<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    --------

                                   FORM 10-KSB

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

    FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

                                       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          (I.R.S. Employer Identification No.)
      incorporation or Organization)

      230 W. Main Street, South 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 required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

      Yes [X] [ ]

      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: $2,399,098

      The aggregate market value of the Common Stock held by non-affiliates of
the Registrant as of February 28, 2005 was approximately $6,250,750, computed on
the basis of the last reported sale price per share ($6.60 reported on March 18,
2005) of such stock on the OTC 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.

      Indicate by check mark whether the Registrant is an accelerated filer as
(defined in Rule 12b-2 of the Act). Yes [ ] [X]

      The number of shares of the Registrant's Common Stock outstanding as of
March 9, 2005 was 2,032,021.

                       DOCUMENTS INCORPORATED BY REFERENCE

             FORM 10-KSB REFERENCE                         DOCUMENTS
             ---------------------                         ---------
      Part III (Items 9, 10, 11, 12 and 14)        Portions of the Registrant's
                                                   Definitive Proxy Statement to
                                                   be used in connection with
                                                   its Annual Meeting of
                                                   Stockholders to be held on
                                                   April 20, 2005.

      Except as otherwise stated, the information contained in this Form 10-KSB
is as of December 31, 2004.

      Transitional Small Business Disclosure Format (check one)?

      Yes [ ] No [X]

================================================================================

<PAGE>

                                     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. 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"). The Cleveland Quarries consist of estimated recoverable reserve
deposits in excess of 300 million cubic feet located on over 975 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.

      In January of 2001, the Company created Amherst Stone at Cleveland
Quarries, Inc. ("Amherst Stone"), a wholly-owned subsidiary, to act as a
distributor directly to northern Ohio builders and landscapers. The Company
intended Amherst Stone to act as a full-time supplier of Cleveland Quarries
sandstone and other natural stone products. In December 2002, the Company
decided to consolidate the activities of Amherst Stone into ASC.

      Unless the context requires otherwise, references in this report to the
"Company" refer to the Company and its wholly-owned subsidiaries.

The Business.

      The Company quarries and markets sandstone and manages the operation of
the Cleveland Quarries. The Cleveland Quarries produce a type of sandstone that
is known in the industry as "Berea Sandstone." For more than 100 years,
sandstone from the Cleveland Quarries has been utilized widely in the United
States and Canada in such projects as the following:

<PAGE>

<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           Oberlin, Ohio (U.S.A.)            2001
    Building
University of Detroit, Mercy      Detroit, Michigan (U.S.A.)        2004
    College
</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 use.
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.

<TABLE>
<CAPTION>
 BLOCKS ARE TURNED                           BLOCKS ARE TURNED INTO
INTO SLABS TO MAKE                           SMALLER BLOCKS TO MAKE
------------------                           ----------------------
<S>                                          <C>
 Table Tops                                          Coping
    Tile                                           Cut Stone
 Patio Stone                                      Grindstones
Garden Stone                                        Curbing
    Sills                                        Building Stone
 Step Treads                                       Breakwater
House Ashlar                                   Laboratory Samples
                                                Landscape Pieces
</TABLE>

                                       2
<PAGE>

      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. The Company believes that its investment in high-tech equipment
will enable it to compete domestically with both domestic and foreign
competitors.

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
for strategic alliances with outside companies that perform these functions.

                           QUARRY TO END-USER

                                 Quarry

Secondary Processor                                     Primary Processor
                                Installer
                           General Contractor

Architect                                                     Distributor
                                Designer
                            Purchasing Agent
                                End-User

                                       3
<PAGE>

      For the period from 2000 to 2004, the Company's annual production of
natural stone was as follows:

<TABLE>
<CAPTION>
RAW STONE:                               (TONS)
----------                               ------
<S>                                      <C>
   2000                                  12,699
   2001                                  16,855
   2002                                  13,196
   2003                                  11,588
   2004                                   6,706
</TABLE>

      Management currently intends to target the following areas:

      Building Stone:

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

      Specialty Products:

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

Employees.

      The Company has approximately 31 full-time employees, of which
approximately 24 are hourly. The average hourly wage of the quarry personnel is
approximately $10.69 per hour. The quarries are situated in a geographic region
that has 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). 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 which is required to utilize
            diamond saw technology;

                                       4
<PAGE>

      -     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.

Marketing.

      The marketing of the Company's products from Ohio is primarily done
through an in-house sales staff and outside sales representation. In addition,
the Company is represented by distributors in the United States and Canada 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 Company's sales in the United States. In
Canada, the Company's sales have occurred almost exclusively in the Provinces of
Ontario, Quebec and British Columbia.

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.

Backlog.

      As of December 31, 2004, the Company's backlog of orders was $285,000 as
compared to a backlog of $250,000 at December 31, 2003.

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 60% 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 holds copyrights in marketing materials and owns various
trademarks. The Company does not believe that intellectual property is material
to the operation of its business.

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

                                       5
<PAGE>

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, 2004 and 2003, the Company did not
make any research and development expenditures.

Methods of Distribution and Costs of Transportation.

      All of the Company's stone is shipped via flatbed truck F.O.B. at South
Amherst.

                        ITEM 2. DESCRIPTION OF PROPERTY.

General.

      The Company owns three separate parcels of land in the Counties of Lorain
and Erie, Ohio. These properties contain stone with a variety of colors and
properties. The Company holds permits for the two parcels that are used as
quarries and both permits are in good standing.

      The parcel in Erie County is in Birmingham Township, consists of
approximately 186 acres, and contains the only Company quarry currently
operating. Stone from this quarry is suitable to all end purposes of the
Company's products and has a higher compressive strength than the stone quarried
from the other Company quarries. Stone from this quarry is suitable not only for
new projects but also for renovation, restoration or expansion of existing
buildings. The Birmingham property also contains a supply of natural gas, which
is leased to a local utility. There are no processing facilities on the
Birmingham property.

      The Company's main parcel is in Amherst Township (Lorain County), consists
of approximately 979 acres, and is the site of six quarries, the mills and
offices. The main parcel fronts

                                       6
<PAGE>

the Ohio State Turnpike approximately twenty minutes west of downtown Cleveland.
All of the quarries on the Lorain County land are currently unused and dormant.

      In December 2002, the Company purchased approximately 150 acres of land in
Lorain County, Ohio adjoining the Company's Lorain County parcel for $500,000.
The promissory note issued by the Company for the purchase price also provides
for a contingent payment described below under the caption "Encumbrances." The
150 acre parcel was purchased in order to control all contiguous properties.

      In the opinion of management, all properties are adequately covered by
insurance.

Reserve Information.

      From approximately 1960 to 1992 the reserves of Cleveland Quarries were
estimated by the then owner (Stancorp), which drilled samples of Berea Sandstone
on the Company-owned properties. The reserve estimates were then calculated
using the deposit area and observations of depth from the existing quarries. On
the basis of the reserve estimates obtained by the previous owner, Management
has estimated that dimensional stone reserves for the Birmingham property are
126 million recoverable cubic feet based on a deposit of at least 30 acres
indicated by topographic studies and that the Lorain County property contains
210 million recoverable cubic feet of dimensional stone and 21 million
recoverable cubic feet of construction stone. There are no reserves on the
parcel of property purchased in December 2002. In summary, Management believes
that the properties have a total estimated recoverable reserve in excess of 300
million cubic feet.

      Usage for the past three years is as follows:

<TABLE>
<CAPTION>
YEAR                 EXTRACTED CU. FT.                   SOLD CU. FT.
----                 -----------------                   ------------
<S>                  <C>                                 <C>
2002                     272,000                           111,000
2003                     165,708                            89,787
2004                      95,899                           103,540
</TABLE>

      Differences between cubic feet extracted and cubic feet sold are primarily
the result of waste. The percentages of waste vary from year to year primarily
because of differences in product mix. In 2004, the increase in cubic feet sold
versus cubic feet extracted is related to the sale of stone extracted in
previous years. At current usage rates, the reserves far exceed any reasonable
expectation of depletion.

