<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                   FORM 10-KSB

(Mark One)
     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934.

For the fiscal year ended    DECEMBER 31, 2000
                          ------------------------------------

                                       OR
     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934.

For the transition period from                    to
                               ------------------    ------------------

                         Commission file number 0-22375
                                                -------

                         AMERICAN STONE INDUSTRIES, INC.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

                       DELAWARE                              13-3704099
-------------------------------------------------    --------------------------
            (State or Other Jurisdiction of               (I.R.S. Employer
            Incorporation or Organization)               (Identification No.)


          8705 Quarry Road, Amherst, Ohio                      44001
-------------------------------------------------    ------------------------
       (Address of Principal Executive Offices)             (Zip Code)

                                 (440) 986-4501
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

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

                                                      Name of Each Exchange
   Title of Each Class                                  On Which Registered
   -------------------                                 ---------------------

                N/A                                     N/A
   --------------------------------          --------------------------------

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

                     Common Stock, $.001 Par Value Per Share
--------------------------------------------------------------------------------
                                (Title of Class)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was

<PAGE>   2

required to file such reports), and (2) has been subject to such filing
requirements for past 90 days.

Yes  X        No
   ------

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

         Issuer's revenues for its most recent fiscal year:   $3,778,681

         The aggregate market value of the Common Stock held by non-affiliates
of the Registrant as of March 7, 2001 was approximately $4,281,771, computed on
the basis of the last reported sale price per share ($4.688) of such stock on
the Nasdaq Bulletin Board. For purposes of this information, shares of Common
Stock that were owned beneficially by executive officers, Directors and persons
who may be deemed to own 10% or more of the outstanding Common Stock were deemed
to be held by affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

         The number of shares of the Registrant's Common Stock outstanding as of
March 7, 2001 was 1,936,364.

                       DOCUMENTS INCORPORATED BY REFERENCE

Form 10-KSB Reference                              Documents
---------------------                              ---------

Part III (Items 9, 10, 11 and 12)      Portions of the Registrant's
                                       Definitive Proxy Statement to be
                                       used in connection with its Annual
                                       Meeting of Stockholders to be held
                                       on April 18, 2001.

         Except as otherwise stated, the information contained in this Form
10-KSB is as of December 31, 2000.


<PAGE>   3



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

General.

                  American Stone Industries, Inc. ("ASI" or the "Company") is a
holding company that conducts its business through its wholly-owned subsidiary,
American Stone Corporation ("ASC"). The Company quarries, purchases and sells
stone for use in the building construction industry. The Company produces two
types of natural stone: (1) dimensional stone, which is natural stone that is
cut to size as specified in architectural designs and is primarily used as
architectural accents to buildings, although dimensional stone is also used for
funeral monuments, landscape and ornamental objects; and (2) construction stone,
which is natural stone primarily used for road base, back fill and erosion
control.

                  The Company was incorporated in the State of Delaware on
November 11, 1992 as Viva Designs U.S.A., Inc. The Company at that time was a
distributor of a line of jewelry and fragrances. Beginning in 1994 and until a
business combination in August 1995, ASI was a distributor of medical equipment
in the United States. In conjunction with the 1995 business combination, the
medical equipment distributorship business was transferred to a related party.
On August 9, 1995, the Company changed its name to American Stone Industries,
Inc. Concurrent with the 1995 business combination, ASI became a holding company
that conducts business through ASC.

                  The Company acquired the operating assets of Cleveland
Quarries, L.P. in February 1996, and thereafter began operating the 145-year old
quarry situated near Amherst, Ohio known as the "Cleveland Sandstone Quarries"
(the "Cleveland Quarries"). Consisting of an estimated 300,000,000 cubic feet of
reserve deposits located on over 1,000 acres of property, management of the
Company ("Management") believes, based upon various industry reports and surveys
since the initial discovery in 1853, that the Cleveland Quarries are among the
World's largest sandstone quarries.

The Business.

                  The Company quarries, purchases and markets sandstone and
manages the operation of the Cleveland Quarries. The Cleveland Quarries produce
sandstone, which is known in the industry as "Berea Sandstone." For more than
100 years, sandstone from the Cleveland Quarries has been utilized throughout
Ohio, the United States and Canada in such products as the following:

                                       1
<PAGE>   4

<TABLE>
<CAPTION>
               Facility/Building                                  Location                             Date
               -----------------                                 -----------                          ------
<S>                                              <C>                                               <C>
The John Hancock Building                        Boston, Mass.  (U.S.A.)                               1948
U.S. Post Office                                 Cleveland, Ohio (U.S.A.)                              1934
Parliament Building                              Ottawa, Ontario (Canada)                              1865
                                                                                                  (rebuilt 1917)
City Hall                                        Buffalo, New York (U.S.A.)                            1930
U.S.  Bankruptcy Court                           Little Rock, Ark. (U.S.A.)                            1918
Oberlin College Campus                           Oberlin, Ohio (U.S.A.)                              1885-1943
Osgoode Hall -- Law courts of                    Toronto, Ontario (Canada)                             1857
Upper Canada
NHL Hockey Hall of Fame                          Toronto, Ontario (Canada)                             1885
County Courthouse                                Savannah, Ga. (U.S.A.)                                1889
St. James Cathedral                              Toronto, Ontario (Canada)                             1853
University of Pennsylvania                       Philadelphia, Penn. (U.S.A.)                        1874-1910
Oberlin College Science Building                 Oberlin, Ohio (U.S.A.)                                2001
</TABLE>

                  Berea Sandstone has been used in the construction of numerous
additional facilities over the past 100 years, including government buildings,
banks, churches and prestigious private residential dwellings throughout the
United States and Canada. One of the most current personal residences of note is
that of Mr. William Gates in Seattle, Washington.

Industry Structure.

                  All natural stone products go through several stages prior to
final consumption. The various stages can be defined as follows: (1) quarrying,
which is the extraction of large blocks of stone; (2) primary processing, which
involves sawing the large blocks into smaller blocks or large slabs; (3)
secondary processing, which is the conversion of smaller blocks or slabs into
finished product; and (4) installation, which involves assembling and installing
finished product. The Company owns and operates its own quarries. The Company is
also a primary processor, as it owns and operates its own slabbing mills. In
addition, the Company has its own secondary processing mill. All three processes
are performed at the Company's South Amherst location in Ohio.

             BLOCKS ARE TURNED                    BLOCKS ARE TURNED INTO
            INTO SLABS TO MAKE                    SMALLER BLOCKS TO MAKE
            ------------------                    ----------------------

                Table Tops                                Coping
                   Tile                                 Cut Stone
                Patio Stone                            Grindstones
               Garden Stone                              Curbing
                   Sills                              Building Stone
                Step Treads                             Breakwater
               House Ashlar                         Laboratory Samples
                                                     Landscape Pieces

                                       2
<PAGE>   5

                  Companies operate in diverse ways within the natural stone
industry. They are usually involved in more than one of these disciplines.
Companies operating at the ends of the process, (i.e., the quarrying and
installation) tend to locate geographically. Quarry operations locate where the
raw material is found and installers operate in the area in which the finished
product is to be installed. Primary processors often locate at or near the
quarries. For this reason, the same company is often involved in both the quarry
and primary processing segment. Similarly, secondary processors locate at or
near the installers' premises. Therefore, companies that do installation are
also usually capable of secondary processing. Management believes that few
companies operate in all segments of the industry.

                  The primary and secondary processing segments are the most
mechanized and therefore the most capital intensive. The machinery can be very
sophisticated and very expensive. There have been major advancements in quarry
technology, and these operations are also becoming very capital intensive. These
expenses have been a barrier to entry into these segments of the industry for
many and, for those that have failed to keep up, it has been a factor creating
adverse consequences.

                  This change is evidenced by the decline in the number of
full-service (primary and secondary) competitors in the domestic market. Most
new capital investment has occurred in Europe, India and China, with little
occurring in North America. American Stone believes that its investment in
high-tech equipment will enable the Company to compete domestically with both
domestic and foreign competitors.

                  Another important element in the cost of processing with
modern machinery has been access to a continuous source of fresh water. This
element will become increasingly more important as water jet technology emerges.
Through its various on-site wells, Management believes that the Company has
adequate access to a continuous source of fresh water.

