an Interpretation of

FASB Statement No. 143." This Interpretation clarifies the timing of liability

recognition for legal obligations associated with an asset retirement when the

timing and (or) method of settling the obligation are conditional on a future

event that may or may not be within the control of the entity. FIN No. 47 is

effective no later than the end of fiscal years ending after December 15, 2005.

We do not believe that adoption of FIN 47 will have a material impact 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

         In November 2005, FASB issued FSP No. 123(R)-3, "Transition Election

Related to Accounting for the Tax Effects of Share-Based Payment Awards." This

pronouncement provides an alternative method of calculating the excess tax

benefits available to absorb any tax deficiencies recognized subsequent to the

adoption of SFAS No. 123(R). The company has until November 2006 to make a

one-time election to adopt the transition method. The company is currently

evaluating FSP 123(R)-3; this one-time election will not affect operating income

or net earnings.

         In February 2006, FASB issued Statement No. 155, Accounting for Certain

Hybrid Financial Instruments, as an amendment to Statement No. 133, Accounting

for Derivatives Instruments and Hedging Activities, and Statement No. 140,

Accounting for Transfers and Servicing of Financial Assets and Extinguishment of

Liabilities. Statement No. 155 amends Statement No. 133 to narrow the scope

exception for interest-only and principal-only strips on debt instruments to

                                      F-10

D-78

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 2 - ACCOUNTING POLICIES - CONTINUED

NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED

include only such strips representing rights to receive a specified portion of

the contractual interest or principle cash flows. Statement No. 155 amends

Statement No. 140 to allow qualifying special purpose entities to hold a passive

derivative financial instrument pertaining to beneficial interests that itself

is a derivative instrument. Statement No. 155 is effective for all financial

instruments acquired or issued in fiscal years beginning after September 15,

2006. The Company does not believe that the adoption of Statement No. 155 will

have a material impact on the Company's condensed consolidated financial

statements.

         In March 2006, the FASB issued Statement No. 156, Accounting for

Servicing of Financial Assets as an amendment to Statement No. 140. Statement

No. 156 requires that all separately recognized servicing rights be initially

measured at fair value, if practicable. In addition, this statement permits an

entity to choose between two measurement methods (amortization method or fair

value measurement method) for each class of separately recognized servicing

assets and liabilities. This new accounting standard is effective for reporting

periods beginning after September 15, 2006. We do not expect the adoption of

SFAS 156 to have a material impact on our results of operations or financial

condition.

         In June 2006, the FASB ratified the consensus reached by the EITF on

EITF Issue No. 05-01, Accounting for the Conversion of an Instrument That

Becomes Convertible Upon the Issuer's Exercise of a Call Option ("EITF 05-01").

The EITF consensus applies to the issuance of equity securities to settle a debt

instrument that was not otherwise currently convertible but became convertible

upon the issuer's exercise of call option when the issuance of equity securities

is pursuant to the instrument's original conversion terms. The adoption of EITF

05-01 is not expected to have a material impact on our results of operations or

financial condition.

         In July 2006, the FASB issued FASB Interpretation No. 48, Accounting

for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for

income taxes by prescribing a minimum probability threshold that a tax position

must meet before a financial statement benefit is recognized. The minimum

threshold is defined in FIN 48 as a tax position that is more likely than not to

be sustained upon examination by the applicable taxing authority, including

resolution of any related appeals or litigation processes, based on the

technical merits of the position. The tax benefit to be recognized is measured

as the largest amount of benefit that is greater than fifty percent likely of

being realized upon ultimate settlement. FIN 48 must be applied to all existing

tax positions upon initial adoption. The cumulative effect of applying FIN 48 at

adoption, if any, is to be reported as an adjustment to opening retained

earnings for the year of adoption. FIN 48 is effective for the Company's 2008

fiscal year, although early adoption is permitted. The Company is currently

assessing the potential effect of FIN 48 on its financial statements.

         In September 2006, the SEC staff issued Staff Accounting Bulletin No.

108, Considering the Effects of Prior Year Misstatements when Quantifying

Misstatements in Current Year Financial Statements (SAB 108). SAB 108 was issued

in order to eliminate the diversity in practice surrounding how public companies

quantify financial statement misstatements. SAB 108 requires that registrants

quantify errors using both a balance sheet and income statement approach and

evaluate whether either approach results in a misstated amount that, when all

relevant quantitative and qualitative factors are considered, is material. SAB

108 must be implemented by the end of the Company's fiscal 2007. The Company is

currently assessing the potential effect of SAB 108 on its financial statements.

         In September 2006, the FASB issued SFAS No. 158, Employers' Accounting

for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB

Statements No. 87, 88, 106, and 132(R) (SFAS 158). This statement requires

recognition of the overfunded or underfunded status of defined benefit pension

and other postretirement plans as an asset or liability in the statement of

financial position and changes in that funded status to be recognized in

comprehensive income in the year in which the changes occur. SFAS 158 also

requires measurement of the funded status of a plan as of the date of the

statement of financial position. The recognition provisions of SFAS 158 are

effective for fiscal 2007, while the measurement date provisions are effective

                                      F-11

D-79

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 2 - ACCOUNTING POLICIES - CONTINUED

NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED

for fiscal year 2009. If SFAS 158 were applied at the end of fiscal 2006, using

the Company's September 30, 2006 actuarial valuation, we would have recorded an

additional pre-tax charge to accumulated other comprehensive income totaling

$7.8 million ($5.5 million after tax) representing the difference between the

funded status of the plans based on the project benefit obligation and the

amounts recorded on our balance sheet at September 30, 2006.

         In September 2006, the FASB issued Statement of Financial Accounting

Standards No. 157, Fair Value Measurements (SFAS 157). SFAS 157 provides a

common definition of fair value and establishes a framework to make the

measurement of fair value in generally accepted accounting principles more

consistent and comparable. SFAS 157 also requires expanded disclosures to

provide information about the extent to which fair value is used to measure

assets and liabilities, the methods and assumptions used to measure fair value,

and the effect of fair value measures on earnings. SFAS 157 is effective for the

Company's 2009 fiscal year, although early adoption is permitted. The Company is

currently assessing the potential effect of SFAS 157 on its financial

statements.

NOTE 3 - NATURE OF BUSINESS

         The Company was incorporated in the State of Nevada on December 17,

1998 and was inactive until the acquisition of Mega Tools Ltd. and Mega Tools

USA, Inc. via reverse acquisition on September 30, 1999. The Company was engaged

in the manufacture and sale of a patented multi-bit screwdriver. The Company

entered into an exclusive North American license agreement with the patent

holder of a retracting cartridge type screwdriver. This license agreement gave

the Company unrestricted use of the patent in Canada and the United States until

November 8, 2005. The Company's wholly owned subsidiaries, Mega Tools USA, Inc.

and Mega Tools Ltd. manufactured and marketed the drivers to customers in the

United States and Canada. With effect from September 30, 2003 the Company exited

its screwdriver operations following the sale of the trade and net assets of

Mega Tools USA, Inc. and Mega Tools Ltd. The historical results of operations

for this business have been reclassified to earnings (loss) from discontinued

operations on the Company's Consolidated Statements of Operations.

         On September 6, 2002 the Company acquired the entire issued share

capital of Spear & Jackson plc and Bowers Group plc. These companies, through

their principal operating entities, as disclosed in note 1, manufacture and

distribute a broad line of hand tools, lawn and garden tools, industrial magnets

and metrology tools primarily in the United Kingdom, Europe, Australia, North

and South America, Asia and the Far East.

         Following recommendations by the SEC, the acquisition of Spear &

Jackson plc and Bowers Group plc ("S&J") by Megapro Tools, Inc. was accounted

for as a reverse acquisition for financial reporting purposes. The reverse

acquisition is deemed a capital transaction and the net assets of S&J (the

accounting acquirer) were carried forward to Megapro Tools, Inc. (the legal

acquirer and the reporting entity) at their carrying value before the

combination. Although S&J was deemed to be the acquiring corporation for

financial accounting and reporting purposes, the legal status of Megapro Tools,

Inc. as the surviving corporation does not change. The relevant acquisition

process utilizes the capital structure of Megapro Tools, Inc. and the assets and

liabilities of S&J are recorded at historical cost.

         In these financial statements, S&J is the operating entity for

financial reporting purposes and the financial statements for all periods

presented represent S&J's financial position and results of operations. The

equity of Megapro Tools Inc. is the historical equity of S&J retroactively

restated to reflect the number of shares issued in the S&J acquisition.

         On 7 November 2002 the Company changed its name from Megapro Tools,

Inc. to Spear & Jackson, Inc.

                                      F-12

D-80

                     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 had

their percentage stock interest increase correspondingly. Jacuzzi Brands, Inc.

("Jacuzzi"), which is a beneficial owner of 3,543,281 shares of common stock,

had its interest in the Company increase to approximately 61.8% of the

outstanding common stock.

         On April 21, 2005, Jacuzzi adopted a plan of disposition of the

Company's common stock. On 23 March 2006, Jacuzzi Brands, Inc. ("Jacuzzi") and

its subsidiary undertaking, USI American Holdings, Inc. ("USI" and together with

Jacuzzi, the "Seller") entered into a Stock Purchase Agreement (the "Stock

Purchase Agreement") with United Pacific Industries Limited ("UPI"), a Bermuda

Corporation, to sell its entire holding of 3,543,281 shares of the common stock

(the "Shares") of Spear & Jackson, Inc. ("SJI") to UPI for $1.40 per share for

an aggregate purchase price of $4,960,593. Such shares constitute all of the

shares of SJI owned by the Seller.

         The representations, warranties and covenants made by Jacuzzi and UPI

were typical for this type of transaction, and included a covenant that

restricts Jacuzzi from soliciting or negotiating with a third party between the

signing date of the Stock Purchase Agreement and the closing date of the

transaction. Jacuzzi also agreed that in connection with the closing of the

transaction, it would, among other things, cause UPI's designees and one

designee of Jacuzzi to be elected to the Board of Directors of Spear & Jackson,

Inc. and will use commercially reasonable best efforts so that such UPI

designees are in sufficient numbers to give UPI a majority of the Board of

Directors of the Spear & Jackson, Inc. UPI also agreed that it or any of its

affiliates would not purchase any additional Common Stock during the period from

the signing date of the Stock Purchase Agreement through one year following the

closing at a price less than $1.40 per share.

         The purchase of the Shares by UPI contemplated by the Stock Purchase

Agreement was subject to the receipt of a number of closing conditions,

including approval by UPI's shareholders and the United Kingdom Pensions

Regulator, and the receipt of certain other regulatory approvals as well as

other customary closing conditions.

         The Seller and UPI then announced that they had entered into Amendment

No. 1 dated 4 May 2006, ("Amendment No. 1 to the Stock Purchase Agreement") to

extend the date by which the Seller and UPI were required to lodge the clearance

application with the UK Pensions Regulator. The Seller and UPI subsequently

received a comfort letter dated July 5 2006, issued by the UK Pensions Regulator

(the "Comfort Letter"). The Seller and UPI agreed to waive the condition

contained in the Stock Purchase Agreement for a clearance from the UK Pensions

Regulator and to accept the Comfort Letter in satisfaction of that condition.

                                      F-13

D-81

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 3 - NATURE OF BUSINESS - CONTINUED

         The trustees of Spear & Jackson, Inc.'s UK Pension Plan confirmed by a

letter dated 6 July 2006 their acceptance of the UK Pensions Regulator's

determination. The Seller and UPI then entered into Amendment No. 2 dated 10

July 2006, ("Amendment No. 2 to the Stock Purchase Agreement") to waive their

respective requirements for a clearance from the UK Pensions Regulator and to

accept in its place the Comfort Letter which stated that the UK Pensions

Regulator was of the view, based on the information supplied to him in

connection with the clearance application, that the change of control as a

result of the sale by the Seller of all of its shares of Spear & Jackson, Inc.

to UPI was not detrimental to the UK pension plan and that the UK Pensions

Regulator believes that a clearance is not necessary for the transaction.

         In addition, the Seller and UPI subsequently announced that they had

entered into Amendment No. 2 to the Stock Purchase Agreement, pursuant to which

UPI agreed, subject to the Closing having occurred, to indemnify the Seller and

JBI Holdings Limited (the "Jacuzzi Indemnified Parties") should the UK Pensions

Regulator, regardless of the Comfort Letter, require any of the Jacuzzi

Indemnified Parties to make a contribution or provide financial support in

relation to the potential pension plan liabilities of SJI or its subsidiaries.

In addition, UPI also agreed that for a period of twelve months from the Closing

Date, UPI will not, and will use its best efforts to ensure that neither Spear &

Jackson, Inc. nor any of its subsidiaries will, take any action or omit to take

any action that causes the UK Pensions Regulator, as a result of such action or

omission, to issue a contribution notice against the Jacuzzi Indemnified Parties

in relation to any UK pension plan in which Spear & Jackson, Inc. or any

subsidiary of Spear & Jackson, Inc. is an employer. Further, UPI agreed that for

a period of twelve months from the Closing Date, that it will not (and will use

its best efforts to ensure that neither Spear & Jackson, Inc. nor any subsidiary

of Spear & Jackson, Inc. will) engage in any action or inaction which in

relation to any such UK pension plan would fall within the UK Pension Regulation

clearance guidance note dated April 2005 as a 'Type A' event unless UPI procures

that clearance is issued by the UK Pensions Regulator in relation to such event

in terms which confirm that no Jacuzzi Indemnified Party shall be linked to a

financial support direction or contribution notice in respect of such event.

         On July 28, 2006 the purchase was formally completed..

         Brian C. Beazer, the Chairman of UPI, is a director of Jacuzzi and

holds approximately 24.56% of the shares of UPI. David H. Clarke, the Chairman

and Chief Executive Officer of Jacuzzi, is a director of UPI and holds

approximately 22.88% of the shares of UPI. Mr. Clarke also holds approximately

28,350 shares of common stock of Spear & Jackson, Inc., representing

approximately 0.49% of the shares of Spear & Jackson, Inc. but the shares of

Spear & Jackson, Inc. owned by Mr. Clarke are not being purchased at the time of

the sale of the Shares by the Seller to UPI.

NOTE 4 - UNUSUAL OR INFREQUENT EVENTS

(a) GAIN ON SALE OF LAND AND BUILDINGS

(i) YEAR ENDED SEPTEMBER 30, 2006

         On July 27, 2006 the Company completed the sale of the remaining

element of its industrial site at St. Paul's Road, Wednesbury, England. Details

of the sale are as follows:

                                                                 (IN THOUSANDS)

Sale proceeds net of selling, professional and other costs ....      $ 4,756

Less: net book value ..........................................       (1,174)

Less: deferred element of gain relating to the future market

   value of rentals ...........................................          (85)

                                                                     -------

Gain on sale ..................................................      $ 3,497

                                                                     =======

                                      F-14

D-82

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 4 - UNUSUAL OR INFREQUENT EVENTS - CONTINUED

(a) GAIN ON SALE OF LAND AND BUILDINGS - CONTINUED

(ii) YEAR ENDED SEPTEMBER 30, 2005

         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

                                   ENGLAND           FLORIDA           TOTAL

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

                               (IN THOUSANDS)    (IN THOUSANDS)   (IN THOUSANDS)

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            5,367

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

   Gain on sale ...............    $3,020             $  259           $3,279

                                   ======             ======           ======

(b) MANUFACTURING REORGANIZATION COSTS

         On January 25, 2006, the Company announced the closure of the remaining

element of its manufacturing site at Wednesbury, England. With effect from

November 30, 2006 all warehouse and distribution operations currently performed

at this location were transferred to the Company's principal UK manufacturing

site in Sheffield. The manufacturing and assembly functions formally carried out

at this site have now been out sourced to suppliers based outside the UK.

         The costs of the closure and relocation of the Wednesbury facility are

anticipated to be approximately $2.1 million. These costs include employee

severance payments, site closure expenses, factory reorganization expenses,

plant transfer costs and associated capital expenditure. In addition to the

above, the Company announced in the quarter ended June 30, 2006 that certain

manufacturing operations carried out at its Atlas site in Sheffield ("Atlas")

will also cease. Provision for employee severance costs in respect of the

closure of these manufacturing operations were made in that quarter.

         As explained above, in footnote 4 a (i), on July 27, 2006, Spear &

Jackson, Inc.'s UK subsidiary, Spear & Jackson Garden Products Limited,

completed the sale of the remaining element of the Wednesbury site for L2.6

million sterling (approximately $4.8 million), excluding disposal costs, which

resulted in a gain on disposal of approximately $3.5 million. Funds realized

from the disposal are to be used to finance the closure costs with any excess

sale proceeds being reinvested in other operational initiatives.

         On August 11, 2006, the Company's UK subsidiary, Eclipse Magnetics

Limited, ("Eclipse"), announced the cessation of certain manufacturing

activities at its site in Sheffield, England. Eclipse also announced that it

would be relocating its business to the Sheffield, Atlas site. The cessation of

manufacturing and site relocation were completed by November 30, 2006 and

provisions have been made at September 30, 2006 in respect of severance,

relocation and empty property rentals.

         The Wednesbury site closure, the production rationalization at Atlas

and the restructuring at Eclipse form part of the Company's UK manufacturing

reorganization program which was initiated to regenerate and modernize key areas

of the hand and garden tools business. These closures will enable the Company to

consolidate its two UK hand and garden tool manufacturing sites and will allow

the Company to develop a modern manufacturing, warehouse and distribution

facility which will be well placed to meet the current and future needs of its

customers.

                                      F-15

D-83

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 4 - UNUSUAL OR INFREQUENT EVENTS - CONTINUED

         As explained in Footnote 4b (ii), above, a surplus element of the

Wednesbury site was sold in 2005 and provision was made at March 31, 2005 for

various site reorganization costs that were to be incurred as a result of that

partial sale. Certain of these costs were not incurred following the decision to

close the remainder of the site and market the property for resale and such

excess provisions were subsequently released in the second quarter of fiscal

2006.

         Costs provided in respect of the Wednesbury and Magnetics closure and

the Atlas reorganization as at September 30, 2006 and September 30, 2005 and

amounts credited in respect of the release of excess provisions from prior

periods relating to the UK manufacturing reorganization and other Group

restructuring costs are as follows:

                                            YEAR ENDED            YEAR ENDED

                                        SEPTEMBER 30, 2006    SEPTEMBER 30, 2005

                                          (IN THOUSANDS)        (IN THOUSANDS)

Severance costs ......................        $1,666                $  487

Fixed asset impairments ..............         1,159                   819

Site closure costs and lease costs ...         1,091                   437

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

                                               3,916                 1,743

Release of excess provisions accrued

 in prior periods ....................          (447)                 (632)

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

Net manufacturing reorganization costs         3,469                 1,111

                                              ======                ======

(c) SETTLEMENT OF CLASS SETTLEMENT LITIGATION

         As further explained in Footnote 20, on July 7, 2006 The US District

Court for the Southern District of Florida issued a Memorandum of Understanding

("MOU") which confirmed that the plaintiffs and defendants in the class action

had reached an agreement in principle for the settlement of this litigation. In

settlement of this action the company paid $650 into a Qualified Settlement

Fund.

         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. In August 2006 the Company entered into a settlement agreement

with the plaintiff by agreeing to accept certain changes to its corporate

governance procedures and the payment of up to $70 in legal fees. This amount

has now been paid into a Court approved fund and if the settlement is authorized

by the Court the suit will be dismissed and the Company and its former directors

will be released.

(d) SUMMARY OF PROVISIONS IN RESPECT OF THE UK MANUFACTURING AND REORGANIZATION

PROGRAM

         As explained in above, provisions totaling $0.5 million were set up in

respect of a UK manufacturing reorganization program that was initiated during

the course of the year ended September 30, 2005. The provisions comprised the

following:

         (i) As a result of the sale of the surplus element of the Company's

manufacturing site at Wednesbury, England, the Company became contractually

obliged to vacate office and warehouse facilities located on those parts of the

site that had been sold. A provision of $0.5 million was made for costs in

connection with this obligation. The provision principally related to office and

factory refurbishment and reorganization expenses together with expenditure in

respect of departmental relocations within the remainder of the site. Following

the sale, elements of the Wednesbury manufacturing operation were closed or

transferred and costs in connection with these initiatives are dealt with in

(ii) and (iii) below.

                                      F-16

D-84

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 4 - UNUSUAL OR INFREQUENT EVENTS - CONTINUED

         In the final quarter of the year ended September 30, 2005 the Company

performed a review of its UK manufacturing operations and began implementation

of a number of strategies to reduce its ongoing cost base. Costs provided in

connection with the implementation of these initiatives relate to:

         (ii) $0.4 million of severance costs relating to the closure and down

scaling of certain manufacturing processes at the Company's Sheffield and

Wednesbury locations in the UK.

         (iii) $0.8 million of impairment write-downs in respect of the plant

and machinery involved in the restructured operations.

         In the year ended September 30, 2006 further provisions were made as

follows:

         (iv) As discussed in (b), above, $2.1 million was provided in respect

of the Wednesbury site closure and Atlas manufacturing reorganization at June

30, 2006.

         (v) $0.3 million was provided in respect of severance costs relating to

the cessation of certain manufacturing activities at Eclipse and costs in

connection with the relocation of its remaining business to the Company's Atlas

site.

         (vi) $720k was provided in respect of the settlement of the main and

derivative class action litigation.

The Company also has a further provision of $2 million in respect of other UK

manufacturing reorganization and relocation costs that was set up in prior

periods.

         In the year ended September, 2006, $0.5 million has been spent in

respect of employee severance costs and other reorganization expenses for which

provision was made at September 30, 2005 and as noted above, additional

provisions of $2.3 million have been made in the period relating to the closure

of the Wednesbury site, the cessation of manufacturing at Eclipse and the

reorganization of the production facilities at Atlas. The following are

summaries of the movements in the year.

                                      F-17

D-85

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 4 - UNUSUAL OR INFREQUENT EVENTS - CONTINUED

The movements in the liability balance between October 1, 2005 and September

30, 2006 are as follows:

<TABLE>

(a) Included in Accrued Expenses and Other Liabilities:

<CAPTION>

                                         AT OCTOBER 1,                                                  AT SEPTEMBER 30,

                                        --------------     EXCHANGE        AMOUNTS         AMOUNTS      ----------------

                                             2005          MOVEMENTS       PROVIDED     PAID/UTILISED        2006

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

                                        (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)   (IN THOUSANDS)

<S>                                     <C>             <C>             <C>             <C>              <C>

Other UK reorganization costs.........        1,687              89             268               -            2,044

Wednesbury move costs.................          444              (4)           (324)           (116)               -

Employee severance costs..............          402              (8)                           (394)               -

Wednesbury/Atlas costs................            -              45           2,063            (721)           1,387

Eclipse move..........................            -              (4)            303               -              299

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

Manufacturing Reorganization costs....        2,533             118           2,310          (1,231)           3,730

Settlement of derivative action.......            -               -              70             (70)               -

Settlement of class litigation........            -               -             650            (650)               -

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

                                          $   2,533         $   118        $  3,030       $  (1,951)       $   3,730

                                          =========         =======        ========       =========        =========

(b) Included in Property, Plant and Equipment:

Asset impairments.....................    $     803         $    36        $  1,159       $    (231)       $   1,767

                                          =========         =======        ========       =========        =========

Total                                     $   3,336         $   154        $  4,189       $  (2,182)       $   5,497

                                          =========         =======        ========       =========        =========

</TABLE>

The movements in the liability balance between October 1, 2004 and September

30, 2005 are as follows:

<TABLE>

(a) Included in Accrued Expenses and Other Liabilities:

<CAPTION>

                                         AT OCTOBER 1,                                                  AT SEPTEMBER 30,

                                        --------------     EXCHANGE        AMOUNTS         AMOUNTS      ----------------

                                             2004          MOVEMENTS       PROVIDED     PAID/UTILISED        2005

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

                                        (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)  (IN THOUSANDS)   (IN THOUSANDS)

<S>                                     <C>             <C>             <C>             <C>              <C>

Wednesbury move costs.................                            7             437                              444

Employee severance costs..............                           (6)            487             (79)             402

Other UK reorganization costs.........        2,411             (92)           (632)                           1,687

Wednesbury / Atlas costs..............            -               -               -               -                -

Settlement of class litigation........            -               -               -               -                -

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

                                          $   2,411         $   (91)       $    292       $     (79)       $   2,533

                                          =========         =======        ========       =========        =========

(b) Included in Property, Plant and Equipment:

Asset impairments.....................    $       -         $   (16)       $    819       $       -        $     803

                                          =========         =======        ========       =========        =========

Total.................................    $   2,411         $  (107)       $  1,111       $     (79)       $   3,336

                                          =========         =======        ========       =========        =========

</TABLE>

                                      F-18

D-86

                     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,

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

                                                                      2006           2005           2004

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

                                                           Note  (IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)

<S>                                                        <C>   <C>            <C>            <C>

Revenues reclassified to discontinued operations:

 Thread gauge measuring division.........................   (b)          590         1,627       $   1,694

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

                                                                     $   590       $ 1,627       $   1,694

                                                                     =======       =======       =========

Loss from discontinued operations

Loss from operations of thread gauge measuring division..   (b)         (101)          163       $    (214)

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

                                                                     $  (101)      $  (163)      $    (214)

                                                                     =======       =======       =========

Profit (loss) on disposal of discontinued operations:

Provision for profit (loss) on disposal of Megapro

   screwdrivers division.................................   (a)      $    12       $    27       $    (187)

Provision for loss on disposal of thread gauge

   measuring division....................................   (b)           36          (503)              -

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

                                                                     $    48       $  (476)      $    (187)

                                                                     =======       =======       =========

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

Total loss from discontinued operations, net of taxes....            $   (53)      $  (639)      $    (401)

                                                                     =======       =======       =========

</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-19

D-87

                     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 which was outstanding at

September 30, 2003. A further $187 was provided against this debt in the year

ended September 30, 2004. It has now been agreed with Megapro that it will pay

Canadian $54 (approximately $41) in settlement of those debts and this is being

repaid in monthly installments of Canadian $5 (approximately $4) of which $27

was received in the year ended September 30, 2005. A further $12 has been

received in the year ended September 30, 2006.

         (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. On February 28, 2006, the

Company concluded the sale of these assets for a nominal consideration. The

assets sold comprised plant and equipment, inventories and goodwill. The

acquirer paid L1 and assumed certain liabilities in respect of the leased

premises from which the trade operates. The carrying value of the assets

relating to this entity were written down to the lower of depreciated cost or

estimated fair value after consideration of selling costs in the quarters ended

March 31, 2005 and September 30, 2005. These assets and liabilities of

discontinued operations held for sale were not 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,

                                                2006                  2005

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

                                            (IN THOUSANDS)       (IN THOUSANDS)

Trade receivables......................    $        17,618      $        17,973

Allowance for doubtful accounts........             (1,635)              (1,525)

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

                                           $        15,983      $        16,448

                                           ===============      ===============

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                  BALANCE

                                 AT BEGINNING   COSTS AND    TO OTHER                AT END OF

DESCRIPTION                       OF PERIOD      EXPENSES    ACCOUNTS   DEDUCTIONS    PERIOD

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

Notes                                                           (1)        (2)

<S>                              <C>            <C>          <C>        <C>          <C>

Year ended September 30, 2006....   $ 1,525       $  207      $   84      $ (181)    $  1,635

                                    =======       ======      ======      ======     ========

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

                                    =======       ======      ======      ======     ========

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

                                    =======       ======      ======      ======     ========

</TABLE>

                                      F-20

D-88

                     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,

                                                2006                  2005

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

                                            (IN THOUSANDS)       (IN THOUSANDS)

Finished products......................    $        19,329      $        19,740

In-process products....................              4,443                6,481

Raw materials..........................              6,191                5,320

Less: allowance for slow moving and

 obsolete inventories..................             (7,110)              (6,542)

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

                                           $        22,853      $        24,999

                                           ===============      ===============

The following table provides a summary of the adjustments to the allowance for

slow moving and obsolete inventories:

<TABLE>

<CAPTION>

                                   BALANCE      CHARGED TO   CHARGED                  BALANCE

                                 AT BEGINNING   COSTS AND    TO OTHER                AT END OF

DESCRIPTION                       OF PERIOD      EXPENSES    ACCOUNTS   DEDUCTIONS    PERIOD

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

Notes                                                           (1)        (2)

<S>                              <C>            <C>          <C>        <C>          <C>

Year ended September 30, 2006....  $  6,542      $ 1,925     $   343    ($ 1,700)     $ 7,110

                                   ========      =======     =======    ========      =======

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

                                   ========      =======     =======    ========      =======

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

                                   ========      =======     =======    ========      =======

</TABLE>

Notes:

   (1) Items charged to other accounts comprise exchange rate fluctuations

       during the year.

   (2) Deductions comprise obsolete items sold or scrapped.

                                      F-21

D-89

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 8 - PROPERTY, PLANT AND EQUIPMENT, NET

<TABLE>

<CAPTION>

                                                                    AT SEPTEMBER 30,   AT SEPTEMBER 30,

                                                             NOTE        2006               2005

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

                                                                     (IN THOUSANDS)     (IN THOUSANDS)

<S>                                                          <C>    <C>                <C>

Assets held and used:

   Land and buildings, at cost ...........................   (a)     $      15,269      $      15,799

   Machinery, equipment and vehicles, at cost.............                  29,299             35,331

   Furniture and fixtures, at cost........................                     867              1,256

   Computer hardware, at cost.............................                   1,834              1,244

   Computer software, at cost.............................                     361                342

   Assets held under finance leases, at cost .............   (b)             2,433              2,883

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

                                                                            50,063             56,855

   Accumulated Depreciation:..............................                 (34,469)           (39,287)

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

   Net....................................................           $      15,594      $      17,568

                                                                     =============      =============

</TABLE>

         (a) The Company completed the sale of its industrial site at Wednesbury

on July 27, 2006. Details of this disposition are provided in note 4, above.

         (b) Included in property, plant and equipment at September 30, 2006 are

capital leases with a net book value of $0.86 million (September 30, 2005 $1.3

million). The cost of these assets held under capital leases was $2.43 million

(September 30, 2005 $2.9 million), and the accumulated depreciation relating to

these assets was $1.57 million (September 30, 2005 $1.6 million).

NOTE 9 - INVESTMENTS

         Investments comprise the following:

<TABLE>

<CAPTION>

                                                                    AT SEPTEMBER 30,   AT SEPTEMBER 30,

                                                             NOTE        2006                2005

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

                                                                     (IN THOUSANDS)     (IN THOUSANDS)

<S>                                                          <C>    <C>                <C>

30% investment in Bipico Industries Private Limited.......   (a)     $          72      $          67

30% investment in  Bowers Metrologie SA...................   (a)                71                 67

Other investments in equity securities....................   (b)                24                 23

25% joint venture in Ningbo Hitech Ltd....................   (c)               341                  -

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

                                                                     $         508      $         157

                                                                     =============      =============

</TABLE>

         (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.

         (c) In January 2006 the company, through its subsidiary undertaking,

Eclipse Magnetics Limited, paid $229 to acquire a 25% stake in a joint venture

company, Ningbo Hitech Magnetic Assemblies Co. Ltd. ("Hi-tech"). At September

30, 2006 the net assets of Hitech amounted to $1.3 million of which the

Company's share is $341. The difference between this amount and the original

investment of $229, excluding the exchange impact of the retranslation

differences, represents the Company's share of High-tech's net earnings for the

period from January 2006 to September 30, 2006. This share of the net earnings

of High-tech is shown separately in the Company's Consolidated Statement of

Operations for the year ended September 30, 2006.