Buildings.

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

<TABLE>
<CAPTION>
                                      YEAR
   BUILDING             SIZE S.F.     BUILT     CURRENT USE            FUTURE USE
   --------             ---------     -----     -----------            ----------
<S>                     <C>           <C>       <C>                    <C>
Mill No. 3               18,175       1946      Processing             Processing
Mill No. 6               45,000       1923      Closed                 None
Mill No. 8               44,165       1926      Gang Sawing            Gang Sawing
Office & Showroom        11,305       1900      Office & Showroom      Office & Showroom
</TABLE>

                                       7

<PAGE>

Encumbrances.

      The Company's main parcel and the parcel in Erie County are subject to
mortgages between the Company and Madison/Route 20 LLC in a loan amount of
$900,000.

      In connection with the purchase of 150 acres of land in December 2002, the
Company granted a mortgage to the seller securing a promissory note due November
21, 2007 in the original principal amount of $500,000 plus fifty percent (50%)
of the difference between the fair market value of the property and the purchase
price of $500,000. See Note 2 of Notes to Financial Statements.

      The Company's main parcel of land in Amherst Township (Lorain County) is
subject to a note payable to BRM Quarry Co., LLC in a principal amount of
$600,000 due June 25, 2007.

      In May 2004 the Company granted to an unrelated third party an option to
purchase approximately 900 acres of land. See Note 9 of Notes to Financial
Statements.

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.

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

      None.

                                     PART II

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

Market Information

      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.OB. The
following table shows the high and low daily closing prices for the Company's
Common Stock for each quarter of 2004 and 2003. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.

<TABLE>
<CAPTION>
  YEAR ENDED
DECEMBER 31, 2003                      HIGH                    LOW
-----------------                      ----                   -----
<S>                                    <C>                    <C>
First Quarter                          $7.25                  $3.40
Second Quarter                         $8.00                  $3.35
Third Quarter                          $8.00                  $4.80
Fourth Quarter                         $9.50                  $5.25
</TABLE>

                                       8
<PAGE>

<TABLE>
<CAPTION>
  YEAR ENDED
DECEMBER 31, 2004                      HIGH                    LOW
-----------------                      ----                   -----
<S>                                    <C>                    <C>
First Quarter                          $9.50                  $9.00
Second Quarter                         $9.00                  $5.25
Third Quarter                          $9.00                  $8.50
Fourth Quarter                         $9.00                  $5.25
</TABLE>

Holders and Dividends

      As of March 6, 2005, there were 87 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 its growth.

Securities Authorized for Issuance Under Equity Compensation Plans

      The following table shows information with respect to each equity
compensation plan under which the Company's Common Stock is authorized for
issuance as of the end of fiscal year 2004.

                      EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                                                         NUMBER OF
                                                                         SECURITIES
                                                                         REMAINING
                                                                       AVAILABLE FOR
                                                                          FUTURE
                                    NUMBER OF           WEIGHTED-      ISSUANCE UNDER
                                  SECURITIES TO          AVERAGE          EQUITY
                                  BE ISSUED UPON      EXERCISE PRICE   COMPENSATION
                                   EXERCISE OF             OF             PLANS
                                   OUTSTANDING        OUTSTANDING       (EXCLUDING
                                     OPTIONS,            OPTIONS,        SECURITIES
                                  WARRANTS AND        WARRANTS AND     REFLECTED IN
PLAN CATEGORY                        RIGHTS              RIGHTS         COLUMN (a))
                                      (a)                  (b)              (c)
<S>                               <C>                 <C>              <C>
Equity compensation plans
approved by security holders          264,404            $  5.38          311,050

Equity compensation plans
not approved by security holders            0            $     0                0

TOTAL                                 264,404            $  5.38          311,050
</TABLE>

                                       9
<PAGE>

Recent Sales of Unregistered Securities

      On July 1, 2004, each of several directors of the Company and other
entities associated with directors of the Company exercised his or its right as
holder of a promissory note of the Company dated April 30, 2003 (the
"Convertible Notes") to convert the Convertible Notes into common stock of the
Company at $3.50 per share, resulting in the issuance of 62,852 shares of common
stock (the "Conversion Stock"). In all of these transactions, the Convertible
Notes and the Conversion Stock were issued without registration under the
Securities Act of 1933 (the "Securities Act") in reliance on Section 4(2) of the
Securities Act. The Convertible Notes and the Conversion Stock were issued
without any general solicitation to persons not requiring the protections
afforded by registration. No underwriting discounts or commissions were paid in
connection with the issuance of the Convertible Notes or the Conversion Stock.

      On or about September 30 or October 1, 2004, Roulston Venture Limited
Partnership exercised its right as a holder of a promissory note of the Company
in the original principal amount of $150,000 (the "RVLP Convertible Note") to
convert the RVLP Convertible Note into common stock of the Company at $5.00 per
share, resulting in the issuance of 30,000 shares of common stock (the "RVLP
Conversion Stock"). The RVLP Convertible Note and the RVLP Conversion Stock were
issued without registration under the Securities Act in reliance on Section 4(2)
of the Securities Act. The RVLP Convertible Note and the RVLP Conversion Stock
were issued without any general solicitation and were sold to a single
institutional investor. No underwriting discounts or commissions were paid in
connection with the issuance of the RVLP Convertible Note or the RVLP Conversion
Stock.

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

Company Overview and Outlook

      American Stone Industries, Inc. is a holding company that mines and sells
stone primarily for the building stone market through its wholly-owned
subsidiary, American Stone Corporation. American Stone Corporation owns and
operates the Cleveland Quarries in Amherst, Ohio. We produce dimensional stone
which is cut to size as specified in architectural designs and primarily used as
architectural accents to buildings. We also produce construction stone which is
primarily used for road base, back fill and erosion control.

      Our challenges in 2004 were, and they continue to be, to increase our
sales base and continue to improve our operating efficiencies while controlling
costs so we can generate profits and positive cash flow and strengthen our
balance sheet. Cash remains tight, but as a result of some price increases,
improvement in product mix, and continuing credit disciplines we have achieved a
profit in fiscal year 2004. Fiscal year 2005 has started slowly due to the
unusually severe winter weather conditions. The request to quote on our products
thus far in 2005 has been strong and we are optimistic for the year ahead. We
are planning a new building that would allow us to be fully operational twelve
months a year.

RESULTS OF OPERATIONS
(all amounts in thousands)

      Following is a discussion of the principal factors that affected the
Company's results of operations during each of the two most recent fiscal years.
This discussion should be read in

                                       10
<PAGE>

conjunction with the Company's Consolidated Financial Statements and the notes
thereto included elsewhere in this report.

Results of Operations for Fiscal Year 2004 compared to Fiscal Year 2003

      Sales in 2004 were $2,399 for an increase of $171, or 7.6%, over 2003
fiscal year sales of $2,228. Sales increased primarily as a result of on time
delivery and increased product quality. Product returns for our customers in
2004 were the lowest in company history.

      Gross profit in fiscal year 2004 was $683, an increase of $190, or 38.5%,
over gross profit of $493 in fiscal year 2003. Gross profit margin for fiscal
year 2004 was 28.5% compared to 22.1% for fiscal year 2003. This improvement in
gross profit margin resulted primarily from price increases and improvements in
product mix. In 2004 the Company focused on sales of larger slabs, for which
margins are higher than detailed finish work.

      Selling and administrative expenses in fiscal year 2004 of $461 represent
a decrease of $65, or 12.5%, compared to $527 in 2003. The 2004 expense figure
includes the benefit of negotiated write-offs of various accounts payable,
aggregating $187, and the 2003 expense figure includes a benefit from the
forgiveness of debt of $223. Without the benefit of these write-offs, selling
and administrative expenses would have been $648 in 2004 and $750 in 2003,
reflecting a decrease in 2004 of 13.6% as compared to 2003.