Marketing Structure.

                  The market for dimensional stone products is served by many
more companies than those involved in production and installation. They include
government agencies, distributors, marketing agencies, architectural and
engineering firms and designers. The company that has the closest contact with
the final consumer is often most responsible for the sale of stone products.
These other companies are often more important to the stone producer than the
stone itself. The illustration below indicates how many layers are potentially
between the end-user and the companies involved in the four levels of the stone
industry. The additional layers between end-user and producer require a
sophisticated marketing department capable of dealing with these companies. The
marketing department may use in-house employees for estimating and drafting
functions or form strategic alliances with outside companies that perform these
functions.


                                       3
<PAGE>   6

                               QUARRY TO END-USER

                  ----------------   Quarry   ---------------
                 |                 -----------               |

        Secondary Processor                           Primary Processor
 --------------------------                           --------------------------
                 |                                            |
                  ---------------   Installer ----------------
                                   -----------

                       -----   General Contractor   ------
                      |      -----------------------      |

                  Architect                           Distributor
               --------------                       ---------------
                      |                                   |
                       ----------   Designer   -----------
                                  -------------
                                       |

                                Purchasing Agent
                              ---------------------
                                       |
                                    End-User
                                  -------------

         For the period from 1996 to 2000, the Company's annual production of
natural stone was as follows:

                  Raw Stone:
                  ---------                 (tons)

                  1996                       8,460
                  1997                       9,566
                  1998                      10,696
                  1999                      13,662
                  2000                      12,699



                                       4
<PAGE>   7

                  Management currently intends to target the following segments
after expanding the sales of its Berea Sandstone:

         Building Stone:
         ---------------

          -  Slabs       Ashlar          Landscaping
          -  Sills       Patio Stone     Tile
          -  Steps       Wallstone       Cutstone        Restoration (Cut Stone)

         Specialty Products:
         -------------------

          -  Cores (Oil & Gas Research)     Grindstones
          -  Breakwater Stone               Ornamental

Employees.

                  The Company has approximately 59 full-time employees, of which
about 51 are hourly. The average hourly wage of the quarry personnel is
approximately $12.50 per hour. The quarries are situated in geographic regions
that have a large labor pool, and Management does not believe that securing
additional labor will be difficult or expensive. In Management's opinion, the
Company has a positive relationship with its employees.

Competition.

                  The Company competes in the natural dimensional stone market.
More specifically, the Company competes against limestones and other sandstones.
The Company's two biggest competitors consist of Briar Hill Stone Co. (Glenmont,
OH -- about 50 employees) and Indiana Limestone Company (Bedford, IN -- about
200 employees). As a practical matter, when submitting proposals to provide
Berea Sandstone to larger commercial sites, the Company competes with quarries
throughout the United States and abroad.

                  The Company intends to compete within this environment
utilizing a strategy that embodies the following:

         -        Ownership of what Management believes to be one of the largest
                  sandstone reserves in the world, which provides the Company
                  with access to the raw material;

         -        Access to a large supply of fresh water through various
                  on-site wells, which will assist in the conversion to diamond
                  technology;

         -        A strategic geographic location from which the Company can
                  serve about 66% of the domestic United States market within a
                  500 mile radius from the quarries;

         -        Low cost of raw materials; and

         -        High quality, attributed to the skilled labor pool, and the
                  higher level of capital investment in equipment.

                                       5
<PAGE>   8

Marketing.

                  The marketing of the Company's products from Ohio is primarily
done through an in-house salaried sales staff. In addition, the Company is
represented by 32 distributors in 14 states and provinces who deal directly with
the end-user by purchasing products from the Company at discounted rates and
selling them to the end-user at a markup.

                  The Company's historical market has been the United States and
Canada. Within the United States, the Midwest and Northeast regions have
traditionally accounted for more than 80% of the sales in the United States. In
Canada, sales have occurred almost exclusively in the Provinces of Ontario,
Quebec and British Columbia. The Company's objective is to develop a world-wide
market with primary emphasis upon the warmer weather sections of the United
States. Costs of transportation become more relevant when the construction site
is more than 500 miles from the quarries.

Business Strategy.

                  The Company intends to expand its current market and financial
base through a business strategy that focuses on:

         -        Dedication to its core business, i.e., the Cleveland Quarries;

         -        Development of ancillary assets, i.e., the sale, lease or
                  joint venture of surplus or nonessential lands; and

         -        Selective acquisition of compatible assets or businesses.

Backlog.

                  As of December 31, 2000, the Company's backlog of orders was
$213,000, as compared to a backlog of $432,000 for the period ending December
31, 1999. The Company is careful not to generate too large of a backlog of
orders to assure that commitments can be fulfilled and to avoid supply problems.

                  In the opinion of Management, the decrease in the Company's
backlog is merely due to the seasonal effect of sales and decreased throughput
times made possible by previous investments.

Seasonality.

                  The Company's sales are cyclical in nature. Historically, the
Company's sales have been highest during the second and third quarters, which
usually account for more than 70% of the fiscal year's sales. The first quarter
typically has the lowest sales due to inclement weather in the Northern Ohio
region and the difficulty of operating a quarry in such an environment.

Intellectual Property/Proprietary Rights.

                  The Company owns intellectual property and does not license
any such rights to others. The Company copyrights its marketing materials, but
such copyrights are not deemed to have any significant value in the marketplace.

                                       6
<PAGE>   9

                  Except as noted above, the Company does not own or license any
proprietary rights.

Regulation.

                  The Company's operations are subject to a variety of statutes,
rules and regulations, which are applicable to any business operating in the
United States. These statutes, rules and regulations range from record keeping
(e.g., the duty to maintain tax-related records for specific time periods as
required by the Internal Revenue Code of 1986, as amended) to employment (e.g.,
the duty to comply with the Equal Employment Opportunity Act of 1972).

                  Due to its quarry operations, the Company is also subject to
certain more specific statutes, rules and regulations, the most significant of
which include:

         -        Mines Safety and Health Act ("MSHA"), which mandates certain
                  safety rules and regulations governing mining operations.

         -        Occupational Safety and Health Act of 1970 ("OSHA"), which
                  generally requires that the Company provide its employees with
                  a safe workplace.

         -        Resource Conservation and Recovery Act of 1976 ("RCRA"), which
                  prohibits the transportation and/or disposal of "hazardous
                  waste" except pursuant to certain standards.

         -        The Department of Transportation, which adopts regulations
                  governing the safe transportation of goods over interstate
                  highways.

                  In the opinion of Management, the Company is in compliance
with all applicable regulations. Material changes in these regulations or the
adoption of new regulations could have a material impact on the operations of
the Company.

Research and Development.

                  In the fiscal years ended December 31, 2000 and 1999, there
were no research and development expenses.

Methods Of Distribution And Costs Of Transportation.

                  All of the stone is shipped via flatbed truck. The current
trucking rate is approximately $0.15 per mile per load. This allows the Company
to ship to 2/3 of the population of the United States and Canada at an average
of $1.25 per cubic foot. Customers are generally charged for shipping. Customs
duties between Canada and the United States are minimal.

Material Developments.

                  The Company acquired ASC in August 1995. As a result of this
transaction, TMT Masonry, Ltd., the former parent of ASC, received shares
representing approximately fifty-five percent (55%) of the Company's outstanding
Common Stock, thereby effecting a change in control of the Company.

                                       7
<PAGE>   10

                  In February 1996, ASC purchased all inventories, real estate,
equipment, intangible assets, rights in leases, and all other operational items
of Cleveland Quarries, L.P., in exchange for cash, the assumption of certain
liabilities, and certain other consideration. The total purchase price was
$2,320,259. In negotiating this purchase price, Management took into
consideration, among other things: (1) the benefit to the Company of acquiring
title to the quarries owned by Cleveland Quarries, L.P.; (2) the potential
economic benefits to the Company of securing title to these assets, especially
the land and reserves of stone; and (3) the value of the assets to be acquired.
At the time of the transaction, the General Partner of Cleveland Quarries, L.P.
was Slate and Stone Corporation of America, Ltd., which held a 1.0% interest in
the limited partnership. The two limited partners were Walter Molnar (9.9%) and
ASC (89.1%).