                                      F-22

D-90

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

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,

                                                           2006              2005              2004

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

                                                      (IN THOUSANDS)    (IN THOUSANDS)    (IN THOUSANDS)

<S>                                                   <C>               <C>               <C>

Continued operations:

   Current tax charge.................................  $     (309)       $    (174)        $    (113)

   Deferred tax credit (charge).......................       1,282             (294)           (1,092)

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

Total.................................................  $      973        $    (468)        $  (1,205)

                                                        ==========        =========         =========

</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,

                                                           2006              2005              2004

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

                                                      (IN THOUSANDS)    (IN THOUSANDS)    (IN THOUSANDS)

<S>                                                   <C>               <C>               <C>

Tax at US federal statutory income tax rate at 35%....  $    2,589        $  (1,247)        $    (574)

Overseas tax at rates different to effective rate.....        (370)             (89)              (81)

Gain on sale of UK property covered by capital

   losses brought forward.............................       1,041              906                 -

Permanent timing differences..........................        (127)            (161)             (162)

Adjustment to actual of prior year estimates..........          (2)             219               118

Valuation allowance relating to UK, US and other

   current year NOLs..................................      (2,127)            (143)             (536)

Miscellaneous                                                  (31)              47                30

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

                                                        $      973        $    (468)        $  (1,205)

                                                        ==========        =========         =========

</TABLE>

Deferred income tax assets and liabilities for 2006 and 2005 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.

                                      F-23

D-91

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 10 - INCOME TAXES - CONTINUED

         The temporary differences and carry forwards that give rise to deferred

assets and liabilities at September 30, 2006 and September 30, 2005 comprise:

                                             AT SEPTEMBER 30,   AT SEPTEMBER 30,

                                                   2006               2005

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

                                              (IN THOUSANDS)     (IN THOUSANDS)

Deferred tax assets:

  Property, plant and equipment...........    $      1,200       $         412

  Pension benefit plan....................          12,169              10,812

  Accruals and allowances.................           3,525               3,666

  Inventory...............................             288                 423

  Tax loss carry forwards and other tax

   credits................................          24,943              21,082

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

  Total deferred tax assets...............          42,125              36,395

  Valuation allowance.....................         (25,373)            (21,082)

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

  Net deferred tax assets.................          16,752              15,313

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

Deferred tax asset, net...................    $     16,752       $      15,313

                                              ============       =============

Deferred tax asset, current portion.......           2,182               2,623

Deferred tax asset, non-current portion...          14,570              12,690

                                              ============       =============

                                              $     16,752       $      15,313

                                              ============       =============

         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,

2006 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 French and Australian companies totaling approximately $9.4 million

(September 30, 2005 $6.5 million) and to other UK tax credits of approximately

$15.5 million (September 30, 2005 $14.6 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, 2006 a valuation allowance of $24.9

million (September 30, 2005 $21.1 million) has been recorded against these

losses.

                                      F-24

D-92

                     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 $2.7 million (2005: $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, 2006 or September

30, 2005 and $0.5 million of letters of credit and bills were outstanding under

these facilities (2005: $0.1 million).

         In addition, the UK subsidiaries of Spear & Jackson, Inc. maintain a

line of credit of $8.4 million (2005: $8.0 million). This is secured by fixed

and floating charges on the assets and undertakings of these businesses. Of the

total facility, $5.6 million (2005: $5.3 million) relates to bank overdrafts and

$2.8 million (2005: $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, 2006 the Company had $nil (2005: $0.8

million) borrowings outstanding under the overdraft line and $0.1 million in

outstanding letters of credit (2005: $0.6 million).

NOTE 12 - ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

                                              AT SEPTEMBER 30,  AT SEPTEMBER 30,

                                                    2006              2005

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

                                               (IN THOUSANDS)    (IN THOUSANDS)

Compensation related........................     $    2,788        $    2,746

Rebates/dealer incentives...................          1,410             1,297

Sales taxes payable.........................            199               462

Finance lease liabilities - current portion.            489               613

Audit and accountancy fees..................            478               503

Commissions.................................            725               735

Property rentals............................            170               224

Provisions..................................          3,730             2,533

Other.......................................          2,245             2,128

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

                                                 $   12,234        $   11,241

                                                 ==========        ==========

NOTE 13 - OTHER LIABILITIES

Other liabilities comprise:

                                              AT SEPTEMBER 30,  AT SEPTEMBER 30,

                                                    2006              2005

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

                                               (IN THOUSANDS)    (IN THOUSANDS)

Finance lease liabilities - non current

 portion....................................     $      418        $      337

Property rentals............................            281               412

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

                                                 $      699        $      749

                                                 ==========        ==========

                                      F-25

D-93

                     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, 2006, September 30, 2005, and September 30, 2004, contributions

amounted to $3.4 million, $10.3 million and $2.7 million, respectively.

Contributions in the year ending September 30, 2005 included special

contributions of L4 million (approximately $7.2 million). The reasons for the

special contribution are explained below. Employer contributions in the year

ending September 30, 2007 are dependent on the outcome of negotiations between

the Company and the Plan trustees in the first half of 2007. The Company

anticipates that contributions in fiscal 2007 will be approximately $4.2

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 L4 million (approximately $7.2 million). L2 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 L1.5 million or

$2.7 million) to a fixed amount of L1.9 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.

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

                                       EXPECTED BENEFIT

            YEAR                           PAYMENTS

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

                                        (IN THOUSANDS)

            2007....................     $    11,835

            2008....................     $    12,367

            2009....................     $    12,924

            2010....................     $    13,505

            2011....................     $    14,112

         2012-2016..................     $    80,682

         The Company's actuary carried out valuations of the plan under SFAS 87,

"Employers Accounting for Pensions", at September 30, 2006 and at September 30,

2005. The following table, as provided by the actuary, analyzes the movement in

the pension plan liability between September 30, 2004, September 30, 2005 and

September 30, 2006 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, 2006 and September 30, 2005:

                                      F-26

D-94

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 14 - PENSION PLAN - CONTINUED

<TABLE>

<CAPTION>

                                                                       2006             2005

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

                                                                  (IN THOUSANDS)   (IN THOUSANDS)

<S>                                                               <C>              <C>

CHANGE IN PROJECTED BENEFIT OBLIGATION:

Projected benefit obligation at the beginning of the year.....    $     213,471    $     180,375

Foreign currency exchange rate changes........................           12,328           (4,530)

Service cost..................................................            2,148            1,805

Interest cost.................................................           10,730           10,072

Employee contributions........................................              798              947

Actuarial loss................................................            6,036           32,229

Benefits paid.................................................          (10,913)          (7,427)

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

   Projected benefit obligation at the end of the year........    $     234,598    $     213,471

                                                                  =============    =============

CHANGE IN FAIR VALUE OF PLAN ASSETS:

Fair value of plan assets at the beginning of the year........    $     170,110    $     141,257

Foreign currency exchange rate changes........................            9,802           (3,525)

Actual return on plan assets..................................           12,980           28,651

Employer contributions........................................            3,428           10,207

Employee contributions........................................              798              947

Benefits paid                                                           (10,913)          (7,427)

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

   Fair value of plan assets at the end of the year...........    $     186,205    $     170,110

                                                                  =============    =============

FUNDED STATUS OF PLAN:

Projected benefit obligation in excess of plan assets.........    $     (48,393)   $     (43,362)

Unrecognized net actuarial loss...............................           71,322           69,907

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

   Net amount recognized......................................    $      22,929    $      26,545

                                                                  =============    =============

AMOUNTS RECOGNIZED IN THE BALANCE SHEET CONSIST OF:

Accrued benefit cost..........................................    $     (40,565)   $     (35,954)

Accumulated other comprehensive income........................           63,495           62,501

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

   Net amount recognized......................................    $      22,930    $      26,546

                                                                  =============    =============

(DECREASE) INCREASE OVER THE YEAR IN THE MINIMUM LIABILITY

   INCLUDED IN OTHER COMPREHENSIVE INCOME.....................    $        (994)   $       8,172

                                                                  =============    =============

</TABLE>

         At September 30, 2006 the projected benefit obligation, accumulated

benefit obligation, and fair value of assets for the pension plan were $234.6

million (2005: $213.5 million), $226.8 million (2005: $206.2 million), and

$186.2 million (2005: $170.1 million).

         At September 30, 2006 and 2005 the Company had minimum pension plan

liabilities of $63.5 million and $62.5 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 decreased by $1.0 million from fiscal 2005

to fiscal 2006.

                                      F-27

D-95

                     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:

                                               2006          2005        2004

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

WEIGHTED AVERAGE ASSUMPTIONS

  Discount rate.........................       5.05%         5.00%       5.50%

  Rate of compensation increase.........       3.10%         2.90%       2.80%

  Expected return on assets.............       6.60%         6.50%       7.00%

  Fixed pension increase................       5.00%         5.00%       5.00%

  LPI pension increase..................       2.80%         2.70%       2.70%

  Post 1988 GMP increase................       2.50%         2.40%       2.40%

  Inflation.............................       3.00%         2.80%       2.80%

                                               2006          2005         2004

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

COMPONENTS OF NET PERIODIC BENEFIT COST

  Defined benefit plans:

    Service cost........................     $  2,148      $  1,805     $ 1,518

    Interest cost.......................       10,730        10,072       8,977

    Expected return on plan assets......      (10,136)      (10,588)    (10,901)

    Recognition of actuarial loss.......        5,615         2,702       1,701

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

Net periodic cost.......................     $  8,357      $  3,991     $ 1,295

                                             ========      ========     =======

         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, 2007 is estimated to be $7.9 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

6.6% a year (2005: 6.5%) 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, 2006 of

4.5% 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-28

D-96

                     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 2007     September 30,     September 30,

                            Pre-Tax Pension         2006          2006 Equity

Change in Assumption            Expense             PBO           (Net of tax)

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

25 basis point

decrease in discount

rate....................    +$1.05 million     +$10.33 million    -$6.88 million

25 basis point

increase in discount

rate....................    -$1.01 million     -$9.85 million     +$6.56 million

25 basis point

decrease in expected

return on assets........    +$0.41 million     -                  -

25 basis point

increase in expected

return on assets........    -$0.41 million     -                  -

25 basis point

increase in compensation

assumption..............    +$0.15 million     +$0.77 million     -

25 basis point

decrease in compensation

assumption..............    -$0.15 million     -$0.75 million     -

Use of PA80C2010

Mortality table.........    -$1.56 million     -$11.47 million    +$7.75 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-29

D-97

                     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, 2006 and September 30, 2005 was as follows:

                        Target           % of Assets at        % of Assets at

                      Allocation       September 30, 2006     September 30, 2005

ASSET CATEGORY:

     Equities..           50%                   51%                    51%

     Bonds.....           50%                   47%                    43%

     Cash......            0%                    2%                     6%

                         ---                   ---                    ---

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,

2006 was $1.0 million. Operating lease costs in the years ended September 30,

2005 and September 30, 2004 were $1.1 million and $0.9 million respectively.

Future minimum rental commitments under non-cancelable operating leases as of

September 30, 2006 are as follows:

                                                      2006

                                                 (IN THOUSANDS)

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

2007.........................................      $   1,060

2008.........................................          1,024

2009.........................................            916

2010.........................................            833

2011.........................................            719

Thereafter...................................          1,340

                                                   ---------

Total minimum lease payments.................      $   5,892

                                                   =========

         Under capital lease agreements, the Company is required to make certain

monthly, quarterly or annual lease payments through 2010. The aggregate minimum

capital lease payments for the next four years, with their present value as of

September 30, 2006, and September 30, 2005 are as follows:

                                                      2006             2005

                                                 (IN THOUSANDS)   (IN THOUSANDS)

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

2007.........................................      $     517        $     651

2008.........................................            317              350

2009.........................................            151                5

2010.........................................              5                -

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

Total minimum lease payments.................            990            1,006

Less amount representing interest at 5.5%....            (83)             (56)

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

Present value of net minimum lease payments..            907              950

Less current portion.........................           (489)            (613)

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

Long-term portion............................      $     418        $     337

                                                   =========        =========

                                      F-30

D-98

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 16 - COMMON STOCK

                                        2006           2005

                                      (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...........     5,735,561     11,741,122

Purchase of shares (see below)...             -     (6,005,561)

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

At end of period.................     5,735,561      5,735,561

                                     ==========     ==========

         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, 2006, September 30,

2005, and September 30, 2004 were as follows:

                                            FOR THE FISCAL YEARS ENDED

                                    SEPTEMBER 30,  SEPTEMBER 30,   SEPTEMBER 30,

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

                                        2006           2005            2004

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

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-31

D-99

                     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,

Australasia and China.

         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 entities in the Netherlands

and China 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-32

D-100

                     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,

                                 2006           2005           2004           2006           2005           2004

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

<S>                          <C>            <C>            <C>            <C>            <C>            <C>

Hand & garden tools .......  $     69,605   $     74,339   $     76,468   $      2,770   $      5,488   $      8,814

Metrology tools ...........        17,050         17,262         15,370          2,968          2,293          2,689

Magnetic products .........        10,928         10,724          9,341            150            395            862

Screwdrivers ..............             -              -              -              -              -              -

Corporate .................             -              -              -          9,706          9,392          9,749

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

   Total ..................  $     97,583   $    102,325   $    101,179   $     15,594   $     17,568   $     22,114

                             ============   ============   ============   ============   ============   ============

Attributable to:

Continuing operations .....  $     96,993   $    100,698   $     99,485   $     15,594   $     17,568   $     22,060

Discontinued operations ...  $        590   $      1,627   $      1,694   $          -   $          -   $         54

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

                             $     97,583   $    102,325   $    101,179   $     15,594   $     17,568   $     22,114

                             ============   ============   ============   ============   ============   ============

<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,

                                 2006           2005           2004           2006           2005           2004

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

<S>                          <C>            <C>            <C>            <C>            <C>            <C>

Hand & garden tools .......  $      2,538   $      2,291   $      1,975   $        879   $      1,256   $      3,726

Metrology tools ...........           251            530            421            709            119            202

Magnetic products .........           228            474            281              7              4             35

Screwdrivers ..............             -              -              -              -              -              -

Corporate .................           206            247            252              -              -          3,228

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

   Total ..................  $      3,223   $      3,542   $      2,929   $      1,595   $      1,379   $      7,191

                             ============   ============   ============   ============   ============   ============

Attributable to:

Continuing operations .....  $      3,223   $      3,488   $      2,922   $      1,595   $      1,379   $      7,137

Discontinued operations ...  $          -   $         54   $          7   $          -   $          -   $         54

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

                             $      3,223   $      3,542   $      2,929   $      1,595   $      1,379   $      7,191

                             ============   ============   ============   ============   ============   ============

<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,

                                 2006           2005           2004           2006           2005           2004

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

<S>                          <C>            <C>            <C>            <C>            <C>            <C>

Hand & garden tools .......  $     (7,075)  $        (19)  $      1,124   $       (109)  $       (178)  $       (203)

Metrology tools ...........         1,666          1,610          1,533            (16)           (14)           (17)

Magnetic products .........            49          1,058          1,136             (4)           (10)           (14)

Screwdrivers ..............             -              -              -              -              -              -

Corporate .................        (1,722)          (982)        (1,849)           156            249            (66)

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

   Total ..................  $     (7,082)  $      1,667   $      1,944   $         27   $         47   $       (300)

                             ============   ============   ============   ============   ============   ============

Attributable to:

Continuing operations .....  $     (6,981)  $      1,830   $      2,158   $         27   $         47   $       (300)

Discontinued operations ...  $       (101)  $       (163)  $       (214)  $          -   $          -   $          -

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

                             $     (7,082)  $      1,667   $      1,944   $         27   $         47   $       (300)

                             ============   ============   ============   ============   ============   ============

</TABLE>

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

                                      F-33

D-101

                     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,

                                 2006           2005           2004           2006           2005           2004

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

<S>                          <C>            <C>            <C>            <C>            <C>            <C>

United Kingdom.............  $     42,269   $     44,555   $     45,417   $     13,734   $     15,875   $     20,337

Europe.....................        21,829         21,778         18,817          1,130          1,163          1,231

Australasia................        13,967         15,160         17,505            422            530            546

North America..............         7,150          6,982          6,954              -              -              -

China & Rest of World......        12,368         13,850         12,486            308              -              -

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

   Total...................  $     97,583   $    102,325   $    101,179   $     15,594   $     17,568   $     22,114

                             ============   ============   ============   ============   ============   ============

Attributable to:

Continuing operations......  $     96,993   $    100,698   $     99,485   $     15,594   $     17,568   $     22,060

Discontinued operations....  $        590   $      1,627   $      1,694   $          -   $          -   $         54

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

                             $     97,583   $    102,325   $    101,179   $     15,594   $     17,568   $     22,114

                             ============   ============   ============   ============   ============   ============

<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,

                                 2006           2005           2004           2006           2005           2004

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

<S>                          <C>            <C>            <C>            <C>            <C>            <C>

United Kingdom.............  $      2,872   $      3,172   $      2,472   $      1,174   $        995   $      3,694

Europe.....................           124            109             93             56             79              3

Australasia................           204            261            313            103            305            266

North America..............             -              -             51              -              -          3,228

China & Rest of World......            23              -              -            262              -              -

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

   Total...................  $      3,223   $      3,542   $      2,929   $      1,595   $      1,379   $      7,191

                             ============   ============   ============   ============   ============   ============

Attributable to:

Continuing operations......  $      3,223   $      3,488   $      2,922   $      1,595   $      1,379   $      7,137

Discontinued operations....  $          -   $         54   $          7   $          -   $          -   $         54

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

                             $      3,223   $      3,542   $      2,929   $      1,595   $      1,379   $      7,191

                             ============   ============   ============   ============   ============   ============

<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,

                                 2006           2005           2004           2006           2005           2004

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

<S>                          <C>            <C>            <C>            <C>            <C>            <C>

United Kingdom.............  $     (6,805)  $      1,938   $      3,441   $        (42)  $        109   $       (186)

Europe.....................           550            355            243           (119)          (185)          (163)

Australasia................           (76)           183           (171)            55             60             24

North America..............          (568)          (809)        (1,569)           131             63             25

China & Rest of World......          (183)                                           2

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

   Total...................  $     (7,082)  $      1,667   $      1,944   $         27   $         47   $       (300)

                             ============   ============   ============   ============   ============   ============

Attributable to:

Continuing operations......  $     (6,981)  $      1,830   $      2,158   $         27   $         47   $       (300)

Discontinued operations....  $       (101)  $       (163)  $       (214)  $          -   $          -   $          -

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

                             $     (7,082)  $      1,667   $      1,944   $         27   $         47   $       (300)

                             ============   ============   ============   ============   ============   ============

</TABLE>

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

      customers.

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

                                      F-34

D-102

                     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, 2006 and 2005:

         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, 2006 and

2005.

         DERIVATIVE FINANCIAL INSTRUMENTS

         The Company had $0.54 million and $1.0 in respect of forward exchange

contracts outstanding as of September 30, 2006 and 2005, 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, 2006 and 2005, which equal the carrying

amounts of the related accounts receivable and accounts payable balances, were

$0.54 million and $1.0 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 2006 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 $0.6

million at September 30, 2006 (2005: $0.7 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, 2006 the extent of this guarantee relating to gross

bank overdrafts was $21.63 million (2005: $20.4 million). The overall pooled

balance of the bank accounts within the pool at September 30, 2006 was a net

balance of $5.4 million (2005: $0.8 million overdrawn).

         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.

         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

                                      F-35

D-103

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 20 - COMMITMENTS AND CONTINGENCIES - CONTD.

of the Company's stock through dissemination of false information, allowing him

to profit from sales of stock through nominee accounts. On May 10, 2004, the

Company consented to the entry of a preliminary injunction, without admitting or

denying the allegations of the SEC complaint. The SEC is continuing its

investigation into pension issues. The Company is offering its full cooperation.

         As a further measure, the Court appointed a Corporate Monitor to

oversee the Company's operations. In addition to Mr. Crowley consenting to a

preliminary injunction the Court's order also temporarily barred Mr. Crowley

from service as an officer or director of a public company, and prohibited him

from voting or disposing of Company stock. Although Soneet Kapila has continued

to serve as Corporate Monitor for the Company, on January 10, 2007, he applied

to the Court to terminate the role of Corporate Monitor having determined that

his function was no longer necessary. The Court has not yet ruled on this

application.

         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 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 as well as funds collected from co-defendants

International Media Solutions, Inc., Yolanda Velazquez and Kermit Silva who are

not affiliated with the Company, to the victims of their 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. No disgorgement or civil penalties were sought from, or ordered to

be paid by, the Company.

         Additionally, the Company entered into a Stock Purchase Agreement with

PNC Tool Holdings LLC ("PNC") and Mr. Crowley, the sole member of PNC. Under the

Stock Purchase Agreement, the Company acquired, for $100, and other good and

valuable consideration, 6,005,561 common shares of the Company held by PNC,

which represented approximately 51.1% of the outstanding common shares of the

Company at December 31, 2004, and which constituted 100% of the common stock

held by such entity. The parties also executed general releases in favor of each

other subject to the fulfillment of the conditions of the Stock Purchase

Agreement. The Stock Purchase Agreement was effected on April 8, 2005, following

formal approval by the SEC on February 10, 2005 and, on February 15, 2005 by the

U.S. District Court for the Southern District of Florida of the settlement of

the litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc.,

International Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case

No: 04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further

conditioned on, among other things, the disgorgement and civil penalty funds

being paid by Mr. Crowley. These monies have now been received and are being

administered for the benefit of the victims of the alleged fraud by a court

appointed administrator pursuant to the Fair Funds provision of the

Sarbanes-Oxley Act of 2002.

         With the return of the Spear & Jackson shares to the Company by PNC,

the stockholders of the Company have had their percentage stock interest

increase correspondingly. Jacuzzi Brands, Inc. ("Jacuzzi"), which is a

beneficial owner of 3,543,281 shares of common stock, had its interest in the

Company increased to approximately 61.8% of the outstanding common stock.

                                      F-36

D-104

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 20 - COMMITMENTS AND CONTINGENCIES - CONTD.

         Subsequent to the SEC action a number of class action lawsuits were

initiated in the U.S. District Court for the Southern District of Florida by

Company stockholders against the Company, Sherb & Co. LLP, the Company's former

independent auditor, and certain of the Company's directors and officers,

including Mr. Crowley, the Company's former Chief Executive Officer/Chairman,

and Mr. Fletcher, the Company's former CFO and current acting Chief Executive

Officer. These suits alleged essentially the same claims as the SEC suit

discussed above.

         These various class action suits were subsequently consolidated.

Thereafter, the defendants filed certain Motions to Dismiss with regard to the

Complaint and on October 19, 2005, the U.S. District Court for the Southern

District of Florida in Re Spear & Jackson Securities Litigation entered its

Order regarding these Motions. The Order denied the Company's motion as well as

that of Mr. Crowley, the former Chief Executive Officer of Spear & Jackson. The

Court granted the Motion to Dismiss on behalf of Mr. Fletcher, the Company's

interim Chief Executive Officer, and also granted the Motion to Dismiss on

behalf of the Company's former independent auditor, Sherb & Co., LLP. The class

plaintiff has subsequently filed an appeal regarding the trial court's decision

to dismiss the case against Sherb & Co., LLP, which appeal is presently pending.

No appeal was filed with respect to the decision to dismiss the case against Mr.

Fletcher.

         On July 7, 2006 the Company, Dennis Crowley and the Class Plaintiff

reached a Memorandum of Understanding ("MOU") which confirmed that the

plaintiffs, the Company and Dennis Crowley had reached an agreement in principle

for the settlement of this litigation, subject to Court approval. According to

the terms of the MOU, the Company deposited $650,000 into a Qualified Settlement

Fund, disbursement pending approval of the Court. Subsequent to this Sherb & Co.

also agreed to the terms of the Settlement agreeing to contribute an additional

$125,000.

         On November 9, 2006, the Stipulation of Settlement was filed with the

Court for preliminary approval. Assuming that the preliminary approval is

granted, the next step will be to notice the Class of the settlement and to set

the approval process for final hearing and final approval before the Court. The

matter will not be finally settled until the Court issues a final judgment

approving the settlement.

         Following the execution of the MOU, the lead plaintiffs commenced

discovery procedures to confirm the fairness and reasonableness of the

Settlement. The plaintiffs retain the right to terminate the Settlement if such

discovery reveals that the Settlement is not fair, reasonable and adequate.

Subject to these discovery procedures confirming the adequacy of the Settlement,

all parties have agreed to use their best efforts to finalize an appropriate

Stipulation of Settlement and any other relevant documentation necessary to

obtain approval by the Court of the settlement of this action.

         If the Settlement outlined in the MOU is not approved by the Court or,

if subsequently terminated, the terms of the above Settlement will be without

prejudice, any settlement amounts already paid will be returned and parties will

revert to their litigation positions immediately prior to the MOU.

         Should the class action settlement be approved, to facilitate the

distribution of the funds from the class suit to the class shareholders and keep

administrative costs to a minimum, the SEC Claim's Administrator applied to the

Court on January 9, 2007 for permission to combine the class action funds with

the funds derived in the SEC litigation, and allow for the SEC's Claim's

Administrator to disburse the collective funds.

         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 the Company as nominal

defendant. Also named as defendants were former directors, Robert Dinerman,

William Fletcher and John Harrington, in addition to Dennis Crowley and the

Company's prior independent auditors, Sherb & Co. LLP. The suit contains

essentially the same factual allegations as the SEC suit, which was filed in

                                      F-37

D-105

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 20 - COMMITMENTS AND CONTINGENCIES - CONTD.

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

additionally 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.

         Due to ongoing settlement discussions with the plaintiff's attorney,

the Company had not responded to the Complaint. In August 2006 the Company

entered into a settlement agreement with the plaintiff by agreeing to accept

certain changes to its corporate governance procedures and the payment of up to

$75,000 in legal fees. The settlement was filed with the Court in early November

2006, and if approved by the Court, will result in a dismissal of the suit and

release the Company and the former director defendants, Messrs Robert Dinerman,

William Fletcher and John Harrington. A Preliminary Approval hearing is

scheduled on February 4, 2007. Dennis Crowley and Sherb & Co. continue as

defendants in this suit.

         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.

NOTE 21 - SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

FISCAL 2006:

<TABLE>

<CAPTION>

                                                         QUARTERS ENDED

                                  DECEMBER       MARCH        JUNE       SEPTEMBER       TOTAL

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

<S>                               <C>          <C>          <C>          <C>           <C>

Net sales ....................    $ 22,926     $ 27,572     $ 24,647     $  21,848     $  96,993

Gross profit .................    $  7,029     $  8,494     $  7,879     $   5,695     $  29,097

Net income (loss)

   Continued operations ......    $ (1,665)    $ (2,063)    $ (2,765)    $      67     $  (6,426)

   Discontinued operations ...    $    (14)    $    (64)    $    (11)    $      36     $     (53)

   Total .....................    $ (1,679)    $ (2,127)    $ (2,776)    $     103     $  (6,479)

Net income (loss) per share

(Basic and diluted)

   Continued operations ......    $  (0.29)    $  (0.36)    $  (0.48)    $    0.01     $   (1.12)

   Discontinued operations ...    $      -     $  (0.01)    $      -     $       -     $   (0.01)

   Total .....................    $  (0.29)    $  (0.37)    $  (0.48)    $    0.01     $   (1.13)

</TABLE>

FISCAL 2005:

<TABLE>

<CAPTION>

                                                         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

   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 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

</TABLE>

                                      F-38

D-106

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

         FINANCIAL DISCLOSURE.

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, for which Chantrey Vellacott was 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 reports issued by Sherb on the consolidated financial statements of

the Company as of, and for the years ended September 30, 2003 and September 30,

2002, did not contain any adverse opinion or disclaimer of opinion, nor were

they qualified or modified as to uncertainty, audit scope or accounting

principles.

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 the former

acting Chief Executive Officer (now Chairman and Managing Director of the

Company's principal UK operating subsidiaries), the Principal Executive Officer

and our Chief Financial Officer (CFO).

Attached as exhibits to this Annual Report are certifications of the PEO 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 PEO 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.

                                       69

D-107

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 CAO 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 in ensuring that both (a) the 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 and (b) that information to be disclosed

in the reports that we file or submit under the Exchange Act is accumulated and

communicated to our management, including the PEO and CFO, to allow timely

decisions regarding required disclosure.

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, 2006 that has materially affected, or is reasonably

likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.

The executive officers of the Company as at 31 December 2006, 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

Lewis Hon Ching Ho           45      Chief Administrative Officer and Director

Andy Yan Wai Poon            35      Secretary and Director

Maria Yuen Man Lam           36      Corporate Controller and Director

Patrick Dyson                50      Chief Financial Officer

Mr. Ho was appointed director on August 9 2006. He joined Pantene Industrial Co.

Ltd, a wholly owned subsidiary of UPI, in 1999. Mr. Ho holds an Associate

diploma in Mechanical Engineering and an Associate's Diploma in

Electrical/Electronic Engineering. He has worked in the manufacturing field for

more than 27 years, of which 17 years has been spent in the electronics

industry, and he has a special expertise in tool and die-making. He was

appointed a director and general manager of PE HGZ, a wholly owned subsidiary of

UPI, in 2005.

Mr. Andy Poon was appointed director on August 9, 2006. He joined UPI in 2005

and is currently the Senior Financial Controller within that organization. He is

a qualified member of the Hong Kong Institute of Certified Public Accountants

and holds a Bachelor's degree in Accountancy and a Master's degree of Corporate

Finance form the Hong Kong Polytechnic University. Prior to his appointment

within UPI, Mr. Poon was, for nine years, a member of the senior financial

management of Liu Chong Hong Investment Limited, a property development and

Finance company. Following the resignation of Ms Maria Lam on January 4, 2007,

Mr. Poon was appointed Corporate Controller of the Company.

Ms. Lam was appointed director on August 9, 2006. She joined UPI in 1997 and is

responsible for the financial, treasury and information technology operations

within that organization. She is a qualified member of the Hong Kong Institute

of Certified Public Accountants and the Association of Chartered Certified

Accountants. Ms. Lam also holds a Bachelor's degree in Accountancy from the Hong

Kong Polytechnic University and a Master's Degree in Management from Macquarie

University. Prior to joining UPI she worked for Deloitte Touche Tohmatsu. Ms Lam

resigned as a director of the Company with effect from January 4, 2007.

                                       70

D-108

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.

Messrs. John Harrington Jnr., Interim Chairman, William Fletcher, Acting Chief

Executive Officer and Director and Robert Dinerman, Director retired and were

not re-appointed on expiration of their term of office as directors on August

27, 2006. Mr. William Fletcher continues to serve as Chairman and Manufacturing

Director of the Company's principal UK operating subsidiaries.

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 2006, in addition to actions taken by unanimous written consent,

there were 8 meetings of the Company's Board of Directors.

COMMITTEES

Following the changes in the Board of Directors and the Company's management,

the Company's audit and compensation committees have not yet been formally

reconstituted. The Board of Directors currently acts as the Audit and

Compensation Committees.