      In fiscal year 2004 the Company recognized $125 from the sale to Trans
European Securities International LLC of an option to purchase land. See Note 9
of the Notes to Financial Statements for a description of that transaction.

      Interest expense increased in fiscal year 2004 to $197 compared to $152.
This increase of $45 or 29.6%, was primarily the result of increased average
borrowing levels in 2004. This increase in borrowing levels was after giving
effect to the conversion of a total of $370 in notes payable into common stock
at the election of the holders of the notes pursuant to their terms.

      Although the Company had a profit before income taxes of $153 in fiscal
year 2004, we did not record any income tax expense because of the availability
of operating loss carryforwards. At December 31, 2004, the Company has unused
operating loss carryforwards of approximately $6,300 that may be applied against
future taxable income and expire in various amounts from 2007 to 2023. Our
ability to benefit from the carryforwards will depend upon generating taxable
income in the future.

      We achieved net income of $153 in fiscal year 2004 compared to a loss of
$186 in 2003. The principal factors in this profit were the receipt of the
$125,000 from the sale of the option and improvements in gross profit.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates, judgments and assumptions in certain circumstances that affect
amounts reported in the accompanying consolidated financial statements. We
evaluate the accounting policies and estimates we use to prepare financial
statements on an ongoing basis. We base our estimates on historical experience
and assumptions believed to be reasonable under the relevant circumstances. In
preparing these financial statements, we have made our best estimates and
judgments of certain amounts included in the financial statements related to the

                                       11
<PAGE>

accounting policies and estimates described in the text that follows. The
application of these critical accounting policies involves the exercise of
judgment and the use of assumptions as to future uncertainties, and as a result,
actual results could differ from these estimates. For additional information
regarding our accounting policies, see Note 1 to the Consolidated Financial
Statements for the fiscal year ended December 31, 2004.

Goodwill.

      As of December 31, 2004, we had $26,661 of goodwill resulting from the
acquisition of businesses. Effective January 1, 2002, we adopted SFAS No. 142
"Goodwill and Other Intangible Assets," under which goodwill is no longer
amortized but is tested for impairment annually (we have selected November 15),
or more often, if an event or circumstance indicates that an impairment loss may
have occurred. In making goodwill impairment assessments, we compare the fair
value of the company with the company's carrying value. If the fair value of the
company exceeds its carrying value, goodwill is considered not to be impaired.
If the carrying value of the company exceeds its fair value, an impairment loss
is measured and recognized.

      As of November 15, 2004, our common stock's latest closing value was $8.00
per share and we had 2,032,021 shares outstanding. Therefore, our total market
value, or fair value, was $16,256. The carrying value of the Company,
represented by stockholders' equity at September 30, 2004, (the last information
as reported on Form 10-QSB) was $1,634. Since the fair value exceeded the
carrying value, we determined that goodwill was not impaired.

Land Depletion.

      Our estimate of land depletion is based on our estimate of remaining
sandstone as determined from current and historical information. We evaluated
the key factors and assumptions used to develop the land depletion estimate in
determining that it is reasonable in relation to the financial statements taken
as a whole.

Contingencies.

      We are subject to various investigations, claims, and legal and
administrative proceedings covering a wide range of matters that arise in the
ordinary course of business activities. Any liability that may result from these
proceedings, and any liability that is judged to be probable and estimable, has
been accrued. Any potential liability not accrued is not currently expected to
have a material adverse effect on our future financial position, results of
operations or cash flows.

CASH FLOWS
(all amounts in thousands)

<TABLE>
<CAPTION>
                                        2004               2003
<S>                                    <C>                <C>
Cash flows provided (used by):

Operating activities                    $303              ($148)
Investing activities                   ($255)             ($ 50)
Financing activities                    $452               $477
</TABLE>

                                       12
<PAGE>

      Cash provided by operating activities in 2004 was $303. The cash provided
from operations included net income of $153, depreciation, amortization and
depletion of $390, and a decrease in inventory of $238. These principal sources
of cash from operations were offset primarily by a reduction in accounts payable
of $422.

      Cash used by operating activities in 2003 was $148. The net loss of $186
included a non-cash gain on forgiveness of bank debt of $223, depreciation and
amortization of $418 and a loss on the sale of equipment of $58. Major uses of
cash were a $188 increase in inventory and a $306 decrease in payables and
accrued liabilities. Major sources of cash were a $228 decrease in accounts
receivable and a $44 decrease in prepaid expenses.

      Cash used in investing activities in 2004 was $255, representing
investment in, among other things, a new block saw and gauging equipment, net of
sales of equipment of $3.

      Cash used by investing activities in 2003 was $50, which included $62 to
purchase equipment primarily to improve productivity.

      Cash provided by financing activities in 2004 was $452, resulting from the
excess of $675 in new long-term borrowings over $224 in repayment of long term
debt.

      Cash provided by financing activities in 2003 was $477. Cash was provided
by long term debt totaling $1,495 while $1,018 of cash was used to repay long
term debt and borrowings under the line of credit. Borrowings in 2003 included
the following:

      -     $220 unsecured notes payable to directors and officers of the
            company

      -     $200 unsecured note payable to bank

      -     $900 mortgage refinance loan payable to Madison/Route 20, LLC

      -     $175 drawn on an unsecured note payable to Roulston Venture Capital
            L.P., a significant shareholder

      More information about Long Term Debt can be found in Note 3 to the
Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES
(all amounts in thousands)

      As of December 31, 2004, we had cash and cash equivalents totaling $784.
During 2004, the Company did not borrow from any line of credit.

      As of December 31, 2004, our current portion of long-term debt was $332,
which represents the principal portion of our debt that is due to be repaid by
December 31, 2005.

      Capital spending in 2005 is currently estimated at between $50 and $100,
primarily for equipment needed to maintain operations.

                                       13
<PAGE>

      We experienced significant operating losses in the three years prior to
2004 which resulted in cash flow and liquidity problems. During the previous 36
months we have taken steps to reduce administrative overhead, employment levels
and other expenses, have instituted strict controls over granting credit to
customers and have put new sales policies and procedures into place. In 2004, we
began to emphasize sale by slab rather than fabricated stone to lower cost of
production and speed up job completion. We have also purchased new computers and
software in order to improve record keeping and tracking of inventory and work
in progress. In addition, we have introduced new full color advertising
literature to for our dealers and their customers. We believe these measures
will contribute to improved operating performance and positive cash flow in
2005. We are also currently exploring additional long term funding sources,
including debt placement, stock issuance and other alternatives. If Trans
European exercises the option to purchase a portion of the company land, the
proceeds of the option exercised will provide substantial liquidity to the
Company. There can be no assurance, however, that Trans European will exercise
the option or, if it does so, that the exercise will be timely in relation to
the liquidity requirements of the Company.

      The following table summarizes our obligations related to long-term debt
and operating leases as of December 31, 2004:

<TABLE>
<CAPTION>
                                         LONG TERM         OPERATING
                                           DEBT              LEASES             TOTAL
                                           ----              ------             -----
<S>                                      <C>               <C>                 <C>
Due in less than 1 year                   $  332              $10              $  342

1-3 years                                 $2,556              $ 7              $2,563

Total                                     $2,888              $17              $2,905
</TABLE>

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

      In this annual report, statements that are not reported financial results
or other historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements give current expectations or forecasts of future events and are not
guarantees of future performance. They are based on management's expectations
that involve a number of business risks and uncertainties, any of which could
cause actual results to differ materially from those expressed in or implied by
the forward-looking statements. You can identify these statements by the fact
that they do not relate strictly to historic or current facts. Words are used
such as "anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe" and other words and terms of similar meaning in connection with the
discussion of future operating or financial performance. In particular, these
include statements relating to future actions; prospective changes in
manufacturing costs, product pricing or product demand; future performance or
results of current and anticipated market conditions and market strategies;
sales efforts; expenses; the outcome of contingencies such as legal proceedings;
and financial results.