                  In August 1996, the Company issued 400,000 shares of its
Common Stock, representing 25% of the Company's total voting power, to Roulston
Ventures Limited Partnership. The sale provided the Company with working capital
and access to a Board of Directors of sophisticated business people.

                  In September 1998, the Company issued 60,000 shares of its
Common Stock to Roulston Ventures Limited Partnership. The proceeds from the
sale of the shares were used to acquire new equipment for the Company.

                  In September 1999, the Company issued an 8% convertible
promissory note in the principal amount of $150,000 to Roulston Ventures Limited
Partnership. The note is convertible into 27,273 shares of Common Stock at $5.50
per share. The proceeds of the note were used to provide the Company with
additional working capital.

                  In November 1999, the Company closed its Toronto-based office
that was operated by its wholly owned subsidiary Tyrrell Stone Design, Ltd.
("Tyrrell"). Tyrrell provided design drawings to architects and stone processing
centers throughout North America and served as the Company's Canadian sales
office since it was acquired in February 1996. Management expects that the
closing of the office will reduce corporate overhead by more than $100,000
annually, and will not have a material impact on sales.

                  In June 2000, the Company issued 200,000 shares of its Common
Stock to Roulston Ventures Limited Partnership. The proceeds from the sale of
the shares were used to acquire new equipment, pay off debt, and improve the
overall cash position of the Company.

ITEM 2.  DESCRIPTION OF PROPERTY.

                  The Company owns two separate parcels of land in the Counties
of Lorain and Erie, Ohio. The property contains both dimensional and
construction stone. On the basis of the reserve estimates obtained by the
previous owner of Cleveland Quarries, L.P., Management has reached certain
conclusions regarding the Company's reserves.

                  From approximately 1960 to 1992 the reserves of Cleveland
Quarries, L.P. were estimated by the then owner (Stancorp), which drilled
samples of Berea Sandstone on the Company-owned properties. The volume of Berea
Sandstone has been estimated on the basis of the length, width and depth of
quarry holes. There are currently more than 600,000 square feet of exposed
quarry face. At this time, the quarry is more than 60 feet deep and 120 feet in
length. In 1996, one section (360' x 120') was prepared for finishing and this
section is expected to last about eight years at current projected sales rates.
Based upon the exposed quarry face and the depth of Berea Sandstone as evidenced
by quarry holes, Management estimates that the total

                                       8
<PAGE>   11

reserves are adequate to meet the needs of the Company for more than 100 years
at current projected sales rates.

                  In summary, Management projects that the property has a total
estimated dimensional stone reserve of 336 million cubic feet. In fiscal 2000,
the Company extracted 177,600 cubic feet of dimensional stone and sold 97,300
cubic feet. In fiscal 1999, the Company extracted 190,000 cubic feet of
dimensional stone and sold 85,000 cubic feet. In fiscal 1998, the Company
extracted 149,601 cubic feet of dimensional stone and sold 85,655 cubic feet.

                  The parcel in Erie County is in Birmingham Township, and is
strictly a quarry operation (the "Birmingham Quarry"). Dimensional stone reserve
estimates were projected to be 126 million cubic feet based on a deposit of at
least 30 acres indicated by topographic studies. The Birmingham Quarry yields
both Gray and Buff Sandstone with a higher compressive strength than that of the
quarries located in the main parcel. The main parcel is in Amherst Township
(Lorain County) and is the site of numerous quarries, the mills and offices. The
main parcel fronts the Ohio State Turnpike approximately twenty minutes west of
downtown Cleveland. The Company estimates that the property contains 210 million
cubic feet of dimensional stone and 21 million cubic feet of construction stone.
Many of the quarries on this section of land are currently unused and dormant.
The same stone that has been used in thousands of applications around the
country is still available for renovation, restoration and expansion of existing
buildings. All of the properties have permits for use as quarries and all
permits are in good standing. The Birmingham property also contains a supply of
natural gas, which is leased to a local utility.

The following is a list of the main buildings on the property:

<TABLE>
<CAPTION>
         MILL #                 SIZE S.F.              YEAR BUILT             CURRENT USE            FUTURE USE
         ------                 ---------              ----------             -----------            ----------

<S>                           <C>                   <C>                      <C>                   <C>
           3                     18,175                   1946                Processing             Processing

           6                     45,000                   1923                  Storage              Processing

           8                     44,165                   1926                Gang Sawing            Gang Sawing

   Office & Showroom             11,305                   1900             Office & Showroom      Office & Showroom
</TABLE>

                  The two parcels in Ohio are subject to a mortgage between the
Company and FirstMerit Bank, N.A. in the principal amount of $1,278,000 to
secure borrowings under a line of credit of up to $750,000 and promissory notes
in the amount of $528,000.

Equipment.

                  The Company's equipment consists of saws, cranes, trucks, tow
motors, grinders, stone cutting equipment and haul tools. Older equipment is in
the process of being overhauled, upgraded and replaced with new equipment.

ITEM 3.  LEGAL PROCEEDINGS.

                  None.

                                       9
<PAGE>   12

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

                  None.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT*

                  The executive officers are elected each year and serve at the
pleasure of the Board of Directors. The following is a list of the executive
officers of the Company as of March 7, 2001.

<TABLE>
<CAPTION>
            NAME                AGE                                       POSITION
            ----                ---                                       --------

<S>                              <C>    <C>
Enzo Costantino                  39     Enzo  Costantino  has served as  Treasurer  of the  Company and as a Director
                                        since 1996.  Mr.  Costantino  has been  Secretary  and Treasurer of TMT since
                                        1994.  Prior to joining  TMT, Mr.  Costantino  was the  controller  of Daicon
                                        Contractors,  a general contractor located in Toronto,  Ontario, from 1989 to
                                        1994, and the cost accounting  manager for Canada  Packers,  a meat processor
                                        located in Toronto, Ontario, from 1983 to 1989.

Michael J. Meier                 46     Michael J. Meier has served as  Secretary  of the  Company  and as a Director
                                        since 1996.  He has been  Director of Finance  and IT,  Specialty  Resins and
                                        Formulators,  of PolyOne  Corporation  (NYSE:  POL)  since May 1999.  PolyOne
                                        Corporation,  with  revenues  in excess of $3  billion,  is an  international
                                        polymer  services  company with  headquarters  in Cleveland,  Ohio. Mr. Meier
                                        was  previously  Vice  President,  Chief  Financial  Officer,  Secretary  and
                                        Treasurer  of  Defiance,  Inc.  (Nasdaq  NM:  DEFI) from 1990 until  February
                                        1999.   Defiance,   a  supplier  of  products   and   services  to  the  U.S.
                                        transportation  industry, was purchased by General Chemical Group Inc. (NYSE:
                                        GCG) in February 1999.

James M. Rallo                   52     James M. Rallo has served as  President  and Chief  Executive  Officer  since
                                        August 1999.  Since 1993,  Mr.  Rallo has been the owner of MQS  Engineering,
                                        Inc.,  a firm  engaged  in light  manufacturing.  Mr.  Rallo  has also been a
                                        manufacturing  engineering  consultant to several companies in the Cleveland,
                                        Ohio area.
</TABLE>

                  * The information under this Item 4A is furnished pursuant to
Instruction 3 to Item 401(b) of Regulation S-K.

                                     PART II

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

                  The Company's Common Stock is currently traded in the
over-the-counter market via the "Bulletin Board" maintained through the National
Association of Securities Dealers, Inc. The trading symbol of the Common Stock
is AMST. The following table shows the high and low daily closing prices for the
Company's Common Stock for each quarter of 2000 and 1999. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.

                                       10
<PAGE>   13

Year Ended December 31, 1999                      High               Low
----------------------------                      ----               ---

First Quarter................................    $7.13              $3.69

Second Quarter...............................     7.75              5.75

Third Quarter................................     9.25              5.25

Fourth Quarter...............................     6.63              5.00


Year Ended December 31, 2000                      High               Low
----------------------------                      ----               ---

First Quarter................................    $6.63              $4.00

Second Quarter...............................     6.25              5.25

Third Quarter................................     6.25              4.00

Fourth Quarter...............................     5.00              3.63

                  As of March 7, 2001, there were approximately 93 holders of
record of the Common Stock of the Company. The Company has paid no dividends on
the Common Stock and it is the Company's present intention to reinvest earnings
internally to finance the expansion of its business. The Company's ability to
pay dividends is limited by the Company's credit facility and is directly
related to the Company's future profitability and need for capital to support
growth.