No members of our Board are independent, within the meaning of the rules of the

Securities and Exchange Commission or self-regulatory organizations. Inasmuch as

the Company does not have an audit committee, the Company does not have an

"audit committee financial expert" within the meaning of Item 401(h) of

Regulation SK.

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.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

Section 16(a) of the Exchange Act requires our executive officers and directors,

and persons who beneficially own more than ten percent of our equity securities,

to file reports of ownership and changes in ownership with the Securities and

Exchange Commission. Officers, directors and greater than ten percent

shareholders are required by SEC regulation to furnish us with copies of all

Section 16(a) forms they file.

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 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.

                                       71

D-109

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, 2006, 2005 and 2004 and each executive officer who received

in excess of $100,000 for such fiscal period.

<TABLE>

<CAPTION>

                                            SUMMARY COMPENSATION TABLE

                                           Annual Compensation           Long-Term Compensation

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

                                                                            Awards            Payouts

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

                                                           Other                 Securities

                                                          Annual                   Under-

                                                          Compen-   Restricted     Lying        LTIP    All Other

                                                          sation      Stock       Options/    Payouts    Compen-

                                 Year   Salary    Bonus     ($)      Award(s)       SARs        ($)      sation

Name and Principal Position      ($)     ($)       ($)      (1)        ($)          (#)         (2)        ($)

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

<S>                              <C>    <C>       <C>     <C>       <C>          <C>          <C>       <C>

Dennis Crowley                   2004   194,545       -         -        -            -           -             -

Chief Executive Officer,

President, Secretary and

Chairman of the Board until

15 April 2004***

William Fletcher                 2006   179,560       -    17,548        -            -           -        20,871

Acting Chief Executive Officer   2005   185,110       -    17,608        -            -           -        60,600

until 27 August 2006**           2004   175,265       -    15,231        -            -           -        54,683

Patrick J. Dyson                 2006   122,102       -    14,728        -            -           -        30,366

Chief Financial Officer*         2005   120,321       -    14,992        -            -           -        26,873

                                 2004   111,900   5,393    12,654        -            -           -        23,723

</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. In August 2006 he retired as director on

     expiration of his term of office but has continued to act as Chairman and

     Managing Director of the Company's UK principal operating subsidiaries.

*    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, 2006.

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.

                                       72

D-110

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, 2006. At September 30,

2006, no director or executive officer held any stock options.

COMPENSATION ARRANGEMENTS OF OTHER DIRECTORS

Mr. Dinerman received compensation of $22,500 in the year ended September 30,

2006 (2005 $12,500, 2004: $nil). Mr. Harrington received compensation of $72,500

in the year ended September 3, 2006 (2005: $12,500, 2004: $nil). Additionally,

Mr. Harrington and Mr. Dinerman were reimbursed for travel and other expenses

incurred in connection with meetings of the Board of Directors and other Company

matters.

Messrs. Poon and Ho and Ms. Lam received no compensation in the year ended

September 30, 2006.

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

December 30, 2006 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:

12012 Southshore Boulevard

Suite 103

Wellington

Florida

33414

                                                    SHARES             PERCENT

                                                 BENEFICIALLY         OF SHARES

NAME AND ADDRESS                                     OWNED           OUTSTANDING

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

William Fletcher (1) .......................               -                -

Patrick J Dyson (2) ........................               -                -

Lewis Hon Ching Ho (3) .....................               -                -

Andy Yan Wai Poon (4) ......................               -                -

Maria Yuen Man Lam (5) .....................               -                -

United Pacific Industries Limited (6) ......       3,543,281            61.78%

199 Des Voeux Road Central,

Suite 27-05/06

Hong Kong

(1)  William Fletcher was the Acting Chief Executive Officer of the Company

     until 27 August 2006. He continues to serve as Chairman and Managing

     Director of the Company's principal operating subsidiaries.

                                       73

D-111

(2)  Patrick Dyson is the Chief Financial Officer of the Company.

(3)  Lewis Hon Ching Ho is the Chief Administrative Officer and a director of

     the Company.

(4)  Andy Yan Wai Poon is the Secretary and a director of the Company. Following

     the resignation of Maria Yuen Man Lam on January 4, 2007, Mr. Poon was also

     appointed Corporate Controller of the Company.

(5)  Maria Yuen Man Lam was, until January 4, 2007, the date of her resignation,

     the Corporate Controller and a director of the Company.

(6)  David H Clarke, director and Executive Vice-Chairman of United Pacific

     Industries Limited ("UPI") holds approximately 22.88% of the shares of UPI

     and also holds approximately 28,350 shares of the common stock of Spear &

     Jackson, Inc.

The Company has no securities authorized for issuance under equity compensation

plans.

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

                                       74

D-112

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.

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.

                                       75

D-113

As a result of the stock purchase, the stockholders of the Company 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

was a beneficial owner at the time of 3,543,281 shares of common stock, had its

interest in the Company increase to approximately 61.8% of the outstanding

common stock.

On April 21, 2005, Jacuzzi adopted a plan of disposition of the Company's common

stock. On March 23, 2006, Jacuzzi and its subsidiary undertaking, USI American

Holdings, Inc. ("USI" and, together with Jacuzzi, "the Seller") entered into a

Stock Purchase Agreement (the "Stock Purchase Agreement" with United Pacific

Industries Limited ("UPI"), a Bermuda Corporation, whose shares are traded on

the Hong Kong Exchange, to sell its entire holding of 3,543,281 shares of the

common stock ("the Shares") of Spear & Jackson, Inc. to UPI for $1.40 per share

for an aggregate purchase price of $4,960,593.

The representations, warranties and covenants made by Jacuzzi and UPI were

typical for this type of transaction, and included a covenant that restricts

Jacuzzi from soliciting or negotiating with a third party between the signing

date of the Stock Purchase Agreement and the closing date of the transaction.

Jacuzzi also agreed that, in connection with the closing of the transaction, it

would, among other things, cause UPI's designees and one designee of Jacuzzi to

be elected to the Board of Directors of Spear & Jackson, Inc. and would use

commercially reasonable best efforts so that such UPI designees are in

sufficient numbers to give UPI a majority of the Board of Directors of the Spear

& Jackson, Inc. UPI also agreed that neither it nor any of its affiliates would

purchase any additional Common Stock during the period from the signing date of

the Stock Purchase Agreement through one year following the closing at a price

less than $1.40 per share.

The purchase of the Shares by UPI contemplated by the Stock Purchase Agreement

was subject to the satisfaction of a number of closing conditions, including

approval by UPI's shareholders and the United Kingdom Pensions Regulator, and

receipt of certain other regulatory approvals as well as other customary closing

conditions. A copy of the Stock Purchase Agreement is on file with the SEC in

connection with the filing by Jacuzzi of a Schedule 13D/A on March 27, 2006.

The Seller and UPI entered into Amendment No. 1 dated as of May 4, 2006

("Amendment No. 1 to the Stock Purchase Agreement") to extend the date by which

the Seller and UPI were required to lodge the clearance application with the UK

Pensions Regulator. The Seller and UPI subsequently received a comfort letter

dated July 5, 2006 issued by the UK Pensions Regulator (the "Comfort Letter").

The Seller and UPI agreed to waive the condition contained in the Stock Purchase

Agreement for a clearance from the UK Pensions Regulator and to accept the

Comfort Letter in satisfaction of that condition.

The trustees of Spear & Jackson, Inc.'s UK Pension Plan confirmed by a letter

dated July 6, 2006 their acceptance of the UK Pensions Regulator's

determination. The Seller and UPI then entered into Amendment No. 2 dated as of

July 10, 2006 ("Amendment No. 2 to the Stock Purchase Agreement") to waive their

respective requirements for a clearance from the UK Pensions Regulator and to

accept in its place the Comfort Letter which states the UK Pensions Regulator is

of the view, based on the information supplied to him in connection with the

clearance application, that the change of control as a result of the sale by the

Seller of all of its shares of Spear & Jackson, Inc. to UPI is not detrimental

to the UK pension plan and the UK Pensions Regulator believes that a clearance

is not necessary for the transaction.

In addition, pursuant to Amendment No. 2 to the Stock Purchase Agreement, UPI

agreed, subject to the Closing having occurred, to indemnify the Seller and JBI

Holdings Limited (the "Jacuzzi Indemnified Parties") should the UK Pensions

Regulator, regardless of the Comfort Letter, require any of the Jacuzzi

Indemnified Parties to make a contribution or provide financial support in

relation to the potential pension plan liabilities of SJI or its subsidiaries.

                                       76

D-114

In addition, UPI has also agreed that for a period of 12-months from the Closing

Date, UPI will not, and will use its best efforts to ensure that neither Spear &

Jackson, Inc. nor any of its subsidiaries will, take any action or omit to take

any action that causes the UK Pensions Regulator, as a result of such action or

omission, to issue a contribution notice against the Jacuzzi Indemnified Parties

in relation to any UK pension plan in which Spear & Jackson, Inc. or any

subsidiary of Spear & Jackson, Inc. is an employer. Further, UPI agreed that for

a period of 12-months from the Closing Date, that it will not (and will use its

best efforts to ensure that neither Spear & Jackson, Inc. nor any subsidiary of

Spear & Jackson, Inc. will) engage in any action or inaction which in relation

to any such UK pension plan would fall within the UK Pension Regulation

clearance guidance note dated April 2005 as a 'Type A' event unless UPI procures

that clearance is issued by the UK Pensions Regulator in relation to such event

in terms which confirm that no Jacuzzi Indemnified Party shall be linked to a

financial support direction or contribution notice in respect of such event.

Closing occurred on July 28, 2006.

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 the Company 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 reviewed the terms of the transaction and evaluated

the receivable and the assets purportedly conveyed to consider its course of

action in this matter and 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 was 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 was subsequently agreed

with Megapro that it would pay Canadian $ 53,900 (approximately $41,000) in

settlement of those debts and was paid in monthly installments of Canadian

$5,000 (approximately $3,800) of which $27,000 was received in the year ended

September 30, 2005 and $12,000 in the year ended September 30, 2006.

                                       77

D-115

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

ANNUAL AUDIT AND QUARTERLY REVIEW FEES

The aggregate fees billed by Chantrey Vellacott DFK for professional services

rendered for the audit of the Company's annual financial statements for the year

ended September 30, 2006 and for professional services rendered for the

quarterly review of the financial statements was $429,000 (2005: $412,000).

TAX FEES

The aggregate fees billed by Chantrey Vellacott DFK for professional services

rendered for tax compliance, tax advice and tax planning were $164,000 for the

year ended September 30, 2006 (September 30, 2005: $178,000).

AUDIT RELATED FEES

There were no fees billed by the Company's accountants for financial information

systems design and implementation in either fiscal 2006 or 2005. There were no

fees billed for professional services related to Sarbanes-Oxley implementation,

Section 404 in particular.

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 2006,

the Audit Committee approved and/or ratified all of the services detailed above.

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, 2006 and 2005 and for each of the three years

in the period ended September 30, 2006 (including the notes thereto which

contain unaudited quarterly financial data for each of the two years ended

September 30, 2006), 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) 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.

(c) Exhibits:

                                       78

D-116

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)

10.4      Sale and purchase of land at St. Paul's Road, Wednesbury, England

          dated 27, July 2006, between Spear & Jackson Garden Products Limited

          and Opus Land (Wednesbury Limited). (6)

10.5      Stock Purchase Agreement, dated March 23,2006 by and among United

          Pacific Industries Limited, Jacuzzi Brands, Inc. and USI America

          Holdings, Inc. (7)

10.6      Assignment of Interests and Claims, dated as of July 28, 2006, by and

          among United Pacific Industries Limited, Jacuzzi Brands, Inc. and USI

          American Holdings, Inc. (8)

10.7      Assignment Agreement, dated as of July 28, 2006, by and between United

          Pacific Industries Limited and Pantene Global Holdings Limited. (8)

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 Sarbannes-Oxley Act of 2002. *

31.2      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant

          to Section 302 of the Sarbannes-Oxley Act of 2002. *

32.1      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant

          to Section 906 of the Sarbannes-Oxley Act of 2002. *

32.2      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant

          to Section 906 of the Sarbannes-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.

(6)  Filed as an exhibit to the Company's Report on Form 8-K filed with the

     Securities and Exchange Commission on August, 2, 2006.

(7)  Filed as an exhibit to the Company's Form SC 13D/A filed with the

     Securities and Exchange Commission originally on March 27 2006 and as

     amended through July 12, 2006.

(8)  Filed as exhibit to the Company's Form SC 13D filed with the Securities and

     Exchange Commission on August 7, 2006.

                                       79

D-117

                                  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: January 15, 2007            SPEAR & JACKSON, INC.

                                   By: /s/ Lewis Hon Ching Ho

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

                                       Lewis Hon Ching Ho

                                       Director and Chief Administrative Officer

                                       (Principal Executive Officer)

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: January 15, 2007            By: /s/ Lewis Hon Ching Ho

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

                                       Lewis Hon Ching Ho

                                       Director and Chief Administrative Officer

                                       (Principal Executive Officer)

Dated: January 15, 2007            By: /s/ Andy Yan Wai Poon

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

                                       Andy Yan Wai Poon

                                       Director, Corporate Controller,

                                       and Secretary

Dated: January 15, 2007            By: /s/ Patrick J. Dyson

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

                                       Patrick J. Dyson

                                       Chief Financial Officer

                                       (Principal Financial

                                       And Accounting Officer)

                                       80

D-118

                                                                    Exhibit 31.1

        CERTIFICATION PURSUANT TO RULE 13a-14(a) or RULE 15d-14(a) OF THE

       SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

                        OF THE SARBANES-OXLEY ACT OF 2002

I, Lewis Hon Ching Ho, director and Principal Executive Officer of Spear &

Jackson, Inc., certify that:

1.   I have reviewed this Annual report on Form 10-K of Spear & Jackson, Inc.

2.   Based on my knowledge, this report does not contain any untrue statement of

     a material fact or omit to state a material fact necessary to make the

     statements made, in light of the circumstances under which such statements

     were made, not misleading with respect to the period covered by this annual

     report; and

3.   Based on my knowledge, the financial statements, and other financial

     information included in this report, fairly present in all material

     respects the financial condition, results of operations and cash flows of

     the registrant as of and for, the periods presented in this annual report.

4.   The registrant's other certifying officer and I are responsible for

     establishing and maintaining disclosure controls and procedures (as defined

     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such

          disclosure controls and procedures to be designed under our

          supervision, to ensure that material information relating to the

          registrant, including its consolidated subsidiaries, is made known to

          us by others within those entities, particularly during the period in

          which this report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls

          and procedures and presented in this report our conclusions about the

          effectiveness of the disclosure controls and procedures, as of the end

          of the period covered by this report based on such evaluation; and

     c)   Disclosed in this report any change in the registrant's internal

          control over financial reporting that occurred during the registrant's

          most recent fiscal quarter (the registrant's fourth fiscal quarter in

          the case of an annual report) that has materially affected, or is

          reasonably likely to materially affect, the registrant's internal

          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on my

     most recent evaluation of internal control over financial reporting, to the

     registrant's auditors and the audit committee of the registrant's board of

     directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or

          operation of internal control over financial reporting which are

          reasonably likely to adversely affect the registrant's ability to

          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other

          employees who have a significant role in the registrant's internal

          control over financial reporting.

/s/ Lewis Hon Ching Ho

Director and Principal Executive Officer

Date: January 15, 2007

D-119

                                                                    Exhibit 31.2

        CERTIFICATION PURSUANT TO RULE 13a-14(a) or RULE 15d-14(a) OF THE

       SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302

                        OF THE SARBANES-OXLEY ACT OF 2002

I, Patrick J. Dyson, the Chief Financial Officer of Spear & Jackson, Inc.,

certify that:

1.   I have reviewed this Annual report on Form 10-K of Spear & Jackson, Inc.

2.   Based on my knowledge, this report does not contain any untrue statement of

     a material fact or omit to state a material fact necessary to make the

     statements made, in light of the circumstances under which such statements

     were made, not misleading with respect to the period covered by this annual

     report;

3.   Based on my knowledge, the financial statements, and other financial

     information included in this report, fairly present in all material

     respects the financial condition, results of operations and cash flows of

     the registrant as of and for, the periods presented in this annual report.

4.   The registrant's other certifying officer and I are responsible for

     establishing and maintaining disclosure controls and procedures (as defined

     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a)   Designed such disclosure controls and procedures, or caused such

          disclosure controls and procedures to be designed under our

          supervision, to ensure that material information relating to the

          registrant, including its consolidated subsidiaries, is made known to

          us by others within those entities, particularly during the period in

          which this report is being prepared;

     b)   Evaluated the effectiveness of the registrant's disclosure controls

          and procedures and presented in this report our conclusions about the

          effectiveness of the disclosure controls and procedures, as of the end

          of the period covered by this report based on such evaluation; and

     c)   Disclosed in this report any change in the registrant's internal

          control over financial reporting that occurred during the registrant's

          most recent fiscal quarter (the registrant's fourth fiscal quarter in

          the case of an annual report) that has materially affected, or is

          reasonably likely to materially affect, the registrant's internal

          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on my

     most recent evaluation of internal control over financial reporting, the

     registrant's auditors and the audit committee of the registrant's board of

     directors (or persons performing the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or

          operation of internal control over financial reporting which are

          reasonably likely to adversely affect the registrant's ability to

          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material, that involves management or other

          employees who have a significant role in the registrant's internal

          control over financial reporting.

/s/ Patrick J. Dyson

Chief Financial Officer

Date: January 15, 2007

D-120

                                                                    Exhibit 32.1

           CERTIFICATION PURSUANT TO 18 U.S.C. AS ADOPTED PURSUANT TO

                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Spear & Jackson, Inc. (the "Company") on

Form 10-K for the year ended September 30, 2006 (the "Report"), I, Lewis Hon

Ching Ho, director and Principal Executive Officer of the Company, certify,

pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section. 906 of the

Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1)   The Report fully complies with the requirements of Section 13(a) or 15(d)

     of the Securities Exchange Act of 1934; and

2)   The information contained in the Report fairly presents, in all material

     respects, the financial condition and result of operations of the Company.

/s/ Lewis Hon Ching Ho

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

Lewis Hon Ching Ho

Director and Principal Executive Officer

January 15, 2007

D-121

                                                                    Exhibit 32.2

           CERTIFICATION PURSUANT TO 18 U.S.C. AS ADOPTED PURSUANT TO

         SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

In connection with the Annual Report of Spear & Jackson, Inc. (the "Company") on

Form 10-K for the year ended September 30, 2006 (the "Report"), I, Patrick J.

Dyson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002,

that, to the best of my knowledge:

1)   The Report fully complies with the requirements of Section 13(a) or 15(d)

     of the Securities Exchange Act of 1934; and

2)   The information contained in the Report fairly presents, in all material

     respects, the financial condition and result of operations of the Company.

/s/ Patrick J. Dyson

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

Patrick J. Dyson

Chief Financial Officer

January 15, 2007

D-122

EXHIBIT E

                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X] Quarterly Report Pursuant To Section 13 or 15(d) of The Securities Exchange

    Act of 1934

                  For the quarterly period ended March 31, 2007

                                       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 of                   (I.R.S. Employer

       incorporation or organization)                  Identification No.)

        12012 Southshore Boulevard, Suite 103, Wellington, Florida 33414

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

          (Address of principal executive offices, including Zip Code)

                                 (561) 793 7233

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

               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. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an

accelerated filer, or a non-accelerated filer. See definition of "accelerated

filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check

one):

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

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2 of the Exchange Act), Yes [ ] No [X]

The number of shares of registrant's common stock outstanding as of May 15, 2007

was 5,735,561.

E-1

                                TABLE OF CONTENTS

PART I.  FINANCIAL INFORMATION

ITEM 1.  Financial Statements  (Unaudited)

         Condensed Consolidated Statements of Operations - Three and

         Six Months ended March 31, 2007 and 2006 .........................    1

         Condensed Consolidated Balance Sheets - March 31, 2007

         And September 30, 2006 (audited) .................................    2

         Condensed Consolidated Statement of Cash flows - Three and Six

         Months ended March 31, 2007 and 2006 .............................    3

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

ITEM 2.  Management's Discussion and Analysis of Financial Condition ......   22

         And Results of Operations

ITEM 3.  Quantitative and Qualitative Disclosure about Market Risk ........   54

ITEM 4.  Controls and Procedures ..........................................   55

PART II. OTHER INFORMATION ................................................   56

ITEM 1.  Legal Proceedings ................................................   56

ITEM 6.  Exhibits .........................................................   58

SIGNATURES ................................................................   59

Certification of Principal Executive Officer and

  Chief Administrative Officer pursuant to Section 302 ....................EX 31

Certification of Principal Executive Officer and

   Chief Administrative Officer pursuant to Section 906 ...................EX 32

E-2

                                     PART I

ITEM 1.  FINANCIAL STATEMENTS

<TABLE>

                                   SPEAR & JACKSON, INC. AND SUBSIDIARIES

                               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                 (UNAUDITED)

                                   (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<CAPTION>

                                                               FOR THE THREE MONTHS     FOR THE SIX MONTHS

                                                                      ENDED                   ENDED

                                                              MARCH 31,   MARCH 31,   MARCH 31,   MARCH 31,

                                                                 2007        2006        2007        2006

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

<S>                                                           <C>         <C>         <C>         <C>

Net sales .................................................   $  29,172   $  27,572   $  53,985   $  50,498

Cost of goods sold ........................................      18,925      19,078      35,396      34,975

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

Gross profit ..............................................      10,247       8,494      18,589      15,523

Operating costs, income and expenses:

   Selling, general and administrative expenses ...........       9,926       9,305      19,692      18,423

   Gain on sale of land and buildings .....................        (224)          -        (312)          -

   Manufacturing and other reorganization costs ...........          88       1,228          98       1,228

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

Operating income (loss) ...................................         457      (2,039)       (889)     (4,128)

Other income

   Rental and other income ................................          42          37          82          74

   Interest (net) .........................................          18          42          25          13

   Share of net earnings of investment in joint venture ...          76           -          76           -

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

Income (loss) from continuing operations before income

   taxes ..................................................         593      (1,960)       (706)     (4,041)

Income tax (provision) benefit ............................         (45)       (103)        (95)        313

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

Income (loss) from continuing operations ..................         548      (2,063)       (801)     (3,728)

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

Discontinued operations:

Loss from discontinued operations .........................           -         (66)          -         (87)

   Adjustments to previously recorded losses on disposal

      of discontinued operations ..........................           -           2           -           9

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

   Loss from discontinued operations ......................           -         (64)          -         (78)

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

Net income (loss) .........................................   $     548   $  (2,127)  $    (801)  $  (3,806)

                                                              =========   =========   =========   =========

Basic and diluted income (loss) per share:

From continuing operations ................................   $    0.10   $   (0.36)  $   (0.14)  $   (0.65)

From discontinued operations ..............................        0.00       (0.01)       0.00       (0.01)

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

                                                              $    0.10   $   (0.37)  $   (0.14)  $   (0.66)

                                                              =========   =========   =========   =========

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

                                                      1

</TABLE>

E-3

<TABLE>

                                   SPEAR & JACKSON, INC. AND SUBSIDIARIES

                                    CONDENSED CONSOLIDATED BALANCE SHEETS

                                        (IN THOUSANDS EXCEPT SHARES)

<CAPTION>

                                                                          AT MARCH 31,     AT SEPTEMBER 30,

                                                                              2007              2006

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

                                                                          (UNAUDITED)

<S>                                                                     <C>                <C>

                                ASSETS

Current assets:

   Cash and cash equivalents ........................................   $          7,205   $          9,930

   Trade receivables, net of allowances for doubtful debts of $1,167

      and $1,635 ....................................................             21,471             15,983

   Inventories ......................................................             24,343             22,853

   Foreign taxes recoverable ........................................                200                215

   Deferred income tax asset, current portion .......................              2,289              2,182

   Other current assets .............................................              1,624              1,425

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

      Total current assets ..........................................             57,132             52,588

Property, plant and equipment, net ..................................             17,051             15,594

Deferred income tax asset ...........................................             15,288             14,570

Investments .........................................................                586                508

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

      Total assets ..................................................   $         90,057   $         83,260

                                                                        ================   ================

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Trade accounts payable ...........................................   $         10,132   $          7,766

   Accrued expenses and other liabilities ...........................             11,408             12,234

   Foreign taxes payable ............................................                202                155

      Total current liabilities .....................................             21,742             20,155

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

Other liabilities ...................................................              1,136                699

Pension liability ...................................................             44,800             40,565

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

      Total liabilities .............................................             67,678             61,419

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

Stockholders' equity:

Common stock, 25,000,000 shares authorized $0.001 par value;

   12,011,122 issued and 5,735,561 shares outstanding ...............                 12                 12

Additional paid in capital ..........................................             51,590             51,590

Accumulated other comprehensive income (loss):

   Minimum pension liability adjustment, net of tax .................            (46,660)           (44,447)

   Foreign currency translation adjustment, net of tax of $nil ......             18,139             14,581

   Unrealized loss on derivative instruments ........................                (16)               (10)

(Accumulated Deficit) retained earnings .............................               (146)               655

Less: 6,275,561 common stock held in treasury, at cost ..............               (540)              (540)

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

      Total stockholders' equity ....................................             22,379             21,841

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

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

      Total liabilities and stockholders' equity ....................   $         90,057   $         83,260

                                                                        ================   ================

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

                                                      2

</TABLE>

E-4

<TABLE>

                                   SPEAR & JACKSON, INC. AND SUBSIDIARIES

                               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                 (UNAUDITED)

                                               (IN THOUSANDS)

<CAPTION>

                                                                                    FOR THE SIX MONTHS ENDED

                                                                                    MARCH 31,      MARCH 31,

                                                                                       2007          2006

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

<S>                                                                                 <C>            <C>

CASH FLOWS FROM OPERATING ACTIVITIES:

   Net loss ..................................................................      $   (801)      $ (3,806)

   Adjustments to reconcile net loss to net cash used in operating activities:

      Depreciation ...........................................................           937          1,084

      Gain on sale of land and buildings .....................................          (312)             -

         (Profit) loss on sale of plant, property and equipment ..............            (4)             2

         Deferred income taxes ...............................................             -           (566)

         Equity earnings in joint venture ....................................           (76)             -

   Changes in operating assets and liabilities:

      Increase in trade receivables ..........................................        (4,457)        (3,979)

      (Increase) decrease in inventories .....................................          (277)         1,725

      Increase in other current assets .......................................          (190)           (64)

      Contributions paid to pension plan .....................................        (1,883)        (1,829)

      Increase in other non-current liabilities ..............................         4,066          4,060

      Increase in trade accounts payable .....................................         1,908          1,641

      (Decrease) increase in accrued expenses and other liabilities ..........        (2,359)           742

      Increase (decrease) in foreign taxes payable ...........................            80           (116)

      Increase in other liabilities ..........................................           402             55

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

NET CASH USED IN OPERATING ACTIVITIES ........................................        (2,966)        (1,051)

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

INVESTING ACTIVITIES:

   Purchases of property, plant and equipment ................................          (863)          (638)

   Proceeds from sale of property, plant and equipment .......................           428             44

   Purchase of equity investment .............................................             -           (229)

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

NET CASH USED IN INVESTING ACTIVITIES ........................................          (435)          (823)

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

FINANCING ACTIVITIES:

   Increase in overdraft .....................................................             -            678

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

NET CASH PROVIDED BY FINANCING ACTIVITIES ....................................             -            678

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

Effect of exchange rate changes on cash and cash equivalents .................           676           (113)

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

CHANGE IN CASH AND CASH EQUIVALENTS ..........................................        (2,725)        (1,309)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............................         9,930          7,289

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................................      $  7,205       $  5,980

                                                                                    ========       ========

SUPPLEMENTAL CASH FLOW INFORMATION

   Cash paid for interest ....................................................      $    162       $     92

                                                                                    ========       ========

   Cash paid for taxes .......................................................      $     46       $    369

                                                                                    ========       ========

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

                                                      3

</TABLE>

E-5

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION

         These condensed consolidated financial statements are expressed in U.S.

dollars and have been prepared in accordance with accounting principles

generally accepted in the United States. The condensed consolidated financial

statements include the accounts of Spear & Jackson, Inc. (the Company) and its

wholly owned subsidiaries, Mega Tools Ltd., Mega Tools USA, Inc., Megapro Tools,

Inc., S and J Acquisition Corp., Spear & Jackson plc and Bowers Group plc. Both

Spear & Jackson plc and Bowers Group plc are sub-holding companies and their

business is carried out by the following directly and indirectly owned

subsidiaries: Bowers Metrology Limited, Bowers Metrology (UK) Limited, Coventry

Gauge Limited, CV Instruments Limited, Eclipse Magnetics Limited, Spear &

Jackson (New Zealand) Limited, James Neill Canada Inc., James Neill Holdings

Limited, James Neill U.S.A. Inc., Spear & Jackson (Australia) Pty Ltd., Magnacut

Limited, Neill Tools Limited, Spear & Jackson Garden Products Limited, Spear &

Jackson Holdings Limited, Spear & Jackson France S.A., Societe Neill France

S.A , CV Instruments Europe BV and Bowers Eclipse Equipment Shanghai Co.

Limited.

         As further explained in note 4, below, the purchase of Spear & Jackson

plc and Bowers Group plc by Megapro Tools, Inc. (now Spear & Jackson, Inc.),

which was completed on September 6, 2002, was treated as a reverse acquisition.

The results and assets of discontinued operations are presented in accordance

with Statement of Financial Accounting Standards ("SFAS") 144.

         All significant intercompany accounts and transactions have been

eliminated on consolidation.

         The accompanying unaudited condensed financial statements have been

prepared in accordance with generally accepted accounting principles for interim

financial statements pursuant to both the rules and regulations of the

Securities and Exchange Commission and with instructions to Form 10-Q.

Accordingly, certain information and footnote disclosures required for annual

financial statements have been condensed or omitted. The Company's management

believes that all adjustments necessary to present fairly the Company's

financial position as of March 31, 2007 and September 30, 2006, and the results

of operations for the three and six month periods ended March 31, 2007 and March

31, 2006 and cash flows for the three and six month periods ended March 31, 2007

and March 31, 2006 have been included and that the disclosures are adequate to

make the information presented not misleading. The balance sheet at September

30, 2006 has been derived from the audited financial statements at that date but

does not include all of the information and footnotes required by generally

accepted accounting principles for complete financial statements. For further

information, refer to the consolidated financial statements and footnotes

thereto included in the Company's and Subsidiaries' annual report on Form 10-K

for the year ended September 30, 2006.

         It is suggested that these financial statements be read in conjunction

with the audited consolidated financial statements and related footnotes of the

Company for the year ended September 30, 2006 included in the Company's annual

report filed on Form 10-K for the period then ended.

         The condensed consolidated financial statements of Spear & Jackson,

Inc. are denominated in US dollars. Changes in exchange rates between UK

sterling, the Euro, the Australian dollar, the New Zealand dollar, the Chinese

Yuan and the US dollar will affect the translation of the Company's UK, French,

Dutch, Chinese, New Zealand and Australian subsidiaries' financial results into

US dollars for the purposes of reporting the consolidated financial results. The

process by which each foreign subsidiary's financial results are translated into

US dollars is as follows: income statement accounts are translated at average

exchange rates for the period; balance sheet asset and liability accounts are

translated at end of period exchange rates; and equity accounts are translated

at historical exchange rates. Translation of the balance sheet in this manner

affects the stockholders' equity account, referred to as the accumulated other

comprehensive income account. Management has decided not to hedge against the

impact of exposures giving rise to these translation adjustments as such hedges

may impact upon the Company's cash flow compared to the translation adjustments

which do not affect cash flow in the medium term.