      Factors that could cause actual results to differ materially include, but
are not limited to: (1) general economic, business and market conditions, (2)
actions by competitors, (3) the success of advertising or promotional efforts,
(d) trends within the building construction industry, (5) the existence or
absence of adverse publicity, (6) changes in relationships with the Company's
major customers or in the financial condition of those customers, (7) equipment
and operational problems,

                                       14
<PAGE>

and (8) the adequacy of the Company's financial resources and the availability
and terms of any additional capital.

      We cannot guarantee that any forward-looking statement will be realized,
although we believe we have been prudent in our plans and assumptions.
Achievement of future results is subject to risks, uncertainties and inaccurate
assumptions. Should known or unknown risks or uncertainties materialize, or
should underlying assumptions prove inaccurate, actual results could vary
materially from those anticipated, estimated or projected. Investors should bear
this in mind as they consider forward-looking statements.

      We undertake no obligation to publicly update forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any further disclosures we make on related subjects
in our Form 10-QSB, 8-K and 10-KSB reports to the Securities and Exchange
Commission. You should understand that it is not possible to predict or identify
all risk factors. Consequently, you should not consider any such list to be a
complete set of all potential risks or uncertainties.

                                       15
<PAGE>

                          ITEM 7. FINANCIAL STATEMENTS.

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

HOBE & LUCAS
CERTIFIED PUBLIC ACCOUNTANTS, INC.
                                                    4807 Rockside Road
                                                    Suite 510
                                                    Independence, Ohio 44131
                                                    Tel: (216) 524-8900
                                                    Fax: (216) 524-8777

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2004 and 2003, 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 of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

      In our opinion, the 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, 2004 and 2003, and the results of its
operations and its cash flows for the years then ended in conformity with U.S.
generally accepted accounting principles.

                                          /s/ Hobe & Lucas
                                              Certified Public Accountants, Inc.

Independence, Ohio
February 18, 2005

                                       16
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                          2004                 2003
                                                                     -------------        --------------
<S>                                                                  <C>                  <C>
                           ASSETS
Current Assets
   Cash and cash equivalents                                         $     783,883        $      284,238
   Accounts receivable, net of allowance for
     doubtful accounts of $20,000 -2004 and 2003                           170,016               160,303
   Prepaid expenses                                                         38,225                 2,700
   Inventory                                                               599,267               837,438
                                                                     -------------        --------------
         Total Current Assets                                            1,591,391             1,284,679
                                                                     -------------        --------------

Property, Plant and Equipment, Net                                       3,112,147             3,243,693
                                                                     -------------        --------------
Other Assets
   Intangible assets                                                         9,043                 9,043
   Goodwill                                                                 26,661                26,661
   Restricted cash                                                          15,024                 7,521
   Deposits                                                                  1,000                 1,000
                                                                     -------------        --------------
                                                                            51,728                44,225
                                                                     -------------        --------------
                                                                     $   4,755,266        $    4,572,597
                                                                     =============        ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
   Current portion of notes payable                                  $     332,177        $    1,505,850
   Accounts payable                                                        123,450               516,345
   Accrued and withheld payroll and payroll taxes                           41,806                44,991
   Accrued liabilities                                                     117,237               143,324
                                                                     -------------        --------------
         Total Current Liabilities                                         614,670             2,210,510
                                                                     -------------        --------------
Long Term Liabilities
   Notes payable                                                         2,555,592             1,300,000
                                                                     -------------        --------------
Stockholders' equity
   Common stock, $.001 par value 20 million
   Shares authorized, 2,032,021 in 2004,
   1,939,169 in 2003 issued and outstanding                                  2,032                 1,939
   Additional paid-in capital                                            5,199,597             4,829,708
   Accumulated deficit                                                  (3,616,625)           (3,769,560)
                                                                     -------------        --------------
                                                                         1,585,004             1,062,087
                                                                     -------------        --------------
                                                                     $   4,755,266        $    4,572,597
                                                                     =============        ==============
</TABLE>

                 See notes to consolidated financial statements.

                                       17
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                        2004                2003
                                                                   ------------         -------------
<S>                                                                <C>                  <C>
Sales                                                              $  2,399,098         $   2,228,170

Cost of goods sold                                                    1,715,716             1,735,270
                                                                   ------------         -------------

Gross profit                                                            683,382               492,900
                                                                   ------------         -------------

Selling and administrative expenses                                     461,493               526,750
                                                                   ------------         -------------

Income/(Loss) from operations                                           221,889               (33,850)
                                                                   ------------         -------------

Sale of Option to sell Land                                             125,000
Interest income                                                           3,343                    36
Interest expense                                                       (197,297)             (152,044)
                                                                   ------------         -------------
                                                                        (68,594)             (152,008)
                                                                   ------------         -------------

Income/(Loss) before provision for income taxes                         152,935              (185,858)

Provision for income taxes                                                  -0-                   -0-
                                                                   ------------         -------------

Net Income/(Loss)                                                  $    152,935         $    (185,858)
                                                                   ============         =============
Net Income/(Loss) per Common Share
Basic                                                              $        .08         $        (.10)
                                                                   ============         =============
Diluted                                                            $        .07         $        (.10)
                                                                   ============         =============

Weighted average shares to compute
   Earnings per share of:
   Basic                                                              1,978,390             1,939,169
   Diluted                                                            2,045,952             2,025,442
</TABLE>

                 See notes to consolidated financial statements.

                                       18
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<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, 2003        1,939,169     $   1,939          $   4,829,708     $  (3,583,702)      $   1,247,945

Net (Loss)                             -0-           -0-                    -0-         (185,858)           (185,858)
                                ---------     ---------          -------------     -------------       -------------

Balance, December 31, 2003      1,939,169         1,939              4,829,708        (3,769,560)          1,062,087

Notes Payable converted
   to common stock                 92,852            93                369,889                -0-            369,982

Net Income                             -0-           -0-                    -0-          152,935             152,935
                                ---------     ---------          -------------     -------------       -------------

Balance, December 31, 2004      2,032,021     $   2,032          $   5,199,597     $  (3,616,625)      $   1,585,004
                                =========     =========          =============     =============       =============
</TABLE>

                 See notes to consolidated financial statements.

                                       19
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                         2004                  2003
                                                                                     ------------         -------------
<S>                                                                                  <C>                  <C>
Net Income/(Loss)                                                                    $    152,935         $    (185,858)
Gain on forgiveness of bank debt                                                               -0-             (223,049)
Adjustments to reconcile net income (loss) to
   net cash provided by (used in) operating activities:
     Depreciation, amortization and depletion                                             389,623               417,917
     (Gain) / Loss on sale of equipment                                                    (3,239)               58,328
     Changes in assets and liabilities:
     (Increase) decrease in accounts receivable                                            (9,713)              227,903
     (Increase) decrease in inventory                                                     238,171              (187,525)
     (Increase) decrease in prepaid expenses                                              (35,525)               44,242
     (Decrease) increase in payables and accrued liabilities                             (422,167)             (306,288)
     Other, net                                                                            (7,503)                5,983
                                                                                     ------------         -------------

       Net Cash Provided/(Used) in Operating Activities                                   302,582              (148,347)
                                                                                     ------------         -------------
Cash Flows from Investing Activities:
   Proceeds from sale of equipment                                                          3,239                11,800
   Purchase of property, plant and equipment                                             (258,077)              (61,735)
                                                                                     ------------         -------------
       Net Cash (Used) for Investing Activities                                          (254,838)              (49,935)
                                                                                     ------------         -------------

Cash Flows from Financing Activities:
   Net payments under line of credit arrangements                                              -0-             (500,000)
   Proceeds from long term debt                                                           675,630             1,495,000
   Repayment of long-term debt                                                           (223,729)             (518,177)
                                                                                     ------------         -------------

     Net Cash Provided by Financing Activities                                            451,901               476,823
                                                                                     ------------         -------------

Net Increase in Cash and Cash Equivalents                                                 499,645               278,541

Cash and Cash Equivalents at Beginning of Year                                            284,238                 5,697
                                                                                     ------------         -------------

Cash and Cash Equivalents at End of Year                                             $    783,883         $     284,238
                                                                                     ============         =============
</TABLE>

                 See notes to consolidated financial statements.