ITEM 6  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

         Set forth below is a discussion of the principal factors that affected
the Company's results of operations during each of the two most recent fiscal
periods. This discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the notes thereto included elsewhere in
this report.

COMPANY OVERVIEW
----------------

TOTAL REVENUE

         Total revenue increased by $338,883, or by 10%, from $3,439,798 in 1999
to $3,778,681 in 2000. The increase was due to a major architectural stone
project along with higher sales of petroleum cores and slab, patio stone, stone
treads and other standard products.

GROSS PROFIT

         Gross profit increased 65% from $685,374 in 1999 to $1,130,816 in 2000.
Gross margin as a percentage of sales increased from 20% in 1999 to 30% in 2000.
The increase was due to manufacturing efficiencies, better pricing and a focus
on higher-margin business.

                                       11
<PAGE>   14

LOSS FROM CLOSING TYRRELL STONE DESIGN LTD.

         The Company incurred a one-time non-cash charge of $140,895 in the
fourth quarter of 1999 to account for the closing of its Canadian subsidiary,
Tyrrell Stone Design Ltd. The charge primarily consisted of the write-off of
goodwill.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses decreased by $9,925 to
$841,928 in 2000 from $851,853 in 1999. As a percentage of total revenue,
selling, general and administrative expenses decreased to 22% in 2000 from 25%
in 1999. The decrease was due in large part to the effect of closing the
Canadian subsidiary.

OTHER INCOME (EXPENSE)

         Interest expense increased from $106,268 in 1999 to $127,281 in 2000
due to increased borrowings late in 1999 for new equipment and working capital.
Interest income increased from $2,308 to $12,710 as a result of proceeds from a
private placement equity investment negotiated in June 2000, which increased
cash and cash equivalents.

INCOME

         The Company had net income of $174,317 in 2000 compared with a net loss
of $411,334 in 1999. The loss in 1999, which included the non-cash charge of
$140,895 for closing the Company's Canadian subsidiary, was due primarily to
inadequate pricing, high operating costs and cash management difficulties.

CASH FLOW AND LIQUIDITY

         The Company's primary source of liquidity in 1999 and 2000 was its bank
line of credit providing maximum borrowings of $750,000, with interest payable
monthly at a rate equivalent to the bank's prime lending rate (9.50% and 8.50%
at December 31, 2000 and 1999, respectively). Borrowings under the credit
agreement are secured by substantially all real estate, inventory and equipment
of the Company. The outstanding balances at December 31, 2000 and 1999 were
$444,684 and $668,720, respectively.

         In February 2001, the Company refinanced its bank line of credit. The
new credit agreement provides for maximum borrowings of $500,000, with interest
payable monthly at a rate equivalent to the bank's prime lending rate.
Borrowings under the agreement are secured by substantially all real estate,
inventory and equipment of the Company.

         In June 2000, the Company negotiated private placement equity
investment of $900,000 from Roulston Venture Capital, L.P. The Partnership
acquired 200,000 shares of newly issued common stock at $4.50 per share, the
then-current market price, in a transaction approved by a majority of the
independent members of the Board. Earlier, in September 1999, the Company
negotiated a $150,000 loan from the Partnership in the form of an 8% note
convertible to 27,273 shares of common stock at $5.50 per share, the
then-current market price.

         Management believes that the Company does not currently have, and is
not expected to have within the next 12 calendar months, any cash flow or
liquidity problems. Management

                                       12
<PAGE>   15

believes that the Company is not in default with respect to any note, loan,
lease or other indebtedness or financing agreement. The Company is not subject
to any unsatisfied judgments, liens or settlement obligations.

NEW SUBSIDIARY

         Subsequent to year-end 2000, the Company created a wholly owned
subsidiary of the Company known as Amherst Stone at Cleveland Quarries, Inc.
("Amherst Stone"). Amherst Stone will act as a full-time distributor of
Cleveland Quarries' sandstone products and other natural stone products and
other natural stone products to northern Ohio builders and landscapers.

FORWARD-LOOKING STATEMENTS
--------------------------

         The Company is making this statement in order to satisfy the "safe
harbor" provisions contained in the Private Securities Litigation Reform Act of
1995. This report includes forward-looking statements relating to the business
of the Company. Forward-looking statements contained herein or in other
statements made by the Company are made based on Management's expectations and
beliefs concerning future events impacting the Company. These events are subject
to uncertainties and factors relating to the Company's operations and business
environment, all of which are difficult to predict and many of which are beyond
the control of the Company. Such unexpected developments could cause actual
results of the Company to differ materially from those matters expressed in or
implied by forward-looking statements. The Company believes that the following
factors, among others, could affect its future performance and cause actual
results of the Company to differ materially from those expressed in or implied
by forward-looking statements made by or on behalf of the Company: (a) general
economic, business and market conditions; (b) competition; (c) the success of
advertising and promotional efforts; (d) trends within the building construction
industry; (e) the existence or absence of adverse publicity; (f) changes in
relationships with the Company's major customers or in the financial condition
of those customers; and (g) the adequacy of the Company's financial resources
and the availability and terms of any additional capital.

ITEM 7.  FINANCIAL STATEMENTS.

                  The following pages contain the Financial Statements and
Supplementary Data as specified by Item 7 of Form 10-KSB.



                                       13
<PAGE>   16

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
of American Stone Industries, Inc. and Subsidiaries
Amherst, Ohio


        We have audited the consolidated balance sheets of American Stone
Industries, Inc. and Subsidiaries as of December 31, 2000 and 1999, and the
related statements of operations, stockholders' equity, and cash flows for the
years then ended. 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 audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American Stone
Industries, Inc. and Subsidiaries as of December 31, 2000 and 1999, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.


Hobe & Lucas






Independence, Ohio
February 8, 2001



                                      F-1
<PAGE>   17

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                           2000                   1999
                                                                                       -----------            --------
<S>                                                                                  <C>                 <C>
Current Assets
    Cash and cash equivalents                                                        $  232,972          $      50,378
    Accounts receivable, net of allowance for
        doubtful accounts of $55,322 - 2000 and
        $3,870 - 1999                                                                   677,020                683,784
    Prepaid expenses                                                                     32,221                 54,876
    Inventory                                                                         1,011,973                901,101
                                                                                     ----------          -------------
             Total current assets                                                     1,954,186              1,690,139
                                                                                     ----------           ------------

Property, Plant and Equipment, Net                                                    3,351,817              3,001,369
                                                                                     ----------           ------------

Other Assets
    Intangibles, Net of amortization                                                     38,680                 41,656
    Restricted cash                                                                      12,916                 12,276
    Deposits                                                                              1,000                  1,000
                                                                                   -------------        ---------------
                                                                                         52,596                 54,932
                                                                                   ------------         --------------
                                                                                     $5,358,599            $ 4,746,440
                                                                                     ==========            ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
    Bank line of credit                                                             $   444,684           $    668,720
    Current portion of notes payable                                                    447,280                413,338
    Accounts payable                                                                    271,765                303,740
    Accrued and withheld payroll
        and payroll taxes                                                                98,451                 27,281
    Accrued liabilities                                                                  65,658                163,426
                                                                                  -------------          -------------
             Total Current Liabilities                                                1,327,838              1,576,505
                                                                                    -----------           ------------

Long Term Liabilities
    Notes payable                                                                       268,375                527,366
                                                                                   ------------          -------------

Stockholders' equity
    Common stock, $.001 par value
        20 million shares authorized
        1,936,364 - 2000 and 1,723,364 - 1999
        shares issued and outstanding                                                     1,936                  1,723
    Additional paid-in capital                                                        4,819,738              3,874,451
    Accumulated deficit                                                              (1,059,288)            (1,233,605)
                                                                                    -----------           ------------
                                                                                      3,762,386              2,642,569
                                                                                    -----------           ------------
                                                                                    $ 5,358,599            $ 4,746,440
                                                                                    ===========            ===========
</TABLE>

                 See notes to consolidated financial statements


                                      F-2
<PAGE>   18

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
                 ----------------------------------------------