         The results of operations for any interim periods are not necessarily

indicative of the results to be expected for the full year, or any subsequent

periods.

                                        4

E-6

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 1 - BASIS OF PRESENTATION - CONTINUED

         The preparation of financial statements in conformity with accounting

principles generally accepted in the United States requires management to make

estimates and assumptions that affect the amounts reported in the financial

statements and accompanying notes. Actual results could differ from those

estimates.

NOTE 2 - RECLASSIFICATION

         Certain reclassifications have been made to the consolidated financial

statements for the three and six months ended March 31, 2006 in order to conform

to current year presentation. Gains arising on the sale of property and

manufacturing and other reorganization costs have been reclassified so that such

gains and costs are now shown as a component of "Operating Costs, Income and

Expense". These items that are further described in Notes 10 and 11, were

previously captioned as "Unusual or Infrequent Items" and were presented after

the Operating profit (loss) for the period. These reclassifications impact only

on the presentation of the Consolidated Statement of Operations and do not have

any impact on previously reported net income or loss.

NOTE 3 - RECENTLY ISSUED ACCOUNTING STANDARDS

         In February 2006, FASB issued statement No. 155, Accounting for Certain

Hybrid Financial Instruments, as an amendment to Statement No. 133, Accounting

for Derivatives Instruments and Hedging Activities, and Statement No. 140,

Accounting for Transfers and Servicing of Financial Assets and Extinguishment of

Liabilities. Statement No. 155 amends Statement No. 133 to narrow the scope

exception for interest-only and principal-only strips on debt instruments to

include only such strips representing rights to receive a specified portion of

the contractual interest or principle cash flows. Statement No. 155 amends

Statement No. 140 to allow qualifying special purpose entities to hold a passive

derivative financial instrument pertaining to beneficial interests that itself

is a derivative instrument. Statement No. 155 is effective for all financial

instruments acquired or issued in fiscal years beginning after September 15,

2006. The adoption of Statement No. 155 has not had a material impact on the

Company's condensed consolidated financial statements.

         In March 2006, the FASB issued Statement No. 156, Accounting for

Servicing of Financial Assets as an amendment to Statement No. 140. Statement

No. 156 requires that all separately recognized servicing rights be initially

measured at fair value, if practicable. In addition, this statement permits an

entity to choose between two measurement methods (amortization method or fair

value measurement method) for each class of separately recognized servicing

assets and liabilities. This new accounting standard is effective for reporting

periods beginning after September 15, 2006.The adoption of SFAS 156 has not had

a material impact on our results of operations or financial condition.

         In July 2006, FASB issued FIN 48, "Accounting for Uncertainty in Income

Taxes" as an interpretation of Statement No. 109. This interpretation clarifies

the application of Statement No. 109 by defining a criterion than an individual

tax position must meet for any part of the benefit of that position to be

recognized in an enterprise's financial statements and also provides guidance on

measurement, derecognition, classification, interest and penalties, accounting

in interim periods and disclosure. FIN 48 is effective for our fiscal years

beginning after December 15, 2006. At this time, we have not completed our

review and assessment of the impact of adoption of FIN 48.

         In September 2006, the SEC staff issued SAB 108, Considering the

Effects of Prior Year Misstatements when Quantifying Misstatements in Current

Year Financial Statements ("SAB 108"). SAB 108 was issued in order to eliminate

the diversity in practice surrounding how public companies quantify financial

statement misstatements. SAB 108 requires that registrants quantify errors using

both a balance sheet and income statement approach and evaluate whether either

approach results in a misstated amount that, when all relevant quantitative and

qualitative factors are considered, is material. SAB 108 must be implemented by

the end of the Company's 2007 fiscal year. The Company is currently assessing

the potential effect of SAB 108 on its financial statements.

                                        5

E-7

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS - CONTINUED

         In September 2006, the FASB issued SFAS 157, Fair Value Measurements

(SFAS 157). SFAS 157 provides a common definition of fair value and establishes

a framework to make the measurement of fair value in generally accepted

accounting principles more consistent and comparable. SFAS 157 also requires

expanded disclosures to provide information about the extent to which fair value

is used to measure assets and liabilities, the methods and assumptions used to

measure fair value, and the effect of fair value measures on earnings. SFAS 157

is effective for the Company's 2009 fiscal year, although early adoption is

permitted. The Company is currently assessing the potential effect of SFAS 157

on its financial statements.

         In September 2006, the FASB issued SFAS No. 158, Employers' Accounting

for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB

Statements No. 87, 88, 106, and 132(R) ("SFAS 158"). This statement requires

recognition of the overfunded or underfunded status of defined benefit pension

and other postretirement plans as an asset or liability in the statement of

financial position and also requires in the funded status to be recognized in

comprehensive income in the year in which such changes occur. SFAS 158 also

requires measurement of the funded status of a plan as of the date of the

statement of financial position. The recognition and disclosure provisions of

SFAS 158 are effective as of the end of the fiscal year ending after December

16, 2006, while the measurement date provisions are effective for fiscal years

ending after December 15, 2008. If SFAS 158 were applied as at March 31, 2007,

using the Company's September 30, 2006 actuarial valuation and rolling this

forward, we would have recorded an additional pre-tax charge to accumulated

other comprehensive income totaling $8.2 million ($5.7 million after tax)

representing the difference between the funded status of the plans based on the

project benefit obligation and the amounts recorded on our balance sheet at

March 31, 2007.

         In February 2007, the FASB issued SFAS No. 159, The Fair Value Option

for Financial Assets and Financial Liabilities - Including an Amendment of FASB

Statement No. 115 ("SFAS 159"). SFAS 159 permits entities to choose to measure

many financial instruments and certain other items at fair value that are not

currently required to be measured at fair value. SFAS 159 permits all entities

to choose, at specified election dates, to measure eligible items at fair value

(the "fair value option"). A business entity shall report unrealized gains and

losses on items for which the fair value option has been elected in earnings at

each subsequent reporting date. Upfront costs and fees related to items for

which the fair value option is elected shall be recognized in earnings as

incurred and not deferred. SFAS 159 also establishes presentation and disclosure

requirements designed to facilitate comparisons between entities that choose

different measurement attributes for similar types of assets and liabilities.

SFAS 159 is effective as of the beginning of an entity's first fiscal year that

begins after November 15, 2007. The Company is currently evaluating the impact

this statement will have on its financial position and results of operations

NOTE 4 - CRITICAL ACCOUNTING POLICIES

         A summary of our critical accounting policies is included in Note 2 to

the audited consolidated financial statements included in the Company's Annual

Report on Form 10-K for the year ended September 30, 2006. Management believes

that the application of these policies on a consistent basis enables the Company

to provide useful and reliable financial information about the Company's

operating results and financial condition.

         As disclosed in the annual report on Form 10-K for the fiscal year

ended September 30, 2006, the discussion and analysis of our financial condition

and results of operations are based upon our consolidated financial statements.

These have been prepared in conformity with accounting principles generally

accepted in the United States. The preparation of the financial statements

requires us to make estimates and assumptions and adopt accounting policies that

affect the reported amounts of assets, liabilities, revenues and expenses as

disclosed in those financial statements. These judgments can be subjective and

complex, and consequently actual results could differ from those estimates. Our

most critical accounting policies relate to revenue recognition; foreign

exchange risk; inventory, the computation of deferred income taxes, the

recognition of deferred income tax assets and pension and other post retirement

benefit costs. Since September 30, 2006, there have been no changes in our

critical accounting policies and no significant changes to the assumptions and

estimates related to them.

                                        6

E-8

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 5 - NATURE OF BUSINESS - CONTINUED

         The Company was incorporated in the State of Nevada on December 17,

1998 and was inactive until the acquisition of Mega Tools Ltd. and Mega Tools

USA, Inc. via reverse acquisition on September 30, 1999. The Company was engaged

in the manufacture and sale of a patented multi-bit screwdriver. The Company

entered into an exclusive North American license agreement with the patent

holder of a retracting cartridge type screwdriver. This license agreement gave

the Company unrestricted use of the patent in Canada and the United States until

November 8, 2005. The Company's wholly owned subsidiaries, Mega Tools USA, Inc.

and Mega Tools Ltd. manufactured and marketed the drivers to customers in the

United States and Canada. With effect from September 30, 2003 the Company exited

its screwdriver operations following the sale of the trade and net assets of

Mega Tools USA, Inc. and Mega Tools Ltd. The historical results of operations

for this business have been reclassified to earnings (loss) from discontinued

operations on the Company's Consolidated Statements of Operations.

         On September 6, 2002 the Company acquired the entire issued share

capital of Spear & Jackson plc and Bowers Group plc. These companies, through

their principal operating entities, as disclosed in note 1, manufacture and

distribute a broad line of hand tools, lawn and garden tools, industrial magnets

and metrology tools primarily in the United Kingdom, Europe, Australia, North

and South America, Asia and the Far East.

         Following recommendations by the SEC, the acquisition of Spear &

Jackson plc and Bowers Group plc ("S&J") by Megapro Tools, Inc. was accounted

for as a reverse acquisition for financial reporting purposes. The reverse

acquisition is deemed a capital transaction and the net assets of S&J (the

accounting acquirer) were carried forward to Megapro Tools, Inc. (the legal

acquirer and the reporting entity) at their carrying value before the

combination. Although S&J was deemed to be the acquiring corporation for

financial accounting and reporting purposes, the legal status of Megapro Tools,

Inc. as the surviving corporation does not change. The relevant acquisition

process utilizes the capital structure of Megapro Tools, Inc. and the assets and

liabilities of S&J are recorded at historical cost.

         In these financial statements, S&J is the operating entity for

financial reporting purposes and the financial statements for all periods

presented represent S&J's financial position and results of operations. The

equity of Megapro Tools Inc. is the historical equity of S&J retroactively

restated to reflect the number of shares issued in the S&J acquisition.

         On November 7, 2002 the Company changed its name from Megapro Tools,

Inc. to Spear & Jackson, Inc.

         Following formal approval by the SEC and the U.S. District Court for

the Southern district of Florida of the settlement of the litigation captioned

SEC v. Dennis Crowley, Spear & Jackson, Inc., International Media Solutions,

Inc., Yolanda Velazquez and Kermit Silva (Case No: 04-80354-civ-Middlebrooks),

the Company entered into a Stock Purchase Agreement with PNC Tool Holdings LLC

("PNC") and Dennis Crowley, the sole member of PNC and former Chief Executive

Officer and Chairman of the Company. The Stock Purchase Agreement was effected

on April 8, 2005.

         Under the Stock Purchase Agreement, the Company acquired, for $100, and

other good and valuable consideration, 6,005,561 common shares of the Company

held by PNC which represented approximately 51.1% of the outstanding common

shares of the Company at December 31, 2004, and which constituted 100% of the

common stock held by such entity. The parties also executed general releases in

favor of each other subject to the fulfillment of the conditions of the Stock

Purchase Agreement.

         As a result of the stock purchase, the stockholders of the Company had

their percentage stock interest increase correspondingly. Jacuzzi Brands, Inc.

("Jacuzzi"), which, at that time was a beneficial owner of 3,543,281 shares of

common stock, had its interest in the Company increase to approximately 61.8% of

the outstanding common stock.

                                        7

E-9

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 5 - NATURE OF BUSINESS - CONTINUED

         On April 21, 2005, Jacuzzi adopted a plan of disposition of the

Company's common stock. On March 23, 2006, "Jacuzzi" and its subsidiary

undertaking, USI American Holdings, Inc. ("USI" and, together with Jacuzzi, the

"Seller") entered into a Stock Purchase Agreement (the "Stock Purchase

Agreement") with United Pacific Industries Limited ("UPI"), a Bermuda

Corporation, to sell its entire holding of 3,543,281 shares of the common stock

(the "Shares") of Spear & Jackson, Inc. ("SJI") to UPI for $1.40 per share for

an aggregate purchase price of $4,960,593. Such shares constituted all of the

shares of SJI owned by the Seller.

         The representations, warranties and covenants made by Jacuzzi and UPI

were typical for this type of transaction. UPI agreed that it or any of its

affiliates would not purchase any additional Common Stock during the period from

the signing date of the Stock Purchase Agreement through one year following the

closing at a price less than $1.40 per share.

         The Seller and UPI then announced that they had entered into Amendment

No. 1 dated 4 May 2006, ("Amendment No. 1 to the Stock Purchase Agreement") to

extend the date by which the Seller and UPI were required to lodge the clearance

application with the UK Pensions Regulator. The Seller and UPI subsequently

received a comfort letter, dated July 5, 2006, issued by the UK Pensions

Regulator (the "Comfort Letter").

         The trustees of Spear & Jackson, Inc.'s UK Pension Plan confirmed by a

letter dated July 6, 2006 their acceptance of the UK Pensions Regulator's

determination. The Seller and UPI then entered into Amendment No. 2 dated July

10, 2006, ("Amendment No. 2 to the Stock Purchase Agreement") to waive their

respective requirements for a clearance from the UK Pensions Regulator and to

accept in its place the Comfort Letter which states the UK Pensions Regulator is

of the view, based on the information supplied to him in connection with the

clearance application, that the change of control as a result of the sale by the

Seller of all of its shares of Spear & Jackson, Inc. to UPI is not detrimental

to the UK pension plan and the UK Pensions Regulator believes that a clearance

is not necessary for the transaction.

         In addition, pursuant to Amendment No. 2 to the Stock Purchase

Agreement UPI agreed, subject to the Closing having occurred, to indemnify the

Seller and JBI Holdings Limited (the "Jacuzzi Indemnified Parties") should the

UK Pensions Regulator, regardless of the Comfort Letter, require any of the

Jacuzzi Indemnified Parties to make a contribution or provide financial support

in relation to the potential pension plan liabilities of SJI or its

subsidiaries. In addition, UPI has also agreed that for a period of twelve

months from the Closing Date, UPI will not, and will use its best efforts to

ensure that neither SJI nor any of its subsidiaries will, take any action or

omit to take any action that causes the UK Pensions Regulator, as a result of

such action or omission, to issue a contribution notice against the Jacuzzi

Indemnified Parties in relation to any UK pension plan in which SJI or any

subsidiary of SJI is an employer. Further, UPI agreed that for a period of

twelve months from the Closing Date, that it will not (and will use its best

efforts to ensure that neither SJI nor any subsidiary of SJI will) engage in any

action or inaction which in relation to any such UK pension plan would fall

within the UK Pension Regulation clearance guidance note dated April 2005 as a

'Type A' event unless UPI procures that clearance is issued by the UK Pensions

Regulator in relation to such event in terms which confirm that no Jacuzzi

Indemnified Party shall be linked to a financial support direction or

contribution notice in respect of such event.

Closing occurred on July 28, 2006.

                                        8

E-10

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 6 - DISCONTINUED OPERATIONS

         The following table presents the results of the Company's operations

that have been reclassified as discontinued and the (loss) income that has been

recorded in connection with the disposal of these businesses:

<TABLE>

<CAPTION>

                                                      FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED

                                                      MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,

                                                        2007             2006             2007             2006

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

                                            NOTE   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)

<S>                                         <C>    <C>              <C>              <C>              <C>

Revenues reclassified to discontinued

   operations:

Thread gauge measuring division .........   (a)    $            -   $          235   $            -   $          590

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

                                                   $            -   $          235   $            -   $          590

                                                   ==============   ==============   ==============   ==============

Loss from discontinued operations:

Loss from operations of thread gauge

   measuring division ...................   (a)                 -   $          (66)               -   $          (87)

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

                                                   $            -   $          (66)  $            -   $          (87)

                                                   ==============   ==============   ==============   ==============

Adjustment to previously recorded loss on

   disposal of discontinued operations:

   Megapro screwdrivers division ........   (b)                 -   $            2                -   $           11

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

                                                   $            -   $            2   $            -   $           11

                                                   ==============   ==============   ==============   ==============

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

Loss from discontinued operations, net of

   taxes ................................          $            -   $          (64)  $            -   $          (76)

                                                   ==============   ==============   ==============   ==============

</TABLE>

         (a) During the fourth quarter of fiscal 2005, the Company began

marketing for sale certain assets associated with its Coventry Gauge thread

gauge measuring business that is located in the United Kingdom. On February 28,

2006, the Company concluded the sale of these assets for a nominal

consideration. The assets sold comprised plant and equipment, inventories and

goodwill. The acquirer paid (pound)1 and assumed certain liabilities in respect

of the leased premises from which the trade operates. The carrying values of the

assets relating to this entity were written down to the lower of depreciated

cost or estimated fair value after consideration of selling costs in the

quarters ended March 31, 2005 and September 30, 2005. No further losses or gain

on disposal are required to be recognized in the current period. The assets and

liabilities of discontinued operations held for sale have not been reported

separately in the consolidated balance sheets of the Company, as the net book

amounts involved are not considered material.

         (b) During the year ending September 30, 2003, the directors of Spear &

Jackson, Inc. carried out a strategic review of the Company's loss making

Megapro screwdriver division ("Megapro"). It was determined that the division

was no longer a core activity of the group and various divestment strategies

were considered.

         With effect from September 30, 2003, the trade and assets of the

division's principal operating companies, Mega Tool USA, Inc. and Mega Tools

Limited, were transferred by prior subsidiary management, and without prior

authorization, at their net book value of $384 to the division's former managing

director. The transfer proceeds were in the form of $284 of loan notes and other

receivables and the discharge of a loan of $100 owed by the company to the

Megapro managing director.

         Having considered the future financial position of Megapro, the

directors of Spear & Jackson, Inc. provided $97 against the recoverability of

the balance of the sales proceeds which was outstanding at September 30, 2003. A

further $187 was provided against this debt in the year ended September 30,

2004. It was then agreed with Megapro that it would pay Canadian $54

(approximately $41) in settlement of those debts and this was repaid in monthly

installments of Canadian $5 (approximately $4).

                                        9

E-11

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 7 - RETIREMENT BENEFIT PLAN

         The Company operates a contributory defined benefit pension plan

covering certain of its employees in the United Kingdom based subsidiaries of

Spear & Jackson plc. The benefits covered by the Plan are based on years of

service and compensation history. Plan assets are primarily invested in

equities, fixed income securities and Government Stocks.

         Pension costs amounted to $2,053 for the quarter ending March 31, 2007

and $2,033 for the same quarter last year. Pension costs for the six months

ended March 31 2007 were $4,066 compared with $4,060 with the comparable period

last year. The net periodic costs include the following components:

<TABLE>

<CAPTION>

                                       FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED

                                       MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,

                                         2007             2006             2007             2006

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

                                    (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)

<S>                                 <C>              <C>              <C>              <C>

Service cost ....................   $          413   $          524   $          818   $        1,049

Interest cost ...................            3,031            2,609            6,002            5,209

Expected return on plan assets ..           (2,829)          (2,466)          (5,602)          (4,925)

Recognition of actuarial loss ...            1,438            1,366            2,848            2,727

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

Total Benefit cost ..............   $        2,053   $        2,033   $        4,066   $        4,060

                                    ==============   ==============   ==============   ==============

</TABLE>

         The Company's funding policy with respect to the Plan is to contribute

annually not less than the minimum required by applicable UK law and pension

regulations. Amounts payable are determined on the advice of the Plan's

actuaries and in agreement with the Plan's Trustees. The Company has contributed

$949 to the Plan in the quarter to March 31, 2007 (2006 $945) and $1,883 in the

six month period ended on that date (2006 $1,829). In the year ended September

30, 2006 the Company paid $3.4 million into the Plan. In the ten month period to

July 31, 2007 the level of contributions will be approximately $3.1 million.

Contributions after that date will be determined after consultation between the

Company, the actuary and the Plan trustees. Following the introduction of new UK

pension legislation it is anticipated that, post July 31, 2007, Company

contributions will increase to approximately $5.9 million per annum.

         Accounting standards require a minimum pension liability be recorded

when the value of pension assets is less than the accumulated benefit obligation

("ABO") at the annual measurement date. As of September 30, 2006, our most

recent measurement date for pension accounting, the value of the ABO exceeded

the market value of investments held by the pension plan by approximately $40.56

million. In accordance with accounting standards, the charge against

stockholders' equity will be adjusted in the fourth quarter to reflect the value

of pension assets compared to the ABO as of the end of September 2007. If the

level of pension assets exceeds the ABO as of a future measurement date, the

full charge against stockholders' equity would be reversed.

                                       10

E-12

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 8 - PROPERTY, PLANT AND EQUIPMENT, NET

                                              AT MARCH 31,     AT SEPTEMBER 30,

                                                  2007               2006

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

                                             (IN THOUSANDS)     (IN THOUSANDS)

Assets held and used at cost:

   Land and buildings .................      $       15,971    $         15,269

   Machinery, equipment and vehicles ..              24,817              29,299

   Furniture and fixtures .............                 912                 867

   Computer hardware ..................               2,616               1,834

   Computer software ..................                 379                 361

   Assets held under finance leases ...  (a)          2,544               2,433

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

                                                     47,239              50,063

   Accumulated Depreciation ...........             (30,188)            (34,469)

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

   Net ................................      $       17,051    $         15,594

                                             ==============    ================

(a) Included in property, plant and equipment at March 31, 2007 are capital

leases with a net book value of $1.41 million (September 30, 2006 $0.86

million). The cost of these assets held under capital leases was $2.54 million

(September 30, 2006 $2.43 million) and the accumulated depreciation relating to

these assets was $1.13 million (September 30, 2006 $1.57 million).

NOTE 9 - INVENTORIES

                                              AT MARCH 31,     AT SEPTEMBER 30,

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

                                                  2007               2006

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

                                             (IN THOUSANDS)     (IN THOUSANDS)

Finished products .....................      $       21,960    $         19,329

In-process products ...................               4,091               4,443

Raw materials .........................               5,578               6,191

Less: allowance for slow moving

   and obsolete inventories ...........              (7,286)             (7,110)

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

                                             $       24,343    $         22,853

                                             ==============    ================

NOTE 10 - GAIN ON SALE OF LAND AND BUILDINGS

The gain on the sale of land and buildings comprises the following:

<TABLE>

<CAPTION>

                                       FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED

                                       MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,

                                         2007             2006             2007             2006

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

                                    (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)

<S>                                 <C>              <C>              <C>              <C>

Gain on sale of land and buildings             224                -              312                -

                                    ==============   ==============   ==============   ==============

</TABLE>

         (a) The $224 gain in the quarter to March 31, 2007 represents the sale,

on March 27, 2007 of land at the Company's Atlas site in Sheffield, England that

was surplus to current requirements. Sale proceeds were $294 and the cost of the

land plus attributable expenses amounted to $70.

         (b) On July 27, 2006 the Company completed the sale of the remaining

element of its industrial site at St. Paul's Road, Wednesbury, England for

$4,756. The conditions of the sale agreement stipulated that the Company could

occupy the site, for a peppercorn rent, until November 30, 2006. In the

financial statements for the year ended September 30, 2006 $88 of the gain on

the sale of the site was deferred. This deferral represented

                                       11

E-13

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 10 - GAIN ON SALE OF LAND AND BUILDINGS - CONTINUED

the fair value of rentals during the period of occupation from the sale of the

site until November 30, 2006, the planned closure dates. The Wednesbury site was

vacated on schedule and the deferred element of the gain was released to the

profit and loss account in the three month period to December 31, 2006 and

accordingly included in the gain reported in the six month period ended March

31, 2007.

NOTE 11 - MANUFACTURING AND OTHER REORGANIZATION COSTS

<TABLE>

<CAPTION>

                                       FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED

                                       MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,

                                         2007             2006             2007             2006

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

                                    (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)

<S>                                 <C>              <C>              <C>              <C>

Manufacturing and other

   reorganization costs ..........              88            1,228               98            1,228

                                    ==============   ==============   ==============   ==============

</TABLE>

      (i) Manufacturing and other reorganization costs of $88 and $98 have been

incurred in the three and six months periods ended March 31, 2007, respectively.

These are analyzed as follows:

         (a) On January 25, 2006, the Company announced the closure of the

remaining element of its manufacturing site at Wednesbury, England. All

warehouse and distribution operations previously performed at this location have

now been transferred to the Company's principal UK manufacturing site in

Sheffield. The manufacturing and assembly functions formerly carried out at this

site have now been out sourced to suppliers based outside the UK.

         (b) The closure and relocation of the Wednesbury facility was completed

by November 30, 2006 and the costs of this exercise, including employee

severance payments, site closure expenses, factory reorganization expenses, were

provided for in the year ended September 30, 2006. Certain costs totaling $12

however, were not provided at that date and provision has been made for them in

the quarter ended March 31, 2007. Additionally, that element of employee

severance costs relating to the payment of loyalty bonuses for those employees

staying until the site vacation in November 2006 was not provided for at

September 30, 2006 and $10 has been expensed to the profit and loss in the

quarter to December 31, 2006 in respect of such bonuses.

         (c) Additionally, in the quarter to September 30, 2006, the Company's

UK subsidiary, Eclipse Magnetics Limited ("Eclipse"), announced the cessation of

certain manufacturing activities at its site in Sheffield, England. Eclipse also

announced that it would be relocating the remaining elements of its business to

the group's Sheffield, Atlas site. Provisions were made at September 30, 2006 in

respect of severance, relocation and empty property rentals and the cessation of

manufacturing and site relocation were completed by December 31, 2006. In the

quarter to March 31, 2007 further provisions of $76 were made with regard to

increases in the amounts previously provided re empty property rentals.

      (ii) Summary of Movements on Provisions in respect of the UK Manufacturing

and Reorganization Program

         A noted above, in January 2006 the company announced the closure of the

remaining element of its manufacturing site at Wednesbury, England. With effect

from November 30, 2006 all warehouse and distribution operations performed at

this operation were transferred to the Company's principal UK manufacturing site

in Sheffield. The manufacturing and assembly functions formerly carried out at

this site have now been out sourced to suppliers based outside the UK. Provision

for the costs of closure, including employee severance costs, site closure

expenses, factory reorganization expenses, and plant transfer costs were made in

the quarter ended March 31, 2006.

                                       12

E-14

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 11 - MANUFACTURING AND OTHER REORGANIZATION COSTS - CONTINUED

         In addition to the above, in the quarter ended June 30, 2006, the

Company announced that certain manufacturing operations carried out at its Atlas

site in Sheffield would also cease. Provision for employee severance and

reorganization costs in respect of the closure of these manufacturing operations

were made in that quarter.

         As mentioned above, on August 11, 2006, The Company's UK subsidiary,

Eclipse Magnetics Limited ("Eclipse"), announced the cessation of certain

manufacturing activities at its site in Sheffield, England. Eclipse also

announced that it would be relocating the remaining elements of its business to

the Sheffield, Atlas site. The cessation of manufacturing and site relocation

were completed by December 31, 2006 and provisions were made at September 30,

2006 in respect of severance, relocation and empty property rentals.

         The Wednesbury site closure, the production rationalization at Atlas

and the restructuring at Eclipse form part of the Company's UK manufacturing

reorganization program which has been initiated to regenerate and modernize key

areas of the hand and garden tools business. The closures will enable the

Company to consolidate its two UK hand and garden tool manufacturing sites and

will allow the Company to develop a modern manufacturing, warehouse and

distribution facility which will be well placed to meet the current and future

needs of its customers.

         As at September 30, 2006 provisions of $3,730 were included within

accrued expenses and other liabilities as follows:

         (a)      $1,387 was provided for in respect of severance, site closure

                  costs and factory reorganization costs in relation to the

                  Wednesbury site closure and Atlas reorganization.

         (b)      $299 was provided in respect of severance costs relating to

                  the cessation of certain manufacturing activities at Eclipse

                  and costs in connection with the relocation of its remaining

                  business to the Atlas site.

         (c)      The Company also had a further provision of $2,044 in respect

                  of other UK manufacturing reorganization costs that was set up

                  in previous years.

Additionally, asset impairments write-downs of $1,767 were made at September 30,

2006 in respect of plant and machinery at the restructured operations.

         The movements in the provisions balance between October 1, 2006 and

March 31, 2007 are as follows:

Included in Accrued Expenses and Other Liabilities:

<TABLE>

<CAPTION>

                                AT SEPTEMBER 30,                                                       AT MARCH 31,

                                ----------------      EXCHANGE          AMOUNTS          AMOUNTS      --------------

                                      2006            MOVEMENTS        PROVIDED       PAID/UTILISED        2007

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

                                 (IN THOUSANDS)    (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)

<S>                             <C>                <C>              <C>              <C>              <C>

Other UK reorganization costs              2,044              100               74             (176)           2,042

Wednesbury / Atlas costs ....              1,387               43              (17)          (1,232)             181

Eclipse move ................                299               15                -             (292)              22

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

                                $          3,730   $          158   $           57   $       (1,700)  $        2,245

                                ================   ==============   ==============   ==============   ==============

Included in Property, Plant

   and Equipment:

Asset impairments ...........   $          1,767   $           87   $          (47)  $         (446)  $        1,361

                                ================   ==============   ==============   ==============   ==============

Total .......................   $          5,497   $          245   $           10   $       (2,146)  $        3,606

                                ================   ==============   ==============   ==============   ==============

</TABLE>

                                       13

E-15

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 11 - MANUFACTURING AND OTHER REORGANIZATION COSTS - CONTINUED

         The movements in the provisions balance between January 1, 2007 and

March 31, 2007 are as follows:

(a) Included in Accrued Expenses and Other Liabilities:

<TABLE>

<CAPTION>

                                 AT DECEMBER 31,                                                       AT MARCH 31,

                                ----------------      EXCHANGE          AMOUNTS          AMOUNTS      --------------

                                      2006            MOVEMENTS        PROVIDED       PAID/UTILISED        2007

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

                                 (IN THOUSANDS)    (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)

<S>                             <C>                <C>              <C>              <C>              <C>

Other UK reorganization costs              2,057                3               74              (92)           2,042

Wednesbury / Atlas costs ....                327               (2)              61             (205)             181

Eclipse move ................                112                -                -              (90)              22

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

                                $          2,496   $            1   $          135   $         (387)  $        2,245

                                ================   ==============   ==============   ==============   ==============

(b) Included in Property,

    Plant and Equipment:

Asset impairments ...........   $          1,575   $            3   $          (47)  $         (170)  $        1,361

                                ================   ==============   ==============   ==============   ==============

Total .......................   $          4,071   $            4   $           88   $         (557)  $        3,606

                                ================   ==============   ==============   ==============   ==============

</TABLE>

NOTE 12 - 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)/ benefit for US and foreign income taxes arising on its continuing

operations consists of:

<TABLE>

<CAPTION>

                               FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED

                               MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,

                                 2007             2006             2007             2006

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

                            (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)

<S>                         <C>              <C>              <C>              <C>

Current tax charge ......   $          (45)  $         (103)  $          (95)  $         (253)

Deferred tax credit .....                -                -                -              566

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

                            $          (45)  $         (103)  $          (95)  $          313

                            ==============   ==============   ==============   ==============

</TABLE>

         A reconciliation of the net (provision) benefit for income taxes

compared with the amounts arising at the US federal rate is as follows:

<TABLE>

<CAPTION>

                                                        FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED

                                                        MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,

                                                          2007             2006             2007             2006

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

                                                     (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)

<S>                                                  <C>              <C>              <C>              <C>

Tax at US federal statutory income tax rate ......   $         (207)  $          708   $          247   $        1,441

Overseas tax at  rates different to effective rate               59             (189)              17             (336)

Adjustment to prior year overseas tax provisions .                -                -                -              (89)

Gain on sale of UK property covered by losses

   brought forward ...............................               67                -               67                -

Permanent differences ............................              (52)             (36)             (92)             (72)

Valuation allowance ..............................               88             (586)            (334)            (631)

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

                                                     $          (45)  $         (103)  $          (95)  $          313

                                                     ==============   ==============   ==============   ==============

</TABLE>

                                       14

E-16

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 12 - INCOME TAXES - CONTINUED

         The Company follows the provisions of SFAS No. 109, "Accounting for

Income Taxes", which requires the Company to recognize deferred tax liabilities

and assets for the expected future tax consequences of events that have been

recognized in the Company's financial statements or tax returns using the

liability method. Under this method, deferred tax liabilities and assets are

determined based on the temporary differences between the financial statement

carrying amounts and tax bases of assets and liabilities using enacted rates in

effect in the years in which the differences are expected to reverse.