                                       20
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                         2004                 2003
                                                                                     ------------         -------------
<S>                                                                                  <C>                  <C>
Supplemental Disclosure of Cash Flows Information:
     Interest paid                                                                   $    180,000         $     150,000
                                                                                     ============         =============
     Taxes paid                                                                      $         -0-        $          -0-
                                                                                     ============         =============
</TABLE>

Supplemental disclosures of non-cash financing activities:

      On July 1, 2004, $220,000 of notes payable were converted to 62,852 shares
of common stock. On September 30, 2004 an additional $150,000 of notes payable
were converted to 30,000 shares of common stock. Both stock conversions were at
the election of the holders in accordance with the terms of the notes.

During 2003, the Company recognized $223,049 of income as forgiveness of debt
from notes payable.

                 See notes to consolidated financial statements.

                                       21
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

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 as promulgated in the United
States 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 operates the Cleveland Quarries
in Amherst, Ohio.

      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
intended Amherst Stone to act as a full-time supplier of Cleveland Quarries
sandstone and other natural stone products. In December 2002, the Company
consolidated the activities of Amherst Stone into its ASC operations.

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.

Risks and Uncertainties

      The Company maintains its cash in bank deposits, which, at times may
exceed federally insured limits. Accounts are guaranteed by the Federal Deposit
Insurance Company (FDIC) up to $100,000. At December 31, 2004, the Company had
approximately $225,000 in excess of FDIC limits. The Company has not experienced
any losses in such accounts.

      Included in the Company's cash is a thirty day renewable commercial paper
instrument through Ford Motor Credit Company. At December 31, 2004, the
instrument had a value of $502,700.

                                       22
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounts Receivable

      Credit is granted to only qualified domestic customers. The allowance for
doubtful accounts is calculated using the Company's prior bad debt experience
and current estimates of uncollectible accounts.

Revenue Recognition

      Revenues are recorded when products are shipped to customers or, in
instances where products are configured to customer requirements, upon the
successful completion of the Company's final test procedures. The Company is
generally not contractually obligated to accept returns, except for defective
product. An allowance for such returns is reflected as a reduction to accounts
receivable when the Company expects to grant credits for such items; otherwise
it is reflected as a liability.

Property, Plant and Equipment - At Cost

      Property, plant and equipment at December 31, 2004 and 2003 consisted of:

<TABLE>
<CAPTION>
                                                        2004                2003
                                                    -------------      ------------
<S>                                                 <C>                <C>
Land                                                $     938,680      $    938,680
Buildings and improvements                              1,477,350         1,477,350
Equipment                                               2,996,394         2,793,440
Computers                                                  69,349            62,175
Vehicle                                                    58,599            10,650
                                                    -------------      ------------
                                                        5,540,372         5,282,295
Less:  Accumulated depreciation                         2,428,225         2,038,602
                                                    -------------      ------------
Net property, plant and equipment                   $   3,112,147      $  3,243,693
                                                    =============      ============
</TABLE>

      Depletion is calculated based on management's estimate of sandstone
reserves. There is no engineer's estimate available for such reserves. Depletion
amounted to $-0- and $1,299 for the years ended December 31, 2004 and 2003,
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 $389,623 and $416,618 for the years ended
December 31, 2004 and 2003, respectively.

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

                                       23
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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, 2004 and 2003. As mentioned in Note
1, Business Activity, in 2002 the Company consolidated the activities of its now
dormant subsidiary, Amherst Stone at Cleveland Quarries, Inc., into ASC
operations. All significant inter-company transactions have been eliminated in
consolidation.

Goodwill and Other Intangibles

      The Company adopted the provisions of FASB Statement 142, Goodwill and
Other Intangible Assets, as of January 1, 2002. The standard provides that
goodwill and intangible assets with indefinite lives no longer be amortized. The
standards provide that goodwill be tested for impairment annually. The Company
selected mid November for its annual impairment testing. The Company recognized
no impairment in 2004 or 2003.

The following is a summary of intangibles:

<TABLE>
<CAPTION>
                                                                2004                2003
                                                             ----------          ----------
<S>                                                          <C>                 <C>
Intangibles not subject to amortization
   Trademarks                                                     9,043               9,043
   Goodwill                                                      26,661              26,661
                                                             ----------          ----------
                                                             $   35,704          $   35,704
                                                             ==========          ==========
</TABLE>

Stock Options

      The Company uses the intrinsic-value method of accounting for stock-based
awards granted to employees and, accordingly, does not currently recognize
compensation expense for its stock-based awards to employees in the Consolidated
Statements of Income.

      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
beginning one year after the date of grant. At December 31, 2004 and 2003,
130,500 and 70,000 options, respectively, with exercise prices ranging from
$3.35 to $6.00 were outstanding. The 60,500 options granted to management in
2004 include 50,000 options granted to the President and CEO. The 50,000 options
granted to the President and CEO are on a different vesting schedule from the
options granted to other employees.

                                       24
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock Options (Continued)

      The President may exercise the options at the following times: 5,416 upon
the granting of the option, 16,666 on June 1, 2005, 16,666 on June 1, 2006, and
11,252 on June 1, 2007. At December 31, 2004 and 2003, 75,416 and -0- options,
respectively, were exercisable.

      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 grant under the plan. Each
option is exercisable one year after the date of grant and expires five years
after the date of grant. On the date of the annual meeting each eligible
director receives an option to purchase 1,500 shares (3,000 shares for the
Board's Chairman) of common stock, and receives an option to purchase 150 shares
(300 shares for the Board's Chairman) of common stock for each Director or
Committee meeting attended for the twelve months prior to the annual meeting.
Each option shall be at fair market value on the date of the grant. At December
31, 2004, 133,904 shares with exercise prices ranging from $2.37 to $9.50 ($6.15
weighted average) were outstanding, 112,904 of which were exercisable. At
December 31, 2003, 112,904 shares with exercise prices ranging from $2.37 to
$9.50 ($5.62 weighted average) were outstanding, 95,644 of which were
exercisable.

      A summary of option activity under the plans follows:

<TABLE>
<CAPTION>
                                                            Number of               Weighted
                                                          Shares Under          Average Exercise
                                                            Option                   Price
                                                          ------------          ----------------
<S>                                                       <C>                   <C>
Outstanding at January 1, 2003                               120,954                $     5.59
   Granted                                                    86,350                      3.61
   Exercised                                                      -0-                     0.00
   Cancelled                                                 (24,400)                     4.76
                                                             -------                ----------

Outstanding at December 31, 2003                             182,904                      4.75
   Granted                                                    81,500                      6.77
   Exercised                                                      -0-                     0.00
   Cancelled                                                      -0-                     0.00
                                                             -------                ----------

Outstanding at December 31, 2004                             264,404                      5.38
                                                             =======                ==========

Options exercisable at December 31, 2004                     188,320                      4.79
                                                             =======                ==========

Options exercisable at December 31, 2003                      96,554                $     5.89
                                                             =======                ==========
</TABLE>

                                       25
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Stock Options (Continued)

      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 option 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 ranging from 1.08% to 2.63% for 2004 and 1.02% for 2003,
expected life of the options of five years, no expected dividend yield and a
volatility factor of 10%. Additionally, a marketability discount of 50% has been
assumed for 2004 and 2003, respectively.