<TABLE>
<CAPTION>
                                                                                           2000                   1999
                                                                                       -----------            --------
<S>                                                                                  <C>                    <C>
Sales                                                                                $3,778,681             $3,439,798


Cost of goods sold                                                                    2,647,865              2,754,424
                                                                                     ----------            -----------


Gross profit                                                                          1,130,816                685,374
                                                                                     ----------           ------------


Loss from closing Tyrrell Stone Design, Ltd.                                               -                   140,895
Selling and administrative expenses                                                     841,928                851,853
                                                                                    -----------           ------------
                                                                                        841,928                992,748
                                                                                    -----------           ------------


Income (loss) from operations                                                           288,888               (307,374)
                                                                                    -----------           ------------


Other Income/(Expense)
    Interest income                                                                      12,710                  2,308
    Interest expense                                                                   (127,281)              (106,268)
                                                                                    -----------           ------------
                                                                                       (114,571)              (103,960)
                                                                                    -----------           ------------


Income (loss) before provision for income taxes                                         174,317               (411,334)


Provision for income taxes                                                                 -                         -
                                                                                    -----------           ------------


Net income (loss)                                                                   $   174,317            $  (411,334)
                                                                                    ===========            ===========


Net Income/(Loss) per Common Share
    Basic                                                                           $       .10            $     (.24)
                                                                                    ===========            ===========
    Diluted                                                                         $       .09            $     (.24)
                                                                                    ===========            ===========
</TABLE>


                 See notes to consolidated financial statements



                                      F-3
<PAGE>   19

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 -----------------------------------------------
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
                 ----------------------------------------------


<TABLE>
<CAPTION>
                                                  COMMON STOCK
                                            -----------------------------             Additional          Total
                                         Issued                   Paid-In            Accumulated       Stockholders'
                                         Shares   Par Value       Capital              Deficit              Equity
                                       ---------------------    -----------         ------------        ------------
<S>                                  <C>           <C>        <C>                <C>                   <C>
Balance, January 1, 1999                1,716,364     $1,716     $3,849,958         $   (822,271)         $3,029,403

Shares issued in stock
    option exercise                         7,000          7         24,493                    -              24,500

Net income                                      -          -              -             (411,334)           (411,334)
                                      -----------     ------     ----------          -----------          ----------

Balance, December 31, 1999              1,723,364     $1,723     $3,874,451          $(1,233,605)         $2,642,569

Shares issued in stock
    option exercise                        13,000         13         45,487                    -              45,500

Shares issued                             200,000        200        899,800                    -             900,000

Net income                                      -          -              -              174,317             174,317
                                      -----------     ------     ----------          -----------          ----------

Balance, December 31, 2000              1,936,364     $1,936     $4,819,738          $(1,059,288)         $3,762,386
                                      ===========     ======     ==========          ===========          ==========
</TABLE>


                 See notes to consolidated financial statements

                                      F-4
<PAGE>   20


                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
                 ----------------------------------------------

<TABLE>
<CAPTION>
                                                                                     2000                      1999
                                                                                   -----------               --------

<S>                                                                                <C>                      <C>
Net Income                                                                         $ 174,317                $(411,334)
                                                                                   ---------                 ---------

Adjustments to reconcile net income (loss) to net cash provided by (used in)
    operating activities:
       Depreciation, amortization and depletion                                      316,816                   278,370
       Loss from closing Tyrrell Stone Design                                           -                      140,895
       Gain on sale of equipment                                                     (25,000)                   (2,858)
       Changes in assets and liabilities:
       Decrease in accounts receivable                                                 6,764                   136,487
       (Increase) in inventory                                                      (110,872)                  (88,877)
       Decrease (Increase) in prepaid expenses                                        22,655                   (24,462)
       (Decrease) in payables and accrued liabilities                                (58,573)                  (98,788)
       Other, net                                                                       (640)                     (606)
                                                                                ------------             -------------
               Total Adjustments                                                     151,150                   340,161
                                                                                  ----------                ----------

           Net Cash Provided by (Used in) Operating
               Activities                                                            325,467                   (71,173)
                                                                                  ----------               -----------

Cash Flows from Investing Activities:
    Proceeds from sale of equipment                                                   25,000                     2,858
    Purchase of property, plant and equipment                                       (664,288)                 (621,401)
                                                                                   ---------                ----------

           Net Cash Used in Investing Activities                                    (639,288)                 (618,543)
                                                                                   ---------                ----------

Cash Flows from Financing Activities:
    Net borrowings under line of credit arrangements                               (224,036)                   218,720
    Proceeds from long term debt                                                      17,854                   554,658
    Repayment of long term debt                                                     (242,903)                 (254,726)
    Proceeds from issuance of common stock                                           945,500                    24,500
                                                                                  ----------               -----------

           Net Cash Provided by Financing Activities                                 496,415                   543,152
                                                                                  ----------                ----------

Net Increase (Decrease) in Cash and Cash Equivalents                                 182,594                  (146,564)

Cash and Cash Equivalents at Beginning of Year                                        50,378                   196,942
                                                                                 -----------                ----------

Cash and Cash Equivalents at End of Year                                           $ 232,972                $   50,378
                                                                                   =========                ==========

Supplemental Disclosure of Cash Flows
    Information:
       Interest paid                                                               $ 128,000                 $ 107,000
       Taxes paid                                                                  $       -                 $       -
</TABLE>

                 See notes to consolidated financial statements


                                      F-5
<PAGE>   21

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

       This summary of significant accounting policies of American Stone
Industries, Inc. and Subsidiaries, (hereinafter "ASI" or the "Company") is
presented to assist in understanding the financial statements. The financial
statements and notes are representations of the Company's management, which is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.

USE OF ESTIMATES

       The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.

BUSINESS ACTIVITY

       American Stone Industries, Inc. (a Delaware corporation) is a
publicly-held company whose stock is traded on the OTC Bulletin Board. American
Stone Industries, Inc. ("ASI") is a holding company that mines and sells stone
predominantly for the building stone market through its wholly owned subsidiary,
American Stone Corporation ("ASC"). ASC owns and operated the Cleveland Quarries
in Amherst, Ohio.

       During 1999, the Company closed its Canadian Subsidiary, Tyrrell Stone
Design, Ltd. ("Tyrrell"). All assets were either sold or transferred to the
Company and the investment in subsidiary written-off. The loss from closing this
subsidiary, consisting primarily of goodwill, amounted to $140,895.

       In January of 2001, the Company created a wholly-owned subsidiary, known
as Amherst Stone at Cleveland Quarries, Inc. (Amherst Stone) to act as a
distributor directly to northern Ohio builders and landscapers. The Company
intends Amherst Stone to act as a full-time supplier of Cleveland Quarries
sandstone and other natural stone products.

PROPERTY, PLANT AND EQUIPMENT - AT COST

       Property, plant and equipment at December 31, 2000 and 1999 consisted of:

                                                     2000              1999
                                                ------------      ------------
         Land                                     $  443,997       $   445,371
         Buildings and improvements                  981,208           843,789
         Equipment                                 2,487,528         2,204,884
         Computers                                    47,986            27,716
         Vehicle                                      11,000           11,000
         Construction in progress                    223,956                 -
                                                 -----------      ------------
                                                   4,195,675         3,532,760
         Less:  Accumulated depreciation             843,858           531,391
                                                 -----------      ------------
         Net property, plant and equipment        $3,351,817        $3,001,369
                                                  ==========      ============

                                      F-6
<PAGE>   22

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------------------

       Depletion is being calculated based on management's estimate of sandstone
reserves. There is no engineer's estimate available for such reserves. Depletion
amounted to $1,374 and $1,498 for the year ended December 31, 2000 and 1999,
respectively.

       The cost of depreciable property is being depreciated over the estimated
useful lives of the assets using the straight-line method for financial
reporting. Depreciation expense was $312,467 and $256,206 for the year ended
December 31, 2000 and 1999, respectively.

       Construction in progress for 2000 represents costs incurred to date for
the purchase and installation of sandblasting equipment and upgrades to the
production buildings.

       Routine maintenance and repairs are charged to operations when incurred.
Expenditures which materially increase value or extend lives are capitalized.