         Deferred income tax expense or benefit is based on the changes in the

asset or liability from period to period. Deferred tax assets are reduced by a

valuation allowance when, in the opinion of management, it is more likely than

not that some portion or all of the deferred tax assets will not be realized.

The Company reviews the recoverability of its deferred tax assets and, based on

such periodic reviews, the Company could recognize a change in the valuation

allowance relating to its deferred tax assets in the future should, for example,

estimates of forecast taxable income be reduced or other favorable or adverse

events occur.

         In the six month period ended March 31, 2007, the potential income tax

benefit relating to the Company's U.S. and non-U.S. subsidiary losses arising in

the period has been offset by a valuation allowance. In assessing the Company's

ability to realize its deferred tax assets, management considered the scheduled

reversal of deferred tax liabilities, projected future taxable income and tax

and other strategic planning initiatives. Future reversal of the valuation

allowance will be achieved either when the tax benefit is realized or when it

has been determined that it is more likely than not that the benefit will be

realized through offset against future taxable income.

         The majority of the Group's deferred tax asset relates to timing

differences originating in its UK subsidiaries. Such deferred tax balances have

been provided at 30%. Legislation currently awaiting government approval will

reduce the rate to 28% from April 1, 2008 onwards. If this new tax legislation

had been formally enacted, the effect on the Group' condensed consolidated

financial statements for the six months ended March 31, 2007 would have been as

follows:

         (i)      The income tax provision would have been reduced by $165

                  resulting in an income tax benefit for the period of $70.

         (ii)     The deferred tax asset of $17,577 would reduce by $1,168 to

                  $16,409.

         (iii)    The net of tax minimum pension liability adjustment of $46,660

                  would increase by $1,333 to $47,993.

                                       15

E-17

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 13 - COMPREHENSIVE INCOME

         Comprehensive income represents net income and other revenues,

expenses, gains and losses that are excluded from net income and recognized

directly as a component of stockholder's equity. Comprehensive income and its

components comprise the following:

<TABLE>

<CAPTION>

                                                 FOR THE THREE MONTHS ENDED         FOR THE SIX MONTHS ENDED

                                                 MARCH 31,        MARCH 31,        MARCH 31,        MARCH 31,

                                                   2007             2006             2007             2006

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

                                              (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)   (IN THOUSANDS)

<S>                                           <C>              <C>              <C>              <C>

Net income (loss) .........................   $          548   $       (2,127)  $         (801)  $       (3,806)

Other comprehensive income (loss)

   Additional minimum pension liability ...             (100)            (445)          (2,213)             849

   Foreign currency translation adjustments              391              434            3,558           (1,546)

   Unrealized gains (losses) on derivative

      instruments .........................                7               24               (6)              38

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

Total comprehensive income (loss) .........   $          846   $       (2,114)  $          538   $       (4,465)

                                              ==============   ==============   ==============   ==============

</TABLE>

NOTE 14 - 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,

Australasia and China.

         Given below are summaries of the significant accounts and balances by

business segment and by geographical location, reconciled to the consolidated

totals. In both periods, transactions and balances applicable to the Company's

distribution companies in France, Australia and New Zealand have been aggregated

with the hand and garden product businesses since these products represent the

most significant proportion of the distribution companies' trades. Those

transactions relating to the Company's distribution entities in the Netherlands

and China have been included in the Metrology division disclosures. The

summaries also provide an analysis of the accounts and balances between

continuing and discontinued operations.

         The financial information of the segments is regularly evaluated by the

corporate operating executives in determining resource allocation and assessing

performance and is reviewed by the Company's Board of Directors.

         The Company's senior management evaluates the performance of each

business segment based on its operating results and, other than general

corporate expenses, allocates specific corporate overhead to each segment.

Accounting policies for the segments are the same as those for the Company.

                                       16

E-18

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 14 - 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)             SALES            LONG-LIVED ASSETS (a)

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

                              THREE MONTHS ENDED              AT                 SIX MONTHS ENDED                AT

                            MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,     MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,

                              2007        2006         2007        2006          2007         2006        2007        2006

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

<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>

Hand & garden tools .....  $   20,807  $   20,795   $    3,583  $     5,003   $   38,296  $    37,053   $   3,583  $    5,003

Metrology tools .........       5,528       4,203        3,091        2,825        9,904        8,624       3,091       2,825

Magnetic products .......       2,837       2,809          368          244        5,785        5,411         368         244

Corporate ...............           -           -       10,009        9,110            -            -      10,009       9,110

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

  Total .................  $   29,172  $   27,807   $   17,051  $    17,182   $   53,985  $    51,088   $  17,051  $   17,182

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

Attributable to:

  Continuing operations .  $   29,172  $   27,572   $   17,051  $    17,182   $   53,985  $    50,498   $  17,051  $   17,182

  Discontinued operations  $        -  $      235   $        -  $         -   $        -  $       590   $       -  $        -

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

                           $   29,172  $   27,807   $   17,051  $    17,182   $   53,985  $    51,088   $  17,051  $   17,182

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

<CAPTION>

                                DEPRECIATION        CAPITAL EXPENDITURE (b)        DEPRECIATION         CAPITAL EXPENDITURE(b)

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

                             THREE MONTHS ENDED       THREE MONTHS ENDED         SIX MONTHS ENDED          SIX MONTHS ENDED

                            MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,     MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,

                              2007        2006         2007        2006          2007         2006         2007       2006

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

<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>

Hand & garden tools .....  $      267  $      356   $    1,102  $       175   $      592  $       734   $   1,331  $      538

Metrology tools .........          83          14          130          327          174           99         157         537

Magnetic products .......          (7)         69          160            -           60          150         280           7

Corporate ...............          57          51            -            -          111          101           -           -

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

  Total .................  $      400  $      490   $    1,392  $       502   $      937  $     1,084   $   1,768  $    1,082

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

Attributable to:

  Continuing operations .  $      400  $      490   $    1,392  $       502   $      937  $     1,084   $   1,768  $    1,082

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

<CAPTION>

                           OPERATING INCOME(LOSS)        NET INTEREST         OPERATING (LOSS) INCOME       NET INTEREST

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

                             THREE MONTHS ENDED       THREE MONTHS ENDED        SIX MONTHS ENDED          SIX MONTHS ENDED

                            MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,     MARCH 31,   MARCH 31,    MARCH 31,   MARCH 31,

                              2007        2006         2007        2006          2007         2006         2007       2006

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

<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>

Hand & garden tools .....  $      221  $   (1,534)  $      (38) $         2   $   (1,206) $    (3,762)  $     (81) $      (36)

Metrology tools .........         578         217            3           (3)         904          612          (8)        (13)

Magnetic products .......          13         119           (3)          (1)         206          195          (4)         (3)

Corporate ...............        (355)       (905)          56           44         (793)      (1,251)        118          65

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

  Total .................  $      457  $   (2,103)  $       18  $        42   $     (889) $    (4,206)  $      25  $       13

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

Attributable to:

  Continuing operations .  $      457  $   (2,039)  $       18  $        42   $     (889) $    (4,128)  $      25  $       13

  Discontinued operations  $        -  $      (64)  $        -  $         -   $        -  $       (78)  $       -  $        -

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

                           $      457  $   (2,103)  $       18  $        42   $     (889) $    (4,206)  $      25  $       13

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

</TABLE>

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

(b)   Capital expenditure for the three months to March 31, 2007 includes $616

      (2006- $124) in respect of assets under finance leases. Capital

      expenditure or for the six months to March 31, 2007 includes $905 (2006-

      $444) in respect of assets under finance leases.

                                       17

E-19

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 14 - SEGMENT DATA - CONTINUED

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

<TABLE>

<CAPTION>

                                  SALES (a)          LONG-LIVED ASSETS (b)           SALES (a)          LONG-LIVED ASSETS (b)

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

                             THREE MONTHS ENDED               AT                  SIX MONTHS ENDED               AT

                            MARCH 31    MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31   MARCH 31

                              2007        2006         2007         2006         2007         2006         2007       2006

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

<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>

United Kingdom ..........  $   11,446  $   12,901   $   15,106  $    15,341   $   20,963  $    22,509   $  15,106  $   15,341

Europe ..................       8,011       6,580        1,230        1,130       13,488       11,255       1,230       1,130

Australasia .............       3,711       3,334          395          411        8,238        7,067         395         411

North America ...........       2,385       1,735            -            -        4,263        3,524           -           -

China and Rest of

  World .................       3,619       3,257          320          300        7,033        6,733         320         300

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

  Total .................  $   29,172  $   27,807   $   17,051  $    17,182   $   53,985  $    51,088   $  17,051  $   17,182

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

Attributable to:

  Continuing operations .  $   29,172  $   27,572   $   17,051  $    17,182   $   53,985  $    50,498   $  17,051  $   17,182

  Discontinued operations  $        -  $      235   $        -  $         -   $        -  $       590   $       -  $        -

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

                           $   29,172  $   27,807   $   17,051  $    17,182   $   53,985  $    51,088   $  17,051  $   17,182

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

<CAPTION>

                                DEPRECIATION        CAPITAL EXPENDITURE (c)        DEPRECIATION         CAPITAL EXPENDITURE(c)

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

                             THREE MONTHS ENDED        THREE MONTHS ENDED         SIX MONTHS ENDED         SIX MONTHS ENDED

                            MARCH 31    MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31   MARCH 31

                              2007        2006         2007         2006         2007         2006         2007       2006

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

<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>

United Kingdom ..........  $      218  $      403   $    1,169  $       359   $      651  $       902   $   1,490  $      849

Europe ..................         109          36          171            7          148           73         195          34

Australasia .............          61          48           29           20          116          106          60          20

China and Rest of

  World .................          12           3           23          116           22            3          23         179

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

  Total .................  $      400  $      490   $    1,392  $       502   $      937  $     1,084   $   1,768  $    1,082

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

Attributable to:

  Continuing operations .  $      400  $      490   $    1,392  $       502   $      937  $     1,084   $   1,768  $    1,082

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

<CAPTION>

                           OPERATING INCOME (LOSS)        NET INTEREST        OPERATING (LOSS) INCOME       NET INTEREST

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

                             THREE MONTHS ENDED        THREE MONTHS ENDED         SIX MONTHS ENDED         SIX MONTHS ENDED

                            MARCH 31    MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31     MARCH 31   MARCH 31

                              2007        2006         2007         2006         2007         2006         2007       2006

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

<S>                        <C>         <C>          <C>         <C>           <C>         <C>           <C>        <C>

United Kingdom ..........  $       89  $   (2,242)  $       26  $        (9)  $   (1,172) $    (4,177)  $      39  $      (32)

Europe ..................         600         399          (49)          (4)         489          360         (91)        (42)

Australasia .............         (26)        (11)          20           13          142          (15)         40          25

North America ...........         (69)       (137)          15           42         (162)        (250)         31          62

China and Rest of

  World .................        (137)       (112)           6            -         (186)        (124)          6           -

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

  Total .................  $      457  $   (2,103)  $       18  $        42   $     (889) $    (4,206)  $      25  $       13

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

Attributable to:

  Continuing operations .  $      457  $   (2,039)  $       18  $        42   $     (889) $    (4,128)  $      25  $       13

  Discontinued operations  $        -  $      (64)  $        -  $         -   $        -  $       (78)  $       -  $        -

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

                           $      457  $   (2,103)  $       18  $        42   $     (889) $    (4,206)  $      25  $       13

                           ==========  ==========   ==========  ===========   ==========  ===========   =========  ==========

</TABLE>

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

      customers.

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

(c)   Capital expenditure for the three months to March 31, 2007 includes $616

      (2006- $124) in respect of assets under finance leases. Capital

      expenditure or for the six months to March 31, 2007 includes $905

      (2006-$444) in respect of assets under finance leases.

                                       18

E-20

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 15 - LEGAL PROCEEDINGS

         On April 15, 2004, the US Securities and Exchange Commission filed suit

in the U.S. District Court for the Southern District of Florida against the

Company and Mr. Dennis Crowley, its then current Chief Executive

Officer/Chairman, among others, alleging violations of the federal securities

laws. Specifically with regard to the Company, the SEC alleged that the Company

violated the SEC's registration, anti-fraud and reporting provisions. These

allegations arise from the alleged failure of Mr. Crowley to accurately report

his ownership of the Company's stock, and his alleged manipulation of the price

of the Company's stock through dissemination of false information, allowing him

to profit from sales of stock through nominee accounts. On May 10, 2004, the

Company consented to the entry of a preliminary injunction, without admitting or

denying the allegations of the SEC complaint. The SEC is continuing its

investigation into pension issues. The Company is offering its full cooperation.

         As a further measure, the Court appointed a Corporate Monitor to

oversee the Company's operations. In addition to Mr. Crowley consenting to a

preliminary injunction the Court's order also temporarily barred Mr. Crowley

from service as an officer or director of a public company, and prohibited him

from voting or disposing of Company stock. Although Soneet Kapila has continued

to serve as Corporate Monitor for the Company, on January 10, 2007, he applied

to the Court to terminate the role of Corporate Monitor having determined that

his function was no longer necessary. As discussed below, on January 22, 2007

the Court entered the order to relieve the Corporate Monitor of his duties.

         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, UK,

is serving as acting Chief Executive Officer. Following extensive settlement

negotiations with 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 as well as funds collected from co-defendants

International Media Solutions, Inc., Yolanda Velazquez and Kermit Silva who are

not affiliated with the Company, to the victims of their 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. No disgorgement or civil penalties were sought from, or ordered to

be paid by, the Company.

         Additionally, the Company entered into a Stock Purchase Agreement with

PNC Tool Holdings LLC ("PNC") and Mr. Crowley, the sole member of PNC. Under the

Stock Purchase Agreement, the Company acquired, for $100, and other good and

valuable consideration, 6,005,561 common shares of the Company held by PNC,

which represented approximately 51.1% of the outstanding common shares of the

Company at December 31, 2004, and which constituted 100% of the common stock

held by such entity. The parties also executed general releases in favor of each

other subject to the fulfillment of the conditions of the Stock Purchase

Agreement. The Stock Purchase Agreement was effected on April 8, 2005, following

formal approval by the SEC on February 10, 2005 and, on February 15, 2005 by the

U.S. District Court for the Southern District of Florida of the settlement of

the litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc.,

International Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case

No: 04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further

conditioned on, among other things, the disgorgement and civil penalty funds

being paid by Mr. Crowley. These monies have now been received and are being

administered for the benefit of the victims of the alleged fraud by a court

appointed administrator pursuant to the Fair Funds provision of the

Sarbanes-Oxley Act of 2002.

                                       19

E-21

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 15 - LEGAL PROCEEDINGS - CONTINUED.

         With the return of the Spear & Jackson shares to the Company by PNC,

the stockholders of the Company have had their percentage stock interest

increase correspondingly. Jacuzzi Brands, Inc. ("Jacuzzi"), which is a

beneficial owner of 3,543,281 shares of common stock, had its interest in the

Company increased to approximately 61.8% of the outstanding common stock.

         Subsequent to the SEC action a number of class action lawsuits were

initiated in the U.S. District Court for the Southern District of Florida by

Company stockholders against the Company, Sherb & Co. LLP, the Company's former

independent auditor, and certain of the Company's directors and officers,

including Mr. Crowley, the Company's former Chief Executive Officer/Chairman,

and Mr. Fletcher, the Company's former CFO and current acting Chief Executive

Officer. These suits alleged essentially the same claims as the SEC suit

discussed above.

         These various class action suits were subsequently consolidated.

Thereafter, the defendants filed certain Motions to Dismiss with regard to the

Complaint and on October 19, 2005, the U.S. District Court for the Southern

District of Florida in Re Spear & Jackson Securities Litigation entered its

Order regarding these Motions. The Order denied the Company's motion as well as

that of Mr. Crowley, the former Chief Executive Officer of Spear & Jackson. The

Court granted the Motion to Dismiss on behalf of Mr. Fletcher, the Company's

interim Chief Executive Officer, and also granted the Motion to Dismiss on

behalf of the Company's former independent auditor, Sherb & Co., LLP. The class

plaintiff has subsequently filed an appeal regarding the trial court's decision

to dismiss the case against Sherb & Co., LLP, which appeal is presently pending.

No appeal was filed with respect to the decision to dismiss the case against Mr.

Fletcher.

         On July 7, 2006 the Company, Dennis Crowley and the Class Plaintiff

reached a Memorandum of Understanding ("MOU") which confirmed that the

plaintiffs, the Company and Dennis Crowley had reached an agreement in principle

for the settlement of this litigation, subject to Court approval. According to

the terms of the MOU, the Company deposited $650,000 into a Qualified Settlement

Fund, for disbursement to the Settlement Class pending approval of the Court.

Subsequent to this Sherb & Co. also agreed to the terms of the Settlement

agreeing to contribute an additional $125,000.

         On November 9, 2006, the Stipulation of Settlement was filed with the

Court for preliminary approval. On January 31, 2007, the Court entered its Order

Preliminarily Approving Settlement and Providing for Notice and Setting Class

Action Statutory Settlement Hearing. The Order, for purposes of the proposed

settlement certified a "Settlement Class" of persons (with certain exceptions)

who purchased the Company's common stock between February 1, 2002 and April 15,

2004. The Order also approved as to form and content the Notice of Pendency and

Proposed Settlement of Class Action and Summary Notice. The Settlement Hearing

was set for May 11, 2007 at 11:30 a.m. at the West Palm Beach, Florida Federal

District Courthouse to determine whether the terms of the Settlement are fair,

just reasonable and adequate to the Settlement Class, and should be approved by

the Court; whether a final judgment should be entered dismissing the litigation;

whether the proposed plan of allocation should be approved; and to determine the

amount of fees and expenses to be awarded to plaintiffs' lead counsel. The Order

also appointed a claims administrator and provided for notice to those who

sought exclusion from the Settlement Class.

         On May 11, 2007, the U.S. District Court for the Southern District of

Florida, sitting in West Palm Beach Florida, heard the Plaintiff's motion for

Final Approval of the Class Action Settlement and Plan of Allocation, to which

there were no objectors or class members that opted out of, the settlement. On

May 14, 2007, the Court signed the Final Judgment thus forever extinguishing all

of the class claims against the Company, and barring any claims for contribution

by third parties. The Final Judgment made clear that the settlement was not an

admission of wrongdoing or liability by the Company.

         To facilitate the distribution of the funds from the class suit to the

class shareholders and keep administrative costs to a minimum, the SEC Claim's

Administrator applied to the Court on January 9, 2007 for permission to combine

the class action funds with the funds derived in the SEC litigation, and allow

for the SEC's Claim's Administrator to disburse the collective funds.

                                       20

E-22

                     SPEAR & JACKSON, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          (IN THOUSANDS EXCEPT SHARES)

NOTE 15 - LEGAL PROCEEDINGS - CONTINUED.

         On September 6, 2005, the Company was served with a Shareholder

Derivative Complaint, Hapka v. Crowley, et al. Case No: CA005068, filed on June

1, 2004 in the Circuit Court for Palm Beach County, Florida. The suit names the

Company as nominal defendant. Also named as defendants were former directors,

Robert Dinerman, William Fletcher and John Harrington, in addition to Dennis

Crowley and the Company's prior independent auditors, Sherb & Co. LLP. 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 additionally 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.

         Due to ongoing settlement discussions with the plaintiff's attorney,

the Company had not responded to the Complaint. In August 2006 the Company

entered into a settlement agreement with the plaintiff by agreeing to accept

certain changes to its corporate governance procedures and the payment of

$70,000 in legal fees. The settlement was filed with the Court in early November

2006, and if approved by the Court, will result in a dismissal of the suit and

release the Company and the former director defendants, Messrs Robert Dinerman,

William Fletcher and John Harrington. Dennis Crowley and Sherb & Co. continue as

defendants in this suit.

         On February 2, 2007, the Circuit Court entered a Preliminary Approval

Order preliminarily approving the partial settlement pursuant to the Stipulation

of Settlement between plaintiff and the Company, including its former directors

William Fletcher, John Harrington, and Robert Dinerman. The Court has set May

29, 2007 at 8a.m. at the West Palm Beach County Courthouse, for the final

Settlement Hearing to determine (i) whether the terms of the Partial Settlement

are fair, just reasonable and adequate to the derivative stockholders and to the

Company, and should be approved by the Court; (ii) whether a final judgment

should be entered dismissing the litigation and releasing the defendants Spear &

Jackson, as described in the Stipulation; and (iii) to determine the amount of

fees and expenses to be awarded to plaintiffs' counsel. The Order approved as to

form and contents the Notice of Partial Settlement and the mailing and

distribution process. The Order also provided for notice to those who sought

exclusion from the settlement.

         There can be no assurance that the Court will approve the terms of this

settlement.

         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.

NOTE 16 - SUBSEQUENT EVENTS

         On May 14, 2007, the Company issued a press release reporting that it

had received an offer letter from its majority shareholder, United Pacific

Industries Limited ("UPI"), in which UPI proposes to acquire for $1.483 per

share in cash (the "Offer") the remaining 2,192,280 outstanding shares of common

stock (the "Shares") of the Company that it does not already own.

         The Company's Board of Directors has delegated to the Finance Committee

chaired by the Company's independent director, Dr. J. Preston Jones, the

authorization to analyze, review and negotiate the Offer. The Finance Committee

will, with the assistance of financial and legal advisors, review the proposal.

The Finance Committee has not yet determined if the Offer is in the best

interests of the Company and its shareholders.

                                       21

E-23

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

         OF OPERATIONS.

GENERAL

The following information should be read in conjunction with the consolidated

financial statements and notes hereto and other information set forth in this

report.

FORWARD LOOKING STATEMENTS

This report (including the information in this discussion) contains

forward-looking statements within the meaning of Section 27A of the Securities

Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,

as amended. These forward-looking statements involve risks and uncertainties,

including statements regarding the Company's capital needs, business strategy

and expectations, and are being made pursuant to the safe harbor provisions 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 under "Risk Factors", below, 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.

RISK FACTORS

Historically, Spear & Jackson, Inc. ("Spear & Jackson", "the Company", "we") has

achieved growth by the development of new products, strategic acquisitions and

expansion of the Company's sales organization. There can be no assurance that

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

which 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:

      -  achieving planned revenue and profit growth in each of the Company's

         business units;

      -  changes in customer requirements and in the volume of sales to

         principal customers;

      -  renewal of material contracts in the Company's business units

         consistent with past experience;

      -  the timing of orders and shipments;

      -  emergence of new competitors or consolidation of existing competitors;

      -  continued absence of consolidation among key customers;

      -  industry demand fluctuations.

                                       22

E-24

Our expectations for both short- and long-term future net revenues are based on

our own estimates of future demand. Orders from our principal customers are

ultimately based on demand from end-users and such prospective end-user demand

can be difficult to measure. Low end-user demand would negatively affect orders

we receive from distributors and other principal customers and this would mean

that our revenues in any fiscal period could be adversely impacted. If our

estimates of sales are not accurate and we experience unforeseen variability in

our revenues and operating results, we may be unable to adjust our expense

levels accordingly and our profit margins will be adversely affected.

A number of our products are sold through distributors and large retailers. No

assurances can be given that any or all such distributors or retailers will

continue their relationship with us. Distributors and other significant retail

customers cannot easily be replaced and the loss of revenues and our inability

to reduce expenses to compensate for the loss of revenues could adversely affect

our net revenues and profit margins.

With the growing trend toward retail trade consolidation, especially in the

developed US, European and Australasian markets, certain of our product groups

are sold to key retailers whose bargaining strength is growing. Accordingly, we

face greater pressure from such significant retail trade customers to provide

more favorable trade terms with, accordingly, the risk of margin dilution. We

can also be negatively affected by changes in the policies of our material

retail trade customers, particularly with regard to the reduction of trade

inventory levels, access to shelf space, and other conditions.

The market for certain of the Company's products is subject to economic

conditions affecting the industrial manufacturing sector, including the level of

capital spending by industrial companies and the general movement of

manufacturing to low cost foreign countries where the Company may not have a

competitive market presence. Accordingly, economic weakness in the industrial

manufacturing sector may result in decreased demand for certain of the Company's

products, which will impact negatively on the Company's trading performance.

Economic weakness in the consumer market will also have a detrimental effect on

the Company's profitability. In the event that demand for any of the Company's

products declines significantly, the Company could be required to recognize

certain costs as well as asset impairment charges on long-lived assets related

to those products.

RISKS ASSOCIATED WITH THE SUCCESSFUL AND TIMELY INTEGRATION OF ANY SIGNIFICANT

BUSINESSES ACQUIRED BY THE COMPANY AND REALIZATION OF ANTICIPATED SYNERGIES:

The Company has made, and in the future may make, acquisitions of, or

significant investments in, businesses with complementary or aligned products

and services or in new start up businesses. Acquisitions involve numerous risks,

including but not limited to: (1) diversion of management's attention from other

operational matters; (2) inability to complete acquisitions along anticipated

timescales, or at all; (3) lack of success in realizing anticipated synergies

from acquisitions and investments (4) weaknesses in acquired company's internal

controls; (5) worse-than-expected performance of the acquired company or its

product offerings; (6) unknown, underestimated and/or undisclosed commitments or

liabilities; (7) failure to integrate and retain key employees; and (8)

unsuccessful integration of operations. The Company's inability to effectively

manage these risks could materially and adversely affect the Company's business,

financial condition and results of operations.

RISKS ASSOCIATED WITH MAJORITY STOCKHOLDER

As detailed in the footnotes to the consolidated financial statements, on July

28, 2006, the Company's majority stockholder, Jacuzzi Brands, Inc. ("Jacuzzi"),

completed the sale of its 61.8% stockholding in Spear & Jackson, Inc. to United

Pacific Industries Limited, a Bermuda corporation, and its wholly-owned

subsidiary Pantene Global Holdings Limited (collectively, "UPI"). This change in

ownership and control of the Company may have a significant impact on its future

strategy, the way that it conducts its operations and the size and composition

of its earnings and net assets, since UPI can influence substantially all

matters requiring stockholder approval by simple majority in excess of 50%,

including the election of directors, the approval of significant corporate

transactions, such as acquisitions, the ability to block an unsolicited tender

offer and any other matter requiring a vote of shareholders.

                                       23

E-25

Additionally, based on its majority ownership, UPI is in position to complete a

merger or other transaction involving the Company, subject to compliance with

applicable regulatory requirements, which could result in the elimination of

minority stockholders. UPI paid Jacuzzi $1.40 per share for its shares of common

stock of the Company. UPI has agreed that for a one-year period following the

closing of its acquisition of the majority interest in the Company, should UPI

or any of its affiliates acquire any additional shares of the Company, the

purchase price per share will not be less than $1.40.

On May 14, 2007, the Company issued a press release reporting that it had

received an offer letter from UPI, in which UPI proposes to acquire for $1.483

per share in cash the remaining 2,192,280 outstanding shares of common stock of

the Company that it does not already own.

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 allocate 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 or products that could dilute margins or limit our ability to spread

manufacturing costs over normal levels of 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 as these reorganization or restructuring plans are implemented

or the related 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 and net assets.

Accordingly, we cannot be certain that currency exchange rate fluctuations will

not adversely affect our future results of operations and financial condition.

                                       24

E-26

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:

      -  unexpected changes in, or the imposition of, additional legislative or

         regulatory requirements in the various geographical regions where the

         Company operates ;

      -  fluctuating exchange rates;

      -  tariffs and other barriers;

      -  difficulties in staffing and managing foreign sales operations;

      -  import and export restrictions;

      -  greater difficulties in accounts receivable collection and longer

         payment cycles;

      -  potentially adverse tax consequences;

      -  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

management's expectations, this may also have a negative impact on Company

earnings.

RISKS IN CONNECTION WITH ATTRACTING AND RETAINING QUALIFIED KEY EMPLOYEES:

The success of the Company's efforts to grow its business depends on the

contributions and abilities of key executive and operating officers and other

personnel. The Company must therefore continue to recruit, retain and motivate

management and operating personnel sufficient to maintain its current business

and support its projected growth. A shortage of these key employees might

jeopardize the Company's ability to meet its growth targets.

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

The Company's management is responsible for establishing and maintaining

adequate internal control over financial reporting. Internal control over

financial reporting is a process to provide reasonable assurance regarding the

reliability of financial reporting for external purposes in accordance with

accounting principles generally accepted in the United States of America.

Internal control over financial reporting includes: maintaining records that in

reasonable detail accurately and fairly reflect the Company's transactions;

providing reasonable assurance that transactions are recorded as necessary for

preparation of the financial statements; providing reasonable assurance that

receipts and expenditures of the Company's assets are made in accordance with

management authorization; and providing reasonable assurance that unauthorized

acquisition, use or disposition of the Company assets that could have a material

effect on the financial statements would be prevented or detected on a timely

basis. Because of its inherent limitations, internal control over financial

reporting is not intended to provide absolute assurance that a misstatement of

the Company's financial statements would be prevented or detected. Any failure

to maintain an effective system of internal control over financial reporting

could limit the Company's ability to report its financial results accurately and

timely or to detect and prevent fraud.

                                       25

E-27

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. The 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 under funded pension plan to the extent necessary

to comply with minimum funding requirements imposed by regulatory demands. The

amount of such cash contributions is based on an actuarial valuation of the

Plan.

A number of statistical and other factors which attempt to anticipate future

events are used by the actuaries in calculating the expense and liability

related to the Plan. These factors include assumptions about the discount rate,

expected return on plan assets and rate of future compensation increases as

determined by us, within certain guidelines, and in conjunction with our

actuarial consultants and auditors. Our actuarial consultants also use

subjective factors such as withdrawal and mortality rates to estimate the

expense and liability related to the Plans. The actuarial assumptions used by us

may differ significantly, either favorably or unfavorably, from actual results

due to changing market and economic conditions, higher or lower withdrawal rates

or longer or shorter life spans of participants.