<TABLE>
<CAPTION>
                                                                                      2004               2003
                                                                                   -----------       -----------
<S>                                                                                <C>               <C>
Net income (loss), as reported                                                     $   152,935       $  (185,858)

Deduct: (Loss), Total stock-based employee compensation expense determined
  under fair value based method for all awards, net of tax effects                    (159,395)          (45,675)
                                                                                   -----------       -----------
Pro forma net (loss)                                                               $    (6,460)      $  (231,533)
                                                                                   ===========       ===========
Earnings per share:
  Basic - as reported                                                              $       .08       $      (.10)
                                                                                   ===========       ===========

  Basic - pro forma                                                                $       .00       $      (.12)
                                                                                   ===========       ===========

  Diluted - as reported                                                            $       .07       $      (.10)
                                                                                   ===========       ===========

  Diluted - pro forma                                                              $       .00       $      (.12)
                                                                                   ===========       ===========
</TABLE>

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. No concentrations existed for the years ended December 31, 2004 and
2003.

                                       26
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Concentration of Credit Risk (Continued)

      Included in the Company's cash is a thirty day renewable commercial paper
instrument through Ford Motor Credit Company. At December 31, 2004, the
instrument had a value of $502,700.

Income Per Common Share

      Income per common share is based on the weighted average number of shares
outstanding, which was 1,978,390 and 1,939,169 for the years ended December 31,
2004 and 2003, respectively.

      The Company has various notes payable that include conversion rights to
common stock. Total potential convertible shares were approximately 160,000
shares at December 31, 2004. Additionally, the Company has outstanding stock
options of 264,404 shares at December 31, 2004. As a result, the Company has the
potential of issuing approximately 424,404 of additional shares of common stock
at December 31, 2004.

Inventory

      Inventories consist of sandstone and are valued 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. The Ohio Department of Natural
Resources requires all companies engaged in mining activities in the state to
maintain an interest bearing certificate of deposit to qualify for a mining
permit.

Shipping and Handling Costs

      The Company includes the cost of shipping and handling in its cost of
goods sold.

New Accounting Pronouncements

      In December 2004 the Financial Accounting Standards Board ("FASB") issued
FASB No. 123 (revised), Share-Based Payment, ("FASB 123 (R)"). FASB 123(R)
eliminates the alternative of using Accounting Principles Board's Opinion No. 25
Accounting for stock issued to employees ("APB No. 25") intrinsic value method
of accounting that was provided in FASB 123 as originally issued. Under Opinion
No. 25, issuing stock options to employees generally resulted in recognition of
no compensation cost. FASB No. 123(R) requires entities to recognize the cost of
employee services received in exchange for awards of equity instruments based on
the grant-date fair value of these awards (with limited exceptions.) FASB No
123(R) is effective for the Company beginning with its quarter ending March 31,
2006. Until FASB No. 123(R) is effective the Company has elected to continue
using the intrinsic value method of accounting for its stock-based compensation
plans.

                                       27
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 2 - RELATED PARTIES

      On October 1, 1999, the Company signed an interest-only note with Roulston
Ventures Limited Partnership (RVLP), a significant shareholder, for $150,000.
Repayment of principal was to be made on October 1, 2004. At any time up to the
maturity date, RVLP had the right to convert the debt into shares of common
stock at $5.00 per share. On September 30, 2004 the entire debt was converted
into 30,000 shares of common stock.

      On October 1, 2002, the Company signed an additional interest only note
with Roulston Venture Capital L.P. (RVCLP), a significant shareholder, for
$300,000. Repayment of the principal is to be made on October 1, 2005. At
anytime up to the maturity date, RVCLP has to right to convert the debt into
shares of common stock at $5.00 per share.

      In 2003, the Company signed unsecured notes payable to directors, officers
of the Company, and various other persons totaling $220,000. Interest only was
payable quarterly at 5% per year. Principal was due between March 31, 2004 and
May 15, 2004. At any time up to the due dates, note holders had the right to
convert the notes into common stock at $3.50 per share. On July 1, 2004 these
notes payable were converted to 65,852 shares of common stock.

      In 2002, the Company entered into a $500,000 note payable - Amherst
Quarry, Inc. (a related party). Principal and interest of 4.5% is due November
21, 2007 and is secured by land. The note was for the purchase of approximately
a 150-acre piece of land adjacent to Company-owned parcels from Amherst
Quarries, Inc. Amherst Quarries is owned 20% by Enzo Costantino and 80% by Glen
Gasparini, both of whom are directors of the Company, and both abstained from
the vote by the Board of Directors. The sale agreement contains terms that may
call for certain contingent payments as follows. If during the life of the
five-year loan, the property is sold for an amount in excess of $500,000, the
previous owner is entitled to payment of one half the difference of the selling
price and $500,000. If at the end of the loan period, the property has not been
sold, the fair market value will be determined by an independent appraisal. The
previous owner will be entitled to one-half the excess of the appraised value
greater than $500,000.

NOTE 3 - LONG TERM DEBT

<TABLE>
<CAPTION>
                                                                                2004         2003
                                                                             ----------   ----------
<S>                                                                          <C>          <C>
Unsecured note payable to Roulston
Ventures L.P. (a significant shareholder).  Interest
only payable quarterly at 6%.  Balance was due
October 1, 2004.  Convertible to common stock
at note holders option on or before due date.
Convertible at $5.00 per share. On September 30,                             $    -0-     $  150,000
2004 the note converted to common stock.
</TABLE>

                                       28
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 3 - LONG TERM DEBT (CONTINUED)

<TABLE>
<CAPTION>
                                                                                   2004                 2003
                                                                                ----------          ------------
<S>                                                                             <C>                 <C>
Balance Forward                                                                 $       -0-         $    150,000

Unsecured note payable to lender.  Interest only
payable quarterly at 6% per year.  Balance due
January 15, 2007.  Convertible to common
stock at note holder's option on or before due
date.  Convertible at $5.00 per share                                              500,000               500,000

Unsecured notes payable to directors, officers of the
Company, and various other persons. Interest only
payable quarterly at 5% per year. Balance was due
between March 31, 2004 and May 15, 2004. Convertible to
common stock at note holders' option on or before due
date. Convertible at $3.50 per share. On July 1, 2004 the
notes were converted to common stock                                                    -0-              220,000

Unsecured note payable to bank.  Interest payable in
monthly installments of prime plus 2%, 6% as of
December 31, 2003.  The loan was paid in full in 2004.                                  -0-              200,000

7.5% fixed rate commercial real estate loan payable to
BRM Quarry Co., LLC. Interest only payable monthly.
Balance due June 25, 2007. Secured by Land.                                        600,000                    -0-

10% fixed rate commercial real estate loan payable to
Madison/Route 20, LLC. Interest only payable monthly.
Balance payable on October 13, 2006. Secured by land.                              900,000               900,000

Unsecured note payable to Roulston Venture Capital L.P
(a significant shareholder). Interest only payable
quarterly at 6%.  Balance is due October 1, 2005.
Convertible to common stock at $5.00 per share
 at note holders option on or before due date.                                     300,000               300,000
</TABLE>

                                       29
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 3 - LONG TERM DEBT (CONTINUED)

<TABLE>
<CAPTION>
                                                                                     2004               2003
                                                                                --------------      ------------
<S>                                                                             <C>                 <C>
Balance Forward                                                                 $    2,300,000      $  2,270,000

Unsecured note payable to lender with interest
at 5%. Balance due February 1, 2007.                                                    25,354            35,850

Note payable to lender with interest at 10% per year.
Monthly payments of $645 including interest until
May 2007. Secured by equipment.                                                         16,057                -0-

Unsecured note payable to lender without interest
Payable in monthly payments of $1,159.
until April 2008.                                                                       46,358                -0-

Note payable - Amherst Quarry, Inc. (a related party).
Principal and interest of 4.5% due November 21, 2007.
Secured by land.  Note provides for certain additional
contingent payments (Note 2).                                                          500,000           500,000
                                                                                --------------      ------------

                                                                                     2,887,769         2,805,850
Less:  Current Portion                                                                 332,177         1,505,850
                                                                                --------------      ------------
                                                                                $    2,555,592      $  1,300,000
                                                                                ==============      ============
</TABLE>

Following is a summary of future maturities of long-term debt as of December 31,
2004:

<TABLE>
<S>                                                                              <C>
2005                                                                             $     332,177
2006                                                                                   933,152
2007                                                                                 1,617,806
2008                                                                                     4,634
2009 and thereafter                                                                         -0-
                                                                                 -------------
                                                                                 $   2,887,769
                                                                                 =============
</TABLE>

NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS

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

                                       30
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 5 - 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 and landscaping industries.