PRINCIPLES OF CONSOLIDATION

    The accompanying financial statements include the accounts of American Stone
Industries, Inc. and its wholly-owned subsidiary American Stone Corporation for
the year ended December 31, 2000 and American Stone Corporation and Tyrrell
Stone Design, Ltd. for the year ended December 31, 1999. All significant
intercompany transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

       For purposes of financial reporting, the Company considers all
highly-liquid debt instruments purchased with an original maturity date of three
months or less to be cash equivalents.

INTANGIBLES

       Goodwill is being amortized on the straight-line method over a twenty and
thirty year period. Other intangible assets, including trademarks are amortized
over their economic lives. Amortization expense for the years ended December 31,
2000 and 1999 were $2,976 and $2,976, respectively. At December 31, 2000 and
1999, intangibles are $38,680 and $41,656 net of accumulated amortization of
$15,604 and $12,628, respectively.


                                      F-7
<PAGE>   23

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------------------

CONCENTRATION OF CREDIT RISK

       Financial instruments, which potentially subject the Company to
concentration of credit risk, principally consist of accounts receivable. The
Company's policies do not require collateral to support customer accounts
receivables.

       The Company conducts a major portion of its business with certain
customers which accounted for more than ten percent of total revenues in 2000
and 1999. Sales to these customers were approximately $670,000 and $436,000 for
the years ended December 31, 2000 and 1999. The accounts receivable from these
customers were $70,000 and $119,397 as of December 31, 2000 and 1999,
respectively.

INCOME PER COMMON SHARE

       Income per common share is based on the weighted average number of shares
outstanding which was 1,831,350 and 1,716,652 for the years ended December 31,
2000 and 1999, respectively.

       The exercise of outstanding stock options would not result in material
dilution.

INVENTORY

       The inventories which consist of sandstone are stated at the lower of
first-in, first-out (FIFO) cost or market.

RESTRICTED CASH

       The Company's certificate of deposit is assigned to the Ohio Department
of Natural Resources Division of Reclamation.

NOTE 2 - STOCKHOLDERS' EQUITY
-----------------------------

       At December 31, 1998, the Company had outstanding stock options to an
officer totaling 25,000 shares at $5.00 per share which were awarded in
February, 1997 at the then fair market value of the shares. These options are
not part of the options plans adopted June 24, 1998 (Note 3). These options
expired in February, 2000. None of these options were exercised during 2000 or
1999.

                                      F-8
<PAGE>   24

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------


NOTE 2 - STOCKHOLDERS' EQUITY (CONTINUED)
-----------------------------------------

    On October 1, 1999, the Company signed an interest-only note with Roulston
Ventures Limited Partnership (RVLP) for $150,000. Repayment of principal to be
made on October 1, 2002. At any time up to the maturity date, RVLP has the right
to convert the debt into shares of common stock at $5.50 per share.

    On July 10, 2000, the Company issued 200,000 of common stock to Roulston
Venture Capital Limited Partnership in a private placement transaction for an
aggregate purchase price of $900,000, or $4.50 per share the then current market
price.

NOTE 3 - STOCK OPTION PLANS
---------------------------

       The Company maintains the 1998 Management Stock Option Plan (management
plan). Options granted under the management plan may be either incentive stock
options or non-statutory stock options. The options expire on the fifth
anniversary of the date of grant with remaining terms to be determined by the
sole discretion of a committee of members of the Company's Board of Directors.
The management plan provides that the Company may grant options (generally at
fair market value at the date of grant) for not more than 300,000 shares of
common stock to management employees. Options granted are generally exercisable
one year after the date of grant. At December 31, 2000, 10,000 options issued in
1999 at $5.00 and 10,000 options issued in 1998 at $3.50, remained exercisable
and outstanding.

       Additionally, the Company maintains the 1998 Non-Employee Director Stock
Option Plan (director plan). The director plan provides for the granting of
stock options to members of the Board of Directors who are not employees of the
Company. There are 300,000 shares available for grants under the plan. Each
option is exercisable one year after the date of grant and expires five years
after the date of grant. Each eligible director receives an option to purchase
1,500 shares (3,000 shares for the Board's Chairman) of common stock on the date
of the annual meeting and 150 shares (300 shares for the Board's Chairman) of
common stock for each Director or Committee meeting attended. Each option shall
be at fair market value on the date of the grant. At December 31, 2000, 65,550
shares with exercise price ranging from $2.37 to $8.75 ($5.23 weighted average)
were outstanding, 41,850 of which were exercisable. At December 31, 1999, 41,850
shares with exercise price ranging from $2.37 to $8.75 ($4.96 weighted average)
were outstanding, 17,100 of which were exercisable.



                                      F-9
<PAGE>   25


                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------


NOTE 3 - STOCK OPTION PLANS (CONTINUED)
---------------------------------------

       A summary of option activity under the plans follows:

<TABLE>
<CAPTION>
                                                                            Number of                    Weighted
                                                                           Shares Under                 Average Option
                                                                               Option                       Price
                                                                           ------------                 --------------

<S>                                                                       <C>                          <C>
Outstanding at January 1, 1999                                               47,100                       $ 3.50
    Granted                                                                  34,750                       $ 5.82
       Exercised                                                             (7,000)                      $ 3.50
    Canceled                                                                    -                         $   -
                                                                           ----------

Outstanding at December 31, 2000                                             74,850                       $ 4.58
    Granted                                                                  23,700                       $ 5.70
    Exercised                                                               (13,000)                      $ 3.50
    Canceled                                                                    -                         $   -
                                                                           ----------

Outstanding at December 31, 2000                                             85,550                       $ 5.06
                                                                           ==========
</TABLE>


       The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APBO No. 25), and related
interpretations, in accounting for its stock options because, as discussed
below, the alternative fair value accounting provided for under Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), requires use of highly subjective assumptions in
option valuation models. Under APBO No. 25, because the exercise price of the
Company's stock options granted is not less than fair market price of the shares
at the date of grant, no compensation is recognized in the financial statements.

       Pro forma information regarding net income and earnings per share,
determined as if the Company had accounted for its employee stock options under
the fair value method of SFAS No. 123, is required by that statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following assumptions for all options granted: a
risk free interest rate of 5.73% and 5.19% for 2000 and 1999, respectively, an
expected life of the options of five years, no expected dividend yield and a
volatility factor of 10%.



                                      F-10
<PAGE>   26

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------


NOTE 3 - STOCK OPTION PLANS (CONTINUED)
---------------------------------------

       Had compensation cost been determined on the basis of fair value pursuant
to SFAS No. 123, net income and earnings per share for 2000 and 1999 would have
been as follows:

                                                     2000             1999
                                                 -----------      ------------
          Net Income
              As reported                       $    174,317         $(411,334)
                                                ============     =============
              Pro forma                         $    101,467          (473,466)
                                                ============     =============

          Basic earnings per share:
              As reported                       $        .10     $        (.24)
                                                ============     =============
              Pro forma                         $        .06     $        (.28)
                                                ============     =============
          Diluted earnings per share:
              As reported                       $        .09     $        (.24)
                                                ============     =============
              Pro forma                         $        .05     $        (.28)
                                                ============     =============


NOTE 4 - LINE OF CREDIT
-----------------------

       The Company has a line of credit with maximum borrowings of $750,000. The
note provides for borrowing with interest payable monthly at a rate equivalent
to the bank's prime lending rate (9.5% and 8.5% at December 31, 2000 and 1999,
respectively). The debt agreement contains certain restrictive terms and
covenants. The Company was in compliance with its covenants at December 31, 2000
and 1999. The debt is secured by substantially all real estate, inventory, and
equipment of the Company. The outstanding balance at December 31, 2000 and 1999
was $444,684 and $668,720, respectively. Amount refinanced in 2001 (Note 11).