The funding status of the Plan can therefore alter as a result of changes in the

actuarial assumptions used, changes in market conditions and a number of other

factors. We cannot provide assurance that the value of the Pension Plan assets,

or the investment returns on those Plan assets, will continue to be sufficient

in the future. It is therefore possible that we may be required to make

significant additional cash contributions to the Plan which would reduce the

cash available for other business requirements, or that we will have to

recognize a significant pension liability adjustment which would decrease the

net assets of the Company.

RISKS RELATED TO RAW MATERIAL AND ENERGY COSTS:

The prices of many of the Company's raw materials vary with market conditions.

In addition, the price of many of the Company's finished goods that are sourced

from overseas' suppliers are impacted by changes in currency rates, freight

costs and raw materials at the point of production.

We purchase the majority of our raw materials for our products on the open

market and we also rely on third parties for the sourcing of certain finished

goods and component parts and assemblies. Accordingly, our cost of products may

be affected by changes in the market price of raw materials, sourced components

or finished goods.

Gas, electricity and other utility prices have become increasingly volatile in

the UK, where we have a significant manufacturing presence. This situation has

been exacerbated by price increases for certain of our raw materials,

particularly steel, cobalt, nickel and plastics. For example, the movements on

cobalt and nickel prices since September 30, 2006 have been as follows:

Cobalt : September 30, 2006 $18/1lb

         March 31, 2007, $30/1lb

         Increase 67%

Nickel : September 30, 2006 $32,250 /tonne

         March 31, 2007, $52,400/ tonne

         Increase 62%

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 and the 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:

                                       26

E-28

      -  increases in transportation costs;

      -  new or increased import duties;

      -  transportation delays;

      -  foreign work stoppages;

      -  potential war, terrorism and political unrest;

      -  exchange rate fluctuations that could increase the cost of foreign

         manufactured goods.

RISKS CONCERNING THE CONTINUED AVAILABILITY OF FINANCING, AND FINANCIAL

RESOURCES ON THE TERMS REQUIRED TO SUPPORT THE COMPANY'S FUTURE BUSINESS

STRATEGIES:

We believe that our existing balances of cash, cash equivalents, our cash flow

from operations, and the existing credit facilities negotiated for the Company's

UK and other operations will be sufficient to meet our cash needs for working

capital and capital expenditures for at least the next 12 months. We may,

however, require additional financing to fund our operations in the future.

Although we expect existing debt financing arrangements and cash flows generated

from operating activities to be sufficient to fund operations at the current and

projected levels in the future, there is no assurance that our operating plan

will be achieved. We may need to take actions to reduce costs and to seek

alternative financing arrangements.

RISKS RELATING TO THE OUTCOME OF PENDING AND FUTURE LITIGATION AND GOVERNMENTAL

OR REGULATORY PROCEEDINGS:

As discussed in the footnotes to the condensed consolidated financial

statements, we are, and have been, 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 such matters cannot always 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, and bad debts,

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.

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; profit volatility

arising from the seasonality of the garden product trade and benefits from

restructuring initiatives falling below forecast. Such factors may therefore

cause our operating results for future periods to be below the expectations of

management and the Company's advisers and this may cause a decline in the price

of our common stock.

There has been no material change in our risk factors from those described on

pages 12 to 16 in our Form 10-K for the fiscal year ended September 30, 2006.

                                       27

E-29

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.

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.

                                       28

E-30

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.

Recent Regulatory Matters

On April 15, 2004, the US Securities and Exchange Commission filed suit in the

U.S. District Court for the Southern District of Florida against the Company and

Mr. Dennis Crowley, its then current Chief Executive Officer/Chairman, among

others, alleging violations of the federal securities laws. Specifically with

regard to the Company, the SEC alleged that the Company violated the SEC's

registration, anti-fraud and reporting provisions. These allegations arise from

the alleged failure of Mr. Crowley to accurately report his ownership of the

Company's stock, and his alleged manipulation of the price of the Company's

stock through dissemination of false information, allowing him to profit from

sales of stock through nominee accounts. On May 10, 2004, the Company consented

to the entry of a preliminary injunction, without admitting or denying the

allegations of the SEC complaint. The SEC is continuing its investigation into

pension issues. The Company is offering its full cooperation.

As a further measure, the Court appointed a Corporate Monitor to oversee the

Company's operations. In addition to Mr. Crowley consenting to a preliminary

injunction the Court's order also temporarily barred Mr. Crowley from service as

an officer or director of a public company, and prohibited him from voting or

disposing of Company stock.

                                       29

E-31

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, was elected to serve as

acting Chief Executive Officer.

Following extensive settlement negotiations with 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 as well as funds collected

from co-defendants International Media Solutions, Inc., Yolanda Velazquez and

Kermit Silva who are not affiliated with the Company, to the victims of their

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. No disgorgement or civil penalties were sought from, or ordered to

be paid by, the Company.

Additionally, the Company entered into a Stock Purchase Agreement with PNC Tool

Holdings LLC ("PNC") and Mr. Crowley, the sole member of PNC. Under the Stock

Purchase Agreement, the Company acquired, for $100, and other good and valuable

consideration, 6,005,561 common shares of the Company held by PNC, which

represented approximately 51.1% of the outstanding common shares of the Company

at December 31, 2004, and which constituted 100% of the common stock held by

such entity. The parties also executed general releases in favor of each other

subject to the fulfillment of the conditions of the Stock Purchase Agreement.

The Stock Purchase Agreement was effected on April 8, 2005, following formal

approval by the SEC on February 10, 2005 and, on February 15, 2005 by the U.S.

District Court for the Southern District of Florida of the settlement of the

litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc., International

Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No:

04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further conditioned

on, among other things, the disgorgement and civil penalty funds being paid by

Mr. Crowley. These monies have now been received and are being administered for

the benefit of the victims of the alleged fraud by a court appointed

administrator pursuant to the Fair Funds provision of the Sarbanes-Oxley Act of

2002.

With the return of the Spear & Jackson shares to the Company by PNC, the

stockholders of the Company had their percentage stock interest increase

correspondingly. Jacuzzi Brands, Inc. ("Jacuzzi"), which at this time was a

beneficial owner of 3,543,281 shares of common stock, had its interest in the

Company increased to approximately 61.8% of the outstanding common stock.

On April 11, 2005, Jacuzzi agreed to the termination of a previous letter

agreement dated September 6, 2002, which supplemented the Stockholders'

Agreement of the same date. The letter agreement required Jacuzzi to vote a

substantial portion of its voting stock in the Company in proportion to the vote

of other stockholders of the Company. At the time the letter was executed,

Jacuzzi was a principal, but a minority shareholder of the Company. As explained

above, with the return to the capital of the Company of the majority shareholder

interest previously held by PNC, Jacuzzi then held 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.

                                       30

E-32

Disposal of Majority Interest by Jacuzzi to United Pacific Industries Limited

On April 21, 2005, Jacuzzi adopted a plan of disposition of its interest in the

Company's common stock. On March 23, 2006, Jacuzzi and its subsidiary

undertaking, USI American Holdings, Inc. ("USI" and, together with Jacuzzi, "the

Seller") entered into a Stock Purchase Agreement (the "Stock Purchase Agreement"

with United Pacific Industries Limited ("UPI"), a Bermuda Corporation, whose

shares are traded on the Hong Kong Exchange, to sell its entire holding of

3,543,281 shares of the common stock ("the Shares") of Spear & Jackson, Inc. to

UPI for $1.40 per share for an aggregate purchase price of $4,960,593.

The representations, warranties and covenants made by Jacuzzi and UPI were

typical for this type of transaction. UPI agreed that neither it nor any of its

affiliates would purchase any additional Common Stock during the period from the

signing date of the Stock Purchase Agreement through one year following the

closing at a price less than $1.40 per share.

A copy of the Stock Purchase Agreement is on file with the SEC in connection

with the filing by Jacuzzi of a Schedule 13D/A on March 27, 2006.

The Seller and UPI entered into Amendment No. 1 dated as of May 4, 2006

("Amendment No. 1 to the Stock Purchase Agreement") to extend the date by which

the Seller and UPI were required to lodge the clearance application with the UK

Pensions Regulator. The Seller and UPI subsequently received a comfort letter

dated July 5, 2006 issued by the UK Pensions Regulator (the "Comfort Letter").

The trustees of Spear & Jackson, Inc.'s UK Pension Plan confirmed by a letter

dated July 6, 2006 their acceptance of the UK Pensions Regulator's

determination. The Seller and UPI then entered into Amendment No. 2 dated as of

July 10, 2006 ("Amendment No. 2 to the Stock Purchase Agreement") to waive their

respective requirements for a clearance from the UK Pensions Regulator and to

accept in its place the Comfort Letter which states the UK Pensions Regulator is

of the view, based on the information supplied to him in connection with the

clearance application, that the change of control as a result of the sale by the

Seller of all of its shares of Spear & Jackson, Inc. to UPI is not detrimental

to the UK pension plan and the UK Pensions Regulator believes that a clearance

is not necessary for the transaction.

In addition, pursuant to Amendment No. 2 to the Stock Purchase Agreement, UPI

agreed, subject to the Closing having occurred, to indemnify the Seller and JBI

Holdings Limited (the "Jacuzzi Indemnified Parties") should the UK Pensions

Regulator, regardless of the Comfort Letter, require any of the Jacuzzi

Indemnified Parties to make a contribution or provide financial support in

relation to the potential pension plan liabilities of SJI or its subsidiaries.

In addition, UPI has also agreed that for a period of 12-months from the Closing

Date, UPI will not, and will use its best efforts to ensure that neither SJI nor

any of its subsidiaries will, take any action or omit to take any action that

causes the UK Pensions Regulator, as a result of such action or omission, to

issue a contribution notice against the Jacuzzi Indemnified Parties in relation

to any UK pension plan in which SJI or any subsidiary of SJI is an employer.

Further, UPI agreed that for a period of 12-months from the Closing Date, that

it will not (and will use its best efforts to ensure that neither SJI nor any

subsidiary of SJI will) engage in any action or inaction which in relation to

any such UK pension plan would fall within the UK Pension Regulation clearance

guidance note dated April 2005 as a 'Type A' event unless UPI procures that

clearance is issued by the UK Pensions Regulator in relation to such event in

terms which confirm that no Jacuzzi Indemnified Party shall be linked to a

financial support direction or contribution notice in respect of such event.

Closing occurred on July 28, 2006.

On June 22, 2006, Jacuzzi and UPI filed a preliminary Form 14C with the SEC

announcing notice of change in control and of a majority of directors pursuant

to section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1

thereunder. The 14C indicated that three new directors would be designated by

and elected to the Board of directors by UPI, to serve until the Company's next

annual meeting. The 14C became effective on August 7, 2006, and the three new

directors replaced the incumbent directors on about August 27, 2006. In the

interim, the Board by resolution, appointed the three new directors--Lewis Hon

Ching Ho, Andy Yan Wai Poon and Maria Yuen Man Lam--to the Board effective on

August 9, 2006.

                                       31

E-33

As previously reported by the Company, on July 28, 2006, Jacuzzi Brands, Inc.

together with USI American Holdings, Inc., completed the sale of their shares of

common stock of Spear & Jackson (representing a majority interest) to United

Pacific Industries Limited, which shares are held by United Pacific Industries

Limited's wholly-owned subsidiary Pantene Global Holdings Limited (collectively,

"UPI"). On August 7, 2006, the Company filed with the Securities and Exchange

Commission, and mailed to the Company's stockholders, an Information Statement

pursuant to Sections 14(c) and 14(f) of the Securities Exchange Act of 1934, as

amended, disclosing the intention of UPI to execute a written consent, as

majority stockholder, electing to the Board of Directors the following UPI

nominees: Lewis Hon Ching Ho; Andy Yan Wai Poon; and Maria Yuen Man Lam. On

August 9, 2006, the Board of Directors expanded the Board of Directors from

three members to six members and elected as additional directors Messrs. Ho and

Poon and Ms. Lam. Information concerning the backgrounds of the new Directors is

included in the Information Statement under the heading "Information Regarding

the Executive Officers and New Directors".

The Board of Directors elected the new Directors as a means to facilitate the

transition from the prior Board of Directors to the new Board of Directors.

Messrs. Harrington, Fletcher and Dinerman retired as Directors on or about

August 27, 2006. On November 8, 2006 the Company filed form 8-K to announce

Maria Yuen Man Lam's resignation as a director of the Company. On February 21,

2007 the Company filed form 8-K to announce the appointment of Mr. Patrick J.

Dyson as director and Chairman of the Company with effect from that date. In

addition, the filing contained the announcement of the resignation of Mr. Andy

Yan Wai Poon as a director and secretary of the Company with effect from

February 28, 2007 and the appointment of Mr. Patrick J. Dyson as secretary with

effect from that date. On April 17, 2007 Mr. D. Preston Jones was appointed as

an independent director. Although Soneet Kapila continued to serve as Corporate

Monitor for the Company, on January 10, 2007, he applied to the Court to

terminate his role as Corporate Monitor having determined that his function was

no longer necessary. On January 22, 2007, the US District Court for the Southern

District of Florida entered into its Order and the Corporate Monitor was

relieved of his duties.

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, was established in Shanghai,

China and it is expected to become fully operational as a distribution and

manufacturing operation during the third quarter of fiscal 2007.

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 was subsequently agreed with Megapro that it would pay

Canadian $ 53,900 (approximately $41,000) in settlement of those debts and these

were paid in monthly installments of Canadian $5,000 (approximately $3,800).

During the fourth quarter of fiscal 2005, the Company began marketing for sale

certain assets associated with its UK thread gauge measuring business. On

February 28, 2006, the Company concluded the sale of these assets for a nominal

consideration. The assets sold comprised plant and equipment, inventories and

goodwill. The acquirer paid (pound)1 sterling and assumed certain liabilities in

respect of the leased premises from which the trade operates. The carrying

values of the assets relating to this operation were 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.

                                       32

E-34

Recent Litigation Developments

Subsequent to the SEC action a number of class action lawsuits were initiated in

the U.S. District Court for the Southern District of Florida by Company

stockholders against the Company, Sherb & Co. LLP, the Company's former

independent auditor, and certain of the Company's directors and officers,

including Mr. Crowley, the Company's former Chief Executive Officer/Chairman,

and Mr. Fletcher, the Company's former CFO and former acting Chief Executive

Officer. These suits alleged essentially the same claims as the SEC suit

discussed above.

These various class action suits were subsequently consolidated. Thereafter, the

defendants filed certain Motions to Dismiss with regard to the Complaint and on

October 19, 2005, the U.S. District Court for the Southern District of Florida

in Re Spear & Jackson Securities Litigation entered its Order regarding these

Motions. The Order denied the Company's motion as well as that of Mr. Crowley,

the former Chief Executive Officer of Spear & Jackson. The Court granted the

Motion to Dismiss on behalf of Mr. Fletcher, the Company's interim Chief

Executive Officer, and also granted the Motion to Dismiss on behalf of the

Company's former independent auditor, Sherb & Co., LLP. The class plaintiff

subsequently filed an appeal regarding the trial court's decision to dismiss the

case against Sherb & Co., LLP, which appeal is presently pending. No appeal was

filed with respect to the decision to dismiss the case against Mr. Fletcher.

On July 7, 2006 the Company, Dennis Crowley and the Class Plaintiff reached a

Memorandum of Understanding ("MOU"), which confirmed that the plaintiffs, the

Company and Crowley in the class action had reached an agreement in principle

for the settlement of this litigation, subject to Court approval. According to

the terms of the MOU, the Company deposited the sum of $650,000 into a Qualified

Settlement Fund, for disbursement to the Settlement Class pending approval of

the Court. Subsequent to this, Sherb & Co. also agreed to the terms of the

Settlement agreeing to contribute an additional $125,000.

On November 9, 2006, the Stipulation of Settlement was filed with the Court for

preliminary approval. On January 31, 2007, the Court entered its Order

Preliminarily Approving Settlement and Providing for Notice and Setting Class

Action Statutory Settlement Hearing. The Order, for purposes of the proposed

settlement certified a "Settlement Class" of persons (with certain exceptions)

who purchased the Company's common stock between February 1, 2002 and April 15,

2004. The Order also approved as to form and content the Notice of Pendency and

Proposed Settlement of Class Action and Summary Notice. The Settlement Hearing

was set for May 11, 2007 at 11:30 a.m. at the West Palm Beach, Florida Federal

District Courthouse to determine whether the terms of the Settlement are fair,

just reasonable and adequate to the Settlement Class, and should be approved by

the Court; whether a final judgment should be entered dismissing the litigation;

whether the proposed plan of allocation should be approved; and to determine the

amount of fees and expenses to be awarded to plaintiffs' lead counsel. The Order

also appointed a claims administrator and provided for notice to those who

sought exclusion from the Settlement Class.

On May 11, 2007, the U.S. District Court for the Southern District of Florida,

sitting in West Palm Beach Florida, heard the Plaintiff's motion for Final

Approval of the Class Action Settlement and Plan of Allocation, to which there

were no objectors or class members that opted out of, the settlement. On May 14,

2007, the Court signed the Final Judgment thus forever extinguishing all of the

class claims against the Company, and barring any claims for contribution by

third parties. The Final Judgment made clear that the settlement was not an

admission of wrongdoing or liability by the Company.

To facilitate the distribution of the funds from the class suit to the class

shareholders and keep administrative costs to a minimum, the SEC Claim's

Administrator applied to the Court on January 9, 2007 for permission to combine

the class action funds with the funds derived in the SEC litigation, and allow

for the SEC's Claim's Administrator to disburse the collective funds.

On September 6, 2005, the Company was served with a Shareholder Derivative

Complaint, Hapka v. Crowley, et al. Case No: CA005068 filed on June 1, 2004 in

the Circuit Court for Palm Beach County, Florida. The suit named the Company as

a nominal defendant. Also named as defendants were former directors Robert

Dinerman, William Fletcher and John Harrington, in addition to Dennis Crowley

and the Company's prior independent auditors, Sherb & Co. LLP. 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

additionally 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.

                                       33

E-35

Due to ongoing settlement discussions with the plaintiff's attorney, the Company

had not responded to the Complaint. In August 2006 the Company entered into a

settlement agreement with the plaintiff by agreeing to accept certain changes to

its corporate governance procedures and the payment of $70,000 in legal fees.

The settlement was filed with the Court in early November 2006, and if approved

by the Court, will result in a dismissal of the suit and release the Company and

the former director defendants Messrs. Robert Dinerman, William Fletcher and

John Harrington, would be dismissed. Dennis Crowley and Sherb & Co. continue as

defendants in this suit.

On February 2, 2007, the Circuit Court entered a Preliminary Approval Order

preliminarily approving the partial settlement pursuant to the Stipulation of

Settlement between plaintiff and the Company, including its former directors

William Fletcher, John Harrington, and Robert Dinerman. The Court has set May

29, 2007 at 8a.m. at the West Palm Beach County Courthouse, for the final

Settlement Hearing to determine (i) whether the terms of the Partial Settlement

are fair, just reasonable and adequate to the derivative stockholders and to the

Company, and should be approved by the Court; (ii) whether a final judgment

should be entered dismissing the litigation and releasing the defendants Spear &

Jackson, as described in the Stipulation; and (iii) to determine the amount of

fees and expenses to be awarded to plaintiffs' counsel. The Order approved as to

form and contents the Notice of Partial Settlement and the mailing and

distribution process. The Order also provided for notice to those who sought

exclusion from the settlement.

There can be no assurance that the Courts will approve the terms of this

settlement.

SUMMARY OF PRINCIPAL OPERATIONS

Spear & Jackson, Inc., through its principal operating entities, as disclosed in

note 1 to the financial statements, manufactures, factors and distributes a

broad line of hand tools, lawn and garden tools, industrial magnets and

metrology tools primarily in the United Kingdom, Europe, Australasia, North and

South America, Asia and the Far East. These products are manufactured and

distributed under various brand names including:

      *  Spear & Jackson - garden tools;

      *  Neill - hand tools;

      *  Bowers - bore gauges and precision measuring tools;

      *  CV - precision measuring instruments;

      *  Robert Sorby - wood turning tools;

      *  Moore & Wright - precision tools;

      *  Eclipse - blades and magnetic equipment;

      *  Elliot Lucas - pincers and pliers; and

      *  Tyzack - builders' tools

Until the disposition of the screwdriver division in September 2003, the Company

also manufactured and sold a range of patented multi-bit screwdrivers under the

"Megapro" brand name. The Company also manufactured and sold a rage of thread

gauge measuring equipment under the "Coventry Gauge" logo until the sale of the

principal business assets of that operation in February 2006.

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

summarized as:

1)    NEILL TOOLS, consisting of Spear & Jackson Garden Tools and Neill Tools,

      manufactures, among other products, hand hacksaws, hacksaw blades, hacksaw

      frames, builder's tools and wood saws, all non-powered. In addition, Neill

      Tools has supplemented its UK manufactured products with factored products

      and bought in components from Far Eastern and Indian suppliers. Neill

      Tools product offering now includes a full range of hand power tools and,

      from January 1, 2005, Spear & Jackson Garden Tools' range has been

      supplemented by a portfolio of electric powered garden tools.

2)    ECLIPSE MAGNETICS' key products are permanent magnets (cast alloy),

      magnetic tools, machine tools, magnetic chucks and turnkey magnetic

      systems. Products range from very simple low-cost items to technically

      complex high value added systems. In addition, Eclipse Magnetics engages

      in the trading of other magnetic material, sourced from the Far East, both

      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.

                                       34

E-36

3)    The Company's metrology division comprises:

      MOORE & WRIGHT which manufactures 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, which measure the diameter

      of machined components. In addition to the core range of bore gauges, the

      Company also manufactures universal gauges and hardness testing equipment.

      In December 2004, the division secured the European distributorship rights

      for a range of premier portable hardness testers sourced from China. This

      distribution operation is operated through a specifically formed Dutch

      subsidiary company, CV Instruments Europe BV, based in Maastricht,

      Holland. An allied manufacturing, quality control and distribution centre,

      Bowers Eclipse Shanghai Equipment Limited, was established in Shanghai,

      China, during the year ended September 30, 2005.

4)    ROBERT SORBY is a manufacturer of hand held wood working tools and

      complementary products. The products are handcrafted with strong aesthetic

      appeal.

In addition, Spear & Jackson, Inc. has subsidiary companies in France (Spear &

Jackson France SA) and Australasia (Spear & Jackson (Australia) Pty Limited and

Spear & Jackson (New Zealand) Limited) which act as distributors for Spear &

Jackson and Bowers manufactured products and complementary products sourced from

third party suppliers.

The Company's continuing operations can be analyzed into three business

segments, hand and garden tools, magnetic products and metrology tools.

For further detailed financial information by reportable segment, including

sales, profit and loss, and total asset information, see note 12 in the "Notes

to the Condensed Consolidated Financial Statements" included within this

Quarterly Report on Form 10-Q. Also included within note 12 is a detailed

geographical analysis including sales, profit and loss, and total net asset

information.

The Company's product offering comprises both own-manufactured items and

products sourced from third party suppliers as fully complete factored products

or semi finished products.

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

      Name/Location                     Products Manufactured

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

A.    UK:

      Neill Tools                       Hand tools

      Atlas Site, Sheffield

      Robert Sorby                      Woodturning tools

      Sheffield

      Bowers Metrology                  Precision measuring tools

      Bradford

Up to the date of their closure in November and December 2006, the Company also

manufactured a range of garden tools at its UK plant in Wednesbury and a range

of magnetic products at its premises in Vulcan Road, Sheffield, England.

B.    France:

      Spear & Jackson                   Assembly of garden tools

      France

We currently sell our products to industrial, commercial and retail markets

throughout the world, with a significant concentration in the United Kingdom,

European Union, Australia, New Zealand and the Far East.

                                       35

E-37

These markets chiefly comprise:

The non-powered hand tool industry in which the Company has hand tool,

engineers' hand tool and garden tool business interests. These products are

typically sold in industrial catalogs, hardware stores, garden centers and

multiple retailers. This industry is highly mature with clearly defined

traditional brand names being joined by a broad base of "house brands" typically

supplied from third world manufacturers.

The magnetic industry. This can be split into magnet manufacturers and magnetic

integrators. The magnet users and integrators utilize the magnetic materials to

produce products such as security sensors, electrical windows and magnetic

filters and lifters.

The metrology industry, which can be split into two main market segments: (i)

low tolerance tools such as tape measures, rulers and protractors and (ii)

surface roughness measuring equipment and laser measuring instruments, etc.,

used in the exact measurement of technologically precise machined components.

The Company's Bowers Metrology Group presently operates in the latter market

segment on a worldwide basis.

The hobbyist and professional wood turning industry. This industry is relatively

small and caters to individuals who have reasonable disposable income, often

retirees, or who are professional wood turners producing craft products.

Our strategy is to maintain and develop the revenues of our businesses through

such methods as:

   o  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.

   o  Continuous product improvement and innovation.

   o  Increasing market share by offering highly competitive product offerings.

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

   o  Improving manufacturing efficiencies and continually reviewing other cost

      saving measures.

The Company offers a comprehensive range of tools and equipment ranging from

hacksaw blades to pliers, from secateurs to digging forks and from a simple red

magnet to a computer controlled materials handling system.

The Company's policy is to support its core product offering with a pipeline of

new products and range extensions. In the three months to March 2007 new product

range launches and other significant product related business developments have

included:

   o  Neill Tools has confirmed new listings within major UK builder's merchants

      with a new range of "Ready to go" plasterers tools. Additionally, a new

      range of petrol driven garden tools was launched within the UK retail

      sector complementing the division's existing range of electric powered

      garden tools. The new e-series range of garden digging tools was launched,

      designed to prevent back strain.

   o  The Eclipse Magnetics division has continued to focus on filtration

      products aimed at domestic and industrial boiler systems, consumer

      hydraulic filters and products for filtering petroleum delivered to gas

      stations.

   o  The Bowers division has been preparing for the launch of a range of new

      products including the Bowers "Ultima" high-accuracy bore gauging range

      and the "Eseway" automatic Rockwell hardness testers at the main industry

      trade show to be held in Germany in May 2007.

   o  Our Australasian division has been investigating and reviewing a number of

      product initiatives for release including garden digging products, power

      generators and a S&J apprentice pack comprising S&J masonry and hand tool

      products.

                                       36

E-38

DISCUSSION OF CRITICAL ACCOUNTING POLICIES

We prepare our consolidated financial statements in accordance with accounting

policies generally accepted in the United States. As such, we are required to

make certain estimates, judgments and assumptions that we believe are reasonable

based upon the information available. These estimates and assumptions affect the

reported amounts of assets and liabilities as of the date of the consolidated

financial statements and the reported amounts of revenues and expenses during

the periods presented. Actual results could differ significantly from those

estimates under different assumptions and conditions.

Management's Discussion and Analysis or Plan of Operation in the Company's 10-K

filing for the year ended September 30, 2006 included a detailed discussion

which addressed our most critical accounting policies. The quarterly financial

statements for the period ended March 31, 2007, attached hereto, should

therefore be read in conjunction with that discussion.

These policies are those that are most important to the portrayal of our

financial condition and results of operations and which require our most

difficult and subjective judgments, often as a result of the need to make

estimates about the effect of matters that are inherently uncertain.

Our most critical accounting policies are those relating to revenue recognition,

foreign exchange risk, inventory valuation, pension and post-retirement benefit

obligations and accounting for deferred and income taxes.

Since September 30, 2006 there have been no changes in our critical accounting

policies and no significant change to the assumptions and estimates related to

them.

Reclassification

Certain reclassifications have been made to the consolidated financial

statements for the three and six months ended March 31, 2006 in order to conform

to current year presentation. Gains arising on the sale of property and

manufacturing and other reorganization costs have been reclassified so that such

gains and costs are now shown as a component of "Operating Costs, Income and

Expense". These items were previously captioned as "Unusual or Infrequent Items"

and were presented after the Operating profit (loss) for the period. These

reclassifications impact only on the presentation of the Consolidated Statement

of Operations and do not have any impact on previously reported net income or

loss.

OVERVIEW

When compared to the equivalent periods last year, the results for the quarter

and six months ended March 31, 2007 show increases in sales and reductions in

operating losses such that the company returned to operating profitability for

the quarter ended March 31, 2007.

Sales revenues for the quarter ended March 31, 2007 increased by $1.6 million

(5.8%) from $27.57 million in 2006 to $29.17 million in 2007. This increase is

analyzed as favorable currency exchange fluctuations in the period of $2.85

million offset by reduced sales volumes of $1.17 million and increased sales

rebates of $0.08 million. Sales volume improvements were recorded in our

Metrology, Robert Sorby, Australia, New Zealand and French divisions, but these

increases were negated by volume shortfalls in our Neill Tools and Eclipse

Magnetics businesses.

In the second quarter of fiscal 2007 soft retail demand continued in the UK, and

the weak US dollar had an adverse effect on the division's sales into US$

denominated markets. In addition, UK garden product sales in the quarter were

down compared to Q2 of fiscal 2006. This arose as a result of timing differences

on sales of Spear & Jackson electric garden products to a major UK catalog

chain. Sales to this customer were transacted in quarter 2 of 2006 but, in

fiscal 2007, the comparable sales have been rescheduled into later months of the

year.

For the six months to March 31, 2007 sales increased by $3.49 million (6.91%)

from $50.50 million in 2006 to $53.99 million in 2007. The increase comprised

$4.58 million relating to favorable currency exchange variations, offset by

$0.83 million reductions in sales volumes and $0.26 million increased sales

rebates.

                                       37

E-39

Gross profit was $ 10.25 million (35.13%) for the quarter to March 31, 2007

compared to $8.49 million (30.81%) for the prior year. For the six months to

March 31, 2007 the gross profit was $18.59 million (34.43%) compared to $15.52

million (30.74%) in the previous year. The improvement reflects the reduction of

direct costs as a result of the extensive restructuring initiatives in our UK

tool and magnetic products manufacturing operations. Own-manufactured product is

being progressively replaced with factored items sourced from overseas thereby

reducing costs and increasing profitability.

Selling, general and administrative expenses have increased by $0.63 million

(6.67%) in the current quarter and $1.27 million (6.89%) for the year to date.

After eliminating the adverse impact of movements in average US$/sterling cross

rates in the period ($1.85 million in the half year and $1.04 million in the

quarter ended March 31, 2007) and general inflationary increases ($0.44 million

in the six months ended March 31, 2007 and $0.22 million in the quarter ended on

that date) the underlying trend is one of decreased SG&A costs.

The results for the three months and six months to March 31, 2007 include a

$0.22 million and $0.31 million credit respectively relating to gains on

property sales. Reorganization costs in the three months to March 31,2007 were

$0.08 million (2006: $1.23 million) and for the six month period under review

they were $0.10 million (2006: $1.23 million). The $1.23 million loss in 2006

relates to costs in connection with the closure of the company's manufacturing

facility in Wednesbury, England.

As a result of the higher gross profits less increased overhead costs, the

Company's Q2 operating result has improved by $2.5 million (122.4%) from a loss

of $2.04 million in 2006 to an income of $0.46 million in 2007. For the six

months to March 31, 2007 losses have decreased by $3.24 million from $4.13

million in 2006 t $0.89 million in 2007.

The improvements in profitability are principally driven by the various UK

reorganization programs initiated in fiscal 2006. These comprise the closure of

the remaining element of the Company's manufacturing site at Wednesbury, the

transfer of all warehouse and distribution operations previously carried out at

that location to the Company's Atlas site in Sheffield, the closure of certain

manufacturing activities at the Atlas site and the cessation of magnet

production and the relocation of the remaining operations of the Magnetics

division to the Company's Atlas site.