      Following is the information regarding the Company's continuing operations
by geographic location.

<TABLE>
<CAPTION>
                                                                                 2004              2003
                                                                             -------------    -------------
<S>                                                                          <C>              <C>
Net sales, including geographic transfers
  United States                                                              $   2,239,923    $   2,006,164
  Canada                                                                           159,175          222,006
                                                                             -------------    -------------
                                                                             $   2,399,098    $   2,228,170
                                                                             =============    =============

Income/(Loss) from operations:

  United States                                                              $     221,889    $     (33,850)
  Canada                                                                                -0-              -0
                                                                             -------------    -------------

Income/(Loss) from operations:                                                     221,889          (33,850)

  Other income  (expense)                                                          (68,954)        (152,008)
                                                                             -------------    -------------

Income/(Loss) from operations before income taxes                            $     152,935    $    (185,858)
                                                                             =============    =============

Identifiable assets:

  United States                                                              $   4,755,266    $   4,572,597
                                                                             =============    =============
</TABLE>

NOTE 6 - LEASES

            The Company has entered into operating lease agreements for trucks
and equipment. Lease payments in 2004 and 2003 amounted to $48,543 and $48,426,
respectively.

     Below is the future minimum lease payment schedule.

<TABLE>
<S>                                         <C>
2005                                        $   9,673
2006                                            6,338
2007                                            1,143
                                            ---------
                                            $  17,154
                                            =========
</TABLE>

                                       31
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 7- INCOME TAXES

      Income taxes on continuing operations include the following:

<TABLE>
<CAPTION>
                                                                             2004       2003
                                                                           --------    -------
<S>                                                                        <C>         <C>
Currently payable                                                          $     -0-   $    -0-
Deferred                                                                         -0-        -0-
                                                                           --------    -------

Total                                                                      $     -0-   $    -0-
                                                                           ========    =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                           2004                         2003
                                                  -----------------------      ----------------------
                                                                    % 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 (loss) for financial reporting
  purpose without tax expense or
  benefit. Utilization of loss carry-
  forward (unavailable for carryback
  against prior income taxes paid)                $   52,000       34%         $  (63,192)        34%
                                                  ----------       --          ----------         --

  Income taxes at statutory rate                  $   52,000       34%         $  (63,192)        34%
                                                  ==========       ==          ==========         ==
</TABLE>

      The Company has unused operating loss carry forwards available at December
31, 2004 of approximately $6,300,000 that may be applied against future taxable
income and expire in various amounts from 2007 to 2023.

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

      The Company's deferred tax assets and liabilities at December 31, 2004 and
2003 consist of:

<TABLE>
<CAPTION>
                                  2004                   2003
                              -------------         -------------
<S>                           <C>                   <C>
Deferred tax asset            $   2,100,000         $   2,217,000
Valuation allowance              (1,973,000)           (2,080,000)
Deferred tax liability             (127,000)             (137,000)
                              -------------         -------------
                              $          -0-        $          -0-
                              =============         =============
</TABLE>

                                       32
<PAGE>

                AMERICAN STONE INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           DECEMBER 31, 2004 AND 2003

NOTE 7 - INCOME TAXES (CONTINUED)

      Deferred taxes are provided for temporary differences in deducting
expenses for financial statement and tax purposes. The principal source for
deferred tax assets is different methods for recovering depreciation and net
operating loss carry forwards. No deferred taxes are reflected in the balance
sheet at December 31, 2004 and 2003 due to a valuation allowance. As of December
31, 2004 and 2003, the Company recognized a $107,000 and $331,000 decrease in
the valuation allowance, respectively.

NOTE 8 - PROFIT SHARING PLAN

      American Stone Corporation has a 401(k) profit-sharing plan (the Plan)
offered to employees with more than 90 days 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 2004 and 2003 were $12,797 and $11,112 respectively.

NOTE 9 - OPTION AGREEMENT

      The Company owns approximately 1,100 acres of land in Northern Ohio. On
May 24, 2004, American Stone Corporation executed an Option Agreement (the
"Agreement") with Trans European Securities International LLP, ("Trans
European"), under which Trans European acquired an option to purchase
approximately 900 acres of American Stone's real estate located in Lorain
County, Ohio, (the "Real Estate") for a purchase price of $23,740,000.

      The property has frontage on State Route 113 and Quarry Road. It is
approximately three miles from the Ohio Turnpike with access at Baumhart Road,
Route 58 and Route 57. Under the terms of the Agreement, Trans European has an
option for a period of 15 months to purchase the Real Estate. To acquire the
option, Trans European was required to pay American Stone a $250,000
non-refundable Option Fee: $125,000 was paid on or about May 9, 2004 and
$125,000 was paid on or about February 18, 2005.

      Upon the exercise of the option, which must take place prior to August 31,
2005,Trans European has agreed to purchase the Real Estate and pay to American
Stone: $5,000,000, minus the Option Fee and other credits and allocations,
within 30 days of the exercise or the expiration of the option period, whichever
is later (the "Closing Date"): $10,000,000 one year later: and the balance of
the purchase price, or approximately $8,490,000 on the second anniversary of the
Closing Date. In addition to the purchase price noted above, Trans European has
agreed to share with American Stone a portion of its earnings that relate to
other than residential sales of real estate.

      The sale of this portion of American Stone's real estate will not
interfere with any of American Stone's existing or planned stone quarrying or
processing operations. American Stone expects to operate in all respects on
their remaining approximately 200 acres of land, which are not included in the
Real Estate which is the subject of the Agreement.

                                       33
<PAGE>

                                    PART III

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

      None.

                        ITEM 8A. CONTROLS AND PROCEDURES

      The Company's management, under the supervision and with the participation
of the Company's President and Chief Executive Officer have concluded that the
Company's disclosure controls and procedures (as defined in Exchange Act Rule
13a - 14) were, as of December 31, 2004, sufficiently effective to ensure that
the information required to be disclosed by the Company in the reports it files
under the Exchange Act is gathered, analyzed and disclosed with adequate
timeliness, accuracy and completeness, based on an evaluation of such controls
and procedures completed on March 7, 2005.

      There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of the evaluation referred to above.

    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 20, 2005.

OFFICERS OF THE COMPANY

      Information required by this Item 9 as to the executive officers of the
Company is set forth below:

      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 16, 2005.

                                       34
<PAGE>

<TABLE>
<CAPTION>
Name and Age                    Position
------------                    --------
<S>                             <C>
Enzo Costantino..........       Mr. Costantino has served as Treasurer of the Company
Age 43                          and as a Director since 1996. He has been Secretary and
                                Treasurer of Terrazzo, Mosaic & Tile Company, Ltd. since
                                1994. Terrazzo, Mosaic & Tile, located in Toronto,
                                Ontario, is a subcontractor for all types of hard and
                                soft commercial surfaces. Prior to joining Terrazzo,
                                Mosaic & Tile, 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.........       Mr. Meier has served as Secretary of the Company and as
Age 50                          a Director since 1996. He has been the Corporate
                                Controller and Chief Accounting Officer of PolyOne
                                Corporation (NYSE: POL) since January 2004. PolyOne
                                Corporation, headquartered in Avon Lake, Ohio with 2004
                                annual revenues of approximately $2 billion, is an
                                international polymer services company with operations
                                in thermoplastic compounds, specialty polymer
                                formulations, color and additive systems, and
                                thermoplastic resin distribution. From September 2002
                                until January 2004 he was the Director of Finance for
                                the Elastomers and Performance Additives Group of
                                PolyOne. From May 1999 until December 2002 he was the
                                Director of Finance and Information Technology of the
                                Specialty Resins and Formulators Group of PolyOne. He
                                was previously Vice-President of Finance, Chief
                                Financial Officer, Secretary and Treasurer of Defiance,
                                Inc. (Nasdaq: 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.