NOTE 5 - LONG TERM DEBT
-----------------------

<TABLE>
<CAPTION>
                                                                                                 2000           1999
                                                                                             ----------       --------
<S>                                                                                       <C>              <C>
       9%, note payable to bank with interest only until March, 1998 then
       payable in monthly installments of $10,407 including interest, final
       payment due November, 2002, secured by substantially all real estate,
       inventory and equipment of the Company. Amount refinanced
       in 2001 (Note 11).                                                                    $215,302         $315,741

       6.29%, note secured by equipment payable
       in 24 monthly installments of $1,067.
       Final payment due December, 2001.                                                       14,147           26,658
</TABLE>

                                      F-11
<PAGE>   27

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------


NOTE 5 - LONG TERM DEBT (CONTINUED)
-----------------------------------

<TABLE>
<CAPTION>
                                                                                                 2000           1999
                                                                                             ----------       --------
<S>                                                                                       <C>              <C>

       Unsecured note payable to Roulston Ventures L.P. Interest only payable
       quarterly at 8%. Balance due October 1, 2002. Convertible to common stock
       at note holders option on or before due date.
       Convertible at $5.50 per share.                                                       $150,000         $150,000

       Note payable to bank payable in monthly installments of $3,143 including
       interest at prime plus 0.75% ( prime was 9.5% and 8.5% at December 31,
       2000 and December 31, 1999, respectively), final payment due April, 2003,
       secured by substantially all real estate, inventory and equipment of the
       Company. Amount refinanced in 2001 (Note 11).                                          107,782          132,478

       7.76%, note payable to bank.  Payable in
       monthly installments of $10,442 plus interest.
       Final payment due July, 2002, secured by
       substantially all real estate, inventory and
       equipment of the Company.  Amount refinanced
       in 2001 (Note 11).                                                                     210,570          315,827

       6.99%, note secured by equipment payable
       in 24 monthly installments of principle and
       interest, final payment due July, 2002.                                                 17,854                -
                                                                                           ----------    -------------
                                                                                              715,655          940,704
       Less:  Current Portion                                                                 447,280          413,338
                                                                                           ----------    -------------
                                                                                             $268,375         $527,366
                                                                                           ==========    =============
</TABLE>

       Following is a summary of future maturities of long term debt as of
December 31, 2000:

           2001                                                    $447,280
           2002                                                     228,226
           2003                                                      40,149
           2004                                                        -
           2005                                                           -
                                                              -------------
                                                                   $715,655
                                                              =============


                                      F-12
<PAGE>   28


                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------


NOTE 6- FAIR VALUE OF FINANCIAL STATEMENTS
------------------------------------------

       The carrying amounts of cash, accounts receivable, accounts payable, and
long-term debt approximate the fair value reported in the balance sheet. The
fair value of long-term debt is based on current rates at which the Company
could borrow funds with similar remaining maturities.

NOTE 7 - FINANCIAL REPORTING FOR SEGMENTS OF THE COMPANY
--------------------------------------------------------

       The Company and its subsidiaries operated predominantly in one industry,
the design, quarrying and cutting of sandstone primarily used in the
construction industry.

       Following is the information regarding the Company's continuing
operations by geographic location. Transfers between geographic areas are
accounted for on a cost plus profit margin basis.

<TABLE>
<CAPTION>
                                                                                     2000                      1999
                                                                                 -----------                ----------
<S>                                                                               <C>                       <C>
    Net sales, including geographic transfers
       United States                                                              $3,453,263                $2,530,123
       Canada                                                                        325,418                   936,002
       Geographic transfers                                                             -                      (26,327)
                                                                                 -----------                -----------
                                                                                  $3,778,681                $3,439,798
                                                                                 ===========                ==========
    Income (Loss) from operations:
       United States                                                             $   262,888               $   (72,442)
       Canada                                                                         26,000                  (234,932)
                                                                                 -----------                -----------

    Income (Loss) from operations:                                                   288,888                  (307,374)
       Interest expense                                                             (127,281)                 (106,268)
       Interest income                                                                12,710                     2,308
                                                                                 -----------                ----------

    Income (Loss) from operations before income taxes                            $   174,317                $ (411,334)
                                                                                 ===========                ==========

    Identifiable assets:
       United States                                                              $5,358,599                $4,736,800
       Canada                                                                              -                         -
                                                                                 -----------                ----------
                                                                                  $5,358,599                $4,736,800
                                                                                 ===========                ==========
</TABLE>



                                      F-13
<PAGE>   29

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------

NOTE 8 - LEASES
---------------

       In March 1999, the Company entered into an operating lease agreement for
a lift truck for a period of 60 months at $1,710 per month. Lease payments in
2000 amounted to $20,520. Total lease payments are $102,600 over the life of the
lease.

       Below is a five year scheduled of minimum lease payments.

                   2001                          $20,520
                   2002                           20,520
                   2003                           20,520
                   2004                            3,420
                   2005                             -

NOTE 9 - INCOME TAXES
---------------------

       Income taxes on continuing operations include the following:
                                                   2000               1999
                                                 --------           --------

           Currently payable                     $      -           $      -
           Deferred                                     -                  -
                                                 --------           --------

               Total                             $      -           $      -
                                                 ========           ========

       A reconciliation of the effective tax rate with the statutory U.S. income
tax rate is as follows:

<TABLE>
<CAPTION>
                                                                         2000                                     1999
                                                                    ----------------                         ---------------
                                                                         % of                                    % of
                                                                        Pretax                                   Pretax
                                                       Income            Amount                Income            Amount
                                                       ------            ------                ------            ------
<S>                                                        <C>             <C>                <C>             <C>
    Income taxes per
       statement of income                            $        -0-        0  %            $         -0-         0   %
    Tax rate differences resulting from:
       Income taxes applicable to
           Canadian income at rate
           different from U.S. rate                          -            -  %                       -          -   %
       Income (loss) for financial reporting
           purpose without tax expense or
           benefit. Utilization of loss carry-
           forward (unavailable for carryback
           against prior income taxes paid)                59,268          34%                (139,854)       (34)  %
                                                          -------         ---                ---------       ----

       Income taxes at statutory rate                     $59,268          34%               $(139,854)       (34)  %
                                                          =======         ===                =========       ====
</TABLE>



                                      F-14
<PAGE>   30

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------

NOTE 9 - INCOME TAXES (CONTINUED)
---------------------------------

       For United States tax purposes, the Company has available at December 31,
2001, unused operating loss carryforwards that may be applied against future
taxable income and that expire as follows:

                Amount of Unused Operating      Expiration During Year Ended
                 Loss Carryforwards                      December 31,
         ---------------------------------             --------------

                       $    48,000                        2007
                         1,553,000                        2008
                           470,000                        2009
                           773,000                        2010
                           131,000                        2012
                           650,000                        2019
                            21,000                        2020
                       -----------
                        $3,646,000
                       ===========


       Utilization of the net operating loss carryforward is contingent upon the
Company having sufficient taxable income in the future.

       The Company's deferred tax assets and liabilities at December 31, 2000
and 1999 consist of:

                                                 2000                   1999
                                               ---------            -----------

              Deferred tax asset               $1,240,000            $1,256,000
              Valuation allowance              (1,165,000)           (1,083,000)
              Deferred tax liability              (75,000)             (173,000)
                                              ------------          -----------
                                               $        -            $        -
                                              ============          ===========

       Deferred taxes are provided for temporary differences in deducting
expenses for financial statement and tax purposes. The principal source for
deferred tax assets are different methods for recovering depreciation and net
operating loss carryforward. No deferred taxes are reflected in the balance
sheet at December 31, 2000 and 1999 due to a valuation allowance. As of December
31, 2000 and 1999, the Company recognized a $82,000 and $160,000 increase in the
valuation allowance, respectively.

NOTE 10 - PROFIT SHARING PLAN
-----------------------------

       American Stone Corporation has a 401(k) profit-sharing plan (the Plan)
offered to employees with more than one year of service. Contributions under the
Plan are discretionary and are determined annually by the Company's Board of
Directors. In addition, the Plan provides for a match of 50% of employee
contributions to the Plan up to 6% of employee wages. Company contributions to
the plan in 2000 and 1999 were $11,333 and $7,800, respectively.


                                      F-15

<PAGE>   31



                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                ------------------------------------------------
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             ------------------------------------------------------
                           DECEMBER 31, 2000 AND 1999
                           --------------------------

NOTE 11 - SUBSEQUENT EVENTS
---------------------------

       In February 2001, the Company negotiated a new debt financing agreement
with a bank for $900,000. As a result, the Company will consolidate three of its
existing term loans into a single loan with an interest rate of 8.0% . Payments
of principal and interest are monthly over five years.

       Additionally, the Company also refinanced its line of credit with an
available line of $500,000 at the bank's current prime rate.









                                      F-16
<PAGE>   32



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

                  None.