To consolidate these operating profit improvements, the Company's focus

continues to be the launch of new products and the implementation of initiatives

to reduce its operational base costs. Such initiatives may include improved raw

materials and product procurement and the introduction of more efficient

processes in order to minimize margin erosion and to retain a competitive

pricing edge over cheap foreign imports. Opportunities will be explored to make

the Company's manufacturing base more cost efficient. Going forward such

initiatives, together with planned investment in new capital equipment in the

UK, China and elsewhere, if successfully implemented, should further improve the

operating performance of the Company.

Despite consideration of these cost control initiatives, the Company's results

continue to be adversely impacted by the significant non-cash, $8.0 million

annual FAS 87 pension charge. As a result, and as is further explained in the

Outlook section, the Company anticipates that it will suffer an operating loss

in the third quarter of fiscal 2007.

                                       38

E-40

RESULTS OF OPERATIONS

The following discussion provides a review of results for the three and six

months ended March 31, 2007 compared to the three and six months ended March 31,

2006.

Summary Profit and Loss Account Data:

<TABLE>

<CAPTION>

                                           Three Months                          Six Months

                                          Ended March 31,                      Ended March 31,

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

                                   2007        2006       % Change      2007        2006       % Change

                                    $m          $m                       $m          $m

<S>                               <C>         <C>         <C>          <C>         <C>         <C>

Sales ......................       29.17       27.57        +5.80       53.99       50.50        +6.91

Cost of goods sold .........      (18.92)     (19.08)       (0.80)     (35.40)     (34.98)       +1.20

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

Gross profit ...............       10.25        8.49       +20.64       18.59       15.52       +19.75

Selling, general and

  administrative expenses ..       (9.93)      (9.30)       +6.67      (19.69)     (18.42)       +6.89

Gain on sale of land

   buildings ...............        0.22        -         +100.00        0.31           -      +100.00

Reorganization costs .......       (0.08)      (1.23)      (92.83)      (0.10)      (1.23)      (92.02)

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

Operating income (loss) ....        0.46       (2.04)      +122.4       (0.89)      (4.13)      +78.46

Other income ...............        0.13        0.08       +72.15        0.18        0.09      +110.3

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

Income(loss) from continuing        0.59       (1.96)      +130.3       (0.71)      (4.04)      +82.53

Income tax .................       (0.04)      (0.1)       +56.30       (0.09)       0.31      +429.5

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

Income(loss) from continuing

 operations after taxes ....        0.55        2.06      +126.56       (0.80)      (3.73)      +78.51

Loss from discontinued

  operations ...............        0.00       (0.07)     +100.00        0.00       (0.08)     +100.00

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

Net income (loss) ..........        0.55       (2.13)      +125.7       (0.80)      (3.81)      +78.95

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

Effective tax rate (%) .....        7.59       (5.09)                  (13.46)      (7.59)

As a percentage of sales %:

Gross profit ...............       35.13       30.81                    34.43       30.74

Selling, general and

  administration expenses ..       34.06       33.75                    36.48       36.48

Operating income (loss) ....        1.57       (7.40)                   (1.65)      (8.17)

Net income (loss) ..........        1.88       (7.71%)                  (1.48)      (7.54)

</TABLE>

Note: The percentage and percentage change data shown above have been calculated

from the Consolidated Statements of Operations included within the Financial

Statements attached hereto. The financial data shown in the Financial Statements

is given in thousands rather than the millions presentation adopted in the table

above.

                                       39

E-41

SALES

Sales from continuing activities increased by $3.49 million (6.91%) from $50.50

million in the six months ended March 31, 2006 to $53.99 million for the six

months ended March 31, 2007. Sales of $29.17 million in the quarter ended March

31, 2007 were $1.60 million (5.80%) higher than sales of $50.5 million recorded

for the comparable period last year.

The net increase in sales is analyzed as follows:

                                                     Three months     Six months

                                                     Ended            Ended

                                                     March 31,        March 31,

                                                     2007             2007

                                            Note     $m               $m

Effect of exchange rate movements .....     (a)       2.85             4.58

Sales volume decreases ................     (b)      (1.17)           (0.83)

Increased rebates .....................     (c)      (0.08)           (0.26)

                                                     -----            -----

                                                      1.60             3.49

                                                     -----            -----

Analyzed by principal business segment, the net sales increase is reconciled as

follows:

                                                     Three months     Six months

                                                     Ended            Ended

                                                     March 31,        March 31,

                                                     2007             2007

                                            Note     $m               $m

a) Hand and garden tools

   Effect of exchange rate movements ..     (a)       1.92             3.11

   Sales volume increases .............     (b)      (1.84)           (1.60)

   Rebates ............................     (c)      (0.08)           (0.26)

                                                     -----            -----

                                                      0.00             1.25

                                                     -----            -----

b) Metrology tools

   Effect of exchange rate movements ..     (a)       0.63             0.92

   Sales volume increases .............     (b)       0.94             0.95

                                                     -----            -----

                                                      1.57             1.87

                                                     -----            -----

c) Magnetic products

   Effect of exchange rate movements ..     (a)       0.30             0.55

   Sales volume decreases .............     (b)      (0.27)           (0.18)

                                                     -----            -----

                                                      0.03             0.37

                                                     -----            -----

   Total                                              1.60             3.49

                                                     -----            -----

Notes:

(a)   The functional currencies of the group's revenues are UK sterling, the

      Euro, the Australian and New Zealand dollar and the Chinese Yuan. The

      principal functional currency is sterling and the variation in the average

      US$/(pound) cross rate in the three and six month period to March 31, 2007

      compared to the comparable period 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

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

                                        2007        2006       % Movement

      3 months ended March 31,          1.955       1.750         11.72

      6 months ended March 31,          1.934       1.752         10.39

                                       40

E-42

(b)   The general trading environment in our principal markets remains little

      changed from that reported in the previous quarter. Flat consumer demand

      continues, we face ongoing competition from rival suppliers across a

      number of product ranges and the practice of major retail customers

      promoting own label offerings sourced from the Far East at the expense of

      S & J Company product increases. As an additional factor, although the US

      $ value of the Company's sales has increased as a result of the movement,

      in particular, in the US$/Sterling cross rate, this weakening results in

      our products becoming uncompetitive in US$ denominated export markets.

      The Neill Tools division witnessed a decrease in sales due to rescheduling

      of certain electric garden product sales to later months of 2007 when the

      comparable sales in the prior year were transacted in Q2 of 2006. In

      addition, our Eclipse Magnetics division has witnessed poor demand for

      magnetic assemblies and materials and has further suffered as a result of

      low customer investment within the Materials Handling sector.

      Despite the ongoing trading conditions there have been some significant

      sales volume increases. In particular, within the Metrology division there

      has been both continued incremental sales growth via its selling and

      distribution facilities in Maastricht and Shanghai and resurgence in UK

      sales. Likewise, Robert Sorby witnessed strong North American sales and

      our Australian division has benefited from a successful air tools

      promotion.

(c)   Sales rebates charged in the three month period ended March 31, 2007

      amounted to $1.65 million compared to $ 1.45 million in the three month

      period ended March 31, 2006. For the six month period under review rebates

      increased from $2.44 million in 2006 to $2.91 million in 2007. The

      increase is primarily due to increased trading volumes in Australia and

      France and the adverse movement in exchange rates.

SEGMENTAL REVIEW OF SALES

We aim to maintain and develop the sales levels of our businesses through the

launch of new products, the improvement of existing ranges 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

Sales for the quarter ended March 31, 2007 of $11.62 million showed a decrease

of $1.11 (8.7%) million over last years sales of $12.73 million. The decrease

was attributable to adverse volumes of $2.32 million, offset by favorable

exchange rates of $1.21 million. In the six months ended March 31, 2007 sales of

$20.90 million were $1.12 million (5.1%) lower than last year's sales of $22.02

million. This decrease comprised adverse volumes of $3.15 million, offset by

favorable exchange movements of $2.0 million and decreased sales rebates of

$0.03 million.

Neill Tools continues to encounter a challenging trading environment in both its

export and home markets.

One again, the UK retail sector has reported a downturn in consumer spending

that has had an adverse impact on our hand and garden tools sales. Additionally,

the division's UK performance in the comparable period to March 2006 benefited

from electrical product sales to a major catalog chain. The customer has

rescheduled comparable sales in fiscal 2007 to the second half of the year.

Despite these difficult trading conditions, the UK garden centre initiative

continues to develop, delivering volumes greater than our original expectations.

A complete new range of garden digging tools was launched in the UK independent

garden market. Following this launch we now have three tiers of product for

customer requirements. During the period under review we launched our new

"E-series" range of Garden digging tools. These are ergonomically designed to

prevent back strain. Initial uptake is encouraging with listings obtained within

both the UK retail and independent sectors.

In export markets, sales have been performing in line with levels experienced

last year. Although demand from the Middle East has softened, this has been

compensated by sales increases in the Far East. The export market continues to

be driven by demand for our hacksaw blades. Sales of these products now

represent 60% of our industrial tools' revenues and strategies continue to be

evaluated to spread this sales concentration risk. The weakening US$ provides

margin challenges within markets where transactions are denominated in that

currency. We are now being approached to offer currency support to mitigate the

adverse effect that the weak dollar has on certain of our customers.

                                       41

E-43

Gross margins have improved considerably when compared to the same period last

year. The main drivers behind the increased margins are the reduction in fixed

production costs arising from the closure of the Company's UK manufacturing

plant at Wednesbury and other reorganization initiatives and the outsourcing of

previously manufactured products.

Going forward, the main challenges for the business remain the continuing review

of the manufacturing cost base and the innovation of new product development in

line with our core brands and competences. The division has now established

links with UK universities to use their specialist design and technology skills

to aid new product development. The outlook for quarter 3 looks positive with

the order book being almost $1 million higher at March 31, 2007 than it was in

the previous year. This places additional challenges on the business to ensure

that these orders are delivered on a timely basis.

ECLIPSE MAGNETICS

Revenues for the quarter showed a marginal $0.03 million increase (1%) over last

year's figures (2007 $2.84 million, 2006 $2.81 million) with favorable exchange

movements of $0.30 million and adverse volumes of $0.27 million. For the six

months ended March 31, 2007 sales showed a 6.95% increase of $0.37 million

(2007, $5.78 million, 2006, $5.41 million) attributable to favorable exchange

variances of $0.55 million offset by adverse volumes of $0.18 million.

The sales shortfalls were driven by poor demand for magnetic assemblies and

materials. Additionally, the lack of capital expenditure investment held back

sales in the materials handling sector. Offsetting these adverse factors were

improvements of 10% in our Separation division, which continues to increase its

market share within the food processing industry.

Trading patterns within the magnetics market continue to reflect global

industrial economic conditions. Our magnetic materials products suffered reduced

demand within both the UK and overseas industrial distribution sectors.

Likewise, a downturn in capital expenditure in the Engineered Products market is

having a negative impact on our project based business.

Competition from the Far East remains the main threat, whether directly or

through agents, as more and more companies emerge in our trading markets who are

able to offer high quality goods at low market price points. The strength of

sterling against the US$ and the Euro is applying increasing pressure on our

margins with the USA being our biggest export market.

Gross margins of 41%, before one -time stock provisioning, have improved since

last year, the main driver being the reduction in fixed production costs. As

previously reported, in August 2006, the company announced both the cessation of

certain manufacturing activities at its site in Sheffield, England and the

relocation of its remaining business to the Atlas site, Sheffield. The

relocation was completed in December 2006. The cost of key primary materials,

steel, nickel and cobalt has continued to increase during the period, with

cobalt and nickel trading at an 8 year high. This increase has and will continue

to put pressure on our margins and, although we were able to pass on this

increase as a surcharge within certain sectors, our main customers will not

accept such surcharges until supply contract renewal dates.

Looking forward, the main challenge remains the distancing of rival Far East

manufacturers from our key customer base. Our commodity-based business is under

threat but to counter this, we continue to promote the attractiveness of our

product by offering added value options to our customers. The materials handling

section of the Engineered Products division is currently facing low quotation

conversions and resource is therefore being focused on other key product groups

to recover those shortfalls.

The continued price increases of neodymium, nickel and cobalt, which are already

having an adverse impact on our margins, will continue to do so if prices keep

increasing. To counter this, management continues to follow a strategy of new

product development as a key driver in increasing market share within key

product segments, active cost control and manufacturing efficiencies.

                                       42

E-44

ROBERT SORBY

Sales for the quarter were $0.34 million (28.4%) more than the comparable period

last year last year (2007 $1.55 million, 2006 $1.21 million), attributable to

favorable exchange variances of $0.16 million and increased volumes of $0.18

million. In the six month period ending March 31, 2007, sales have increased by

$0.55 million (21.78%) from $2.53 million in 2006 to $3.08 million in 2007. This

increase is attributable to favorable exchange variances of $0.29 million and

increases sales volumes of $0.26 million.

The first two quarters of fiscal 2007 have witnessed improvements in both home

and export retail sales when compared to the same period last year.

Growth in the second quarter has come primarily from North America where

long-term marketing initiatives are coming into fruition. These initiatives

include a program of in-store demonstrations in North-Eastern USA and retail

shows across the United States and Canada.

In the UK sales increased by 2% where the success of the "ProEdge" sharpening

system was offset by a downturn in demand for lathes and lathe chucks. Demand

for the "ProEdge" product continues to exceed expectations but it is clear that

sales are generated by dedicated product demonstrations and we will therefore

continue to participate in dealer in-house shows etc. to promote this and other

items.

Our retail operation continued to benefit form the incorporation of an

e-commerce site last summer and this now contributes 15% of the store's

turnover. As a result, further focus will be put on e-commerce in future months.

Gross margins in the period have improved when compared to the same period last

year, mainly attributable to a more favorable mix of product sales. At the same

time overhead costs have been rigorously held in check.

Looking forward the business climate remains uncertain. There will be changes in

our UK distribution of lathes and chucks and the continuing weakness of the US

dollar against the pound sterling will negatively impact margins. The launch of

the new "Pro-edge" sharpening system has created a number of new opportunities,

but given the relative complexities of marketing electrical products in

international markets, the full launch of this product is to be phased in over a

period of time. A European launch will be followed by the product's introduction

into the US market with both launches being completed by the end of fiscal 2007.

BOWERS

Sales for the second quarter have increased by $1.57 million (39.34.%) from

$3.97 million in Q2 of fiscal 2006 to $5.54 million in Q2 of fiscal 2007. This

increase is attributable to favorable exchange rate variances of $0.63 million

and increased volumes of $.94 million. Cumulatively, sales have increased by

$1.87 million (23.28%) from $8.03 million in the six months to March 31, 2006 to

$9.90 million in the six months to March 31, 2007 attributable to favorable

exchange rate variances of $0.92 million and increased sales volumes of $0.95

million.

Quarter 2 has proved to be excellent for the Bowers Group as a whole with all

divisions performing well. In particular, export sales via our UK operations and

sales from our distribution outlet in the Netherlands have been particularly

strong. Additionally, after a disappointing Q1 UK sales performance, the UK

division bounced back strongly with an excellent order intake from all sectors.

The Shanghai facility is currently operating as a quality control and

administration centre for products being shipped to Europe. A further investment

of $0.5 million was made in the operation in the current quarter to fund the

purchase of capital equipment so that manufacturing operations can commence in

quarter 3 of Fiscal 2007.

Gross margins have been in line with expectations with the cost of incentives to

offset the strength of sterling and some higher than expected machinery

maintenance costs being offset by improved margins on imported products due to

the weakness of the US $. Energy costs and raw material costs have now

stabilized but increases in the price of high demand materials such as steel and

aluminium remain possible.

                                       43

E-45

There were no major exhibitions in the latest quarter but, in May 2007, Bowers

will be exhibiting in Germany, at the "Control" industry exhibition. This show

is to be used as a platform to launch a new range of products including the new

Bowers "Ultima" high-accuracy bore gauging range and the new "Eseway" automatic

Rockwell hardness testers. These are two of the largest product launches that

Bowers has seen in more than five years and production of both lines is expected

to commence from June 2007.

The continued recruitment of skilled labor in the UK manufacturing division

continues to be challenging with fewer graduates choosing engineering as a

career. New capital expenditure programs for CNC machinery are currently being

implemented in order to counter this shortage of labor.

The outlook for the remainder of fiscal 2007 remains positive, particularly as

we have rectified the disappointing first quarter sales in the UK domestic

division. Much of the new business relates to the Aerospace market although the

automotive sector is now showing signs of improvement. Recent currency

fluctuations are a cause for concern although there are no signs, at the moment,

of the buoyant US industrial market slowing down.

S&J FRANCE

Sales in the quarter have increased by $0.36 million (10.13%) from $3.58 million

in 2006 to $3.94 million in 2007, the increase being attributable to favorable

exchange rate variances of $0.34 million and increased volumes of $0.04 million

offset by increased rebate levels of $0.02 million. For the six month period

ended March 31, 2007 sales have increased by $0.60 million (10.95%) from $5.52

million in 2006 to $6.12 million in 2007. This is attributable to favorable

exchange variances of $0.49 million and increased volumes of $0.13 less

increased rebates of $0.02 million.

Recently released statistics compiled by French garden product trade

associations indicate that sales of garden products in the French market have

decreased by 4.3% between 2005 and 2006. In addition to this overall decrease in

demand, traditional garden tool sales continue to be negatively affected by

intense competition and the increasing flow of cheap Asian and Far Eastern

imports.

Despite this environment of softening demand for garden tools, sales of new

products and the benefits of an increasingly diversified product offering have

resulted in the company achieving increased sales volumes in the period. As an

additional contributory factor, in comparison to the same period last year, we

have also recorded increased sales to certain of our major customers under their

own label brands albeit at very narrow margins.

Although our success in product diversification is encouraging, our base garden

tool business continues to suffer. The French economy remains subdued and

business conditions in the Company's principal markets have continued to mirror

this depressed retail environment. As noted above, the volume of products sold

is decreasing and the retail price points are being systematically reduced

thanks to the amount of entry level products sourced, typically, from the Far

East. Additionally, competition remains intense in the French garden products

market with a number of suppliers trying to secure business with a shrinking

base of retail outlets. We can also see the trend becoming more widespread of

customers switching to the sale of own label offerings at the expense of premium

branded product. All of these factors inevitably lead to pressure on margins and

the situation is exacerbated by our sales profile where 40% of our turnover is

concentrated on two customers.

In order to relieve these margin pressures the Company continues to look for new

suppliers in China and India in order to drive down product costs. Quality

control and reliability of delivery times remain key criteria to ensure that the

Company's branding, customer service and market reputation are not compromised.

The Company will continue to concentrate on marketing activity to promote its

principal brands and to secure new listings. Such activity has and will continue

to centre on the publication of a new 2007 product catalogue, improvements to

the Company web site, advertising, newsletters, e-marketing, etc.

                                       44

E-46

As sales of traditional product lines decline (forks, hooks, snow tools, etc.)

it is clear that we must offer new product ranges and that we are able to offer

products of the right quality and at appropriate price points. With this in mind

we have tried to launch new products which are competitive in terms of price and

which are not simply garden tools but with which are associated with a more

general garden leisure theme, e.g. bonsai tools, wooden baskets, wooden crates,

repotting tables and decorative wooden wheel barrows. Focus will therefore

continue on new product development as a way of both improving margins and

eliminating the seasonal peaks that are typical of the garden products business.

AUSTRALASIA

Sales have increased by $0.42 million (12.71%) in the current quarter from $3.28

million in Q2 of 2006 to $3.70 million in Q2 of 2007. Volume increases of $0.26

million and favorable exchange rate variances of $.0.19 million were partially

offset by increased sales rebates of $0.03 million. Cumulatively, for the six

months to March 31, 2007 sales have increased by $1.21 million (17.25%) from

$6.99 million in 2006 to $8.20 million in 2007 due to favorable volumes of $1.16

million and exchange variances of $0.33 million, offset by increased rebates of

$0.28 million.

Australia has had a successful quarter following on from a high achieving Q1.

Once again, imported house brands and the ongoing drought have impeded sales of

garden products compared to the previous year but this was offset by improved

sales in masonry, hand tool and particularly air product categories as a result

of promotions with major customers. This increased promotional activity has,

however, incurred higher levels of sales rebates.

In New Zealand there has been a slight dip in Q2 sales levels when compared to

last year due to decreases in air and garden sales and the delisting of an

unprofitable drainage product range being only partially offset by gains in

garden cutting and digging tools. Overall for the six month period sales are

higher than last year due to increased promotional activity within the air tool

category. Customer confidence is at a high in New Zealand with reduced fuel

prices resulting in increased disposable income.

As a result of increased sales levels, improved sourcing, wholesale price

increases and currency price gains, and changes within the sales and customer

mix of the businesses, gross margins have seen a considerable improvement over

the same period last year.

Despite the Q1 and Q2 achievements, competition from imported Asian products and

retailer house brands continue to place sales volumes, margins and market share

under pressure.

Overall, increased sales to our major customers reflect the continued expansion

and domination of the market by the major corporate retailers who continue to

expand their market share at the expense of the traditional independent retail

groups. As such, our sales mix reflects this trend with sales growth continuing

in the corporate sector whilst sales to the independent retailers continue to

decline. Our objective going forward is to spread our exposure to the corporate

sector by increasing our sales and market share in the independent and

industrial markets.

A major focus going forward will be the promotion and marketing of Spear &

Jackson brands to gain incremental sales and profit growth together with

aggressive pricing strategies to maintain and improve market share in all the

categories in which we compete. The division will continue to develop and

introduce new and extended ranges under the S&J brand across the garden digging,

cutting, hand tool, masonry, hammer and air tool ranges. In addition, improved

product procurement and the successful implementation of price increases will

help to ensure our sales and trading margins continue to improve going forward.

                                       45

E-47

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:

                            Three months ended           Six months ended

                          March 31,     March 31,     March 31,     March, 31

                             2007          2006          2007          2006

                              %             %             %             %

Cost of goods sold .....    64.87         69.19         65.56         69.26

as a % of sales

Gross profit margin ....    35.13         30.81         34.43         30.74

Costs of goods sold decreased to $18.92 million in the three month period ended

March 31, 2007 from $19.08 million in 2006. In the six month period under review

costs of goods sold have increased from $34.98 million in 2006 to $35.40 million

in 2007.

The increased gross margin in the periods under review and the decrease in the

cost of goods sold as a percentage of sales reflects the improvements in

manufacturing efficiencies and the reduction of direct costs as a result of the

extensive restructuring initiatives in our UK manufacturing operations. The UK

manufacturing reorganization program, initiated in the last quarter of 2005 and

continued in the second and subsequent quarters of Fiscal 2006 with the

announcement of the closure of our manufacturing site at Wednesbury in the UK,

the relocation of the UK central warehouse to the Atlas site in Sheffield and

the cessation of certain manufacturing activities in the UK magnetics division

has had, and will have, a beneficial effect on margins. Own-manufactured product

is being progressively replaced with factored items sourced from overseas

thereby reducing costs and increasing profitability.

We will continue to 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. Improvements in manufacturing

efficiency and the reduction of direct costs continue to be the focus of

management as a means to improve competitiveness in new and existing markets.

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 since the trading

issues crystallized by the weakening value of the dollar are currently faced by

many other UK companies with material export sales interests.

EXPENSES

Selling, general and administrative (SG&A) expenses increased by $0.63 million

(6.67%) from $9.30 million in the quarter ended March 31, 2006 to $9.93 million

in the quarter ended March 31, 2007. In the six months ended March 3, 2007 costs

of $19.69 million have increased by $1.27 million (6.89%) from $18.42 million in

the six months to March 2006.

                                       46

E-48

The principal reasons for the movements are as follows:

                                                   Increase over Prior Year

                                              Quarter ended     Six months ended

                                                March 31,           March 31,

                                                  2007                2007

                                                   $m                  $m

a) Impact of movements in average

   US$/sterling cross rates in the period          1.04               1.85

b) Increased Bowers Shanghai 2007 costs .          0.08               0.20

c) Increased UK distribution costs ......          0.13               0.24

d) Inflationary increases ...............          0.22               0.44

e) Decreased US head office costs .......         (0.07)             (0.08)

f) Other net decreases ..................         (0.77)             (1.38)

                                                  -----              -----

Total net increase in SG&A expenses .....          0.63               1.27

                                                  -----              -----

GAIN ON SALE OF LAND AND BUILDINGS

The credit of $0.22 million in the quarter to March 31, 2007 represents the

sale, on March 27, 2007, of land at the company's Atlas site in Sheffield,

England that was surplus to current requirements. The net credit of $0.31

million in the six month period relates to the gain on the sale of the Atlas

site referred to above together with a credit of $0.9 million in relation to the

deferred element of the gain arising on the sale, in July 2006, of the land and

buildings at the Company's UK manufacturing site Wednesbury.

MANUFACTURING AND OTHER REORGANIZATION COSTS

A net charge of $0.08 million was incurred in the three month period to March

31, 2007 compared to a $1.23 million charge in the previous year. Cumulatively,

to March 31, 2007, a $0.10 million charge was incurred compared to $1.23 million

in the previous year.

On January 25, 2006, the Company announced the closure of the remaining element

of its manufacturing site at Wednesbury, England. The closure and relocation of

the Wednesbury facility was completed by November 30, 2006 and the costs for

this exercise of $1.23 million, including employee severance payments, site

closure expenses, factory reorganization expenses were provided for in the

quarter to March 31, 2006. However, costs of $0.01million, including that

element of employee severance costs relating to the payment of loyalty bonuses,

have been expensed to the profit and loss account in the Quarter to December

2006.

Additionally, in the quarter to September 30, 2006, the Company's UK subsidiary,

Eclipse Magnetics Limited, announced the cessation of certain of its

manufacturing activities and its relocation to the Atlas site in Sheffield,

England. While provision was made for this move at September 30, 2006, further

provisions of $0.08 have been made in the three months to March 31, 2007,

principally in respect of increases in the amounts previously provided re empty

property rentals.

OTHER INCOME AND EXPENSES

Other income and expenses has moved from a net credit of $.08 million in Q2 of

2006 to a net credit of $0.13 million in Q2 of 2007. For the six month period

under review other income and expenses has moved from a net credit of $0.09

million in 2006 to a net credit of $0.18 in 2007.

The increase is primarily due to the inclusion of $0.08 million in Q2 of fiscal

2007 in respect of the Group's share of earnings in Ningbo Hightec Magnetic

Assemblies Co. Ltd., a joint venture company in which the company holds a 25%

stake.

                                       47

E-49

INCOME TAX

An income tax charge of $0.04 million arose in the quarter to March 31, 2007

compared to a charge of $0.1 million in the comparable period last year. For the

six months to March 31, 2007 there was a $0.09 million charge compared to a

$0.31 million credit in the comparable period last year.

Income taxes represented 7.59% of the profit before tax in the three months to

March 31, 2007 and 5.09% of the loss before tax in 2006. For the six months to

March 31, 2007 taxes represented 13.46% of the net loss before tax and 7.59% for

the comparable period last year.

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, the provision of valuation

allowances against potential deferred tax assets regarded as non-recoverable 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:

      i)    As a result of pre-tax losses in a number of the UK entities in the

            six months to March 2007 and the ongoing benefit of a tax deduction

            (spread over 4 years) in respect of the special contribution of $7.2

            million that was made to the Company Pension Plan in fiscal 2005,

            tax losses have been generated in certain of the UK companies.

            Valuation allowances of approximately $0.19 million have been

            applied to these losses as a recent history of losses and other

            factors has precluded the Company from demonstrating that it is more

            likely than not that the benefits of these operating loss carry

            forwards will be realized.

      ii)   Income within certain overseas subsidiaries within the Spear &

            Jackson Group is taxed at different rates from the effective rate.

            The typical local taxation rate suffered by the Company's non-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 debit of

            approximately $0.02 million.

      iii)  Permanent differences between accounting and taxable income as a

            result of non-deductible expenses have had the effect of increasing

            the taxation charge by $.0 9 million.

      iv)   In addition, the 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 income is envisaged in the short term and

            to which a valuation allowance has therefore been applied (tax

            impact $0.07 million).

      v)    The gain of $0.22 arising in the three months to March 31, 2007 on

            the sale of the Company's surplus land at its Atlas site, Sheffield,

            is not subject to taxation due to the availability of capital losses

            brought forward which have not been recognized within the deferred

            tax computation.

The majority of the Group's deferred tax asset relates to timing differences

originating in its UK subsidiaries. Such deferred tax balances have been

provided at 30%. Legislation currently awaiting government approval will reduce

the rate to 28% from April 2008 onwards. If this new tax legislation had been

formally enacted as of Mach 31, 2007, the effect on the Group's condensed

consolidated financial statements for the six months ended March 31, 2007 would

have been as follows:

      i)    The income tax provision would have been reduced by $165 resulting

            in an income tax benefit of $70.

      ii)   The deferred tax asset of $17,577 would reduce by $1,168 to $16,409.

      iii)  The net of tax minimum pension liability adjustment of $46,660 would

            increase by $1,333 to $47,993.

                                       48

E-50

INCOME (LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAXES

Our net income from continuing activities after income taxes in the three months

to March 31, 2007 was $0.55 million (2006: $2.06 million loss). In the six

months to March 31, 2007 the loss from continuing activities was $0.80 million

(2006: $3.73 million)

DISCONTINUED OPERATIONS

Discontinued operations in the results for the three and six month periods

ending to March 31, 2006 relate to the Metrology Division's Coventry Gauge

thread gauge measuring 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

its thread gauge measuring business located in the United Kingdom. The carrying

values of the assets relating to this entity were initially written down to

estimated fair value in the quarter ended March 31, 2005 and further write-downs

were made in the final quarter of fiscal 2005. On February 28, 2006, the Company

concluded the sale of these assets for a nominal consideration.

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".

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents amounted to $7.21 million at March 31, 2007 ($9.93

million at September 30, 2006), working capital (excluding deferred taxes)

totaled $33.10 million ($30.25 million at September 30, 2006) and our

stockholder's equity was $22.38 at March 31, 2007 ($21.84 million at September

31, 2006).

Net cash used in operating activities in the six month period ended March 31,

2007 was $2.97 million compared to $1.05 million in the six months ended March

31, 2006. This increase of $1.92 million primarily arises from:

   -  increase in trade working capital outflows of $2.21 million (361%)

   -  decrease in net inflows from other assets and liabilities (including

      taxation) of $2.74 million (95.93%)

   -  Reduction in net loss (adjusted for depreciation, gain on sale of land and

      buildings and deferred income taxes, etc) of $3.03 million (92.2%) as

      dealt with in the commentary on results, above.

The reasons for these trade working capital variances and movements in other

assets and liabilities are summarized below:

(a)   Trade working capital variances.