Russell Ciphers, Sr......       Russell Ciphers, Sr. has served as President and Chief
Age 67                          Executive Officer since October 23, 2002 and as
                                Principal Financial Officer since March 19, 2003. Mr.
                                Ciphers was previously the President and Chief Executive
                                Officer of R.B. MFG. Co., a material handling
                                manufacturer, from February 1996 until October 1, 2001.
</TABLE>

AUDIT COMMITTEE FINANCIAL EXPERTS

      The Board of Directors of the Company has determined that Michael J.
Meier, who is a member of the audit committee of the Board of Directors of the
Company, qualifies as an "audit committee financial expert" as defined in the
applicable regulation of the Commission and is "independent" as that term is
defined by listing standards of the NASDAQ.

                                       35
<PAGE>

REPORTING OF BENEFICIAL OWNERSHIP

      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 20, 2005.

CODE OF ETHICS

      The Company has adopted a code of ethics applicable to its principal
executive officer, principal financial officer, principal accounting officer or
controller or persons performing similar functions (the "Code of Ethics").

                        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 20, 2005.

          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 20, 2005.

            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 20, 2005.

                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
38.

      (b)   Reports on Form 8-K.

      None.

                                       36
<PAGE>

                 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Certain information required by this Item 14 is incorporated by reference
to the information set forth under the caption "Audited Related Fees" in the
Company's definitive proxy statement for the Annual Meeting of Stockholders to
be held on April 20, 2005.

      The audit committee of the Company approves in advance all audit,
audit-related and non-audit services provided by the independent auditors and
reviews all significant fees related to their services. None of services
provided by the independent accountants during fiscal year 2003 or fiscal year
2004 were approved after the fact pursuant to Rule 2.01(c)(7)(i)(C).

                                   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/ Russell Ciphers, Sr.
                                      -----------------------------------------
                                      Russell Ciphers, Sr., President and Chief
                                      Executive Officer
                                      Date: March 30, 2005

      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.

By:        /s/  Russell Ciphers             By:       /s/ Enzo Costantino
    ----------------------------------          ------------------------------
    Russell Ciphers, Sr., President             Enzo Costantino, Treasurer and
    and Chief Executive Officer                 Director
    (Principal Executive Officer and            Date: March 30, 2005
    Principal Financial Officer)
    Date: March 30, 2005

By:        /s/ Thomas H. Roulston II        By:       /s/ Michael J. Meier
    ----------------------------------          ------------------------------
    Thomas H. Roulston II, Chairman             Michael J. Meier, Secretary and
    of the Board (Principal Accounting          Director
    Officer)                                    Date: March 30, 2005
    Date: March 30, 2005

By:        /s/ Glen Gasparini               By:       /s/ Timothy I. Panzica
    ----------------------------------          ------------------------------
    Glen Gasparini, Director                    Timothy I. Panzica, Director
    Date: March 30, 2005                        Date: March 30, 2005

By:        /s/ John R. Male                 By:       /s/ Louis Stokes
    ----------------------------------          ------------------------------
    John R. Male, Director                      Louis Stokes, Director
    Date: March 30, 2005                        Date: March 30, 2005

                                       37
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER                     DESCRIPTION OF DOCUMENT
--------------                     -----------------------
<S>              <C>                                                                         <C>
  3.1            Certificate of Incorporation of the Company, dated November 13, 1992,       (H)
                 as amended March 9, 1993, December 14, 1993, May 31, 1994,
                 August 1995, and June 24, 1998

  3.2            By-laws of the Company                                                      (A)

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

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

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

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

 10.5            Share Purchase Option Agreement among TMT Masonry, Ltd., Roulston           (A)
                 Ventures Limited Partnership and the Company

 10.6            Share Purchase Option Agreement among TMT Masonry, Ltd., Roulston           (C)
                 Ventures Limited Partnership and the Company, dated November 22, 1996

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

*10.8            American Stone Industries, Inc.  1998 Non-Employee Director Stock           (B)
                 Option Plan

 10.9            FirstMerit Bank, N.A., Defined Contribution Master Plan and                 (D)
                 Trust Agreement

10.10            Promissory Note payable by American Stone Industries, Inc. to               (H)
                 Independence Bank dated January 5, 2004.

10.11            Convertible Subordinated Promissory Note Payable to Cost                    (E)
                 Controls, Inc.

10.12            6.00% Convertible Subordinated Note Due October 1, 2004, issued by the      (F)
                 Company to Roulston Ventures Limited Partnership
</TABLE>

                                       38
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NUMBER                        DESCRIPTION OF DOCUMENT
--------------                        -----------------------
<S>             <C>                                                                         <C>
10.13           6.00% Convertible Subordinated Note Due October 1, 2005, issued by          (F)
                the Company to Roulston Venture Capital, L.P.

10.14           $500,000 Promissory Note issued by the Company to Amherst Quarry, Inc.      (F)

10.15           Mortgage Deed granted by the Company to Amherst Quarry, Inc. in             (F)
                consideration of $500,000 Promissory Note

10.16           Subordinated debenture issued to Fairport Finance Corp. on May 1, 2003      (G)

10.17           Subordinated debenture issued to Male Family Limited Partnership on         (G)
                May 1, 2003

10.18           Subordinated debenture issued to Michael J. Meier on April 1, 2003          (G)

10.19           Subordinated debenture issued to Timothy I. Panzica on April 1, 2003        (G)

10.20           Subordinated debenture issued to Louis B. Stokes on April 1, 2003           (G)

10.21           Subordinated debenture issued to Terrazzo Mosaic & Tile Co. on              (G)
                April 1, 2003

10.22           Promissory Note for Fixed Rate Commercial Real Estate Loan payable          (H)
                to Madison/Route 20, LLC

10.23           Option Agreement Relating to Land at Cleveland Quarries between             (I)
                American Stone and Trans European Securities International LLP

10.24           Loan Modification Agreement to Promissory Note for Fixed Rate               (J)
                Commercial Real Estate Loan payable to Madison/Route 20, LLC

10.25           Promissory Note for Fixed Rate Second Mortgage on Real Estate               (J)
                Payable to BRM Quarry Co. LLC

14.1            Code of Ethics (February 2004)                                              (H)

21.1            Subsidiaries of the Company

23.1            Consent of Hobe & Lucas

31.1            Rule 13a-14a/15d-14(a) Certification

32.1            Section 1350 Certification
</TABLE>

------------------
*        Management contract or compensatory plan or arrangement.

                                       39
<PAGE>

(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
      Form 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,
      1998.

(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,
      2001.

(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,
      2002.

(G)   Incorporated herein by reference to exhibits 10.1 through 10.6 to the
      Company's quarterly report on Form 10-QSB for the period ended September
      30, 2003.

(H)   Incorporated herein by reference to the appropriate exhibit to the
      Company's annual report on Form 10-KSB for the period ended December 31,
      2003.

(I)   Incorporated herein by reference to exhibit 10.1 to the Company's
      quarterly report on Form 10-QSB for the period ended June 30, 2004.

(J)   Incorporated herein by reference to exhibits 10.1 through 10.2 to the
      Company's quarterly report on Form 10-QSB for the period ended September
      30, 2004.

                                       40