                                    PART III

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

                  The information required by this Item 9 as to the Directors of
the Company is incorporated herein by reference to the information set forth
under the caption "Election of Directors" in the Company's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held on April 18, 2001,
since such Proxy Statement will be filed with the Securities and Exchange
Commission not later than 120 days after the end of the Company's fiscal year
pursuant to Regulation 14A. Information required by this Item 9 as to the
executive officers of the Company is included as Item 4A of Part I of this
Annual Report on Form 10-KSB as permitted by Instruction 3 to Item 401(b) of
Regulation S-K. Information required by Item 405 of Regulation S-B is
incorporated by reference to the information set forth under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
April 18, 2001.

ITEM 10. EXECUTIVE COMPENSATION.

                  The information required by this Item 10 is incorporated by
reference to the information set forth under the caption "Executive
Compensation" in the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on April 18, 2001, since such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the end of the Company's fiscal year pursuant to Regulation 14A.

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

                  The information required by this Item 11 is incorporated by
reference to the information set forth under the caption "Common Stock
Ownership" in the Company's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on April 18, 2001, since such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the end of the Company's fiscal year pursuant to Regulation 14A.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

                  The information required by this Item 12 is incorporated by
reference to the information set forth under the caption "Certain Relationships
and Related Party Transactions" in the Company's definitive Proxy Statement for
the Annual Meeting of Stockholders to be held on April 18, 2001, since such
Proxy Statement will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the Company's fiscal year pursuant to
Regulation 14A.

                                       14
<PAGE>   33

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

                  (a)      Exhibits

                           Reference is made to the Exhibit Index set forth
herein beginning at page E-1.

                  (b)      Reports on Form 8-K.

                           None.


                                       15
<PAGE>   34

                                   SIGNATURES

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

AMERICAN STONE INDUSTRIES, INC.


By: /s/  James M. Rallo
   -----------------------------------------------
         James M. Rallo, President and
         Chief Executive Officer
         Date: March 27, 2001

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


<TABLE>
<S>                                                      <C>
By: /s/ James M. Rallo                                    By: /s/ Jacquita K. Hauserman
  ---------------------------------------------------       ---------------------------
         James M. Rallo, President and                    Jacquita K. Hauserman, Director
         Chief Executive Officer (Principal               Date: March 27, 2001
         Executive Officer)
         Date: March 27, 2001


By: /s/ Enzo Costantino                                   By: /s/ Michael J. Meier
    -------------------------------------------------         --------------------
         Enzo Costantino, Treasurer and Director          Michael J. Meier, Secretary and Director
         (Principal Accounting Officer and                Date: March 27, 2001
         Principal Financial Officer)
         Date: March 27, 2001


BY: /s/ Thomas H. Roulston Ii                             By: /s/ Timothy I. Panzica
     ------------------------------------------------         ----------------------
         Thomas H. Roulston II, Chairman                  Timothy I. Panzica, Director
         of the Board                                     Date: March 27, 2001
         Date: March 27, 2001


BY: /s/ Glen Gasparini                                    By: /s/ Louis Stokes
    -------------------------------------------------         ----------------
         Glen Gasparini, Director                         Louis Stokes, Director
         Date: March 27, 2001                             Date: March 27, 2001
</TABLE>



                                       16
<PAGE>   35

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
    EXHIBIT NUMBER                                 DESCRIPTION OF DOCUMENT

<S>                      <C>                                                                              <C>
          3.1            Certificate of Incorporation of the Company, dated November 13, 1992
                                                                                                            (A)
          3.2            Certificate  of  Amendment  of  the  Certificate  of  Incorporation  of  the
                         Company, dated March 9, 1993                                                       (A)

          3.3            Certificate  of  Amendment  of  the  Certificate  of  Incorporation  of  the
                         Company, dated December 14, 1993                                                   (A)

          3.4            Certificate for Renewal and Revival of Charter, dated May 31, 1994                 (A)

          3.5            Certificate  of  Amendment  of  the  Certificate  of  Incorporation  of  the
                         Company, dated August, 1995                                                        (A)

          3.6            Certificate  of Amendment of the  Certificate of  Incorporation  of American
                         Stone Industries, Inc., dated June 24, 1998                                        (B)

          3.7            By-laws of the Company                                                             (A)

         10.1            Business  Loan  Agreement  between  American  Stone  Corporation  and  First
                         National Bank of Ohio, dated September 13, 1996                                    (A)

         10.2            Amendment to Loan Agreement  between  American Stone  Corporation  and First
                         National Bank of Ohio, dated February 26, 1997                                     (A)

         10.3            Asset Purchase  Agreement  between American Stone  Corporation and Cleveland
                         Quarries L.P., dated February 1, 1996                                              (A)

         10.4            Amendment to and Restatement of Asset Purchase Agreement of February,  1996,
                         between  American  Stone  Corporation  and Cleveland  Quarries  L.P.,  dated
                         December 20, 1996                                                                  (A)

         *10.5           Share Purchase  Agreement  between David Tyrrell and the Company,  dated May
                         22, 1996                                                                           (A)

         10.6            Stock Purchase  Agreement between Roulston Ventures Limited  Partnership and
                         the Company, dated August 27, 1996                                                 (A)

         10.7            Indemnification  Agreement between Cleveland Quarries, L.P., Slate and Stone
                         Corporation of America,  and American Stone Corporation,  dated December 20,
                         1996                                                                               (A)

         10.8            Share  Purchase  Option  Agreement  between  TMT  Masonry,   Ltd.,  Roulston
                         Ventures Limited Partnership and the Company                                       (A)
</TABLE>

                                       17
<PAGE>   36

<TABLE>
<CAPTION>
    EXHIBIT NUMBER                                 DESCRIPTION OF DOCUMENT

<S>                      <C>                                                                              <C>
         10.9            Share  Purchase  Option  Agreement  between  TMT  Masonry,   Ltd.,  Roulston
                         Ventures Limited Partnership and the Company, dated November 22, 1996
                                                                                                            (C)
         10.10           Business Loan Agreement  between  American Stone  Corporation and FirstMerit
                         Bank, N.A. dated November 10, 1997                                                 (D)

         10.11           Modification of Mortgage between  American Stone  Corporation and FirstMerit
                         Bank, N.A., dated November 10, 1997                                                (D)

         10.12           Modification of Mortgage between  American Stone  Corporation and FirstMerit
                         Bank, N.A., dated November 10, 1997                                                (D)

         10.13           Commercial   Security  Agreement  between  American  Stone  Corporation  and
                         FirstMerit Bank, N.A., dated November 10, 1997                                     (D)

         10.14           8.00%  Convertible  Subordinated  Note Due  October 1,  2002,  issued by the       (F)
                         Company to Roulston Ventures Limited Partnership.

         10.15           Amendment to Business  Loan  Agreement,  dated  November  23, 1999,  between       (F)
                         American Stone Corporation and FirstMerit Bank, N. A.

        *10.16           American Stone Industries, Inc. 1998 Management Stock Option Plan                  (B)

        *10.17           American Stone Industries, Inc. 1998 Non-Employee Director Stock Option Plan
                                                                                                            (B)
         10.18           FirstMerit Bank, N.A., Defined Contribution Master Plan and Trust Agreement
                                                                                                            (E)
         21.1            Subsidiaries of the Company

         23.1            Consent of Hobe & Lucas
</TABLE>

* Management contract or compensatory plan or arrangement.

(A)      Incorporated herein by reference to the appropriate exhibit to the
         Company's registration statement on Form 10-SB filed on April 11, 1997.

(B)      Incorporated herein by reference to the appropriate exhibit to the
         Company's quarterly report on Form 10-QSB for the period ended
         September 30, 1998.

(C)      Incorporated herein by reference to the appropriate exhibit to the
         amendment filed on July 30, 1997 to Company's registration statement on
         From 10-SB filed on April 11, 1997.

(D)      Incorporated herein by reference to the appropriate exhibit to the
         Company's annual report on Form 10-KSB for the period ended December
         31, 1997.

                                       18
<PAGE>   37

(E)      Incorporated herein by reference to the appropriate exhibit to the
         Company's annual report on Form 10-KSB for the period ended December
         31, 1998.

(F)      Incorporated herein by reference to the appropriate exhibit to the
         Company's annual report on Form 10-KSB for the period ended December
         31, 1999.



                                       19