      The net decrease in cash inflows derived from decreases in trade working

      capital is as follows:

                                                   Note          $ million

      Decreased inventory inflows                  (i)             (2.00)

      Increased trade receivable outflows          (ii)            (0.49)

      Increased trade payable inflows              (iii)            0.28

                                                                   -----

                                                                   (2.21)

                                       49

E-51

i)    The inventory inflows for the six months to March 31, 2006 benefited from

      the rigorous inventory reduction program initiated within the UK hand and

      tool division at the beginning of fiscal 2006. By September 30, 2006,

      stock levels across most of the divisions had decreased, especially in

      those operations undergoing manufacturing reorganization programs, where

      lower inventory levels were achieved following the move to factored rather

      than own-manufactured product. As a result, therefore, stock reductions in

      the six months to March 31, 2007 were not as pronounced as in the previous

      period under review. In Eclipse Magnetics, however, where the

      reorganization plans were initiated at a later date, there have been

      significant stock reductions in the six month period to March 31, 2007.

ii)   The increase in trade receivable outflows is primarily due to the

      increased levels of export sales in February and March 2007 in certain of

      our operating divisions when compared to the same period last year. Such

      export sales have longer settlement terms For example, payment dates can

      range from 60 days to 90 days after date of invoice for export based

      customers, compared to 30 to 60 days for home based customers. The

      differing sales profiles can therefore have a significant impact on trade

      receivable levels when comparing one period to another.

iii)  Decreased trade payable outflows of $0.28 million mirror the inventory

      movements discussed in i), above, although the favorable variance has been

      diluted by increasing levels of purchases of factored goods from overseas

      suppliers on reduced settlement terms.

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

i)    The major contributory factor is the $1.7 million payment of severance and

      move costs associated with the UK manufacturing reorganization programs at

      the Wednesbury and Atlas sites and the Eclipse Magnetics division. In the

      six month period to March 31, 2007 $ 1.7 million had been defrayed. In the

      six-month period to March 31, 2006 although $0.5 million had been defrayed

      at that date in respect of the UK manufacturing reorganization program,

      this payment was offset, in cash flow terms, by an additional

      restructuring provision of $1.5 million that was made in respect of the

      closure of the Wednesbury site.

ii)   Reduced accrual levels at March 31, 2007 compared to March 31, 2006,

      especially in those restructured trading entities where creditors in

      respect of direct labor costs, previously accrued for in other creditors,

      have been replaced with accruals for factored/bought-in product, that are

      included within trade payables.

Cash used in investing activities in the six months to March 31, 2007 was $0.44

million compared to $0.82 million in 2006. The 2006 comparatives include a $0.23

million investment in Ningbo Hightec Magnetic Assemblies Co. Ltd., a joint

venture company in which the company holds a 25% stake. Additionally, the 2006

figures include higher capital expenditure levels including start up funding in

the Bowers Shanghai operation and new investment in the Bowers UK operations.

The 2007 expenditure mainly comprises the purchase of new computer hardware at

the UK operations Head Quarters at the Atlas site in Sheffield. The six months

to March 31, 2007 also includes an inflow of $294 relating to the sale proceeds

of land at the Atlas site, Sheffield, England.

There was no net cash provided by financing activities in the six month period

to March 31, 2007 compared to $0.68 million in the comparable period last year.

The 2006 figure represents the utilization of the UK bank facility to meet

cyclical trading demands in the UK, increased pension plan contributions and the

payment of restructuring costs associated with the manufacturing reorganization

program. There has been no similar utilization of the UK bank overdraft facility

in the six months to March 31, 2007.

BANK FACILITIES

The UK subsidiaries of Spear & Jackson plc and Bowers Group plc maintain a line

of credit of $8.83 million. This is secured by fixed and floating charges on the

assets and undertakings of these businesses. Of the total facility, $5.88

million relates to bank overdrafts and $2.95 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 March 31, 2007 and September 30,

2006 the company had $nil outstanding under the overdraft line and at March 31,

2007 $0.04 million in outstanding letters of credit (September 30, 2006: $0.6

million).

                                       50

E-52

The French and Australian subsidiaries of Spear & Jackson plc maintain

short-term credit facilities of $2.86 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 both March 31, 2007 and September 30, 2006. $0.22 million of

letters of credit and bills were outstanding under these facilities at March 31,

2007 (September 30, 2006: $0.5 million).

The UK facilities were renewed in December 2006, the Australian facilities were

renewed in October 2006 and the French facilities fall for renewal at various

dates in 2007. 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 March

31, 2007 the extent of this guarantee relating to gross bank overdrafts was

$23.43 million (September 30, 2006 $21.6 million). The overall pooled balance of

the bank accounts within the pool at March 31, 2007 was net cash in hand balance

of $3.56 million (September 30, 2005 $5.4 million).

The bank overdraft and other facilities of Spear & Jackson Australia Pty.

Limited have been guaranteed by its immediate parent, James Neill Holdings

Limited and the bank overdraft and other facilities of Spear & Jackson France SA

have been guaranteed by Spear & Jackson plc.

Historically, 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.

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:

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.

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

The Company makes a range of contractual obligations in the ordinary course of

business. The following table summarizes the Company's principal obligations at

March 31, 2007:

                             Total Amount       Payments due by period ($m)

                             Committed      1 year     1-3      4-5      5 years

Contractual obligation       ($m)           or less    years    years    or more

Capital lease obligations    1.5            0.6        0.8      0.1      -

Operating leases

(note a)                     5.5            1.1        1.8      1.3      1.3

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

                             7.0            1.7        2.6      1.4      1.3

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

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

      operating leases.

                                       51

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(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, 2006

      the Company paid $3.4 million into the plan. With regard to the year ended

      September 30, 2007, in the ten month period to July 31, 2007 the level of

      contributions will be approximately $3.1 million. Contributions after that

      date will be determined after consultation between the Company, the

      actuary and the pension plan trustees. Following the introduction of new

      UK pension legislation it is anticipated that, post July 31, 2007, Company

      contributions will increase but the amount of such increase will only be

      established once the Plan's triennial valuation at April 5, 2007 is

      completed by the Plan actuary and discussions between the Company and the

      Plan Trustees are concluded.

(c)   As at March 31, 2007 the Company had letters of credit of $0.26 million

      outstanding, which are secured by the UK and Australian credit facilities.

At March 31, 2007 the Company had no material off-balance sheet arrangements

other than the non-debt obligations described in contractual obligations above.

OUTLOOK

We anticipate that an operating profit (before the inclusion of FAS 87 pension

charges) of approximately $1.4 million will be recorded in Quarter 3 of fiscal

2007. After taking into account quarterly pension charges of $2.1 million an

operating loss is forecast for Quarter 3. This result is dependant upon current

forecast sales levels being realized with no significant sales revenue either

being lost or being deferred into future quarters and no dilution of margins.

The trading result for the year is still anticipated to be a loss, as all base

trading profits will be eliminated by the significant non-cash pension charge

calculated in accordance with FAS 87. The Company's actuaries anticipate that

the charge will be $8.0 million for fiscal 2007 compared to $8.4 million for

fiscal 2006. As a result of the level of pension charges, the Company also does

not anticipate returning a net profit after tax for fiscal 2007. Management will

consider all available operational strategies to mitigate the negative impact of

trading losses which arise as a result of these high pension costs.

As previously reported, during the later part of fiscal 2005 and during 2006 the

Company performed a detailed review of its UK manufacturing operations to

identify initiatives to combat declining sales performance and the increase in

low cost imports from Far Eastern markets. In January 2006, the Company

announced the closure of its Wednesbury manufacturing and distribution facility

and the relocation of the central UK warehousing facility to the Atlas site in

Sheffield, England. This was completed by the end of November 2006. In fiscal

2005 the Company had previously sold the excess element of its site and on July

27, 2006 the Company completed the sale of the remaining element of the

Wednesbury property.

In addition, in the third quarter of fiscal 2006, the Company announced the

cessation of certain manufacturing operations at both its Atlas site and the

Eclipse Magnetics UK facility in Sheffield. It was also announced that the

remaining elements of the Magnetics business would be transferred to the Atlas

Site. This reorganization was completed in December 2006.

The Wednesbury site closure, the Atlas reorganization and the Eclipse

restructuring and relocation represent a significant change to the shape and

structure of the UK business and it is therefore probable that, in the short

term, the cost savings that the reorganizations will deliver will be diluted

whilst new procedures and processes are being established. Nevertheless, the

results for the six month period ended March 31, 2007 showed an improvement in

the Company's gross margins over the comparable period in the prior year from

30.74% in 2006 to 34.43% in 2007 which demonstrates that the reorganization

initiatives are already impacting positively on the business.

Given the competitive markets in which we operate, we will continue to look at

further initiatives to rationalize underperforming areas of the business and to

monitor operational infrastructures in the United Kingdom, particularly overhead

costs, to ensure that these are as cost efficient as possible and at a level

appropriate to the needs of the business.

                                       52

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The Company's core UK hand and garden businesses continue to face challenging

trading conditions. The trends highlighted in Q1 of fiscal 2007 remain, with the

key considerations being soft demand in the UK retail sector, fierce competition

from cheap foreign imports and the increasing trend for multiple retailers to

buy and promote own label brands in preference to Company products. The

reorganization program referred to above was implemented to address these issues

and further strategies will be considered to further improve the Company's base

- line profitability.

As with the Company's UK hand and garden tool businesses, and despite strong

trading performances in Quarters 1 and 2, our Australasian and French

subsidiaries continue to experience difficult trading conditions because of flat

retail demand, the ongoing drought in Australia, increased levels of competition

from Far East imports, reduced consumer spending and the increasing trend of

retail groups to consolidate and to increase their promotional activity of house

brands in preference to company branded product.

To counteract such factors, the management of these operations has developed and

introduced a number of new and extended ranges and promotional programs. Going

forward it is anticipated that these ranges should deliver incremental sales and

margin growth. Additionally, overhead reduction programs are ongoing as

management continues to focus on the removal of all excess costs from the

businesses.

Within the Metrology division, the selling and distribution outlet in Maastricht

is now fully operational. In the future, this revenue and earnings growth will

be enhanced by the division's operation in Shanghai, China. In Q2 of fiscal

2007, a further $0.5 million of investment funding has been injected into the

business. These funds will be utilized in acquiring items of plant and

machinery, which will enable the company to set up its own manufacturing

facility. This manufacturing should be operational during the course of Q3

Looking forward, demand for our own manufactured metrology hand tools will

continue to face further pressure from low cost Far East imports. The Company

therefore recognizes the need to focus its UK manufacturing sites on producing

more high technology products and measuring solutions. New products are the key

drivers for growth and several new ranges are due to be launched during the

remainder of fiscal 2007.

We anticipate that our businesses will face the issues of increased costs and

margin erosion as a result of raw material, fuel and other utility price

increases, interest rate increases, the $8.0 million FAS 87 pension charge and a

weak dollar. These factors will again put pressure on our margins and overhead

costs. Wherever possible, these increases will be passed on though sales price

increases or their adverse effects will be mitigated by cost reductions or the

implementation of earning enhancing strategies.

Any strengthening of the US dollar would impact favorably on the business, as

this would ease the pressure on margins and increase our competitiveness.

Current trends, however, indicate no end to a continued weakening which will

place additional pressure on our sales into a number of our US$ denominated

export markets.

In the forthcoming months we will continue to focus on improving cash

generation. In the first half of fiscal 2007 significant costs have been

defrayed in relation to the various restructuring initiatives. These costs have

been funded from existing core UK bank facilities. Further funds have also been

utilized to finance the next stage of the development of the Shanghai business

through the set up of its own manufacturing facility. The Company has commenced

negotiations with the trustees of the pension plan to determine the level of

future employer cash contributions that will become effective in Q4. The

contributions will be calculated in accordance with new UK pension legislation

and after discussions with the Plan trustees. The new contribution rate will not

be known until after the Plan's triennial valuation has been completed by the

Plan actuary and discussions between the Company and the Trustees are concluded.

It is likely, however, that pension payments will increase from July 2007.

To restrict the pressure that this expenditure will have on the Company's bank

facilities, focus will be maintained on the strict control of working capital

and the implementation of strategies to both increase Company profitability and

reduce costs.

                                       53

E-55

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; successful procurement of new and existing products at

favorable prices, 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; continued

reorganization of our existing manufacturing and overhead bases so that they are

as cost efficient as possible; the successful development of our operations in

China and elsewhere; and the maximization of cash resources and the negotiation

of additional bank facilities, where required, so that we are able to fund new

initiatives and take advantage of market opportunities.

Much, however, will continue to depend on the level of retail demand in our UK,

French and Australasian markets. Softening demand and a further deterioration in

consumer confidence could significantly impact on our earnings levels in

subsequent periods.

The formal resolution of the SEC legal action in fiscal 2005 and the Class

Action Litigation will enable the Company to move forward with more certainty so

that both short and long term commercial strategies can be formulated and

implemented. The stability of the Company will be further enhanced by the

settlement of the derivative Action litigation. Additionally, the Court's

approval, on January 22, 2007, to the Corporate Monitor's request to be relieved

of his duties is another indication of the significant steps that the Company

has taken in restoring its financial and reputational standing since the

Monitor's original appointment in April 2004.

The sale of Jacuzzi Brands, Inc.'s 61.8% majority shareholding in Spear &

Jackson, Inc. to United Pacific Industries Limited ("UPI") on July 28, 2006

removed another area of uncertainty and has provided a platform for future

business growth. The development of detailed business strategies under our new

ownership structure is in its formative stages but potential synergies and areas

of specific market and commercial expertise, particularly in the Far Eastern

trading arena, have been identified which, going forward, are hoped to be of

benefit to both Spear & Jackson, Inc. and UPI.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The principal market risks to which the Company is exposed comprise interest and

exchange rate fluctuation, changes in commodity prices and credit risk.

INTEREST RATE RISK

The Company is exposed to interest rate changes primarily as a result of

interest payable on its bank borrowings, car finance arrangements classified as

finance leases and interest receivable on its cash deposits. At March 31, 2007

the Company had no borrowings in the form of overdrafts, finance lease

liabilities of $0.84 million and had cash and cash equivalents of approximately

$7.21 million. Given the current levels of borrowings and the amounts

outstanding under finance leases, 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 increase the Company's interest charge by $0.08 million.

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,

New Zealand and China. These operations transact business in the relevant local

currency and their financial statements are prepared in those currencies.

Translation of the balance sheets, income statements and cash flows of these

subsidiaries into US dollars is therefore impacted by changes in foreign

exchange rates.

                                       54

E-56

In the six months ended March 31, 2007 compared to the equivalent period in

2006, the change in exchange rates had the effect of increasing the Company's

consolidated sales by $4.58 million or 9.07%. Since most of the Company's

international operating expenses are also denominated in local currencies, the

change in exchange rates had the effect increasing operating expenses by $1.85

million for the six months ended March 31, 2007 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 March 31, 2007 the Company held

forward contracts to sell Australian and New Zealand dollars to buy

approximately $0.78 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 $0.08 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 March 31, 2007 the Company had made an allowance of $1.17 million in respect

of doubtful accounts which management believes is sufficient to cover all known

or expected debt non-recoveries.

ITEM 4.  CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures as defined in Rules

13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended

(the "Exchange Act") that are designed to ensure that information required to be

disclosed in its reports filed or submitted under the Exchange Act is processed,

recorded, summarized and reported within the time periods specified in the SEC's

rules and forms, and that such information is accumulated and communicated to

the Company's management, including the Company's Principal Administrative

Officer (PAO) and Chief Financial Officer (CFO), as appropriate, to allow for

timely decisions regarding required disclosure. In designing and evaluating the

disclosure controls and procedures, management recognizes that any controls and

procedures, no matter how well designed and operated, can provide only

reasonable assurance of achieving the desired control objectives, and management

is required to apply its judgment in evaluating the cost-benefit relationship of

possible controls and procedures.

                                       55

E-57

The Company carried out an evaluation, under the supervision and with the

participation of the Company's management, including the former acting Chief

Executive Officer (now Chairman and Managing Director of the Company's principal

UK operating subsidiaries), the PAO and CFO, of the effectiveness of the design

and operation of the Company's disclosure controls and procedures pursuant to

Exchange Act Rule 13a-15(e) as of the end of the period covered by this report.

Based upon that evaluation, the PAO and CFO concluded that the Company's

disclosure controls and procedures are effective in timely alerting them to

material information relating to the Company (including its consolidated

subsidiaries) required to be included in the Company's periodic SEC filings, and

management has concluded that the unaudited consolidated condensed financial

statements included in this Form 10-Q fairly present, in all material respects,

the Company's financial position, results of operations and cash flows for the

periods presented.

There has been no significant change in our internal control over financial

reporting that occurred during the period covered by this report that has

materially affected, or that is reasonably likely to materially affect our

internal control over financial reporting.

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

On April 15, 2004, the US Securities and Exchange Commission filed suit in the

U.S. District Court for the Southern District of Florida against the Company and

Mr. Dennis Crowley, its then current Chief Executive Officer/Chairman, among

others, alleging violations of the federal securities laws. Specifically with

regard to the Company, the SEC alleged that the Company violated the SEC's

registration, anti-fraud and reporting provisions. These allegations arise from

the alleged failure of Mr. Crowley to accurately report his ownership of the

Company's stock, and his alleged manipulation of the price of the Company's

stock through dissemination of false information, allowing him to profit from

sales of stock through nominee accounts. On May 10, 2004, the Company consented

to the entry of a preliminary injunction, without admitting or denying the

allegations of the SEC complaint. The SEC is continuing its investigation into

pension issues. The Company is offering its full cooperation.

As a further measure, the Court appointed a Corporate Monitor to oversee the

Company's operations. In addition to Mr. Crowley consenting to a preliminary

injunction the Court's order also temporarily barred Mr. Crowley from service as

an officer or director of a public company, and prohibited him from voting or

disposing of Company stock. Although Soneet Kapila has continued to serve as

Corporate Monitor for the Company, on January 10, 2007, he applied to the Court

to terminate the role of Corporate Monitor having determined that his function

was no longer necessary. On January 22, 2007, the Court entered the order

relieving the Corporate Monitor of his duties.

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, was elected to serve as

acting Chief Executive Officer. Following extensive settlement negotiations with

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 as well as

funds collected from co-defendants International Media Solutions, Inc., Yolanda

Velazquez and Kermit Silva who were not affiliated with the Company, to the

victims of their 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. No disgorgement or civil penalties were sought from, or ordered to

be paid by, the Company.

                                       56

E-58

Additionally, the Company entered into a Stock Purchase Agreement with PNC Tool

Holdings LLC ("PNC") and Mr. Crowley, the sole member of PNC. Under the Stock

Purchase Agreement, the Company acquired, for $100, and other good and valuable

consideration, 6,005,561 common shares of the Company held by PNC, which

represented approximately 51.1% of the outstanding common shares of the Company

at December 31, 2004, and which constituted 100% of the common stock held by

such entity. The parties also executed general releases in favor of each other

subject to the fulfillment of the conditions of the Stock Purchase Agreement.

The Stock Purchase Agreement was effected on April 8, 2005, following formal

approval by the SEC on February 10, 2005 and, on February 15, 2005 by the U.S.

District Court for the Southern District of Florida of the settlement of the

litigation captioned SEC v. Dennis Crowley, Spear & Jackson, Inc., International

Media Solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No:

04-80354-civ-Middlebrooks). The Stock Purchase Agreement was further conditioned

on, among other things, the disgorgement and civil penalty funds being paid by

Mr. Crowley. These monies have now been received and are being administered for

the benefit of the victims of the alleged fraud by a court appointed

administrator pursuant to the Fair Funds provision of the Sarbanes-Oxley Act of

2002.

With the return of the Spear & Jackson shares to the Company by PNC, the

stockholders of the Company had their percentage stock interest increase

correspondingly. Jacuzzi Brands, Inc. ("Jacuzzi"), which at this time was a

beneficial owner of 3,543,281 shares of common stock had its interest in the

Company increase to approximately 61.8% of the outstanding common stock.

Subsequent to the SEC action a number of class action lawsuits were initiated in

the U.S. District Court for the Southern District of Florida by Company

stockholders against the Company, Sherb & Co. LLP, the Company's former

independent auditor, and certain of the Company's directors and officers,

including Mr. Crowley, the Company's former Chief Executive Officer/Chairman,

and Mr. Fletcher, the Company's former CFO and current acting Chief Executive

Officer. These suits allege essentially the same claims as the SEC suit

discussed above.

These various class action suits were subsequently consolidated. Thereafter, the

defendants filed certain Motions to Dismiss with regard to the Complaint and on

October 19, 2005, the U.S. District Court for the Southern District of Florida

in Re Spear & Jackson Securities Litigation entered its Order regarding these

Motions. The Order denied the Company's motion as well as that of Mr. Crowley,

the former Chief Executive Officer of Spear & Jackson. The Court granted the

Motion to Dismiss on behalf of Mr. Fletcher, the Company's interim Chief

Executive Officer, and also granted the Motion to Dismiss on behalf of the

Company's former independent auditor, Sherb & Co., LLP. The class plaintiff has

filed an appeal regarding the trial court's decision to dismiss the case against

Sherb & Co., LLP, which appeal is presently pending. No appeal was filed with

respect to the decision to dismiss the case against Mr. Fletcher.

On July 7, 2006 the Company, Dennis Crowley and the Class Plaintiff reached a

Memorandum of Understanding ("MOU"), which confirmed that the plaintiffs, the

Company and Crowley in the class action had reached an agreement in principle

for the settlement of this litigation, subject to Court approval. According to

the terms of the MOU, the Company deposited the sum of $650,000 into a Qualified

Settlement Fund for disbursement to the Settlement Class pending approval of the

Court. Subsequent to this, Sherb & Co. also agreed to the terms of the

Settlement agreeing to contribute an additional $125,000.

On November 9, 2006, the Stipulation of Settlement was filed with the Court for

preliminary approval. On January 31, 2007, the Court entered its Order

Preliminarily Approving Settlement and Providing for Notice and Setting Class

Action Statutory Settlement Hearing. The Order, for purposes of the proposed

settlement, certified a "Settlement Class" of persons (with certain exceptions)

who purchased the Company's common stock between February 1, 2002 and April 15,

2004. The Order also approved as to form and content the Notice of Pendency and

Proposed Settlement of Class Action and Summary Notice. The Settlement Hearing

was set for May 11, 2007 at 11:30 a.m. at the West Palm Beach, Florida Federal

District Courthouse to determine whether the terms of the Settlement are fair,

just reasonable and adequate to the Settlement Class, and should be approved by

the Court; whether a final judgment should be entered dismissing the litigation;

whether the proposed plan of allocation should be approved; and to determine the

amount of fees and expenses to be awarded to plaintiffs' lead counsel. The Order

also appointed a claims administrator and provided for notice to those who

sought exclusion from the Settlement Class.

                                       57

E-59

On May 11, 2007, the U.S. District Court for the Southern District of Florida,

sitting in West Palm Beach Florida, heard the Plaintiff's motion for Final

Approval of the Class Action Settlement and Plan of Allocation, to which there

were no objectors or class members that opted out of, the settlement. On May 14,

2007, the Court signed the Final Judgment thus forever extinguishing all of the

class claims against the Company, and barring any claims for contribution by

third parties. The Final Judgment made clear that the settlement was not an

admission of wrongdoing or liability by the Company.

To facilitate the distribution of the funds from the class suit to the class

shareholders and keep administrative costs to a minimum, the SEC Claim's

Administrator applied to the Court on January 9, 2007 for permission to combine

the class action funds with the funds derived in the SEC litigation, and allow

for the SEC's Claim's Administrator to disburse the collective funds.

On September 6, 2005, the Company was served with a Shareholder Derivative

Complaint, Hapka v. Crowley, et al. Case No. CA005068, filed on June 1, 2004 in

the Circuit Court for Palm Beach County, Florida. The suit names the Company as

a nominal defendant, and former directors Robert Dinerman, William Fletcher and

John Harrington, in addition to Dennis Crowley and the Company's prior

independent auditors, Sherb & Co. LLP. 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 additionally 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.

Due to ongoing settlement discussions with the plaintiff's attorney, the Company

had not responded to the Complaint. In August 2006 the Company entered into a

settlement agreement with the plaintiff by agreeing to accept certain changes to

its corporate governance procedures and the payment of $70,000 in legal fees.

The settlement was filed with the Court in early November 2006, and if approved

by the Court, will result in a dismissal of the suit and release the Company and

the former director defendants Robert Dinerman, William Fletcher and John

Harrington. Dennis Crowley and Sherb & Co. continue as defendants in this suit.

On February 2, 2007, the Circuit Court entered a Preliminary Approval Order

preliminarily approving the partial settlement pursuant to the Stipulation of

Settlement between plaintiff and the Company, including its former directors

William Fletcher, John Harrington, and Robert Dinerman. The Court has set May

29, 2007 at 8a.m. at the West Palm Beach County Courthouse, for the final

Settlement Hearing to determine (i) whether the terms of the Partial Settlement

are fair, just reasonable and adequate to the derivative stockholders and to the

Company, and should be approved by the Court; (ii) whether a final judgment

should be entered dismissing the litigation and releasing the defendants Spear &

Jackson, as described in the Stipulation; and (iii) to determine the amount of

fees and expenses to be awarded to plaintiffs' counsel. The Order approved as to

form and contents the Notice of Partial Settlement and the mailing and

distribution process. The Order also provided for notice to those who sought

exclusion from the settlement.

There can be no assurance that the Courts will approve the terms of this

settlement.

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 6.  EXHIBITS

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.

                                       58

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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: May 15, 2007                     SPEAR & JACKSON, INC.

                                        By: /s/ Patrick J. Dyson

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

                                            Patrick J. Dyson

                                            Chairman, Director and

                                            Chief Financial Officer

                                            (Principal Executive Officer)

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: May 15, 2007                     By: /s/ Patrick J. Dyson

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

                                            Patrick J. Dyson

                                            Chairman, Director and

                                            Chief Financial Officer

                                            (Principal Executive Officer)

Dated: May 15, 2007                     By: /s/ Lewis Hon Ching Ho

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

                                            Lewis Hon Ching Ho

                                            Director and

                                            Chief Administrative Officer

                                            (Principal Administrative Officer)

                                       59

E-61

                                                                    Exhibit 31.1

        CERTIFICATION PURSUANT TO RULE 13a-14(a) or RULE 15d-14(a) OF THE

             SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO

                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Patrick J. Dyson, certify that:

1. I have reviewed this Quarterly report on Form 10-Q of Spear & Jackson, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a

   material fact or omit to state a material fact necessary to make the

   statements made, in light of the circumstances under which such statements

   were made, not misleading with respect to the period covered by this

   quarterly report; and

3. Based on my knowledge, the financial statements, and other financial

   information included in this report, fairly present in all material respects

   the financial condition, results of operations and cash flows of the

   registrant as of and for, the periods presented in this quarterly report.

4. The registrant's other certifying officer and I are responsible for

   establishing and maintaining disclosure controls and procedures (as defined

   in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

   a) Designed such disclosure controls and procedures, or caused such

      disclosure controls and procedures to be designed under our supervision,

      to ensure that material information relating to the registrant, including

      its consolidated subsidiaries, is made known to us by others within those

      entities, particularly during the period in which this report is being

      prepared;

   b) Evaluated the effectiveness of the registrant's disclosure controls and

      procedures and presented in this report our conclusions about the

      effectiveness of the disclosure controls and procedures, as of the end of

      the period covered by this report based on such evaluation; and

   c) Disclosed in this report any change in the registrant's internal control

      over financial reporting that occurred during the registrant's most recent

      fiscal quarter (the registrant's fourth fiscal quarter in the case of an

      annual report) that has materially affected, or is reasonably likely to

      materially affect, the registrant's internal control over financial

      reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our

   most recent evaluation of internal control over financial reporting, to the

   registrant's auditors and the audit committee of the registrant's board of

   directors (or persons performing the equivalent functions):

   a) All significant deficiencies and material weaknesses in the design or

      operation of internal control over financial reporting which are

      reasonably likely to adversely affect the registrant's ability to record,

      process, summarize and report financial information; and

   b) Any fraud, whether or not material, that involves management or other

      employees who have a significant role in the registrant's internal control

      over financial reporting.

/s/ Patrick J. Dyson

Chairman, Chief Financial Officer and Principal Executive Officer

Date: May 15, 2007

E-62

                                                                    Exhibit 31.2

        CERTIFICATION PURSUANT TO RULE 13a-14(a) or RULE 15d-14(a) OF THE

             SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO

                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lewis Hon Ching Ho, certify that:

1. I have reviewed this Quarterly report on Form 10-Q of Spear & Jackson, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a

   material fact or omit to state a material fact necessary to make the

   statements made, in light of the circumstances under which such statements

   were made, not misleading with respect to the period covered by this

   quarterly report; and

3. Based on my knowledge, the financial statements, and other financial

   information included in this report, fairly present in all material respects

   the financial condition, results of operations and cash flows of the

   registrant as of and for, the periods presented in this quarterly report.

4. The registrant's other certifying officer and I are responsible for

   establishing and maintaining disclosure controls and procedures (as defined

   in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

   a) Designed such disclosure controls and procedures, or caused such

      disclosure controls and procedures to be designed under our supervision,

      to ensure that material information relating to the registrant, including

      its consolidated subsidiaries, is made known to us by others within those

      entities, particularly during the period in which this report is being

      prepared;

   b) Evaluated the effectiveness of the registrant's disclosure controls and

      procedures and presented in this report our conclusions about the

      effectiveness of the disclosure controls and procedures, as of the end of

      the period covered by this report based on such evaluation; and

   c) Disclosed in this report any change in the registrant's internal control

      over financial reporting that occurred during the registrant's most recent

      fiscal quarter (the registrant's fourth fiscal quarter in the case of an

      annual report) that has materially affected, or is reasonably likely to

      materially affect, the registrant's internal control over financial

      reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our

   most recent evaluation of internal control over financial reporting, to the

   registrant's auditors and the audit committee of the registrant's board of

   directors (or persons performing the equivalent functions):

   a) All significant deficiencies and material weaknesses in the design or

      operation of internal control over financial reporting which are

      reasonably likely to adversely affect the registrant's ability to record,

      process, summarize and report financial information; and

   b) Any fraud, whether or not material, that involves management or other

      employees who have a significant role in the registrant's internal control

      over financial reporting.

/s/ Lewis Hon Ching Ho

Chief Administrative Officer

Date: May 15, 2007

E-63

                                                                    Exhibit 32.1

           CERTIFICATION PURSUANT TO 18 U.S.C. AS ADOPTED PURSUANT TO

                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Spear & Jackson, Inc. (the "Company") on

Form 10-Q for the period ended March 31, 2007 (the "Report"), I, Patrick J.

Dyson, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to

Section. 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my

knowledge:

1)    The Report fully complies with the requirements of Section 13(a) or 15(d)

      of the Securities Exchange Act of 1934; and

2)    The information contained in the Report fairly presents, in all material

      respects, the financial condition and result of operations of the Company.

/s/ Patrick J. Dyson

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

Patrick J. Dyson

Director and Principal Executive Officer

May 15, 2007

E-64

                                                                    Exhibit 32.2

           CERTIFICATION PURSUANT TO 18 U.S.C. AS ADOPTED PURSUANT TO

         SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

In connection with the Annual Report of Spear & Jackson, Inc. (the "Company") on

Form 10-Q for the period ended March 31, 2007 (the "Report"), I, Lewis Hon Ching

Ho, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to ss. 906

of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1)    The Report fully complies with the requirements of Section 13(a) or 15(d)

      of the Securities Exchange Act of 1934; and

2)    The information contained in the Report fairly presents, in all material

      respects, the financial condition and result of operations of the Company.

/s/ Lewis Hon Ching Ho

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

Lewis Hon Ching Ho

Chief Administrative Officer

May 15, 2007

E-65